Chewy Inc Q4 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Doug Anmuth - JPMorgan - Analyst : Thanks so much for taking the questions. I have two. First, Sumit and David, can you just talk about the '24 revenue growth, obviously starting with 2% outlook in 1Q? But perhaps you can talk about what drives the confidence and acceleration as you go through the course of the year and if there's anything else you can add just around the cadence in terms of the quarters going forward. And then on active customers, I know you're talking about flat for '24. Can you give us any insights into the dynamics between gross adds and what happened with churn or attrition on existing customers? Thanks.

Question: Doug Anmuth - JPMorgan - Analyst : Good. Thank you, both. Appreciate that.

Question: Mark Mahaney - Evercore ISI - Analyst : Hey. I just wanted to ask about the advertising revenue opportunities, and I know you talked about what you've seen so far, and outlook seems relatively constructive for the year. Can you peel that back a little bit more? And where do you think you are on ad load versus where you could be? Where do you think you are in terms of endemic and non-endemic advertising in terms of where you could be and any clear lessons that you've drawn so far that make you reasonably confident about the outlook for the year? Thanks a lot.

Question: Mark Mahaney - Evercore ISI - Analyst : Okay. Thank you, Sumit.

Question: Dylan Carden - William Blair & Co - Analyst : Appreciate it. Sumit, that kind of cohort analysis on the churn side, I wonder if you could kind of speak to it on the NSPAC side. And I guess the broad question would be how relevant some of your historic cohort spending metrics are and just whether or not there's any impact from higher levels of Autoship if those customers kind of said it and forget it and don't yield up in the same fashion because they don't visit the site with the same frequency. Any detail there would be helpful. Thanks.

Question: Dylan Carden - William Blair & Co - Analyst : Got it. Thank you.

Question: Anna Andreeva - Needham & Co Inc - Analyst : Great. Thanks so much for taking our questions. We have two. On the adjusted EBITDA, I think the guide implies a slightly less than the 16% incremental margins you guys outlined during the Analyst Day, and you mentioned the guide that implies some OpEx leverage. So should we expect more muted gross margin gains for the year? Just any color there would be super helpful. And then secondly, CapEx, as you mentioned, came in a little lower than the guide for '23. Should we expect it to stay at similar 1.3% of sales or below for '24? Any thoughts on initiating a buyback just given this ramping free cash flow generation. Thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2024 / 9:00PM, CHWY.N - Q4 2023 Chewy Inc Earnings Call

Question: Anna Andreeva - Needham & Co Inc - Analyst : All right. Thank you so much. Best of luck.

Question: Steven Zaccone - Citigroup - Analyst : Great. Good afternoon and thanks for taking my question. And Dave, congrats on the new role. Sumit, I wanted to ask about the broader pet industry. We've heard about some higher promotional activity and then some trade down activity turns in the pet food space. What are you seeing REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2024 / 9:00PM, CHWY.N - Q4 2023 Chewy Inc Earnings Call in your business? And I guess as you think through the year, do you think we're in the worst of it now or could the space get a little bit more competitive as we get into the back half? Thanks.

Question: Steven Zaccone - Citigroup - Analyst : Okay. Thank you very much.

Question: Nathan Feather - Morgan Stanley - Analyst : Thanks for taking my question, everyone. So thinking about the 50 basis points of EBITDA margin expansion guided to for the year, can you help us walk through the key drivers to get there and what could really drive upside for that? And then anything you can share on how much international expansion is weighing on margins? Thank you.

Question: Alexandra Steiger - Goldman Sachs - Analyst : Great. Thank you for taking my question. First one, on competition. So how would you characterize the competitive landscape as we enter 2024 and what gives you the confidence in continuing to gain market share this year? And then, one follow-up on the Q4 EBITDA outperformance. So can you maybe just help us understand the contribution from the various initiatives you have laid out versus some of the efficiencies you're seeing on automation and/or OpEx discipline? Thank you.

Question: Alexandra Steiger - Goldman Sachs - Analyst : Very helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2024 / 9:00PM, CHWY.N - Q4 2023 Chewy Inc Earnings Call

Question: Rupesh Parikh - Oppenheimer - Analyst : Good afternoon. Thanks for taking my question. So a question for Dave. So you've obviously been there a few weeks now, so it's still early, but just curious if you see any new opportunities in the business?

Question: Rupesh Parikh - Oppenheimer - Analyst : Yeah. And I guess just my follow-up question. So it sounds like this year, a household formation is likely going to be weak. So if you guys think about a return to positive net active customer growth, is that essentially you just need a better macro and a return to stronger pet household formation? Is that the key ingredient at this point?

Question: Rupesh Parikh - Oppenheimer - Analyst : Great. Thank you.