PetMed Express, Inc.

My name is Camilla, and I will be the operator for today's call. I would now like to pass the conference over to our host, Mr. Brian Prentiveau with Investor Relations. Sir, the floor is now yours.

Thank you, operator. And I'd like to welcome everybody here today to the PetMed Express Fiscal First Quarter Earnings Call. I would also like to remind everyone that the first portion of this conference call will be listen only until the question and answer session which will be later in the call. Also, certain information that will be included during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934 as amended that may involve a number of risks and uncertainties. These statements are based on our beliefs as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual results could differ materially from those projected. There can be no assurance that any forward-looking results will occur or be realized. Nothing contained in this presentation is or should be relied upon as a representation or warranty as to any future matter, including any matter in respect of the operations or business or financial condition of PetMeds. PetMeds undertakes no obligation to update publicly these forward-looking statements based on subsequent events, except as may be required by applicable law, regulation, or other competent legal authority. We have identified various risk factors associated with our operations in our most recent annual report and other filings with the Securities and Exchange Commission. Also, during the course of today's call, company will be discussing one or more non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release we issued this afternoon. Now, let me introduce our CEO and President, Matt Hewlett.

Matt? Thank you, Brian. Thank you for making the time today to participate in our earnings call. We are looking forward to sharing our operational advancements and financial achievements with the investment and analyst community. First, we will provide an overview of our business progress since our last update on May 18th, 2023. This will offer insights into the significant developments and milestones achieved during this period. Second, we will provide a summary of our quarterly financial results, including a detailed analysis of our financial performance. PetMeds is a company that delivers prescription and non-prescription medications food, supplements, supplies, and vet services direct to the consumer. Our expert online pharmacy is an established and trusted brand as evidenced by the fact that we have served more than 11 million pet parents over our company's 27-year operating history. While we have a loyal customer base of pet parents who value our brand, service, and quality, we believe our company and this industry can provide even more to the millions of pet parents across the country. As such, Our goal is to be the market leader in pet wellness and healthcare, or as we like to say, the trusted pet health experts, because we believe every pet deserves to live a long, happy, healthy life. Next slide, please. Since April, we have been fully engaged in integrating our latest acquisition, PetCareRx, into the PetMeds family, a significant milestone for our organization. This acquisition presents a compelling opportunity for us to expand our product catalog and capitalize on the many synergies between PetCareRx and PetMeds. By leveraging the PetCareRx catalog, we can offer a broader range of products to our PetMeds customer base. This strategic move aligns with our core investment thesis and positions us for further growth and success. Since its inception, PetMeds has focused primarily on pet medication refills. and PetCareRx accelerates our plan to improve the legacy pet meds business. Our aim is to enhance our merchandising capabilities and expand our product offerings with a particular emphasis on consumables while continuing to leverage our core expertise in pet medication. This evolution will meet the broader needs of our customers and will strengthen our market position as a comprehensive pet care provider. So far, our efforts are yielding encouraging results. Since completing the acquisition, we have undertaken a thorough data optimization process, ensuring that our AI-based site recommendation engine is fully optimized to suggest relevant non-prescription products to our customers. Furthermore, we have enhanced the site experience for our valued returning customers, encouraging them to purchase additional products, personalized to their individual pet's needs. In addition, our newly designed checkout process provides a seamless and convenient experience, further bolstering customer satisfaction and loyalty. In line with our commitment to providing services from nose to tail, we have begun integrating the PetCareRx catalog into our operations, including our distribution facilities. As part of the PetCareRx product integration, we now offer the complete food line of Purina products, including its prescription food line. Purina is one of the largest pet food product companies in the world, The Purina product line ranks in the top 10 best-selling brands for PetCareRx. And by integrating the PetCareRx product offering, we have extended this world-class brand to our PetMeds offering for pet parents. Purina's focus on pet health and providing options that help with pet allergies, weight management, joint health, and immune support, among other targeted health benefits, aligns so well with our goal to be the market leader in pet wellness and health care. We will start to see other benefits from the unification of PetMeds and PetCareRx. As an example, we have started to leverage our combined buying power and believe we will be able to deliver lower costs to our customers on a per unit basis. Operationally, we have spent considerable time and focus on upgrading internal systems and controls. We completed the migration of our legacy email system to a modern, cutting-edge platform. This transformation unlocks new marketing capabilities. enabling us to engage with our customer base more effectively. Through targeted and personalized communication, we will be able to provide better product and service recommendations. We believe that with the combined purchasing power, coupled with our meticulous identification and execution of cost synergies, we are well on track to deliver on our objective of Petco Rx becoming adjusted EBITDA accretive before the end of our fiscal year. This achievement underscores our commitment to creating value for our shareholders and maximizing the potential of this strategic acquisition. Next slide, please. As we mentioned on previous earnings calls over the last year, PetMeds has been in a rebuilding mode. The strategic transformation that we charted encompassing both organic and inorganic investments is aimed at positioning PetMeds for long-term success, enhancing our operational capabilities, expanding our product portfolio, and ultimately creating sustainable value for our shareholders. Today's call marks a slightly different tone from previous calls. PetMeds has undergone rapid changes over the past two years, and we firmly believe in the path we have chosen as a premium specialty retailer brand. We have been deliberate in the execution of our strategy, as well as in the consistency and transparency of our external communication. to ensure that our stakeholders are well-informed about the essential criteria that serve as performance indicators for our transformation into a growth-oriented business. These indicators are year-over-year increases in new customers, continued gains in recurring revenue, more product and service diversification beyond our core medication expertise, meeting and exceeding market growth rates for the entire pet meds business. These performance indicators serve to guide us as we navigate our journey towards becoming a thriving growth-focused company. I am thrilled to share the exciting news that this quarter signifies a re-acceleration in our company's trajectory, including early signs of promise in our ongoing business transformation. It is important to note that a business transformation is an ever-evolving process, particularly in the early stages. However, Today, I am delighted to announce that we have successfully positioned ourselves as a growth business, meeting the four key performance indicators as previously outlined. I would now like to summarize some of the key business and financial highlights for the quarter. As a reminder, this includes the full quarter of results for PetCareRx. Number one, we had record-setting year-over-year revenue growth. Number two, both new and returning customers increased year-over-year. New customers grew consecutively for three quarters in a row, which is a turnaround from a two-and-a-half-year decline. Number three, reorder sales are now 68 million, or 87% of our business, which represents growth of 7% year-over-year. Number four, we are launching our new insurance product in the market in conjunction with our insurance partner, Pumpkin Insurance, next month. While our CFO, Christine Chambers, will delve into a more comprehensive analysis of our quarterly financial performance later in the presentation, I would like to provide a glimpse of some notable financial highlights. For the quarter ending June 30th, 2023, sales were $78 million compared to sales of $70 million in the prior year, an 11% increase year-over-year as a result of the combined sales of our recent acquisition of PetCareRx, as well as a more stabilized core pet meds business. Furthermore, I am pleased to share positive results pertaining to our new customer base. In the quarter, we achieved approximately 86,000 new customers, representing a 25% year-over-year increase. This marks the third consecutive quarter of net new customer growth, decisively breaking the trend of declining net new customers since Q1 of 2021 and propelling us into our next chapter of growth. This notable achievement is attributed to the continued growth of PetMed's new customer acquisition efforts combined with increased reach for the PetCare Rx acquisition. New customer acquisition efficiency metrics remain in line with our expectations. Customer lifetime value to customer acquisition costs for the quarter stood at 2.0, affirming our commitment to optimizing our marketing investments. We are delighted to report sustained improvements in the subscription part of our business. Our auto ship and save program has continued to expand. During the first fiscal quarter, 49% of our revenue was derived from recurring sources through our auto ship subscription and Pet Plus membership programs, marking a significant increase from 34% for the same period last year. Lastly, I want to share our excitement regarding the emerging opportunity in pet insurance. As one of the fastest growing non-medical pet services, pet insurance is projected to continue its upward trajectory. According to the North American Pet Health Insurance Association, a mere 4.4 million pets were insured in 2021, which accounts for less than 5% of the total pet population. Recognizing this as a significant untapped opportunity, we envision that the introduction of our insurance product in partnership with Pumpkin Insurance will be viewed as a valuable offering by our expansive community of over 2 million pet parents. We plan to launch this new insurance offering within the next quarter, further solidifying our commitment to comprehensive pet care solutions. Turning to slide six. Over the past several quarters, we've extensively discussed our strategy and future direction. PetMeds is undergoing a transformation from being a prominent pet medication retailer to positioning itself as the foremost authority in pet health care, a market leader in expertise on pet well-being. Our goal is to become every pet parent's go-to destination for holistic health and wellness from nose to tail. To recap, our pet health care strategy revolves around four key pillars, medication, care, nutrition, and wellness. PetMeds has long established itself as one of the largest and most trusted pet pharmacies in the United States. Our logistical expertise enables us to facilitate and authorize millions of prescription orders annually, bridging the gap between veterinarians and pet parents. The acquisition of PetCare Rx represents a significant growth opportunity for PetMed Express, as we are now actively working on introducing premium and prescription food to our extensive base of over 2 million pet parents. In terms of care, We recognize the potential of the nascent pet telemedicine market as a substantial opportunity as regulations continue to evolve. We have closely observed the shifting regulatory landscape with more and more states embracing pet telemedicine. Today, we offer our full telemedicine product in over 25 states. Starting in September, we will offer telemedicine in Arizona with Florida, Colorado, and California expected in Q4. These new geographical areas present untapped markets, encompassing a combined population of nearly 150 million people, with 75% of them being pet owners in need of care for their pets. Our partnership with Vester is an important element of our growth strategy, as it has enabled PetMed to become the first pet retailer to offer pet telemedicine to pet parents on a larger scale. This important and strategic bet will continue to evolve alongside regulatory changes, consumer education, and awareness. To further enable our pet parents towards accessing care and achieving wellness for their pets, we are excited to soon be able to offer pet insurance. Our partnership with leading insurance company Pumpkin Insurance, which is now majority owned by JAB Holdings, will bring incremental value to our customers and will bring incremental profitability to pet meds over time. We consider these four pillars, medication, care, nutrition, and wellness, crucial in establishing a unique preferred brand and experience for pet parents everywhere, positioning ourselves as their go-to destination. We are now better positioned to offer our over 2 million pet parents more health options than ever before. We have a wider variety of premium prescription food, health food options, and supplements. Pet parents can book a vet telemedicine appointment on our website, and starting soon through our partnership with Pumpkin Insurance, we can soon begin offering health insurance for our furry family members. Now I'd like to hand the presentation over to Christine.