CHWY - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Chewy Second Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions].

I would now like to hand the conference over to your speaker today, Kelsey Turcotte. Please go ahead.

Kelsey Turcotte

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

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

found filed can Our earnings letter the our have SEC the a on A release Investor today of also Relations Form earlier conference posted our webcast with website, link which X-K investor.chewy.com. to on been the shareholders, and be we call to section today's site. of to

We making statements statements strategies actual from statements. cause our this concerning and XXXX statements the on Chewy's trends. materially of to those are business contemplated results by Act under are and industry risks will uncertainties, results, Private subject forward-looking which be Reform certain forward-looking differ call, Securities forward-looking statements could future including prospects, and Litigation Such financial to

this Also any information future the date. Reported except forward-looking an indication of update as any results of We required by on as are statements be as today's disclaim should obligation note that considered to us call to performance. forward-looking based not statements law. available on

please information, information Chewy's on the our and filed the risk refer factors with SEC. in X-K SEC and and July filed with other the the XXXX, today earlier to XX-Q XX, Form further we For that other filings

are on discuss to earlier will our measures with Reconciliations These Investor measures. to be GAAP Form SEC financial call, website, our substitute to directly non-GAAP or this intended measures in provided for today. were are financial results. Relations a certain the comparable on X-K filed non-GAAP most during GAAP we earnings the not Also shareholders which letter the release

being be on in Relations call on replay also IR of Finally, its Investor is this our available website this will call shortly. our entirety website. A webcast

call Sumit. I'd turn to now to like over the

Sumit Singh

thanks you call. and Thanks, for to on us Kelsey, the of all joining

the our We second results with quarter. for are pleased

posted is I review website our to and our to Investor shareholder encourage As letter you Kelsey mentioned, it. Relations

the quarter, this I I'll start to afternoon few a discuss guidance. will by updates, results Mario finally, call to financial I'll business then the over turn highlights of financial discuss our and sharing and

reflecting our year-over-year $XXX year-over-year business XX% Net sales to customers. model to higher billion, million including in the underlying grew strength $XXX, our per customer and increased of quarter expansion QX approximately XX% XX $X.XX grew spending customers customers. active customer up existing the million X.X in for from Net sales base Active to XXXX. among

net points for of reached up and QX a Autoship the that XXX growth with shared vectors margin continuing you result execution previously. XX.X%, customer percent as XX.X%. Gross on sales margin was have sales basis a year-over-year we as of

margin result margin EBITDA QX and expenses. basis of gross of operating X.X% points scaling negative as of adjusted our versus improved Finally, a XXXX, XXX expansion

things that inputs parents experience our at business scale remain The from of shopping industry. hear sets the and Time pet growth we of is data-driven continued optimize and the margin we apart one for Chewy the strong, and expansion again, decisions. that topline to disciplined through with in their us drive business

Keeping trusted service engagement, convenience the drive From assortment of experiences our loyalty broad purchasing. e-commerce, two-day personalized teams our growth. core long-term at to knowledgeable customer fast our the our delivery, execute fuels sustainable online one award-winning brands, to team to the customer of convenient and the customer everything destination of to for center to of is of well and repeat strategy and pet most brand high-touch to mission the becoming our continues which against parents, we do

from our few QX. share to a like Now highlights I'd business

customers, payback flow marketing. in cash new customer levels consistent we rapid the strategically acquisition free Given from and our invest

and capital, that effectively manage lifetime closely in quarter, more Platform, We we end, to the disciplined we DMP, current channels. launched our acquisition in this across Management new cost deploy value. or a key To Data like investments are how and monitoring second marketing metrics future

Moreover, awareness an customer in market that invest form strategy and inputs to brand we more thoroughly as relatively future. levels studying the of the low a unaided opportunity research of consider the aided so in foundation broader this brand can and our

expect our marketing excited phase awareness search, and marketing that team We all strategy. next including our is increased benefit in this brand will visibility about channels, and

on segmentation a area into all proprietary customer data In front. made formatted consolidated clean, dataset QX, to allowing the single data platform reliable data another create and consistently customer veterinarian We and for was significant we where customer a progress pet and master data.

teams Our customer and all this for site our marketing mobile app. platforms and utilize will across on data targeting enhanced merchandising and segmentation

team to platforms to to made commands our voice new and and end, headway find on consistent A sample of the redesigns, parents. ways products experience a for that customers constantly set identifying browsing the quarter. all enjoyable are mobile app conveniently in providing Our voice To further improve shopping across choice include experience to navigation these their enable new pet search now launching which of and platforms. is our browse, into search second we features using

Our newest love received to value [Technical overall deliver Difficulty]. business, results Chewy favorable who from strong our reviews our continues Pharmacy, and proposition customers

in of be joint or Difficulty] enforcement taking proud effort minimum We pricing pharma pet position the a to leading with manufacturer industry. in MAP, the advertised [Technical are also

for community pricing big suppliers Chewy and will and for us, including our partner our We to believe a that and across goal trifecta health fair improving with make business shop veterinarians and in our veterinarian is Pharmacy of at tools the continue targeted improving specifically the vet pet we experience. to space invest in it easier customers, pet Furthering that channels product our win and this alike. transparent to parents wellness, innovation

continue is the we future. to RxManager vet and and medications product newly pet's evolve manner record a for their community this pet continuing provide and to in better to Our convenience streamlined prescription making diets help easier the customers to manage in launched parents, compliance keeping similar

Last delivery Mid-Atlantic the recently we of ground X,XXX the employ least, region. Salisbury, which largest facility fulfillment approximately expected completed. This ninth Chewtopians once and broke XXX,XXX-square-foot center one across on in our location to capabilities our but will will in network be North Carolina, not is enhance

in Carolina, like fulfillment us reach even will the enable New millions North one to centers, of customers faster.

management. And transportation we Most in to infrastructure recently, logistics as overall transport implemented enterprise our industrial-grade continuous supply well. continue drive improve management to an improvement system and chain we've

are the is improve With and cross-fulfillment the customer functionality deliver, mission. to designed better be will These to to will inbound Chewy's we system transportation operations. able this robust all further investments which core experience, plan center

with are results the QX and strength underlying our business. we our pleased Overall, of

when this We with experience will prices yet new in our attractive in areas raise pet personalized product selection, for thoughtful for service, of ever-expanding look to continue the bar and parents and opportunities, customer will to bold which marketing category. business and make continue combined investments

The our team in progress continues to strategy make care taking and executing customers. of our

I to over provide review walk will detailed results Now who more call of financial and QX Mario, the turn you our a outlook. our will Mario? through

Mario Marte

Sumit. Good afternoon, Thank everyone. you,

increase compared Autoship exceeded overall execution. growth million XX% Our increase business sales in and XXXX, net $XXX.X sales. an customer million and reached $X.XX sales focused compared to million, philosophy to an in QX second $XXX.X in of results $XXX.X our XX% quarter XXXX, billion, QX highlight of Net outpacing

active XXX and million versus quarter an We customers, at XXXX. efficiencies. to increase of XXXX versus QX chain product QX second Gross operating quarter a increase $XXX.X disciplined margin points million of and of with basis million X.X were XXXX. customers the ended was our supply sales, XX.X% fiscal QX execution XX XX.X%, margin for increasing by improve XXX-basis-point an million end versus the year the or improvement net X.X driven expenses of

of million net sales. SG&A or was $XXX.X XX.X%

for a service shared costs, SG&A previously, fulfillment well us As share-based as all credit expense. customer and card we non-cash compensation, processing includes have as fees, and

XXXX QX net Excluding percent to share-based as basis XX.X%. increased XXXX, SG&A a sales compensation of and year-over-year QX expense points XX in

scaling primarily The a costs and a increase net to as was investments largely in our operating company. as of as acquisition. be focused of continue on related net sales, of was or public year-over-year net SG&A as million by percent customer percent driven $XXX.X marketing to Advertising X.X% marketing a sales sales

and to existing scaling absolute this over sales. and our line the increase also acquisition while of as a marketing in a from As terms us recurring stream revenue allows result, time, net customers investments long-term percent

million, was increase $XX.X loss to net an $XX.X compared XXXX. of QX QX million

was net Our points margin negative X.X%, XX improving basis year-over-year.

margin loss year-over-year. share-based improved of million compensation in impact points XXX both the net and $XX Excluding XX.X% XXXX basis XXXX, QX or and QX improved net

QX adjusted XXXX. QX million million, of $XX.X $XX.X EBITDA loss compared an to improvement was

have execute operating adjusted EBITDA in negative adjusted the EBITDA Our was Improvements at year-over-year. gradually same to scale vectors on that margin previously our XXX and we reflect shared growth improving and basis our and points X.X%, both adjusted time. with you the EBITDA margin margin expenses ability

cash of Dayton, We XXXX, of proceeds outlays cash of generated equipment, of $XX.X the internal million million, for of of of were to equivalents, costs. comprised balance of in second our and second net labor ended underwriting cash cash $XX.X positive capital partially capital million. primarily flow investments by free operations comprised IT QX $X.X the in In of from quarter, of million investments capitalization offset $XXX the Ohio including cash fulfillment closing and million which cash the We the quarter from our launch $XXX.X center. IPO, added sheet, positive with

guidance. to turn I'll Now

and XX-week a in a This was quarters. that our production from would with XX-week a impact like coupled QX year. This cash inventory operations for year, a full-year when note fluctuate for to year-over-year new while As we may fiscal third also sales. both will between QX XXXX to we cycle build fulfillment from we cash our XXXX levels quarter our will be to cash prepare as used launch cash reminder, growth XXXX XXXX. We and fiscal center, favorable the historically lead conversion

$X.XX For between year-over-year. of to we growth QX billion, XX% sales net billion representing to XXXX, $X.XX XX% expect

in XXX XXXX, between and net Included expected basis XX% fiscal costs to XXX of be our for in and to EBITDA as For EBITDA year related the year-over-year fiscal is between XX% to billion growth Adjusted XX%. guidance $X.XX operating to XX% versus for points we XXXX. public year growth expected XXXX, margin $X.XX are Adjusted company. the week following; representing to is a improve year-over-year. expect sales extra billion, the fiscal fiscal

I the will And that, call over for We are operating for turn the second about to excited financial operator questions. quarter. the Operator? results and with the

Operator

question from with Your Morgan Stanley. [Operator Instructions] Brian Nowak first comes

open. Your line is

Brian Nowak

questions. two. for have I Thanks taking my

two Management not first it's How buyers? be current onto do at bring who you what curious Data you I'd pet do a are as about one, the yet think you on marketing. have are those hear need to but you new platform key one target the pet people? owners or factors owners looking think interesting you're data, the Just new I Platform to

question through Thanks. the us on to roadmap more of healthcare really pharmacy and to Then is healthcare. current of second you drive purchasing Walk your products the buyers sort guys. start from

Sumit Singh

to one Brian, from question. Hey take hear I'll I'll then Good second and probably repeat you. the Sumit. the first have this you is

the direct marketing to acquisatory is On remember spend our think primarily it's side, I recognize target helpful -- we that marketing, response.

able and across techniques, an array and And only so not offline and and to so of networks moving network classical the channels techniques, kind media as TV so we of to online social forth digital channels with target also direct such starting mail the across on. Google over are but

marketing the spend the our And fact -- continues target, essentially channels. so investment to live we our also marketing we're able recognize across the not of full able we're effectively our and to making that because only pattern that customers of already stack can that in recognize to we nature lives attribution refine the that attribute technology pretty spend response we're accurately. And

about us we our reaching as their it. it's -- optimizing as about spend them on side. then or think That's for So well both our and optimizing experience how

not was to was question [ph] healthcare [live] a customers around then buying it's start second products. And healthcare Yeah, great question. that

multiple think I it in angles. think, we about different

are to on customers bringing momentum catalog coming some able wellness, organic well all, business exposure of customer superior most of which the of via experience, momentum, customers. broad proposition as both we're pleased active to utilizing is reach organic that health a our our offline of with current be and existing of the newer online part First as the our mostly tactics our of healthcare and we and growth, to

teams direct on, we I pet relying said reach conversations active that fact on into there. and that more with having A, also our X things relying that knowledge we customers So service we're have we're the and our that the and the customer great file have than the we -- two profiles base. connection We're million these a with customers, a way on customers. having On our are customer

customers, actively existing just et or newer channels there we prescription and the the pharmacy we across shop deploy medication, cetera, and on and but to to how tactics health the because use cetera. that layer not buy of also customers et go either we're On healthcare, back proposition utilizing recognize supplements, diet wellness could

And that last example site put don't assets. least, across customers Rx we And product, not engagement efforts something particular that customer an site in. put we're then but that that is the engaging with with happy Manager we are forget pretty in that we our measure merchandising merchandising the way maniacally. Product there, is our and

Brian Nowak

Great. Thanks, guys.

Operator

comes question JPMorgan. next with Anmuth Your from Doug

open. Your line is

Doug Anmuth

just to question. the few. I taking want ask a for Thanks

about that basis of basis having impact there driven there? approaching is low on Can do talk about Prime then you and expanded just much end XX about anything longer-term Just to about how that there think the And margins, target? if initiatives of around cohort? kind how first of that was talk the Autoship, then retention your that biggest points points around Can then on early year-over-year sequentially. gross promotions Thanks. they nice you around and just like And then also you're the you quarter. XX% are as Day, the looks it for in a increase XXX

Mario Marte

revenue, few Mario. In at there of and factors I'll Sumit out our well. is, second as first is a benefits the play. cost question, grow the gross will before, us this to here the predictability as lower Doug, Hey supply One margins, the the we've partners entire scale take of shared enables on part which chain, the the we to as are us quarter answer and Autoship. regards of and benefits then

the include our expanded quarters XX% the And count our three was for to is have in better we we're that we've third of second of which item offering. always margin alone, profile expanded In is SKU that second and product the by additional quarter about looking in mix The catalog product one the before. we sales. goods, hard as and shared a

provides of that the a As sales from customer come margin. tailwind that existing percent increases, nice our to

say, would we do promotional margin forward, from I fluctuations that expect quarter. some to cause seasonality gross activity going to quarter

Sumit Singh

question around take second I'll part Doug, this is of the Sumit. your Autoship.

sales that pleased net the are XX% by our we So fact of came Autoship. from

on, couple a to was are hit the of really there factors. Prime nothing promotions think head this driven number I And question around different by Day.

This is a longer-reaching number.

customers in are of of course, a here factors playing increase. seeing of different And point of his so which couple up there you're active that as Autoship base. is are sort the Mario sales a point, mentioned pick third is in the as with mix the that I'll One larger the engaged program power over from increases,

one. that's So

recommend customers improving put of and is then our that think Autoship. two two that they're engaging I engines is front to we're and to our and constantly be and the assortment One continue care sense with is able the for two, and we fact [indiscernible] choices Number to I'll browsing repeat for meaningful that more customers better personalization And our improvising our in into interact inputs the upon. that eligible when site. recommendation

are entity The us point interesting that there, baskets in with to -- product. for which they observe engaging the complementary our the healthcare to that is as building and engaging that for the we're me seeing are out an Autoship are and customers third think way I and thing hypotheses

with our the develop, the educate way Autoship our use, stronger way come should we products tactics our for we and pattern and healthcare be hypothesis seeing them, the engaging even the them, was with way response we're for we with the customers, of It communicate we that through. that that

with into So some I nuggets. today, without you those specific I think getting numbers of can leave

Doug Anmuth

Thank both. you,

Operator

Your with America. next of question from Nat Bank Schindler comes

Your line Schindler America, of is Nat open. go ahead. Bank with please

Your open. line is

Nat Schindler

Doug asked. little a on bit Probably that. expanding about what Sorry

growth Autoship not one benefit away mostly you're is that higher the your pretty I food, be your If you Autoship growth, not shift and margin food. look it the to gross thing gross products, seems that getting clear seems that assume. or from towards at mix yet i.e. would actually yet benefit you're your margin compare also getting from

and case, coming you goods, much brands you pharmacy? from could house get the much do that's which the margin that simply vendor your also seem get to incremental more how driving you you If efficiencies, these, revenue of how think could besides just for be share hard more increasing

Sumit Singh

Nat, question. elaborate on that

Before I lost midway. maybe you, a rephrase question with of the of Can I tracking think question. I answer it, bit it's that? kind of but started I track broad you a

Nat Schindler

okay. mix products continuing not quarter? driver Are pharma? a little have like basis bit shift they how us give gross point, businesses goods much higher more And to they year-over-year, hard margin said in profit, see you in as gross they're to this contribute I'm if mix your -- at Actually, you points on you XXX probably small towards could more if are as major of Well, and you too grow how became because estimation data shift your -- the they margin? could improvement gross further, guessing, those the the on

Sumit Singh

it, okay. Got

Here going we're it about back way is we we're right. is think answer that to question, our that to we executing that The strategy. go the how way

base platform a sort The customers, is and first active which talk the on always the are is manner, our about. customers of first meaningful growing more we bringing assortment part more same, in that bucket larger doing the of the to the of

so you primarily seeing those is to expansion that are attributed today And Right. the three.

or ourselves private bringing our competitive B, are bringing national our assortment, and the expanding always out healthcare segment, way that branded differentiating bucket that brands but that voids. talk private A, the to branded second then to assortment is not is differentiating is with, filling customers that about and The we we

previous fully interact Doug These vectors mixed with was hypotheses that with was that an to allusion healthcare, the should engaged build customers that of Autoship fact course of fact that the -- baskets. landed. my haven't alluding to them healthcare when are two and our be is And response we fired the we seeing

show is is show our third about starting future -- then yet bucket question? portion not are hypotheses Does was strategy we But launched, small not much talk help the that on to vector through. that through. there. have And answer or third to a fired which starting to are expansions. the our of So the that Essentially vectors

Nat Schindler

to just said maybe but at XX.X%. you're Yes, little nail before, what Doug a bit already

only mix You more points end and have way exceed five-year XXX your go basis shift, to easily of five to low shouldn't years? you With target. the that before

Sumit Singh

it. so I about XXX XXX think basis five XXXX we -- that talked mean major that that we And baseline at, as to it is to you're opportunity seeing, making. that's one eight us bucket that should about way progress I and the points about, a -- point two provided number sort exited think we the expansion the the we we're think just I way right, to that XX of from get is, it

upper gets that's a combination And then that. the essentially we're the long the range of term one, So three bucket two us and delivering over margin. to where of

to innovate. continue improvise we and honestly, And

stronger, our some at our kind guidance into learn this we way our as as part is, this. we we update of learn And So accordingly. learning of we're -- way

Nat Schindler

thank Great, you much. very

Operator

Barclays. with next comes Deepak from question Your Mathivanan

open. is line Your

Deepak Mathivanan

the for questions. taking Two Hey guys, question. thanks

we Is to adds initiatives? to few better the first, next ROI you with targeting expect can something and from respect in up master over net the dataset see marketing attribution show improve quarters? these? that specifically that Platform of the Data from talk So Should the and Management benefits about the would new

management It was to that center technology expenses second question a our Thank SG&A in was where there Are Obviously a incremental? due initiative and from then some are meaningfully forecast. quarter. to standpoint then little And SBC than you. systems, the maybe fulfillment the areas other standpoint bit higher new or actually like related the transport line. of

Mario Marte

Thanks, Deepak.

to one on answer I'll So question. Actually, me the SG&A the the Sumit will let take take portion. second SG&A. just the first try

to as -- a limited the revenue, a point, -- to I couple percent of items. of your of percent it think but is as a really percent increase, it SG&A did

FC One we in Ohio. Dayton, the is launched new

expense, also report began that booked company. public costs operating to and a share-based to some as increase a And versus compensation We million related was then also $XX QX. higher we

year. items, If Deepak, sales you are same of normalize last those three basically the percent you for net at as QX

really, it's drove that the So three items increase. those

Sumit Singh

Deepak, things first the one, right. so two And there's that DMP, the on happen,

that pretty which us think know -- our to data, now think our the -- master pet data, customer one, powerful -- is if that think products you created internally of about have time, Chewy right, us So an I a we have, because all connects our at dataset combination a vet we same supplies. as ourselves and want Chewtopians we as -- internally, to e-tailer don't data

We as good product that's ourselves back on stepping of and of building think experience-led this. the technology of proposition data. essentially an stone the And

seek data information. like fronts much of different measurement to have we The how on to it to allows couple we is speak in, and when you two do strategically. since on tactically but you just measurements this things utilize there I'll talk not it put to a or about, data you So that,

allowing sharper. better our and obviously to better ability is One us gets targeting segmentation -- gets

-- the through to that, drive for us frontier we gets As efficiencies find our the do efficient marketing and efficient frontier better.

able point That's are that's to be hypotheses what you kind and better. leading attribute with. on your So are learning going we to that's our in of Yes.

and recognized the community. connect thinking parent the just and connect Number it the to we're that that that's needs, that surface And mean, experiences. to profile a do is and we into we wellness have us customer, when about angle we think to not that actually vet it the fact the of that, pet allows can millions of two, data personalize experience active build us allows health pet second but what I there. that

and bringing And there. back is that's -- to that platform the our connecting. think we're marketplace, how there the on to the to product those two and we about tech two of So

Deepak Mathivanan

if Mario, you with that ask tailwind, point can guidance, margins the raised to elaborate full-year on related just Okay. continue to to guidance pretty higher margin see to I full-year and are but respect obviously, the rest incremental you the the you I EBITDA revenue good points sort gross think revised of? we end. be only year low aware basis mean on that there go the was the that costs like of for XX you should of as forward

Mario Marte

way costs, like. would answer Things to Deepak, filing and the the results fees, that I is that guidance reflected provided. But we're a the in professional for public QX we in we've do us those the accounted we and as like incremental and beginning operating and have fees company, that see insurance

Deepak Mathivanan

it. Got

super Thanks, guys. Okay, helpful.

Sumit Singh

Thank you.

Operator

Thill Jefferies. Your Brent comes next from with question

is open. line Your

Brent Thill

you. thank Great,

You've the that adding seeing some taking done for I that to about Thanks Anything you're helping the the of notable, a that players many to seeing seeing base. you're you're are job new space great or competitive from out. the asking currently? this headwinds have of guess customers question. larger stand are tailwinds that been that in differentiators either

Sumit Singh

that This problem. you. good hear No one. Sumit. is It's I'll take from to

to business, and on fully and focused our we are that deliver the think ensuring it's out talk that private focused bringing we're to executing same differentiating brands, focused out healthcare, the the the we're -- customer the focused innovation, focused team empowered experience feels expansion assortment, on completely see, the about, that vectors can on building. we've strategy and we're that the on, we're ourselves, seek is on on running we results to deliver. the base of I we as laid always focused standpoint, you go From our that

hear talk on And about that's also now our ourselves. we -- to If take how building specific see emphasis is product think experiences a question, I products of it. on you're there tech. to and what back more happy is us starting the

Brent Thill

what terms competitively the of Yeah, seen view changed I of from looks anything like? couple you've your quarters that's guess, anyone in last the just landscape new that in

Sumit Singh

Nothing of that out the run would characterize business normal of I operation.

Brent Thill

thanks. Perfect,

Operator

Mahaney Your Markets. question from Mark Capital next comes RBC with

is line Your open.

Mark Mahaney

Thanks. how drill And just acquisition you about think the Could in should you costs? saw down those Thanks on a just quarter? customer you forward. trend talk going lot. What then

Mario Marte

But Hi [ph] in No that Mario, tend is to this regular TV trends And we've input I'll a that than on QX, bit QX you did the active a a a of some difference the the basis. our bit significant is acquisition expensive difference years. would year. XX say QX, the other what last didn't an did we increase see take past. significant we versus a active of at that, happen customers, that seen rise see increase, XX% at in in costs. question. in look end we've in if I year-over-year; more in Mark, seen years there, million costs QX prior increase customers

in active really we customers. about good where are feel we So

Sumit Singh

is Mark, Sumit. this

on, Here's on then. layer of will I top that what

acquisatory about and on to connect opportunity in, market is awareness when and our a therefore targeting starting we both to market. to our sophistication upper we funnels, commentary today us is So in for numbers. And our that low dots we way of recall fact and that lower, the there refining advantage and are the in and middle that in the take lean recognize -- our in spend, how approach across -- go the to way think you go response

So well. as in I earnings think the that's what we script mentioned

drive lot we we'll to but to our good expect So that, as into engine. go more we I that a learn, talk you of learning about and back come think

Mark Mahaney

Mario. Sumit. Thank you, Thanks,

Sumit Singh

Thanks, Mark.

Operator

from Your comes Sheridan next question Eric with UBS.

Your line is open.

Eric Sheridan

And you for out are successful product Obviously changing early so days, what next months value product the still think to the but need of Thanks to just uptake of in curious it's about vertical, you're key guys. Chewy some the as it? or over relatively that that it's make XX Maybe sort maybe for of adopt one sure arching you you are trajectory look the about front about investors? investments as of you're thinking of sort make of mind people the Thanks, lifetime the customer taking X, you XX, Pharmacy. question. platform seeing. what on How

Sumit Singh

Sure. hear you, It's Eric. good to from

all, there pet has need of have also that know or XX% a of we're and way other. in that early in or the wellness First least that is million XX greater what stage. we health active one that and a at pet we know check customers parents for than that wellness a some we out Recognizing have health and necessity

investment level so in areas of far. focus two Our and has gone

subscriber and providing an in tying our back was rate an experience think the I is marketing, that comment stickiness which in with on we're building into the pleased the and across it. of that baskets, One then needs board or they're customer understanding where and different assortment that three tracking, hypotheses these that metrics with made them, our way I four targeted healthcare, that that the Autoship of we're the front customer,

curve of way in And The believe protect making time about we're the the to that, are to that's ahead are Last to business. that that's type I our presence location. is investing customer we do right you And our capacity. we business. the talked investments of expanding we sometimes Phoenix in do and expanding experience, how I

our shipping There now. licenses we're So out of expanded. have so we -- have Phoenix

location. have XX to our ship to Phoenix now states from We licenses

So we're coming along as planned.

we license. then QX, where also wholesale we in And location another a opened on brought

wholesale our customers, vet we point also to this way the not licenses want that service we have community. well have as at our as only retail So in we licenses,

one thing. I last will say

spoke community for on product parents, is engaging are for something our Rx manager products completely on. which about for also time vet with. customers pet but only Last building not are focused that we focus launch, Our I the the

I each to hope the products with we're more talk come building interact be as for vet we well. community, to to should back that you continue other, we about and the tremendously As which powerful believe

Eric Sheridan

Thanks for the color.

Operator

question with next Your Wells from Brian comes Fargo. Fitzgerald

Your line is open.

Brian Fitzgerald

there how Thanks, fully how rolled And launch? on you tempo across from to the the guys. questions transportation remind trending -- progresses online, break out the been that's all Salisbury A terms management can of couple in coming that FCs? system and on the of ground us

side. Finally on one logistics more the

regional populated or penetration those about can you're and areas you and how awareness Carolina consumers? and builds, densely do where how differences Ohio do those the Given you penetrate less opportunities with think think you North

Sumit Singh

This is I'll at a crack take Sumit. that.

year. there. remains track Carolina next there, nothing No to questions three share. change new on open North to So

consider roll-out. rolled We a it we successful out in Second Phase And X TMS. rolling three phases. We TMS. question is are out this

we And the the two, next before followers believe and the are fast year. end the roll-out of will full happen

is Carolina to -- question about I'm areas can third Ohio how think how across can opportunity. how those build of trying The penetrate North and we do recall, and logistics we

Brian Fitzgerald

Coast-centric and across Coast-centric, East Yeah, thanks. around penetrations and think you differences West versus those about maybe regions, more awareness how opportunities? building you The different regional question was penetrate now

Sumit Singh

America built Sure. logistics you North lies. support to if population where traditionally, I networks density in look are demand mean at the and

on that -- breaking of strategic is And and where So kind diligent roughly -- we very generally Mid; the very place breakdown about XX% West. down XX% XX% East/Northeast, we're FCs. if

process We goes long that have behind a it. planning

-- transportation to is to fast, take We reliable. the partners in playing. arc our logistics the delivery are We way. connect to make right at our our to want customers where sure -- our deliver look that click want we We

All of you're North we launching Ohio If Carolina. And more about specific something for, of that ask. go are those that how there factors and the is into going thinking on just back play. is

Brian Fitzgerald

it, Appreciate great. that's No, Sumit.

Sumit Singh

Great.

Operator

with question next Nomura. comes Your from Mark Kelley

open. line is Your

Mark Kelley

guys I it. thanks appreciate taking question. for the great, Hey,

Wilkes-Barre it What your like can for is, areas it example. the the just one are talk labor are first market? about market you some know a are competitive just like how I in The thoughts sounds others, tighter remains tight. on bit? you But than

second, need and this And build you think curious to you're what at like investments marketing out still was make need stack. I else you what sounds continuing your do tech DMP you the point commentary, with to it there? along

Mario Marte

environment, provide team is improving Mark, part labor the we competitive a and are, strive and to market wages, Hey believe look, this to single and and question. we regards competitive benefits, how Mario. working I'll great nearly day. we XX,XXX answer do In our every of first with the that members we good

talent So in been locations. at view, successful from our point all of our attracting we've

Sumit Singh

our second On journey, I'll XX% way us I take stack the would the there. being one. as marketing of characterize

rather with to hooked we connect have treating back. now we it's market together. DMP, go these -- than back DSP and singular already how collectively up do That's unit smart to segmentation all really how about a do. We the software smart that And we understanding attribution have as stuff a what really and and in systems, identification

Mark Kelley

Thanks, Great. guys.

Operator

There are no further to Sumit Singh questions. back I will turn remarks. the call for closing

Sumit Singh

participation many quarters. Thank of you coming you all We seeing Have the nice evening. attention a forward today. for and to in look your

Operator

for joining conference today's Thank call. you us. concludes This

now You may disconnect.

Chewy (CHWY) 18 Sep 192019 Q2 Earnings call transcript