Chewy, Inc. (NYSE: CHWY) (“Chewy”), a trusted destination for
pet parents and partners everywhere, has released its financial
results for the fiscal fourth quarter and full year 2023 ended
January 28, 2024, and posted a letter to its shareholders on its
investor relations website at https://investor.chewy.com.
Fiscal Q4 2023 Highlights:
- Net sales of $2.83 billion improved 4.2 percent year over
year
- Gross margin of 28.2 percent expanded 10 basis points year over
year
- Net income of $31.9 million, including share-based compensation
expense and related taxes of $60.7 million
- Net margin of 1.1 percent expanded 80 basis points year over
year
- Basic and diluted earnings per share of $0.07, an increase of
$0.05 year over year
- Adjusted EBITDA(1) of $86.5 million, a decrease of $6.2 million
year over year
- Adjusted EBITDA margin(1) of 3.1 percent contracted 30 basis
points year over year
- Adjusted net income(1) of $80.3 million, an increase of $10.0
million year over year
- Adjusted basic earnings per share(1) of $0.19, an increase of
$0.02 year over year
- Adjusted diluted earnings per share(1) of $0.18, an increase of
$0.02 year over year
Fiscal 2023 Highlights:
- Net sales of $11.15 billion improved 10.2 percent year over
year
- Gross margin of 28.4 percent expanded 40 basis points year over
year
- Net income of $39.6 million, including share-based compensation
expense of $248.5 million
- Net margin of 0.4 percent contracted 10 basis points year over
year
- Basic and diluted earnings per share of $0.09, a decrease of
$0.03 year over year
- Adjusted EBITDA(1) of $368.1 million, an increase of $61.3
million year over year
- Adjusted EBITDA margin(1) of 3.3 percent expanded 30 basis
points year over year
- Adjusted net income(1) of $296.2 million, an increase of $69.8
million year over year
- Adjusted basic earnings per share(1) of $0.69, an increase of
$0.15 year over year
- Adjusted diluted earnings per share(1) of $0.69, an increase of
$0.16 year over year
“I am proud of the performance the team delivered to close out a
strong fourth quarter and full year. In 2023, we gained market
share while simultaneously expanding margins and accelerating free
cash flow generation,” said Sumit Singh, Chief Executive Officer of
Chewy. “As we embark on 2024, we remain committed to further
expanding our margins and generating meaningful free cash flow for
our shareholders. Furthermore, we are excited about the strategic
opportunities ahead and our role in continuing to drive innovation
across the pet category.”
Management will host a conference call and webcast to discuss
Chewy’s financial results today at 5:00 pm ET.
Chewy Fiscal Fourth Quarter and Full Year 2023 Financial Results
Conference Call When: Wednesday, March 20, 2024 Time: 5:00 pm ET
Live webcast and replay: https://investor.chewy.com Conference call
registration:
https://www.netroadshow.com/events/login?show=3c58ea47&confId=61388
(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 websites and mobile applications 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, and we create and offer our own private
brands. Through our websites and mobile applications, we offer our
customers approximately 115,000 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.
Although we believe that the forward-looking statements
contained in this communication are based on reasonable
assumptions, you should be aware that many factors could cause
actual results to differ materially from those in such
forward-looking statements, including but not limited to, 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 jurisdictions and offerings; successfully
respond to business disruptions; 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 the
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
markets; 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 websites, 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; utilize net operating
loss and tax credit carryforwards, and other tax attributes, 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 new
offerings; manage challenges presented by international markets;
successfully compete in the pet products and services health and
retail industry, especially in the e-commerce sector; comply with
the terms of our credit facility; 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 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 such information
provides a reasonable basis for these statements, this 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 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; severance and 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, 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; and litigation matters and other items which are not
components of our core business operations. We believe it is useful
to exclude severance and exit costs because these expenses
represent temporary initiatives to realign resources and enhance
operational efficiency, 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 or initiative and include changes in the fair
value of equity warrants, severance and 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, net margin, and our other GAAP results.
The following table presents a reconciliation of net 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
52 Weeks Ended
Reconciliation of Net Income to
Adjusted EBITDA
January 28,
2024
January 29,
2023
January 28,
2024
January 29,
2023
Net income
$
31,886
$
6,784
$
39,580
$
49,899
Add (deduct):
Depreciation and amortization
27,441
22,635
109,693
83,440
Share-based compensation expense and
related taxes
60,665
50,188
248,543
163,211
Interest income, net
(31,384
)
(6,200
)
(58,501
)
(9,290
)
Change in fair value of equity
warrants
(26,621
)
13,340
(13,079
)
13,340
Income tax provision
4,639
2,646
8,650
2,646
Severance costs
14,348
—
14,348
—
Transaction related costs
4,660
1,852
7,827
3,953
Exit costs
—
—
6,839
—
Other
833
1,427
4,168
(460
)
Adjusted EBITDA
$
86,467
$
92,672
$
368,068
$
306,739
Net sales
$
2,825,904
$
2,712,849
$
11,147,720
$
10,119,000
Net margin
1.1
%
0.3
%
0.4
%
0.5
%
Adjusted EBITDA margin
3.1
%
3.4
%
3.3
%
3.0
%
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 severance 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 changes in the fair value of equity
warrants because the variability of equity warrant gains and losses
is not representative of our underlying operations. We believe it
is useful to exclude severance and exit costs because these
expenses represent temporary initiatives to realign resources and
enhance operational efficiency, which are not components of our
core business 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
52 Weeks Ended
Reconciliation of Net Income to
Adjusted Net Income
January 28,
2024
January 29,
2023
January 28,
2024
January 29,
2023
Net income
$
31,886
$
6,784
$
39,580
$
49,899
Add (deduct):
Share-based compensation expense and
related taxes
60,665
50,188
248,543
163,211
Change in fair value of equity
warrants
(26,621
)
13,340
(13,079
)
13,340
Severance costs
14,348
—
14,348
—
Exit costs
—
—
6,839
—
Adjusted net income
$
80,278
$
70,312
$
296,231
$
226,450
Weighted-average common shares used in
computing adjusted earnings per share:
Basic
431,600
424,328
429,457
422,331
Effect of dilutive share-based awards
2,342
5,084
2,583
5,439
Diluted
433,942
429,412
432,040
427,770
Earnings per share attributable to common
Class A and Class B stockholders
Basic
$
0.07
$
0.02
$
0.09
$
0.12
Diluted
$
0.07
$
0.02
$
0.09
$
0.12
Adjusted basic
$
0.19
$
0.17
$
0.69
$
0.54
Adjusted diluted
$
0.18
$
0.16
$
0.69
$
0.53
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240320906396/en/
Investor Contact: Jennifer Hsu ir@chewy.com Media
Contact: Diane Pelkey dpelkey@chewy.com
Chewy (NYSE:CHWY)
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