PetMed Express, Inc. (PETS) Bundle
Understanding PetMed Express, Inc. (PETS) Revenue Streams
Understanding PetMed Express’s Revenue Streams
The revenue structure of the company is primarily categorized into three sources: reorder sales, new order sales, and membership fees. This breakdown allows for a clearer understanding of the company’s financial performance.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 ($ in thousands) | Q3 2023 ($ in thousands) | 6M 2024 ($ in thousands) | 6M 2023 ($ in thousands) | Change ($ in thousands) | Percentage Change (%) |
|---|---|---|---|---|---|---|
| Reorder Sales | 50,052 | 58,017 | 104,291 | 120,182 | (15,891) | (13.2) |
| New Order Sales | 7,449 | 10,558 | 18,838 | 24,251 | (5,413) | (22.3) |
| Membership Fees | 2,069 | 2,424 | 4,393 | 4,810 | (417) | (8.7) |
| Total Net Sales | 59,570 | 70,999 | 127,522 | 149,243 | (21,721) | (14.6) |
Year-over-Year Revenue Growth Rate
For the quarter ended September 30, 2024, total net sales decreased by approximately $11.4 million, or 16.1%, compared to the same quarter of the previous year. For the six months ended September 30, 2024, total net sales decreased by approximately $21.7 million, or 14.6%, compared to the prior year period.
Contribution of Different Business Segments to Overall Revenue
As of the most recent quarter, reorder sales represented about 84.0% of total net sales, while new order sales contributed 12.5% and membership fees accounted for 3.5%.
Analysis of Significant Changes in Revenue Streams
The decline in reorder sales of approximately $8.0 million, or 13.7%, for the quarter is primarily attributed to decreased prescription medication sales. New order sales experienced a more significant drop, decreasing by approximately $3.1 million, or 29.4%. The changes in revenue streams reflect broader macroeconomic challenges and shifts in consumer purchasing behavior.
Furthermore, the company adjusted its definition of new order sales, shortening the qualifying period from thirty-six months to twelve months. This change may affect future revenue reporting, emphasizing the need for investors to monitor ongoing sales classifications closely.
A Deep Dive into PetMed Express, Inc. (PETS) Profitability
Profitability Metrics
In analyzing the profitability metrics for the company as of 2024, several key figures stand out, including gross profit, operating profit, and net profit margins.
Gross Profit
For the quarter ended September 30, 2024, the gross profit was approximately $17.3 million, a decrease of 13.7% from the $20.1 million reported for the same period in 2023. For the six months ended September 30, 2024, gross profit totaled $35.3 million, down 17.2% from $42.6 million in 2023.
The gross margin percentage increased slightly to 29.1% for the quarter ended September 30, 2024, compared to 28.3% for the same period in 2023, primarily due to a favorable sales mix and lower discount activity.
Operating Profit
Operating income for the quarter ended September 30, 2024, was reported at $554,000, compared to $875,000 for the same quarter in 2023. The six-month operating income showed a significant recovery with a profit of $4.9 million compared to a loss of $1.3 million in the prior year.
Net Profit
Net income for the quarter ended September 30, 2024, was $2.3 million, translating to a net income per share of $0.11. This reflects an increase from the $715,000 reported in the same quarter of 2023. For the six months ended September 30, 2024, net income was $6.1 million, significantly improved from a net loss of $421,000 in the prior year.
Profit Margin Overview
| Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 |
|---|---|---|---|---|
| Gross Profit | $17.3 million | $20.1 million | $35.3 million | $42.6 million |
| Operating Profit | $554,000 | $875,000 | $4.9 million | ($1.3 million) |
| Net Income | $2.3 million | $715,000 | $6.1 million | ($421,000) |
Trends in Profitability Over Time
The trends indicate a recovery in profitability metrics, particularly in net income, which saw a substantial turnaround from a loss to a profit over the year. The operational efficiency has improved as reflected in the gross margin, which indicates better cost management despite the decline in total sales.
Comparison with Industry Averages
When compared to industry averages, the gross margin percentage of 29.1% aligns closely with the industry median of around 30%. However, the operating profit margin, which is lower than the industry average of approximately 5%, suggests room for improvement in operational efficiency.
Operational Efficiency Analysis
Cost management has shown positive signs, with general and administrative expenses decreasing by 12.3% to approximately $10.5 million for the quarter ended September 30, 2024. This decrease was largely driven by a reduction in stock-based compensation and payroll expenses.
The table below summarizes the operational efficiency metrics:
| Expense Category | Q2 2024 | Q2 2023 |
|---|---|---|
| General and Administrative | $10.5 million | $12.0 million |
| Advertising | $4.6 million | $5.5 million |
| Total Operating Expenses | $16.8 million | $19.2 million |
Debt vs. Equity: How PetMed Express, Inc. (PETS) Finances Its Growth
Debt vs. Equity: How PetMed Express, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, PetMed Express, Inc. reported total liabilities of $49.6 million, a decrease from $73.2 million in the same period of the previous year. Current liabilities amounted to $48.8 million, compared to $72.2 million as of September 30, 2023. The company's long-term debt stands at $0, indicating a debt-free status in terms of long-term obligations.
Debt-to-Equity Ratio
The debt-to-equity ratio is a critical measure of financial leverage. As of September 30, 2024, the company’s equity was reported at $96.4 million. With no long-term debt, the debt-to-equity ratio is effectively 0.00, which is significantly lower than the industry average of approximately 0.5 to 1.0.
| Metric | Value |
|---|---|
| Total Liabilities | $49.6 million |
| Current Liabilities | $48.8 million |
| Long-term Debt | $0 |
| Total Equity | $96.4 million |
| Debt-to-Equity Ratio | 0.00 |
Recent Debt Issuances and Credit Ratings
There have been no recent debt issuances as the company maintains a policy of minimal leverage. The lack of long-term debt and strong equity position suggest a robust financial health. The company has not sought any refinancing activities in the past fiscal year, maintaining its current capital structure without additional borrowing.
Balancing Debt Financing and Equity Funding
The company has focused on equity funding through retained earnings and has suspended dividend payments as of October 26, 2023, to redirect cash flow towards growth initiatives. The decision to suspend dividends was made to enhance the use of cash reserves for strategic investments rather than distributing cash to shareholders.
The current working capital as of September 30, 2024, is reported at $21.9 million, reflecting a healthy liquidity position. This proactive management of working capital further supports the company’s strategy to finance growth through internal cash flows rather than external debt.
| Financial Metric | Value |
|---|---|
| Working Capital | $21.9 million |
| Dividend Payments (Suspended) | Indefinitely |
| Cash Flow from Operations | $(1.1) million (for six months ended September 30, 2024) |
Assessing PetMed Express, Inc. (PETS) Liquidity
Assessing PetMed Express, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was approximately 0.45, calculated from current assets of $21.9 million and current liabilities of $48.8 million .
Quick Ratio: The quick ratio, which excludes inventory from current assets, was approximately 0.35, indicating potential liquidity concerns .
Analysis of Working Capital Trends
Working capital for the six-month period ending September 30, 2024, was $21.9 million, an increase from $21.5 million as of March 31, 2024 . This change reflects a decrease in current liabilities by $23.3 million, primarily due to reductions in accounts payable .
Cash Flow Statements Overview
Operating Cash Flow: For the six months ended September 30, 2024, net cash used in operating activities was $1.1 million, compared to $0.2 million for the same period in 2023 .
Investing Cash Flow: Net cash used in investing activities was $1.9 million for the six months ended September 30, 2024, significantly lower than $38.0 million for the same period in 2023 .
Financing Cash Flow: Net cash used in financing activities was $0.2 million for the six months ended September 30, 2024, down from $12.4 million in 2023, reflecting the suspension of dividend payments .
Potential Liquidity Concerns or Strengths
The liquidity position is concerning due to a current ratio below 1.0, indicating that current liabilities exceed current assets. The decrease in cash flow from operating activities and the suspension of dividends may limit financial flexibility .
| Liquidity Measure | September 30, 2024 | March 31, 2024 | September 30, 2023 |
|---|---|---|---|
| Current Ratio | 0.45 | 0.43 | 0.61 |
| Quick Ratio | 0.35 | 0.34 | 0.50 |
| Working Capital | $21.9 million | $21.5 million | $22.5 million |
| Net Cash from Operating Activities | ($1.1 million) | ($0.2 million) | ($0.5 million) |
| Net Cash Used in Investing Activities | ($1.9 million) | ($38.0 million) | ($5.0 million) |
| Net Cash Used in Financing Activities | ($0.2 million) | ($12.4 million) | ($6.0 million) |
Is PetMed Express, Inc. (PETS) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of the company, key valuation metrics such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios are crucial. As of September 30, 2024, the following metrics were recorded:
- P/E Ratio: 18.3
- P/B Ratio: 1.23
- EV/EBITDA Ratio: 14.5
Recent stock price trends highlight significant fluctuations over the past 12 months. The stock price ranged from a low of $4.01 to a high of $12.75. As of the latest close, the stock price was approximately $5.30.
The company has not declared any dividends since suspending its quarterly dividend indefinitely in October 2023, focusing instead on growth initiatives. Prior to the suspension, the dividend yield was 5.7% based on the last declared dividend of $0.60 per share for the six months ended September 30, 2023.
Analyst Consensus
Analyst consensus on the stock valuation indicates a mixed outlook, with recommendations as follows:
- Buy: 2 analysts
- Hold: 5 analysts
- Sell: 1 analyst
Financial Performance Overview
The following table summarizes key financial performance indicators for the six months ended September 30, 2024, compared to the previous year:
| Financial Metric | Q2 2024 | Q2 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Net Sales | $127.5 million | $149.2 million | ($21.7 million) | (14.6%) |
| Gross Profit | $35.3 million | $42.6 million | ($7.3 million) | (17.2%) |
| Net Income | $6.08 million | ($0.42 million) | $6.5 million | 1544% |
| Adjusted EBITDA | $2.1 million | $3.4 million | ($1.3 million) | (39%) |
Operating expenses have been a focus, with total operating expenses decreasing to approximately $30.3 million for the six months ended September 30, 2024, down from $43.8 million in the prior year.
As of September 30, 2024, the company’s total shareholders' equity stood at $96.4 million, reflecting a slight decrease from $96.7 million in March 2024.
Overall, the valuation analysis indicates a complex picture, with various metrics suggesting potential undervaluation, especially in the context of recent performance improvements and market conditions.
Key Risks Facing PetMed Express, Inc. (PETS)
Key Risks Facing PetMed Express, Inc.
PetMed Express, Inc. is currently navigating a landscape filled with various internal and external risks that could impact its financial health. Understanding these risks is essential for investors looking to assess the company's future performance.
Overview of Internal and External Risks
Several risk factors can impact the company, including:
- Industry Competition: The pet medication and supply industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company reported a 16.1% decrease in sales compared to the previous year, attributed to increased competition and shifting consumer preferences.
- Regulatory Changes: Changes in regulations regarding pet medication can pose risks. The company must comply with various state and federal regulations, which could increase operational costs.
- Market Conditions: Broader macroeconomic factors, such as inflation and changing consumer behavior, have led to a 14.6% decline in total net sales for the six months ended September 30, 2024, compared to the same period in 2023.
Operational Risks
The company's operational risks include:
- Sales Decline: Sales decreased by approximately $11.4 million, or 16.1%, to approximately $59.6 million for the quarter ended September 30, 2024.
- Inventory Management: The company has implemented a SKU rationalization strategy, leading to a significant decline in inventory levels and impacting sales.
- Customer Acquisition: New customer acquisition dropped to approximately 77,000 for the quarter ended September 30, 2024, compared to 113,000 in the same quarter of 2023.
Financial Risks
Financial risks include:
- Cash Flow Issues: The company reported net cash used in operating activities of $1.1 million for the six months ended September 30, 2024.
- Debt Obligations: As of September 30, 2024, the company had $52.0 million in cash and cash equivalents with no debt obligations.
- Stock-based Compensation: The company recorded stock-based compensation expenses of $7.631 million for the six months ended September 30, 2024, which significantly impacts net income.
Strategic Risks
Strategic risks encompass the following:
- Dividend Suspension: The board suspended the quarterly dividend indefinitely on October 26, 2023, to focus on growth initiatives.
- Acquisition Risks: The acquisition of PetCareRx has introduced complexities, including a limitation on net operating loss carryforwards due to ownership change, reducing potential tax benefits to approximately $14.5 million.
Mitigation Strategies
The company has taken several steps to mitigate these risks:
- Operational Efficiency: Management is focused on improving operational efficiency and aligning staffing needs to current market conditions.
- Cost Management: The company is implementing cost-saving measures to enhance its variable cost structure.
- Market Adaptation: The company continues to adapt its marketing strategies to address changing consumer behaviors and preferences.
| Risk Factor | Description | Impact |
|---|---|---|
| Sales Decline | Decrease in sales by $11.4 million (16.1%) for Q3 2024 | Revenue Loss |
| Inventory Management | Implementation of SKU rationalization strategy | Operational Disruption |
| Customer Acquisition | New customer acquisition down to 77,000 for Q3 2024 | Future Revenue Concerns |
| Cash Flow Issues | Net cash used in operating activities of $1.1 million for H1 2024 | Liquidity Risk |
| Debt Obligations | No debt obligations, $52.0 million in cash | Financial Stability |
Future Growth Prospects for PetMed Express, Inc. (PETS)
Future Growth Prospects for PetMed Express, Inc.
The following section outlines the growth opportunities available for PetMed Express, Inc. as of 2024, emphasizing key drivers that could influence its future performance.
Key Growth Drivers
- Product Innovations: Continuous development of new products and enhancement of existing offerings are crucial. The company has seen a shift in consumer preferences towards subscription services, with 53.3% of total sales attributed to the AutoShip & Save subscription model for the quarter ended September 30, 2024, up from 51.0% for the same period in 2023.
- Market Expansions: The company aims to penetrate new markets and increase its customer base. In the quarter ended September 30, 2024, approximately 77,000 new customers were acquired, compared to 113,000 in the same quarter of the previous year.
- Strategic Acquisitions: The acquisition of PetCareRx on April 3, 2023, has expanded the company’s market reach and product offerings. This acquisition has resulted in a significant increase in deferred revenue, which stood at $1.6 million as of September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
The company experienced a decline in sales, with total net sales of $59.6 million for the quarter ended September 30, 2024, down 16.1% from $71.0 million in the same quarter of 2023. For the six months ended September 30, 2024, total net sales were $127.5 million, reflecting a decrease of 14.6% compared to $149.2 million in the prior year. However, strategic initiatives aimed at improving customer retention and acquisition could stabilize and eventually enhance revenue streams.
Strategic Initiatives and Partnerships
Partnerships with veterinary clinics and pet care providers are essential for expanding service offerings. The company’s membership programs, such as PetPlus, contribute to consistent revenue through annual fees, which were $4.4 million for the six months ended September 30, 2024. The focus on enhancing digital marketing strategies and customer engagement through technology will also aid in driving growth.
Competitive Advantages
- Brand Recognition: Established brand presence in the pet medication market provides a significant competitive edge.
- Cost Management: A decrease in general and administrative expenses, which fell by 12.3% to approximately $10.5 million for the quarter ended September 30, 2024, supports improved profitability.
- Customer Loyalty: The subscription model fosters customer loyalty, as evidenced by the increase in reorder sales, which accounted for 84.0% of total sales for the quarter.
| Growth Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Net Sales | $59.6 million | $71.0 million | -16.1% |
| Reorder Sales | $50.1 million | $58.0 million | -13.7% |
| New Order Sales | $7.4 million | $10.6 million | -29.4% |
| Membership Fees | $2.1 million | $2.4 million | -14.6% |
| New Customers Acquired | 77,000 | 113,000 | -31.8% |
PetMed Express, Inc. (PETS) DCF Excel Template
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Updated on 16 Nov 2024
Resources:
- PetMed Express, Inc. (PETS) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of PetMed Express, Inc. (PETS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View PetMed Express, Inc. (PETS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.