PETMED EXPRESS INCPETS
PETMED EXPRESS INC Revenue Disclosure
(2) 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, supplies, membership fees, and veterinary services. Certain pet supplies offered on the Company’s websites are drop shipped to customers. We are the principal in the arrangement, as we control the goods prior to transfer and are responsible for suppler selection, pricing, and returns for damaged or missing product. Revenue contracts contain one performance obligation, which is delivery of the product. 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 to 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 are not material.
Outbound shipping and handling fees are an accounting policy election and are included in product sales upon purchase. 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 fee revenue is recognized from two models: (1) PetPlus membership for PetCareRx customers, and (2) employer-sponsored partner membership that provide access to the PetPlus program. These memberships offer discounted pricing, free standard shipping, veterinary telehealth services, along with other benefits, which together represent a single stand-ready performance obligation. PetPlus membership are billed annually upfront and automatically renew each year, with revenue recognized ratably over the subscription period.
In addition to annual membership fees earned under the PetPlus program, PetCareRx partner memberships are earned on a month-to-month basis. For the twelve months ended March 31, 2026 and March 31, 2025, membership fees earned under the partner program were $4.5 million and $3.7 million, respectively.
Deferred revenue at March 31, 2025 also includes $1.1 million collected from our customers prior to delivery of AutoShip products, which was subsequently recognized in fiscal 2026.
The following table presents changes in deferred revenue associated with the Company's PetPlus and other programs:
| (amounts in millions) | ||||||||
Deferred revenue, March 31, 2024 | $ | 2.6 | ||||||
| Deferred AutoShip revenue | 1.1 | |||||||
| Deferred memberships fees and others received | 2.5 | |||||||
| Deferred membership fee revenue and others recognized | (4.1) | |||||||
| Deferred revenue, March 31, 2025 | 2.1 | |||||||
| Deferred memberships fees and others received | 2.0 | |||||||
| AutoShip revenue recognized | (1.1) | |||||||
| Deferred membership fee revenue and others recognized | (2.3) | |||||||
| Deferred revenue, March 31, 2026 | $ | 0.7 | ||||||
The Company offers a customer loyalty program which is accounted for as a separate performance obligation because it provides customers with a material right. The Company allocates a portion of the transaction price to the loyalty awards based on the relative standalone selling prices and estimated redemption patterns, and recognizes revenue as net sales upon redemption or expiration. As of March 31, 2026 and March 31, 2025, the related contract liability was $1.9 million and $1.7 million, respectively.
The Company has no material contract asset balances as of March 31, 2026 or March 31, 2025.
The Company maintains an allowance for credit losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card chargebacks or insufficient funds checks. The Company determines its estimates of the uncollectability of accounts receivable by analyzing historical bad debts and current economic trends in compliance with the provisions of ASC Topic 326, Financial Instruments - Credit Losses. The allowance for credit losses was approximately $25 thousand and $91 thousand at March 31, 2026 and March 31, 2025, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Jun 2, 2026 | Showing above |
| 2025 | Oct 14, 2025 | |
| 2024 | Jun 14, 2024 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.