PETMED EXPRESS INC
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
PETS$1.22-1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001040130-24-000069
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001040130-24-000117
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 74 previous paragraphs and 71 current paragraphs.
33 unchanged; 19 reworded; 17 added; 22 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report on Form 10-K, filed on June 11, 2024, except as noted below:
Current report
Long-lived Assets
Current report
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of the asset to the undiscounted cash flows expected to be generated from the asset. Management determined that no impairment of long-lived assets existed as of September 30, 2024.
Current report
Goodwill and Intangible Assets
Current report
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. The Company is required to assess goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company performs its annual impairment assessment in the fourth quarter of each year. The Company has concluded that it has one reporting unit and has assigned the entire balance of goodwill to this reporting unit. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Current report
The Company performed a goodwill impairment test as of September 30, 2024 initially usinga qualitative assessment. The Company considered its share price decreases as well as the decrease in its quarterly sales from the three months ended June 30, 2024 to be indicative of a risk that the carrying amount of goodwill may not be recoverable. Based on these and other qualitative factors, the Company determined a triggering event occurred that required an interim goodwill impairment test. The Company performed a quantitative impairment test and valuation to identify the fair value of its reporting unit.
Current report
Based on the quantitative assessment, the Company concluded that goodwill was not impaired because the estimated fair value of the reporting unit exceeded its carrying value by approximately$44.8 million. The Company estimated the fair value of its reporting unit using a combination of a discounted cash flow and public company market approach with a 70% and 30% weighting, respectively. A key assumption under the cash flow approach was a 30% weighted average cost of capital. A key assumption under the public company market approach was a 10% control premium.
Current report
The Company’s other indefinite-lived intangible assets are primarily made up of a trade name which was evaluated for impairment using a qualitative assessment and concluded it was not more likely than not that the other indefinite-lived assets were impaired as of September 30, 2024.
Current report
Economic Conditions, Challenges, and Risk
Current report
New order sales decreased by approximately $3.1 million or 29.4%, to approximately $7.4 millionfor the quarter ended September 30, 2024, compared to $10.6 millionfor the quarter ended September 30, 2023. New order sales decreased by approximately $5.4 million or 22.3%, to approximately $18.8 million for the six months ended September 30, 2024, compared to $24.3 million for the six months ended September 30, 2023. The decrease for the quarter ended September 30, 2024 in new order sales is primarily due to a strategic reduction in media spend.
Current report
The Company changed the definition of a new order sale on July 1, 2024, to include sales from customers who have not previously ordered from the Company over the past twelve months compared to the prior definition which was thirty-six months. The reorder and new order sales amounts for the three and six months ended September 30, 2024, and the reorder and new order sales amounts for the three and six months ended September 30, 2023 reflect this new definition.
Current report
Under the previous definition of a new customer, reorder and new order sales were $62.4 million and $6.2 million, respectively, for the three months ended September 30, 2023. Under the previous definition of a new customer, reorder and new order sales were $130.4 million and $14.0 million, respectively, for the six months ended September 30, 2023.
Current report
General and administrative expenses decreased by approximately $1.5 million, or 12.3%, to approximately $10.5 million for the quarter ended September 30, 2024, from approximately $12.0 million for the quarter ended September 30, 2023. The decrease to general and administrative expenses for the quarter ended September 30, 2024 was primarily due to a $1.2 million decrease in stock-based compensation expense, which was primarily related to reduced stock compensation associated with an executive departure, a $0.3 million decrease in payroll, and a $0.4 million decrease in credit card processing fees. These decreases were partially offset a $0.3 million increase in professional fees.
Current report
Other income
Current report
Overview
Current report
We believe that our cash and cash equivalents currently on hand and expected cash flows from future operations will be sufficient to continue operations for at least the next twelve months. We continue to monitor, evaluate, and manage our operating plans, forecasts, and liquidity considering the most recent developments driven by macroeconomic conditions, such as supply chain challenges, inflation, rising interest rates, and geopolitical events. We proactively seek opportunities to improve the efficiency of our operations, take steps to realize internal cost savings, including aligning our staffing needs, creating a more variable cost structure to better support our current and expected future levels of operations and process streamlining.
Current report
Current Sources of Liquidity
Removed paragraphs (22)
Previous report
Restatement
Previous report
As described in the Note 1 of “Notes to Condensed Consolidated Financial Statements,” we have restated our consolidated financial statements and Item 2. Management’s Discussion of Financial Condition and Results of Operations for the three months ended June 30, 2023.
Previous report
Revenue recognition
Previous report
We account for revenue under Accounting Standards Codification ("ASC") Topic 606 ("Revenue from Contracts with Customers"). The Company generates revenue by selling prescription and non-prescription pet medication products, pet food, supplements, supplies, membership fees, and veterinary services. Certain pet supplies offered on our websites are drop shipped to customers. We consider ourself the principal in the arrangement because we control the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product; customer care and support is deemed not to be a material right to the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns, however this is not considered a key judgment. There are no amounts excluded from the variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which the shipment of the product occurs. This key judgment is determined as the shipping point, which represents the point in time where we have a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership.
Previous report
Outbound shipping and handling fees are an accounting policy election and are included in sales as we consider ourself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales. Virtually all of our sales are paid by credit cards and we usually receive the cash settlement in two to three banking days. Credit card sales minimize the accounts receivable balances relative to sales.
Previous report
Membership fees represent the amounts recognized periodically from the PetPlus memberships provided through PetCareRx. In addition to annual membership fees earned under the PetPlus program, we also earns membership fees on a month-to-month basis as earned under our monthly partner program. Memberships provide wholesale pricing, free standard shipping, veterinary telehealth services and local Caremark Pharmacy prescription pickup. The PetPlus membership fee is an annual charge and automatically renews one year from the initial enrollment date. We recognize the revenue ratably over the term of the membership which is generally one year.
Previous report
We maintain an allowance for doubtful accounts for losses that we estimate will arise from customers’ inability to make required payments, arising from either credit card chargebacks or insufficient funds checks. We determine our estimates of the uncollectibility of accounts receivable by analyzing historical and current bad debts and economic trends in compliance with the provisions of ASC Topic 326 ("Financial Instruments - Credit Losses"). The allowance for doubtful accounts was approximately $109 thousand at June 30, 2024, compared to $273 thousand at March 31, 2024.
Previous report
Business Combinations
Previous report
We account for our business combinations using the acquisition method of accounting in accordance with ASC Topic 805 ("Business Combinations"). The purchase price is allocated to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination are included in our unaudited condensed consolidated financial statements from the date of acquisition.
Previous report
Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with the determination of fair values, we may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain obligations assumed. Acquisition-related transaction costs incurred by us are not included as a component of consideration transferred but are accounted for as an operating expense in the period in which the costs are incurred.
Previous report
Use of Estimates
Previous report
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the attached unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
Previous report
Acquisition
Previous report
On April 3, 2023, we acquired 100% of the issued and outstanding equity interests of PetCareRx, Inc. (“PetCareRx”), a New York corporation and a leading supplier of pet food, pet medications, and supplies. The acquisition was completed pursuant to an Agreement and Plan of Merger ("Merger Agreement") by and among us, Harry Merger Sub, Inc., a New York corporation and a wholly-owned subsidiary of the Company ("Merger Sub"), PetCareRx and Jeanette Loeb (as representative of the PetCareRx equity holders). The Merger Agreement provided for our acquisition of PetCareRx pursuant to the merger of Merger Sub with and into PetCareRx, with PetCareRx as the surviving corporation. The aggregate purchase price consideration was $36.1 million and was funded from our cash on hand.
Previous report
The fair values of intangible assets acquired consist of a trade name, customer relationships, and developed technology, which were estimated by applying various discounted cash flow models such as the relief from royalty rate for the trade name, the multi-period excess earnings method for the customer relationships, and the cost to replace method for the developed technology. The fair value measurements were based on significant inputs that are not observable (Level 3). The assumptions made by management in determining the fair value of intangible assets included a discount rate of 12% based on the weighted average cost of capital.
Previous report
Income taxes
Previous report
We account for income taxes under the provisions of ASC Topic 740 (“Accounting for Income Taxes”), which generally requires recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in our condensed consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting carrying values and the tax bases of assets and liabilities and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse.
Previous report
As a result of the acquisition, we performed an Internal Revenue Code Section 382 analysis to determine if the net operating losses carried forward will have a utilization limitation. Any limitation may result in the expiration of a portion of the federal net operating loss carryforward before utilization, which would reduce our gross deferred tax assets. As of April 3, 2023, and prior to the acquisition, PetCareRx had approximately $96.0 million of net operating losses and $1.9 million of disallowed interest expense. The results of the Section 382 analysis determined the net operating loss and disallowed interest expense in total, would be limited and reduced to $14.5 million.
Previous report
Economic Conditions, Challenges, and Risks
Previous report
(1) In April 2024, the Company and its former CEO entered into a Transition and Separation Agreement pursuant to which the Company cancelled the 510,000 restricted shares with a market condition and accelerated vesting on the 30,000 remaining unvested time-restricted shares which otherwise would not have vested. Cancellation and acceleration of these shares resulted in an $8.7 million reduction of compensation expense in the three months ended June 30, 2024.
Previous report
New order sales decreased by approximately $2.2 million or 28.4%, to approximately $5.6 millionfor the quarter ended June 30, 2024, compared to $7.8 millionfor the quarter ended June 30, 2023. The decrease in new order sales is primarily due to the combination of lower gross media spend resulting in a decrease in new customers acquired.
Previous report
Other income (As Restated)
Reworded paragraphs (19)
Previous wording
We market our products through national advertising campaigns which aim to increase the recognition of the “PetMeds®” brand name, and "PetCareRx" brand name, increase traffic on our websites atwww.petmeds.com andwww.petcarerx.com, acquire new customers, and maximize repeat purchases. Our sales consist of products sold mainly to retail consumers. The average purchase was approximately $97 for the quarters ended June 30, 2024, and June 30, 2023.
Current wording
We market our products through national advertising campaigns which aim to increase the recognition of the “PetMeds®” brand name, and "PetCareRx" brand name, increase traffic to our websites atwww.petmeds.com andwww.petcarerx.com, acquire new customers, and maximize repeat purchases. Our sales consist of products sold mainly to retail consumers. The average purchase was approximately $96 and $94 for the quarters ended September 30, 2024, and September 30, 2023, respectively.
Previous wording
We believe it is useful to exclude non-cash charges, such as net share-based compensation expense, depreciation and amortization from our adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax provision and interest income (expense), as neither are components of our core business operations. We also believe that it is useful to exclude other non-operational expenses, including acquisition costs related to PetCareRx, employee severance and estimated state sales tax accrual as these items are not indicative of our ongoing operations. Adjusted EBITDA has limitations as a financial measure, and these non-GAAP measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
Current wording
We believe it is useful to exclude non-cash charges, such as net stock-based compensation expense, depreciation and amortization from our adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax provision and interest income (expense), as neither are components of our core business operations. We also believe that it is useful to exclude other non-operational expenses, including acquisition costs related to PetCareRx, employee severance and estimated state sales tax accruals and settlements as these items are not indicative of our ongoing operations. Adjusted EBITDA has limitations as a financial measure, and these non-GAAP measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
Previous wording
(2) Included in interest income, net is $410 thousand of interest expense related to the sales tax liability and $505 thousand of interest income for the three months ended June 30, 2024. This compares to $426 thousand of interest expense related to the sales tax liability and $620 thousand of interest income for the three months ended June 30, 2023.
Current wording
(1) Included in interest income, net is $0.4 million of interest expense related to the sales tax liability and $0.6 million of interest income for the three months ended September 30, 2024. This compares to $0.4 million of interest expense related to the sales tax liability and $0.6 million of interest income for the three months ended September 30, 2023.
Previous wording
Three Months Ended June 30, 2024 Compared With Three Months Ended June 30, 2023
Current wording
Three Months Ended September 30, 2024 Compared With Three Months Ended September 30, 2023 and Six Months Ended September 30, 2024 Compared With Six Months Ended September 30, 2023
Previous wording
Sales decreased by approximately$10.3 million, or 13.2%, to approximately $68.0 million for the quarter ended June 30, 2024, compared to approx imately$78.2 million for the quarter ended June 30, 2023. The decrease in sales for the quarter ended June 30, 2024 reflects both broader macroeconomic factors, higher consumer promotional usage and specific internal challenges.
Current wording
Sales decreased by approximately$11.4 million, or 16.1%, to approximately $59.6 million for the quarter ended September 30, 2024, compared to approx imately$71.0 million for the quarter ended September 30, 2023. Sales decreased by approximately $21.7 million, or 14.6%, to approximately $127.5 million for the six months ended September 30, 2024, compared to approx imately$149.2 million for the quarter ended September 30, 2023. The decrease in sales for the quarter ended September 30, 2024 reflects broader macroeconomic factors partially offset by lower consumer promotional usage. The decrease in sales for the six months ended September 30, 2024 reflects both broader macroeconomic factors and higher consumer promotional usage.
Previous wording
Reorder sales decreased by approximately $8.0 million, or 11.8%, to approximately $60.0 million for the three months ended June 30, 2024, compared to approximately $68.0 million for the three months ended June 30, 2023. The decrease in reorder sales is primarily due to a decline in prescription medication sales.
Current wording
Reorder sales decreased by approximately $8.0 million, or 13.7%, to approximately $50.1 million for the quarter ended September 30, 2024, compared to approximately $58.0 million for the quarter ended September 30, 2023. Reorder sales decreased by approximately $15.9 million, or 13.2%, to approximately $104.3 million for the six months ended September 30, 2024, compared to approximately $120.2 million for the forsix months ended September 30, 2023. The decrease in reorder sales is primarily due to a decline in prescription medication sales.
Previous wording
We acquired approximately 75,000 new customers for the quarter ended June 30, 2024 compared to approximately 86,000 new customers for the quarter ended June 30, 2023. The following tables illustrates sales by various sales classifications:
Current wording
We acquired approximately 77,000 new customers for the quarter ended September 30, 2024 compared to approximately 113,000 new customers for the quarter ended September 30, 2023. We acquired approximately 197,000 new customers for the six months ended September 30, 2024 compared to approximately 250,000 new customers for the six months ended September 30, 2023. The following tables illustrates sales by various sales classifications:
Previous wording
AutoShip & Save subscription sales as a percentage of total sales was 52.5% of net sales for the most recent quarter ended June 30, 2024, up from 48.7% of net sales for the same period last year and down from 53.5% of net sales sequentially in the prior quarter.
Current wording
AutoShip & Save subscription sales as a percentage of total sales was 53.3% of net sales for the most recent quarter ended September 30, 2024, up from 51.0% of net sales for the same period last year.
Previous wording
Cost of sales decreased by approximately$5.7 million, or 10.3%, to approximately $50.0 million for the quarter ended June 30, 2024, from approximately $55.7 million for the quarter ended June 30, 2023. Cost of sales, as a percentage of sales, was 73.6% for the quarter ended June 30, 2024, compared to 71.2% for the quarter ended June 30, 2023. The cost of sales, as a percentage of sales, increased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to an increase in discount activity in the most recent period.
Current wording
Cost of sales decreased by approximately$8.7 million, or 17.0%, to approximately $42.3 million for the quarter ended September 30, 2024, from approximately $50.9 million for the quarter ended September 30, 2023. Cost of sales decreased by approximately $14.4 million, or 13.5%, to approximately $92.2 million for the six months ended September 30, 2024, from approximately $106.7 million for the six months ended September 30, 2023. Cost of sales, as a percentage of sales, was 70.9% for the quarter ended September 30, 2024, compared to 71.7% for the quarter ended September 30, 2023. Cost of sales, as a percentage of sales, was 72.3% for the six months ended September 30, 2024, compared to 71.5% for the six months ended September 30, 2023. The cost of sales, as a percentage of sales, decreased for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 primarily due to an increase in vendor promotional activity in the most recent period. The cost of sales, as a percentage of sales, increased for the six months ended September 30, 2024 compared to the six months ended September 30, 2023 primarily due to an increase in discount activity in the most recent period.
Previous wording
Gross profit decreased by approximately $4.6 million, or 20.2%, to approximately $18.0 million for the quarter ended June 30, 2024, from approximately $22.5 million for the quarter ended June 30, 2023. The gross profit decreases for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 were primarily due to lower sales and a lower gross margin over the same period due to an increase in discount activity in the most recent quarter.
Current wording
Gross profit decreased by approximately $2.8 million, or 13.7%, to approximately $17.3 million for the quarter ended September 30, 2024, from approximately $20.1 million for the quarter ended September 30, 2023. Gross profit decreased by approximately $7.3 million, or 17.2%, to approximately $35.3 million for the six months ended September 30, 2024, from approximately $42.6 million for the six months ended September 30, 2023.The gross profit decreases for the quarter and six months ended ended September 30, 2024 compared to the quarter ended and six months ended September 30, 2023 were primarily due to lower sales. The gross margin percentage increased by approximately 0.8%, to approximately 29.1% for the quarter ended September 30, 2024, from approximately 28.3% for the quarter ended September 30, 2023, primarily due to favorable sales mix and lower discount activity in the most recent quarter.
Previous wording
General and administrative expenses decreased by approximately $10.8 million, or 69.0%, to approximately $4.9 million for the quarter ended June 30, 2024, from approximately $15.7 million for the quarter ended June 30, 2023. The decrease to general and administrative expenses for the quarter ended June 30, 2024 was primarily due to a $10.0 million decrease in stock compensation expense, of which $8.7 million was from the stock compensation reversal associated with an executive departure, a $0.2 million decrease in payroll expenses of which $0.2 million was due to higher severance in the previous year, $0.2 million lower professional fees of which $0.9 million was from higher acquisition/ partnership transaction on other items in the previous year, and a $0.5 million decrease of variable and other overhead expenses.
Current wording
General and administrative expenses decreased by approximately $12.3 million, or 44.5%, to approximately $15.4 million for the six months ended September 30, 2024, from approximately $27.7 million for the six months ended September 30, 2023. The decrease to general and administrative expenses for the six months ended September 30, 2024 was primarily due to an $11.1 million decrease in stock-based compensation expense, of which $8.7 million was from the stock compensation reversal associated with an executive departure, a $0.5 million decrease in credit card processing fees which were driven by lower sales, and a $0.6 million decrease in payroll.
Previous wording
Advertising expenses decreased by approximately $0.3 million, or 3.8%, to approximately $7.0 million for the quarter ended June 30, 2024, from approximately $7.3 million for the quarter ended June 30, 2023. The decrease for the quarter can be mainly attributed to lower gross media spend partially offset by lower marketing funded by manufacturers. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was $93 for the quarter ended June 30, 2024 compared to $84 for the quarter ended June 30, 2023. The increase to customer acquisition costs for the quarter ended June 30, 2024, was due to a less efficient variable marketing spend. The advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future sales, whereas a less favorable advertising environment may negatively impact future sales. As a percentage of sales, advertising expense was 10.3% and 9.3% for the quarters ended June 30, 2024 and 2023, respectively. The advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability.
Current wording
Advertising expenses decreased by approximately $0.9 million, or 16.4%, to approximately $4.6 million for the quarter ended September 30, 2024, from approximately $5.5 million for the quarter ended September 30, 2023. The decrease for the quarter can be mainly attributed to lower gross media spend and by lower marketing funded by manufacturers. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was $60 for the quarter ended September 30, 2024 compared to $49 for the quarter ended September 30, 2023. The increase to customer acquisition costs for the quarter ended September 30, 2024, was due to a less efficient variable marketing spend. The advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future sales, whereas a less favorable advertising environment may negatively impact future sales. As a percentage of sales, advertising expense was 7.7% and 7.8% for the quarters ended September 30, 2024 and 2023, respectively. The advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability.
Previous wording
Depreciation and amortization expense was $1.7 million and $1.7 million for the quarters ended June 30, 2024 and June 30, 2023, respectively.
Current wording
Depreciation and amortization expense was $1.7 million and $1.7 million for the quarters ended September 30, 2024 and September 30, 2023, respectively. Depreciation and amortization expense was $3.4 million and $3.4 million for the six months ended September 30, 2024 and September 30, 2023, respectively.
Previous wording
Other income decreased to approximately $0.3 million for the quarter ended June 30, 2024 compared to approximately $0.7 million for the quarter ended June 30, 2023. The decrease to other income for the quarter was due to slightly lower invested balances, and a one time payment received in prior year. Interest income may decrease in the future based on several factors, including utilization of our cash balances on future investments or partnerships, or on our operating activities. Additionally, interest income could increase or decrease if the current interest rate environment changes.
Current wording
Other income remained unchanged for the quarter ended September 30, 2024 and 2023. Other income decreased to approximately $0.7 million for the six months ended September 30, 2024 compared to approximately $1.1 million for the six months ended September 30, 2023.The decrease to other income for the quarter was due to slightly lower invested balances, and a one time payment received in prior year. Interest income may decrease in the future based on several factors, including utilization of our cash balances on future investments or partnerships, or on our operating activities. Additionally, interest income could increase or decrease if the current interest rate environment changes.
Previous wording
Provision for income taxes (As Restated)
Current wording
Provision for income taxes
Previous wording
For the quarters ended June 30, 2024 and 2023, the Company recorded an income tax provision of approximately $1.0 million and a tax benefit of approximately $0.3 million, respectively. The increase in the tax provision for the three months ended June 30, 2024 is related to the cancellation of the former CEO’s performance stock units resulting in additional $8.7 million of income during the quarter. The effective tax rate for the quarter ended June 30, 2024 was approximately 20.3%, compared to approximately 20.4% for the quarter ended June 30, 2023.
Current wording
For the quarters ended September 30, 2024 and 2023, the Company recorded an income tax benefit of approximately $1.4 million and a tax provision of approximately $0.6 million, respectively. For the six months ended September 30, 2024 and 2023, the Company recorded an income tax benefit of approximately $0.4 million and a tax provision of approximately $0.3 million, respectively. The decrease in the tax provision for the three and six months ended September 30, 2024 is related to the cancellation of the former CEO’s performance stock units resulting in additional $8.7 million of income during the quarter. The effective tax rate for the quarter ended September 30, 2024 was approximately (151.5)%, compared to approximately 44.1% for the quarter ended September 30, 2023.
Previous wording
Our working capital at June 30, 2024 and March 31, 2024 was $19.3 million and $21.5 million, respectively. The $2.2 million decrease in working capital was attributable to the $13.8 million decrease in current liabilities, primarily accounts payable, offset by the $16.0 million decrease in current assets, primarily cash and inventory. Net cash used in operating activities was $8.5 million for the three months ended June 30, 2024, compared to cash provided by operating activities of $0.6 million for the three months ended June 30, 2023. The $9.1 million decrease in cash provided by operating activities is due to the $4.9 million increase in net income reduced by $9.2 million of non-cash operating adjustments and offset by the $4.8 million increase in current liabilities net of current assets excluding cash. Net cash used in investing activities was $0.7 million for the three months ended June 30, 2024, compared to $37.0 million used in investing activities for the three months ended June 30, 2023. The change in net cash used in investing activities is primarily related to the PetCareRx acquisition and an additional investment in Vetster in the prior year. Net cash used in financing activities was $0.1 million and $6.1 million for the three months ended June 30, 2024 and the three months ended June 30, 2023, respectively, due to the payment of an aggregate $0.00 per share dividend for the three months ended June 30, 2024, and an aggregate $0.30 per share dividend for the three months ended June 30, 2023.
Current wording
Our working capital at September 30, 2024 and March 31, 2024 was $21.9 million and $21.5 million, respectively. The $0.5 million increase in working capital was attributable to the $22.9 million decrease in current assets, primarily inventory and prepaid expenses, which were offset by the $23.3 million decrease in current liabilities, primarily accounts payable. Net cash used in operating activities was $1.1 million for the six months ended September 30, 2024, compared to cash used in operating activities of $0.2 million for the six months ended September 30, 2023. The inventory decline was attributable to the Company’s SKU rationalization strategy to reduce the amount of inventory on hand. The $0.9 million decrease in cash provided by operating activities is due to the $6.5 million increase in net income reduced by $11.5 million of non-cash operating adjustments and offset by the $4.1 million increase in current liabilities net of current assets excluding cash. Net cash used in investing activities was $1.9 million for the six months ended September 30, 2024, compared to $38.0 million used in investing activities for the six months ended September 30, 2023. The change in net cash used in investing activities is primarily related to the PetCareRx acquisition and an additional investment in Vetster in the prior year. Net cash used in financing activities was $0.2 million and $12.4 million for the six months ended September 30, 2024 and the six months ended September 30, 2023, respectively, due to the payment of an aggregate $0.60 per share dividend for the six months ended September 30, 2023.
Previous wording
On October 26, 2023, our Board of Directors elected to suspend the quarterly dividend indefinitely. This move is intended to focus use of the Company’s existing cash flow on growth initiatives and other, higher return initiatives. The board reviews and discusses the capital allocation needs of the Company on a quarterly basis and as part of that review, has determined to suspend the dividend indefinitely.The declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors.
Current wording
The board reviews and discusses the capital allocation needs of the Company on a quarterly basis and as part of that review on October 26, 2023, our Board of Directors elected to suspend the quarterly dividend indefinitely. This move was intended to focus use of the Company’s existing cash flow on growth initiatives and other, higher return initiatives. The declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors.
Previous wording
As of June 30, 2024, we had $1.3 million in outstanding lease commitments assumed in the PetCarerRx acquisition for the leases on two buildings. Other than the foregoing leases, we are not currently bound by any material long-term or short-term commitments for the purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any future increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Our primary source of working capital is cash from operations. We presently have no alternative sources of working capital and have no commitments.
Current wording
As of September 30, 2024, we had $1.2 million in outstanding lease commitments assumed in the PetCareRx acquisition for the leases on two buildings. Other than the foregoing leases, we are not currently bound by any material long-term or short-term commitments for the purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any future increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Our primary source of working capital is cash from operations. We presently have no alternative sources of working capital and have no commitments.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
(1) Included in interest income, net is $0.8 million of interest expense related to the sales tax liability and $1.1 million of interest income for the six months ended September 30, 2024. This compares to $0.8 million of interest expense related to the sales tax liability and $1.2 million of interest income for the six months ended September 30, 2023.
Current report — wording carried from elsewhere
Advertising expenses decreased by approximately $1.2 million, or 9.2%, to approximately $11.6 million for the six months ended September 30, 2024, from approximately $12.8 million for the six months ended September 30, 2023. The decrease can be mainly attributed to lower gross media spend partially offset by lower marketing funded by manufacturers. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was $59 for the six months ended September 30, 2024 compared to $51 for the six months ended September 30, 2023. As a percentage of sales, advertising expense was 9.1% and 8.6% for thesix months ended September 30, 2024 and 2023, respectively.