Chewy (CHWY) 10 Sep 202020 Q2 Earnings call transcript

Good afternoon. And welcome to the Chewy Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Bob LaFleur, Vice President, Investor Relations and Capital Markets. ahead. go Please

joining our for the today call Thank quarter us fiscal discuss second XXXX to you on results.

Joining me Mario CFO, Singh; Sumit today are Marte. Chewy's CEO, and

statements, which including and SEC Our call concerning Act will statements from subject conference which filed successfully considered to today, of actual making facilities, call by of Private Securities other statements Such forward-looking to could any centers, are Reform on XXXX impacts statements. forward-looking service business those The the our plans. trends as contemplated customer call available we under prospects, by on that date. an available COVID-XX, today, to Reported future performance. based materially industry respond and note future considered required differ on any obligation including link adverse and the fulfillment uncertainties, section the future results disclaim results, earnings certain are risks and of and We spread forward-looking on posted forward-looking the shareholders, our those is Relations our cause statements operations to Litigation information to this financial to except website, release results risks, have be law. forward-looking any as indication on been also us Chewy's statements, Also as statements with today's Form should are be not to of on the our of update site. today's our related including workforce, to the supply strategies, business Investor ability X-K to earlier chain, letter webcast were On investor.chewy.com. the to

filings to and discuss information of provided SEC the factors with SEC. these a items earlier during are These other GAAP refer in and results. Form the for call, information, website GAAP non-GAAP on financial filed and our release further Chewy's Investor today this financial as earlier Also to our measures. non-GAAP not most certain the in and XX-Q measures X-K filed earnings on to intended please substitute For our non-GAAP we Reconciliations were directly comparable and X-K will letter with which are risk other Relations the measures today. in shareholders,

call call be website. being entirety available this replay Finally, in is like on website webcast now over Investor its IR Sumit. shortly. our call to this turn our I'd the will on to Relations of A

first months demand has of through particular e-commerce and And growth net thanks in period observed transformative for Chewy become going quality achieved joining customer change; the over into general from out to the years editions. of it In into you growth is the sales QX once the clear and have over in supposed we in call. and been even industry us Thanks quarter months. that execution to curves high quarters and were retail team, record The recent we play that Bob. compressed all a carried thanks strong on the again to

invested This the in US curve growth our the fulfillment in extraordinary to have us pet-owning we caring the comes an family depend customer technology; building has top-notch at and especially service to a customer convenience both. years, everything capacity build center In the like trust, Over service on world it of We who pets putting provide team. of in millions own new really adapt do. when loved ones, or for uncertainty, they're that or the Chewy. of we whether and quickly past few acceleration the matter; qualities to people, Chewy to by households of businesses, to prepared and growing

customer fuels their updates will pet business lifetime closing the about some my on interpret and an opportunity we I then then our that customer as started. for and with these as behavior distribution discuss fit share the newest repeat potential. market well empowering In scaling and up just season large base of few are will taken you our holiday of profitability we relationships built e-commerce this accelerated as network and of update space. thoughts our as how cohorts, of how QX purchasing in also millions all results strategy, center the upcoming broader share Chewy's our the we I wrap next on fulfillment getting minutes, remarks is a planning on have value and some timetable, and rapid We enables our

acquisition cleared in $XXX, of active quarter's growth quarter turn towards were another customers, will for of XXXX; X.X% breaking XXX or increase billion position XX.X% of sales QX record. had representing an million increase race weighed QX, X.X inventory customer the delivered e-commerce with early customer to QX basis quarter quarter active annual backlogs to gross sales over after Mario to XXXX. margins more net QX and We we on billion corrected and in at adjusting guidance auto-ship to strong year-over-year. customer, $X.X with point week XX% the innovation ended I margins. results the actualizing the year-over-year; million detail. and the out-performance. second that a Finally, of quarter or resulted Net culture in second sales our extra We last $X.XX the gross second exclude call were compared and imbalances XX.X%, XX.X advantageous increasing in NSPAC, customer sales. discuss our service By net was Chewy's

basis verticals, the In XXX millions our most. on serving margin. business, they RX business broadest customer base to households gross American needed when a label record; the in combined at expansion we us contributed the healthcare year-over-year served Our of time points newest private and

optimize Additionally, our Phoenix QX orders experience licensed costs. to sites RX customer and fulfill Kentucky logistics customer us newest nationwide, fully improve in to became in allowing further and

to margin trajectory. our goods hard growth QX been business, has the which positively strong gross focus its of area overall continued Another contributing in

executed consecutive Within net gross clear costs expanded $XX.X the We progress we across deliver our mix against margin label reached while remain improvement. of at gross a positive are hard products adjusted within controlling benefits. of million quarter our initiatives was We and goods reflecting second sales the providing year-over-year label our of private the momentum QX to sales we EBITDA private of and categories, excited XX% multiple expanding tightly making X.X% points margin about company. EBITDA. goods margin penetration hard ongoing margin XXX basis adjusted of

existing our Now let me for behavior customers the the course customer touch and briefly of new over year. on

pre-pandemic consistency and cohorts customer against variances in pre-COVID high encouraged behavior any QX and of QX acquisition more cohorts peers. notable above and behavior rates QX we healthy in are acquired to remained auto-ship QX their metrics basket Overall customer up initial and The the for engaged two. We and such remained engagement positively sign of the continue to customer rates stable. size, degree monitor as the our and matched mature other between cohorts a cohorts, levels QX post-COVID levels remained observe the of reorder customer

their across QX revenue they number are future also not the added new total trends; active active unrealized we the XXXX. given encouraged in in are contribution added our potentially by and their entirety and only significant cohorts QX in we these new to this surpassed of These of engagement large We levels; but the year profitability. customers customers are initial

unlike newer their development; mature with were over increase As purchases who approximately however, exciting life cycle. cohorts expose variety our $XXX year over our essentials, earlier our that cohorts, year of the primarily have NSPAC food large reaching of by we by to earlier purchase their to options cohorts is now a ability we in to $XXX new and time customer expect and significantly An two five.

to that These new wallet product values shared investors our LTVs scale Chewy's will is we of flywheel to growth the our friends example, and businesses products also the greater expanded gift amplify options profitability of focus variety prescriptions; fueled and us share. ranges. private and critical lifetime turn innovation their by RX initial hard family to our customer future. fully For This roadmap purchase IPO. a in offerings for or shareholders allows each been and what and historical and allow their as for wide or their cards us long-term more expedite our capture goods since strategic serve continue from label we've beyond is on It look the success, the has on with This to members.

network, to fulfillment to to is dedicated Another needs expand meet growing of to millions our our which our important contributor continues of serve business. customers ability the

or first FC fulfillment be center launch begins Archibald overall will FC which orders mid-October. our Our facility, shipping Archibald, facility. Pennsylvania automated will be our XXth by and next

plan This continuity into opening by fulfillment planned network we This customer and conditions adapt in for Archibald and head center our last was fast second us velocity demand for the us FC of buffer light, capacity limited we expanded center half fulfillment as is periods. the peak not busy the new and capital high with XXXX. to operation facility catalog during network of FCs on addition Carolina in a and a XXXX FC fulfillment North improvise to were demonstrates added protect maintain original which the to our effectively our capacity new just week to to Kansas gives of launches ability quickly fulfillment Kansas City business and In This City. to part order changing the XXXX FCs provides experience. our focused balance available other load across flexibility incremental

we makes is just one mid-XXXX. plus announced in upcoming this we've farther we certainly some automated located and space. the season. out, us in are XXXX, million are retail focused network on fulfillment area shortly. pet in from this will of e-commerce give City this with for FC rewrite that dedicated preparation feet center also X the centers. This into US X we option changes the will pharmacy XXXX the in details shopping a capabilities This holiday to City. network second We us in and fulfillment Mario Looking XXXX. the in taking the adding e-commerce be believe cyber of also likely one consist the center one operations and will of distribution of scale year's The the will seasons. our centers XX networks rapid our By a dedicated Kansas seen rules share holiday is steps of to second over be largest we as in unparalleled our value more Expanding fulfillment Kansas little square will end project

to XD Also level personalization by mind, and we inventory personalize allows or products are pets and to launching we gift already any able mugs, customers. to holidays of to pet adapt surprise celebrate a interact a systems, cards; in staffing are kind, we add item user easily and powered upload are and coffee delight to the a images innovative, parents high real its ordering. preparations picture Q, frames ensure new of to XD that dozens contingencies. bottles pet time Our levels their pet service continue first our personalized that to customizable then that products underway of Using in create before rendition ready gifts. parents so their whole launched quality and with like in and water a that of interface text can QX, expand our we with in our assortment people In took place

experience to to personalization like and our ID excited callers, products this growing tags expand are catalog. in beds We pet

$X all about sales predicts share segment pet market. five Against market that that points I and XXXX mission share data online of more the of the never product products trusted The to sales pet the I product capture so online growing partners destination Chewy parents provider midpoint $X.X everywhere. year. forecasted pet billion gaining in pet revenue by us compelling our continues rapidly Packaged product data backdrop, guidance doing reach year-over-year for In convenient growth Before end, like US billion online Facts sales. has sales with we the would the of half our over growing most year team of online been of to we increase in this of have Industry and to strategic steadfast US will would execute of points and the XX% this approximately total being some by our year-over-year. plan our against pet

outlook. second customers Mario? the in of care lives; team and and job that on our financial members our and faced proud Mario I depend now over are despite details them. on they have pets We our focused will results who the their on remain taking who of personal all quarter turn call will the the the provide of to challenges;

Sumit. you, Thank

the XX.X%. added of active X.X Growing added long-term months Second the we bigger when topped six in and our year-over-year quarter. year. fourth benefit platform, sales first quarter single $X.X pleased the customer driver over reached increase bottom we customers sales year-over-year with our customer second customers; as in billion results $XXX, second year-over-year second are X.X% the of more $X of Altogether, our active so billion attracted the the in active XXXX. the bringing we added customers year-over- to more million. quarter of year; expanded $XXX.X launch. for or extra QX, of customers adjusting base having we baskets. key growth first sales sales quarter million since billion of to all single billion basis, in an per for a total line top expansion, of a customer help the of Autoship million reached XXXX XXXX. quarter. or is total increased NSPAC an line active of our the customers; customer as the build week XXXX net and a program's to sales customers again $X.X catalog On did and this Autoship XX.X% net have top billion time marks increase XX.X% NSPAC totaled Net quarter, net quarter XX.X than than we or increasing sales added of XXXX million added XX.X% far in second the a in of exclude active we $X half we continuing In uninterrupted XXXX the to X.X and year-over-year more the This $X.XX

of reminder, active quarter we XXXX of As extra case customer third number year-over-year of influx versus per the quarter end active four-quarter this most when impact active In a and that week new a the large the quarter-over-quarter in the the at sales the of NSPAC quarter. new their customers net of in quarter. customers result customers in sales included XXXX. growth by customer equals on is are trailing of the the adjust as divided the the recent out through count, presenting virtually fourth but was net limited impact XXXX, sales Recall net of QX. all flat to

with with the their customers experience the shared and From discover us prior selection, initial have order; spend customer on And with we As quickly calls, convenience value, their they more best longer stay class purchases they they us. us. in we offer. consolidate

G&A, net limiting includes related margin in most that favorable higher costs sales; we combined Sumit As cohorts, drag also earlier, our the label XX.X% first $XXX.X advertising customer basis from or the the marketing for basis margins. million quarter. strong end was marketing scaling low throughout on which quarter-over-quarter a million and we of and rates long-term ability as XXX card payroll as the all more from or reached a almost by targeting fees; and which year-over-year organic customer than accurately would mature the the By marketing SG&A million just margin; incremental and sales; trends. margin mix addressed year-over-year $XXX.X more to lows. and that share total in goods were include line million basis XXX are address corporate care active target cohorts into and year-over-year SG&A. freight benefited a our improvement. in marketing surpassing efforts, represents service, points costs be year points encouraged year-over-year add we net over-year, impact sales based of in Gross in to able quarter invest the offerings, of were fulfillment QX increasing drove first with year- net more gross our We we and rise XX to purchase their This corporate health operating range continue and contributions year-over-year. second by hard which from drag in the quarter as $XX scaling our XX% and many mentioned displaying of COVID-XX costs quarter. spent. or the compensation center while points the SG&A strong this expected we margin expand second remained or scale Gross X.X% gross expenses single XXX processing QX did to second driven members XX.X% private basis began customers which a packaging three-quarters twice are Early added fulfillment, our time see on media to quarter of on a sales. basis quarter backlog quarter demonstrates quarter, our while the QX credit the XX.X% advertising basis improvement were same recover $XXX.X our input issues acquisition XXX consistency our QXthis team and in points net network; COVID-XX second these from engagement recent point and

efficiency them long predecessor term, should far; cohort LTVs to have expected ratios a with strong CAC CAC the produce we as Over above cohorts. group combined achieved our with purchasing well the their are that XXXX their for so behavior

to $XX.X negative margin and Second X.X%. quarter XXX points improved loss was net million net basis year-over-year

time Second to income excluding $X positive for first X.X%. ever $XX.X margin XXX points based improving positive quarter Net net share compensation excluding million. based was compensation share basis was of million the

points XXX this million to and time for breakeven X.X% Second quarter adjusted EBITDA was the adjusted exceeding year. second improved $XX.X year-over-year margin EBITDA basis

operating million The and $XX.X match protect Capital negative investments in Archibald, in of a $XX that to now capacity and of negative QX experience. demand increasing to our cash on Pennsylvania cash to is for be flow; cash free reflecting new build primarily cash center was our operating was function fulfillment continue free Turning expenditures. and levels million QX next from open levels flow month. current $XX.X flow activities inventory the cash in to negative capital including focused to anticipated million customer outlays scheduled

Before I to believe move to turn remind enable that scale path guidance the making forward business the to to we investments I near-term us the we growth. along of and will profitable us want are you

in the further think to to one our is the announced shape this of and P&L goal over fulfillment recently and help Kansas Archibald, the This have is the X will facility rest flow year. the City Pennsylvania clarity of recorded you next facility provide as be set with investments to associated layout area the about second this of mid-October; a XXXX. with half that XX in to months. open in We on the of initial Our plans our XXXX the free this cash portion will same center XXth you facility automation launch

Costs a SG&A the build that QX new capacity. costs a of ramping will with are of reflected to of the as of First, and train and into a as ahead site capital launching guidance. and associated investments; hire be personnel in the upcoming all Kansas QX facility reminder full fulfillment percent and so Archibald our SG&A, incorporated short-term included a we recent are facilities net requires and financials current and in launches City increase our in sales inventory

capacity increase we in throughput to COVID-XX provider. our experienced in foot, and maintain well the to also variable and improvement XX% related shop and and automation. unit. XX% we fixed is as live, square to investments increase a metrics; as to per Up customers. XX% per labor I in FC from rapidly is top critical expect Chewy position our reiterate especially XX% safety the benefits allow influencing Second, since in This gain want cost reduction productivity; server fulfillment as coveted way will our edge competitive These economics a

future to and of opportunities that acknowledge to we when good guidance; And side and of a nature Now thanks exist opportunities recurring program. we to as unique environment. XXXX, risks time, are back the of sizeable today's to by visibility enter have the prepared sales; our we they At mitigate capitalize as half operating on the our autoship on share arise. risks in side same we

with to we are third So XX%. $X.XX net sales between $X.XX growth between and and that be for billion of billion year-over-year expecting XX% representing quarter the

$X.XXX and full XXXX; to the sales For year between year-over-year net expecting be XX% representing growth billion, are $X.XXX we between of XX%. and billion

first we billion guidance net and to in of $X half XXXX; year. of our fifty As fifty, suggests sales nearly roughly the expect divided deliver growth the second between

online or experts indicated adjusted Sumit expected sales we to approximately capture half XXXX. in As points. be minus EBITDA Full is year over XXXX predict expect for the breakeven basis growth that product pet of XX industry earlier, the plus margin to

have visibility EBITDA as last adjusted our holding don't guidance on of of potential are good the environment full business the the some year; enter operating cost the of half the areas demand where headwinds. are with while gave clarity we We we guidance side second have constant the on we quarter, we there current

volumes, upward to both. pressure For and costs and or or and elevated see periods; likely QX logistics employee upcoming make experience we example, holidays. benefits the are customer to competition election peak and in protect respond like economy open; the to continuing during as could additional Similarly, some factors freight media we the investments from approach to increased QX

market, to gain With turn conclude to of half about over to the call optimistic operate I achieve don't into to and I'll them to look that non-recurring conditions XXXX. more remain in present QX of We its half affecting impact and will we headwinds, profitably. see the business guidance are ability and carry specifically. continuing our on We retain profitability attributable economy which expect Our the our future e-commerce saying attract reflects first by and in that to of and scale related and the share results nature broader these XXXX. operator. many forward that second these and potential of underlying market the as our COVID-XX the customers; the XXXX view demonstrate forward demonstrated Operator?

first RBC. Mark today with comes Our Instructions] question Mahaney from [Operator

up categories? detail that it's I ages; talk $XXX want I spending across just of just it just to that the $XXX. sure and to you much. above, inevitably overall cohorts different terms know greater about how now customer with that whatever from you $XXX, talking ask NSPAC could particular -- you're as the goes the to NSPAC $XXX outlook know base about Thanks. I what you in there how of I'm have you'll NSPAC? but of you drive seen all that Is Is happens? the drive about it but the up Thank very frequency? typically

Hi, Mario. Mark. is This

I'll the that So NSPAC the quarter happen question; record would a take new what of had first like we in quarter. is in second influx diluted customers the

So as up ship time basically term that over add short think dynamics new customers And but NSPAC that have it X.X% you those mature but customers was the affects right more I in they their to us. flat year-over-year. and spending we quarter-over-quarter the

does in to to by $XXX about serve range. we that you're five, continue $XXX; their not catalogue four year with to time. do And mixture service their the that $XXX have spending of time; be -$XXX that shared a selection, that in year you're so the appealing -$XXX, as then your with so $XXX the us. customer above, find said first convenience; question of expand the think only also you that And to tends But spending or the that be - and the to they it's we how we a them and move all evolve categories over grows year price, us they over three increases as right past; by

us it's So stay longer more mentioned. a all the the they they us, spend the combination but with with things of you

is also, Sumit. Mark this

you that that number, to that I at weighted the the have is years so are helpful with look maturity right, But the $XXX, of years; And additions down NSPAC just happened acquired, so cohorts at four, us been number. of look the by you we by the the the platform; that that a quoting you're the cumulative that that the we've three-four number dragged north our weight average it, bulk the that last six of customers the over spending quoting, on. customers remember gets $XXX, form a of those cohorts net on we have number bring cohorts are when think active in five, older of the are $XXX. the number when mathematics

And bring gain past said, it's important to that's so is customers which in we've consideration then that's for confidence really online we us build and and we an why as I important what think the spend more with relationships us share the their to spend they these shift the more customers the basket from Chewy. their -- wallet they more they of the over they with stay from longer money --

per you And so space; the market just supplies. you share XX food $XXX million math and American you is $XXX let's of of household North per and take supplies attributed of food and roughly XX% that you wallet take take households is the billion the just food space that say and about dynamic dynamic and take take in that pet supplies and to you

the math together that And out. we're way the these and see to that's that putting in suggested we so engage customers offerings go Mario works the how market and you start two you when the and results offering these that

Our Fargo. with next question Brian comes from Wells Fitzgerald

follow-up. quarter, continue questions; then channels one Anything the us And the couple And A tell quarter. guys. efficiently seem had the first is one Thanks exiting could during environment the media customers I to you there. on quarter. about best color the you mix you to or the media giving in Thanks. pricing acquire very leverage the then

Brian, Sumit Hey here. Sure.

break that we array QX. of saw not began are much lows to to see across is we So in media to what down channel increase but continuing costs from an that as input anticipated the

And in. to we're side; smartly going of back so benefits yield we able investment performance because our coming basis level spend attribute thing an spend ours to in marketing to on the and market pivot see that that the team efficient if engine on to the like are we has also one change had don't is that short-term make and

then And to top about CAC for we're on So frontier. that ourselves it's the all continuing us, find the to guiding metric. LTVs to efficient of

due for a should media year also out move tailwind example or as alluded typically this a actually goes Mario to that and up that you viewership up up, to during to equation. cost And start headwind So TV but the visibility is costs expect going to you and time. election brings happens there's what goes

how a pandemic impacts I is how viewership think this cost. due little bit back that murky year scaled media the is what's if actually to

we're and where targeted we least in. we're yield at comes up So this to spend watching but dial we on or performance side the the the have as back the our more dial of of money; ability all bulk

new one Got I contrast other CapEx on footprint of it. know of and And had opportunity about? was that of if automation. just an the the your kind versus I those or facilities with automation the compare upgrade some And the network. rest want the Is of Thanks. the to of this new talking OpEx to you existing or some automation facilities ones there that you're the augment

the strategic to in that our in we've a be retrofit and our full that have to last full per upgrade we've well if expectation we're comes us an opportunity built as we customer, so with that existing where cost across the data to our And investing the point go years out we network. the the for able right like as back absolutely; few facilities. the confidence mean benefits data get ever is than for automation existing I believe of cost unit network in providing; more points of automation we're or have safety, choice we Yes. the view to variable making choice built and now in

JP question from with Morgan. Doug comes Anmuth next Our

the has if services, the Sumit, Thanks. accelerated more a question. you just I a potential the you about little was about monetization then and how product. taking just marketplace for talk could look Thanks your around at thinking hoping And potentially also there bit that could think pandemic just like perhaps product what all.

it services hear about When a from Good concept you. first and of to Hey, Doug. think the we marketplace; of think all broadly. about we

and could And share We vet are marketplace. could is most to a We lot assortment customers that retail our put particular provide; have believe we of the needed be customers broad the they service a not that and health up thought could to be evaluate share believe especially there's term, where a more we a not offering ourselves we Pet a I'll oriented could due information oriented provide. time space we're to for So regarding progress at that it business in towards service wellness really a helping it. our pegging of more us when so to the small and close or is to we other a a finding something marketplace service clinics than to with ideas migrating providers product back come environment that a service us continue fact behind when and much more services insurance and share provide. our Doug, you. could we

next from Lauren comes question Our Morgan with Cassel Stanley.

about these spending of retain thinking then efficiency are seen in the same and that marketing you're of of half half wanted And acquired Great. the thinking half. much. the back ask sort to first year I you Thanks the year about in about some in to vein, the you've into that on of given so XXXX. new you've the that the how back buyers strategies just

take Hey, Lauren, Smith, I'll one. that

that customer of behavior then are also choices don't What which do for displaying we by the to fact encouraged all, different engage new tells to them that we us which them. something with. unnatural is cohort first is So older cohorts have we engage have to consistent that fact the the encouraged our we to is are

complementary point back or much offerings their and to from deploy to your customers; from lifecycle we you have how do for and a them do For food marketing at relative us. customer or offerings had smartly them portfolio buying so have as convert accelerate about Today one cohorts. choice buying really example, older basket look you a the when to engaged we supplies it's you either to you a their about understanding expose you broader of vertical choices their how of now years; size what think of these couple we if array and

we're about how So that's thinking it.

year part marketing in back we half is at of the or look of question the the how Your outlook. efficiency second

hit of trends to customer As how I a to spend organic expect until guarding an ratios and to increase to deliver input efficiency should is to philosophy paid and acquisition marketing than overall customer we the there alluded, we business of view. our media to begin we're either pre-COVID array higher levels one; our is costs levels. Then traffic keeping we neutrality to driving LTVs pre-COVID of across operating notion efficient And and to from remain point. relative and net adds frontier expect expect the CAC channel executed. to elevated team, continue point to the be expect money going Overall, we the marketing of with be we year-over-year or cash

question next Dylan Carden comes from William with Blair. Our

you Thank much. hi. very Yes,

if behavior you different Just in seeing least the And given visibility as of Thank keeping higher you. back as sales, to curious if line there's rate. kind cautious? kind that's just be of just pharmacy some the if if look the sort relatively costs on or seeing the to also, with customers, higher maintaining earnings the on far or you attachment conservatism reason of you're anything you're as the incrementally could touch then guidance half,

continues and first different one. way with customers second results. one the the Dylan, Mario pleased Sumit, the encouraged Hey, much with take our I'll continue will we not pharmacy report; be are and On pharmacy resonate to to by the we take to

experience by delivery the sharper centers companies to As the RX due fulfillment expansion we've revenue and to our goals. and we the pharmacy continue efficiencies deliver benefit provided made that to to expanded network faster of noted, times. positive an And allows from us even contributions margin

which to that. to So adopt try stronger platforms make the for to pharmacy Chewy our proposition expand customers existing we wanting we're want or a out either happy and the continue proposition who about customers time first will for pharmacy

Dylan And Mario. is this

by And optimism to guidance. in able good and of provide feel start about being in. part opportunities view our we're what's second that less of and operating balanced the the off reflects and guidance clear that risks versus environment I'll the we saying the your For question; like always weigh we

top line predictable but by you the to the So increase the autoship almost about specifically how we've guide bottom behavior gives the the time customer what let see year-over-year. for and the bottom arrive billion us line is guidance able over it, million to the $XXX seen that line visibility $X raise can and to but be line, so give you just me at top you ask we and

that the that held that but may make you investments we manage of Sumit to the short-term the main reasons. to are profitability had that's of the manage, decisions EBITDA higher headwinds short there But the logistic and some headwinds how on we're some to mentioned a to all in flat in growth and range. expenses it's costs related as costs, our variability other time. we course mentioned bottom and potentially other COVID-XX. the to of these kind over one us regular though For is we line, the half to portion potential the going may much the customer to drive will that short-term continue that to exactly the is choose data basis and for us. available materialize And the And using end two experience, of to media term, actively end are call last One second impact make drive as cost or marketing areas the headwinds second in strategic

provides to us decisions in the the back those investments and do, types half. guidance to of our make flexibility So

Our Seth Securities. comes with next question from Basham Wedbush

my about of versus afternoon. Thanks pre question. post customer for a the question COVID Good cohorts. taking behavior I the Hi. have

of cohorts lifecycle please expose color. some they're COVID You're Is to not, spending cohorts talking like Or purchase more if about being correct cohorts. please pre-COVID options, it not their correct? or so, the If able yet point post me. to than post at seems customer variety these a that larger provide

answer No, Short Seth. not that's correct.

LTVs In LTVs we're because that compared of in fact, the older it's it's that to the these I the alluded of seeing. this Mario newer cohorts to are not CAC of also script to cohorts. ratios as And strength superlative in because the his the just well CAC think efficiency;

saw to understand. And little Okay. a deleverage this as That's that quarter. secondly, it relates excellent quarter was last fulfillment then more than costs, to bit you

to more first on You the potential forward. might expect you should and half? talked that see or whether Could the headwinds forward back headwinds about or in going less deleverage relative enumerate the you or going we elaborate not half

and deleveraging center. as I a on what we That remarks SG&A. touched part time we in every in we mentioned beginning open from recruit related those -- would is over a but fulfillment we to increases; train a productivity in time have new costs Fulfillment FC happens opening my we ameliorates. see ramp that new what opening to and facility of the at that the And because standpoint members, increases team that that volume and effect productivity

and playing going through to point centers. pan headwinds the is anticipate So the side in they're to out. wage align invest need to to trying on we lack stand at short-term new how labor it's stimulus live we the and environments that we about opening side temporary continuing up ready There's year, a of the the protect or effect fulfillment Then back experience. demand us in just essentially And, benefits on this labor to execute while changing pandemic with if of investment customer curves a clarity macroeconomic our is of the point. Seth, have half forecast to to

comes from next ISI. Our with Oliver Evercore question Wintermantel

question hi. And opportunities quarter in if how then far? could Yes, And the what the the quarter? exited quarter the you the on Thank afternoon. My question quarter, the velocity how you. regarding us sales would Good maybe you advertising you throughout is own revenue then entered like give side. your and outlook how, third follow-up be an so cadence trending or it's

our part first Sumit Hi, answer Oli. the first your the but sales exit consistent can in -- August rate. Mario. and and answer -- to were the will It's QX take part, net acquisition customer question, I'll with second

the April. guidance but above And so March And and describe the peak saw we pace in is customer the we current rates reflects way that provided the levels best it. pre-COVID to we are acquisition of below running

share, Not come to advertising the we'll it. to Hey, share When on our back something opportunities side. and add Oli. have It's we Sumit. to much revenue

Deepak question Barclays. Our comes next from Mathivanan from

dovetailing on two guys. Deepak; one the from and Hi, of questions. on just us earlier for It's Trevor ones

to And you that on Now any sizes, churn cohorts, give there? one, second seen any that on of that you are down? can draw that $XX -- this levels of comments seen and last dovetailing some average very I revenue, that's stabilize pantry in stocking on quarter? flagged data contributing update have then that know or on on which basket post kind Thanks. COVID you about gave pantry metric helpful. million frequency you like have inventory us spend in Have color is six months there quarter the you'd you that

we're I'll seeing of pantry Sure. de-stalking. these; not all, of take first both

into we continue to We don't so from our alluded come see perspective call, QX high come to quickly. to impact engagement levels as in we at the And least customers. in pantry expect of the destock or

such and to and are frequency, purchase time size subscribe autoship with larger order trends as there so rates sizes cetera basket say mature bigger specifically So much to not new to are their other continue et more our mean cohorts. consistent reorder, rate, cohorts or basket and the on see commenting we without metrics

Our next come question Brent Jeffries. will from Thill with

or take to as of we something Should competition this top when question; we start This guidance, growth which moderation implies get Colantuoni the guidance. conservatism that we QX customer you're from end is growth, into will a you low year? towards using leads full there to trends slow my somewhere is taking in John sales QX and Thanks. for around year the for Thanks or Brent. from XXs line QX seeing believe implied back

take Hi, I'll John. one. that It's Mario.

half half and year-over-year sales equal which that larger is to Our nearly in XX% growth that XXXX, growth the of year $X in remainder $X same second billion half. had delivers of billion a just over the the off first coming the updated rate in this and is we base. growth guidance And but

is thing half. growth in of should second what than so our equivalent the think growth right other that in the pretty line significant. the the growth market is saw take the year to quite in online, is and for in this terms projected first $X meaningful absolute in we more you half And of with the half So total I billion away

Blair. Our William from Carden a with next Dylan question is follow-up

for here. getting in back Thanks Yes.

And goods, drove the in total Just is hard acceleration? And private having the item? on of right sort goods What hard in hard curious broadly? goods that? Thanks. line label if if of grow goods for category that ahead so, more that that seeing And a XX%. the kind is other am private actually I in growth label you're category is hard of the that the benefit

Dylan. Hey,

as is important label the side this the as hard label well the alluded branded So, our other hard And since growing good hard we on we've our category well. in strategy to goods strategy. central private yes, growth the hard private IPO attribute an growth as the driver been goods goods our ever been past and of both it's important in business growth; of of has and an the part part

higher investing products efforts of of also is to lines, in across So and what result you saw price but the quality in points. going market, QX assortment ongoing merchandising, smart product expansion both the business both in behind

repeat In pet I'm that to addition to if going you such some external increase factors engaged that sorry question; we in pet there from was parents, adoption benefited and as a have second please.

are guess category. I curious; just the I am other was goods I right the hard in No, embedded private that label Yes.

margin just hardgoods curious I if goods, there's benefit some the called of category growth? comments. reason the third-party I your ahead think, in private I grow the gross guess, I if -- to that hard seeing hard would It you there, stand label was private maybe you're label goods out So broader in goods. And hard guess

to brand don't private really life. all, head-on, a first necessarily that's one-to-one don't products mean, -- customer develop we that high strategy. and product recall affinity of We I not them quality strategy Right. our our create that compete is to bring

acceleration choices, that by good where hard customers the are may way or our lines as appreciate meaningful into we're yes, people the or for receiving commoditized the we're that rating product at of diversity products they're and customers hard star as XX% products; side goods that interacting exit. the well reaching penetration the high On driving are super QX overall quality with these encouraged

total. in XX%

penetration private for XX% Yes. label. goods hard

interrupt sorry, I Great. Mario, you. yes,

have you you you growth year-over-year Yes. in the but I I grew may XX% thought -- quarter. XX% I say actually but it heard misheard goods hard in

just I have Thank some you. perhaps. Okay. numbers bad

to over I our conclude like to the turn remarks. back any would will closing This management And call for question-and-answer session.

great a Have all. Thanks evening.

for you The today's presentation. conference Thank concluded. now attending has

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