Petmed Express Inc Q4 FY2021 Earnings Call

Welcome to PetMed's conference call to review the financial results for the fourth quarter and fiscal year ending March 31, 2022. This conference call is being recorded at the company's request. Founded in 1969, PetMeds is your trusted pet health expert and America's most trusted pet pharmacy, delivering prescription and nonprescription pet medications and other health products for dogs, cats, and horses directly to customers. PetMeds markets its products through national advertising campaigns that encourage customers to order online or by phone, aiming to enhance the recognition of the PetMeds brand. PetMeds offers a convenient, cost-effective, easy-to-order solution for obtaining pet medication, along with rapid home delivery. I would like to turn the call over to the company's Chief Financial Officer, Mr. Bruce Rosenbloom.

Thank you. And I'd like to welcome everybody here today. I would also like to remind everyone that the first portion of this conference call will be listen-only until the question-and-answer session, which will be later in the call. Also, certain information that will be included in this press conference may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 or the Securities and Exchange Commission that may involve a number of risks and uncertainties. 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 results could differ materially from those projected. The company undertakes no obligation to update these statements based on subsequent events. We have identified various risk factors associated with our operations in our most recent Annual Report and other filings with the Securities and Exchange Commission. Now let me introduce our CEO and President, Matt Hulett. Matt?

Thanks, Bruce. Good afternoon and thank you for joining us. This earnings call marks the eight-month point since I started as the new CEO and President of PetMed. Throughout this time, I've remained committed to clarity and transparency with investors and key stakeholders regarding the progress of our strategic transformation. To be clear, PetMeds pioneered the online pet prescription business over 26 years ago, and that is a legacy of which everyone at PetMeds is very proud. However, in recent years, growth has slowed, and outside of a significant 2020 uptick in sales related to the pandemic, our leadership position has slipped. I continue to believe that PetMed is a terrific company with a talented, dedicated workforce serving a large and loyal customer base. During today's earnings call, we will share some early indications regarding the stabilization of our core business and the articulation of our new strategy, along with tangible evidence of operational progress towards executing that new strategy. My commitment is to be open and transparent about how we are engineering the transformation of this iconic company. Today, I will divide my prepared remarks between our core prescription business and our pet health expert strategy, with more time spent on the latter, including some specific steps we have already taken towards executing on this broader strategy. I have a number of key points I want to communicate with you today. For clarity, I've organized them into three themes. The first theme is the stabilization of the core business where the significant revenue declines we've experienced over the past year have begun to moderate. For example, our revenue in the fourth quarter decreased 7.9% year-over-year compared to a decrease of 12.7% for the preceding nine-month period. While January and February had revenue declines in the low single digits, weather in March had a more material impact on our quarter. Specifically, a cooler March in much of the country delayed the start of the flea and tick season, which normally represents a ramp-up in customer demand for us, leading to a slower-than-expected final month of the quarter. We expect sales in this category to rebound as higher temperatures return to much of the country and stimulate a more normal flea and tick and heartworm medication demand from pet parents. Based on historic customer purchase patterns, we expect that the sales impact for this year will be a delay to the start of the seasonal sales rather than a compression or loss of sales over the course of the summer. Adjusted EBITDA for the fourth quarter exceeded our expectations, being down only 8.4% compared to the 31% decrease reported for the third quarter. Bruce will cover this in more detail, but we achieved these results despite double-digit percent increases in general and administrative expenses year-over-year due to purposeful investments in headcount and infrastructure to support our future growth. Notably, we kept our variable marketing spend relatively flat year-over-year. As you may recall, last quarter, we had an inefficient quarter that resulted in unexpected inefficiency in our marketing spend. We have now settled into a good place with our marketing operations. We are actively testing our key customer learnings from last quarter and remain laser-focused on activities to grow our new customer numbers. While we have not fully cracked the code on new customer growth, we are executing on several strategic steps, having just started our new customer segmentation strategy and recently bringing on new team members like our new Chief Marketing Officer. The second theme is the acceleration of our subscription business. Today, I am pleased to report that as of March, 37% of our revenue is recurring revenue derived from our AutoShip & Save subscription program. This is a significant 41% increase from the previous quarter. As mentioned in our last earnings call, we are introducing two new metrics that are strategically important as our business evolves into a subscription e-commerce business. As a result of this evolution, we expect to see an increase in our LTV as the subscription program creates a more reliable recurring revenue stream from our customers. Our new customer count for the quarter is approximately 66,000, and our LTV to CAC for the quarter is 2.5 times. The new customer count is calculated using a more specific definition of new customers as those who have not previously purchased from us within the past three years. As I mentioned earlier, we believe LTV to CAC is a more meaningful measure of the marketing value creation versus using our traditional return on advertising spend metrics. We expect to see this LTV to CAC number grow as we migrate more of our returning customers to our AutoShip & Save subscription program and expand the basket size or average order value over the lifetime of our customers. The final theme is the rapid acceleration of our pet health expert strategy, with the first building block of this strategic pillar being telemedicine. On April 19, we announced our initial deployment of an investment and partnership strategy that greatly accelerates our experts in pet health strategy. You may recall on that date, we announced an exclusive partnership with the fastest-growing and industry-leading telemedicine platform, Vetster. This is the exciting first of many transactions that will build the strategic pillar of our expert pet health strategy. I hinted at telemedicine during our last call. To enter this space, we delivered a novel approach to capital allocation that I will talk about later on this call. Now let us dive deeper into the details with the presentation material. As always, we like to feature pictures of our customers’ and employees’ pets in our slide deck. You will see many original pictures throughout this presentation. In fact, this slide features my dog Harry, a PetMeds customer since he was eight weeks old. Let us start with a look at the current market and a perspective on the overall opportunity. As we've covered in our previous earnings calls, PetMeds operates in a very large and growing addressable market. The U.S. pet market is over USD100 billion in annual sales, and it is expected to reach USD120 billion by 2024. The addressable pet medication market, which we participate in today, is approximately USD10 billion and growing rapidly. We are actively working on improving our core business that has been on a decline while also setting our sights on expanding our addressable market into the broader wellness market, which is estimated to be over USD30 billion. Today, we are one of the leading pet pharmacies. PetMeds is also an important part of the strategy of many of the pet platforms and players in the industry. Additionally, as I learned over these months since I started in the business, there are not many trusted online prescription providers for these pet platforms and players to partner with, which puts us in an enviable position. Our core asset and demonstrated competency in prescriptions will enable us to move much more quickly to execute on our broader pet health expert strategy, as I will elaborate on in a moment. Not only are we operating in a large addressable market, but we also operate in a market that is growing with favorable underlying behavioral trends for digital retailers. U.S. household pet ownership has increased over time, and today, seven out of ten U.S. households have a pet. COVID has accelerated this trend, and now more than ever, pet parents are keenly attuned to the health needs of their pets. In a post-COVID world, those pet parents will seek health and wellness care provided by a trusted brand. I believe PetMeds is uniquely positioned to take advantage of this trend. Consumers now expect everything to be real-time, fast, and digital, a trend that has impacted every industry. As we've seen in other digital e-commerce verticals, the ongoing move towards digitization of retail is accelerating. Today, our addressable market is largely dominated by offline sales, but we see the growing trend toward online purchases as very favorable to us. Pet parents see their pets as an extension of their own family, and they increasingly demand healthier pet care options. We see this as a positive trend for PetMeds and an opportunity for growth. Likewise, in alignment with trends in human health, pet parents are considering the entire spectrum of their pet's care from diet to veterinary services and reexamining the channels through which they access those products and services. Lastly, the pandemic accelerated the increasing trend for the digitization of healthcare. Specifically, in the pet market, regulations related to in-person veterinary visits and prescription fulfillment were temporarily waived for the first time during COVID, leading to unprecedented online services. Our team has spent considerable time conducting research with the industry generally, as well as specifically with pet parents. In April, we announced an important strategic partnership and investment in pet telemedicine with Vetster. With this groundbreaking partnership, we believe we are enabling the first mainstream pet telemedicine platform, one that will accelerate widespread adoption of pet telemedicine. PetMeds has historically been a somewhat low-growth yet high-dividend company. We are intent, however, on becoming a higher-growth company and believe we are in a great position to do that. PetMeds is profitable with a pristine balance sheet. We do not have any debt and have approximately USD111 million in cash and cash equivalents as of March 31, 2022. We are cash flow positive. PetMeds is moving much of our business from a transactional direct-to-consumer model to a subscription business. Subscription businesses are clearly compelling business models due to their predictable, stable recurring cash flows. As I mentioned at the beginning of the call, we ended March with approximately 37% of our customers enrolled in ordering via our AutoShip & Save subscription program, and we anticipate that this number will continue to rise. We continue to have a large base of returning customers, which is an indication of the quality of service and the value we deliver. We are fortunate to have a large base of over 2 million pet parents that have purchased from us over the last two years. We have over 26 years of experience as a pure-play pet pharmacy, fully licensed in 50 states, delivering outstanding service and value. This domain experience makes our progression into other segments much easier. Our customers love our brand and service. Our NPS score is over 80, which places us in the upper quartile along with some of the most beloved brands globally. Now I'd like to have Bruce review our financials for the quarter.

Thanks, Matt. During the review of our financial results, we will compare our fourth fiscal quarter, which ended on March 31, 2022, to last year's quarter that ended on March 31, 2021. I would also like to highlight that we introduced new non-GAAP financial metrics last quarter, adjusted EBITDA and adjusted EBITDA per share. We decided to include these metrics because they are key measures used by management and by our Board to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding capital allocation. 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. Throughout our most recent fiscal year, we've faced a unique situation comparing two vastly different environments between 2020 and 2021, mostly post-pandemic. As we move forward into our first full fiscal year, the year ending March 31, 2023, with our new marketing partnerships, agencies, processes, and with many of our highlighted initiatives firmly in place, we expect to be much more efficient with our variable marketing spend and to achieve improved results. For the current year, fourth-quarter sales were USD66 million compared to sales of USD71.7 million for the same period last year, a decrease of 7.9%. While we were disappointed with the overall sales results for the quarter compared to the prior year, we were encouraged by the sales trends we saw in January and February, which were only down in the low-single digits. However, as Matt mentioned earlier, due to colder weather this spring, we saw a delay in the flea, tick, and heartworm season, resulting in decreased demand for these products in March, in contrast to last year, where the season started in early March. A positive trend to highlight is the continued growth of our AutoShip & Save subscription program. Approximately, 37% of our revenue in March was generated from this program, with some of our more popular brands exceeding 41%, reflecting the alignment of our discount promotional offers, which required enrollment in the AutoShip program. Growing our subscription revenue is one of our main priorities in fiscal 2023, and we expect to see stronger reorder sales as our AutoShip revenue continues to grow. During the quarter, we saw decreases in both new orders and reorder sales. New order sales have decreased by 35% to USD4.9 million for the quarter, compared to USD7.4 million for the same quarter last year. We acquired approximately 53,000 new customers in our fourth fiscal quarter ended March 31, 2022, compared to 88,000 for the same period last year. Reorder sales decreased by 4.8% to USD61.1 million for the quarter ended March 31, 2022, compared to reorder sales of USD64.2 million for the same quarter last year. For the full year, reorder sales decreased by 8.2% to USD250.4 million compared to USD272.6 million for the prior year. With the increasing adoption rates of AutoShip subscriptions, we will see more opportunities to continue building our relationships with our loyal customer base. We will also work to improve our reorder sales by marketing to this loyal customer base with increased product offerings and services. For the fourth fiscal quarter, our gross profit as a percentage of sales was 29.4% compared to 28.6% for the same period last year. This percentage increase was due to some of our major manufacturers shifting their funding from cooperative marketing rebates to discounting product costs and funding promotional discounts related to AutoShip. There may be an opportunity to improve gross margins in fiscal 2023 if the shift to prescription medications continues, allowing us to grow future sales without reliance on price promotions. Net income was USD6.1 million, or USD0.30 diluted per share, for the fourth quarter of fiscal 2022 compared to USD6.8 million, or USD0.34 diluted earnings per share for the same quarter last year, reflecting a decrease in net income of 11%. Net income during the quarter was also aided by two tax benefits: a USD196,000 state tax rebate related to 2020 and a USD131,000 state rate reduction in 2021, recognized in the March quarter. Adjusted EBITDA for the March quarter was USD9.5 million, or USD0.47 on a diluted basis, compared to USD10.4 million, or USD0.52 on a diluted basis for the same quarter last year, reflecting a decrease in adjusted EBITDA of 8.4%. Adjusted EBITDA and adjusted EBITDA per share add back certain non-cash expenditures, including stock compensation, interest income and expense, income taxes, depreciation, and amortization. Again, adjusted EBITDA and adjusted EBITDA per share are non-GAAP key measures used by management and our Board to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding capital allocation. We will continue to disclose this financial measure in our future filings. As Matt mentioned earlier in the earnings call, adjusted EBITDA for the March quarter exceeded our expectations, being down only 8.4% for the fourth quarter ended March 31, 2022, compared to being down 31% for the third quarter ending December 31, 2021. Over the past six months, we have seen double-digit percentage increases in general and administrative expenses year-over-year due to intentional and strategic investments in both headcount and infrastructure. We will continue to make purposeful investments in the business to fuel and support future growth. We also expect to see a continued investment in capital expenditures to the tune of approximately USD5 million in fiscal 2023, of which USD4.2 million is incremental to the business. We had USD111 million in cash and cash equivalents and USD32.5 million in inventory with no debt as of March 31, 2022. The company continues to be committed to returning capital to our stockholders. As such, the Board of Directors declared a quarterly dividend of USD0.30 per share on the company's common stock, payable on May 27, 2022, to shareholders of record as of May 20, 2022. Please note that the declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors each quarter after reviewing the company's financial performance. Now I'd like to hand the presentation back over to Matt.

Thanks, Bruce. We embarked on a new journey eight months ago when I joined the company. In evaluating and planning for our future, we wanted first to reexamine how we saw ourselves as a culture and company, and then we delved into redefining our core purpose. We looked at where we excel today in the market and how we consistently solve our customers' pain points, using that as the starting place for our re-envisioning process. Through that work, we identified a clear market need to have a brand and company focused on being the trusted pet health expert. In many ways, we have served this function for our customers for over 26 years. Selling prescription medication represents perhaps the most complex part of the pet ecosystem. It involves both collaboration with and authorization from veterinarians, dispensing controlled substances, and complying with regulatory requirements. In short, it's hard. When you contact us either online or over the phone, we pay close attention to your pet's specific health needs with important and customer-specific details, such as monitoring for drug interactions and ensuring the accuracy of your pet's prescription. We now have the capability to extend those demonstrated competencies much further. To that end, I am pleased to unveil our new vision and mission. Our vision: every pet deserves to live a long, happy, healthy life. Our mission: PetMeds aims to be the most trusted pet health expert by providing incredible care and services that are affordable to the broadest group of pet parents. In order to realize this vision, we need to execute our mission through the strategy I'd like to share with you next. We are now ready to talk about our long-term strategy in some detail. We've been hinting at a larger strategy since I took the helm eight months ago. PetMed is moving from being just a leading pet medication retailer to a market leader in expert pet healthcare. We have gained permission from our customers over the last 26 years to became their trusted partner in pet care. Pet parents want more from us, which drives our plans forward. We've taken important steps towards executing our long-term strategy, starting with the announcement of our telemedicine efforts. The strategic pillars we will be executing on are nutrition, medications, wellness, and care, with data being at the heart of our services. Our recent announcement with Vetster is the first component of our care offering. For instance, AutoShip is a fantastic program that allows pet parents to improve their pet care through cost savings, convenience, and most importantly, health compliance for their pets. But we think we can expand beyond that. In the future, we will enhance this AutoShip service further. Being the trusted pet health expert also means recognizing that we are not the same for all people. Like I said before, anyone can sell dog food, but it is far different from being the trusted health expert who consistently addresses unique individual pet health and wellness needs. Next slide, please, so we can cover this recent partnership and announcement. We are thrilled about telemedicine. We just announced a strategic investment and partnership this quarter, including an impressive array of innovations we believe will revolutionize pet care. We've partnered with Vetster, a leading startup in the pet sector providing incredible services for both pets and vets. The company is led by a phenomenal team of seasoned and successful entrepreneurs. We are excited to offer what we believe is the most advanced telemedicine platform on the market. This partnership enables PetMeds to leap ahead of other pet retailers while better supporting vets and pets than ever before. I would now like to provide an overview of the deal and its structure. I've hinted at our belief in telemedicine since I joined. This deal is one of many steps that PetMeds will take to solidify our place as the go-to expert pet health brand. PetMeds continues to maintain a strong balance sheet, and we have indicated that we intend to leverage over USD100 million in cash. This deal shows our resolve to make smart investments that will transform PetMeds into a growth company. Here's an overview of our deal with Vetster: PetMeds is the exclusive pet medication provider to Vetster, and Vetster is the exclusive telemedicine provider to PetMed; we're making a USD5 million investment in a minority stake in Vetster as part of the Series B round of funding; there will be an ability to grow PetMeds ownership share in the form of performance-based warrants based on specific performance objectives; we have a mutually exclusive long-term agreement to build new distribution channels and create unparalleled customer experiences; and our technology and e-commerce integration provides a powerful combination that has never been introduced in the pet category. We see numerous upsides as we introduce telemedicine to the mainstream while connecting over 2 million pet parents with more than 70,000 veterinarians in the PetMeds network. This partnership closes the loop by providing real-time access to a qualifying telemedicine experience, enabling pet parents to obtain prescriptions directly without needing in-office visits. This partnership will create new revenue streams for PetMeds as well, driven by Vetster’s traffic. Our unique investment and partnership will allow us to accelerate our go-to-market strategy. PetMeds will leverage the Vetster platform to deliver virtual vet clinic services integrated with our pet medication and retail platform directly into their interface. We're climbing up the sales funnel, anticipating that offering telehealth will help us acquire new customers and create more incentives for PetMed subscribers. Our customers can access instant care via text or live video chat with their veterinarian or any vet provider through our exclusive vet marketplace on smartphones or desktops 24/7. We believe this partnership is a major win for vets, too. This collaboration provides vets with additional capabilities and new revenue streams. Our plan is to empower vet clinics to operate more flexibly, while also democratizing access to quality pet healthcare for pet parents. We've intentionally focused on continuing to build relationships with vets, and we view this as a game changer for vets, pets, and pet parents. Our mutual goal is to enhance the accessibility, affordability, and availability of quality pet healthcare everywhere. We foresee that pet telemedicine will become as significant a trend as it is in human healthcare, and we are excited about the possibilities this partnership will unlock for all stakeholders involved. We see a great future ahead of us as we expand health and wellness services and grow our e-commerce subscription base significantly. We have a lot left to do, and growing our new customer base is a significant focus for the company. I hope this level of detail and transparency demonstrates our confidence in the future while providing insight into the associated investment costs and activities reflected in our operating results. This concludes our prepared remarks. Operator, we are now ready to take questions.

The first question is from Erin Wright with Morgan Stanley.

Great. What are you seeing quarter-to-date in terms of demand trends and the progression of the flea and tick season that you said was off to a somewhat slower start here, but should we anticipate a meaningful bolus here associated with parasiticides in the current quarter? How do you anticipate that playing out from what you're seeing?

Bruce, do you want to take that and I can follow?

Sure. Erin, as we mentioned, during the quarter, we started out very strong. Obviously, once we hit March, we definitely saw a drop in demand, unlike what we saw in March 2021. We've also received similar information from manufacturers about the slow flea and tick season. So that's something that I think all of us have seen. Traditionally, it’s a six-month period. In the past, it has extended. We'll just have to see how it plays out in the current quarter. But yes, we definitely saw that in March, and we'll see how it shakes out for the June quarter.

Yes. The only thing I would add is, we do have a concentration of flea and tick and heartworm products. We felt quite confident that costs were starting to even out in January and February. Unfortunately, you can't control the weather. We do have category concentration in those areas, but we expect our long-term loyal returning base will drive reorders back to where we expect them when the weather warms up.

Okay. And then two quick follow-ups here. Given some of the initiatives around advertising and the spend for the quarter, how should we think about advertising spend in fiscal 2023? Should we anticipate a step up from here as a percentage of sales in the coming quarters? I guess, help us frame that in terms of how you're thinking about advertising spend. And in terms of the telemedicine partnership, can you describe a little bit more on the financial contributions for you? Will this be material for you in the near term?

Yes, I'll take the last question first and then throw it over to Bruce. Regarding telemedicine, it is a very exciting opportunity since we're in the prescription space as a core offering to consumers. We want to ensure consumers have the ability to connect with a vet on their desktop or mobile device while having prescriptions delivered. We aren't guiding on how big this opportunity is because it is relatively new. The VCPR regulations that connect consumers with vets are also quite new. We see the regulations loosening and demand increasing over time, so we aren't setting firm guidance but are highly optimistic about the upside potential with our partner Vetster, who has a remarkable team who knows how to build demand.

Sure. As for advertising, for the quarter, advertising was down about USD800,000 or about 20% from where we were last year. We were on target to spend somewhat similar to the previous year. The slow start to the season prompted us to reduce our spending. We expect to spend at similar levels as seen last year, but we anticipate being more efficient with our spending. If we identify areas producing a significantly better return, we will take advantage of those.

Yes, I'd like to add to that. We wanted to ensure that we were spending money when demand was there, given the lower flea and tick and heartworm sales. We decided not to accelerate spend. We also recently introduced this LTV to CAC number, which is currently at 2.5x. This could vary over time as we start to invest more in front of it. We want to be smart about how we scale our demand. While we hope that the 2.5x will be stable, it could fluctuate depending on the types of consumers we are acquiring and the best points to invest. Overall, we anticipate higher advertising spending than seen previously but will remain performance-focused.

The next question comes from the line of Corey Grady with Jefferies.

I wanted to follow up on the new marketing strategies and partnerships. Can you spend more time discussing areas where you're seeing validation in terms of returns and areas where you're continuing to test?

Thanks for the question. Yes, I want to remind you that much of our past work has focused on building a platform for growth. As you may recall, we had inefficiencies last quarter. We've implemented new marketing technologies and engaged with new partners while running many tests. We've noticed significant interest in our pet health expert strategy, which positions us for growth. We are seeing early positive signals in our adjusted positioning and creative around this area. As we scale, I believe our media mix will also scale in a profitable manner. I want to point out that of the 3,000 companies in the Russell 3000, 1,000 are not profitable. We typically grow profitably, finding net new customers. PetMeds is well-regarded for standing for pet healthcare, which excites me for future growth.

Got it. That's helpful. And for my second question, could you quantify the sales impact from the delay of the flea and tick season? Also, how did results for the quarter in terms of sales composition, reorder versus new order, compare to your expectations going into the quarter?

I'll start and then, Bruce, do you want to finish?

Sure. As mentioned on the earnings call, January and February trended positively. We started to see a normalization of the comparisons, which was important for us. Unfortunately, March was much colder than expected, resulting in lower reorder sales than anticipated. Between the two, the delay in the flea and tick season directly impacted reorders more significantly.

Yes, to add to what Bruce said, we were quite upbeat going into March, having seen positive trends in January and February. However, March's colder conditions caused the anticipated demand to fall short. The comparison against last year's strong performance makes the drop more apparent. We hope that as the weather improves, demand will pick up.

The next question comes from David Maley with 1102 Partners.

You mentioned that Vetster is the first of many transactions. Should we expect transactions to be of a similar size? Or is it likely that down the road there might be larger deals? Would a larger deal impact your decision on the dividend?

Thanks, David, for your question. There's two parts to your question. I'll take the first part, then the second. We have plenty of cash, and we haven't effectively put it to use yet. We're filling out the pieces of our strategy around care, wellness, and diet, as well as medication. Customers expect us to deliver more products, and that’s what motivates us to explore partnerships, investments, or mergers and acquisitions like we did with Vetster. We intend to keep looking for similar opportunities. As asset prices settle and the economy shifts, there may be more chances to pursue M&A. We’re open to both partnerships and potential acquisitions. We generate a lot of cash, so we have the ability to do both capital allocation strategies. Regarding the dividend, we're committed to returning capital to shareholders. We plan to support the dividend while looking to invest in growth. We've struggled with new customer growth for some time, so we want to manage that carefully. We're in discussions with the Board regarding these many options.

Yes. No, that's good. That's good color. Really appreciate it.

There are no further questions at this time. I will now turn the presentation back to the host.

Thank you, operator. As you just heard, the future of PetMeds is much broader than just a prescription e-commerce company. We are building our strategy out and working hard to transform into a broader e-commerce and subscription brand that reflects and leverages our status as the trusted pet health experts. I will continue to detail our progress and look forward to providing you with updates in the not-too-distant future. As always, thank you to all of our employees, customers, partners, suppliers, and investors for your continued confidence and support. Thank you for listening in. Operator, this ends the conference call.

That does conclude today's conference. We thank you for your participation and ask that you please disconnect your line.