Chewy, Inc. (NYSE: CHWY) (“Chewy”), a trusted online destination
for pet parents, has released its financial results for the second
quarter of fiscal year 2019 ended August 4, 2019, and posted a
letter to its shareholders on its investor relations website at
https://investor.chewy.com.
Fiscal Q2 2019 Highlights:
- Net sales of $1.15 billion grew 43 percent year-over-year
- Gross margin of 23.6 percent expanded 300 basis points
year-over-year
- Net loss of $82.9 million, including a non-cash share-based
compensation charge of $43.8 million
- Adjusted EBITDA(1) loss of $29.2 million improved 45 percent
year-over-year
- Adjusted EBITDA margin(1) of (2.5) percent expanded 410 basis
points year-over-year
“We are pleased to report strong second quarter 2019 results
with net sales growing 43 percent year-over-year, and gross margin
increasing 300 basis points over the same time horizon,” said Sumit
Singh, Chief Executive Officer of Chewy. “Keeping the customer at
the center of everything we do is core to our mission of becoming
the most trusted and convenient online destination for pet parents,
and the team continues to execute well against our strategy of
long-term, sustainable growth and margin expansion.”
Management will host a conference call and webcast to discuss
Chewy's financial results today at 5:00 pm ET.
Chewy Fiscal Second Quarter 2019 Financial Results Conference
Call When: Tuesday, September 17, 2019 Time: 5:00
pm ET Conference ID: 5198004 Live Call: (866)
393-4306 (US/Canada Toll-Free) or (734) 385-2616 (International)
Replay: (855) 859-2056 (US/Canada Toll-Free) or (404)
537-3406 (International) (The replay will be available
approximately two hours after the completion of the live call until
11:59 pm ET on September 24, 2019.) Webcast:
https://investor.chewy.com
(1) Adjusted EBITDA and adjusted EBITDA margin are non-GAAP
financial measures. See “Non-GAAP Financial Measures” for
additional information on non-GAAP financial measures and a
reconciliation to the most comparable GAAP measures.
About Chewy
Our mission is to be the most trusted and convenient online
destination for pet parents everywhere. We believe that we are the
preeminent online source for pet products, supplies and
prescriptions as a result of our broad selection of high-quality
products, which we offer at competitive prices and deliver with an
exceptional level of care and a personal touch. We continually
develop innovative ways for our customers to engage with us, and
partner with more than 1,600 of the best and most trusted brands in
the pet industry to bring a high-bar, customer-centric experience
to our customers.
Forward-Looking
Statements
This communication contains forward-looking statements about us
and our industry that involve substantial risks and uncertainties.
All statements other than statements of historical facts contained
in this communication, including statements regarding our future
results of operations or financial condition, business strategy and
plans and objectives of management for future operations, are
forward-looking statements. In some cases, you can identify
forward-looking statements because they contain words such as
“anticipate,” “believe,” “contemplate,” “continue,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,”
“predict,” “project,” “should,” “target,” “will” or “would” or the
negative of these words or other similar terms or expressions.
These forward-looking statements include, but are not limited to,
statements concerning our ability to: sustain our recent growth
rates and manage our growth effectively; acquire new customers in a
cost-effective manner and increase our net sales per active
customer; accurately predict economic conditions and their impact
on consumer spending patterns, particularly in the pet products
market, and accurately forecast net sales and appropriately plan
our expenses in the future; introduce new products or offerings and
improve existing products; successfully compete in the pet products
and services retail industry, especially in the e-commerce sector;
source additional, or strengthen our existing relationships with,
suppliers; negotiate acceptable pricing and other terms with
third-party service providers, suppliers and outsourcing partners
and maintain our relationships with such entities; optimize,
operate and manage the expansion of the capacity of our fulfillment
centers; provide our customers with a cost-effective platform that
is able to respond and adapt to rapid changes in technology;
maintain adequate cybersecurity with respect to our systems and
ensure that our third-party service providers do the same with
respect to their systems; successfully manufacture and sell our own
private brand products; maintain consumer confidence in the safety
and quality of our vendor-supplied and private brand food products
and hardgood products; comply with existing or future laws and
regulations in a cost-efficient manner; attract, develop, motivate
and retain well-qualified employees; and adequately protect our
intellectual property rights and successfully defend ourselves
against any intellectual property infringement claims or other
allegations that we may be subject to.
You should not rely on forward-looking statements as predictions
of future events. We have based the forward-looking statements
contained in this communication primarily on our current
expectations and projections about future events and trends that we
believe may affect our business, financial condition, and results
of operations. The outcome of the events described in these
forward-looking statements is subject to risks, uncertainties and
other factors described in our filings with the Securities and
Exchange Commission and elsewhere in this communication. Moreover,
we operate in a very competitive and rapidly changing environment.
New risks and uncertainties emerge from time to time, and it is not
possible for us to predict all risks and uncertainties that could
have an impact on the forward-looking statements contained in this
communication. The results, events and circumstances reflected in
the forward-looking statements may not be achieved or occur, and
actual results, events or circumstances could differ
materially from those described in the forward-looking
statements. In addition, statements that “we believe” and similar
statements reflect our beliefs and opinions on the relevant
subject. These statements are based on information available to us
as of the date of this communication. While we believe that
information provides a reasonable basis for these statements, that
information may be limited or incomplete. Our statements should not
be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all relevant information. These statements are
inherently uncertain, and investors are cautioned not to unduly
rely on these statements. The forward-looking statements made in
this communication relate only to events as of the date on which
the statements are made. We undertake no obligation to update any
forward-looking statements made in this communication to reflect
events or circumstances after the date of this communication or to
reflect new information or the occurrence of unanticipated events,
except as required by law. We may not actually achieve the plans,
intentions or expectations disclosed in our forward-looking
statements, and you should not place undue reliance on our
forward-looking statements. Our forward-looking statements do not
reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments.
Non-GAAP Financial
Measures
To provide investors with additional information regarding our
financial results, we have disclosed here and elsewhere in this
earnings release adjusted EBITDA, a non-GAAP financial measure that
we calculate as net loss excluding depreciation and amortization;
share-based compensation expense; income tax provision; interest
income (expense), net; management fee expense; transaction and
other costs. We have provided a reconciliation below of adjusted
EBITDA to net loss, the most directly comparable GAAP financial
measure.
We have included adjusted EBITDA in this earnings release
because it is a key measure used by our management and board of
directors to evaluate our operating performance, generate future
operating plans and make strategic decisions regarding the
allocation of capital. In particular, the exclusion of certain
expenses in calculating adjusted EBITDA facilitates operating
performance comparability across reporting periods by removing the
effect of non-cash expenses and certain variable charges.
Accordingly, we believe that adjusted EBITDA provides useful
information to investors and others in understanding and evaluating
our operating results in the same manner as our management and
board of directors.
We believe it is useful to exclude non-cash charges, such as
depreciation and amortization, share-based compensation expense and
management fee expense from our adjusted EBITDA because the amount
of such expenses in any specific period may not directly correlate
to the underlying performance of our business operations. We
believe it is useful to exclude income tax provision; interest
income (expense), net; and transaction and other costs as these
items are not components of our core business operations. Adjusted
EBITDA has limitations as a financial measure and you should not
consider it in isolation or as a substitute for analysis of our
results as reported under GAAP. Some of these limitations are:
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized may have to be replaced
in the future and adjusted EBITDA does not reflect capital
expenditure requirements for such replacements or for new capital
expenditures;
- adjusted EBITDA does not reflect share-based compensation and
related taxes. Share-based compensation has been, and will continue
to be for the foreseeable future, a recurring expense in our
business and an important part of our compensation strategy;
- adjusted EBITDA does not reflect interest income (expense),
net; or changes in, or cash requirements for, our working
capital;
- adjusted EBITDA does not reflect transaction and other costs
which are generally incremental costs that result from an actual or
planned transaction and include transaction costs (i.e. IPO costs),
integration consulting fees, internal salaries and wages (to the
extent the individuals are assigned full-time to integration and
transformation activities) and certain costs related to integrating
and converging IT systems;
- other companies, including companies in our industry, may
calculate adjusted EBITDA differently, which reduces its usefulness
as a comparative measure.
Because of these limitations, you should consider adjusted
EBITDA alongside other financial performance measures, including
various cash flow metrics, net loss and our other GAAP results.
The following table presents a reconciliation of net loss to
adjusted EBITDA for each of the periods indicated.
($ in thousands, except percentages)
13 Weeks Ended
Reconciliation of Net Loss to Adjusted EBITDA August 4,
2019 July 29, 2018 Net loss
$
(82,876
)
$
(63,114
)
Add (deduct): Depreciation and amortization
7,630
5,357
Share-based compensation expense
43,783
4,045
Interest income, net
(204
)
(21
)
Management fee expense(1)
325
325
Transaction related costs
1,396
— Other
763
— Adjusted EBITDA
$
(29,183
)
$
(53,408
)
Net sales
$
1,153,545
$
805,587
Adjusted EBITDA margin
(2.5
)%
(6.6
)%
(1)Management fee expense allocated to us by PetSmart for
organizational oversight and certain limited corporate functions.
Although we are not a party to the agreement governing the
management fee, this management fee is reflected as an expense in
our condensed consolidated financial statements.
We define adjusted EBITDA margin as adjusted EBITDA divided by
net sales.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190917006109/en/
Media Contact: Roxsanne Tai MediaInquiries@chewy.com
Investor Contact: Kelsey Turcotte ir@chewy.com
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