Chewy, Inc. (NYSE: CHWY) (“Chewy”), a trusted destination for
pet parents and partners everywhere, has released its financial
results for the third quarter of fiscal year 2023 ended October 29,
2023, and posted a letter to its shareholders on its investor
relations website at https://investor.chewy.com.
Fiscal Q3 2023 Highlights:
- Net sales of $2.74 billion improved 8.2 percent year over
year
- Gross margin of 28.5 percent increased 10 basis points year
over year
- Net loss of $35.8 million, including share-based compensation
expense and related taxes of $65.8 million
- Net margin of (1.3) percent decreased 140 basis points year
over year
- Basic and diluted loss per share of $0.08, a decrease of $0.09
year over year
- Adjusted EBITDA(1) of $82.1 million, an increase of $11.7
million year over year
- Adjusted EBITDA margin(1) of 3.0 percent increased 20 basis
points year over year
- Adjusted net income(1) of $63.0 million, an increase of $14.6
million year over year
- Adjusted basic and diluted earnings per share(1) of $0.15, an
increase of $0.04 year over year
“Chewy continues to gain market share, with third quarter net
sales increasing 8% against industry growth in the low single
digits,” said Sumit Singh, Chief Executive Officer of Chewy. “Our
team also continues to execute admirably, as reflected by another
strong quarter of 28.5% gross margin and 3.0% adjusted EBITDA
margin profitability.”
Management will host a conference call and webcast to discuss
Chewy's financial results today at 5:00 pm ET.
Chewy Fiscal Third Quarter 2023 Financial Results Conference
Call When: Wednesday, December 6, 2023 Time: 5:00
pm ET Conference ID: 528484 Live Call: 1-844-200-6205
(US Toll-Free), 1-646-904-5544 (US and all other locations)
Replay: 1-866-813-9403 (US Toll-Free), 1-929-458-6194 (US
and all other locations) Replay Access Code: 798952 (The
replay will be available approximately two hours after the
completion of the live call until 11:59 pm PT on December 13, 2023)
Webcast: https://investor.chewy.com
As a reminder, Chewy will hold its Inaugural Investor Day on
Thursday, December 14, 2023, at 8:00 am ET in New York City. During
the event, Chewy’s leadership team will provide updates on the
company’s long-term strategy, followed by Q&A.
A link to a live webcast is available on Chewy’s investor
relations website at https://investor.chewy.com. Following the
conclusion of the event, a replay and presentation materials will
be available for at least 90 days.
(1)
Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and
adjusted basic and diluted earnings per share 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 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 and services, which we offer at competitive prices and
deliver with an exceptional level of care and a personal touch to
build brand loyalty and drive repeat purchasing. We seek to
continually develop innovative ways for our customers to engage
with us, as our website and mobile app allow our pet parents to
manage their pets’ health, wellness, and merchandise needs, while
enabling them to conveniently shop for our products. We partner
with approximately 3,500 of the best and most trusted brands in the
pet industry offering approximately 110,000 products and services
offerings, to bring what we believe is 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,”
“forecast,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “seek,” “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 successfully manage challenges to our future growth,
including introducing new products or services, improving existing
products and services, and expanding into new offerings;
successfully manage risks related to the macroeconomic environment,
including any adverse impacts on our business operations, financial
performance, supply chain, workforce, facilities, customer services
and operations; acquire and retain new customers in a
cost-effective manner and increase our net sales, improve margins
and maintain profitability; manage our growth effectively; maintain
positive perceptions of our company and preserve, grow, and
leverage the value of our reputation and our brand; limit operating
losses as we continue to expand our business; forecast net sales
and appropriately plan our expenses in the future; estimate the
size of our addressable market; strengthen our current supplier
relationships, retain key suppliers, and source additional
suppliers; negotiate acceptable pricing and other terms with
third-party service providers, suppliers and outsourcing partners
and maintain our relationships with such parties; mitigate changes
in, or disruptions to, our shipping arrangements and operations;
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; limit our losses related to online payment methods;
maintain and scale our technology, including the reliability of our
website, mobile applications, and network infrastructure; maintain
adequate cybersecurity with respect to our systems and ensure that
our third-party service providers do the same with respect to their
systems; maintain consumer confidence in the safety, quality and
health of our products; limit risks associated with our suppliers
and our outsourcing partners; comply with existing or future laws
and regulations in a cost-efficient manner; compete with other
retailers and service providers; utilize tax attributes, net
operating loss and tax credit carryforwards, and limit fluctuations
in our tax obligations and effective tax rate; adequately protect
our intellectual property rights; successfully defend ourselves
against any allegations or claims that we may be subject to;
attract, develop, motivate and retain highly-qualified and skilled
employees; predict and respond to economic conditions, industry
trends, and market conditions, and their impact on the pet products
market; reduce merchandise returns or refunds; respond to severe
weather and limit disruption to normal business operations; manage
new acquisitions, investments or alliances, and integrate them into
our existing business; successfully compete in the pet insurance
market; manage challenges presented by international markets;
successfully compete in the pet products and services health and
retail industry, especially in the e-commerce sector; raise capital
as needed; and maintain effective internal control over financial
reporting and disclosure controls and procedures.
You should not rely on forward-looking statements as predictions
of future events, and you should understand that these statements
are not guarantees of performance or results, and our actual
results could differ materially from those expressed in the
forward-looking statements due to a variety of factors. We have
based the forward-looking statements contained in this
communication primarily on our current assumptions, 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 the section titled “Risk Factors”
included under Part I, Item 1A of our Annual Report on Form 10-K
and in our other 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
Adjusted EBITDA and Adjusted EBITDA Margin
To provide investors with additional information regarding our
financial results, we have disclosed in this earnings release
adjusted EBITDA, a non-GAAP financial measure that we calculate as
net income (loss) excluding depreciation and amortization;
share-based compensation expense and related taxes; income tax
provision; interest income (expense), net; transaction related
costs; changes in the fair value of equity warrants; exit costs;
and litigation matters and other items that we do not consider
representative of our underlying operations. We have provided a
reconciliation below of adjusted EBITDA to net income (loss), the
most directly comparable GAAP financial measure.
We have included adjusted EBITDA and adjusted EBITDA margin in
this earnings release because each 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 and
adjusted EBITDA margin 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 and adjusted EBITDA margin provide
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 and share-based compensation 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;
transaction related costs; changes in the fair value of equity
warrants; exit costs; and litigation matters and other items which
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 related costs and
other items which are either not representative of our underlying
operations or are incremental costs that result from an actual or
planned transaction and include changes in the fair value of equity
warrants, exit costs, litigation matters, 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
income (loss), net margin, and our other GAAP results.
The following table presents a reconciliation of net (loss)
income to adjusted EBITDA, as well as the calculation of net margin
and adjusted EBITDA margin, for each of the periods indicated.
(in thousands, except percentages)
13 Weeks Ended
39 Weeks Ended
Reconciliation of Net (Loss) Income to
Adjusted EBITDA
October 29,
2023
October 30,
2022
October 29,
2023
October 30,
2022
Net (loss) income
$
(35,810
)
$
2,311
$
5,317
$
43,128
Add (deduct):
Depreciation and amortization
25,523
23,018
82,195
60,696
Share-based compensation expense and
related taxes
65,799
46,090
187,878
113,023
Interest income, net
(10,173
)
(2,745
)
(27,117
)
(3,091
)
Change in fair value of equity
warrants
33,800
—
13,542
—
Income tax provision
1,704
—
4,011
—
Exit costs
(778
)
—
6,839
—
Transaction related costs
1,041
706
3,167
2,101
Other
1,020
1,019
3,335
(1,887
)
Adjusted EBITDA
$
82,126
$
70,399
$
279,167
$
213,970
Net sales
$
2,738,611
$
2,532,122
$
8,301,055
$
7,391,460
Net margin
(1.3
)%
0.1
%
0.1
%
0.6
%
Adjusted EBITDA margin
3.0
%
2.8
%
3.4
%
2.9
%
We define net margin as net income divided by net sales and
adjusted EBITDA margin as adjusted EBITDA divided by net sales.
Adjusted Net Income and Adjusted Basic and Diluted Earnings per
Share
To provide investors with additional information regarding our
financial results, we have disclosed in this earnings release
adjusted net income and adjusted basic and diluted earnings per
share, which represent non-GAAP financial measures. We calculate
adjusted net income as net income excluding share-based
compensation expense and related taxes, changes in the fair value
of equity warrants, and exit costs. We calculate adjusted basic and
diluted earnings per share by dividing adjusted net income
attributable to common stockholders by the weighted-average shares
outstanding during the period. We have provided a reconciliation
below of adjusted net income to net income, the most directly
comparable GAAP financial measure.
We have included adjusted net income and adjusted basic and
diluted earnings per share in this earnings release because each 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 net income and adjusted basic and diluted earnings per
share facilitates operating performance comparability across
reporting periods by removing the effect of non-cash expenses and
certain variable gains and losses that do not represent a component
of our core business operations. We believe it is useful to exclude
non-cash share-based compensation expense 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 exit costs and the changes in the fair
value of equity warrants, because exit costs and the variability of
equity warrant gains and losses are not representative of our
underlying operations. Accordingly, we believe that these measures
provide useful information to investors and others in understanding
and evaluating our operating results in the same manner as our
management and board of directors.
Adjusted net income and adjusted basic and diluted earnings per
share have limitations as financial measures and you should not
consider them in isolation or as substitutes for analysis of our
results as reported under GAAP. Other companies may calculate
adjusted net income and adjusted basic and diluted earnings per
share differently, which reduces their usefulness as comparative
measures. Because of these limitations, you should consider
adjusted net income and adjusted basic and diluted earnings
alongside other financial performance measures, including various
cash flow metrics, net income, basic and diluted earnings per
share, and our other GAAP results.
The following table presents a reconciliation of net income to
adjusted net income, as well as the calculation of adjusted basic
and diluted earnings per share, for each of the periods
indicated.
(in thousands, except per share data)
13 Weeks Ended
39 Weeks Ended
Reconciliation of Net (Loss) Income to
Adjusted Net Income
October 29,
2023
October 30,
2022
October 29,
2023
October 30,
2022
Net (loss) income
$
(35,810
)
$
2,311
$
5,317
$
43,128
Add (deduct):
Share-based compensation expense and
related taxes
65,799
46,090
187,878
113,023
Change in fair value of equity
warrants
33,800
—
13,542
—
Exit costs
(778
)
—
$
6,839
$
—
Adjusted net income
$
63,011
$
48,401
$
213,576
$
156,151
Weighted-average common shares used in
computing (loss) earnings per share and adjusted earnings per
share:
Basic
430,758
422,898
428,743
421,665
Effect of dilutive share-based awards
1,414
5,227
2,663
5,558
Diluted
432,172
428,125
431,406
427,223
(Loss) earnings per share attributable to
common Class A and Class B stockholders
Basic
$
(0.08
)
$
0.01
$
0.01
$
0.10
Diluted
$
(0.08
)
$
0.01
$
0.01
$
0.10
Adjusted basic
$
0.15
$
0.11
$
0.50
$
0.37
Adjusted diluted
$
0.15
$
0.11
$
0.50
$
0.37
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231206112352/en/
Investor Contact: Jennifer Hsu ir@chewy.com
Media Contact: Diane Pelkey dpelkey@chewy.com
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