PETMED EXPRESS INC
For the period ended Dec 31, 2024. Filed Feb 10, 2025.
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.
Dec 31, 2024 · Filed Feb 10, 2025
PETS$1.25+2.5%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious 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 OPERATIONSCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-10.
0001040130-25-000014
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 71 previous paragraphs and 70 current paragraphs.
37 unchanged; 30 reworded; 2 added; 4 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 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 (2)
Current report
Net Sales
Current report
Cost of sales decreased by approximately$9.4 million, or 19.7%, to approximately $38.1 million for the quarter ended December 31, 2024, from approximately $47.4 million for the quarter ended December 31, 2023. Cost of sales decreased by approximately $23.8 million, or 15.4%, to approximately $130.3 million for the nine months ended December 31, 2024, from approximately $154.1 million for the nine months ended December 31, 2023. Cost of sales, as a percentage of sales, was 71.9% for the quarter ended December 31, 2024, compared to 72.6% for the quarter ended December 31, 2023. Cost of sales, as a percentage of sales, was 72.2% for the nine months ended December 31, 2024, compared to 71.8% for the nine months ended December 31, 2023. The year over year decline for cost of sales, as a percentage of sales for the quarter ended December 31, 2024 compared to the quarter ended December 31, 2023 was primarily due to lower discount activity and favorable sales mix. Theincrease in cost of sales, as a percentage of sales, for the nine months ended December 31, 2024 compared to the nine months ended December 31, 2023 was primarily due to an increase in discount activity during the first six months of the fiscal year.
Removed paragraphs (4)
Previous 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.
Previous 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.
Previous report
Sales
Previous report
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.
Reworded paragraphs (30)
Previous wording
PetMed Express, Inc. and subsidiaries, d/b/a PetMeds®, is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, foods, supplements, supplies and vet services for dogs, cats and horses. PetMeds markets and sells directly to consumers through its websites, toll-free numbers, and mobile application. We offer consumers an attractive alternative for obtaining pet medications, foods, and supplies in terms of convenience, price, speed of delivery, and valued customer service.
Current wording
PetMed Express, Inc. and subsidiaries, d/b/a PetMeds®, and PetCareRx, Inc. is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, foods, supplements, supplies and vet services for dogs, cats and horses. PetMeds markets and sells directly to consumers through its websites, toll-free numbers, and mobile application. We offer consumers an attractive alternative for obtaining pet medications, foods, and supplies in terms of convenience, price, speed of delivery, and valued customer service.
Previous wording
Presently, our product line includes approximately 15,000 of the most popular pet medications, health products, food and supplies for dogs, cats, and horses.
Current wording
Presently, our product line includes approximately 12,000 of the most popular pet medications, health products, food and supplies for dogs, cats, and horses.
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 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.
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 $97 and $93 for the quarters ended December 31, 2024, and December 31, 2023, respectively.
Previous wording
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 wording
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 the Company concluded that it was not more likely than not that the other indefinite-lived assets were impaired as of December 31, 2024.
Previous wording
Macroeconomic factors, including inflation, increased interest rates, significant capital market and supply chain volatility, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify. In addition, rising fuel, utility, and food costs, rising interest rates, and recessionary fears may impact customer demand and our ability to forecast consumer spending patterns. We also expect the current macroeconomic environment and enterprise customer cost optimization efforts to impact our revenue growth rates. We expect some or all of these factors to continue to impact our operations for the remainder of fiscal 2025.
Current wording
Macroeconomic factors, including inflation, increased interest rates, significant capital market and supply chain volatility, and political, global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify. In addition, rising fuel, utility, and food costs, rising interest rates, and recessionary fears may impact customer demand and our ability to forecast consumer spending patterns. We also expect the current macroeconomic environment and enterprise customer cost optimization efforts to impact our revenue growth rates. We expect some or all of these factors to continue to impact our operations for the remainder of fiscal 2025.
Previous wording
The following should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain operating data appearing in our unaudited Condensed Consolidated Statements of Income (Loss):
Current wording
The following should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain operating data appearing in our unaudited Condensed Consolidated Statements of (Loss) Income:
Previous wording
To provide investors and the market with additional information regarding our financial results, we have disclosed (see below) adjusted EBITDA, a non-GAAP financial measure that we calculate as net income excluding share-based compensation expense, depreciation and amortization, income tax provision, interest income (expense), and other non-operational expenses. We have provided reconciliations below of net income to adjusted EBITDA, the most directly comparable GAAP financial measures.
Current wording
To provide investors and the market with additional information regarding our financial results, we have disclosed (see below) adjusted EBITDA, a non-GAAP financial measure that we calculate as net income excluding share-based compensation expense (benefit), depreciation and amortization, income tax provision, interest income (expense), and other non-operational expenses. We have provided reconciliations below of net income to adjusted EBITDA, the most directly comparable GAAP financial measures.
Previous 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:
Current wording
We believe it is useful to exclude non-cash charges, such as net stock-based compensation expense (benefit), 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
The following tables present a reconciliation of net income (loss), the most directly comparable GAAP measure, to adjusted EBITDA for each of the periods indicated:
Current wording
The following tables present a reconciliation of net (loss) income , the most directly comparable GAAP measure, to adjusted EBITDA for each of the periods indicated:
Previous 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.
Current wording
(1) Included in interest income, net is $0.4 million of interest expense related to the sales tax liability and $0.5 million of interest income for the three months ended December 31, 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 December 31, 2023.
Previous wording
(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 wording
(1) Included in interest income, net is $1.2 million of interest expense related to the sales tax liability and $1.5 million of interest income for the nine months ended December 31, 2024. This compares to $1.3 million of interest expense related to the sales tax liability and $1.7 million of interest income for the nine months ended December 31, 2023.
Previous 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
Current wording
Three Months Ended December 31, 2024 Compared With Three Months Ended December 31, 2023 and Nine Months Ended December 31, 2024 Compared With Nine Months Ended December 31, 2023
Previous 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.
Current wording
Sales decreased by approximately$12.3 million, or 18.9%, to approximately $53.0 million for the quarter ended December 31, 2024, compared to approx imately$65.3 million for the quarter ended December 31, 2023. Sales decreased by approximately $34.1 million, or 15.9%, to approximately $180.5 million for the nine months ended December 31, 2024, compared to approx imately$214.6 million for the nine months ended December 31, 2023. The decrease in sales for the quarter ended December 31, 2024 was primarily driven by an strategic reduction in gross advertising as we reset our marketing foundation for sustainable profitability. The decrease in sales for the nine months ended December 31, 2024 reflects a strategic reduction in advertising, broader macroeconomic factors, and higher consumer promotional usage.
Previous 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.
Current wording
Reorder sales decreased by approximately $9.0 million, or 16.6%, to approximately $45.1 million for the quarter ended December 31, 2024, compared to approximately $54.1 million for the quarter ended December 31, 2023. Reorder sales decreased by approximately $24.9 million, or 14.3%, to approximately $149.4 million for the nine months ended December 31, 2024, compared to approximately $174.3 million for the nine months ended December 31, 2023. The decrease in reorder sales for the three and nine months ended December 31, 2024 is primarily due to a decline in prescription medication sales.
Previous wording
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 wording
New order sales decreased by approximately $2.7 million or 31.0%, to approximately $6.1 million for the quarter ended December 31, 2024, compared to $8.8 millionfor the quarter ended December 31, 2023. New order sales decreased by approximately $8.1 million or 24.6%, to approximately $24.9 million for the nine months ended December 31, 2024, compared to $33.1 million for the nine months ended December 31, 2023. The decrease for the quarter ended December 31, 2024 in new order sales is primarily due to a strategic reduction in advertising.
Previous 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:
Current wording
We acquired approximately 63,000 new customers for the quarter ended December 31, 2024 compared to approximately 97,000 new customers for the quarter ended December 31, 2023. We acquired approximately 260,000 new customers for the nine months ended December 31, 2024 compared to approximately 347,000 new customers for the nine months ended December 31, 2023. The following tables illustrates revenue by various revenue classifications:
Previous wording
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 wording
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 nine months ended December 31, 2024, and the reorder and new order sales amounts for the three and nine months ended December 31, 2023 reflect this new definition.
Previous wording
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 wording
Under the previous definition of a new customer, reorder and new order sales were $57.7 million and $5.2 million, respectively, for the three months ended December 31, 2023. Under the previous definition of a new customer, reorder and new order sales were $188.1 million and $19.2 million, respectively, for the nine months ended December 31, 2023.
Previous 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.
Current wording
Recurring net sales, which includes AutoShip & Save subscriptions, and membership revenue, as a percentage of total gross sales was 56.2% for the most recent quarter ended December 31, 2024, up from 52.2% for the same period last year.
Previous 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.
Current wording
Gross profit decreased by approximately $3.0 million, or 16.6%, to approximately $14.9 million for the quarter ended December 31, 2024, from approximately $17.9 million for the quarter ended December 31, 2023. Gross profit decreased by approximately $10.3 million, or 17.0%, to approximately $50.2 million for the nine months ended December 31, 2024, from approximately $60.5 million for the nine months ended December 31, 2023. The gross profit decreases for the quarter and nine months ended December 31, 2024 compared to the quarter ended and nine months ended December 31, 2023 were primarily due to lower sales. The gross margin percentage increased by approximately 0.8%, to approximately 28.1% for the quarter ended December 31, 2024, from approximately 27.4% for the quarter ended December 31, 2023, primarily due to favorable sales mix and lower consumer promotional usage.
Previous wording
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 wording
General and administrative expenses decreased by approximately $2.6 million, or 19.7%, to approximately $10.8 million for the quarter ended December 31, 2024, from approximately $13.4 million for the quarter ended December 31, 2023. The decrease to general and administrative expenses for the quarter ended December 31, 2024 was due to a $1.3 million decrease in stock-based compensation expense, primarily related to reduced stock compensation associated with an executive departure, a $1.1 million decrease in payroll and payroll related expense, and a $0.4 million decrease in credit card processing fees driven by lower sales.
Previous 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.
Current wording
General and administrative expenses decreased by approximately $14.9 million, or 36.4%, to approximately $26.2 million for the nine months ended December 31, 2024, from approximately $41.1 million for the nine months ended December 31, 2023. The decrease to general and administrative expenses for the nine months ended December 31, 2024 was due to a $12.4 million decrease in stock-based compensation expense, of which $8.7 million was from the stock compensation reversal associated with an executive departure, a $1.6 million decrease in payroll and payroll related expense, and a $0.9 million decrease in credit card processing fees which were driven by lower sales.
Previous 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.
Current wording
The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was $47 for the quarter ended December 31, 2024 compared to $59 for the quarter ended December 31, 2023. The decrease to customer acquisition costs for the quarter ended December 31, 2024, was due to a more 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.
Previous wording
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.
Current wording
Advertising expenses decreased by approximately $4.0 million, or 21.3%, to approximately $14.6 million for the nine months ended December 31, 2024, from approximately $18.5 million for the nine months ended December 31, 2023. The decrease can be mainly attributed to lower gross media spend, partially offset by lower marketing funded by manufacturers and advertising partners. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was $56 for the nine months ended December 31, 2024 compared to $53 for the nine months ended December 31, 2023. As a percentage of sales, advertising expense was 8.1% and 8.6% for the nine months ended December 31, 2024 and 2023, respectively.
Previous 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.
Current wording
Depreciation and amortization expense was $1.6 million and $1.8 million for the quarters ended December 31, 2024 and December 31, 2023, respectively. Depreciation and amortization expense was $5.0 million and $5.2 million for the nine months ended December 31, 2024 and December 31, 2023, respectively.
Previous 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.
Current wording
Other income decreased to approximately $0.2 million for the quarter ended December 31, 2024 compared to approximately $0.4 million for the quarter ended December 31, 2023. Other income decreased to approximately $0.9 million for the nine months ended December 31, 2024 compared to approximately $1.5 million for the nine months ended December 31, 2023.The decrease to other income for the quarter andthe nine months ended December 31, 2024 was due to slightly lower invested balances, and the loss of subleasing rental revenue. 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
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.
Current wording
For the quarters ended December 31, 2024 and 2023, the Company recorded an income tax provision of approximately $0.5 million and a tax benefit of approximately $0.6 million, respectively. For the nine months ended December 31, 2024 and 2023, the Company recorded an income tax provision of approximately $0.0 million and a tax benefit of approximately $0.3 million, respectively. The increase in the tax provision for the three and nine months ended December 31, 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 December 31, 2024 was approximately (192.1)%, compared to approximately 23.4% for the quarter ended December 31, 2023.
Previous 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.
Current wording
Our working capital at December 31, 2024 and March 31, 2024 was $20.4 million and $21.5 million, respectively. The $1.1 million decrease in working capital was attributable to the $25.3 million decrease in current assets, primarily inventory and prepaid expenses, which were partially offset by the $24.2 million decrease in current liabilities, primarily accounts payable. The inventory decline was attributable to the Company’s strategy to operate with fewer weeks of supply on hand, and to a lesser extent, timing of inventory receipts moving into the fourth quarter.. Net cash used in operating activities was $2.3 million for the nine months ended December 31, 2024, compared to cash used in operating activities of $2.8 million for the nine months ended December 31, 2023. The $0.5 million increase in cash provided by operating activities is due to the $7.8 million increase in net income reduced by $12.1 million of non-cash operating adjustments and partially offset by the $4.8 million increase in current liabilities net of current assets excluding cash. Net cash used in investing activities was $2.7 million for the nine months ended December 31, 2024, compared to $39.4 million used in investing activities for the nine months ended December 31, 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 nine months ended December 31, 2024 and the nine months ended December 31, 2023, respectively, due to the payment of an aggregate $0.60 per share dividend for the nine months ended December 31, 2023.
Previous 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.
Current wording
The Board of Directors 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 action was intended to focus use of the Company’s existing cash and 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 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.
Current wording
As of December 31, 2024, we had $1.1 million in outstanding lease commitments assumed as part of 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 (1)
Current report — wording carried from elsewhere
Advertising expenses decreased by approximately $2.8 million, or 48.2%, to approximately $3.0 million for the quarter ended December 31, 2024, from approximately $5.8 million for the quarter ended December 31, 2023. The decrease for the quarter can be mainly attributed to lower gross media spend and a higher proportion of spending funded by third party partners. We strategically reduced gross advertising as we reset our marketing foundation for sustainable profitability. As a percentage of sales, advertising expense was 5.6% and 8.8% for the quarters ended December 31, 2024 and 2023, respectively. The advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability.