Your Trusted Pet Health Expert
2022
ANNUAL REPORT
PetMed Express, Inc.
Dear Shareholders:
Thank you for being an investor and key stakeholder of PetMed Express, Inc., or “PetMeds,” as we informally refer to
ourselves. I am nine months into my journey with PetMeds, and I am more excited than ever about the business, its
growth opportunities, and the transformation that the team and I are leading. PetMeds has unique assets and core
advantages to the business that provide key differentiators in the pet industry. These include being a well-known
brand that 55% of U.S. pet parents are aware of, our strong operational expertise in the pet pharmaceutical space,
and our industry-leading Net Promoter Score of 81%.
PetMeds’ mission is “to be the most trusted pet health expert by providing incredible care and services that are
affordable to the broadest group of pet parents.” Working together with our pet parents, our vendor community,
and our veterinarian partners, we are enabling pets to live longer, happier, and healthier lives. PetMeds operates in
a very large and growing addressable market. The U.S. pet market is approximately $117 billion in annual sales,
and it is expected to reach $120 billion by 2024. The pet medication market segment, where we participate today,
is approximately $10 billion annually and it is growing rapidly. Today 7 out of 10 U.S. households have at least one
pet. Now more than ever, pet parents are keenly attuned to their pets’ health needs and are actively seeking health
and wellness care support and resources, provided by trusted brands. We believe PetMeds is uniquely positioned
to be that trusted pet healthcare brand.
PetMeds is one of the leading pet pharmacies in the United States, and we are ready for our next chapter of growth.
Having first established a pioneering foothold in the online pet prescription market 26 years ago, today we see a
broader opportunity where many players can participate. In being THE trusted pet health expert, we believe that
PetMeds has exciting opportunities to address far more customer needs than just those on which we are focused
today. Going forward, these opportunities will enable us to further expand our addressable market and, most impor-
tantly, allow us to bring even greater value to our customers. PetMeds’ strategy is built upon four strategic pillars:
nutrition, medications, wellness, and care. Underpinning those strategic pillars is data, which is both defining and
at the heart of our services. We have taken important steps towards executing on our long-term strategy, starting
with the recent announcement that we entered into the telemedicine space through our investment in and partner-
ship with Vetster. We will be moving rapidly to fill in the strategic building blocks in the next several quarters and I
look forward to sharing the progress with you.
In early 2020, as a result of the pandemic, PetMeds experienced an unexpectedly large increase in sales due to
the stay-at-home effect on both pet parents and veterinarian clinics. However, we also saw increased competition
for new pet parents’ business in 2021, and as a result, our March 31, 2022 year-over-year fiscal comparison saw a
deceleration of revenue and profitability. For the fiscal year ended March 31, 2022, our sales decreased by 11.6%
to $273.4 million compared to $309.2 million for the prior fiscal year. In response to this trend, we took steps to
solidify our long-term strategy and made positive contributions to our business model, such as migrating a signifi-
cant portion of our business to a recurring, subscription business. As of March 2022, 37% of our sales are being
generated by our AutoShip & Save subscription program. To enhance the financial information we already provide
you, during the current fiscal year we introduced two new non-GAAP financial guidance metrics–adjusted EBITDA
and adjusted EBITDA per share. We decided to include these new metrics because they are key measures used by
management and by our Board of Directors to evaluate our operating performance. Adjusted EBITDA and adjusted
EBITDA per share provide a more accurate picture of our underlying profitability and also highlight the more recent
increases in non-cash stock-based compensation. Adjusted EBITDA for the fiscal year ended March 31, 2022 was
$34.0 million, or $1.67 on a diluted per share basis, compared to $44.6 million, or $2.22 on a diluted per share basis,
for the same period last year. At March 31, 2022, the Company had $111.1 million in cash and cash equivalents,
and had no debt.
During fiscal 2022, we paid $1.20 per share in dividends to our shareholders. Since fiscal 2009, PetMeds has
returned almost $226 million in dividends to our shareholders and repurchased $81.3 million through share buy-
backs. We are committed to delivering shareholder value and will continue to evaluate the payment of future
dividends, subject to a determination by our Board of Directors each quarter, following its review of the Company’s
financial performance and capital allocation strategy.
We are incredibly proud of the long history of delivering empathetic care and service to millions of customers and
their pets. We understand our position as a trusted care provider, and we are proud of our front-line team members
that deliver exceptional service in the pharmacy, the customer care center, and in our distribution center. PetMeds
is also committed to doing more for the broader environment, society and humanity, and this year we initiated our
environmental, social and governance (ESG) commitment. Although we are in the early stages of our ESG strategy,
we pledge to reduce our emissions footprint and will join the Science Based Target Initiative (SBTi) to solidify our
commitment to be kinder to the environment. We are also committed to fostering, cultivating, and preserving a
culture of diversity, equity, and inclusion. PetMeds firmly believes that we cannot consider ourselves successful as
a business if our team members, our communities, and our planet do not thrive as well.
Ultimately, we believe that the investments that we are making now, combined with our existing profitable direct-
to-consumer e-commerce business and our strong balance sheet, position us well in the face of more challenging
macroeconomic conditions. As we continue to make investments towards our future growth, we will strive to be
measured and thoughtful in our capital allocation as well.
We remain committed to, and optimistic about, our long-term strategy and the timing and our ability to execute on
our transformation. As always, we remain grateful to you, our shareholders, as well as our dedicated employees,
our suppliers, our partners, and our customers, without whom PetMeds could not exist. Thank you for your contin-
ued confidence and support.
PERFORMANCE
SUMMARY
Sales
($ in millions)
$309.2
$283.4
$284.1
$273.8
$273.4
2018 2019 2020 2021 2022
Net Income
($ in millions)
$37.3
$37.7
$30.6
$25.9
$21.1
2018 2019 2020 2021 2022
Earnings per share EPS
(Diluted)
$1.82
$1.84
$1.52
$1.29
$1.04
2018 2019 2020 2021 2022
Dividends declared
(Per share)
$1.06
$1.08
$1.12
$1.20
$0.85
2018 2019 2020 2021 2022
(all above fiscal years ended on March 31st)
Mathew Hulett
President, Chief Executive Officer, Director
June 17, 2022
PetMed Express, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:55)(cid:55) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2022
OR
(cid:133)(cid:133) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 000-28827
_______________________________________________________
PETMED EXPRESS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of
incorporation or organization)
65-0680967
(IRS Employer
Identification No.)
420 South Congress Avenue, Delray Beach, Florida 33445
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (561) 526-4444
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol
Name of each exchange on which registered
Common Stock, PETS
$.001 Par value per share
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered under Section 12(g) of the Act:
NONE
___________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:133) No (cid:54)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No (cid:54)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes (cid:54) No (cid:133)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes (cid:54) No (cid:133)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
(cid:133)
(cid:133)
Accelerated filer
Smaller reporting company
Emerging growth company
(cid:54)
(cid:133)
(cid:133)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:133)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. (cid:54)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No (cid:54)
The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of September 30, 2021, the last business
day of the registrant’s most recently completed second fiscal quarter, was $540.1 million based on the closing sales price of the registrant’s
Common Stock on that date, as reported on the NASDAQ Global Select Market.
The number of shares of the registrant’s Common Stock outstanding as of May 24, 2022, was 20,988,237.
DOCUMENTS INCORPORATED BY REFERENCE
Information to be set forth in our Proxy Statement relating to our 2022 Annual Meeting of Stockholders to be held on July 28, 2022, is
incorporated by reference in Items 10, 11, 12, 13, and 14 of Part III of this report.
[This Page Intentionally Left Blank]
PETMED EXPRESS, INC.
2022 Annual Report on Form 10-K
TABLE OF CONTENTS
Page
PART I........................................................................................................................................................................ 1
Item 1. Business ................................................................................................................................................. 1
Item 1A. Risk Factors ............................................................................................................................................ 7
Item 1B. Unresolved Staff Comments ................................................................................................................. 14
Item 2. Properties ............................................................................................................................................. 14
Item 3. Legal Proceedings................................................................................................................................ 14
Item 4. Mine Safety Disclosures ....................................................................................................................... 14
PART II..................................................................................................................................................................... 15
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities........................................................................................ 15
Item 6.
[Reserved] ............................................................................................................................................ 17
Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations ..................................................................................................................................... 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk……………………................................... 27
Item 8. Financial Statements and Supplementary Data…………………….. .................................................... 28
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure .......................................................................................................................................... 48
Item 9A. Controls and Procedures ...................................................................................................................... 48
Item 9B. Other Information .................................................................................................................................. 48
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections……………………………………48
PART III ................................................................................................................................................................... 49
Item 10. Directors, Executive Officers, and Corporate Governance .................................................................. 49
Item 11. Executive Compensation...................................................................................................................... 49
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters........................................................................................................................... 49
Item 13. Certain Relationships and Related Transactions, and Director Independence ................................... 49
Item 14. Principal Accountant Fees and Services.............................................................................................. 49
PART IV ................................................................................................................................................................... 50
Item 15. Exhibit and Financial Statement Schedules ......................................................................................... 50
Item 16. Form 10-K Summary ............................................................................................................................ 51
SIGNATURES.......................................................................................................................................................... 52
[This Page Intentionally Left Blank]
PART I
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain information in this Annual Report on Form 10-K includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (“Securities Act”) and Section 21E of the Securities
Exchange Act of 1934, as amended (“Exchange Act”). You can identify these forward-looking statements by the
words "believes," "intends," "expects," "may," "will," "should," "plan," "projects," "contemplates," "intends," "budgets,"
"predicts," "estimates," "anticipates," or similar expressions. These statements are based on our beliefs, as well as
assumptions we have used based upon information currently available to us. Because these statements reflect our
current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual
future results may differ significantly from the results discussed in the forward-looking statements. Factors that might
cause such differences include, but are not limited to, those discussed in Part I, Item 1A of this Annual Report on
Form 10-K under the heading “Risk Factors.” A reader, whether investing in our common stock or not, should not
place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report on
Form 10-K. The Company assumes no obligation to revise or update any forward-looking statements for any reason,
except as required by law.
When used in this Annual Report on Form 10-K, "PetMed Express," "1-800-PetMeds," “PetMeds,” "PetMed,"
“PetMeds.com,” "PetMed Express.com," "the Company," "we," "our," and "us" refers collectively to PetMed Express,
Inc. and its wholly owned subsidiaries.
ITEM 1. BUSINESS
General
PetMed Express, Inc. and subsidiaries, d/b/a PetMeds®, is a leading nationwide pet pharmacy. The Company
markets prescription and non-prescription pet medications, and other health products and supplies for dogs, cats,
and horses direct to the consumer. The Company offers consumers an attractive alternative for obtaining pet
medications in terms of convenience, price, speed of delivery, and valued customer service.
The Company markets its products through national advertising campaigns, which aim to increase the
recognition of the “PetMeds” brand name, increase traffic on its website at www.petmeds.com, acquire new
customers, and maximize repeat purchases. Virtually all of the Company’s sales are to residents in the United
States. Our fiscal year end is March 31, our executive offices are currently located at 420 South Congress Avenue,
Delray Beach, Florida 33445, and our telephone number is (561) 526-4444.
Our Products
We offer a broad selection of products for dogs, cats, and horses. Our current product line contains
approximately 3,000 SKUs of the most popular pet medications, health products, and supplies. These products
include a majority of the well-known brands of pet medications. Generally, our prices are competitive with the prices
for medications charged by veterinarians, online retailers and other retailers. We also offer additional pet supplies
on our website for sale, which are drop shipped to our customers by third parties. These pet supplies include: food,
beds, crates, stairs, and other popular pet supplies. We research new products, and regularly select new products
or the latest generation of existing products to become part of our product selection. In addition, we also refine our
current products to respond to changing consumer-purchasing habits. Our website is designed to give us the
flexibility to change featured products or promotions. Our product line provides customers with a wide variety of
selections across the most popular health categories for dogs, cats, and horses. Our current products include:
Non-Prescription Medications (OTC) and supplies: Flea and tick control products, bone and joint care products,
vitamins, treats, nutritional supplements, hygiene products, and supplies.
Prescription Medications (Rx): Heartworm and flea and tick preventatives, arthritis, dermatitis, thyroid, diabetes,
pain medications, heart/blood pressure, and other specialty medications, as well as generic substitutes.
1
Sales
We offer our products through two main sales channels: (1) the Internet through our website and mobile app,
and (2) the telephone contact center through our toll-free number. We have designed our website and mobile
application to provide a convenient, cost-effective, and informative shopping experience that encourages consumers
to purchase products important for a pet’s health and quality of life. We believe that these channels allow us to
increase the visibility of our brand name and provide our customers with increased shopping flexibility and excellent
service.
Internet
We seek to combine our product selection and pet health information with the shopping ease of the Internet to
deliver a convenient and personalized shopping experience. Our website offers health and nutritional product
selections for dogs, cats, and horses, and relevant editorial and easily obtainable or retrievable resource information.
Customers can search our website for products and access resources on a variety of information on dogs, cats, and
horses. Customers can shop at our website by category, product line, individual product, or symptom. We attracted
approximately 28 million visits to our website (including our mobile app) during fiscal 2022, approximately 8.5% of
those visits resulted in an order, and our website generated approximately 84% of our total sales for the same time
period. On our website pet owners have access to health information covering pets’ behavior and illnesses, and
natural and pharmaceutical remedies specifically for a pet’s problem. The pet education content on our main website
is periodically updated with the latest research for pet owners. As part of our multichannel strategy, we also offer
mobile versions of our website (www.petmeds.com) and an application for mobile phones, tablets, and other devices.
Our website and mobile application features include: AutoShip & Save subscription (“AutoShip”); “ask-the-vet”; live
web chat; easy refill medication reminders; local veterinarian finder; and express checkout to provide our customers
with fast, easy, and helpful service from their mobile devices.
In July 2021 we launched the new AutoShip program on our website. AutoShip is a new convenient way for our
loyal customer base to have future pet medication orders delivered directly to them without the need to place an
order each time. Currently, approximately 37% of our sales were generated via our AutoShip program in the month
of March. The Company has set a goal of generating approximately 50% of its sales via the AutoShip program in
FY 2023.
Telephone Contact Center
Our customer care representatives receive and process inbound and outbound customer calls, facilitate our live
web chat, and process customer e-mails. Our telephone system is equipped with certain features including pop-up
screens and call blending capabilities that give us the ability to efficiently utilize our customer care representatives’
time, providing excellent customer care, service, and support. Our customer care representatives receive a base
salary and are rewarded with commissions for sales, and bonuses and other awards for achieving certain quality
goals.
Our Customers
Approximately 2.0 million customers have purchased from us within the last two years. We attracted
approximately 263,000 and 443,000 new customers in fiscal 2022 and 2021, respectively. Our customers are located
throughout the United States, with approximately 50% of customers residing in California, Florida, Texas, New York,
Pennsylvania, North Carolina, Georgia, and Virginia. Our primary focus has been on retail customers and the
average purchase was approximately $93 and $89 for fiscal 2022 and fiscal 2021, respectively.
Marketing
The goal of our marketing strategy is to build brand recognition, increase customer traffic, add new customers,
build strong customer loyalty, maximize reorders, and develop incremental revenue opportunities. We have an
integrated marketing campaign that includes digital marketing, television advertising, and direct mail/print and e-
mail.
2
Digital Marketing
We advertise and market our products primarily online. We make our brand available to Internet consumers by
purchasing targeted keywords and achieving prominent placement on the top search engines and search engine
networks. We utilize Internet display and video advertisements, social media, and comparison shopping, and we are
also members of an affiliate program with merchant clients and affiliate websites.
Television Advertising
Our television advertising is designed to build brand equity, create brand awareness, and generate initial
purchases of products via the telephone and the Internet. Our television commercials typically focus on our ability to
rapidly deliver to customers the same medications offered by veterinarians. We believe that television advertising is
particularly effective and instrumental in building brand awareness. Our most current television commercial, airing
nationally, speaks to pet owners about the savings and convenience of purchasing the same exact pet medications
from PetMeds.
Direct Mail/Print and E-mail
We use direct mail/print and e-mail to acquire new customers and to remind our existing customers to reorder.
Operations
Order Processing
Our website allows customers to easily browse and purchase all of our products online. Our website is designed
to be fast, secure, and easy to use with order and shipping confirmations, and with online order tracking capabilities.
We provide our customers with toll-free telephone access to our customer care representatives. Our call center
generally operates from 7:00 AM to 11:00 PM, Monday through Thursday, 7:00 AM to 9:00 PM on Friday, 9:00 AM
to 6:00 PM on Saturday, and 9:00 AM to 5:00 PM on Sunday, Eastern Time. The process of customers purchasing
products from PetMeds consists of a few simple steps. A customer first places an order online or by calling our toll-
free telephone number. The following information is needed to process prescription orders: pet information,
prescription information, and the veterinarian’s name and phone number. This information is entered into our order
process system. Then our pharmacists and pharmacy technicians verify all prescriptions. The order process system
checks for the verification for prescription medication orders and a valid payment method for all orders. Verified
orders are then sent to our fulfillment center, where items are picked, and then shipped via the United States Postal
Service and United Parcel Service. Our customers enjoy the convenience of rapid home delivery, with the majority
of all orders being shipped within 24 hours of ordering.
Customer Care and Support
We believe that a high level of customer care and support is critical in retaining and expanding our customer
base. Customer care representatives participate in ongoing training programs under the supervision of our training
managers. These training sessions include a variety of topics such as product knowledge, computer usage,
customer service tips, and the relationship between our Company and veterinarians. Our customer care
representatives respond to customers’ e-mails, calls, and live web chats that are related to products, order status,
prices, and shipping. We believe our customer care representatives are a valuable source of feedback regarding
customer satisfaction.
Warehousing and Shipping
We inventory our products and fill most customer orders from our corporate headquarters in Delray Beach,
Florida. We have an in-house fulfillment and distribution operation, which is used to manage the entire supply chain,
beginning with the placement of the order, continuing through order processing, and then fulfilling and shipping of
the product to the customer. We offer a variety of shipping options, including next day delivery. We ship to anywhere
in the United States served by the United States Postal Service or United Parcel Service. Priority orders are
expedited in our fulfillment process. Our goal is to ship the products the same day that the order is received. For
prescription medications, our goal is to ship the product immediately after the prescription has been authorized by
the customer’s veterinarian. We currently offer free shipping to all customers whose order value is $49 or more.
3
Purchasing and Supply of Products
We purchase our products from a variety of sources, including certain manufacturers, domestic distributors, and
wholesalers. There were five suppliers from whom we purchased approximately 80% of all products in fiscal 2022.
We believe having strong relationships with product manufacturers and distributors will ensure the availability of an
adequate volume of products ordered by our customers. Part of our growth strategy included developing direct
relationships with all of the leading pharmaceutical manufacturers of the more popular prescription and non-
prescription medications. We now have direct relationships with all these major manufacturers.
Technology
We utilize integrated technologies in our call centers, e-commerce, order entry, and inventory control/fulfillment
operations. Our systems are custom configured by us to optimize our computer telephone integration and mail-
order processing. The systems are designed to maintain a large database of specialized information and process a
large volume of orders efficiently and effectively. Our systems provide our customer care representatives, and our
customers on our website, including on our mobile application, with real time product availability information and
updated customer information to enhance our customer care.
We also have an integrated direct connection for processing credit cards to ensure that a valid credit card number
and authorization have been received at the same time our customer care representatives are on the telephone with
the customer or when a customer submits an order on our website. Our information systems provide our customer
care representatives with records of all prior contact with a customer, including the customer’s address, telephone
number, e-mail address, prescription information, order history, payment history, and notes.
Competition
The pet medications market is competitive and highly fragmented. Our competitors consist of veterinarians, and
online and traditional retailers. We believe that the following are the principal competitive factors in our market:
(cid:120)
Product selection and availability, including the availability of prescription and non-prescription
medications;
Brand recognition;
(cid:120)
(cid:120) Reliability and speed of delivery;
(cid:120)
(cid:120)
(cid:120) Website and mobile application usability and content.
Personalized service and convenience;
Price; and
We compete with veterinarians, and online and traditional retailers for the sale of prescription and non-
prescription pet medications and other health products. Many pet owners may prefer the convenience of purchasing
their pet medications or other health products at the time of a veterinarian visit. In order to effectively compete with
veterinarians, we must continue to educate pet owners about the service, convenience, and savings offered by our
Company.
According to the American Pet Products Association, pet spending in the United States increased 19.3% to
$123.6 billion in 2021. Veterinary care and Rx medications represented $34.3 billion, or 28% of the total spending
on pets in the United States. The pet medication market, which included prescription and nonprescription
medication, is estimated to be approximately $10.0 billion, with veterinarians having the majority of the prescription
market share. The dog and cat population is approximately 184 million, with approximately 70% of all households
having a pet.
We believe that the following are the main competitive strengths that differentiate PetMeds from the competition:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Pure Play Channel leader, in an estimated $10.0 billion industry;
“1-800-PetMeds” brand name with 25 years of experience, consumers know us as the trusted pet
medication experts;
Licensed pharmacy to conduct business in 50 states, and a Pharmacy Verified website (a website
verification program by the National Association of Boards of Pharmacy®, which identifies online
pharmacies and pharmacy-related websites as safe and legitimate); and
Exceptional customer care and support.
4
Intellectual Property
We conduct our business under the trade name “PetMeds” and use a family of trade names all containing the
term “PetMeds” or “PetMed” in some form. We believe the “1-800-PetMeds” trade name, which is also our toll-free
telephone number, and the “PetMeds” family of trademarks, have added significant value and are important factors
in the marketing of our products. We have also obtained the right to use and control the Internet addresses
www.1800petmeds.com,
and
www.petmeds.com.
www.petmedexpress.com,
www.1888petmeds.com,
www.petmed.com,
the right
We also obtained
to use and control
Internet addresses www.petmeds.pharmacy,
www.petmed.pharmacy, and www.1800petmeds.pharmacy, through a National Association of Boards of Pharmacy®
initiative to ensure high standards for online pharmacies. We do not expect to lose the ability to use the Internet
addresses; however, there can be no assurance in this regard and the loss of these addresses may have a material
adverse effect on our financial position and results of operations. We are the exclusive owners of United States
Trademark Registrations for “America’s Largest Pet Pharmacy®,” “America’s Most Trusted Pet Pharmacy®,”
“Trusted Pet Medication Experts®,” “PetMed Express and Design®,”1-800-PetMeds and Design®,” 1-800-
PetMeds®,” and “PetMeds®,” among numerous others.
the
Government Regulation
Dispensing prescription medications is governed at the state level by Boards of Pharmacy, or similar regulatory
agencies, of each state where prescription medications are dispensed. We are subject to regulation by the State of
Florida and are licensed as a community pharmacy by the Florida Board of Pharmacy. Our current license is valid
until February 28, 2023, and prior to that date a renewal application will be submitted to the Board of Pharmacy.
During fiscal 2015 we obtained a federal registration, and state registrations/permits as required, to dispense
Schedule IV controlled substances, and we also updated our federal registration and state registrations/permits as
required to include the ability to dispense Schedule V controlled substances.
Our pharmacy practice is also licensed and/or regulated by 49 other state pharmacy boards, the District of
Columbia Board of Pharmacy, and the United States Drug Enforcement Administration, and with respect to our
products, by other regulatory authorities including, but not necessarily limited to, the United States Food and Drug
Administration (“FDA”) and the United States Environmental Protection Agency. As a licensed pharmacy in the
State of Florida, we are subject to the Florida Pharmacy Act and regulations promulgated thereunder. To the extent
that we are unable to maintain our license as a community pharmacy with the Florida Board of Pharmacy, or if we
do not maintain the licenses granted by other state pharmacy boards, or if we become subject to actions by the FDA,
or other enforcement regulators, our distribution of prescription medications to pet owners could cease, which could
have a material adverse effect on our financial condition and results of operations.
We rely on legal and operational compliance programs, as well as outside counsel, to guide our business in
complying with applicable laws and regulations in the areas in which we do business. In addition, regulatory regime
changes may add cost and complexity to our compliance efforts. Based on information currently available, we believe
that our compliance in general with federal and state regulations will not have a material effect on our earnings or
financial condition. However, it is difficult to predict with certainty the potential impact of future compliance efforts
and thus, future costs associated with such matters may exceed current reserves. As of March 31, 2022 we have
no reserves related to federal and state regulations.
Human Capital Resources
We strive to create a high-performance culture that embraces diversity, inclusion, diverse perspectives and
experiences, to ensure that employees have opportunities to develop the skills they need to grow and excel in their
fields. Human capital management is a priority for our executives and Board of Directors, and we are committed to
identifying and developing the talent necessary for our long-term success. We have a talent and succession planning
process and have established programs to support the development of our talent pipeline for critical roles in our
organization. We conduct an annual review with human resources and the departmental leadership teams, focusing
on high performing and high potential talent, diverse talent and succession for our critical roles.
We also recognize that it is important to develop our future leaders. We provide a variety of resources to help
our employees build and develop their skills, including online development resources as well as individual
development opportunities and projects for key talent. Additionally, we have leadership development resources for
our future leaders as they continue to develop their skills.
5
We also foster a strong corporate culture that promotes high standards of ethics and compliance for our
business, including policies that set forth principles to guide employee, officer, director, and vendor conduct, such
as our Code of Business Conduct and Ethics. We also maintain a whistleblower policy and anonymous hotline for
the confidential reporting of any suspected policy violations or unethical business conduct on the part of our
employees, officers, directors, or vendors.
We currently have 212 full time employees, including: 126 in customer care and marketing; 23 in fulfillment and
purchasing; 46 in our pharmacy; 4 in information technology; 7 in accounting/human resources; and 6 in
management. None of our employees are represented by a labor union or governed by any collective bargaining
agreements. We consider relations with our employees to be in good standing. The majority of our employees work
at our headquarters and distribution center located in Delray Beach, Florida. As a result of the COVID-19 pandemic
many of our personnel are currently working remotely, and in the long term, we expect some personnel to transition
into working remotely on a regular basis.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the
best interest of our employees as well as the communities in which we operate. These measures include allowing
most employees to work from home and implementing additional safety measures for employees continuing critical
on-site work. We believe in supporting our employees’ health and well-being. Our goal is to help employees make
informed decisions about their health by providing the tools and resources necessary to achieve a healthier lifestyle.
We offer our employees a wide array of benefits such as life and health (medical, dental, and vision) insurance, paid
time off and retirement benefits, as well as emotional well-being services through our health insurance program.
We offer competitive compensation to attract and retain the best people, and we help care for our people so
they can focus on our mission. Our employees' total compensation package includes market-competitive salary,
bonuses or sales commissions, and equity. We generally offer annual equity grants to certain full-time employees,
primarily management. Having compensation tied to annual equity grants helps ensure that our employees will be
committed to the Company’s long-term success. We have conducted an annual pay equity analysis and continue to
be committed to pay equity.
Available Information
Our website address is www.petmeds.com. The information on our website is not, and shall not be deemed to
be, a part of or incorporated into this Annual Report on Form 10-K or any other filings we make with the Securities
and Exchange Commission ("SEC"). We file annual, quarterly, and current reports, proxy statements, and other
information with the SEC. Our SEC filings, including our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to the Exchange
Act are available free of charge over the Internet on our website or at the SEC's web site at www.sec.gov. Our SEC
filings will be available through our website as soon as reasonably practicable after we have electronically filed or
furnished them to the SEC.
6
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described
below, that could materially and adversely affect our business, financial condition, operating results and the trading
price of our common stock. Because of the following factors, as well as other factors affecting the Company’s results
of operations and financial condition, past financial performance should not be considered to be a reliable indicator
of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
This discussion of risk factors contains forward-looking statements. This section should be read in conjunction with
Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the
consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K.
Regulatory Risks
We may inadvertently fail to comply with various state or federal regulations covering the dispensing of prescription
pet medications which may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one
or more of our pharmacy licenses.
The sale and delivery of prescription pet medications is generally governed by state laws and state regulations,
and with respect to controlled substances, also by federal law. Since our pharmacy is located in the State of Florida,
the Company is governed by the laws and regulations of the State of Florida. Each prescription pet medication sale
we make is likely also to be covered by the laws of the state where the customer is located. The laws and regulations
relating to the sale and delivery of prescription pet medications vary from state to state, but generally require that
prescription pet medications be dispensed with the authorization from a prescribing veterinarian. Our current license
is valid until February 28, 2023, and there is no guarantee that we will be able to renew it. To the extent that we are
unable to maintain our license as a community pharmacy with the Florida Board of Pharmacy, or if we do not maintain
the licenses granted by other state boards, or if we become subject to actions by the FDA, or other enforcement
regulators, our dispensing of prescription medications to pet owners could cease, which could have a material
adverse effect on our operations.
The Company is a party to routine litigation and administrative complaints incidental to its business.
Management does not believe that the resolution of any or all of such routine litigation and administrative complaints
is likely to have a material adverse effect on the Company’s financial condition or results of operations. While we
make every effort to fully comply with all applicable state rules, laws, and regulations, from time to time we have
been the subject of administrative complaints regarding the authorization of prescriptions prior to shipment. We
cannot assure you that we will not be the subject of administrative complaints in the future. We cannot guarantee
you that we will not be subject to reprimands, sanctions, probations, or fines, or that one or more of our pharmacy
licenses will not be suspended or revoked. If we were unable to maintain our license as a community pharmacy in
the State of Florida, or if we are not granted licensure in a state that begins to require licensure, or if one or more of
the licenses granted by other state boards should be suspended or revoked, our ability to continue to sell prescription
medications and to continue our business as it is presently conducted could be in jeopardy.
Business Risks
Our failure to properly manage our inventory may result in excessive inventory carrying costs, or inadequate supply
of products, which could materially adversely affect our financial condition and results of operations.
Our current product line contains approximately 3,000 SKUs. A significant portion of our sales is attributable to
products representing approximately 100 SKUs, including the most popular flea and tick, and heartworm
preventative brands. We need to properly manage our inventory to provide an adequate supply of these products
and avoid excessive inventory of the products representing the balance of the SKUs. We generally place orders for
products with our suppliers based upon our internal estimates of the amounts of inventory we will need to fill future
orders. These estimates may be significantly different from the actual orders we receive.
In the event that subsequent orders fall short of original estimates, we may be left with excess inventory.
Significant excess inventory could result in price discounts, increased inventory carrying costs, and obsolescence.
Similarly, if we fail to have an adequate supply of some SKUs, we may lose sales opportunities. We cannot
guarantee that we will maintain appropriate inventory levels. Any failure on our part to maintain appropriate inventory
levels may have a material adverse effect on our financial condition and results of operations.
7
Resistance from veterinarians to authorize prescriptions, or attempts/efforts on their part to discourage pet owners
from purchasing from us could cause our sales to decrease and could materially adversely affect our financial
condition and results of operations.
Since we began our operations, some veterinarians have resisted providing our customers with a copy of their
pet’s prescription or authorizing the prescription to our pharmacy staff, thereby effectively preventing us from filling
such prescriptions under state law. We have also been informed by customers and consumers that veterinarians
have tried to discourage pet owners from purchasing from internet mail-order pharmacies.
Although veterinarians in some states are required by law to provide a pet owner with a prescription if medically
appropriate, if the number of veterinarians who refuse to authorize prescriptions should increase, or if veterinarians
are successful in discouraging pet owners from purchasing from internet mail-order pharmacies, our sales could
decrease, and our financial condition and results of operations may be materially adversely affected.
Significant portions of our sales are made to residents of eight states. If we should lose our pharmacy license in one
or more of these states, our financial condition and results of operations would be materially adversely affected.
While we ship pet medications to customers in all 50 states, approximately 50% of our sales for the fiscal year
ended March 31, 2022, were made to customers located in the states of California, Florida, Texas, New York,
Pennsylvania, North Carolina, Georgia, and Virginia.
If for any reason our license to operate a pharmacy in one or
more of those states should be suspended or revoked, or if it is not renewed, our ability to sell prescription
medications to residents of those states would cease and our financial condition and results of operations in future
periods would be materially adversely affected.
We now have direct buying relationships with all the major pet medication manufacturers; the contractual relationship
depends on our compliance with their minimum advertised pricing policies (MAPP).
During fiscal 2020, the Company established direct purchasing relationships with all the major pet medication
manufacturers. These relationships entitle the Company to buy directly from the manufacturer under the terms and
conditions of a purchasing agreement which dictates purchase pricing of inventory and criteria to obtain additional
discounts and rebates. The terms of these agreements also require the Company to comply with the manufacturers’
MAPP. Each advertisement and/or promotion of a product below the MAPP price, should they occur, would be a
violation of the policy. This policy applies to all advertisements of products in all media including, without limitation,
flyers, posters, coupons, mailers, inserts, newspapers, magazines, on-line catalogs, mail order catalogs, public
signage and all Internet or similar electronic media, television, radio and public signage, including websites, email
newsletters, forums, and auction sites.
At the discretion of the manufacturers, non-compliance with the MAPP can result in one or more of the following
actions: (1) forfeiture of future rebates or discounts from the manufacturer, (2) suspension of future purchases from
the manufacturer, (3) or termination of current or future business relationship. The Company has and will continue
to make every attempt to abide by the manufacturers MAPP. However, no assurances can be made that the
Company will not violate MAPP inadvertently. A reduction or discontinuance of these rebates or discounts would
increase our costs and could reduce our profitability. If any of these major pet medication manufacturers were to
terminate our purchasing relationship it could materially adversely affect our business. If the manufacturers are not
able to enforce their MAPP industry-wide, then our profit margins and results of operations may also be impacted
negatively.
The loss of any of our key suppliers would negatively impact our business.
We have direct purchasing relationships with all of the major pet medication manufacturers, the majority of which
we purchase significant quantities of pet medication products, with the majority from these major manufacturers.
We do maintain annual purchasing contracts with these major manufacturers. While we believe that our supplier
relationships are good, a supplier could discontinue selling to us at any time. The loss of any of our key suppliers of
pet medications offered by us would have a negative impact on our business, financial condition, and results of
operations.
Shipping is a critical part of our business and any changes in, or disruptions to, our shipping arrangements could
adversely affect our business, financial condition, and results of operations.
8
We currently rely on third-party national, regional, and local logistics providers to deliver the products we offer
on our website. If we are not able to negotiate acceptable pricing and other terms with these providers, or if these
providers experience performance problems or other difficulties in processing our orders or delivering our products
to customers, it could negatively impact our results of operations and our customers’ experience. In addition, our
ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by
factors beyond our and these providers’ control, including inclement weather, fire, flood, power loss, earthquakes,
acts of war or terrorism or other events, such as labor shortages and disputes, financial difficulties, volatility in the
prices of fuel, gasoline and commodities such as paper and packing supplies, system failures and other disruptions
to the operations of the shipping companies on which we rely. We are also subject to risks of damage or loss during
delivery by our shipping vendors. Further, due to the continuing spread of COVID-19 and its variant strains and
related work and travel restrictions, there may be disruptions and delays in national, regional and local shipping,
which may negatively impact our customers’ experience and our operations and financial results. The spread of
COVID-19, and any future similar outbreak, may disrupt our suppliers and logistics providers and other third- party
delivery agents, as their workers may be prohibited or otherwise unable to report to work and transporting products
within regions may be limited due to factory closures, port closures and increased border controls and closures,
among other things. If the products ordered by our customers are not delivered in a timely fashion or are damaged
or lost during the delivery process, our customers could become dissatisfied and cease buying products through our
website and mobile applications, which would adversely affect our business, financial condition, and results of
operations.
The content of our website could expose us to various kinds of liability, which, if prosecuted successfully, could
negatively impact our business.
Because we post product and pet health information and other content on our website, we face potential liability
for negligence, copyright infringement, patent infringement, trademark infringement, defamation, and/or other claims
based on the nature and content of the materials we post. Various claims have been brought, and sometimes
successfully prosecuted, against Internet content distributors. We could be exposed to liability with respect to the
unauthorized duplication of content or unauthorized use of other parties’ proprietary technology. Although we
maintain general liability insurance, our insurance may not cover potential claims of this type or may not be adequate
to indemnify us for all liability that may be imposed. Any imposition of liability that is not covered by insurance, or is
in excess of insurance coverage, could materially adversely affect our financial condition and results of operations.
We may not be able to protect our intellectual property rights, and/or we may be found to infringe on the proprietary
rights of others.
We rely on a combination of trademarks, trade secrets, copyright laws, and contractual restrictions to protect
our intellectual property rights. These afford only limited protection. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy our non-prescription private label or generic equivalents, when and
if developed, as well as aspects of our sales formats, or to obtain and use information that we regard as proprietary,
including the technology used to operate our website and our content, and our trademarks. Litigation or proceedings
before the United States Patent and Trademark Office or other bodies may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets and domain names, or to determine the validity and scope of
the proprietary rights of others. Any litigation or adverse proceeding could result in substantial costs and diversion
of resources and could seriously harm our business and operating results. Third parties may also claim infringement
by us with respect to past, current, or future technologies. We expect that participants in our market will be
increasingly involved in infringement claims as the number of services and competitors in our industry segment
grows. Any claim, whether meritorious or not, could be time-consuming, result in costly litigation, cause service
upgrade delays, or require us to enter into royalty or licensing agreements. These royalty or licensing agreements
might not be available on terms acceptable to us or at all.
If we are unable to protect our Internet addresses or to prevent others from using Internet addresses that are
confusingly similar, our business may be adversely impacted.
Our
www.petmeds.com,
Internet addresses, www.1800petmeds.com, www.1888petmeds.com, www.petmedexpress.com,
www.petmed.com,
and
www.petmeds.pharmacy,
www.1800petmeds.pharmacy, are critical to our brand recognition and our overall success. If we are unable to
protect these Internet addresses, our competitors could capitalize on our brand recognition. There may be similar
Internet addresses used by competitors. Governmental agencies and their designees generally regulate the
acquisition and maintenance of Internet addresses. The regulation of Internet addresses in the United States and
in foreign countries has changed and may undergo further change in the near future. Furthermore, the relationship
between regulations governing Internet addresses and laws protecting trademarks and similar proprietary rights is
www.petmed.pharmacy,
9
unclear. Therefore, we may not be able to protect our own Internet addresses or prevent third parties from acquiring
Internet addresses that are confusingly similar to, infringe upon, or otherwise decrease the value of our Internet
addresses.
Since all of our operations are housed in a single location, we are more susceptible to a business interruption in the
event of damage to, or disruptions in, our facility.
Our headquarters and distribution center are currently located in one location in South Florida, and most of our
shipments of products to our customers are made from this sole distribution center. Because we consolidate our
operations in one location, we are more susceptible to power and equipment failures, and business interruptions in
the event of fires, floods, and other natural disasters than if we had additional locations. Furthermore, because we
are located in South Florida, which is a hurricane-sensitive area, we are particularly susceptible to the risk of damage
to, or total destruction of, our headquarters and distribution center and surrounding transportation infrastructure
caused by a hurricane. We cannot assure you that we are adequately insured to cover the amount of any losses
relating to any of these potential events, including business interruptions resulting from damage to or destruction of
our headquarters and distribution center, or power and equipment failures relating to our call center or websites, or
interruptions or disruptions to major transportation infrastructure, or other events that do not occur on our premises.
The occurrence of one or more of these events could adversely impact our ability to generate revenues in future
periods.
A failure of our information systems and customer-facing technology systems or any security breach or unauthorized
disclosure of confidential information, or other cyber-attacks on our systems, could result in litigation and regulatory
risk, harm our reputation and have a material adverse effect on our business.
Our business is dependent upon the efficient operation of our information systems. In particular, we rely on our
information systems to effectively manage our business model strategy, with tools to track and manage sales,
inventory, marketing, customer service efforts, the preparation of our consolidated financial and operating
data, credit card information, and customer information. The failure of our information systems to perform as
designed or the failure to maintain and enhance or protect the integrity of these systems could disrupt our business
operations, adversely impact sales and the results of operations, expose us to customer or third-party claims, or
result in adverse publicity.
Through our information technology, we are able to provide an improved overall shopping and interconnected
retail experience that empowers our customers to shop and interact with us from computers, tablets, smartphones
and other mobile devices. We use our website and our mobile application both as sales channels for our products
and also as methods of providing product and other relevant information to our customers to drive online sales. Our
online programs, communities and knowledge center allow us to inform, assist and interact with our customers. We
also continually seek to enhance all of our online properties to provide an attractive user-friendly interface for our
customers. Disruptions, failures or other performance issues with these customer-facing technology systems could
impair the benefits that they provide to our online business and negatively affect our relationship with our customers.
Additionally, we collect, process, and retain sensitive and confidential customer information in the normal course
of our business. Despite the security measures we have in place and any additional measures we may implement
in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to security
breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism, or other
events. Any security breach or event resulting in the misappropriation, loss, or other unauthorized disclosure of
confidential information, whether by us directly or our third-party service providers, could damage our reputation,
expose us to the risks of litigation and liability, disrupt our business, or otherwise affect our results of operations.
Our operating results are difficult to predict and may fluctuate, and a portion of our sales are seasonal.
Factors that may cause our operating results to fluctuate include:
(cid:120) Our ability to obtain new customers at a reasonable cost, retain existing customers, or encourage reorders;
(cid:120) Our ability to increase the number of visitors to our website, or our ability to convert visitors to our website
into customers;
The mix of medications and other pet products sold by us;
(cid:120)
(cid:120) Our ability to manage inventory levels or obtain an adequate supply of products;
(cid:120) Our ability to adequately maintain, upgrade, and develop our website, the systems that we use to process
customers’ orders and payments, or our computer network;
Increased competition within our market niche;
(cid:120)
10
Price competition;
(cid:120)
(cid:120) New products introduced to the market, including generics;
(cid:120)
(cid:120)
Increases in the cost of advertising;
The amount and timing of operating costs and capital expenditures relating to expansion of our product line
or operations;
(cid:120) Disruption of our toll-free telephone service, technical difficulties, or systems and Internet outages or
(cid:120)
slowdowns;
The impact of COVID-19 on our business operations and generally on the economy, including the measures
taken by governmental authorities to address it; and
(cid:120) Unfavorable general economic trends.
Because our operating results are difficult to predict, we believe that quarter-to-quarter comparisons of our
operating results are not a good indication of our future performance. The majority of our product sales are affected
by the seasons, due to the seasonality of mainly flea, tick, and heartworm medications. For the quarters ended June
30, 2021, September 30, 2021, December 31, 2021, and March 31, 2022, Company sales were 29%, 25%, 22%,
In addition to the seasonality of our sales, our annual and quarterly operating results have
and 24%, respectively.
fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, including weather, many
of which are out of our control. Any change in one or more of these factors could materially adversely affect our
financial condition and results of operations in future periods.
Uncertainties in economic conditions and their impact on consumer spending patterns could adversely impact our
business, financial condition, and results of operations.
Our results of operations are sensitive to changes in certain macro-economic conditions that impact consumer
spending on pet products and services. Some of the factors that may affect consumer spending on pet products
and services include consumer confidence, levels of unemployment, inflation, interest rates, tax rates and general
uncertainty regarding the overall future economic environment. We may experience declines in sales or changes in
the types of products sold during economic downturns. Any material decline in the amount of consumer spending
or other adverse economic changes could reduce our sales, and a decrease in the sales of higher-margin products
could reduce profitability and, in each case, harm our business, financial condition, and results of operations.
We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses,
facilities, technologies, offerings, or products, or through strategic alliances, and the failure to manage these
acquisitions, investments, or other strategic alliances, or to integrate them with our existing business, could have a
material adverse effect on us.
We recently entered into, and made an investment in, a strategic alliance, and we may in the future consider
opportunities to acquire or make investments in new or complementary businesses, facilities, technologies,
offerings, or products, or enter into other strategic alliances, which may enhance our capabilities, complement our
current products and services or expand the breadth of our markets. Acquisitions, investments and other strategic
alliances involve numerous risks, including:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
problems integrating the acquired business, facilities, technologies or products, including issues
maintaining uniform standards, procedures, controls and policies;
unanticipated costs associated with acquisitions, investments or strategic alliances;
losses we may incur as a result of declines in the value of an investment or as a result of incorporating an
investee’s financial performance into our financial results;
diversion of management’s attention from our existing business;
risks associated with entering new markets in which we may have limited or no experience;
the risks associated with businesses we acquire or invest in, which may differ from or be more significant
than the risks our other businesses face;
potential unknown liabilities associated with a business we acquire or in which we invest; and
increased legal and accounting compliance costs.
Our ability to successfully grow through strategic transactions depends upon our ability to identify, negotiate,
complete and integrate suitable target businesses, facilities, technologies, products and services. These efforts
could be expensive and time-consuming and may disrupt our ongoing business and prevent management from
focusing on our operations. As a result of future strategic transactions, we might need to issue additional equity
securities, spend our cash, or incur debt (which may only be available on unfavorable terms, if at all) or contingent
liabilities, any of which could reduce our profitability and harm our business. If we are unable to identify suitable
11
acquisitions, investments or strategic relationships, or if we are unable to integrate any acquired businesses,
facilities, technologies, offerings and products effectively, our business, financial condition, and results of operations
could be materially and adversely affected. Also, while we employ several different methodologies to assess
potential business opportunities, the new businesses or investments may not meet or exceed our expectations or
desired objectives.
Financial Risks
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject
us to potential liability and potentially disrupt our business.
We accept payments using a variety of methods, including credit and debit cards, PayPal, and checks, and we
may offer new payment options over time. Acceptance of these payment options subjects us to rules, regulations,
contractual obligations and compliance requirements, including payment network rules and operating guidelines,
data security standards and certification requirements, and rules governing electronic funds transfers. These
requirements may change over time or be reinterpreted, making compliance more difficult or costly. For certain
payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over
time and raise our operating costs.
We rely on third parties to provide payment processing services, including the processing of credit cards, debit
cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or
if their systems are compromised, it could potentially disrupt our business. The payment methods that we offer also
subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to
obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with
applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised
due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other
third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of
payments may be impaired. As a result, our business and operating results could be adversely affected.
Industry Risks
We face significant competition from veterinarians and online and traditional retailers and may not be able to compete
profitably with them.
We compete directly and indirectly with veterinarians for the sale of pet medications and other health products.
Veterinarians hold a competitive advantage over us because many pet owners may find it more convenient or
preferable to purchase these products directly from their veterinarians at the time of an office visit. We also compete
directly and indirectly with both online and traditional retailers. Both online and traditional retailers may hold a
competitive advantage over us because of longer operating histories, established brand names, greater resources,
and/or an established customer base. Online retailers may have a competitive advantage over us because of
established affiliate relationships to drive traffic to their website. Traditional retailers may hold a competitive
advantage over us because pet owners may prefer to purchase these products from a store instead of online. In
addition, we face growing competition from online and multichannel retailers, some of whom may have a lower cost
structure than ours, as customers now routinely use computers, tablets, smartphones, and other mobile devices and
mobile applications to shop online and compare prices and products in real time. In order to effectively compete in
the future, we may be required to offer promotions and other incentives, which may result in lower operating margins
and adversely affect the results of operations. We also face a significant challenge from our competitors forming
alliances with each other, such as those between online and traditional retailers. These relationships may enable
both their online and retail stores to negotiate better pricing and better terms from suppliers by aggregating the
demand for products and negotiating volume discounts, which could be a competitive disadvantage to us.
Risks Related to COVID-19
The COVID-19 global pandemic and related government, private sector and individual consumer responsive actions
may adversely affect our business operations, employee availability, financial performance, liquidity and cash flow
for an unknown period of time.
The outbreak of COVID-19 was declared a pandemic by the World Health Organization and continues to spread
in the United States, Canada, and in many other countries globally. COVID-19 has had, and continues to have, a
significant impact in the United States and around the world, prompting governments and businesses to take
unprecedented measures in response. Such measures have included restrictions on travel and business operations,
12
temporary closures of businesses, and quarantine and shelter-in-place orders. The COVID-19 pandemic has at times
significantly curtailed economic activity in the United States and globally, and caused significant volatility and
disruption in global financial markets. The continued adverse public health developments, the related government
and private sector responsive actions, and the economic effects of the COVID-19 pandemic may adversely affect
our business operations. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, as the
situation is continually evolving. The COVID-19 pandemic may disrupt the global supply chain and may cause
disruptions to our operations if a significant number of employees are quarantined or if they are otherwise limited in
their ability to work at our fulfillment center. Additional federal or state mandates could also impact our ability to take
or fulfill our customers’ orders and operate our business. As an essential business, we have been open during our
normal business hours without any material disruptions to our operations. We are dedicated to making every effort
to ensure the health and safety of our employees. We have implemented working from home where possible and
enhanced disinfection and social distancing within our workplace. Many of our personnel are working remotely and
it is possible that this could have a negative impact on the execution of our business plans and operations. If a natural
disaster, power outage, connectivity issue, or other event occurs that impacts our employees’ ability to work remotely,
it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The
increase in remote working may also result in consumer privacy, IT security and fraud concerns as well as operational
inefficiencies.
The operations of our fulfillment center may be substantially disrupted by additional federal or state mandates
ordering shutdowns or by the inability of our employees to travel to work due to COVID-19. The inability to ship from
our fulfillment center due to a COVID-19 outbreak, disruptions to the operations of our fulfillment center, or increased
costs in fulfillment center capacity may negatively impact our financial performance or slow our future growth.
The uncertainty around the duration of business disruptions and the extent of the spread of the virus and the
emergence of new variants of the virus in the United States and to other areas of the world will likely continue to
adversely impact the national and global economy and negatively impact consumer spending. Any of these outcomes
could have a material adverse impact on our business, financial condition, operating results and ability to execute
and capitalize on our strategies. The full extent of COVID-19’s impact on our operations and financial performance
depends on future developments that are uncertain and unpredictable, including the duration and spread of the
pandemic, its impact on capital and financial markets and any new information that may emerge concerning the
severity and new variants of the virus, its spread to other regions as well as the actions taken to contain it, among
others.
Securities Risks
Our stock price fluctuates from time to time and may fall below expectations of securities analysts and investors,
and could subject us to litigation, which may result in you suffering a loss on your investment.
The market price of our common stock may fluctuate significantly in response to a number of factors, many of
which are out of our control. These factors include: quarterly variations in operating results; changes in accounting
treatments or principles; announcements by us or our competitors of new products and services offerings; significant
contracts, acquisitions, or strategic relationships; additions or departures of key personnel; any future sales of our
common stock or other securities; stock market price and volume fluctuations of publicly traded companies; and
general political, economic, and market conditions.
In some future quarter our operating results may fall below the
expectations of securities analysts and investors, which could result in a decrease in the trading price of our common
stock. In addition, if the Company fails to meet expectations related to future growth, profitability, dividends, or other
market expectations, the price of the Company’s common stock may decline significantly, which could have a
material adverse impact on investor confidence and employee retention. In the past, securities class action litigation
has often been brought against a company following periods of volatility in the market price of its securities. We
may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert
management's attention and resources, which could seriously harm our business and operating results.
We may issue additional shares of preferred stock that could defer a change of control or dilute the interests of our
common shareholders. Our charter documents could defer a takeover effort which could inhibit your ability to receive
an acquisition premium for your shares.
Our charter permits our Board of Directors to issue up to 5.0 million shares of preferred stock without shareholder
approval. Currently there are 2,500 shares of our Convertible Preferred Stock issued and outstanding. This leaves
slightly less than 5.0 million shares of preferred stock available for issuance at the discretion of our Board of
Directors. These shares, if issued, could contain dividend, liquidation, conversion, voting, or other rights which could
adversely affect the rights of our common shareholders and which could also be utilized, under some circumstances,
13
as a method of discouraging, delaying, or preventing a change in control. Provisions of our articles of incorporation,
bylaws and Florida law could make it more difficult for a third party to acquire us, even if many of our shareholders
believe it is in their best interest.
Our ability to pay regular dividends to our shareholders and the amounts of any such dividends are subject to the
discretion of the Board and may be limited by our financial condition, or limitations under Florida law.
We have paid dividends to our shareholders since 2009 and it is currently anticipated that we will continue to
pay regular quarterly dividends, any such determination to pay dividends and the amounts thereof will be at the
discretion of the Board and will be dependent on then-existing conditions, including our financial condition, income,
legal requirements, including limitations under Florida law, and other factors the Board deems relevant. The Board
has previously decided, and may in the future decide, in its sole discretion, to change the amount or frequency of
dividends or discontinue the payment of dividends entirely. For these reasons, shareholders will not be able to rely
on dividends to receive a return on investment. Accordingly, realization of any gain on shares of our common stock
may depend on the appreciation of the price of our common stock, which may not occur.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
We own our facilities, including our principal executive offices and distribution center, which are located at 420
South Congress Avenue, Delray Beach, Florida 33445 (the “Property”). The Property consists of approximately
634,000 square feet of land or 14.6 acres with two building complexes totaling approximately 185,000 square feet,
with additional land for future use. The first building complex consists of approximately 125,000 square feet and the
second building complex consists of approximately 60,000 square feet each consisting of both office and warehouse
space. The Company occupies approximately 97,000 square feet of the first building for its principal offices and
distribution center. As of March 31, 2022, 48% of the Property was leased to two tenants with a remaining weighted
average lease term of 3.0 years. We believe that our facilities are sufficient for our current needs and are in good
condition in all material respects.
ITEM 3. LEGAL PROCEEDINGS
The Company has settled complaints that had been filed with various states’ pharmacy boards in the past. There
can be no assurances made other states will not attempt to take similar actions against the Company in the future.
The Company initiates litigation to protect its trade or service marks. There can be no assurance that the Company
will be successful in protecting its trade or service marks. Legal costs related to the above matters are expensed as
incurred.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
14
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Price Range of Common Stock
Our common stock is traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “PETS.” The
prices set forth below reflect the high and low sale prices per share in each of the quarters of fiscal 2022 and 2021
as reported by the NASDAQ.
Fiscal 2022:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2021:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Holders
High
$46.06
$34.00
$32.00
$29.18
High
$40.96
$41.83
$33.77
$51.80
Low
$27.73
$26.50
$25.26
$23.62
Low
$27.94
$29.00
$28.96
$29.77
There were 105 holders of record of our common stock on May 24, 2022, and approximately 48,300 of our
holders are “street name” or beneficial holders, whose shares are held by banks, brokers, or other financial
institutions.
Dividends
During fiscal 2021 and 2022, our Board of Directors declared the following dividends:
Declaration Date
Per Share
Dividend
May 4, 2020
July 20, 2020
October 26, 2020
January 19, 2021
May 3, 2021
July 26, 2021
October 25, 2021
January 24, 2022
$0.28
$0.28
$0.28
$0.28
$0.30
$0.30
$0.30
$0.30
Record Date
May 15, 2020
July 31, 2020
November 9, 2020
February 1, 2021
May 14, 2021
August 6, 2021
November 8, 2021
February 7, 2022
Total Amount
(In thousands)
$5,647
$5,647
$5,676
$5,676
$6,081
$6,102
$6,283
$6,294
Payment Date
May 22, 2020
August 7, 2020
November 20, 2020
February 12, 2021
May 21, 2021
August 13, 2021
November 19, 2021
February 18, 2022
On May 3, 2021, the Company’s Board of Directors declared an increased quarterly dividend from $0.28 to $0.30
per share, on its common stock. The Company’s Board of Directors declared a quarterly dividend of $0.30 per share
on May 9, 2022. The Board established a May 20, 2022 record date and a May 27, 2022 payment date. 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.
Issuer Purchases of Equity Securities
On November 8, 2006, the Company's Board of Directors approved a share repurchase plan of up to $20.0
million. On October 31, 2008, November 1, 2010, and August 1, 2011, the Company’s Board of Directors approved
an increase under the share repurchase plan, each for an additional $20.0 million. The repurchase plan is intended
to be implemented through purchases made from time to time in either the open market or through private
transactions at the Company's discretion, subject to market conditions and other factors, in accordance with SEC
requirements.
15
There can be no assurances as to the precise number of shares that will be repurchased under the share
repurchase plan, and the Company may discontinue the share repurchase plan at any time subject to compliance
with applicable regulatory requirements. Shares purchased pursuant to the share repurchase plan will either be
cancelled or held in the Company's treasury. On January 25, 2019, the Company’s Board of Directors authorized
an additional $30.0 million under the repurchase plan. During fiscal 2020 the Company purchased and retired
approximately 613,000 shares of its common stock for approximately $11.5 million, averaging approximately $18.73
per share. As of March 31, 2022, the Company had approximately $28.7 million remaining under the Company’s
share repurchase plan. Since the inception of the share repurchase plan up to March 31, 2022, approximately 6.2
million shares have been repurchased under the plan for approximately $81.3 million, averaging approximately
$13.11 per share.
Performance Graph
Set forth below is a line graph comparing the five-year cumulative performance of our Common Stock with the
Nasdaq Composite, the Russell 2000, and our SIC Code 5912 (pharmacy peer group) from March 31, 2017, to
March 31, 2022. The graph assumes that $100 was invested on March 31, 2017, in each of our Common Stock, the
Nasdaq Composite, the Russell 2000, and the SIC Code 5912 (pharmacy peer group). Because we have historically
paid dividends on a quarterly basis, the graph assumes that dividends were reinvested. The performance graph
and related information below shall not be deemed “filed” with the SEC, nor shall such information be incorporated
by reference into any future filing under the Securities Act or Exchange Act, each as amended, except to the extent
that we specifically incorporate it by reference into such filing.
300.00
250.00
200.00
150.00
100.00
50.00
0.00
7
1
0
2
,
1
3
h
c
r
a
M
e
d
a
m
t
n
e
m
t
s
e
v
n
I
0
0
1
$
f
o
e
u
l
a
V
PetMed Express, Inc.
Nasdaq Composite
Russell 2000
SIC Code 5912
3/31/2017
3/31/2018
3/31/2019
3/31/2020
3/31/2021
3/31/2022
Nasdaq Composite
SIC Code 5912
Russell 2000
PetMed Express, Inc.
Performance graph data:
Fiscal Year Ended March 31,
PetMed Express, Inc.
Nasdaq Composite
SIC Code 5912
Russell 2000
2017
100.00
100.00
100.00
100.00
2018
211.75
120.76
80.17
111.79
2020
159.37
134.52
70.52
86.72
2021
201.60
233.26
92.62
168.96
2022
155.76
252.05
108.31
159.19
2019
119.69
133.60
75.01
114.09
16
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth securities authorized for issuance under equity compensation plans, including
individual compensation arrangements, by us under our 2015 Outside Director Equity Compensation Restricted
Stock Plan and 2016 Employee Equity Compensation Restricted Stock Plan as of March 31, 2022:
EQUITY COMPENSATION PLAN INFORMATION
(In thousands)
Number of securities
Number of securities
to be issued upon
Weighted average
remaining available
exercise of outstanding
exercise price of
for future issuance
options, warrants
outstanding options,
under equity
Plan category
and rights
warrants and rights
compensation plans
2015 Outside Director Equity Compensation Restricted Stock Plan
2016 Employee Equity Compensation Restricted Stock Plan
Total
(1)
65
706
771
-
-
488 (1)
107
595
The number of shares of common stock available for issuance under the 2015 Outside Director Equity Compensation
Restricted Stock Plan automatically increase on the first trading day of January each calendar year during the term of the
2015 Outside Director Equity Compensation Restricted Stock Plan, by an amount equal to ten percent (10%) of the total
number of shares of common stock authorized under the 2015 Outside Director Equity Compensation Restricted Stock Plan.
ITEM 6. [RESERVED]
17
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Executive Summary
PetMed Express (the “Company”) was incorporated in the state of Florida in January 1996, and since 2004 its
common stock has traded on the NASDAQ Global Select Market under the symbol “PETS.” The Company began
selling pet medications and other pet health products in September 1996, and in March 2010, the Company started
offering additional pet supplies on its website for sale, and these items are drop shipped to customers by third party
vendors. Presently, the Company’s product line includes approximately 3,000 of the most popular pet medications,
health products, and supplies for dogs, cats, and horses.
The Company markets its products through national advertising campaigns which aim to increase the recognition
of the “PetMeds” brand name, increase traffic on its website at www.petmeds.com, acquire new customers, and
maximize repeat purchases. Approximately 84% of all sales were generated via the Internet in both fiscal 2022 and
fiscal 2021. The twelve-month average purchase was approximately $93 per order for the fiscal year ended March
31, 2022, compared to $89 for the fiscal year ended March 31, 2021.
Critical Accounting Policies
Our discussion and analysis of our financial condition and the results of our operations contained herein are
based upon our Consolidated Financial Statements and the data used to prepare them. The Company’s
Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted
in the United States of America. On an ongoing basis we re-evaluate our judgments and estimates including those
related to product returns, bad debts, inventories, and income taxes. We base our estimates and judgments on our
historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering
available information. Actual results may differ from these estimates under different assumptions or conditions. Our
estimates are guided by observing the following critical accounting policies.
Revenue recognition
The Company generates revenue by selling pet medication products and pet supplies mainly to retail customers.
Certain pet supplies offered on the Company’s website are drop shipped to customers. The Company considers
itself the principal in the arrangement because the Company controls 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
this is not considered a key judgment. There are no amounts excluded from variable
patterns; however,
consideration. Revenue is recognized when control transfers to the customer at the point in time in which the
shipment of the product occurs. Outbound shipping and handling fees are an accounting policy election and are
included in sales as the Company considers itself 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.
The Company disaggregates revenue in the following two categories: (1) reorder sales vs new order sales, and
(2) internet sales vs contact center sales. The following table illustrates sales by various classifications:
Sales (In thousands)
2022
%
2021
%
$ Variance % Variance
Year Ended March 31,
Reorder Sales
New Order Sales
$
$
250,401
23,016
91.6%
8.4%
$
$
272,648
36,567
88.2%
11.8%
$
$
(22,247)
(13,551)
-8.2%
-37.1%
Total Net Sales
$
273,417
100.0%
$
309,215
100.0%
$
(35,798)
-11.6%
Internet Sales
Contact Center Sales
$
$
230,263
43,154
84.2%
15.8%
$
$
259,404
49,811
83.9%
16.1%
$
$
(29,141)
(6,657)
-11.2%
-13.4%
Total Net Sales
$
273,417
100.0%
$
309,215
100.0%
$
(35,798)
-11.6%
18
Sales (In thousands)
2021
%
2020
%
$ Variance
% Variance
Year Ended March 31,
Reorder Sales
New Order Sales
$
$
272,648
36,567
88.2%
11.8%
$
$
248,560
35,565
87.5%
12.5%
$
$
24,088
1,002
Total Net Sales
$
309,215
100.0%
$
284,125
100.0%
$
25,090
Internet Sales
Contact Center Sales
$
$
259,404
49,811
83.9%
16.1%
$
$
238,054
46,071
83.8%
16.2%
$
$
21,350
3,740
Total Net Sales
$
309,215
100.0%
$
284,125
100.0%
$
25,090
9.7%
2.8%
8.8%
9.0%
8.1%
8.8%
Virtually all of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement
in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales. The
Company had no material contract asset or contract liability balances as of March 31, 2022, or March 31, 2021.
The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise
from customers’ inability to make required payments, arising from either credit card chargebacks or insufficient funds
checks. The Company determines its estimates of the un-collectability of accounts receivable by analyzing historical
bad debts and current economic trends. The allowance for doubtful accounts was approximately $39,000 at both
March 31, 2021, and March 31, 2022.
Valuation of inventory
Inventories consist of prescription and non-prescription pet medications and pet supplies that are available for
sale and are priced at the lower of cost or net realizable value using a weighted average cost method. The Company
writes down its inventory for estimated obsolescence. The inventory reserve was approximately $81,000 and
$86,000 at March 31, 2022 and 2021, respectively.
Advertising
The Company's advertising expense consists primarily of Internet marketing, direct mail/print, and television
advertising. Internet costs are expensed in the month incurred and direct mail/print advertising costs are expensed
when the related brochures and postcards are produced, distributed, or superseded. Television advertising costs
are expensed as the advertisements are televised.
Accounting for income taxes
The Company accounts for income taxes under the provisions of ASC Topic 740, (“Accounting for Income
Taxes”), which generally requires the recognition of deferred tax assets and liabilities for the expected future tax
benefits or consequences of events that have been included in the 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.
19
Results of Operations
The following should be read in conjunction with the Company’s 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 the Company’s Consolidated Statements of Income:
Sales
Cost of sales
Gross profit
Operating expenses:
General and administrative
Advertising
Depreciation
Total operating expenses
Income from operations
Total other income
Income before provision for income taxes
Provision for income taxes
Fiscal Year Ended March 31,
2022
2021
2020
100.0
%
100.0
%
100.0
%
71.4
28.6
11.3
6.9
1.0
19.2
9.4
0.5
9.9
2.2
70.9
29.1
9.1
7.0
0.8
16.9
12.2
0.5
12.7
2.8
71.4
28.6
8.9
8.0
0.8
17.7
10.9
1.0
11.9
2.8
Net income
7.7
%
9.9
%
9.1
%
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA per share
To provide investors and the market with additional information regarding our financial results, we have disclosed
(see below) adjusted EBITDA and adjusted EBITDA per share, non-GAAP financial measures that we calculate as
net income excluding; share-based compensation expense; depreciation and amortization; income tax provision;
and interest income (expense). We have provided reconciliations below of adjusted EBITDA to net income and
adjusted EBITDA per share to diluted earnings per share, the most directly comparable GAAP financial measures.
We have included adjusted EBITDA and adjusted EBITDA per share, herein, because they are key measures
used by our management and Board of Directors to evaluate our operating performance, generate future operating
plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses
in calculating adjusted EBITDA facilitates operating performance comparability across reporting periods by removing
the effect of non-cash expenses. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA per share
provide useful information to investors and others in understanding and evaluating our operating results in the same
manner as our management and Board of Directors.
We believe it is useful to exclude non-cash charges, such as, share-based compensation expense, depreciation
and amortization from our adjusted EBITDA and adjusted EBITDA per share because the amount of such expenses
in any specific period may not directly correlate to the underlying performance of our business operations. In addition,
we believe it is useful to exclude in our adjusted EBITDA and adjusted EBITDA per share income tax provision and
interest income (expense), as neither are components of our core business operations. Adjusted EBITDA and
adjusted EBITDA per share have limitations as financial measures, these non-GAAP measures should not be
20
considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these
limitations are:
(cid:120)
(cid:120)
(cid:120)
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized
may have to be replaced in the future and adjusted EBITDA and adjusted EBITDA per share do not reflect
capital expenditure requirements for such replacements or for new capital expenditures;
Adjusted EBITDA and adjusted EBITDA per share do not reflect share-based compensation. Share-based
compensation has been, and will continue to be for the foreseeable future, a material recurring expense in our
business and an important part of our compensation strategy;
Adjusted EBITDA and adjusted EBITDA per share do not reflect interest income (expense), net; or changes
in, or cash requirements for, our working capital; and
(cid:120) Other companies, including companies in our industry, may calculate adjusted EBITDA and adjusted EBITDA
per share differently, which reduces these measures’ usefulness as comparative measures.
Because of these and other limitations, you should consider adjusted EBITDA and adjusted EBITDA per share only
as supplemental to, and alongside with other GAAP based financial performance measures, including various cash
flow metrics, net income, net margin, and our other GAAP results.
The following table presents a reconciliation of net income, the most directly comparable GAAP measure to
adjusted EBITDA and adjusted EBITDA per share for each of the periods indicated:
Reconciliation of Non-GAAP Measures
PetMed Express, Inc.
($ in thousands, except percentages)
2022
2021
Change
Change
2022
2021
Change
Change
Three Months Ended
Year Ended
March 31, March 31,
$
%
March 31, March 31,
$
%
Consolidated Reconciliation of GAAP Net Income to Adjusted EBITDA:
Net income
Add (subtract):
$
6,066
$
6,812
$
(746)
-11%
$
21,100
$
30,603
$
(9,503)
-31%
Share-based compensation
$
1,509
$
1,013
$
496
49%
$
4,549
$
3,307
$
1,242
Income Taxes
Depreciation
Interest Income/Expense
$
(92)
$
(85)
$
(7)
$
687
$
636
$
51
8%
8%
$
2,738
$
2,427
$
311
$
(335)
$
(314)
$
(21)
$
1,368
$
2,037
$
(669)
-33%
$
5,971
$
8,613
$
(2,642)
38%
-31%
13%
7%
Adjusted EBITDA
$
9,538
$
10,413
$
(875)
-8%
$
34,023
$
44,636
$
(10,613)
-24%
($ in thousands, except percentages March 31, March 31,
$
%
March 31, March 31,
$
%
and per share amounts)
2022
2021
Change
Change
2022
2021
Change
Change
Three Months Ended
Year Ended
Consolidated Reconciliation of GAAP Net Income Per Share to Adjusted EBITDA per share:
Net income per share, diluted
$
0.30
$
0.34
$
(0.04)
-12%
$
1.04
$
1.52
$
(0.48)
-32%
Add (subtract):
Share-based compensation
$
0.07
$
0.05
$
0.02
40%
$
0.22
$
0.16
$
0.06
38%
Income Taxes
Depreciation
$
0.07
$
0.10
$
(0.03)
-30%
$
0.29
$
0.43
$
(0.14)
-33%
$
0.03
$
0.03
$
-
0%
$
0.13
$
0.12
$
0.01
Interest Income/Expense
$
-
$
-
$
-
0%
$
(0.01)
$
(0.01)
$
-
8%
0%
Adjusted EBITDA Per Share
$
0.47
$
0.52
$
(0.05)
-9%
$
1.67
$
2.22
$
(0.55)
-25%
21
Fiscal 2022 Compared to Fiscal 2021
COVID-19
We are dedicated to making every effort to ensure our customers’ pets receive the medications they need. We
are also dedicated to making every effort to ensure the health and safety of our employees. We have continued
with working from home where possible and enhanced disinfection and social distancing within our workplace. The
Company has been open during our normal business hours without any material disruptions to our operations. We
have not seen any major disruptions in our supply chain; however, we have experienced some delays in the delivery
of some
and related government, private sector and individual consumer responsive actions may adversely affect our
business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of
time” in Part I, Item 1A of this Form 10-K.
“The outbreak of
items. See
inventory
factor
risk
the COVID-19 global pandemic
Sales
Sales decreased by approximately $35.8 million, or 11.6%, to $273.4 million for the fiscal year ended March 31,
2022, from approximately $309.2 million for the fiscal year ended March 31, 2021. The decrease in sales for the
fiscal year ended March 31, 2022, was primarily due to decreases in reorder and new order sales. Sales for fiscal
year 2022 were impacted by a much more competitive environment, and a crowded advertising market which had
substantially higher advertising costs compared to the same period in the prior year. Veterinary visits increased
during fiscal year 2022, compared to being down during the prior year. We believe the increase in veterinary visits
was primarily due to pet owners needing to visit their veterinarian for their pets’ annual exam in order to renew their
prescriptions, as many veterinarians were closed in the prior year due to the pandemic. The Company acquired
approximately 263,000 new customers for the fiscal year ended March 31, 2022, compared to approximately
443,000 new customers for the same period the prior year. The following chart illustrates sales by various sales
classifications:
Sales (In thousands)
2022
%
2021
%
$ Variance % Variance
Year Ended March 31,
Reorder Sales
New Order Sales
$
$
250,401
23,016
91.6%
8.4%
$
$
272,648
36,567
88.2%
11.8%
$
$
(22,247)
(13,551)
-8.2%
-37.1%
Total Net Sales
$
273,417
100.0%
$
309,215
100.0%
$
(35,798)
-11.6%
Internet Sales
Contact Center Sales
$
$
230,263
43,154
84.2%
15.8%
$
$
259,404
49,811
83.9%
16.1%
$
$
(29,141)
(6,657)
-11.2%
-13.4%
Total Net Sales
$
273,417
100.0%
$
309,215
100.0%
$
(35,798)
-11.6%
Going forward sales may be adversely affected due to increased competition and consumers giving more
consideration to price. The changes in consumer behavior post pandemic makes future sales somewhat challenging
to predict. No guarantees can be made that sales will continue to grow in the future. The majority of our product
sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications. For
the quarters ended June 30, September 30, December 31, and March 31 of fiscal year 2022, the Company’s sales
were approximately 29%, 25%, 22%, and 24%, respectively. For the quarters ended June 30, September 30,
December 31, and March 31 of fiscal year 2021, the Company’s sales were approximately 31%, 25%, 21%, and
23%, respectively.
Cost of sales
Cost of sales decreased by approximately $24.0 million, or 10.9% to $195.3 million for the fiscal year ended
March 31, 2022, from $219.3 million for the fiscal year ended March 31, 2021. The cost of sales decrease can be
directly related to the decrease in sales during fiscal year 2022. As a percentage of sales, cost of sales was 71.4%
in fiscal year 2022, as compared to 70.9% in fiscal 2021. The cost of sales percentage increase was adversely
impacted due to the major manufacturers, with whom we have a purchasing relationship, shifting their rebate funding
from discounting product costs to more cooperative marketing rebates.
22
Gross profit
Gross profit decreased by approximately $11.8 million, or 13.2%, to $78.1 million for the fiscal year ended March
31, 2022, from $89.9 million for the fiscal year ended March 31, 2021. The decrease in gross profit can be directly
related to the decrease in sales during fiscal 2022. Gross profit as a percentage of sales for fiscal 2022 was 28.6%
compared to 29.1% for fiscal 2021. The decrease in the gross profit percentage was adversely impacted due to the
major manufacturers, with whom we have a purchasing relationship, shifting their rebate funding from discounting
product costs to more cooperative marketing rebates.
General and administrative expenses
General and administrative expenses increased by approximately $2.5 million, or 9.0%, to $30.8 million for the
fiscal year ended March 31, 2022, from $28.3 million for the fiscal year ended March 31, 2021. The increase in
general and administrative expenses for the fiscal year ended March 31, 2022 was primarily due to the following: a
$1.4 million increase in payroll expenses, the majority of which related to increased stock compensation expense; a
$989,000 increase in professional fees related to brand and marketing consultation, legal, and investment banking;
and a $514,000 increase in other expenses which include property expenses, travel related expense, insurance
expense, and other expenses. Offsetting the increase was a decrease of $397,000 primarily related to decreased
bank service fees due to the decrease in sales. General and administrative expenses as a percentage of sales was
11.3% for the fiscal year ended March 31, 2022, compared to 9.1% for the fiscal year ended March 31, 2021. The
Company expects general and administrative expense as a percentage of sales to approximate 12.5% and expects
stock compensation expense to approximate $6.4 million in fiscal 2023.
Advertising expenses
Advertising expenses decreased by approximately $2.8 million to $18.8 million for the fiscal year ended March
31, 2022, from $21.6 million for the fiscal year ended March 31, 2021. The decrease in advertising expenses for
fiscal 2022 was due to the Company receiving increased cooperative marketing funds from product manufacturers
to offset our advertising expenses, within the terms of our contractual relationships. Overall advertising spending
was flat compared to fiscal 2021, yet total net advertising expenses decreased due to increased cooperative
advertising rebates. The advertising costs of acquiring a new customer, defined as total advertising costs divided by
new customers acquired, was $72 for the fiscal year ended March 31, 2022, compared to $49 for the fiscal year
ended March 31, 2021. The increase to customer acquisition costs for the fiscal year ended March 31, 2022, was
due to an increase in overall advertising prices and a less efficient variable marketing spend. Advertising cost of
acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising
creative, advertising 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 6.9% and 7.0% for the fiscal years ended March 31, 2022, and 2021, respectively. The Company
currently anticipates advertising as a percentage of sales to be approximately 7.0% for fiscal year 2023. However,
the advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability.
Depreciation
Depreciation expense for the fiscal year ended March 31, 2022, increased to approximately $2.7 million from
$2.4 million for the fiscal year ended March 31, 2021. This increase to depreciation expense for the fiscal year
ended March 31, 2022, can be attributed to increased new property and equipment additions in fiscal 2022.
Other income
Other income decreased by approximately $268,000, to $1.4 million for the fiscal year ended March 31, 2022,
from $1.6 million for the fiscal year ended March 31, 2021. The decrease was related to a reduction in advertising
income in fiscal 2022. Interest income was flat compared to the prior year. Interest income may decrease in the
future as the Company utilizes its cash balances on its share repurchase plan, with approximately $28.7 million
remaining as of March 31, 2022, on any quarterly dividend payment, on future investment/partnerships, or on its
operating activities.
23
Provision for income taxes
For the fiscal years ended March 31, 2022 and 2021, the Company recorded an income tax provision of
approximately $6.0 million and $8.6 million, respectively. The decrease to the income tax provision for fiscal 2022
is related to a decrease in operating income compared to fiscal 2021. The effective tax rate for the fiscal years
ended March 31, 2022, and 2021 were 22.1% and 22.0%, respectively. The slight increase to the effective rate for
the fiscal year ended March 31, 2022, can be attributed to the Company receiving more one-time tax benefits in
fiscal 2021 than in fiscal 2022. The one-time tax benefits received in fiscal 2021 included a one-time state income
tax refund of $285,000 in the June 2020 quarter and a $135,000 income tax benefit related to restricted stock
compensation in the September 2020 and March 2021 quarters. This compared to a $196,000 one-time state income
tax refund and a $131,000 benefit due to a state rate reduction in the March 2022 quarter. The Company estimates
its effective tax rate will be approximately 23.0% for fiscal 2023.
Net income
Net income decreased by approximately $9.5 million, or 31%, to approximately $21.1 million for the fiscal year
ended March 31, 2022, from approximately $30.6 million for the fiscal year ended March 31, 2021. The decrease
to net income was primarily related to a decrease in sales and resulting gross profit, and an increase in general and
administrative expenses, all partially offset by a decrease in advertising expenses, during the fiscal year.
Fiscal 2021 Compared to Fiscal 2020
Sales
Sales increased by approximately $25.1 million, or 8.8%, to $309.2 million for the fiscal year ended March 31,
2021, from approximately $284.1 million for the fiscal year ended March 31, 2020. The increase in sales for the
fiscal year ended March 31, 2021 was primarily due to increased reorder sales and new order sales. Fiscal 2021
started out with greater than expected e-commerce demand due to COVID-19, with consumers shifting their
purchases to online, which positively impacted our reorder and new order sales during the year. In the latter half of
fiscal 2021, veterinarian clinics and retail stores re-opened. The Company acquired approximately 443,000 new
customers for the fiscal year ended March 31, 2021, compared to approximately 421,000 new customers for the
same period the prior year. The following chart illustrates sales by various sales classifications:
Sales (In thousands)
2021
%
2020
%
$ Variance
% Variance
Year Ended March 31,
Reorder Sales
New Order Sales
$
$
272,648
36,567
88.2%
11.8%
$
$
248,560
35,565
87.5%
12.5%
$
$
24,088
1,002
Total Net Sales
$
309,215
100.0%
$
284,125
100.0%
$
25,090
Internet Sales
Contact Center Sales
$
$
259,404
49,811
83.9%
16.1%
$
$
238,054
46,071
83.8%
16.2%
$
$
21,350
3,740
Total Net Sales
$
309,215
100.0%
$
284,125
100.0%
$
25,090
9.7%
2.8%
8.8%
9.0%
8.1%
8.8%
Going forward sales may be adversely affected due to increased competition and consumers giving more
consideration to price. The changes in consumer behavior post pandemic makes future sales somewhat challenging
to predict. No guarantees can be made that sales will continue to grow in the future. The majority of our product
sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications. For
the quarters ended June 30, September 30, December 31, and March 31 of fiscal 2021, the Company’s sales were
approximately 31%, 25%, 21%, and 23%, respectively. For the quarters ended June 30, September 30, December
31, and March 31 of fiscal 2020, the Company’s sales were approximately 28%, 25%, 21%, and 26%, respectively.
Cost of sales
Cost of sales increased by approximately $16.4 million, or 8.1% to $219.3 million for the fiscal year ended March
31, 2021, from $202.9 million for the fiscal year ended March 31, 2020. The cost of sales increase can be directly
related to the increase in sales during fiscal 2021. As a percentage of sales, cost of sales was 70.9% in fiscal 2021,
as compared to 71.4% in fiscal 2020. The cost of sales percentage decrease can be attributed to the benefit of
having direct relationships with all major manufacturers, which helped reduce product costs, and these
manufacturers having minimum advertised price policies. In the future, cost of sales may be adversely impacted
24
due to the major manufacturers shifting their rebate funding from discounting product costs to cooperative marketing
rebates.
Gross profit
Gross profit increased by approximately $8.7 million, or 10.7%, to $89.9 million for the fiscal year ended March
31, 2021, from $81.2 million for the fiscal year ended March 31, 2020. The increase in gross profit can be directly
related to the increase in sales during fiscal 2021. Gross profit as a percentage of sales for fiscal 2021 was 29.1%
compared to 28.6% for fiscal 2020. The increase in gross profit percentage can be attributed to the benefit of having
direct relationships with all major manufacturers, which helped reduce product costs, and these manufacturers
having minimum advertised price policies. Going forward gross profit may be adversely affected due to increased
competition and consumers giving more consideration to price. In the future, gross profit may also be adversely
impacted due to the major manufacturers shifting their rebate funding from discounting product costs to cooperative
marketing rebates.
General and administrative expenses
General and administrative expenses increased by approximately $3.0 million, or 12.0%, to $28.3 million for the
fiscal year ended March 31, 2021 from $25.3 million for the fiscal year ended March 31, 2020. The increase in
general and administrative expenses for the fiscal year ended March 31, 2021 was primarily due to the following: a
$1.9 million increase in payroll expenses, due to increased sales and increased COVID-19 related work from home
expenses, with $485,000 related to increased stock compensation expense due to the accelerated release of
restrictions of the Company’s former Chairman Robert Schweitzer’s restricted stock upon his passing on February
23, 2021; a $619,000 increase in bank service fees due to increased sales; a $388,000 increase in property
expenses related to the Company’s e-commerce platform; and a $207,000 increase in telephone expenses due to
employees working from home in response to COVID-19. Offsetting the increase was a net decrease of $48,000
to other expenses which include insurance, professional fees, and bad debt expense. General and administrative
expenses as a percentage of sales was 9.1% for the fiscal year ended March 31, 2021, compared to 8.9% for the
fiscal year ended March 31, 2020.
Advertising expenses
Advertising expenses decreased by approximately $1.1 million to $21.6 million for the fiscal year ended March
31, 2021, from $22.7 million for the fiscal year ended March 31, 2020. The decrease in advertising expenses for
fiscal 2021 was due to the Company receiving increased cooperative marketing funds from product manufacturers
to offset our advertising expenses, within the terms of our contractual relationships. Overall advertising spending
increased over the prior year, yet total net advertising expenses decreased due to increased cooperative advertising
rebates. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new
customers acquired, was $49 for the fiscal year ended March 31, 2021, compared to $54 for the fiscal year ended
March 31, 2020. The decrease to customer acquisition costs for the fiscal year ended March 31, 2021 can also be
attributed to receiving increased cooperative marketing funds from product manufacturers. Advertising cost of
acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising
creative, advertising 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 7.0% and 8.0% for the fiscal years ended March 31, 2021
and 2020, respectively. The decrease in advertising expense as a percentage of total sales for the fiscal year ended
March 31, 2021 can be attributed to a decrease in advertising expenses and an increase in sales as compared to
the same period in the prior year. The Company currently anticipates advertising as a percentage of sales to be
approximately 7% for fiscal 2022. However, the advertising percentage may fluctuate quarter to quarter due to
seasonality and advertising availability.
Depreciation
Depreciation expense for the fiscal year ended March 31, 2021 increased slightly to approximately $2.4 million
from $2.3 million for the fiscal year ended March 31, 2020. This increase to depreciation expense for the fiscal year
ended March 31, 2021 can be attributed to increased new property and equipment additions in fiscal 2021.
25
Other income
Other income decreased by approximately $1.3 million to $1.6 million for the fiscal year ended March 31, 2021,
from $2.9 million for the fiscal year ended March 31, 2020. The decrease to other income was primarily related to
decreased interest income due to decreased interest rates compared to the prior year. Interest income may
decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately
$28.7 million remaining at March 31, 2021, on any quarterly dividend payment, on its operating activities, or with
further decreases in interest rates.
Provision for income taxes
For the fiscal years ended March 31, 2021 and 2020, the Company recorded an income tax provision of
approximately $8.6 million and $8.0 million, respectively. The increase to the income tax provision for fiscal 2021 is
related to an increase in operating income compared to fiscal 2020. The effective tax rate for the fiscal years ended
March 31, 2021 and 2020 were 22.0% and 23.7%, respectively. The decrease to the effective rate for the fiscal year
ended March 31, 2021 can be attributed to the Company receiving a one-time state income tax refund of $285,000
in the June 2020 quarter and a $135,000 income tax benefit related to restricted stock compensation in the
September 2020 and March 2021 quarters, compared to a $322,000 income tax charge related to restricted stock
compensation, which was recognized in the September 2019 quarter. The Company estimates its effective tax rate
will be approximately 23.5% for fiscal 2022.
Net income
Net income increased by approximately $4.7 million, or 18.4%, to approximately $30.6 million for the fiscal year
ended March 31, 2021 from approximately $25.9 million for the fiscal year ended March 31, 2020. The increase to
net income was primarily related to an increase in gross profit, offset by an increase in operating expenses and a
decrease to interest income during the fiscal year.
Liquidity and Capital Resources
The Company’s working capital at March 31, 2022 and 2021 was approximately $117.8 million and
approximately $116.3 million, respectively. The $1.5 million increase in working capital was primarily attributable to
income generated by operations and a reduction to accounts payable, offset by dividends paid in the period. Net
cash provided by operating activities was $18.5 million and $40.1 million for the fiscal years ended March 31, 2022
and 2021, respectively. This change can be mainly attributed to a decrease in the Company’s net income for the
fiscal year ended March 31, 2022 and a decrease to accounts payable compared to the prior year. Net cash used
in investing activities was $1.8 million and $2.4 million for the fiscal years ended March 31, 2022 and 2021,
respectively. This change in investing activities is related to decreased property and equipment additions acquired
in fiscal 2022. Net cash used in financing activities was $24.4 million and $22.7 million for the fiscal years ended
March 31, 2022 and 2021, respectively. The increase to financing activities relates to an increase in the dividend
paid in fiscal 2022, compared to the dividend paid in fiscal 2021. At March 31, 2022, the Company had approximately
$28.7 million remaining under the Company’s share repurchase plan.
Subsequent to March 31, 2022, the Company’s Board of Directors declared a quarterly dividend of $0.30 per
share on May 9, 2022. The Board established a May 20, 2022 record date and a May 27, 2022 payment date.
Depending on future market conditions the Company may utilize its cash and cash equivalents on the remaining
balance of its current share repurchase plan, on quarterly dividends, or on its operating activities.
At March 31, 2022 the Company had no material outstanding lease commitments. We are not currently bound
by any long- or short-term agreements 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. Presently, we have
approximately $5.0 million forecasted for capital expenditures in fiscal 2023, which will be funded through cash from
operations. The Company’s primary source of working capital is cash from operations. The Company presently has
no need for alternative sources of working capital and has no commitments or plans to obtain additional capital.
Recent Accounting Pronouncements
26
Recent Accounting Pronouncements
Other than disclosures included in Note 1 of the Consolidated Financial Statements, which are incorporated by
reference as if fully set forth herein, the Company does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial
position, results of operations, or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk generally represents the risk that losses may occur in the value of financial instruments as a result
of movements in interest rates, foreign currency exchange rates, and commodity prices. Our financial instruments
include cash and cash equivalents, accounts receivable, and accounts payable. The book values of cash
equivalents, accounts receivable, and accounts payable are considered to be representative of fair value because
of the short maturity of these instruments. Interest rates affect our return on excess cash and cash equivalents. At
March 31, 2022, we had $111.1 million in cash and cash equivalents, primarily money market accounts. A majority
of our cash and cash equivalents generates interest income based on prevailing interest rates.
A significant change in interest rates could impact the amount of interest income generated from our excess
cash and cash equivalents. It would also impact the market value of our cash and cash equivalents. Our cash and
cash equivalents are subject to market risk, primarily interest rate and credit risk. Our investments are managed by
a limited number of outside professional managers within investment guidelines set by our Board of Directors. Such
guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting our
investments to high-quality debt instruments with both short- and long-term maturities. We do not hold any derivative
financial instruments that could expose us to significant market risk. At March 31, 2022, we had no debt obligations.
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PETMED EXPRESS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID:49)
Consolidated Balance Sheets as of March 31, 2022 and 2021
Consolidated Statements of Income for each of the three years in the period
ended March 31, 2022
Consolidated Statements of Changes in Shareholders’ Equity for each of the three years in the period
ended March 31, 2022
Consolidated Statements of Cash Flows for each of the three years in the period ended March 31, 2022
Notes to Consolidated Financial Statements
Report of Management on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Page
29
30
31
32
33
34
46
47
28
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of PetMed Express, Inc. and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PetMed Express, Inc. and its subsidiaries (the
Company) as of March 31, 2022 and 2021, the related consolidated statements of income, changes in shareholders’
equity and cash flows for each of the three years in the period ended March 31, 2022, and the related notes to the
consolidated financial statements (collectively, the financial statements).
In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and the
results of their operations and their cash flows for each of the three years in the period ended March 31, 2022, in
conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2022, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission in 2013, and our report dated May 24, 2022 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (i) relate to accounts or disclosures
that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex
judgments. We determined that there are no critical audit matters.
/s/ RSM US LLP
We have served as the Company’s auditor since 2007.
Fort Lauderdale, Florida
May 24, 2022
29
PETMED EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful
accounts of $39 and $39, respectively
Inventories - finished goods
Prepaid expenses and other current assets
Prepaid income taxes
Total current assets
Noncurrent assets:
Property and equipment, net
Intangible assets
Total noncurrent assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
Deferred tax liabilities
Total liabilities
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
Common stock, $.001 par value, 40,000 shares authorized;
20,979 and 20,269 shares issued and outstanding, respectively
Additional paid-in capital
Retained earnings
Total shareholders' equity
March 31,
2022
March 31,
2021
$
111,080
$
118,718
$
$
1,913
32,455
4,866
681
2,587
34,420
4,503
959
150,995
161,187
24,464
860
25,324
25,450
860
26,310
176,319
$
187,497
27,500
5,697
$
33,197
936
34,133
9
21
11,660
130,496
142,186
39,548
5,387
44,935
1,281
46,216
9
20
7,111
134,141
141,281
Total liabilities and shareholders' equity
$
176,319
$
187,497
See accompanying notes to consolidated financial statements.
30
PETMED EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for per share amounts)
Sales
Cost of sales
Gross profit
Operating expenses:
General and administrative
Advertising
Depreciation
Total operating expenses
Income from operations
Other income (expense):
Interest income, net
Other, net
Total other income
2022
Year Ended March 31,
2021
2020
$
273,417 $
195,341
309,215 $
219,267
284,125
202,879
78,076
89,948
81,246
30,829
18,799
2,738
52,366
25,710
335
1,026
1,361
28,293
21,641
2,427
52,361
37,587
314
1,315
1,629
25,264
22,748
2,257
50,269
30,977
1,747
1,169
2,916
Income before provision for income taxes
27,071
39,216
33,893
Provision for income taxes
5,971
8,613
8,042
Net income
Net income per common share:
Basic
Diluted
Weighted average number of common shares outstanding:
Basic
Diluted
Cash dividends declared per common share
$
$
$
$
21,100 $
30,603 $
25,851
1.05 $
1.04 $
1.53 $
1.52 $
1.29
1.29
20,176
20,358
20,060
20,119
20,041
20,055
1.20 $
1.12 $
1.08
See accompanying notes to consolidated financial statements.
31
PETMED EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended March 31, 2020, March 31, 2021, and March 31, 2022
(In thousands)
Convertible
Preferred Stock
Common
Stock
Shares
Amounts
Shares
Amounts
Additional
Paid-In
Capital
Retained
Earnings
Total
Balance, March 31, 2019
3
9
20,674
21
12,478
122,172
134,680
Issuance of restricted stock, net
Share based compensation
Repurchased and retired shares
Dividends declared
Net income
Balance, March 31, 2020
Issuance of restricted stock, net
Share based compensation
Dividends declared
Net income
Balance, March 31, 2021
Issuance of restricted stock, net
Share based compensation
Dividends declared
Net income
-
-
-
-
-
-
-
-
-
-
-
-
-
3
3
-
-
-
-
-
-
-
-
-
-
-
-
-
105
-
(613)
-
-
-
-
-
-
-
2,822
(1)
(11,496)
-
-
-
-
2,822
(11,497)
-
-
(21,846)
(21,846)
25,851
25,851
9
20,166
20
3,804
126,177
130,010
103
-
-
-
9
20,269
710
-
-
-
-
-
-
-
20
1
-
-
-
-
3,307
-
-
-
-
-
3,307
(22,639)
(22,639)
30,603
30,603
7,111
134,141
141,281
-
4,549
-
-
-
-
1
4,549
(24,745)
(24,745)
21,100
21,100
Balance, March 31, 2022
3 $
9
20,979 $
21 $
11,660 $ 130,496 $
142,186
See accompanying notes to consolidated financial statements.
32
PETMED EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation
Share based compensation
Deferred income taxes
Bad debt expense
(Increase) decrease in operating assets
and increase (decrease) in liabilities:
Accounts receivable
Inventories - finished goods
Prepaid income taxes
Prepaid expenses and other current assets
Accounts payable
Accrued expenses and other current liabilities
Income taxes payable
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Dividends paid
Repurchase and retirement of common stock
Net cash used in financing activities
Year Ended
March 31,
2021
2020
2022
$
21,100 $
30,603 $
25,851
2,738
4,549
(345)
165
509
1,965
278
(363)
(12,048)
(50)
-
18,498
2,427
3,307
311
130
1,126
(16,536)
(959)
(974)
19,890
1,221
(471)
40,075
(1,752)
(1,752)
(2,432)
(2,432)
2,257
2,822
(151)
191
(1,492)
3,486
582
(376)
3,383
1,820
471
38,844
(2,311)
(2,311)
(24,384)
-
(24,384)
(22,687)
-
(22,687)
(21,803)
(11,497)
(33,300)
Net (decrease) increase in cash and cash equivalents
(7,638)
14,956
3,233
Cash and cash equivalents, at beginning of year
118,718
103,762
100,529
Cash and cash equivalents, at end of year
Supplemental disclosure of cash flow information:
Cash paid for income taxes
Property and equipment in current assets
Dividends payable in accrued expenses
$
$
$
$
111,080 $
118,718 $
103,762
6,085 $
10,018 $
7,140
-
$
-
$
1,745
558 $
198 $
246
See accompanying notes to consolidated financial statements.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
Summary of Significant Accounting Policies
Organization
PetMed Express, Inc. and subsidiaries, d/b/a PetMeds® (the “Company”), is a leading nationwide pet
pharmacy. The Company markets prescription and non-prescription pet medications, health products, and
supplies for dogs, cats, and horses, direct to the consumer. The Company markets its products through
national advertising campaigns, which aim to increase the recognition of the “1-800-PetMeds” brand name
and “PetMeds” family of trademarks, increase traffic on its website at www.petmeds.com, acquire new
customers, and maximize repeat purchases. Virtually all of the Company's sales are to residents in the
United States. The Company’s corporate headquarters and distribution facility are located in Delray Beach,
Florida. The Company's fiscal year end is March 31, and references herein to fiscal 2022, 2021, or 2020
refer to the Company's fiscal years ended March 31, 2022, 2021, and 2020, respectively.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany transactions have been eliminated in consolidation.
Revenue Recognition
The Company generates revenue by selling pet medication products and pet supplies. Certain pet supplies
offered on the Company’s website are drop shipped to customers. The Company considers itself the
principal in the arrangement because the Company controls 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 variable consideration. Revenue is recognized when control transfers to the customer at the
point in time in which shipment of the product occurs. This key judgment is determined as the shipping point
represents the point in time in which the Company has a present right to payment, title has transferred to
the customer, and the customer has assumed the risks and rewards of ownership. Outbound shipping and
handling fees are an accounting policy election and are included in sales as the Company considers itself
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.
The Company disaggregates revenue in the following two categories: (1) reorder sales vs new order sales,
and (2) internet sales vs contact center sales. The following table illustrates s by various classifications:
Sales (In thousands)
2022
%
2021
%
$ Variance % Variance
Year Ended March 31,
Reorder Sales
New Order Sales
$
$
250,401
23,016
91.6%
8.4%
$
$
272,648
36,567
88.2%
11.8%
$
$
(22,247)
(13,551)
-8.2%
-37.1%
Total Net Sales
$
273,417
100.0%
$
309,215
100.0%
$
(35,798)
-11.6%
Internet Sales
Contact Center Sales
$
$
230,263
43,154
84.2%
15.8%
$
$
259,404
49,811
83.9%
16.1%
$
$
(29,141)
(6,657)
-11.2%
-13.4%
Total Net Sales
$
273,417
100.0%
$
309,215
100.0%
$
(35,798)
-11.6%
34
(1)
Summary of Significant Accounting Policies (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sales (In thousands)
2021
%
2020
%
$ Variance % Variance
Year Ended March 31,
Reorder Sales
New Order Sales
$
$
272,648
36,567
88.2%
11.8%
$
$
248,560
35,565
87.5%
12.5%
$
$
24,088
1,002
Total Net Sales
$
309,215
100.0%
$
284,125
100.0%
$
25,090
Internet Sales
Contact Center Sales
$
$
259,404
49,811
83.9%
16.1%
$
$
238,054
46,071
83.8%
16.2%
$
$
21,350
3,740
Total Net Sales
$
309,215
100.0%
$
284,125
100.0%
$
25,090
9.7%
2.8%
8.8%
9.0%
8.1%
8.8%
Virtually all of the Company’s sales are paid by credit cards and the Company usually receives the cash
settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative
to sales. The Company had no material contract asset or liability balances as of March 31, 2022 and 2021.
The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise
from customers’ inability to make required payments, arising from either credit card chargebacks or
insufficient funds checks. The Company determines its estimates of the un-collectability of accounts
receivable by analyzing historical bad debts and current economic trends. The allowance for doubtful
accounts was approximately $39,000 at March 31, 2022 and March 31, 2021.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturity of three months or less when purchased
to be cash equivalents. Cash and cash equivalents at March 31, 2022 and 2021 consisted of the Company’s
cash accounts and money market accounts with a maturity of three months or less. The carrying amount of
cash equivalents approximates fair value. The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not experienced any losses in such
accounts.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Inventories
Inventories consist of prescription and non-prescription pet medications and pet supplies that are available
for sale and are priced at the lower of cost or net realizable value using a weighted average cost method.
The Company writes down its inventory for estimated obsolescence. The inventory reserve was
approximately $81,000 and $86,000 at March 31, 2022 and 2021, respectively.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated
useful lives of the assets. Our building is being depreciated over a period of thirty years. The furniture,
fixtures, equipment, and computer software are being depreciated over periods ranging from three to ten
years.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
Summary of Significant Accounting Policies (Continued)
Long-lived Assets
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.
Intangible Assets
The intangible assets consist of a toll-free telephone number and an internet domain name. In accordance
with the Accounting Standards Codification (“ASC”) Topic 350 (“Goodwill and Other Intangible Assets”) the
intangible assets are not being amortized and are subject to an annual review for impairment.
Fair Value of Financial Instruments
The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts
payable approximate fair value due to the short-term nature of these instruments.
Advertising
The Company's advertising expense consists primarily of Internet marketing, direct mail/print, and television
advertising. Internet costs are expensed in the month incurred and direct mail/print advertising costs are
expensed when the related catalogs, brochures, and postcards are produced, distributed, or superseded.
Television advertising costs are expensed as the advertisements are televised.
Comprehensive Income
The Company applies ASC Topic 220 (“Reporting Comprehensive Income”) which requires that all items
that are recognized under accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other financial statements. The items of
other comprehensive income that are typically required to be displayed are foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses on certain investments in debt and equity
securities. For the fiscal years ended March 31, 2022, 2021 and 2020 the Company had no unrealized
gains or losses.
Income Taxes
The Company accounts for income taxes under the provisions of ASC Topic 740 (“Accounting for Income
Taxes”) which generally requires the recognition of deferred tax assets and liabilities for the expected future
tax benefits or consequences of events that have been included in the 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. As required by “Accounting for Uncertainty in Income Taxes” guidance, which clarifies ASC Topic
740, the Company recognizes the financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position following an audit. For tax positions
meeting the more-likely-than-not threshold, the amount recognized in the Consolidated Financial Statements
is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement
with the relevant tax authority.
The Company applies “Accounting for Uncertainty in Income Taxes” guidance to all tax positions for which
the statute of limitations remains open. The Company files tax returns in the U.S. federal jurisdiction and
Florida and Arizona. With few exceptions, the Company is no longer subject to U.S. federal, state or local
income tax examinations by tax authorities for years ending March 31, 2019, or earlier. Any interest and
penalties related to income taxes will be recorded to other income (expenses).
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
Summary of Significant Accounting Policies (Continued)
Business Concentrations
The Company purchases its products from a variety of sources, including certain manufacturers, domestic
distributors, and wholesalers. We have multiple suppliers for each of our products to obtain the lowest cost.
There were five suppliers from which we purchased approximately 80% of all products in fiscal 2022 and
2021.
Accounting for Share Based Compensation
The Company records compensation expense associated with restricted stock in accordance with ASC
Topic 718 (“Share Based Payment”). The compensation expense related to all of the Company’s stock-
based compensation arrangements is recorded as a component of general and administrative expenses.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued ASU 2020-03, “Codification Improvements
to Financial Instruments” (“ASU 2020-03”). ASU 2020-03 improves and clarifies various financial
instruments topics. ASU 2020-03 includes seven different issues that describe the areas of improvement
and the related amendments to GAAP, intended to make the standards easier to understand and apply by
eliminating inconsistencies and providing clarifications. The Company will adopt ASU 2020-03 on April 1,
2022. The Company does not expect the adoption of this new standard to have a material impact on our
consolidated financial statements.
The Company does not believe that any other recently issued, but not yet effective, accounting standards,
if currently adopted, will have a material effect on the Company’s consolidated financial position, results of
operations, or cash flows.
(2)
Property and Equipment
Major classifications of property and equipment consist of the following (in thousands):
Building
Land
Building Improvements
Computer Software
Furniture, fixtures and equipment
Less: accumulated depreciation
Property and equipment, net
March 31,
2022
2021
$
14,997 $
3,700
2,834
5,512
9,106
36,149
(11,685)
14,997
3,700
2,834
5,621
8,626
35,778
(10,328)
$
24,464 $
25,450
(3)
Valuation and Qualifying Accounts
Activity in the Company's valuation and qualifying accounts consists of the following (in thousands):
Year Ended March 31,
2021
2022
2020
Allowance for doubtful accounts:
Balance at beginning of period
Provision for doubtful accounts
Write-off of uncollectible accounts receivable
Balance at end of year
$
$
39 $
59 $
165
(165)
130
(150)
39 $
39 $
39
191
(171)
59
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4)
Accrued Expenses and Other Current Liabilities
Major classifications of accrued expenses and other current liabilities consist of the following (in thousands):
$
Accrued sales tax
Accrued credit card fees
Accrued salaries and benefits
Accrued merchandise credits / reward program
Accrued professional expenses
Accrued sales return allowance
Accrued dividends payable
Accrued real estate taxes
Other accrued liabilities
Accrued expenses and other current liabilities
$
March 31,
2022
2021
1,106 $
428
1,134
1,623
459
190
558
111
88
5,697 $
1,063
456
1,525
1,413
290
220
198
114
108
5,387
(5)
Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The
tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred
tax liabilities are as follows (in thousands):
March 31,
2022
2021
Deferred tax assets:
Accrued expenses
Deferred stock compensation
Bad debt and inventory reserves
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
$
364 $
662
27
1,053
(1,989)
Total net deferred tax liabilities
$
(936) $
At March 31, 2022, the Company had no federal net operating loss carryforwards.
The components of the income tax provision consist of the following (in thousands):
406
321
29
756
(2,037)
(1,281)
Current taxes
Federal
State
Total current taxes
Deferred taxes
Federal
State
Total deferred taxes
2022
Year Ended March 31,
2021
2020
$
5,801 $
515
6,316
7,446 $
856
8,302
(317)
(28)
(345)
279
32
311
7,352
841
8,193
(135)
(16)
(151)
Total provision for income taxes
$
5,971 $
8,613 $
8,042
38
(5)
Income Taxes (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The reconciliation of income tax provision computed at the U.S. federal statutory tax rates to income tax
expense is as follows (in thousands):
Year Ended March 31,
2021
2022
2020
Income taxes at U.S. statutory rates
State income taxes, net of federal tax benefit
Restricted stock (windfall) shortfall adjustment
Other
Total provision for income taxes
$
$
5,685 $
379
33
(126)
8,235 $
708
(135)
(195)
7,118
649
322
(47)
5,971 $
8,613 $
8,042
In fiscal 2022 the Company recognized a stock compensation shortfall charge of approximately $33,000 and
recognized a one-time charge of approximately $29,000 related to a return to provision true up of the fiscal
2021 income tax provision. In fiscal 2021 the Company recognized a stock compensation windfall benefit
of approximately $135,000, and recognized a one-time benefit of approximately $194,000, related to a return
to provision true up of the fiscal 2020 income tax provision. In fiscal 2020 the Company recognized a stock
compensation shortfall charge of approximately $322,000, and recognized a one-time benefit of
approximately $93,000, related to a return to provision true up of the fiscal 2019 income tax provision.
(6)
Shareholders’ Equity
Preferred Stock
In April 1998, the Company issued 250,000 shares of its $.001 par value preferred stock at a price of $4.00
per share, less issuance costs of $112,187. Each share of the preferred stock is convertible into
approximately 4.05 shares of common stock at the election of the shareholder. The shares have a liquidation
value of $4.00 per share and may pay dividends at the sole discretion of the Company. The Company does
not anticipate paying dividends to the preferred shareholders in the foreseeable future. Each share of
preferred stock is entitled to one vote on all matters submitted to a vote of shareholders of the Company. At
March 31, 2022 and 2021, 2,500 shares of the convertible preferred stock remained unconverted and
outstanding.
Share Repurchase Plan
On November 8, 2006, the Company's Board of Directors approved a share repurchase plan of up to $20.0
million. On October 31, 2008, November 1, 2010, and August 1, 2011, the Company’s Board of Directors
approved an increase under the repurchase plan each for an additional $20.0 million. On January 25, 2019,
the Company’s Board of Directors authorized an additional $30.0 million under the repurchase plan. The
repurchase plan is intended to be implemented through purchases made from time to time in either the open
market or through private transactions at the Company's discretion, subject to market conditions and other
factors, in accordance with Securities and Exchange Commission requirements. There can be no
assurances as to the precise number of shares that will be repurchased under the share repurchase plan,
and the Company may discontinue the share repurchase plan at any time subject to compliance with
applicable regulatory requirements. Shares purchased pursuant to the share repurchase plan will either be
retired or held in the Company's treasury. During fiscal 2020 the Company purchased and retired
approximately 613,000 shares of its common stock for approximately $11.5 million. During fiscal 2022 and
2021 the Company had no share repurchases. At March 31, 2022 the Company had approximately $28.7
million remaining under the Company’s share repurchase plan.
Dividends
On May 3, 2021, the Company’s Board of Directors increased the quarterly dividend to $0.30 per share, on
its common stock. 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. During fiscal
2022, our Board of Directors declared the following dividends:
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6)
Shareholders’ Equity (Continued)
Declaration Date
May 3, 2021
July 26, 2021
October 25, 2021
January 24, 2022
Per Share
Dividend
$0.30
$0.30
$0.30
$0.30
Record Date
May 14, 2021
August 6, 2021
November 8, 2021
February 7, 2022
Total Amount
(In thousands)
$6,081
$6,102
$6,283
$6,294
Payment Date
May 21, 2021
August 13, 2021
November 19, 2021
February 18, 2022
(7)
Restricted Stock
In July 2015, the Company’s 2015 Outside Director Equity Compensation Restricted Stock Plan (“2015
Director Plan”) became effective upon the approval of the plan by the Company’s Shareholders. The 2015
Director Plan authorizes 400,000 shares of the Company's common stock available for issuance under the
plan and provides for an automatic increase every year in the amount of shares available for issuance under
the plan of 10% of the shares authorized under the plan. In July 2016, the Company’s 2016 Employee
Equity Compensation Restricted Stock Plan (“2016 Employee Plan”) became effective upon the approval of
the plan by the Company’s Shareholders. The 2016 Employee Plan authorizes 1,000,000 shares of the
Company's Common stock available for issuance under the plan. The value of the restricted stock is
determined based on the market value of the stock at the issuance date. The restriction period or forfeiture
period is determined by the Company’s Board and is to be no less than 1 year and no more than ten years
unless otherwise specified by the Board of Directors.
At March 31, 2022, the Company had 893,258 restricted common shares issued under the 2016 Employee
Plan and 208,880 restricted common shares issued under the 2015 Director Plan. The majority of shares
were issued subject to a restriction and forfeiture period which lapses ratably on the first, second, and third
anniversaries of the date of grant, and the fair value of which is being amortized over a one to three-year
restriction period. For the fiscal years ended March 31, 2022, 2021, and 2020, the Company recognized
compensation expense related to the Employee and Director Plans of $4.5 million, $3.3 million, and $2.8
million, respectively.
A summary of the Company’s non-vested restricted stock at March 31, 2022 is as follows (in thousands):
Non-vested restricted stock outstanding at March 31, 2021
Restricted stock granted
Restricted stock vested
Restricted stock forfeited or expired
Non-vested restricted stock outstanding at March 31, 2022
Employee
Plan
Number of
Shares
Director
Plan
Number of
Shares
Both Plans
Number of
Shares
98
676
(69)
(3)
702
62
44
(30)
(7)
69
160
720
(99)
(10)
771
At March 31, 2022 and 2021, there were 770,652 and 160,117, restricted shares subject to restriction and
forfeiture outstanding, respectively. During the fiscal years ended March 31, 2022 and 2021, the Company
issued, net of forfeitures, 709,599 and 102,931 restricted shares, respectively. At March 31, 2022 and 2021,
there were $13.4 million and $2.5 million of unrecognized compensation costs related to the restricted stock
subject to restriction and forfeiture awards, respectively, which is expected to be recognized over the
remaining weighted average restriction and forfeiture period of 2.3 and 1.8 years for fiscal 2022 and 2021,
respectively.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8)
Fair Value Measurements
The Company carries cash and cash equivalents and investments at fair value in the Consolidated Balance
Sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value
is a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or a liability. ASC Topic 820 (“Fair Value Measurements”) establishes a three-
tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair
value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active
markets.
Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. The Company’s cash equivalents are classified
within Level 1. At March 31, 2022 and 2021 the Company had invested the majority of its cash and cash
equivalents balance in money market funds (level 1).
(9)
Net Income Per Share
In accordance with the provisions of ASC Topic 260 (“Earnings Per Share”) basic net income per share is
computed by dividing net income available to common shareholders by the weighted average number of
common shares outstanding during the period. Diluted net income per common share includes the dilutive
effect of potential restricted stock and the effects of the potential conversion of preferred shares, calculated
using the treasury stock method. Unvested restricted stock, and convertible preferred shares issued by the
Company represent the only dilutive effect reflected in diluted weighted average shares outstanding. The
following is a reconciliation of the numerators and denominators of the basic and diluted net income per
share computations for the periods presented (in thousands, except for per share amounts):
Net income (numerator):
Net income
Shares (denominator)
Weighted average number of common shares
outstanding used in basic computation
Common shares issuable upon the vesting
of restricted stock
Common shares issuable upon conversion
of preferred shares
Shares used in diluted computation
Net income per common share:
Year Ended March 31,
2021
2022
2020
$
21,100
$
30,603
$
25,851
20,176
20,060
20,041
172
10
20,358
49
10
20,119
4
10
20,055
Basic
Diluted
$
$
1.05
1.04
$
$
1.53
1.52
$
$
1.29
1.29
At March 31, 2022, 2021, and 2020, 220,727, 20,952, and 72,120 shares of common restricted stock,
respectively, were excluded from the computations of diluted net income per common share, as their
inclusion would have had an anti-dilutive effect on diluted net income per common share.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10)
Commitments and Contingencies
Legal Matters and Routine Proceedings
The Company has settled complaints that had been filed with various states’ pharmacy boards in the past.
There can be no assurances made that other states will not attempt to take similar actions against the
Company in the future. The Company initiates litigation to protect its trade or service marks. There can be
no assurance that the Company will be successful in protecting its trade or service marks. Legal costs
related to the above matters are expensed as incurred.
Operating Leases
Upon acquisition of the Delray Beach property in January 2016, 48% of the property, approximately 88,000
square feet of the property was leased to two tenants. At March 31, 2022, the leases with these two tenants
had a remaining weighted average lease term of 3.0 years. The Company recorded approximately $689,000
and $670,000 in rental revenue in fiscal 2022 and 2021, respectively, which was included in other income.
The Company expects to receive the following future lease payments, under the current lease agreements,
over the next five years: $710,000 in fiscal 2023; $731,000 in fiscal 2024, $566,000 in fiscal 2025, and
$110,000 in fiscal 2026.
Employment Agreements
On July 12, 2019, the Company entered into Amendment No. 7 , with Menderes Akdag (“Mr. Akdag”), former
CEO & President and Director, providing that in the event that a Change in Control (as was thereinafter
defined) of the Company was to occur at any time, Mr. Akdag would have the right to terminate his
employment for “Good Reason,” (as was thereinafter defined) upon thirty (30) days written notice given at
any time within one (1) year after the occurrence of such event, and upon such termination Mr. Akdag would
be entitled to a one-time payment of two times his salary as of the date of such termination. On July 31,
2020, the Company entered into Amendment No. 8 which extended Mr. Akdag’s contract for an additional
year at an annual rate of $626,860 and granted Mr. Akdag 37,800 restricted shares, which were subject to
restriction and forfeiture until July 31, 2021, in accordance with the parameters of his executive
compensation plan.
On May 28, 2021, the Board of Directors notified Mr. Akdag that the Company would not extend Mr. Akdag’s
employment agreement with the Company, and the employment agreement would therefore end on July 30,
2021, in accordance with the scheduled end date of the agreement. Effective July 31, 2021, the Board of
Directors appointed Bruce S. Rosenbloom (“Mr. Rosenbloom”), the Company’s Chief Financial Officer, as
Interim Chief Executive Officer and President of the Company, until a permanent successor chief executive
officer was appointed. Mr. Rosenbloom received an additional cash stipend of $10,000 for the additional
responsibilities while serving as Interim Chief Executive Officer and President, which ended on August 30,
2021.
On June 11, 2021, the Company and Mr. Akdag, entered into a CEO Separation Agreement and General
Release setting forth certain matters relating to the expiration of Mr. Akdag’s employment with the Company
(the “Separation Agreement”). The Separation Agreement provided that Mr. Akdag’s employment with the
Company, and service as an officer and director of the Company, would terminate as of July 30, 2021. The
Separation Agreement also documented Mr. Akdag’s agreement that, during his remaining period of
employment through July 30, 2021, he would continue to provide his fulltime and attention to the business
affairs of the Company and cooperate with the Company’s Board of Directors on the transition to a new chief
executive officer. The Separation Agreement provided that Mr. Akdag would be paid two lump-sum
severance payments of $325,000 each, with the first such payment to be paid, and was paid, on August 10,
2021, and the second to be paid, and was paid, on December 31, 2021, subject to his compliance with the
terms and conditions of his then existing employment agreement, and the Separation Agreement. In
exchange for the Company’s agreement to make the severance payments, Mr. Akdag granted the Company
a full release of any and all claims that he may have against the Company and its affiliates and related
parties.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10)
Commitments and Contingencies (Continued)
In addition, as a part of the Separation Agreement, the Company confirmed that the 37,800 restricted shares
held by Mr. Akdag will be, and were, released from restriction and forfeiture on July 31, 2021, and that the
Company would, and did, cover the tax withholding obligations in connection with such release of shares
from restriction and forfeiture. Under the Separation Agreement, Mr. Akdag agreed that he would continue
to comply with his existing confidentiality, non-solicitation, and non-compete obligations, and he further
agreed that until July 31, 2022, he would comply with certain “standstill” covenants relating to the Company.
On August 25, 2021, the Board of Directors appointed Mathew N. Hulett (Mr. Hulett”) as Chief Executive
Officer and President of the Company and as a member of the Board of Directors. These appointments
were effective as of August 30, 2021. On August 25, 2021, the Company entered into an employment
agreement with Mr. Hulett to serve as the Company’s Chief Executive Officer and President. The
employment agreement is for an initial term of three (3) years commencing on August 30, 2021 and will
automatically renew for successive one (1) year terms, or for longer periods as mutually agreed upon by the
parties, unless the employment agreement is expressly cancelled by either Mr. Hulett or the Company sixty
(60) days prior to the end of the then current term, or is otherwise terminated as provided in the agreement.
The employment agreement provides that Mr. Hulett will receive an annual base salary of $500,000, subject
to periodic review for increases with the approval of the Board of Directors, and will be eligible to participate
in the standard employee benefit plans generally available to executives and employees of the Company,
including health insurance, life and disability insurance, restricted stock under the Company’s equity
compensation plan(s), 401(k) plan, and paid time off and paid holidays. The employment agreement also
provides that the Company will reimburse Mr. Hulett for his documented business expenses incurred in
connection with his employment pursuant to the Company's standard reimbursement expense policy and
practices. The employment agreement contains certain rights of Mr. Hulett and the Company to terminate
Mr. Hulett’s employment, including termination by the Company for “Cause” as defined in the employment
agreement, and termination by Mr. Hulett for “Good Reason” as defined in the employment agreement within
twelve (12) months of a Change in Control as defined in the employment agreement. Mr. Hulett is also
entitled to severance pay equal to twelve (12) months of Mr. Hulett’s current base salary and eighteen (18)
months of health insurance benefits in the event of his termination by the Company without Cause, or
termination by Mr. Hulett for Good Reason within twelve (12) months of a Change in Control. The foregoing
severance benefits are conditioned upon Mr. Hulett’s execution of a release of claims and compliance with
certain restrictive covenants. The employment agreement contains customary non-disclosure and non-
solicitation provisions as well as a one (1) year non-compete following the termination of the agreement.
On August 30, 2021, Mr. Hulett also received an award of 90,000 shares of restricted stock under the
Company’s 2016 Employee Plan, which stock restrictions will lapse pro rata on each of August 30, 2022,
August 30, 2023, and August 30, 2024, which are subject to forfeiture in the event of termination of
employment (except as provided in the restricted stock agreement). Mr. Hulett also received an award of
510,000 shares of performance restricted stock under the 2016 Employee Plan, which stock restrictions will
lapse on the third anniversary of the date of grant based on (i) achieving absolute stock price hurdles within
the three-year period from the date of grant, and (ii) continued employment through the performance period
of three years from the date of grant, in accordance with the following schedule: 85,000 shares at the stock
hurdle price of $40 per share, 107,000 shares at the stock hurdle price of $45 per share, 106,000 shares at
the stock hurdle price of $50, 106,000 shares at the stock hurdle price of $55, and 106,000 shares at the
stock hurdle price of $60.
Should none of the absolute stock price hurdles be met during the three-year period from the date of grant
no shares would vest (as defined in the performance restricted stock agreement). Once the absolute stock
price hurdle is achieved, it will be considered to have met the absolute stock price hurdle, regardless of the
stock price on the third anniversary of the date of grant. The absolute stock price hurdle would be considered
to have been met if the average closing stock price of the Company is at or above the absolute stock price
hurdle for a period of ninety (90) consecutive trading days. If the shares would be considered to have met
the absolute stock price hurdle, they will only vest on the third anniversary of date of grant, subject to Mr.
Hulett’s continued employment through the performance period of three years from the date of grant (except
as provided in the performance restricted stock agreement). As of March 31, 2022, none of the performance
restricted stock vested, as no performance stock price hurdles were met.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11)
Employee Benefit Plan
The Company maintains a 401(k) Savings Plan for eligible employees. The plan is a defined contribution
plan that is administered by the Company. All regular, full-time employees are eligible for voluntary
participation upon completing one year of service and having attained the age of 21. The plan provides for
growth in savings through contributions and income from investments. It is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended. Plan participants are allowed to contribute
a specified percentage of their base salary. In 2006, the Company approved a matching contribution which
is funded subsequent to the calendar year. During the fiscal years ended March 31, 2022, 2021, and 2020,
the Company charged $238,000, $245,000, and $211,000, respectively, of 401(k) matching contribution and
administration expense to general and administrative expenses.
(12)
COVID-19
On March 11, 2020, the World Health Organization declared that the novel coronavirus (COVID-19) had
become a pandemic, and on March 13, 2020, the U.S. President declared a National Emergency concerning
the disease. Additionally, in March 2020, state governments in the Company’s geographic operating area
began instituting preventative shut down measures in order to combat the novel coronavirus pandemic. The
coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an
adverse impact on the economies and financial markets of the geographical area in which the Company
operates. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was
enacted to amongst other provisions, provide emergency assistance for individuals, families and businesses
affected by the novel coronavirus pandemic. The Company’s business being deemed essential resulted in
incremental financial performance that may not be indicative of future financial results and there remains
uncertainty and increased risks concerning its employees, customers, supply chain and government
regulation.
During fiscal 2022, the Company has been open during our normal business hours without any material
disruptions to our operations. We have not seen any major disruptions in our supply chain; however, we
have experienced some delays in the delivery of some inventory items. We are dedicated to making every
effort to ensure our customers’ pets receive the medications they need. We are also dedicated to making
every effort to ensure the health and safety of our employees. We have continued with working from home
where possible and enhanced disinfection and social distancing within our workplace.
(13)
Subsequent Events
Subsequent to March 31, 2022 the Company issued 7,450 restricted shares to certain employees of the
Company under the 2016 Employee Plan, with a fair value of $23.50 per share. In April 2022, the Company
issued 1,875 restricted shares to Diana Garvis Purcell, a newly appointed director on our Board of Directors,
with a fair value of $25.53 per share. In connection with Ms. Purcel’s appointment on the Board, the Board
voted to increase the size of the Board by one director to seven persons effective April 4, 2022.
On April 19, 2022, the Company engaged in a three-year partnership agreement with Vetster Inc. (“Vetster”),
a veterinary telehealth Canadian company. The Company also purchased a 5% minority interest in Vetster
in the amount of $5.0 million The Company also received warrants for additional equity in Vetster, which
are tied to future performance milestones. Under the terms of the agreement, the Company becomes the
exclusive e-commerce provider for Vetster, and Vetster becomes the exclusive provider of telehealth and
telemedicine services to the Company.
On May 9, 2022, the Company’s Board of Directors declared a quarterly dividend of $0.30 per share on its
common stock. The $6.3 million dividend will be payable on May 27, 2022, to shareholders of record at the
close of business on May 20, 2022.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14)
Related Party Transaction
The Company’s Board of Directors Chairman, Gian Fulgoni, serves on the board of directors of Prophet, a
brand and marketing consulting company, which PetMed Express, Inc. engaged with in March 2021 for
$292,000. The Company expensed $32,000 in fiscal 2021, with the remaining $260,000 expensed in fiscal
2022. This transaction was approved by the Company’s Board of Directors with terms that are comparable
to those with an unrelated third party.
(15)
Quarterly Financial Data (Unaudited)
Summarized unaudited quarterly financial data for fiscal 2022 and 2021 is as follows (in thousands, except
for per share amounts):
Quarter Ended:
June 30, 2021
September 30, 2021
December 31, 2021
March 31, 2022
Sales
Gross Profit
Income from operations
Net income
Diluted net income per common share
$
$
$
$
$
79,312
21,780
5,419
4,428
0.22
$
$
$
$
$
67,386
19,174
8,087
6,349
0.31
$
$
$
$
$
60,717
17,725
5,147
4,257
0.21
$
$
$
$
$
66,002
19,397
7,057
6,066
0.30
Quarter Ended:
June 30, 2020
September 30, 2020
December 31, 2020
March 31, 2021
Sales
Gross Profit
Income from operations
Net income
Diluted net income per common share
$
$
$
$
$
96,204
26,785
9,436
7,768
0.39
$
$
$
$
$
75,436
23,018
10,471
8,412
0.42
$
$
$
$
$
65,896
19,623
9,293
7,611
0.38
$
$
$
$
$
71,679
20,522
8,387
6,812
0.34
45
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for the preparation and integrity of the Consolidated Financial
Statements appearing in our Annual Report on Form 10-K. The financial statements were prepared in conformity
with generally accepted accounting principles appropriate in the circumstances and, accordingly, include certain
amounts based on our best judgments and estimates. Financial information in the Annual Report on Form 10-K is
consistent with that in the financial statements.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rules 13a-15(f) under the Securities Exchange Act of 1934 (“Exchange Act”).
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the Consolidated Financial Statements. Our internal control
over financial reporting is supported by a team of consultants and appropriate reviews by management, written
policies and guidelines, careful selection and training of qualified personnel, and a written Corporate Code of
Business Conduct and Ethics adopted by our Company’s Board of Directors, applicable to all Company Directors
and all officers and employees of our Company and subsidiaries.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements
and even when determined to be effective, can only provide reasonable assurance with respect to financial statement
preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The Audit Committee (“Committee”) of our Company’s Board of Directors, comprised solely of Directors who are
independent in accordance with the requirements of The NASDAQ Stock Market LLC listing standards, the
Exchange Act and the Company’s Corporate Governance Guidelines, meets with the independent auditors and
management periodically to discuss internal control over financial reporting, and auditing and financial reporting
matters. The Committee reviews with the independent auditors the scope and results of the audit effort. The
Committee also meets periodically with the independent auditors without management present to ensure that the
independent auditors have free access to the Committee.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31,
2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework - 2013. Based on
our assessment, management believes that the Company maintained effective internal control over financial
reporting as of March 31, 2022.
The Company’s independent auditors, RSM US LLP, a registered public accounting firm, are appointed by the Audit
Committee of the Company’s Board of Directors, subject to ratification by our Company’s shareholders. RSM US
LLP have audited and reported on the Consolidated Financial Statements of PetMed Express, Inc. and subsidiaries,
and issued a report on the Company’s internal control over financial reporting. The reports of the independent
auditors are contained in our Annual Report on Form 10-K.
/s/ Mathew N. Hulett
Mathew N. Hulett
President, Chief Executive Officer, Director
May 24, 2022
/s/ Bruce S. Rosenbloom
Bruce S. Rosenbloom
Chief Financial Officer
May 24, 2022
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of PetMed Express, Inc. and subsidiaries
Opinion on the Internal Control Over Financial Reporting
We have audited PetMed Express, Inc. and subsidiaries’ (the Company) internal control over financial reporting as
of March 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the
In our opinion, the Company
Committee of Sponsoring Organizations of the Treadway Commission in 2013.
maintained, in all material respects, effective internal control over financial reporting as of March 31, 2022, based
on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements of the Company and our report dated May 24, 2022
expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ RSM US LLP
Fort Lauderdale, Florida
May 24, 2022
47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, including our Chief Executive Officer and Chief Financial Officer, has conducted
an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of March 31, 2022, the end of the period
covered by this report (the "Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded as of the Evaluation Date, that our disclosure controls and procedures were effective
such that the information relating to PetMed Express, Inc., including our consolidated subsidiaries, required to be
disclosed in our SEC reports (i) is recorded, processed, summarized, and reported within the time periods specified
in SEC rules and forms, and (ii) is accumulated and communicated to our management including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of March 31, 2022 based on the framework in
Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework,
management concluded that our internal control over financial reporting was effective, as of March 31, 2022, as
stated in our report which is included herein. Our internal control over financial reporting as of March 31, 2022 has
been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report which is
contained in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal controls over financial reporting during the fourth quarter ended
March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
48
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this item will be set forth in our Proxy Statement, to be filed with the SEC within 120
days after the end of the fiscal year ended March 31, 2022, relating to our 2022 Annual Meeting of Stockholders to
be held on July 28, 2022, and is incorporated herein by reference.
We adopted a Corporate Code of Business Conduct and Ethics applicable to all officers, directors, and
employees. The Company’s Corporate Code of Business Conduct and Ethics is available on our website at
www.petmeds.com under “About Us - Corporate Governance”. You may also obtain a copy of our Corporate Code
of Business Conduct and Ethics free of charge by contacting Investor Relations at 1-800-738-6337.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forth in our Proxy Statement, to be filed with the SEC within 120
days after the end of the fiscal year ended March 31, 2022, relating to our 2022 Annual Meeting of Stockholders to
be held on July 28, 2022, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this item (other than information required by Item 201(d) of Regulation S-K with
respect to equity compensation plans, which is set forth under Item 5. in this Annual Report on Form 10-K) will be
set forth in our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year ended March
31, 2022, relating to our 2022 Annual Meeting of Stockholders to be held on July 28, 2022, and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be set forth in our Proxy Statement, to be filed with the SEC within 120
days after the end of the fiscal year ended March 31, 2021, relating to our 2021 Annual Meeting of Stockholders to
be held on July 28, 2022, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item will be set forth in our Proxy Statement, to be filed with the SEC within 120
days after the end of the fiscal year ended March 31, 2022, relating to our 2022 Annual Meeting of Stockholders to
be held on July 28, 2022, and is incorporated herein by reference.
49
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K.
(1) Consolidated Financial Statements – See the Index to Consolidated Financial Statements in Item 8 of
this Annual Report on Form 10-K.
The following exhibits are filed as part of this Annual Report on Form 10-K or hereby incorporated by
reference to exhibits previously filed with the SEC.
(3) Articles of Incorporation and By-Laws
3.1
3.2
3.4
Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form 10-SB, File No. 000-28827, filed January 10, 2000).
Articles of Amendment to the Amended and Restated Articles of Incorporation filed June 6, 2001
(incorporated by reference to Exhibit 3.2 of the Registrant’s Form 10-K for the year ended March 31,
2015, filed May 22, 2015).
Second Amended and Restated By-Laws of PetMed Express, Inc. (incorporated by reference to Exhibit
3.1 of the Registrant’s Form 8-K, filed March 26, 2020).
(4) Instruments Defining the Rights of Security Holders
4.1
Specimen common stock certificate (incorporated by reference to Exhibit 4.2 to the Registration
Statement on Form 10-SB, File No. 000-28827, filed January 10, 2000).
Description of Securities.*
4.2
(10) Material Contracts
10.1+ Employment Letter with Bruce Rosenbloom dated May 30, 2001 (incorporated by reference to Exhibit
10.9 of the Registrant’s Form 8-K filed April 7, 2009).
10.2+ 2015 Outside Director Equity Compensation Restricted Stock Plan (incorporated by reference to Exhibit
B of our definitive Proxy Statement for our 2015 Annual Meeting of Stockholders filed June 8, 2015).
10.2.1
Form of Restricted Stock Agreement used for grants of restricted stock under the 2015
Outside Director Equity Compensation Restricted Stock Plan (incorporated by reference to
Exhibit 10.10.1 of the Registrant’s Form 10-K for the year ended March 31, 2017 filed May
23, 2017).
10.3
Agreement of Purchase and Sale [420 South Congress Avenue] (incorporated by reference to Exhibit
10.11 of the Registrant’s Form 10-Q for the quarter ended December 31, 2015, filed February 2, 2016).
10.4+ 2016 Employee Equity Compensation Restricted Stock Plan, including form of Restricted Stock
Agreement used for grants of restricted stock (incorporated by reference to Exhibit A of our definitive
Proxy Statement for our 2016 Annual Meeting of Stockholders filed June 13, 2016).
10.5+ Amendment No. 1 to Offer Letter with Bruce Rosenbloom (incorporated by reference to Exhibit 10.1 of
the Registrant’s Form 10-Q for the quarter ended September 30, 2017, filed October 31, 2017).
10.6+ Form of Indemnification Agreement entered into with the Directors and Executive Officers of the
Company (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarter ended
June 30, 2019, filed July 30, 2019).
10.7+ CEO Separation Agreement and General Release with Menderes Akdag (incorporated by reference to
Exhibit 10.1 of the Registrant’s Form 8-K filed June 15, 2021).
10.8+ Letter Agreement with Bruce Rosenbloom (incorporated by reference to Exhibit 10.1 of the Registrant’s
Form 8-K filed July 6, 2021).
10.9+ Executive Employment Agreement with Mathew N. Hulett (incorporated by reference to Exhibit 10.1 of
the Registrant’s Form 8-K filed August 30, 2021).
10.10+ Restricted Stock Agreement with Mathew N. Hulett (incorporated by reference to Exhibit 10.1 of the
Registrant’s Form 8-K filed August 30, 2021).
10.11+ Restricted Performance Stock Agreement with Mathew N. Hulett (incorporated by reference to Exhibit
10.1 of the Registrant’s Form 8-K filed August 30, 2021).
50
(21) Subsidiaries of Registrant
21.1
Subsidiaries of Registrant*
(23) Consents of Experts and Counsel
23.1
Consent of RSM US LLP*
(31) Certifications
31.1
31.2
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)*
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)*
(32) Certifications
32.1
___________
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 1350**
*Filed herewith
**Furnished herewith
+ Indicates a management contract or compensatory plan or arrangement
101.INS*** Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data
File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*** Inline XBRL Taxonomy Extension Schema Document
101.CAL*** Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*** Inline XBRL Taxonomy Extension Definition LInkbase Document
101.LAB*** Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*** Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of
sections 11 or 12 of the Securities Act, as amended, is deemed not filed for purposes of section 18 of the Exchange
Act, and otherwise is not subject to liability under these sections.
ITEM 16. FORM 10–K SUMMARY
None.
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 24, 2022
PETMED EXPRESS, INC.
(the “registrant”)
By: /s/ Mathew N. Hulett
Mathew N. Hulett
Chief Executive Officer and President
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on May 24, 2022.
SIGNATURE
TITLE
/s/ Mathew N. Hulett
Mathew N. Hulett
/s/ Gian M. Fulgoni
Gian M. Fulgoni
/s/ Bruce S. Rosenbloom
Bruce S. Rosenbloom
/s/ Ronald J. Korn
Ronald J. Korn
Chief Executive Officer, President and Director
(principal executive officer)
Chairman of the Board and Director
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
Director
/s/ Leslie C.G. Campbell
Director
Leslie C.G. Campbell
/s/ Jodi Watson
Jodi Watson
/s/ Peter S. Cobb
Peter S. Cobb
/s/ Diana Garvis Purcel
Diana Garvis Purcel
Director
Director
Director
52
DESCRIPTION OF THE COMPANY’S SECURITIES REGISTERED
PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
The following is a brief description of the common stock, $0.001 par value per share (the “Common Stock”), of
PetMed Express, Inc., a Florida corporation (the “Company”), which is the only security of the Company registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
Exhibit 4.2
Description of Common Stock
General
The following descriptions of our Common Stock and of certain provisions of Florida law do not purport to be
complete and are subject to and qualified in their entirety by reference to our amended and restated articles of
incorporation, our amended and restated bylaws and the Florida Business Corporation Act, as amended (the “Florida
Act”). The Company has authorized 40,000,000 shares of Common Stock of which as of May 24, 2022, 20,988,237
shares of Common Stock are issued and outstanding. All of our outstanding shares of Common Stock are fully paid
and non-assessable. Our Common Stock is listed on the NASDAQ Global Select Market under the symbol “PETS.”
Common Stock
Holders of the Common Stock have no pre-emptive, redemption, subscription or conversion rights. Each outstanding
share of Common Stock is entitled to one vote on all matters submitted to a vote of the Company's shareholders.
Subject to the dividend rights of the holders of any outstanding preferred stock, each share of Common Stock is
entitled to participate equally with respect to dividends as may be declared by the board of directors out of funds
legally available therefor. In the case of voluntary or involuntary liquidation, distribution or sale of assets, dissolution,
or winding up of the Company, holders of our Common Stock are entitled to receive a pro rata share of the amount
distributed after provisions for payment of all debts, other liabilities and any liquidation preferences of outstanding
preferred stock. The Florida Act also may affect the terms of these securities.
Limitations on Rights of Holders of Common Stock – Preferred Stock
The rights of holders of Common Stock may be materially limited or qualified by the rights of holders of preferred
stock that we may issue in the future. Set forth below is a description of the Company’s authority to issue preferred
stock and the possible terms of that stock.
Our amended and restated articles of incorporation authorizes our board of directors, without further shareholder
action, to provide for the issuance of up to 5,000,000 shares of preferred stock, with a par value of $.001 per share,
in one or more series, and to fix the designations, preferences, conversion rights, cumulative, relative, participating,
optional or other rights, including voting rights, qualifications, limitations or restrictions, redemption and liquidation
preferences of each of these series. Of the preferred stock, 250,000 shares have been designated Convertible
Preferred Stock of which as of May 24, 2022, 2,500 shares of Convertible Preferred Stock are issued and
outstanding. We may amend from time to time our amended and restated articles of incorporation to increase the
number of authorized shares of preferred stock. Any such amendment would require the approval of the holders of
a majority of our shares of Common Stock entitled to vote.
Shareholder Action by Written Consent and Special Meeting
Our amended and restated bylaws provide for action by our shareholders without a meeting with the written consent
of shareholders holding the number of shares necessary to approve such action if it were taken at a meeting at
which all shares entitled to vote thereon were present. Our amended and restated bylaws also provide that
shareholder action can be taken at an annual meeting of the shareholders or at a special meeting which may be
called, for any purpose or purposes, by the board of directors or the person or persons authorized to do so by the
board of directors and must be called by the Secretary if the holders of not less than ten percent of all votes entitled
to be cast on any issue proposed to be considered at such special meeting sign, date and deliver to the Secretary
one or more written demands for a special meeting, describing the purpose or purposes for which it is to be held.
Authorized but Unissued Shares
Our authorized but unissued shares of Common Stock and preferred stock are available for future issuance without
shareholder approval, subject to the requirements of applicable law or regulation, including any listing requirement
of the principal stock exchange on which our Common Stock is then listed. These additional shares may be utilized
for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions
and employee benefit plans. The existence of authorized but unissued shares of Common Stock and preferred stock
could render more difficult or discourage an attempt to obtain control of a majority of our Common Stock by means
of a proxy contest, tender offer, merger or otherwise.
Board Authority to Amend Bylaws
Under our amended and restated bylaws, our board of directors has the authority to adopt, amend or repeal the
bylaws without the approval of our shareholders unless the Florida Act reserves the power to amend a particular
bylaw provision exclusively to the shareholders.
Certain Anti-Takeover provisions of Florida Law and our Bylaws
Florida Business Corporation Act
We are subject to certain anti-takeover provisions that apply to public corporations under Florida law. Pursuant to
Section 607.0901 of the Florida Act, a publicly held Florida corporation may not engage in a broad range of business
combinations or other extraordinary corporate transactions with an “interested shareholder” without the approval of
the holders of two-thirds of the voting shares of such corporation (excluding shares held by the interested
shareholder), unless:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the transaction is approved by a majority of disinterested directors before the shareholder becomes an
interested shareholder;
the interested shareholder has owned at least 80% of the corporation’s outstanding voting shares for at least
five years preceding the announcement date of any such business combination;
the interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares of the
corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a
majority of the disinterested directors; or
the consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price
criteria.
An “interested shareholder” is defined as a person who together with affiliates and associates beneficially owns more
than 10% of a corporation’s outstanding voting shares. We have not made an election in our amended and restated
articles of incorporation to opt out of Section 607.0901.
In addition, we are subject to Section 607.0902 of the Florida Act which prohibits the voting of shares in a publicly
held Florida corporation that are acquired in a “control share acquisition” unless (i) our board of directors approved
such acquisition prior to its consummation or (ii) after such acquisition, in lieu of prior approval by our board of
directors, the holders of a majority of the corporation’s voting shares, exclusive of shares owned by officers of the
corporation, employee directors or the acquiring party, approve the granting of voting rights as to the shares acquired
in the control share acquisition. A “control share acquisition” is defined as an acquisition that immediately thereafter
entitles the acquiring party to 20% or more of the total voting power in an election of directors.
These statutory provisions may prevent takeover attempts that might result in a premium over the market price for
shares of our common stock.
Advance Notice of Shareholder Proposals or Nominations
Our amended and restated bylaws provide that shareholders at an annual meeting may only consider proposals or
nominations (i) specified in the notice of meeting given by or at the direction of the Board, (ii) properly brought before
the meeting by or at the direction of the Board or (iii) otherwise properly brought before the meeting by a shareholder
of the Company who was a shareholder of record on (a) the date of the giving of timely notice to our Corporate
Secretary and (b) the record date for the meeting, who is entitled to vote at the meeting and who has given our
Corporate Secretary timely written notice, in proper form. In addition to certain other applicable requirements, for
business to be properly brought before an annual meeting by a shareholder, such shareholder generally must have
given notice thereof in proper written form to our Corporate Secretary not less than 90 days nor more than 120 days
prior to the anniversary date of the immediately preceding annual meeting of shareholders. Our amended and
restated bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper
procedures are not followed or may discourage or defer a potential acquiror from conducting a solicitation of proxies
to elect its own slate of directors or otherwise attempting to obtain control of us.
Proxy Access
Our By-Laws permit a shareholder (or a group of up to 20 shareholders) owning three percent (3%) or more of our
common stock continuously for at least three years to nominate and include in our proxy statement candidates for
up to the greater of 2 of 20% of our Board. To be timely, a notice of a nomination under our proxy access bylaw
provisions must be delivered to or mailed and received at the principal executive offices of the Company not less
than one-hundred twenty (120) days nor more than one-hundred fifty (150) days prior to the anniversary of the date
that the Company first distributed its proxy statement to shareholders for the immediately preceding annual meeting
of shareholders. The notice must contain certain information specified in our amended and restated bylaws.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's common stock is Continental Stock Transfer & Trust Company.
Exhibit 21.1
SUBSIDIARIES OF PETMED EXPRESS, INC.
PetMed Express, Inc. directly owns all of the outstanding interests in the following subsidiaries:
Southeastern Veterinary Exports, Inc., a Florida Corporation
First Image Marketing, Inc., a Florida Corporation
Global Veterinary Supply, Inc., a Florida Corporation
420 South Congress Avenue LLC, a Florida Limited Liability Company
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in these Registration Statements (No. 333-218917, No. 333-145179,
No. 333-145180) on Form S-8 and related Reoffer Prospectus of PetMed Express, Inc. of our reports dated May
24, 2022, relating to the consolidated financial statements of PetMed Express, Inc., and the effectiveness of internal
control over financial reporting appearing in the Annual Report on Form 10-K of PetMed Express, Inc. for the year
ended March 31, 2022.
We also consent to the reference to our firm under the heading “Experts” in such Reoffer Prospectus.
Exhibit 23.1
/s/ RSM US LLP
West Palm Beach, Florida
May 24, 2022
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mathew N. Hulett, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of PetMed Express, Inc. for the fiscal year ended March
31, 2022;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s Board of Directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
May 24, 2022
By: /s/ Mathew N. Hulett
Mathew N. Hulett
Chief Executive Officer and President
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Bruce S. Rosenbloom, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of PetMed Express, Inc. for the fiscal year ended March
31, 2022;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s Board of Directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
May 24, 2022
By: /s/ Bruce S. Rosenbloom
Bruce S. Rosenbloom
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Mathew N. Hulett, and I, Bruce S. Rosenbloom, each certify to the best of our knowledge, based upon a review
of the Annual Report on Form 10-K for the year ended March 31, 2022 (the “Report”) of PetMed Express, Inc. (the
“Registrant”), that:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
the information contained in the Report, fairly presents, in all material respects, the financial condition
and results of operations of the Registrant.
Date: May 24, 2022
By:_/s/ Mathew N. Hulett
Mathew N. Hulett
Chief Executive Officer and President
By:_/s/ Bruce S. Rosenbloom_______
Bruce S. Rosenbloom
Chief Financial Officer
Corporate Information:
Directors, Executive Officers, and Corporate Secretary
Dr. Gian M. Fulgoni
Chairman of the Board
and Independent Director
Venture Partner, 4490 Ventures
Executive Chairman, Varcode, Ltd.
Leslie C.G. Campbell
Independent Director
Peter S. Cobb
Independent Director
Mathew N. Hulett
Director, Chief Executive Officer
and President of the Company
Ronald J. Korn
Independent Director
President of Ronald Korn Consulting
Diana Garvis Purcel
Independent Director
Jodi Watson
Independent Director
Bruce S. Rosenbloom, CPA
Chief Financial Officer and Treasurer
of the Company
Wendy Zalai
Corporate Secretary and Controller
of the Company
Corporate Headquarters
PetMed Express, Inc.
420 South Congress Ave., Suite 100
Delray Beach, Florida 33445
Independent Registered Public Accounting Firm
RSM US LLP
Fort Lauderdale, Florida
Transfer Agent
Continental Stock Transfer & Trust Company
New York, New York
Stock Exchange Listing
The NASDAQ Stock Market LLC
Trading Symbol: PETS
Annual Meeting
The Annual Meeting of Stockholders will be held at 1 p.m. Eastern Time,
July 28, 2022.
Investor Relations
PetMed Express, Inc. welcomes inquiries from shareholders and other
interested investors. You may contact us by phone: (800) 738-6337 or
(561) 526-4444 or email investor@petmeds.com.
QUARTERLY
STOCK
PRICE RANGE
First Quarter
Fiscal 2022
High
Low
$46.06
$27.73
Fiscal 2021
High
Low
$40.96
$27.94
Second Quarter
Fiscal 2022
High
Low
$34.00
$26.50
Fiscal 2021
High
Low
$41.83
$29.00
Third Quarter
Fiscal 2022
High
Low
$32.00
$25.26
Fiscal 2021
High
Low
$33.77
$28.96
Fourth Quarter
Fiscal 2022
High
Low
$29.18
$23.62
Fiscal 2021
High
Low
$51.80
$29.77
PetMed Express, Inc.
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