PetMed Express, Inc. (NASDAQ: PETS) Q4 2025 Earnings Call | 06/11/2025

PetMed Express Q3 FY25 Earnings Call Summary

PetMed Express reported progress on its turnaround strategy in Q3 FY25, focusing on returning to profitability, enhancing the customer experience, and optimizing operations. While sales declined due to reduced marketing spend, the company achieved improved profitability and is making foundational investments for future growth.

Key Financial Highlights (Q3 FY25 vs. Q3 FY24):

• Net Sales: $53 million, down 19% from $65.3 million, primarily due to a 34% reduction in gross advertising spend.
• New Customers: Welcomed approximately 63,000 new customers with shipped orders during the quarter.
• Average Order Value (AOV): Gross order AOV increased by 7% to $108; shipped order AOV rose by 4.3% to $97.
• Gross Profit: $14.9 million, down from $17.9 million. As a percentage of sales, gross profit improved by 80 basis points to 28.1% due to a favorable sales mix and lower discount activity.
• General & Administrative (G&A) Expenses: $10.8 million, a 19.7% decrease from $13.4 million, driven by lower stock-based compensation, reduced payroll, and decreased credit card processing fees.
• Advertising Expenses: $3 million, significantly down from $5.8 million, reflecting reduced gross media spend and higher third-party partner funding.
• Net Loss: $700,000 (3 cents per diluted share), a meaningful improvement from a $2 million loss (10 cents per diluted share) in the prior year.
• Adjusted EBITDA: Positive $2 million, a substantial improvement from $900,000 in the prior year period.
• Balance Sheet: Strong, with $50 million in cash and cash equivalents and no debt as of December 31, 2024.
• Inventory Efficiency: Inventory turn rose to 1.5 in Q3 (from 0.9 last year), with a 66% reduction in total inventory on hand ($11.8 million vs. $34.6 million last year).

Strategic and Operational Progress:

• Profitability Focus: High priority on returning to profitability through cost-cutting and consolidation, targeting $5 million in annualized savings from integrating PetCareRx operations. Remains on track to meet this goal.
• Customer Experience & Technology:
  • Executed a full website refresh and relaunched iOS/Android mobile apps.
  • Implemented "Buy Now, Pay Later" payment option.
  • Enhanced the veterinary portal and launched PetHealthMD.com for pet health guidance.
  • Resolved OMS issues and successfully replatformed the Autoship recurring subscription program, leading to improvements in sign-ups and credit card rejection rates.
• Product & Inventory Optimization: Eliminated 4,000 underperforming SKUs to make room for high-value products, which did not significantly impact revenue.
• Operational Efficiency: Integrated an AI-driven workforce management tool in call center operations, increasing sales per agent by 18.8% and AOV by 3.4% for call center-driven orders.
• Marketing Reset: Strategically pulled back on aggressive promotions during a competitive holiday season to prioritize margin protection. Refining acquisition strategies through new email designs, segmentation, personalization, and dynamic content (early indicators show promise with 9% increase in revenue per email in January).
• Targeting New Demographics: Actively transitioning messaging and platforms to capture younger, digitally-focused millennial and Gen Z consumers who are increasingly spending on pets.
• Customer Behavior: Acknowledged continued consumer pressure, with reduced vet visits and prescriptions. However, high-household-income consumers are maintaining spending.
• Future Investments: Anticipates increased investments in Q4 and beyond to enhance customer engagement, acquisition, and underlying infrastructure (e.g., last-mile delivery) to meet evolving consumer expectations for timely product delivery.

PetMed Express reiterated its commitment to pet health and wellness, supporting shelters, and delivering value to shareholders through its transformation efforts.