PETS
#Thank you.
Good morning.
I would like to welcome everybody here today.
Before I turn the call over to Mendo <UNK>, our President and Chief Executive Officer, I would 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 on the call.
Also, certain information that will be included in this press conference may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 or the Securities and Exchange Commission 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 future results may vary significantly based on a number of factors that may cause the actual results or events to be materially different from future results, performance or achievements expressed or implied by these statements.
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.
Now let me introduce today's speaker, Mendo <UNK>, President and Chief Executive Officer of 1-800-PetMeds.
Mendo.
Thank you, <UNK>.
Welcome, everyone, and thank you for joining us.
Today, we'll review the highlights of our financial results.
We'll compare our fourth fiscal quarter and fiscal year ended on March 31, 2018, to last year's quarter, our fiscal year ended on March 31, 2017.
For the fourth fiscal quarter ended on March 31, 2018, our sales were $67.3 million compared to sales of $63 million for the same period the prior year, an increase of 6.8%.
For the fiscal year ended on March 31, 2018, sales were $273.8 million compared to $249.2 million for the prior fiscal year, an increase of 9.9%.
The increase in sales for the quarter was due to an increase in reorder sales, and the increase in sales for the fiscal year was due to increases in new order and reorder sales.
The average order value was approximately $89 for the quarter compared to $86 for the same quarter the prior year.
For the fourth fiscal quarter, net income was $10.2 million or $0.50 diluted per share compared to $7.5 million or $0.37 diluted per share for the same quarter of the prior year, an increase to net income of 36%.
For the fiscal year, net income was $37.3 million or $1.82 diluted per share compared to $23.8 million or $1.17 diluted per share a year ago, an increase to net income of 57%.
The increases in net income for the quarter and the fiscal year were mainly due to higher gross profit margins.
In addition, the new tax law helped boost our earnings.
New order sales decreased by 5% to $10.3 million for the quarter compared to $10.9 million for the same period the prior year.
For the fiscal year, new order sales increased by 8% to $46.3 million compared to $42.9 million for the prior year.
Reorder sales increased by 9.4% to $57 million for the quarter compared to reorder sales of $52.1 million for the same quarter of the prior year.
For the fiscal year, reorder sales increased by 10.3% to $227.5 million compared to $206.3 million for the prior year.
We acquired approximately 113,000 new customers in our fourth fiscal quarter compared to 126,000 for the same period the prior year, and we acquired approximately 521,000 new customers in the fiscal year compared to 514,000 for the prior year.
For the quarter, approximately 85% of our sales were generated on our website compared to 83% for the same period the prior year.
The seasonality in our business is due to the proportion of flea, tick and heartworm medications in our product mix.
Spring and summer are considered peak season, with fall and winter being the off-season.
For the fourth fiscal quarter, our gross profit as a percent of sales was 37% compared to 35.1% for the same period a year ago.
For the fiscal year, our gross profit as a percent of sales was 35.7% compared to 31.8% for the prior year.
The percentage increases for the quarter and the fiscal year can mainly be attributed to a shift in sales to higher margin items.
Our general and administrative expenses as a percent of sales was relatively flat at 9% for the quarter compared to 8.9% for the same quarter the prior year.
And for the fiscal year, it was at 8.9% compared to 9.2% for the prior year.
For the quarter, we spent about the same, $4.3 million in advertising compared to $4.4 million for the same quarter of the prior year.
For the fiscal year, our spending was $19.3 million for advertising compared to $17.7 million for the prior fiscal year, an increase of 9%.
We increased advertising for the year to stimulate new order sales.
Advertising cost of acquiring a customer for the quarter was approximately $38 compared to $35 for the same quarter the prior year.
And for the fiscal year, it was $37 compared to $34 for the prior fiscal year.
The increases are mainly due to increases in advertising costs.
We had $77.9 million in cash and cash equivalents and $23.3 million in inventory, with no debt as of March 31, 2018.
Net cash from operations for the fiscal year was $37.4 million compared to $47.2 million for the prior fiscal year.
The majority of the decrease was due to accounts payable staying relatively flat and an increase in inventory compared to the last fiscal year.
Capital expenditures were approximately $700,000 for the fiscal year.
This ends the financial review.
Operator, we are ready to take questions.
It is, yes.
It is a shift to higher-margin items, next-generation medications.
Our margins, going forward, will depend on the sales product mix and also how the competition behaves price-wise.
The market gets more competitive typically during spring and summer.
It's possible.
The competition picked up in the last week or 2.
So we'll see what happens.
The weather was colder, as you pointed out.
And the colder weather negatively impacts demand, especially on flea and tick and somewhat on heartworm meds, so we were not as aggressive, as you noticed.
We spent about the same dollars in advertising as we did the last ---+ same quarter last year.
Yes.
We just talked about the colder weather typically negatively impacts demand.
So we were not as aggressive.
I think really the biggest change, as Mendo actually spoke about it on his prepared remarks, is really a change in payables compared to some last year versus this year.
Our inventory also contributed to it as well.
I think those were the main factors with the cash flow from operations.
For this current fiscal year, you mean.
If you look at the G&A, there was an increase mainly on payroll mainly due to stock-based compensation because of the stock price going up during the fiscal year compared to the prior year.
And also credit card processing fees were up due to increased sales.
So we'll see what happens.
We anticipate spending more on advertising compared to the last fiscal year.
The weather was colder.
So the colder weather negatively impacts demand on the categories flea and tick and somewhat on heartworm.
So that's why our advertising spending was flat for the March quarter.
It's normal, typical.
And spring, typically, competition increases.
It's ---+ I mean, the sales are shifting to higher-priced items.
So it's going to depend on the mix.
Also, we're fairly successful on selling multiple packs.
Thank you.
In fiscal 2019, we are focusing on continuing to increase sales and improve our service level.
This wraps up today's conference call.
Thank you for joining us.
Operator, this ends the conference call.
