Note 2 - Revenue Recognition

3 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note 2:  Revenue Recognition

The Company generates revenue by selling pet medication products and pet supplies mainly to retail customers. Certain pet supplies offered on the Company’s website 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 estimated based on historical patterns, however this is not considered a key judgment. There are no amounts excluded from the variable consideration. Revenue is recognized when control transfers to the customer at the point in time in 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.

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.

The Company disaggregates revenue in the following two categories: (1) reorder revenue vs new order revenue, and (2) internet revenue vs. contact center revenue. The following table illustrates revenue by various classifications:

Three Months Ended June 30,
Revenue (In thousands)	2022		%			2021		%			$ Variance			% Variance
Reorder Sales	$	63,339		90.2	%	$	70,937		89.4	%	$	(7,598	)		-10.7	%
New Order Sales		6,848		9.8	%		8,375		10.6	%		(1,527	)		-18.2	%
Total Net Sales	$	70,187		100.0	%	$	79,312		100.0	%	$	(9,125	)		-11.5	%
Internet Sales	$	60,295		85.9	%	$	66,447		83.8	%	$	(6,152	)		-9.3	%
Contact Center Sales		9,892		14.1	%		12,865		16.2	%		(2,973	)		-23.1	%
Total Net Sales	$	70,187		100.0	%	$	79,312		100.0	%	$	(9,125	)		-11.5	%

The Company changed the definition of a new customer on April 1, 2022, to include anyone who has not ordered over the past thirty-six months. The reorder and new order sales amounts for three months ended June 30, 2022 reflect this change in the new customer definition. The reorder and new order sales for the three months ended June 30, 2021 do not reflect this new customer definition. Had the Company changed the definition of a new customer in the prior year, reorder sales for the three months ended June 30, 2021 would have been $68.7 million instead of $70.9 million reported above, and new order sales would have been $10.6 million instead of $8.4 million reported above. Virtually all of 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. The Company had no material contract asset or liability balances as of June 30, 2022 or March 31, 2022.