PetMed Express D/B/A 1-800-PetMeds Announces Its Second Quarter Financial Results and Its $0.19 Per Share Quarterly Dividend

 Second Quarter Net Income Increased 9% 
Second Quarter Sales Increased 7%

POMPANO BEACH, Fla., Oct. 24, 2016 (GLOBE NEWSWIRE) — PetMed Express, Inc. (NASDAQ:PETS) today announced its financial results for the quarter ended September 30, 2016.  Net income was $4.9 million, or $0.24 diluted per share, compared to net income of $4.5 million, or $0.22 diluted per share, for the quarter ended September 30, 2015, an 8.8% increase to net income.  Net income for the six months ended September 30, 2016 was $11.5 million, or $0.56 diluted per share, compared to net income of $10.3 million, or $0.51 diluted per share, for the six months ended September 30, 2015, a 12% increase to net income.  Net sales for the quarter ended September 30, 2016 were $60.8 million, compared to $56.7 million for the quarter ended September 30, 2015, an increase of 7.2%.  Net sales for the six months ended September 30, 2016 were $133.3 million, compared to $128.4 million for the six months ended September 30, 2015, an increase of 3.8%.  New order sales increased 6.3% to $10.7 million for the quarter ended September 30, 2016, compared to $10.1 million for the same quarter in the prior year.  The Company’s online sales for the quarter ended September 30, 2016 were approximately 82% of all sales, compared to 81% for the same quarter the prior year. 

Menderes Akdag, CEO and President, commented: “During the September quarter we saw increases in both our new order and reorder sales, with reorder sales increasing 7.4% to $50.1 million for the quarter ended September 30, 2016 compared to $46.7 million for the same quarter the prior year.  Our new customer acquisition costs were reduced to $33 for the quarter ended September 30, 2016, compared to $49 for the same period in the prior year.   We also saw continued improvement on our bottom line results for the quarter ended September 30, 2016, due to a reduction in our operating expenses, which decreased by about 384 basis points, attributable to a reduction in advertising spending.  Cash flow from operations was $27.8 million for the six month ended September 30, 2016, compared to $14.0 million for the six month ended September 30, 2015, with a majority of the increase due to a reduction in inventory.  We are currently preparing to move into our new corporate headquarters and distribution facility, which is expected to occur in our third fiscal quarter.”

The Board of Directors declared a quarterly dividend of $0.19 per share on the Company’s common stock.  The dividend will be payable on November 18, 2016, to shareholders of record at the close of business on November 7, 2016.  The Company intends to continue to pay regular quarterly dividends; however the declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors each quarter following its review of the Company’s financial performance.

This morning at 8:30 A.M. Eastern Time, Mr. Akdag will host a conference call to review the quarter’s financial results.  To access the call, which is open to the public, please dial (888) 455-1758 (toll free) or (203) 827-7025.  Callers will be required to supply PETMEDS as the passcode.  For those unable to participate in the live event, the call will be available for replay from 10:00 A.M. on October 24, 2016 until November 7, 2016 at 11:59 P.M.  To access the replay, call (800) 839-2310 (toll free) or (203) 369-3635 and enter passcode 5500.

Founded in 1996, PetMed Express is America’s Largest Pet Pharmacy, delivering prescription and non-prescription pet medications and other health products for dogs and cats at competitive prices direct to the consumer through its 1-800-PetMeds toll free number and on the Internet through its website at www.1800petmeds.com.
                                                             
This press release may contain “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission, that involve a number of risks and uncertainties, including the Company’s ability to meet the objectives included in its business plan.  Important factors that could cause results to differ materially from those indicated by such “forward-looking” statements are set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the PetMed Express Annual Report on Form 10-K for the year ended March 31, 2016.  The Company’s future results may also be impacted by other risk factors listed from time to time in its SEC filings, including, but not limited to, the Company’s Form 10-Q and its Annual Report on Form 10-K.

For investment relations contact PetMed Express, Inc., Bruce S. Rosenbloom, CFO, 954-979-5995.

PETMED EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for per share data)
                 
      September 30,    March 31, 
      2016 
    2016 
      (Unaudited)         
ASSETS                
                 
Current assets:                
Cash and cash equivalents   $ 51,896     $ 37,639  
Accounts receivable, less allowance for doubtful                
accounts of $10 and $13, respectively     1,369       1,724  
Inventories – finished goods     14,820       25,586  
Prepaid expenses and other current assets     6,486       2,435  
Prepaid income taxes     21       243  
Total current assets     74,592       67,627  
                 
Noncurrent assets:                
Property and equipment, net     20,576       20,929  
Intangible assets     860       860  
Deferred tax assets     499       863  
Total noncurrent assets     21,935       22,652  
                 
Total assets   $ 96,527     $ 90,279  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
                 
Current liabilities:                
Accounts payable   $ 6,147     $ 5,004  
Accrued expenses and other current liabilities     2,416       2,080  
Total liabilities     8,563       7,084  
                 
Commitments and contingencies                
                 
Shareholders’ equity:                
Preferred stock, $.001 par value, 5,000 shares authorized;                
3 convertible shares issued and outstanding with a                
liquidation preference of $4 per share     9       9  
Common stock, $.001 par value, 40,000 shares authorized;                
20,527 and 20,447 shares issued and outstanding, respectively     21       20  
Additional paid-in capital     5,932       4,871  
Retained earnings     82,002       78,295  
                 
Total shareholders’ equity     87,964       83,195  
                 
Total liabilities and shareholders’ equity   $ 96,527     $ 90,279  
                 

 PETMED EXPRESS, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
 (In thousands, except for per share amounts) (Unaudited) 
                               
     Three Months Ended       Six Months Ended 
     September 30,       September 30, 
    2016       2015      2016       2015 
                                       
Sales $   60,791     $   56,725     $   133,278     $   128,359  
Cost of sales     42,727         37,812         92,762         86,480  
                               
Gross profit     18,064         18,913         40,516         41,879  
                                       
Operating expenses:                                      
General and administrative     5,747         5,388         11,845         11,187  
Advertising     4,382         6,249         10,142         14,134  
Depreciation     204         186         398         377  
Total operating expenses     10,333         11,823         22,385         25,698  
                               
Income from operations     7,731         7,090         18,131         16,181  
                               
Other income:                              
Interest income, net     32         55         60         105  
Other, net     23         (4 )       76         (8 )
Total other income     55         51         136         97  
                               
Income before provision for income taxes     7,786         7,141         18,267         16,278  
                               
Provision for income taxes     2,887         2,639         6,774         6,019  
                               
Net income $   4,899     $   4,502     $   11,493     $   10,259  
                               
Net change in unrealized gain (loss) on short                              
term investments             16                 (19 )
                               
Comprehensive income $   4,899     $   4,518     $   11,493     $   10,240  
                               
Net income per common share:                              
Basic $   0.24     $   0.22     $   0.57     $   0.51  
Diluted $   0.24     $   0.22     $   0.56     $   0.51  
                               
Weighted average number of common shares outstanding:                              
Basic     20,234         20,126         20,208         20,100  
Diluted     20,377         20,246         20,355         20,222  
                               
Cash dividends declared per common share $   0.19     $   0.18     $   0.38     $   0.36  
                               

PETMED EXPRESS, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
 (In thousands) (Unaudited)   
   
       Six Months Ended   
       September 30,   
       2016       2015   
Cash flows from operating activities:              
Net income   $   11,493     $   10,259    
Adjustments to reconcile net income to net cash              
provided by operating activities:              
Depreciation       398         377    
Share based compensation       946         777    
Deferred income taxes       364         4    
Bad debt expense       352         227    
(Increase) decrease in operating assets              
and increase (decrease) in liabilities:              
Accounts receivable       3         81    
Inventories – finished goods       10,765         664    
Prepaid income taxes       222         (60 )  
Prepaid expenses and other current assets       1,764         (86 )  
Accounts payable       1,143         2,125    
Income taxes payable               (50 )  
Accrued expenses and other current liabilities       335         (277 )  
Net cash provided by operating activities       27,785         14,041    
               
Cash flows from investing activities:              
Net change in investments               (33 )  
Purchases of property and equipment       (5,859 )       (175 )  
Net cash used in investing activities       (5,859 )       (208 )  
               
Cash flows from financing activities:              
Dividends paid       (7,784 )       (7,358 )  
Excess tax benefits related to restricted stock       115         92    
Net cash used in financing activities       (7,669 )       (7,266 )  
               
Net increase in cash and cash equivalents       14,257         6,567    
Cash and cash equivalents, at beginning of period       37,639         35,613    
               
Cash and cash equivalents, at end of period   $   51,896     $   42,180    
               
Supplemental disclosure of cash flow information:              
               
Cash paid for income taxes   $   6,186     $   6,033    
               
Prepaid property and equipment in current assets   $   5,815     $      
               
Dividends payable in accrued expenses   $   144     $   154