pets-20250930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number: 000-28827

________________________

PETMED EXPRESS, INC.

(Exact name of registrant as specified in its charter)

________________________


FLORIDA			65-0680967
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

420 South Congress Avenue, Delray Beach, Florida 33445

(Address of principal executive offices, including zip code)

(561) 526-4444

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	PETS	NASDAQ Global Select Market
Preferred Stock Purchase Rights	N/A	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o			Accelerated Filer x
Non-accelerated filer o			Smaller reporting company o
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 21,369,521 shares of Common Stock, $.001 par value per share, at December 5, 2025.

PART I - FINANCIAL INFORMATION

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, certain information in this Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, our results of operations, financial position and our business outlook, business trends and other information, may be forward-looking statements. You can identify these forward-looking statements by the words "believes," "intends," "expects," “might,” "may," "will," "should," "plans," "projects," "contemplates," "intends," "budgets," “potential,” "predicts," "estimates," "anticipates," “future,” “goal,” and variations of such words or similar expressions. These statements are based on our beliefs, as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved, and actual future results may differ materially from what is expressed in or indicated by the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A, under the heading “Risk Factors,” in our Annual Report on Form 10-K for the year ended March 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on October 14, 2025, and under “Part II, Item 1A., Risk Factors” in this Quarterly Report on Form 10-Q, if and as such risk factors may be updated from time to time in our periodic filings with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and a reader, whether investing in our common stock or not, should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct, or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this Quarterly Report on Form 10-Q apply only as of the date of this Quarterly Report on Form 10-Q or as of the date they were made or as otherwise specified herein. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Investors and others should note that we use our websites (https://petmeds.com, https://petcarerx.com and https://www.investors.petmeds.com), as well as social media, press releases, SEC filings, public conference calls and webcasts, as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings, public conference calls and webcasts. The contents of our websites and social media posts, however, are not incorporated by reference into this Quarterly Report on Form 10-Q. Further, our references to website URLs in this filing are intended to be inactive textual references only.

NOTE REGARDING COMPANY REFERENCES

When used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise indicates, "PetMed Express," "PetMeds," "PetMed," "the Company," "we," "our," and "us" refers to PetMed Express, Inc. and its direct and indirect wholly owned subsidiaries, taken as a whole.

ITEM 1. FINANCIAL STATEMENTS.

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share amounts)


	September 30, 2025		March 31, 2025
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	36,098	$	54,720
Accounts receivable, less allowance for credit losses of $32 and $91, respectively	1,965		2,317
Inventories, net	14,768		16,205
Prepaid expenses and other current assets	6,361		5,330
Prepaid income taxes	263		299
Total current assets	59,455		78,871

Noncurrent assets:
Property and equipment, net	28,338		28,859
Intangible and other assets, net	11,767		13,346
Goodwill	—		26,658
Operating lease right-of-use assets	741		966

Total noncurrent assets	40,846		69,829

Total assets	$	100,301	$	148,700

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	19,119	$	23,564
Sales tax payable	25,283		24,867
Accrued expenses and other current liabilities	10,809		11,711
Current operating lease liabilities	477		461
Deferred revenue	995		2,085
Income taxes payable	—		80
Total current liabilities	56,683		62,768

Deferred tax liabilities, net	263		263
Operating lease liabilities, net of current lease liabilities	291		535


Total liabilities	57,237		63,566

Commitments and contingencies (Note 9)

Shareholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized:
Convertible Preferred stock, $0.001 par value, with a liquidation preference of $4 per share, 250,000 shares authorized ; 2,500 and 2,500 convertible shares issued and outstanding, respectively	9		9
Series A Junior Participating Preferred Stock, $0.001 par value, 100,000 shares authorized; no shares issued or outstanding	—		—
Common stock, $.001 par value, 40,000,000 shares authorized; 21,015,559 and 20,656,822 shares issued and outstanding, respectively	21		21
Additional paid-in capital	19,161		18,560
Retained earnings	23,873		66,544

Total shareholders' equity	43,064		85,134

Total liabilities and shareholders' equity	$	100,301	$	148,700

See accompanying notes to unaudited condensed consolidated financial statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share amounts) (Unaudited)


	Three Months Ended September 30,				Six Months Ended September 30,
	2025		2024 As Restated		2025		2024 As Restated

Net sales	$	44,364	$	58,044	$	95,544	$	124,251
Cost of sales	31,949		39,271		68,726		86,441

Gross profit	12,415		18,773		26,818		37,810

Operating expenses:
General and administrative	14,176		10,492		27,124		15,366
Advertising	4,341		6,069		10,387		14,125
Depreciation and amortization	2,278		1,658		4,561		3,379
Impairment of goodwill and intangible assets	—		—		27,258		—
Total operating expenses	20,795		18,219		69,330		32,870

(Loss) income from operations	(8,380)		554		(42,512)		4,940

Other income:
Interest (expense) income, net	(326)		185		(524)		280
Other, net	195		186		382		417
Total other (expense) income	(131)		371		(142)		697

(Loss) income before (benefit) provision for income taxes	(8,511)		925		(42,654)		5,637

Provision (benefit) for income taxes	9		(1,401)		18		(443)

Net (loss) income	$	(8,520)	$	2,326	$	(42,672)	$	6,080

Net (loss) income per common share:
Basic	$	(0.41)	$	0.11	$	(2.05)	$	0.30
Diluted	$	(0.41)	$	0.11	$	(2.05)	$	0.29

Weighted average number of common shares outstanding:
Basic	20,889,124		20,597,807		20,822,270		20,555,544
Diluted	20,889,124		20,938,817		20,822,270		20,940,161

See accompanying notes to unaudited condensed consolidated financial statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Six Months Ended September 30,
	2025		2024
Cash flows from operating activities:
Net (loss) income	$	(42,672)	$	6,080
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	4,561		3,379
Impairment of goodwill and intangible assets	27,258		—
Share based compensation	839		(7,631)
Deferred income taxes	—		(696)
Bad debt expense	6		176
(Increase) decrease in operating assets and increase (decrease) in operating liabilities:
Accounts receivable	346		1,488
Inventories, net	1,437		15,464
Prepaid income taxes	36		(179)
Prepaid expenses and other current assets	(1,031)		2,670
Operating lease right-of-use assets, net	225		245
Accounts payable	(4,445)		(20,071)
Sales tax payable	416		(639)
Accrued expenses and other current liabilities	(23)		(221)
Lease liabilities	(228)		(240)
Deferred revenue	(1,090)		(953)
Income taxes payable	(80)		—
Net cash used in operating activities	(14,445)		(1,128)

Cash flows from investing activities:


Purchases of property and equipment	(3,916)		(1,948)
Net cash used in investing activities	(3,916)		(1,948)

Cash flows from financing activities:
Dividends paid	(23)		(175)
Cash paid for tax withholding on net settlement of restricted stock	(238)		—
Net cash used in financing activities	(261)		(175)

Net decrease in cash and cash equivalents	(18,622)		(3,251)
Cash and cash equivalents, at beginning of period	54,720		55,296

Cash and cash equivalents, at end of period	$	36,098	$	52,045

Supplemental disclosure of cash flow information:

Cash paid for income taxes	$	66	$	466

Dividends payable in accrued expenses and other current liabilities	$	1	$	39

Non-cash investing activity for property and equipment additions	$	(854)	$	—

See accompanying notes to unaudited condensed consolidated financial statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Restatement of Previously Issued Consolidated Financial Statements

As further described below, our unaudited consolidated financial statements for the three and six months ended September 30, 2024, have been restated to reflect the correction of material errors.

Restatement Background

The need for restatement was identified: (1) in part by the Audit Committee Investigation (the “Investigation”) as disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, as filed with the SEC on October 14, 2025 (the “2025 Form 10-K”); and (2) during financial analyses conducted in connection with the preparation of the Company’s consolidated financial statements for the fiscal year ended March 31, 2025. The Company participates in a range of vendor-funded programs through which it receives reimbursements for certain activities, including advertising, sales incentives, and other promotional efforts, typically linked to purchase or sales volume thresholds. These programs are designed to offset costs incurred in connection with stocking, promoting, and selling vendor products.

The Company identified certain errors in its accounting for payments, rebates and discounts from suppliers arising from a misapplication of US GAAP. Historically, the Company accounted for (1) certain promotional sales reimbursements as a component of its revenues and (2) certain co-operative advertising expenses as a component of advertising costs that were not specific, incremental or identifiable. The Company notes that these payments, rebates and discounts should be accounted for as a component of (reduction to) cost of sales. Furthermore, after a thorough review of the Company's vendor agreements, the Company also identified the following additional errors within our accounting for vendor consideration which was also included in the Restatement:

1)A specific vendor whose marketing and advertising arrangements, previously categorized as cost of sales, needed to be reclassified to offset advertising expenses.

2)A specific vendor whose promotional sales reimbursements, previously categorized as advertising expenses, needed to be reclassified to cost of sales.

Restatement Adjustments

The following table summarizes the effect of the errors on the Company’s consolidated statements of operations for the three and six months ended September 30, 2024:


	Three Month Ended September 30, 2024
	As Reported			Adjustment		As Restated
Net sales	$	59,570		$	(1,526)	$	58,044
Cost of sales	$	42,259		$	(2,988)	$	39,271
Gross profit	$	17,311		$	1,462	$	18,773

Advertising	$	4,606		$	1,463	$	6,069
Total operating expenses	$	16,756		$	1,463	$	18,219

Advertising Costs of Acquiring a New Customer	$60					$79
Advertising Costs as a Percentage of Sales	7.7		%			10.5		%


	Six Months Ended September 30, 2024
	As Reported			Adjustment		As Restated
Net sales	$	127,522		$	(3,271)	$	124,251
Cost of sales	$	92,240		$	(5,799)	$	86,441
Gross profit	$	35,282		$	2,528	$	37,810

Advertising	$	11,596		$	2,529	$	14,125
Total operating expenses	$	30,341		$	2,529	$	32,870

Advertising Costs of Acquiring a New Customer	$59					$72
Advertising Costs as a Percentage of Sales	9.1		%			11.4		%

Note 2: Summary of Significant Accounting Policies

Organization

PetMed Express, Inc. and subsidiaries, d/b/a PetMeds® and PetCareRx, Inc. d/b/a PetCareRx® (collectively, the “Company”), is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, food, supplements, supplies and vet services for dogs, cats, and horses. The Company markets and sells directly to consumers through its websites, customer contact center, and mobile application. The Company offers consumers an attractive alternative for obtaining pet medications, foods, and supplies in terms of convenience, price, speed of delivery, and valued customer service.

Founded in 1996, the Company’s executive headquarters offices are currently located in Delray Beach, Florida. The Company’s fiscal year end is March 31, and references herein to fiscal 2026 or fiscal 2025 refer to the Company's fiscal years ending March 31, 2026 and 2025, respectively.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and footnotes required by accounting principles generally accepted in the United States ("GAAP") for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company at September 30, 2025, the Statements of Operations for the three and six months ended September 30, 2025 and 2024, and Cash Flows for the six months ended September 30, 2025 and 2024. The results of operations for the three and six months ended September 30, 2025 are not necessarily indicative of the operating results expected for the fiscal year ending March 31, 2026. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in our 2025 Form 10-K. The unaudited condensed consolidated financial statements include the accounts of PetMed Express, Inc. and its direct and indirect wholly owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

Deferred Revenue

Deferred revenue is recorded when payments are received or due in advance of performing our service obligations and revenue is recognized over the service period. Deferred revenue includes prepayments of PetPlus memberships with PetCareRx, Inc. (“PetCareRx”). The total deferred revenue as of September 30, 2025 and March 31, 2025 for these memberships was $1.0 million and $1.0 million, respectively. Memberships provide discounted pricing, free standard shipping, veterinary telehealth services and local Caremark Pharmacy prescription pickup. The membership fee is an annual charge and automatically renews one year from the initial enrollment date. The Company generally recognizes the revenue ratably over the term of the membership. Deferred revenue at March 31, 2025 also includes $1.1 million collected from our customers prior to delivery of AutoShip products, which is recorded as deferred revenue on the condensed consolidated balance sheets.

Long-lived Assets

Long-lived assets, which primarily includes fixed assets, definite lived intangibles, right-of-use assets, and other assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to the undiscounted cash flows expected to be generated by the asset group from its use and eventual disposition of that asset group. Assets are considered to be impaired if the carrying amount of an asset group exceeds the future undiscounted cash flows. If impairment is determined to exist, any related impairment loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less cost of disposal. The Company determined that all of its long-lived assets are part of a single entity-wide asset group for the purpose of long-lived asset impairment assessment.

During the three months ended June 30, 2025, the Company identified triggering events for the Company’s long-lived asset group. These triggering events included a downward revision to the Company’s forecast and a decrease in the Company’s market capitalization which fell below the Company’s carrying value for a sustained period beginning in the fourth quarter of fiscal 2025. As a result of the identified triggering events, the Company performed a recoverability test for the identified long-lived asset group. The undiscounted cash flow projections were based on estimates made by management of current and future strategic and operational plans and future financial performance projected, using various assumptions including, but not limited to: revenues, gross profits, operating expenses, and working capital through the remaining useful life of the primary asset in the asset group. The results of the test indicated that the carrying amounts for the long-lived asset group were expected to be recoverable.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. The Company is required to assess goodwill for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company performs its annual impairment assessment in the fourth fiscal quarter of each year. An impairment test of goodwill consists of comparing the carrying amount of the single reporting unit to the fair value of the unit. An impairment loss is recognized by the amount that the carrying amount exceeds the fair value, limited to the amount of goodwill. The Company has concluded that it has one reporting unit and has assigned the entire balance of goodwill to this reporting unit.

For the three months ended June 30, 2025, the Company identified potential impairment triggering events indicating that the fair value of its reporting unit was more likely than not less than its carrying value as of June 30, 2025. These triggering events included a downward revision to the Company’s forecast due to continued revenue declines and a decrease in the Company’s stock price and market capitalization that was sustained in the first quarter of fiscal 2026. In accordance with Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other, the Company performed a quantitative goodwill impairment test as of June 30, 2025.

The fair value of the single reporting unit was estimated using an income approach, employing a discounted cash flow model. As part of the discounted cash flow model, the Company developed estimates, assumptions and judgments about future results. The discounted cash flow projections were based on estimates made by management of current and future strategic and operational plans and future financial performance. Valuation assumptions used in the Company's discounted cash flow valuation also include projected capital expenditures, earnings before interest expense, income taxes, depreciation and amortization expense (EBITDA), depreciation expense, working capital, discount rates, tax rates and terminal growth rates. The Company applied a terminal growth rate of 3%, income tax rate of 25.3% and discount rate of 14.0% based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the single reporting unit. As a result of this impairment test, the Company determined the carrying value of the reporting unit exceeded its fair value, resulting in a goodwill impairment charge of $26.7 million during the three months ended June 30,

2025, which represented the entirety of the goodwill balance previously recorded. There was no tax impact to the impairment as goodwill is not tax deductible.

In accordance with ASC 820, Fair Value Measurement, the fair value measurement for the goodwill impairment is categorized as a Level 3 fair value measurement. This is due to the significant unobservable inputs used in the valuation, including the forecasted revenues, discount rate, and terminal growth rate, which require significant management judgment and estimation.

Intangible Assets

The Company acquired definite-lived intangible assets in the acquisition that are being amortized based on their estimated useful lives in accordance with ASC Topic 350, Intangibles - Goodwill and Other. These definite-lived intangible assets are being amortized over periods ranging from three to seven years. Acquired trade name is not being amortized and is subject to a review for impairment on an annual basis, or more frequently if circumstances indicate an impairment may have occurred. If the carrying amount of an indefinite lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

During the first quarter of our fiscal year ending 2026, because of the triggering events the Company performed the quantitative test which resulted in additional impairment related to the PCRX trade name of $0.6 million, due to a reduction in actual and forecasted revenues.

The fair value of the trade name was determined using the "relief from royalty" method.

This method estimates the value of the trade name by calculating the present value of the royalty payments that would have been avoided by owning the trade name rather than licensing it. Key assumptions used in this valuation include:

•Royalty Rate: A hypothetical royalty rate of 0.5% was applied, based on comparable market transactions and industry benchmarks for similar trade names. This rate reflects the estimated arm's-length royalty that a market participant would be willing to pay for the use of the trade name.

•Forecasted Revenues: Future revenue projections associated with the use of the trade name were based on the Company's internal forecasts, incorporating expectations for market growth. These forecasts were adjusted to reflect the impact of the identified triggering event.

•Discount Rate: A discount rate of 14.0% was utilized, representing the Company's weighted average cost of capital (WACC) adjusted for the specific risks associated with the trade name and the relevant industry.

•Capitalization Rate: A capitalization growth rate of 11.0% was applied to project cash flows beyond the discrete forecast period, reflecting long-term sustainable growth expectations.

In accordance with ASC 820, Fair Value Measurement, the fair value measurement for the trade name impairment is categorized as a Level 3 fair value measurement. This is due to the significant unobservable inputs used in the relief from royalty valuation, including the royalty rate, forecasted revenues, discount rate, and terminal growth rate, which require significant management judgment and estimation.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The FASB issued this ASU to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update became effective with the Company’s Fiscal Year 2025 annual reporting period and with the Company’s Fiscal Year 2026 interim reporting periods. The

adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and resulted in additional segment disclosures within Footnote 4, “Segment Reporting”.

In December 2023, the FASB issued Update 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". This Update applies to all entities that are subject to Topic 740. The amendments in this Update revise income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as the effectiveness of certain other income tax disclosures. The Update is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Update should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact of adopting this Update.

In November 2024, the FASB issued ASU No.2024-03, Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) to require public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, and may be applied on a retrospective or prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting this Update.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”) to simplify the estimation of credit losses on current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The amendments allow all entities to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. This ASU is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those fiscal years. Early adoption is permitted. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. The Company is currently evaluating the impact of adopting this Update.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”) to modernize the accounting for internal-use software costs, primarily by simplifying the requirements to capitalize software development costs. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years and may be applied using a prospective, retrospective or modified transition approach. Early adoption is permitted. The Company is currently evaluating the impact of adopting this Update.

Note 3: Revenue Recognition

In accordance with ASC Topic 606 ("Revenue from Contracts with Customers"), the Company primarily generates revenue by selling prescription and non-prescription pet medication products, pet food, supplements, and supplies, membership fees, and veterinary services. Certain pet supplies offered on the Company’s websites are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product. Customer care and support is deemed not to be a material right to the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are based on historical patterns, however this is not considered a key judgment. Revenue is recognized when control transfers to the customer at the point in time at which the shipment of the product occurs. This key judgment is determined as the shipping point, which represents the point in time when the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership. Virtually all the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize the accounts receivable balances relative to sales. Revenue is recorded net of sales tax, discounts and return allowances. Return allowances are estimated using historical experience and not material.

Outbound shipping and handling fees are an accounting policy election and are included in sales as the Company considers itself the principal in the arrangement given its responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales.

Membership fees represent the amounts recognized from two membership models. The first is the PetPlus membership for PetCareRx customers, and the second is a partner membership, which allows employees in-network to join the PetPlus membership program through their employers. These memberships provide discounted pricing, free standard shipping, veterinary telehealth services and local Caremark Pharmacy prescription pickup which represent a single stand-ready performance obligation to provide these benefits. The PetPlus membership fee is an upfront annual charge and automatically renews one year from the initial enrollment date. The Company recognizes the revenue ratably over the term of the PetPlus membership which is generally one year. On March 31, 2025, the Company also had deferred $1.1 million of AutoShip revenue. As shown in the following table, under the PetPlus and other programs, the Company recognized $0.7 million and $2.4 million of previously deferred annual membership fees and AutoShip revenue in the three and six months ended September 30, 2025, and had $1.0 million of deferred revenue as of September 30, 2025.


(amounts in millions)	2025		2024
Deferred revenue, March 31	$	2.1	2.6
Deferred memberships fees and others received	0.8		1.1
Deferred membership fee revenue and others recognized	(1.8)		(1.5)
Deferred revenue, June 30	1.1		2.1
Deferred memberships fees and others received	0.6		0.7
Deferred membership fee revenue and others recognized	(0.7)		(1.2)
Deferred revenue, September 30	$	1.0	$	1.6

In addition to annual membership fees earned under the PetPlus program, the Company also earns membership fees on a month-to-month basis under its PetCareRx partner membership program. For the three and six months ended September 30, 2025, membership fees earned under the partner program were $1.1 million and $2.1 million. For the three and six months ended September 30, 2024, membership fees earned under the partner program were $0.9 million and $1.8 million.

The Company has no material contract asset or liability balances at September 30, 2025 or March 31, 2025, respectively.

The Company disaggregates sales in the following categories: reorder sales vs new order sales vs membership fees. The following table illustrates sales in those categories:


	Three Months Ended September 30,								Increase (Decrease)
Net Sales (in thousands)	2025		%		2024 As Restated		%		$		%

Reorder sales	$	37,408	84.3	%	$	48,724	83.9	%	$	(11,316)	(23.2)	%
New order sales	5,332		12.0	%	7,251		12.5	%	(1,919)		(26.5)	%
Membership fees	1,624		3.7	%	2,069		3.6	%	(445)		(21.5)	%

Total net sales	$	44,364	100.0	%	$	58,044	100.0	%	$	(13,680)	(23.6)	%


	Six Months Ended September 30,								Increase (Decrease)
Net Sales (in thousands)	2025		%		2024 As Restated		%		$		%

Reorder sales	$	78,713	82.4	%	$	101,520	81.7	%	$	(22,807)	(22.5)	%
New order sales	13,577		14.2	%	18,338		14.8	%	(4,761)		(26.0)	%
Membership fees	3,254		3.4	%	4,393		3.5	%	(1,139)		(25.9)	%

Total net sales	$	95,544	100.0	%	$	124,251	100.0	%	$	(28,707)	(23.1)	%

Note 4: Segment Reporting

The Company has a single segment that derives sales from customers through the sale of products which are shipped directly to customers. The accounting policies of the Company's single segment are the same as those described in the Company's Significant Accounting Policies.

The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net income and Adjusted EBITDA that is reconciled to GAAP net loss reported on the accompanying Consolidated Statements of Operations below. The CODM uses consolidated net income and Adjusted EBITDA to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity. Adjusted EBITDA is used to monitor budget versus actual results and forecast versus actual results and is utilized when establishing management’s compensation in collaboration with the Board of Directors. Consolidated net income and Adjusted EBITDA should only be considered as supplemental to, and alongside with, other GAAP based financial performance measures, including various cash flow metrics, net income, net margin, and our other GAAP results.

The table below provides a summary of significant expense categories regularly provided to the CODM reconciled to Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net (loss) income, for the three and six months ended September 30, 2025 and 2024. The CODM does not review segment assets at a different asset level or category than those disclosed within the consolidated balance sheets.


	Three Months Ended
($ in thousands)	September 30, 2025		September 30, 2024 (As Restated)
Net Sales	44,364		58,044
Significant expense categories:
Cost of sales	31,949		39,271
Advertising	4,341		6,069
Other segment expenses (1)	10,390		10,606
Adjusted EBITDA	$	(2,316)	$	2,098

(Add) subtract:
Share-based compensation expense (reversal)	248		573
Income taxes	9		(1,401)
Depreciation and amortization	2,278		1,658
Interest income (expense), net	326		(185)

Employee severance	1,223		305
Sales tax expense (income)	—		(1,178)
Professional fees (2)	2,120		—

Net (loss) income	$	(8,520)	$	2,326


	Six Months Ended
($ in thousands)	September 30, 2025		September 30, 2024 (As Restated)
Net Sales	95,544		124,251
Significant expense categories:
Cost of sales	68,726		86,441
Advertising	10,387		14,125
Other segment expenses (1)	21,443		23,124
Adjusted EBITDA	$	(5,012)	$	561

(Add) subtract:
Share-based compensation (reversal) expense	839		(7,631)
Income taxes	18		(443)
Depreciation and amortization	4,561		3,379
Interest income, net	524		(280)
Acquisition/Partnership transactions and other items	—		180
Employee severance	1,319		454
Sales tax expense (income)	—		(1,178)
Professional fees

SEC Form 10-Q filed by PetMed Express Inc.