Chewy, Inc. (NYSE: CHWY) (“Chewy”), a trusted online destination
for pet parents, has released its financial results for the first
quarter of fiscal year 2020 ended May 3, 2020, and posted a letter
to its shareholders on its investor relations website at
https://investor.chewy.com.
Fiscal Q1 2020 Highlights:
- Net sales of $1.62 billion grew 46 percent year-over-year
- Gross margin of 23.4 percent expanded 50 basis points
year-over-year
- Net loss of $47.9 million, including share-based compensation
expense of $42.3 million
- Net margin of (3.0) percent declined 30 basis points
year-over-year attributable to share-based compensation expense in
the period
- Adjusted EBITDA(1) of $3.4 million improved 122 percent
year-over-year
- Adjusted EBITDA margin(1) of 0.2 percent improved 160 basis
points year-over-year
“We had a strong start to 2020 with first quarter net sales
increasing 46 percent year-over-year and gross margins expanding 50
basis points. We also achieved a significant milestone by
delivering our first ever quarter of positive adjusted EBITDA,”
said Sumit Singh, Chief Executive Officer of Chewy. “We are proud
to be the e-tailer of choice for millions of new and existing pet
parents during this unprecedented time. Chewy is well-positioned to
thrive in this expanded marketplace, and we remain focused, as
always, on our mission of becoming the most trusted and convenient
online destination for pet parents (and partners) everywhere.”
Management will host a conference call and webcast to discuss
Chewy's financial results today at 5:00 pm ET.
Chewy First Quarter 2020 Financial Results Conference Call
When: Tuesday, June 9, 2020 Time: 5:00 pm ET
Conference ID: 5976029 Live Call: (866) 211-4125
(US/Canada Toll-Free) or (647) 689-6728 (International)
Replay: (800) 585-8367 (US/Canada Toll-Free) or (416)
621-4642 (International) (The replay will be available
approximately two hours after the completion of the live call until
11:59 pm ET on June 16, 2020.) 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 (and partners) 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 2,000 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: successfully manage the risks
relating to the spread of Coronavirus, 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 and related taxes; 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; and
- 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 and adjusted EBITDA margin alongside other financial
performance measures, including various cash flow metrics, net
loss, net margin, 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 May 3,
2020 May 5, 2019 Net loss
$
(47,870
)
$
(29,554
)
Add (deduct): Depreciation and amortization
7,253
6,949
Share-based compensation expense and related taxes
42,341
7,230
Interest expense (income), net
384
(716
)
Management fee expense(1)
325
325
Other
1,010
—
Adjusted EBITDA
$
3,443
$
(15,766
)
Net sales
$
1,621,393
$
1,108,872
Net margin
(3.0)%
(2.7)%
Adjusted EBITDA margin
0.2%
(1.4)%
(1)
Management fee expense allocated to us by PetSmart for
organizational oversight and certain limited corporate functions
provided by its sponsors. 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 net margin as net loss divided by net sales and
adjusted EBITDA margin as adjusted EBITDA divided by net sales.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200609005794/en/
Investor Contact: Robert A. LaFleur ir@chewy.com
Media Contact: Diane Pelkey dpelkey@chewy.com
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