Ready to go? All right. Thanks for everybody for joining us for the PetMed Express fireside chat. Welcome to those in the room, as well as joining via the webcast. I'm Reid Anderson with ICR, and we're pleased to have Sandra Campos, the CEO of PetMeds, and Robyn D'Elia, the CFO, with us today. Thank you for joining, so you joined about, I don't know, eight, nine months ago. Probably feels like eight years, but the thing that always comes to mind with this story when I tell people about it is transformation, and I mean, that word gets thrown around a lot, but you really have been kind of, I mean, drinking out of a fire hose for transformation since you started.
There's a lot of stuff going on, a lot to unpack here, but I think this is the place to start. And so I think maybe just share your view. And maybe before you do, just kind of give your view of the PetMeds business. But let's talk about what you've been doing, kind of the foundational aspects of transforming this business from when you started back in April and May.
Sure. First of all, thanks, everyone. Thank you, Reid, because you're always by our side here. First of all, I was on the board for a year at PetMeds prior to joining at the end of April, beginning of May in this role. The whole time, as a passionate pet owner myself, because I have many, I really saw the opportunity in being able to accelerate, modernize this business because we're the first online pet pharmacy that existed. They're almost 30 years now in business. And that really says a lot. It started out as 1-800-PetMeds. The initial business model was really a value player at the time. You could get your pet pharmacy, your pharmaceuticals at a lower value price point. That was the value proposition back then. Obviously, over time, a lot of things changed.
Consumers changed, behaviors changed, competition changed, et cetera. Technology changed. So there's so much that's happened over many years. And I think since pretty much 2017, 2019, 2021, obviously, we had COVID. There was a big bump up, a lot of pet owners, a lot more acceleration of everything. And now we've seen a shift. Macroeconomic factors affect pet owners. Inflation affects pet owners. There's a lot of things that now we've got more surrenders, less adoption, less compliance in terms of veterinary visits and some of the medications. So the business overall, we needed to look at it. And I came in looking at an opportunity to be able to take the business and, again, modernize it, create some real relevance around what we do because I call it the jewel in the crown.
And the jewel in the crown is our pharmacy. We have been doing pharmaceutical business incredibly well for almost 30 years. And that means that we have licenses across all 50 states. It is not a small feat to be able to do that, number one. Number two, it's also a very heavy lift in terms of our pharmacists that we employ, the customer call center that we have to have because we have a lot of communication. 100,000 customers call us. We also have thousands of veterinarians that we speak to, animal hospitals, clinics that our pharmacists are actually going and having direct conversations with for approvals of prescriptions to make sure that it's the right medication for the weight of your pet.
We have five different levels of verification process that we employ so that we can make sure that whatever we ship out to a pet is actually going to be enhancing their life, saving their life in a lot of cases as well. So that's been the jewel of the crown. But in addition to that, obviously, we acquired a company, PetCareRx, a couple of years ago. That company had less pharmaceuticals, more in food and others. So we've expanding in terms of food, over-the-counter products, everything that I call better for your pet. So just like in humans, we're all thinking about what's better for us, what's going to help extend our life, what are the single ingredients? We know we don't want byproducts in our foods. We don't want that for our pets either.
And as we have more Millennial Gen Z consumers and their behavior patterns are perhaps having either less kids or having them later, their kids are the pets. And a lot of our own pets are our families now. So you're caring for them more. We care more. So everything that we've looked at from a transformational perspective is to start with the root and the purpose of why we exist. And that is to make sure that we help pets stay healthy, happy, longer. So we have to have products that help pet parents. We have to make sure that we're giving the right products at the right time and providing all the messaging around that.
As a business, because we had many, many years of success, and then we've had obviously a lot of years in now the last couple of years of having two companies, the first goal was to get back to profitability, to really make sure that we're reducing our cost and operating expenses, which we've done. We're now on track to save the $5 million that we stated that we would for on an annualized run rate basis. We've been able to do a lot of operational initiatives in the last eight months. Six months of those were focused really heavily on technology.
We launched a new website at the beginning of November, a new experience, a new mobile app, all these things that we hadn't done, buy now pay later type of platforms that we're including, a lot of basic foundational fundamentals that we really had to start impacting and changing. We have a new C-suite, a lot of executives who came on board who not only have retail and consumer experience and e-commerce, obviously, but also scaling. And every one of us has been in businesses where we've scaled from low hundred million to billions. And knowing how to do that is also very different. It takes a different skill set as well. So we've been on a real trajectory. We've been focusing on a lot of different efforts, obviously. And as we do all of that, it takes time.
Each one of these different initiatives has a lot of tentacles to it as well. Not just from the operational piece, as we've talked about, but also consumer messaging. The other part of the business, and sorry, I'll let you ask another question. The other part of the business is that because we were known as 1-800-PetMeds, how many people here even remember what 1-800 is? Probably many of us, but there's a lot of you're under the age of 50, 45, perhaps you don't know what 1-800 is. We've had to really rebrand, make sure that we get pet meds out there in terms of relevance and understanding that we're here for the pets. We're here for making sure that obviously the pet wellness and health and wellness is where we're focused.
Just another side note on that, because it is our core and what we care about the most, we're really focusing in on making sure we can't help pets be healthy and happy if they don't have homes. So we're focusing a lot with shelters and ensuring that we have adoptions and that we're helping those shelters get pets adopted as well. In fact, we have one here.
That's right. I was going to say at the end, we'll make sure we get commercial. They have a great activation back in Coquina with there's live animals back there.
Take a pet home with you.
Yes, that would be good. So we will for sure get that. So that's great. And that's a good overview. So the other thing too, I think, again, you talked about branding and marketing, but really from a branding standpoint, you really, your kind of vision or where you're really turning this now is this you're a consumer pet healthcare company now. You're not a retailer. I mean, you are, but really you're a consumer pet healthcare company. So maybe just peel back the layers of that a little bit more relative to branding and relative to marketing, how you're approaching that.
Yeah, well, I started, again, going back and looking at what we do really, really well and what the customers know us for, where the customers have been with us for 20 years, and again, it goes into the health and wellness, so when we're compared to an omnichannel retailer that has physical stores as well as online, we can't compete. When we're compared to companies that do 90% of their business in bedding and crates and blankets, et cetera, that's not where we compete. What we do well, again, goes back to the health and wellness and the pharmacy, and that will go into and is going into food and vitamins and supplements, but all of those areas also that don't have byproducts, so we're really trying to make sure that it's science-backed products that are veterinarian approved, in some cases veterinarian created as well.
So we're also building more of our own brands and creating more opportunities with some of those vets who are creating or veterinarians, sorry, who are creating some of these products that are a little bit more unique to the market today. I think that's a real distinction though, because I've been in retail my entire career. I've been an omnichannel retail, global retailers. We're U.S., we're online, and we focus on one area of the business, which is the health and wellness. So that's a key distinction in terms of how we want to make sure that we're looking at this business.
Yeah, I was going to talk a little product a little bit later, but you reminded me on this thread here about the unique products, the pet, what do we call it? Dr.
Dr. Cuddles. Oh, yes.
Tell them about that.
That's a good example, so I was mentioning that we are really looking at and bringing on board science-backed, veterinarian-created products. We have a VAB, which is our Veterinary Advisory Board as well, and they actually approve products as being better for pets, so we focus on dog, cat, and equine, and in this case, Dr. Cuddles happens to be Dr. Matt Glassman, who created a product that is an emergency kit, so many times, and I've had the experience of my own dogs as well, where they get into rat poison, they might get into antifreeze, they'll get into chocolate, and other things, and you have life-saving measures that have to happen right then and there.
You're taking them to the hospital, and it's thousands of dollars later, so this is an actual product that you can give your pet at that point in time. You still need to follow up with your veterinarian. You still need to go, but you're not having that emergency risk of having to immediately either have seizures on an animal, which happens, or you have to take them and rush them to the hospital.
And maybe just to close the thought or just to finish the thought on the product side. So I guess you've done some SKU rationalizations, some other things too. Maybe just kind of put a bow on that, how that kind of ties into the transformation. It's ongoing. It's still early, but I think you've had some early success with that as well.
So when I joined the company, we had more than 16,000 SKUs. And obviously, not all SKUs are made equal. And we also don't believe that more SKUs equals greater revenue and greater profitability. So we went back to identify what are the products that are the day-to-day products that we need and what are those vendors that we're able to obviously get better margins, better partnerships on co-op and other things. And so we've reduced that. We're about 11,000 now. So it's reduced pretty dramatically in our case.
And as we do that, we're doing it again to make sure that we have all the right products that can go along with our purpose and those that I've mentioned repeatedly now, which is really about those better for your pet products. And then obviously better for us as a business to make sure that we're really maximizing the opportunities with the vendors and maximizing those potentials for our customers so that you can be with us from the moment that you have a puppy or a kitten and start at the beginning of life all the way to the end, all stages.
All right, let's talk about customers. So again, shifting kind of the narrative, the positioning, customers. What are you doing to attract new customers? You said you've got a very big core customer base. It's been with you a long time, but you want to attract new. So where are you seeing the biggest opportunities to attract new customers? What tactics or strategies are you using to target these groups? And just kind of, again, it's still very early, but maybe give us a sense of where you see that.
How many people remember Betty White? She's amazing. She was the last spokesperson that the company had. It's been quite a few years since we've actually done some real commercial advertising and any type of advertising for this business. As the years obviously have gone on, we recognize that we have a set customer. We have 2 million active customers. We have a set customers that if you're, again, I'll say 50 plus, are pretty active with PetMeds and understand and know and do a lot of still calling 1-800-PetMeds. They still call that phone number every day. We still have a tremendous amount of agents to be able to support that. The younger, the Millennial, the Gen Z consumer, which we all know is today's dominant consumer, and the higher household income consumer are the ones that we're actually looking for now.
And we're doing that through rebranding, repositioning. We've got new marketing materials. We're going to be doing a lot of things that we haven't done before, like radio, which we started in December. So we're doing local radio, national radio. We're doing CTV, Amazon CTV, which again, we've just started. We're doing some out of home, which will be billboards and wild posting and other banners. We've got partnerships, which we've just done across the board on some podcasts as well. So we're expanding our reach because we want to be where the customer is. We know we need to be where the customer is. But in some cases, they're in stores. In some cases, they're online, but also they're experiencing through different mediums. And we're going after all of those now.
That is, are you kind of resetting the kind of the level of marketing spend to support this business going forward? Again, don't need numbers, but just think about that.
In the first eight months, we haven't, and the reason being that we needed to really pull back is everything I was mentioning on the operational front. We needed to revise our website. We need to make sure that we had rebranding, repositioning, because we wanted to bring new customers into an experience that was modern. Now that we have that, that we're cementing all that, that we're creating new creatives, new messaging, new targeted messaging that can actually be, if those of you that know digital, you know digital, Meta in particular, it is all about the creative in terms of what converts and what drives customers to your site. It's all about the creative, so we had to get there to where we're now can actually start really deploying more capital. We've started doing it in little ways.
I mentioned radio and CTV that we started in December. And we're doing that as a test, but now we're starting to get more traction where we understand, okay, what are the customers responding to? Where are they in this whole life cycle? What do people understand? What do they know? And we have PetMeds as a name, but we're a lot more than medication. So because we have so much more product, that's the other area that we're focusing on in terms of our marketing and our messaging so that we can really make people understand that it's PetMeds Plus.
Yeah, that's great. One of the, I think one of the really attractive features of the pets business is your ability to capture high rates of kind of recurring revenue. Autoship is a big thing for you, subscriptions, et cetera. So where are you today? Maybe remind us where you are today relative to some of those recurring revenue drivers or how you think about it and then kind of how you think about that going forward too.
Yeah, I don't want to take the whole spot. That's okay. I mean, today, our recurring revenues are at 53%. We see a tremendous opportunity to increase that experience both through existing customers who do not use our Autoship functionality today and then as well as bringing in new customers and kind of promoting the benefits of Autoship, right? It's a bit of set it and forget it, especially if you have to order food on a regular basis, right?
So you set that up and it just delivers to your door. And so it's just a much easier customer experience and it allows those customers to spend more quality time with their pets. And we implemented a new tool on that as well. So that was another technology upgrade that we had. So we implemented a new tool for Autoship that's also going to help have some self-service features for any customer as well.
Okay, the technology piece, that's the piece I want to come back to. We talked a little bit about upfront. And so this was another one. Maybe remind us the other kind of key sort of building blocks of the tech stack that you've really swapped out or changed or where you're focused, just kind of the, because I think that's another key part here. It's very early, but I think that's very helpful for people.
First and foremost, because we are a digital business, it's the order management platform. Our OMS, our OSP, which is our Autoship platform, which was something that we also changed. Those are two major significant pieces that we had to look at. We are using Salesforce Commerce Cloud, but within that, we also have an order management system that we needed to personalize and make sure that we have the ability to capture whether that's homepage attributes, our product display pages, our listings, all the different components that go into it from copy, et cetera.
It gets much more integrated, but there's a lot of backend new MarTech payment platforms, which we updated as well. Anything that the customer sees and the customer experiences is the whole goal is to make it seamless. It's just easy checkout, right? Fewer steps, fewer clicks is a higher conversion. So we know that just historically, and we want to make sure that we're implementing new tech that's also going to help automate that.
Okay. And in terms of the tech investments you've made though, I mean, is the bigger piece of that kind of behind you now, that was the stuff you put in the last since you sort of joined, or is there still some, the next year, still some key investments to make?
There's some investments to make, I would say fundamentally and foundationally from a finance systems perspective, but overall, we're not going to make transformational changes on technology just for the sake of updating technology. We really had to do it for the customer first, and now we're taking a step and a pause to make sure that we are optimizing each one of those investments that we've made, making sure that each one of those is working before we do anything else, so we're just taking steps. We did a lot in six months.
Yes, you did.
We did a lot of that, but now we have to make sure that we're optimizing each area.
Okay, good.
I'm sorry, I just would add to one area that we invested in that we haven't touched on yet, is just the customer service experience. And so we have put in some new technologies that allow automation and some self-service opportunities on the customer front as well.
We do have a customer call center team, which we also upgraded technology for them as well. In every single department, every single function, in order for it to be something that A, becomes more automated, B, becomes something that can actually scale, we've added technology there. The customer call center team also has new upgraded phone systems, which is best in class and a lot more functionality there for the customer.
Good. I want to go back to the partnerships. You hit on one of them earlier, but again, that's kind of one of your dimensions of potential growth is kind of partnering with somebody. So Vetster, Well Groomed, that kind of thing. But maybe just share with people what some of those key partnerships are and how you're thinking about that to help drive business, whether it's with existing or new customers.
So we've had a partnership with. We believe, first of all, that there's an ecosystem of all the care that you need for pets. And that would be your veterinarian, that would be your groomer, that would be insurance, which everyone should have. We believe in that. We don't run it, but that is a partnership that we do have. But it saves a lot of money when you don't expect it. And it's always when you least expect it when you're going to get hit with things like that. So telehealth, Vetster is a telehealth provider. And we also, veterinarians obviously are very key and close, and that's a big part of what we, so we're not walking away from that. But we also know that they're not always open at night, on the weekends. And so sometimes when you need a veterinarian, you need one.
So Vetster is our partner in that. We also use an app called AskVet, which has technicians. And it's a tremendous amount of value for our customers. It's more than $1,500 of value that we provide them where they have access to vet technicians 24/7. If you need any kind of emergency, we give free appointments for Vetster so you can actually get in 14 different states. You can actually get prescriptions through Vetster as well, but you can call any point in time if you're in New York and it's late at night, you can actually find somebody who's in Washington and you can speak to them right then and there. So there's a lot of advantages to having these. Groomers. Wellgroomed is a company that we've partnered with.
They're actually growing pretty aggressively. And now it's a franchise grooming company. And what they do is they'll take your pet and they'll have your pet for four hours. And during that time, not only are they grooming your pet, but they're also checking for wellness. It's a wellness checkup. So it'll be everything from your ear to the nose to various things. And when you come in to pick up your pet, they'll give you, "Here are all the things that we see. And by the way, here's some products that could actually help that." So we're the backend product there.
We see as our future, there's also opportunities to be that backend pharmacy, not only pharmacy support, but it's also over the counter on the products that we actually know really well to be able to help address some basic things, whether it's dental, ear, et cetera, or some more serious things that might have to do with more prescription requirements.
Got it. So we're getting close here, but I got one more. And because personally, you're extremely passionate about pets, you have a lot of pets, but also I think.
Can we count them?
Yeah, we should. It's probably a couple more now.
Actually, one more now.
Okay, so one more, but I think too, this is an area that has had a lot of growth, but as you said upfront, it's not immune to the economy, so what are you seeing today versus what you might have seen a year ago? Is that stabilizing? Are you seeing any indicators, just kind of temperature check your industry today?
Yeah, it's two years now, reduced veterinary visits. That's one. It's also reduced, obviously that means reduced prescriptions, but it's reduced compliance on the prescriptions as well. So people might not go and extend it out a little bit further. We're seeing some stabilization, and we're hearing that overall in terms of some of the research that's out there, but we're definitely hearing it's very much a consumer pressure in terms of any type of price, so when they call in, it's always about coupons and it's been very competitive.
The fourth quarter of the calendar year was very competitive overall in terms of promos and coupons and what they could get at a better price when they get it. We actually offer some discounts that are supported by our vendors for initial Autoship customers, and that's a significant saving. So customers are always looking, and we've definitely heard the last six months a lot more of that increased pressure.
Okay. We've got 56 seconds. So if you want to do a commercial or make any for your activation and remind people to go back there.
I mentioned that we're really. I have eight horses, three dogs, and a cat. Clearly I'm the consumer as well as someone running this business. Because we really focus in on ensuring that pets do have loving homes, we're tying and connecting ourselves to shelters around the country, and we're supporting them. We've obviously had hurricanes in Florida. We supported shelters, and we went physically, delivered products. We've been working with. I don't know if you guys know Chris Godwin. He's a Tampa Bay Buccaneers wide receiver. We've been working with Team Godwin and the shelters that they actually support as well. In fact, if you go to our activation in the Coquina Ballroom, you'll see one of his cleats, which is a size 15. I think it's like this.
He has a pair of cleats that is designed and was designed specifically for PetMeds and with Chris Godwin in mind and his jerseys there signed, but we've been really focusing in on really supporting those in need. So now with the LA Wildfires, you'll also see that we have there if you want to support, we're out there. We've got six different organizations that we're working with. Pasadena Humane Society being one of them, but there's various. They have animals who've been burned. We have animals who don't know where their homes are.
So there's a lot of different things that are happening. So obviously this is a little bit timely because of the need that's so great in LA right now, but if you go by, you'll also see some pets to adopt. So we will hand deliver, personally deliver them to you. I will be at your door if you go and adopt one of those.
That's a great place to close. Thank you both very much.
Thank you.
Thanks, Reid. Thanks to everyone.
Good job.