PetMed Express (PETS) Q4 2026 Earnings Transcript

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DATE

Tuesday, June 2, 2026, at 4:30 p.m. ET

CALL PARTICIPANTS

• Chairman of the Board, Interim CEO, and President — Leslie C. G. Campbell
• Chief Financial Officer — Doug Krulik

TAKEAWAYS

• Net Sales -- $42.8 million in the quarter, down 15.6% from the prior year's comparable quarter, reflecting declines in prescription medication sales.
• Sequential Sales Momentum -- The company reported a quarter-over-quarter increase in net sales, marking its first Q4 sequential gain since fiscal 2024, attributed to improvements in prescription medication and auto ship sales.
• Gross Profit Margin -- Gross profit margin improved to 32.6% from 29.9% in the year-ago period, a 270 basis point gain, primarily due to the New York sales tax liability settlement.
• General and Administrative Expenses -- G&A expenses decreased to $11.4 million, down 8.6% versus the same period last year, benefiting from cost optimization efforts.
• Advertising Expense -- Advertising costs rose to $5.8 million from $5.4 million, with the increase driven by vendor co-op funds recognition.
• Depreciation and Amortization -- Depreciation and amortization were $2.4 million in the quarter, compared to $600,000 in the prior year.
• Adjusted EBITDA -- The quarter's adjusted EBITDA loss was $2.8 million, versus a loss of $1.9 million in the previous year's quarter.
• Full-Year Net Sales -- Annual net sales totaled $179 million, a 21.1% decrease against the previous year, primarily due to continued prescription medication sales declines.
• Full-Year Net Loss -- Net loss for the fiscal year was $57.3 million, or $2.74 per diluted share, compared to $6.3 million, or $0.30 per diluted share, in the prior year, with the larger loss driven by noncash goodwill impairment, inventory write-downs, and nonrecurring legal and severance costs.
• Significant One-Time Charges -- Fiscal year included a $26.7 million noncash goodwill impairment (Q1), $2.1 million wholesale inventory write-down (Q3), and $4.5 million of legal, professional, and severance expenses related to a whistleblower investigation.
• Adjusted EBITDA (Full Year) -- Full-year adjusted EBITDA was negative $15.4 million, compared to positive $700,000 in the prior year.
• Cash Position & Debt -- As of March 31, 2026, the company reported $21.4 million in cash and cash equivalents and held no debt.
• Cost Reductions and Vendor Exits -- Cost-reduction actions, including the exit from underperforming vendor relationships, are expected to generate $6.1 million in annualized savings.
• New York State Sales Tax Settlement -- The company settled its New York State sales tax liability in Q4, resulting in a $2.8 million reduction in net loss for fiscal year 2026.
• Internal Controls Remediation -- Three previously disclosed internal control weaknesses—tone at the top, complex accounting, and income taxes—were fully remediated.
• Technology Upgrades -- Completed implementation of a new ERP system, fraud prevention system, and call center technology to modernize operations and reduce risk.
• Leadership & Organizational Changes -- Created a chief growth officer role and made key internal promotions, enhancing leadership alignment across marketing and operations.
• Employee Satisfaction -- Management cited a substantial increase in employee satisfaction ratings attributed to expanded benefits and renewed focus on company culture.
• M&A Process Outcome -- In December 2025, the company received two unsolicited, nonbinding offers to acquire the company at $4-$4.25 per share; the board ultimately decided not to proceed with either, opting to remain independent.
• Strategic Partnerships -- Entered a master services agreement with Rural King for white-label pharmacy fulfillment, expanding business-to-business opportunities.

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RISKS

• Full-year net sales and prescription medication declines continued, with annual sales down 21.1%, and Q4 sales down 15.6% compared to the prior year, signaling continued fundamental business challenges.
• Adjusted EBITDA loss widened to $15.4 million for the year against a positive $700,000 prior, highlighting deteriorating underlying profitability.
• The net loss increased to $57.3 million for the year, driven by significant nonrecurring charges and decreased sales.
• The company acknowledged a $2.1 million wholesale inventory write-down from an unsuccessful non-core initiative, and $4.5 million in nonrecurring legal, professional, and executive severance costs tied to a whistleblower investigation.

SUMMARY

PetMed Express (NASDAQ:PETS) management stated they stabilized core operations and delivered their first Q4 sequential revenue increase since fiscal 2024, supported by improvements in prescription medication and auto ship sales. The year saw substantial nonrecurring charges — including goodwill impairment, inventory write-downs, and legal costs — resulting in a significantly wider net loss. PetMed Express remediated all previously disclosed material weaknesses in internal controls and executed operational and technology upgrades, including a new ERP and fraud prevention system. The board confirmed it rejected two December acquisition proposals at $4-$4.25 per share and will continue as an independent company, though it remains open to future M&A opportunities. Strategic initiatives include cost reduction actions projected to save $6.1 million annually and a new master services agreement with Rural King for pharmacy fulfillment services.

• PetMed Express exited underperforming vendor relationships during the year to realign its cost base and improve financial flexibility.
• Full-year adjusted EBITDA swung from a positive to a negative $15.4 million, with the increase in net loss directly attributed to nonrecurring legal, impairment, and severance expenses, as explained by management.
• The successful remediation of internal controls weaknesses around accounting, management tone, and tax reporting was cited as a key step toward restoring regulatory compliance.
• Operational reorganization included new appointments and a dedicated growth officer position to support marketing and merchandising strategy.

INDUSTRY GLOSSARY

• ERP (Enterprise Resource Planning): Company-wide software system integrating finance, operations, and supply chain functions for real-time management and reporting.
• Auto ship: Subscription-based fulfillment service automatically delivering pet medications or supplies at set intervals.
• White label pharmacy fulfillment: Logistics and dispensing service allowing other companies to offer pharmacy products under their own brand, with PetMed Express handling back-end operations.
• B2B (Business-to-business): Commercial transaction or partnership between businesses rather than businesses and individual consumers.
• Co-op funds: Marketing allowances provided by suppliers to retailers for advertising support, typically recognized as a reduction to advertising expense or as offsetting costs on financials.

Full Conference Call Transcript

Leslie C. G. Campbell, PetMed's Chairman of the Board and Interim CEO and President.

Leslie C. G. Campbell: Thank you, Reed, and welcome to everyone joining our call this afternoon. Following my remarks, Doug will provide a detailed overview of our financial results. Fiscal year 26 was a pivotal year for PetMed Express. During which we made significant financial, operational, and cultural improvements that are aimed at putting the company back on track for sustainable long term results. While our full year results reflect the challenges we faced particularly in the first half of the year, I am pleased to report that we made substantial progress in the second half of the year in stabilizing our core business and strengthening our foundation for future value creation.

In the second half of the year, we also regained critical regulatory compliance. With the filing of our Form 10-K for fiscal year 25 in October and the completion of our fiscal year 26 Q1 and Q2 quarterly filings in December. In December, we also announced the change in our external auditor firm to Baker Tilly US LLP. 12/31/2025. And we then successfully held our annual shareholder meeting for fiscal year 25 in January. You will see in today's 10 k filing we also made meaningful progress in improving our internal controls. Fully remediating 3 previously disclosed weaknesses. Tone at the top, complex accounting issues, and income taxes.

Although Doug will speak to our financial results in a moment, I would like to provide a little bit of additional detail now. Our net sales for the full fiscal year 2026 were down 21.1%. But we saw a slowing of year over year revenue decline in Q3 and again in Q4, with Q4 being down 15.6% compared to the prior year, or 17.8% adjusted for the settlement of our New York State sales tax liability. We also began to see green shoots in the second half of the year in important areas like prescription medication sales, prescription and nonprescription food sales, and auto ship sign ups.

And we were pleased to deliver a sequential quarterly increase in fourth quarter net sales, our first Q4 sequential quarterly increase since fiscal year 24. Demonstrating some positive momentum. These improvements, while modest, signal that the strategic and operational initiatives we implemented in the back half of fiscal 2026 are beginning to take hold. Our full year fiscal 2026 results also include several significant nonrecurring accounting entries including a $26.7 million noncash goodwill impairment reported in Q1 and a $2.1 million wholesale inventory write down reported in Q3 related to an initiative that was an unsuccessful departure from our core business.

We also incurred nonrecurring legal, professional, and executive severance costs totaling $4.5 million in fiscal year 26 related to the whistleblower investigation previously disclosed in our fiscal year 25 Form 10-K filed in October. However, during fiscal year 26, we also made meaningful progress on cost reduction efforts including exiting underperforming vendor relationships over the second half of the year that will yield approximately $6.1 million in annualized savings. We also successfully settled our New York State sales tax liability in Q4 resulting in a $2.8 million decrease to net loss in fiscal year 26. While we were working on these financial improvements, we also made significant operational improvements.

Strategically reorganizing to optimize headcount productivity in our pharmacy, call center, and distribution centers improving both operational performance and customer experience. Compared to a year ago, our cost structure is now lower and more aligned with the size of the business, while important customer facing operational metrics are much improved. Finally, we completed several important technology and infrastructure initiatives including the successful implementation of a new ERP system, a new fraud prevention system, and a new call center technology which serves as the backbone of our phone system. These implementations modernize our tech stack significantly improve our operations, and are critical to providing exceptional service to our customers.

With these major initiatives now behind us, we will continue to prioritize website and user experience optimization while significantly reducing operational risk. We also hit a notable company milestone in January when we celebrated PetMed's 30th year anniversary. As part of our anniversary celebration, we were really proud to recognize over 40 employees who have been with the company for more than 10 years. Half of whom, by the end of this year, will actually have been with the company more than 20 years.

This long tenured employee base speaks not only to a workforce deeply committed to our mission, but 1 with true expertise that can only be earned by individuals serving customers in the pet health industry for decades. Leveraging this talented and long tenured employee base, this year we reorganized our leadership structure creating a chief growth officer role to align marketing, buying and merchandising, and site merchandising. We also made several key internal promotions across distribution, customer care, and pharmacy operations. A strong reflection of the depth of talent across the company.

To further support the commitment and dedication of our employees, we meaningfully expanded our employee benefits coverage And as a result of our renewed focus on culture, we saw our employee satisfaction ratings substantially increase. Looking ahead, we plan to build on this year's financial, operational and cultural improvements as an important foundation for our future. We will continue to focus on operational excellence, driving sustainable long term results and delivering value for shareholders.

We intend to do this in part through improved customer retention, by leveraging our operational and technology improvements, and also by expanding our market footprint through B2B relationships utilizing our membership programs as well as our white label pharmacy fulfillment services, like our recently announced master services agreement with Rural King. We believe these offerings represent a significant opportunity to leverage our deep pharmacy expertise and infrastructure to reach more customers through our partners. Finally, before we move to Doug's presentation of the financials, I want to update you on the status of the unsolicited offers the company received several months ago.

In December 2025, the company received 2 unsolicited publicly disclosed nonbinding preliminary proposals to acquire all of the outstanding common stock of the company at prices ranging from $4 to $4.25 per share. These nonbinding proposals were subject to customary conditions including the satisfactory completion of due diligence and the negotiation and execution of a mutually definitive agreement. The board, consistent with its fiduciary duties and in consultation with financial and legal advisers, carefully evaluated the 2 proposals and solicited interest from other potential strategic and financial sponsors.

Following this process, and after careful deliberation and consideration of the alternatives, the Board determines that it is in the best interest of the company and its stockholders, not to proceed with either of the publicly announced proposals and consequently, PetMeds is continuing to operate as an independent publicly traded company. However, the Board remains open to considering inbound indications of interest that may be received in the future with respect to a potential transaction and will continue to act in accordance with its fiduciary duties to evaluate any such proposals should they arise.

As we enter fiscal year 2027, we are confident that the foundation we have built through operational cleanup, cost optimization, technology modernization, and strategic partnerships, positions us well for the long term. We remain deeply committed to our mission of ensuring pets live longer, healthier, and happier lives and we are focused on delivering value for our shareholders through disciplined execution of our strategic priorities. With that, I will turn the call over to Doug Krulik, for a more detailed review of our financial results. Doug?

Doug Krulik: Thank you, Leslie. Net sales for the fourth quarter were $42.8 million compared to $50.8 million in the same period last year, a 15.6% decline primarily driven by a decline in prescription medication sales. Despite this decline, in Q4, we saw a modest sequential improvement from Q3, driven by improvements in prescription medication and auto ship sales. Indicating positive momentum as we close out the year. Gross profit was $13.9 million compared to $15.2 million last year. As a percent of sales, gross profit this year was 32.6% compared to 29.9% in the prior year. A 270 basis point improvement. This improvement was primarily driven by the impact of our settlement of the New York sales tax liability.

General and administrative expenses for the fourth quarter were $11.4 million versus $12.5 million last year. An 8.6% decrease. This year over year improvement was driven by cost optimization efforts. Advertising expenses for the fourth quarter were $5.8 million compared to $5.4 million last year. This increase was driven by the presentation of co op funds we received from our vendors this quarter. Depreciation and amortization was $2.4 million for the fourth quarter, versus $600 thousand or $0.56 per diluted share for the same period last year Adjusted EBITDA loss was $2.8 million compared to a loss of $1.9 million in the prior year period. Now I will briefly comment on the full year 2026 results.

For the full fiscal year, net sales were $179 million compared to $227 million in the prior year, a 21.1% decline primarily driven by a decline in prescription medication sales. Net loss for the full fiscal year was $57.3 million or $2.74 per diluted share compared to a net loss of $6.3 million or $0.30 per diluted share in the prior year. The increase in net loss was driven by several items, including the $26.7 million noncash goodwill impairment charge reported in Q1 the $2.1 million wholesale inventory write down reported in Q3 related to an initiative that was not part of our core business.

Lower gross profit resulting from decreased net sales and increased G&A expenses driven by the non-recurrence of an $8.7 million 1-time stock compensation reversal in fiscal year 2025 We also incurred nonrecurring legal, professional, and severance costs totaling $4.5 million related to the whistleblower investigation and related matters. Adjusted EBITDA for the full fiscal year was negative $15.4 million compared to positive $700 thousand in the prior year. Turning to our balance sheet. As of 03/31/2026, we had $21.4 million in cash and cash equivalents and no debt. With that, I will turn the call back to Leslie for closing remarks. Thanks, Doug.

Leslie C. G. Campbell: And thank you to all the attendees for your time and interest today in PetMeds. We are really grateful for the support of all of our shareholders. And have, in particular, appreciated the opportunity to communicate with a number of you throughout this past year. I also want to thank our employees for their genuine commitment to serving our customers every day And, of course, a big thank you to our loyal customers and their veterinarians who trust us to be part of helping their pets live longer, healthier, happier lives. 2026 was a pivotal year for PetMeds during which we made significant progress in stabilizing our core business and strengthening our foundation.

Thank you again for allowing us to share these results with you today and we look forward to updating you on our progress next quarter.

Operator: Thank you. And with that, ladies and gentlemen, this conference has now concluded. Thank you for attending the PetMed Express fiscal fourth quarter 26 Financial Results Conference Call. You may now disconnect your lines.

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