Good morning, everyone, and thank you for joining the PetMed Express 2023 analyst call. My name is Rob, the operator for today's call. I would now like to pass the conference over to our host, Mr. Brian Prenoveau, with Investor relations. Sir, the floor is now yours.
Thank you, operator. I'd like to welcome everybody today to the PetMed Express 2023 analyst call. 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. Certain information that will be included during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934, as amended, 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.
There can be no assurance that any forward-looking results will occur or be realized, and nothing contained in this presentation is or should be re-relied upon as a representation or warranty as to any future matter, including any matter in respect to the operations or business or financial condition of PetMeds. PetMeds undertakes no obligation to update publicly these forward-looking statements based on subsequent events, except as may be required by applicable law, regulation, or other competent legal authority. 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. Let me introduce our CEO and President, Matt Hulett. Matt?
Thank you, Brian. Thank you for making the time today to participate in this investor presentation. The PetMeds management team felt that the recent deal activity necessitated a special communication to our current and future stakeholders. First, I'd like to make today's presentation simple and impactful. If you take away nothing else from the presentation, I'd like you to remember this: PetMeds is poised to be a growth company. Earlier this week, we announced a definitive agreement to acquire PetCareRx, a leading supplier of pet medications, food, and supplies. Today, we will be sharing some of the key aspects of the deal, including the overall strategic rationale. Our strong belief is that this forum will provide a great opportunity to provide further details on the acquisition while providing a big picture overview of our business and how this acquisition fits into our larger worldview.
I'm joined today by Christine Chambers, PetMeds CFO. During today's presentation, we're going to cover the following. One, PetMeds 1.0, the legacy business and where I started on the turnaround road. Two, progress on our focus of being the pet health expert strategy. Three, our overview of the market opportunity and the strategies we are focused on. Four, an overview of our recent announcement to acquire leading pet care retailer, PetCareRx. Five, an overview of our current financial status before we open up the call to questions. On slide five, let's first start with the PetMeds business. PetMeds has a long history in the pet medication space. It is a phenomenal company that delivers exceptional service to our pet parents and pets.
This is evidenced by our NPS scores that have consistently been over 80, which puts us in the upper quartile alongside some of the most beloved brands in the world. The business was built with a strong balance sheet focused on delivering a high dividend yield to investors. In fact, PetMeds today is the only small cap stock in the e-commerce industry that is profitable and issues a dividend. Over time, growth slowed due in part to some lack of innovation and product assortment as well as increased competition. The business and the brand have several key assets that we can and will leverage as we pivot to a growth-oriented business. Our brand is both widely known and trusted. Our own market research indicates that 55% of U.S. pet parents are aware of the PetMeds brand.
Having a strong brand takes years to develop, and our customers tell us they look at PetMeds as their trusted pharmacy and pet medication expert. We have over 26 years of experience as a pure play pet pharmacy, fully licensed or authorized as a pet pharmacy to conduct business in all 50 states, delivering outstanding service and value. Our long-standing domain expertise in pharmacy is in what I would call the most complicated part of the pet ecosystem, which makes our progression into the other segments much easier. This expertise as a pharmacy has also enabled us to establish very deep roots in the pet healthcare industry. Our decades-long experience with the vet community is a significant competitive advantage. We have one of the largest direct-to-consumer vet networks in the online retail space. With over 70,000 veterinarians we have worked with over the company's history.
Because of our industry-leading service relationships with vets, our prescription medication authorization rates are the highest they have ever been, which speaks volumes to the level of veterinarian cooperation we receive on a daily basis. Our customers love our brand and our service. We provide a 100% satisfaction guarantee to our customers, and we go the extra mile for our customers with genuinely empathetic and excellent service. We don't just have a transactional interaction with our customers. We have built trusting, genuine relationships. Our customers view PetMeds as a trusted pet health expert, and we take that responsibility seriously.
Over one year ago, we set out to develop a new strategy, including bringing on a new experience and transformational executive team, and revitalizing the PetMeds brand and product offering in an effort to attract new customers, grow sales, and leverage the brand's many assets to take advantage of the opportunities we saw in the market. Recently, we have been able to stabilize the business with flattish year-over-year revenues from double-digit declines. This has been accomplished through a number of foundational changes that have taken place in the last 12 months.
We brought on a new experienced management team, introduced and shifted to a new holistic strategy, Your Trusted Pet Health Expert, grew essential nascent AutoShip sales to a current level of almost 40% of our business, placed a strategic investment in partnership investor, an exclusive deal, and a minority ownership of a company that unlocks pet telemedicine to the masses. We're the only online retailer, to our knowledge, that is live with pet telemedicine. Now we're here just nine months later with another transformational opportunity that vastly increases our addressable market and provides immediate upside to PetMeds. Turning to slide seven. We have discussed over many quarters what that strategy is and what it will be. PetMeds is shifting from being simply a leading pet medication retailer to being the pet health experts, a market leader in pet healthcare expertise.
We want to be every pet parent's go-to destination for holistic health and wellness from nose to tail. Our focus is not to be all things to all people. At PetMeds, we have a unique perspective. We establish relationships with pet parents through pet medication prescriptions first. We think this has been an entryway to further goods and services, including prescription food, televet services, supplements, and pet insurance, among others. The four points of our paw print are medication, care, nutrition, and wellness. We view these points as being key to building a differentiated brand and experience to pet parents everywhere. As we all know, pets are really our family members. Becoming the go-to place for your pet health needs is not only honorable from a social perspective, but also from an investment investor perspective.
We recognize the shifts that are occurring in the regulatory landscape, which led us to our first big bet, pet telemedicine. Our investment and partnership investor enabled PetMeds to become what we think was the first pet retailer to offer pet telemedicine to pet parents at scale. This is a strategic bet that will continue to develop as regulation changes as well as consumer education and awareness develops. We see the virtualization of vet services as being a key pillar to the pets business and a differentiator in the pet space. Turning to slide eight. We are making significant progress in a relatively short amount of time. As previously mentioned, recurring subscription revenue has increased significantly and now represents about 40% of our revenue base. We believe that number could still grow.
Until recently, PetMeds hasn't provided the full selection of non-medication products that our customers are looking for. We have been hinting at our expansion into premium food and other consumables for a while now. With this week's announcement, we will now have a broader catalog of premium prescription and non-prescription pet foods and supplies that should further expand our customer base, customer retention, increase basket size, and subscription revenue. As mentioned, the addition of pet telemedicine rounds out our holistic health and wellness strategy, delivering unique and differentiated services to our customer base. Before discussing further details of the acquisition, I want to provide a high-level overview of the pet market, how we intersect in areas of focus. This should be useful as we discuss the rationale for interest in acquiring PetCareRx and how this perfectly fits into the serviceable addressable market we are pursuing.
The overall pet market continues to grow. In 2021, it was almost $123 billion in annual sales. Third-party research expects this to continue to grow at a 9% annual CAGR in the next five years. That's an impressive rate for an industry already at $123 billion in sales. That translates to an extra $70 billion in annual pet spending in the next five years and a huge opportunity for PetMeds. It is our intent to grow within our niche of being Your Trusted Pet Health Expert. By focusing on total wellness, we can offer products and services to pet parents that are diet and health-focused in the areas of pet medication, premium prescription and non-prescription food, supplements, insurance, and televet services. Even within this targeted subsegment of the overall pet market, we believe this is a multi-billion dollar opportunity.
We believe that we are participating in some of the fastest-growing areas of the pet market. Internet sales of pet medication are expected to grow 16% annually over the next five years and take more market share when compared to sales at veterinarian offices or traditional brick-and-mortar establishments. Similarly, more people are buying their pet food and treats online versus in-store. In 2021, online sales were approximately 30% of total spend. That is expected to increase to almost half of all pet food and treat spend in five years. Online pet food and treat spend is forecast to grow 17% annually over that time, compared to 4% growth in brick-and-mortar spending. I will now turn the call over to our CFO, Christine Chambers, to discuss the PetCareRx acquisition in more detail. Christine.
Thanks, Matt. Earlier this week, we announced our intent to acquire leading pet care provider PetCareRx in an all-cash transaction for $36 million. Other high-level details of PetCareRx include its trailing 12-month revenue of about $42 million, 200,000 customers, more than 10,000 brands and product SKUs, about 80 employees, and a headquarters and distribution center located in Long Island, New York. Gross margins approximately the same as PetMeds. PetCareRx has been operating as a business almost as long as PetMeds. Their culture and mission are closely aligned with our own. This is critical, since acquisitions are more successful when values align. In fact, they're sort of a mini version of PetMeds, which makes the combination immediately synergistic. We expect the deal to close this quarter.
While the PetCareRx brand will continue to operate independently as part of PetMeds wellness and consumables business, it is expected to immediately deliver double-digit top-line growth for our business. Over time, we expect it to be bottom line accretive as we leverage synergies and streamline infrastructure. In short, the headline for the deal rationale is that the acquisition expands the addressable market for PetMeds while providing immediate upside. Instead of providing just a sliver of our customers' needs, PetMeds can now deliver on what we call a full nose-to-tail solution for our customers that includes medication, specialty food and diet products, vet services, and soon to follow, new wellness services. Here are additional benefits and rationale for the acquisition. Firstly, it expands our addressable markets.
Today, PetMeds participates in the medication market, which is approximately a $12 billion market out of a $123 billion pet market in the United States. With the acquisition of PetCareRx, we are now participating in a much larger addressable market. PetCareRx not only carries an extensive list of medications, they also made the investment to expand their addressable market by curating over 13,000 of the best non-medication health and wellness products in the market, including foods, supplements, and other similar products. They also bring incremental distribution center capability outside of core medication distribution. Secondly, almost half of PetCareRx's revenue is derived from non-medication products. We will rapidly be moving the relationships and products from the PetCareRx portfolio over to PetMeds over the next several quarters. We are confident that we will see similar expansion of buying behavior with our PetMeds customers.
More wallet share for pet customers and higher LTV. If you think about it, PetMeds has only serviced a small portion of our customers' overall needs for their pet. Medication is purchased on a much less frequent basis than the more common consumable pet products. With the acquisition of PetCareRx, PetMeds will be selling more products on a more regular basis to its customers. Matt will summarize the benefits of the announced acquisition.
We are extremely excited about the PetCareRx acquisition and where the PetMeds business is going from here. We believe we are just getting started on our growth objectives. Our product expansion is a key element to opening up new potential customers and offering existing customers more product breadth. In April of last year, we announced an exclusive partnership with the fastest-growing and industry-leading telemedicine platform, Vetster. We believe we are enabling the first mainstream pet telemedicine platform and the one that will prove to be an accelerator of widespread adoption of pet telemedicine. We now have the PetMeds platform integrated into the Vetster platform, and we recently introduced PetMeds' very own pet telemedicine service called VetLive in October of last year. PetCareRx has built a unique customer offering, a membership model where customers pay an upfront membership fee in order to receive discounts and free shipping.
PetCareRx's broad catalog is a perfect complement to our medication expertise. Prescription medication is among the most complex fulfillment items in the pet market. We have carved a large niche in being the experts for prescription medication refills. With the expanded catalog of PetCareRx products, we will have much more frequent touch points, expanding the potential for cross-selling, increasing customer stickiness, and ultimately lowering our acquisition cost. They have strong relationships with their suppliers, especially premium food brands. Christine will now walk us through the financial status and why we believe we are well-positioned to take advantage of a growing market.
Thanks, Matt. Let's turn to slide 17. As Matt mentioned, we have started to see the revenue decline slow down as we turn the corner and stabilize the core business. We have believed we have laid out a strategy and begun to execute on that strategy to jumpstart revenue growth and recapture market share. Pet health and wellness is a growing market, we believe our product and service focus is among the fastest-growing segments of the overall pet market. To take advantage of further opportunities, we think we are ideally poised to accelerate growth. As of September 30th, 2022, we had just under $100 million of cash and no debt. We've generated over $30 million of EBITDA in the previous 12 months. As a high cash flow producing business, we want to be mindful and diligent about how we allocate that cash.
Our balance sheet provides us with the financial flexibility and liquidity to be opportunistic with future opportunities. We view capital allocation as three legs on a stool: organic growth, inorganic growth, and returning capital to shareholders. Our business, including the integration of PetCareRx, has minimal CapEx requirements, and we manage a moderate working capital balance in support of inventory fluctuations and seasonality. The second leg of the stool is acquisition opportunities and investments in partnerships. We just announced the recent acquisition that we believe adds to the overall product portfolio and increases our customer count. In April 2022, we announced an investment in Vetster, a leading pet telemedicine offering. We continue to look at opportunities that will maintain strict discipline around future acquisitions and partnerships. As Matt mentioned earlier, PetMeds doesn't want to be all things to all parents.
We want to maintain a focus on pet health and wellness, so any acquisition, partnerships, or additional investments would have to fit within the framework and be complementary or additive to our existing business. Returning cash to shareholders. PetMeds has been a consistent dividend payer for several years. As a growing business, we want to balance the best use of our cash, given the opportunities that are in front of us. We will continue to strategically review and analytically assess the use of cash for the dividend and in support of organic and inorganic growth in a way we believe can drive total shareholder value in the long term. Over the next few years, we believe we're in a great position to succeed on our strategic goals.
The acquisition of PetCareRx gives us an immediate revenue boost. We believe we can expand on that growth through the expanded product catalog and differentiated services. Through operational synergies and other initiatives such as expanding customer wallet share, we are working to expand EBITDA margins and improve overall profitability. We intend to do this by utilizing the existing cash flow of the business to further expand our products, customers, and overall offering. I'll now turn the call back to Matt to provide a recap of today's Analyst Day before opening the call up to questions. Matt.
Thanks, Christine. The PetCareRx transaction marks PetMeds' second transaction in the last nine months since the introduction of the new management team and business strategy. The first transaction was a combined investment business relationship with Vetster in April 2022, which introduced VetLive, a one-of-a-kind offering for pet parents in the pet telemedicine space. PetMeds continues to evaluate incremental growth through acquisitions, partnerships, and investments. There is a massive total addressable market for PetMeds, and we want to focus on overall pet health and wellness. That serviceable market remains a significant multi-billion-dollar opportunity as well. Our unique perspective and offering focused on total wellness should inspire greater loyalty and customer retention with pet parents across the spectrum. Lastly, we think that we have the financial health and stability to accomplish these goals.
With significant cash on hand, a business that generates significant cash flow and a strong balance sheet, we think we have ample flexibility to assess growth opportunities and focus on the most meaningful and best opportunities for us. Let's summarize today's call and highlights by turning to the next slide. With over 2 million unique customers and a valued brand name, we believe we are well-positioned to take advantage of the multitude of opportunities in front of us. Our plan is to expand our overall customer base, provide more products, and create unique and differentiated services for pet parents across the country. Our new management team, along with the hundreds of dedicated employees, have never been as excited to make the lives of pets healthier and happier. Of course, this is not the end of transformation. Expect more progress on our growth initiatives to bolster our Pet Health Expert strategy.
I would like to welcome the PetCareRx team to the PetMeds pack. Together, we look forward to improving the lives of even more pets and pet parents as we share a common ethos around our vision that every pet deserves to live a happy, healthy life. We will be announcing our earnings date very soon and look forward to discussing our performance this quarter. Thank you. We are now prepared to take your questions.
Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad, and a confirmation tone indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Anthony Lebiedzinski with Sidoti. Please proceed with your questions.
Thank you, and good morning. You know, thanks for taking the question. Yeah, so first, just on the PetCareRx deal. Can you talk about what have been their revenue trends over the last few years and also talk to the new customer... I'm sorry. Just total number of customers. I know it's 200,000 right now, but can you give us a sense as to how that's progressed the last few years and whether all of these customers are incremental actually to PetMed Express? I know, Christine, you touched on the gross margins, but maybe if you could just also talk about the operating margins also for PetCareRx, that'd be very helpful.
Yeah. Christine, I'll take the first part if you can take the second part.
Okay.
Thanks, Anthony, for your question. It's great to hear from you. On the first part in terms of revenue growth trends, one of the interesting components to PetCareRx is when we said on the call that they were sort of a mini version of PetMeds. PetCareRx did a really successful migration from a prescription-only business to more of a balanced portfolio of products, with prescriptions as kind of the main reason why customers have gone to that brand. Selling other products like premium prescription food were certainly a revenue accelerator. I don't think we're gonna cover their kind of growth rate trends. I can say that they were a growth company. They were growing their business both on new customers as well as top-line revenue.
Other than that, I don't think we're gonna give a lot of trends related to their business. The adjunct of their expanded catalog was certainly an accelerator for their business, which again, as we mentioned on the call, mid to long term, we're excited to integrate more of those products on top of PetMed since we're so medication-centric. Christine, do you wanna answer the last couple?
Yeah, thanks, Anthony, for the questions.
Mm-hmm.
You know, in terms of the margins, like I said, the gross margins we expect to be similar to that of PetMeds. In terms of operating margins, PetCareRx is not accretive on a standalone basis today. You know, after we close the acquisition, we'll be working on operating synergies, that, you know, we believe will drive improved margins going forward. The businesses are very similar, and so there are natural synergies to be had. The PetCareRx business, you know, even though a smaller business has some of those higher fixed costs that we see, as an, you know, opportunity going forward.
You know, we also believe that through the growth in the industry and as we grow our overall revenue through the expanded catalog, that that'll add overall profitability to the combined businesses as we move forward as well.
Got it. Okay. Thanks for that. Just wondering, whether PetCareRx will need any material CapEx spending, as you go through that process. Have you assessed that yet?
Christine, do you wanna take that?
Yeah, absolutely. We are continuing, you know, to assess as we're not yet closed, but we don't believe that there is a huge incremental CapEx requirement for the integration. As we've mentioned, we very much believe on managing the brands independently at this stage. Yeah, we don't expect there to be any large or significant CapEx investments.
Got it. Okay. Then the, you know, the last question from me, and I'll let others jump with their own questions. You know, given that you're now increasing your cash usage for acquisitions, do you have any updated thoughts on the dividends, or is that too early?
Maybe I'll answer that and then hand to Christine. Yeah, too early for this call, since the objective is really to talk about PetCareRx and really a signal to our stakeholders that we're excited about growing the PetMeds business. I would say that, you know, we definitely believe that a business that's growing to kind of the relative market share in the pet space is a good metric to be thinking about from an investor perspective. PetMeds hasn't been growing to market share, which by definition is losing share. As we think about the allocation of capital both for inorganic as well as kind of reinvestment back into the core organic components of the business with aspects like variable marketing, you know, we're gonna look to get a total shareholder return based on growing the business but also staying profitable.
Nothing to announce here, the way we think about it is, you know, a successful business in the pet space, which is relatively not re-recessionary proof, but certainly re-recessionary resilient. You know, it's gonna take some investment, we're excited to, in future calls, discuss how we think about capital allocation. Christine, do you wanna put a bow on that answer?
I think you covered it pretty well, Matt. Yeah, I think just to reiterate, you know, as I mentioned, you know, we think about capital allocation as that, you know, investment in organic, inorganic, growth as well as returning capital to shareholders. You know, we do believe that in an industry that is growing, that we again, want to optimize that capital allocation across across those sort of three legs in a way that drives overall total shareholder value. I think more to come and we, yeah, we'll be reviewing a lot of our dividend strategy in our upcoming board meetings.
Got it. Well, thank you very much and best of luck.
Thanks, Anthony. Great to hear from you.
Our next question is from the line of Corey Grady with Jefferies. Please proceed with your questions.
Hey, thanks for taking my questions. I wanted to follow up on the PetCareRx acquisition. What is the expected financial impact of the acquisition to the business this year? Can you talk about the synergies you see, timing of capture and, you know, when you're expecting to get the deal accretive to on an adjusted EBITDA basis?
Thanks, Corey, for your question. It's great to hear from you. I'll tackle maybe four of those answers. Just kidding, Christine. I'll hand two of those to you. The way I think about this is we're not discussing the exact amount that the business is accretive to PetMeds because, again, we haven't closed the business yet. Like we said on the call, this is a very complementary business to PetMeds. It's not like a business that's very different than our own. It's a mini version of PetMeds. We're excited about, for example, combining our relationships with our suppliers to get more favorable agreements there in terms of revenue upside. We're certainly excited about bringing on some of these premium brands on the food and consumables side onto PetMeds.
This isn't a guidance call, but we're excited about seeing the benefits there. There's just natural things that both companies do that there's opportunities for cost synergies. I think if you think about it's like combining two very similar businesses together, and there's very natural synergies that come out of that. We're also excited about a distribution center addition to the portfolio, we're adding a New York location that specializes in large format shipping. It gives us an opportunity for a business like PetMeds based in Delray Beach, for opportunities for not only expansion of distribution center and products, but also the ability for us to think differently about shipping and handling costs. As we expand our distribution centers, we expect more synergies there. That's kind of my overall comment.
Christine, do you wanna handle the revenue components and some of the other synergy pieces?
Thanks, Matt. As I mentioned, the trailing 12-month revenue of PetCareRx is about $42 million, and we do expect to close by the end of the quarter. That'll obviously drive, you know, an immediate revenue growth for the PetCareRx business as we combine the businesses, and then obviously adding that customer base. I think going forward, we believe that the combined product catalog will provide our existing customers, you know, with a variety of products and reasons to return. If you think about it, you know, PetMeds has sort of that lower order frequency business, you know, due to our more traditional pharmacist refill cycle, and PetCareRx has a higher order frequency.
As we think about the synergies and the combination of bringing that product catalog over, you know, we believe in the growth, not just the immediate growth from adding the business, but growth in the future as well. With respect to synergies, I think Matt's already touched on that. I think as I mentioned, it's not an accretive business on a standalone basis today, but, you know, there are natural synergies from just the very similar business models and how we operate and our opportunity to leverage some of those synergies going forward.
Got it. That's helpful. Just to follow up on the expanded product catalog. With the additional 10,000 SKUs from PetCareRx, I mean, are you at a point where you can accelerate the customer acquisition spend? Maybe you can talk about, you know, your expectations for LTV following the acquisition, you know, compared to, I think PetMeds is in the $150 range. Just talk about where you see that going as you get benefits from higher frequency and AOV. Thanks.
Yeah, thanks for your question. That's a good one. It's a little early for us to be predicting LTV. As you know, we've been pretty disciplined in terms of our lifetime value to CAC ratio, as a new metric we started reporting within the last year. When we looked at the PetCareRx business, what I can say is when we looked at the business, as a modeling exercise, it was very clear to us that providing a diet and health-focused pet parent like we currently have at PetMeds and how PetCareRx has a similar set of cohorts as well, that those customers were more engaged throughout the life cycle of the pet relationship with and the pet parent.
It was an order of magnitude higher in terms of engagement and purchases than what PetMeds enjoys today. PetMeds has extremely loyal base, as anyone who's followed the stock and the story for a while knows, because prescriptions are extremely sticky in terms of the level of engagement that we have with our customers. We use that as a basis for our investment thesis in this business that we can increase engagement, increase lifetime value, and as I said on the call, we believe that lifetime value will expand and give us more of an opportunity to acquire more customers at scale.
where that lands in terms of post-close and synergies and how long it takes us to get a flotilla of products SKUs up on the site. We're not prepared to talk about today, but it was an order of magnitude in terms of purchase behavior and LTV versus where PetMeds is today. Which is again, the thesis for why we looked at PetCareRx and why we're excited to work with them. Christine, do you wanna answer the first question?
Yeah. Corey, with respect to the expanded product catalog, I think you're asking just about the expanded CAC and user acquisition. Is that correct?
Yeah. I mean, Yeah. Do you feel like you now have a broad enough assortment with this acquisition to kind of lean into customer acquisition spend and acquiring, you know, focusing on acquiring new customers?
Yeah. I think that, you know, there's opportunity with as we think about the channels and the acquisition of acquiring new customers. You know, there's obviously some natural competition between different brands and there's probably opportunity. We believe there's opportunity, you know, with having the combined, you know, management of user acquisition going forward, that there's some natural synergies from a marketing perspective. I think there's. We continue to look into that. We'll continue to evolve our thinking as we as we start, you know, come close to closing the business.
Maybe I'll add a little bit more color to that. you know, you know, again, we wanna be really disciplined in terms of how we allocate capital, and we tend to look at historical cohorts versus future cohorts in terms of our spend. Since, you know, AutoShip, for instance, is something we've implemented in the last year from basically zero to close to 40% of our business. You know, the profile of those customers obviously is gonna be different than somebody who doesn't have a recurring relationship with us. We're gonna be looking at the cohorts that are buying multiple products from us very closely before we get over our skis and customer acquisition costs.
again, like I said before, we do have a real-world model and understanding of an operating cadence for engagement LTV and customer acquisition with PetCareRx, since they've had that expanded profile. It gives us really good confidence that LTV will grow over time. The last thing I would say about that is, you know, this isn't just a financial engineering exercise. When we came into the business, we heard firsthand from our customers, who are, again, very diet-focused and very health-focused, that there is a very specific set of products that they would like from PetMeds.
When you look at kind of both the quant and the financial engineering component of this, there's also a real-world, customer needs approach that we took with our customers in terms of research and what they want, which gives us a lot of confidence that as we start integrating our businesses and working together, that there's just a really good one plus one equals three synergies to this business. It reminds me a lot of when I was at Expedia many, many years ago, and we were in the, just the flights business, and then we actually became a leader in the trips business, integrating hotel, car, air, the whole trip. It does feel a little bit more like that transformation, where we have all these customers, they want more products from us.
These customers are very focused on the efficacy of the products that they're looking for from PetMeds and as well as PetCareRx. In many ways, they view us as an extension of their vet. That's kinda how our customers think about us, which is maybe slightly different than how other pet parents interact with other brands. We'd like to think of ourselves as the CVS brand equivalent in the pet space versus maybe some others who are more kind of the Walmart-focused. We wanna be a very specialty retailer, and we have very interesting customers who are maybe a little bit different than a mass market pet parent.
Corey, I'm giving you a little bit of color there. Again, we're not going to do a lot of aggressive variable marketing, without the proof points around LTV long term. We're really confident based on the model and the business that PetCareRx has built, that we can have similar synergies mid to long term with PetMeds. Hopefully, that gives you a little bit of color.
That's really helpful. Thank you.
Thank you. As a reminder to ask a question today, you may press star one from your telephone keypad. Thank you. At this time, I'm showing no additional questions. I'll turn the floor to management for any further remarks.
Many thanks, operator. Thanks everyone for joining us here today. We're extremely excited about the acquisition of PetCareRx, and as I mentioned, we're excited to bring the PetCareRx team into the fold. With over 2 million customers and a valued brand name, we believe we're extremely well-positioned to take advantage of the opportunities in front of us. Our plan is to expand our overall customer base and provide more products to create a unique and differentiated experiences for pet parents across the country. As a new management team, along with the hundreds of dedicated employees at PetMeds, we're really excited to make lives for pets healthier and happier. This isn't the end of the transformation, as we mentioned. Expect more progress on our growth initiatives to bolster our pet health strategy.
We look forward to our upcoming earnings date very soon, and we look forward to discussing our performance from this last quarter. Thank you all, and we really appreciate you attending today.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.