Good morning all, and thank you for joining us for the Chewy Second Quarter 2024 Earnings Call. My name is Carlie and I'll be the call coordinator today. [Operator Instructions]. I'll now hand over to your host, Jen Hsu, Investor Relations to begin.

Thank you for joining us on the call today to discuss our second quarter results for fiscal year 2024. Joining me today are Chewy's CEO, Sumit Singh, and CFO, David Reeder. Our earnings release, which was filed with the SEC earlier today has been posted to the Investor Relations section of our website. In addition to the earnings release, a presentation summarizing our results is also available on our website at investor.chewy.com. On our call today, we will be making forward-looking statements, including statements concerning Chewy s financial results and performance, industry trends, strategic initiatives, share repurchase programs, and the environment that we operate in. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks, uncertainties, and other factors described in the section titled Risk Factors in our quarterly report on Form 10-Q from last quarter and in our other filings with the SEC, including the quarterly report on Form 10-Q filed earlier today, which could cause actual results to differ materially from those contemplated by our forward-looking statement. Reported results should not be considered an indication of future performance. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements except as required by law. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided on our Investor Relations website and in our earnings release, which was filed with the SEC today. These non-GAAP measures are not intended as a substitute for GAAP results. Additionally, unless otherwise stated, all comparisons discussed on today's call will be against the comparable period of fiscal year 2023. Finally, this call in its entirety is being webcast on our Investor Relations website. A replay of the audio webcast will also be available on our Investor Relations website shortly. I'd now like to turn the call over to Sumit.

Thank you, Jen, and thank you all for joining us on today's call. Our Q2 results reflect another quarter of strong execution against our strategic priorities. We delivered top-line growth at the high end of our guidance range, continued significant adjusted EBITDA margin expansion, and compelling free cash flow generation. Initiatives, including Chewy Vet Care and Sponsored Ads are performing well, and I look forward to telling you more about these in a few minutes. With that, let's dive in. Q2 net sales grew by approximately 3% to $2.86 billion. Autoship customer sales grew by approximately 6% or double the rate of company-wide net sales to reach 78% of net sales, reflecting both the convenience and the value of the program and the strength of our non-discretionary categories, including consumables and health, which collectively represented approximately 85% of our net sales in the quarter. In addition to the engagement created through our Autoship program, our ability to grow share of wallet was also evident in Q2 with metrics such as net sales per active customer or NSPAC, which set a new record at $565, growing over 6% in the quarter. NSPAC growth is being driven by factors such as strengthening mix of repeatable categories and growth in our premium product lines, for example, premium food and Chewy Health. Also notable this quarter was the strengthening customer engagement through our mobile app. Over the past year or so, we have been hard at work redesigning our mobile app and making the overall user experience more convenient for our customers. This quarter, we saw some early signs of this strategy paying dividends. Unique customers who placed orders through our app increased by approximately 13% year-over-year, with overall mobile app orders increasing approximately 15% year-over-year. We observed both higher units per order and…

Thank you, Sumit. Second quarter net sales of $2.86 billion came in at the high end of our guidance range and grew 2.6% year-over-year. These top-line results demonstrate the predictability and durability of our business model even in a normalizing market. Active customers grew modestly on a sequential basis to approximately 20.0 million. As Sumit noted earlier, gross ads once again exceeded our internal expectations this quarter, signaling that in addition to macro normalization, our efforts with respect to customer engagement continue to gain traction. While we are encouraged by the trend of this metric and the team continues to execute our customer engagement strategy, we believe it is prudent to maintain our 2024 view of approximately flat active customers for the year. Net sales per active customer or NSPAC came in at $565, reflecting an increase of 6.2%. NSPAC yet again reached the new record high demonstrating our continued ability to grow share of wallet. Our subscription like Autoship business continues to be a core pillar of strength for Chewy with Autoship customer sales of over $2.2 billion in the quarter growing 5.8% and representing 78.4% of our total net sales, up 230 basis points on a year-over-year basis. Moving to profitability, we reported second quarter gross margin of 29.5%, representing a 120 basis point year-over-year increase, coming in slightly ahead of expectations and underscoring the increasingly attractive mix of our business as well as our position as a strategic channel for our vendor partners. We believe we have continued headroom to expand gross margin over time. Shifting to operating expenses, please note that my discussion of SG&A excludes share-based compensation expense and related taxes. We continue to demonstrate OpEx leverage in the quarter with SG&A coming in at $538.8 million or 18.8% of net sales, representing 100 basis…

Thank you. [Operator Instructions] Our first question comes from Doug Anmuth of JPMorgan. Doug, your line is now open.

Thanks so much for taking the questions. I have two. Last quarter, you talked about signs of green shoots with pet adoptions exceeding relinquishments for the first time in about two years. So, hope you could talk more about whether those positive trends are continuing based on the data and surveys that you're seeing? And then Sumit, I know it's early, but just as you think about fiscal '25, is it fair to expect more balanced growth between active customers and NSPAC then? Thank you.

Hi, Dough. Good morning. So on the first one, household formation trends, at large we're seeing similar trends this quarter as we did in Q1, albeit with some seasonality impact as Q2 is typically a peak period for pet relinquishments, primarily due to seasonal travel during the spring and the summer months, and January, February are typically peak adoption months in the U.S. at the very least. As we've talked about previously, there's no one source of truth for pet household formation growth data. However, big picture, we believe that adoptions in the quarter remain up. From our data, we suggest kind of low-teens on a year-over-year basis, and relinquishments remain down, low to mid single digits on a year-over-year basis, supporting our continued kind of theory on the green shoots. The absolute number still needs to recover. So when you look at overall pet household year-over-year, it's relatively flattish, but the trends are certainly improving. On your second question, I think it's helpful to understand. So I would start by saying we're obviously not guiding, but yes, we would certainly hope so, right? As Chewy continues to grow and customers get attracted to the value propositions of various products and services and lines of businesses that we're introducing. NSPAC will continue to remain a prevalent force in our revenue algorithm. And at the same time, we certainly hope and expect to return to active customer growth next year, right? It's also helpful to understand what it is that drove kind of net ads grow to this quarter. And we believe it's much more as a result of some of the efforts that we've been driving in the last several quarters, rather than the macro turning around. Although there are certainly green shoots and macro which were encouraged by, quarter-over-quarter, that isn't what drove our turnaround. So we're certainly hopeful.

Great, thank you, Sumit.

Thank you. Our next question comes from Mark Mahaney of Evercore ISI. Mark, your line is now open.

Okay, thanks. Two questions, please. That SG&A being flattish, even slightly down on a year-over-year basis. Just talk about that going forward. Are you at a point in the cost structure where you -- where its sustainably -- you can keep it roughly at this level until you get a material reacceleration in revenue growth and decide to reinvest in growth? And then, any quick comments on international markets, and particularly on Canada and what you're seeing up in I think especially in the Toronto area? Thank you very much.

Good morning Mark. This is Dave Reeder. I'll take the first part of that question and then maybe I'll just talk a little bit about the Canadian question. With respect to SG&A, you're exactly right. We're an at-scale revenue business, roughly 78% slightly north of that of our revenue flowing through autoships, so highly predictable. And with that type of revenue profile, we are able to get quite a bit of leverage out of -- really the three parts of at-scale portions of our business, the fixed fulfillment centers, the at-scale software, and then of course, our at-scale human capital. And so, we did have SG&A, excluding stock-based comp come down on a year-over-year basis in a relatively meaningful way. Our employees remain incredibly productive. And that is a trend that we expect on a go-forward basis to be relatively flat, albeit we are continuing to make investments. Sumit, do you want to talk a little bit about Canada?

Mark, Canada is going as expected. In some areas exceeding our expectations, particularly in the way that customers are transacting through our app business in the way that they're building their baskets in Canada. Assortment continues to grow in Canada. Our service receives very high NPS, and customers are continually asking us when we are expanding. Mid-to-high teens traffic is already coming out of Ontario as we build out our awareness in the Canadian marketplace and also that will help us drive efficiencies from a marketing investment point of view, because the quicker you can gain kind of the base from an awareness point of view up top, the more subsidized direct acquisition costs for us. So that's been a little bit of our focus in the last few months. We've only been in the market three quarters and overall, results are as planned. We're not planning any incremental or materially incremental investment in Canada as we move through the back half of the year, so all of this is incorporated in the profit guidance.

Okay. Thank you, David. Thank you, Sumit.

Thanks, Mark.

Thank you very much. Our next question comes from Michael Morton. Michael, your line is now open.

Hello. Hi, there. Thank you for the question. I was wondering, as the industry starts to improve from the COVID pull forward and it's getting healthier with net adoption, could you maybe talk through over the last several years how you've seen the consumer journey change from top of the funnel maybe to bottom? And then as a result, as pet households start to improve these last three to six months. What is the reaction you're seeing in the competitive environment, like specifically in the auction from your competitors? Thank you so much.

Good morning, Michael. I'm trying to understand the first question a little bit more. How have you seen customer journey change from the upper funnel to the lower funnel? So, the traffic trends continue. Yeah, go ahead.

Yes, if you just think about a more digitally inclined consumer, right? Like there is the world pre-COVID and then post-COVID. And it's different from walking into a brick and mortar store, how that's evolved and then how the competition is evolving?

Yes, sure. So overall, clearly, if there was any question about the secular growth towards e-comm, that question is off the table at this point, given how rapidly the market shifted to e-commerce coming into the pandemic. We were kind of low 20s penetrated for e-comm coming out of the pandemic. We were almost low 30s penetrated. Now, some of that growth has gone back into retail as customers have sort of settled out, but the secular trend towards e-comm has very much continued. This quarter we saw our traffic pick up low to mid single digit on a year-over-year basis, which we hadn't seen for the last couple of quarters. And like I said, this is, in our opinion, more driven by the efforts that we've made in the last couple of quarters. I'm happy to talk about that in greater detail. But overall, we are seeing efficiency in the channels, particularly on the lower funnel. And at the same time, we continue to invest reasonably, appropriately on building awareness, because upper funnel awareness is an important trend to us. So overall, I would say the secular trend continues and we're best positioned to kind of capture a meaningful portion of the share that's moving online as we always have. And your second question on what are we seeing from competitive environment? So overall, I mean, innovation, there's not a great degree of kind of product innovation coming to the market at this particular point. Most of the landscape is just trying to understand consumer, predict consumer behavior. The innovations that we've brought to market are resonating well, whether it's programs that we've launched around kind of improvement in Autoship, or improvement in our segmentation and targeting, or the app business, or the Chewy Plus paid membership programs, et cetera, et cetera. And so, we are -- these are not really things that are effectively competed against, because they build sort of a moat around you and the ecosystem. So we're competing very effectively there. In terms of sort of promotionality, the market's overall relatively stable. And as we expected, and as you would expect, moving towards the back half of the year, there was slightly higher promotionality coming into Q2 and exiting Q2, primarily in non-discretionary categories. So I believe everybody at this point is playing to their strengths. Competitors that are stronger in hard goods are really trying to drive elasticity there. Our revenue mix of 85% coming from consumables and health really provides us a solid insurance kind of coverage around volatility and demand. And then as you heard, 78% of the volume is going through Autoship. So overall, we're playing through the playbook.

Thank you.

Thank you, Michael.

Thank you very much. Our next question comes from Eric Sheridan of Goldman Sachs. Eric, your line is now open.

Thank you so much for taking the question. Following up on your comments on repair marks on mobile, maybe a two-parter, Sumit wanted to know if maybe first you could take a step back and talk a little bit about the journey you've been on in improving the mobile experience for consumers and how that's approached up to this point? And then in terms of what you're seeing from the consumer on mobile, anything you want to call out in terms of how that might be a tailwind for the business beyond just 2024, any key investments you feel you need to make in mobile? Thank you.

So I'll start with the second one. If you look at, we started investing in the mobile ecosystem in the last several years more seriously. We've had an app for several years. But the traffic going through the app, the orders transacting through the app, the conversion, the experience, our focus on retaining customers in the app and closed loop ecosystem hasn't really elevated more than the last several quarters. And so the tailwinds that I -- or some of the early results that I talked about in the script are reflective of the efforts that we've put in the script are reflective of the efforts that we've put in that direction. We see the opportunity as large, less than 20% of our orders currently transact through our app. And if you look at like-sized businesses, we should be north of 60% of orders going through our app. Now, that's a healthy aspiration, but it's something that we believe should be achievable over time. We see higher AOV, we see greater autoship penetration, we see our ability to keep the customer in a closed loop ecosystem, so you're not spending on external marketing to be able to maintain these healthy relationships and drive conversion. They're one step away from letting you discover, letting them discover your, you know, best features that are launched. It delivers the personalization journey much more effectively. So, broadly speaking, I think the effort makes a lot of sense to us. And we're early at the same time, rapidly innovating in the area.

Thank you.

Thank you very much. Our next question comes from Rupesh Parikh of Oppenheimer. Rupesh, your line is now open.

Good morning, and thanks for taking my questions. So my first question is just on monthly trends, just want to get a sense of the cadence of trends during the quarter, and then maybe what you're seeing quarter to-date? And then my second question is hard goods growth actually outpaced consumables. So just curious more color on what you saw in hard goods and just confident in being able to sustain that positive momentum?

Good morning, Rupesh. With respect to monthly trends, I would say very much as we expected. When you have such a large percentage of your business flow through consumables and even perhaps more importantly, the highest loyalty program that Chewy has, Autoship, and you have a pretty regular cadence from a monthly perspective. And so, I would say both the months through second quarter, as well as kind of what we've seen entering third quarter, I would say very much as we've expected and very much in line with our guidance. With respect to hard goods, from a hard goods perspective, we would characterize hard goods as having kind of stabilized and being broadly flat on a quarter-to-quarter basis. I think the positive signals that we're seeing from hard goods is that we've reached a level of stability, which to us indicates with active customers growth sequentially Q1 to Q2 for the first time since Q1 of '23 with some of the pet household formation that Sumit highlighted earlier, we feel like hard goods broadly flat, stabilized at this stage, and very much in line and consistent with what we see as a normalizing market in 2024, with perhaps a full return to industry normality in 2025. Sumit, anything you'd add to the hard good side?

No. It's good.

Thank you for your question.

Great, thank you. I'll pass it on.

Thank you very much. Our next question comes from Trevor Young of Barclays. Trevor, your line is now open.

Great, thanks. Two questions here. First, on the improvement in net ads, the first sequential growth in more than a year, how much of the contribution there was from Canada and were net ads in the U.S., maybe flatter or even up at this point? And then second one, back to the mobile app discussion, what portion of orders are from mobile web at present? And are you able to funnel those users towards the app install more quickly at this point? Or do we still have more work to do on the app before you're willing to really push that app install?

Hi, Trevor. So, let me add some additional color on how active customers are trending at Chewy. I'm looking at your question here, improving the -- how about Canada. Canada was -- Canada is and was and is and remains kind of relatively immaterial to the scale of the customer base, given that the business is only three quarters in. And it's meeting our expectations, but the curves are reasonably balanced there, so overall immaterial. So let me add some additional color into how active customers are trending. So new to Chewy customers exceeded our internal expectations and remain a larger proportion of the overall gross ads. That indicates to us that there remains a large pool of prospective customers we have yet to introduce to our ecosystem. Additionally, we're reactivating customers at an accelerated pace and are seeing improvements. I've talked about CRM improvements in the past around personalization and customer segmentation, bear fruit. Specifically, we're taking advantage of our ability to segment and target customers who visit our website and drive purchase conversion. This is an ability that we did not have last year. Hence, kind of my comment to tying back to the recent trending is more us than kind of the change or the rate of change in the macro. Third, we've also materially stepped up our efforts on retention with a greater focus on areas such as onboarding and settling customers post their first order purchase, as well as an enhanced focus on post-purchase experience, whether it is through direct communication with customers or continued improvement delivery experience or keeping them in the locked app ecosystem, et cetera, et cetera. What this does is it helps reduce churn and improve second-order purchase rates for these customers. So we're seeing an improvement in each of these three areas, which is sort of the internal trending at Chewy. Your last question is around, or your other questions are on mobile app. So I'll disappoint you by not sharing the specific details, but yes, I mean, as you would expect from the sources of traffic, mobile app is a healthy proportion, and yes, we have the ability now to be able to funnel these into the app. We're not predicting or providing guidance on the rate of this migration. Customer behavior needs to be understood, and there's a certain kind of organic trend that customers take regardless of your efforts. So it's a focus area for us and we'll continue to shine some light here as we move forward.

Thank you, Sumit.

Thank you, Trevor.

Thank you. Our next question comes from Dylan Carden of William Blair. Dylan, your line is now open.

Appreciate it. I'm curious if there's any nuance to margin as active customer growth returns to the model. And particularly, Autoship now 78 plus percent, presumably that's in large part because you have more mature customers making up the balance of the business, should that come in as active customer growth accelerates? And will you spend on marketing and how much into sort of a better demand environment would be the two ones that I'm most focused on, but anything you can add there would be helpful? Thanks.

I can start quickly, and Dave can add as he sees fit. The customers that we're acquiring are, in our opinion, higher-quality customers than what we've picked up in the last couple of years. We've stopped and are not keen on picking up customers just for velocity. So the quality of customers as we interpret them, particularly to metrics like, repeatable category penetration, autoship subscription rates, and three, their second order purchase or their overall kind of third order purchase settlement rates. These are sort of indicative metrics on customer quality. Secondly, the NSPAC curves in these customers has remained healthy. And given the efficacy of the operation at this point, helps us sort of achieve a higher flow through, even if we have to attract or bid competitively up in the funnel when acquiring them. Third, as you sort of just heard me share, there's a healthy level of traffic that visits our website, given our high brand awareness, that we didn't have the ability to convert. If we have the ability to pick up appropriate signals from this customer, then we should also have the ability to convert them effectively at a much lower cap than going out and fishing for these customers out in the marketplace. So I feel like we're appropriately focused here, appropriately disciplined, and appropriately bullish. Dave, anything to add?

Yes, if I could just build on some of what Sumit said here. When you think about nuance, Chewy is nuance to margin. If you extract out, you start with at-scale revenue, you start with the amount of recurring revenue that we have driven through Autoship. That then flows down into product categories and the expanding product portfolio that Chewy is now offering everything from kind of core e-commerce ecosystem all the way flowing through health care now flowing through services as well as additional improvements like Sponsored Ads. And so not only do you have the ability to retain existing customers in the Chewy ecosystem, providing better service, better products, more capability in terms of care for their pet within Chewy, but your value proposition then to new customers also continues to expand. And so, when you look at our increasing flow through for the second quarter, something like $56 million on $77 million of revenue, those are year-over-year numbers. And what you're really seeing is you're seeing more existing Chewy customers spend more in the Chewy active ecosystem. Then you're also seeing new customers that are coming to Chewy. You're seeing them exposed to more categories and spending more time as a new customer also in the ecosystem. So we're very pleased with the value proposition that we're providing to our customers. We continue to have a very, very high brand score with very satisfied customers and the trajectory to us in the backdrop of normalizing the pet industry is quite pleasing right now.

Very good. Thank you very much.

Thank you, Dale.

Thank you very much. Our next question comes from Anna Andreeva of Piper Sandler. Anna, your line is now open.

Great. Thanks so much for taking our question. And we have two. First off, just to follow-up on the positive net ads and congrats on that. So, sounds like the segmentation and the targeting initiatives that you guys have been working on are still early on and continuing. And, Sumit, I think you said, 2Q tends to be the peak for relinquishments. So, are you expecting net ads to be positive again for the third quarter? I know you've reaffirmed flattish for the year. And then, secondly, to Dave, really strong gross margins. Can you rank the biggest drivers within that? Just again, looking at Sponsored Ads, the mix and promotionality, and how do you feel about sustainability of those? Thanks so much.

Sure, let me actually start on both of those with net ads first. When we started and guided for this year, what we spoke about was that we expected net ads to be flat to slightly down in the first half of this year, and then we expected net ads to be flat to slightly up in the second half of this year, largely kind of becoming equal to where we finished fourth quarter of 2023. We haven't really changed that guidance. We do believe that we performed better in the first half than what we initially expected. We do believe that we're seeing some signals of a normalizing pet industry. We believe that the actions that we are driving specifically at Chewy are resulting in better than at least internally expected expectations or forecasts at the beginning first half of this year. But at this point in time, we're not really changing our guidance on net ads for the year. We feel like it's a little early to be doing that. I would characterize it as pleased with the first half, pleased with our efforts. We believe we're going to take share irrespective of what's happening macro, but we'll continue to enter the second half of the year with kind of the guidance that we gave at the beginning. With respect to gross margins, we've been very pleased with our gross margins, as you would probably expect. We guided full year gross margin now at about 29% for the year. Obviously, we posted higher than that in the first quarter, as well as the second quarter. The biggest drivers on a year-over-year basis with respect to increasing gross margin, one would be the increase in Sponsored Ads. We've spoken about Sponsored Ads having the capability to reach kind of 1% to 3% of net sales at a quite high margin. And we're at the low end of that range, I'd say, towards the low end of that range margin and we're at the low end of that range. I'd say, towards the low end of that range and we think that by the end of this year we'll be at the low end of that range in 2024. So continuing to make good progress on Sponsored Ads, We characterize that as kind of growth quarter to quarter to quarter to quarter throughout 2024 and that is what we're seeing. We're seeing that value prop resonate with our vendors as well as with our customers. Secondarily, in terms of the gross margin, we're continuing to mix up the business. We're continuing to expose more customers at Chewy to our full product portfolio. That includes healthcare. And so as we continue to do that we continue to mix up that business. So Sponsored Ads, health care, and then of course all the scale that we're getting out of our fixed fulfillment centers.

All right, fair enough. Thanks so much.

Thanks Anna.

Thank you very much. Our final question comes from Curtis Nagle of Bank of America Merrill Lynch. Curtis, your line is now open.

Terrific. Thanks very much. Two from me. Just one, I'm wondering if you could talk a little bit more in terms of competitive trends, particularly from the larger online platforms. I think you mentioned, and this is consistent with other calls, that maybe you were seeing, I don't know if it's pressure or just some ramping up on hard goods, but just generally speaking from the larger platforms, what are you seeing there?

Competitive trends quarter-over-quarter haven't really changed. We see secular trending towards e-comm continue. We see us picking up a healthy portion of that growth that is moving online. On hard goods, we've stabilized. Coming into the year, I mentioned hard goods as an opportunity for Chewy, and our teams have rallied behind that. We've added assortment. We've sharpened conversion without really incrementally driving up discounting too much. So it's not like we've actually overspent on our promotion side to drive the elasticity. So the results are more kind of organic inputs of conversion. So hard goods we consider as not declining more towards kind of stabilizing at this point. On consumables and health, we are competing very effectively, out competing in several areas across those type of lines of businesses. Chewy Plus paid membership has been trending as per expectation. Our rate of customer acquisition is exceeding internal forecasts. Our rate of conversion from free to paid is exceeding our internal forecast. Engagement remains high. So broadly speaking, I would characterize competitive trends as fairly stable on a quarter-over-quarter basis.

Did you have a follow up, Curt?

Understood. Yes, just a quick one on the clinics. Just sounds like in terms of acquiring vets, things are going well. Maybe dive into a little bit more in terms of what's resonating. Is it compensations? It's strengthen the brand? Where are you recruiting that's primarily from?

Yes, so I would characterize the effort as broad-based. So it's two things. It's A, the halo of the Chewy brand that has always been known, and we want it to be known for a customer's first mentality that carries over to our partners. So it's not just a customer's first mentality, it's a partner first mentality as well. Number two, we've really tried to understand the inputs of what drives vet satisfaction, vet retention. Some of these are as simple as picking up vets from the right stages of their career stage, vets that are looking for growth opportunities, vets that are looking to spend more of their hours treating patients versus their hours solving back office challenges or entering data. So we've taken these type of dissatisfaction drivers or satisfaction drivers and dissat drivers and turned them into satisfaction drivers, right? So we've -- our tech allows us to reduce the amount of work that a vet spends in back office by over 50%, making them more efficient, and also more available to spend time in the front office or treating their patients, which is what they like to do. We are spending time and building relationships with kind of sources of recruitment going all the way back to universities, associations, showcasing them, detect the power of technology, the power of experience combined together. So I think its early days, but our approach to the market has been one that kind of works backwards from the veterinarians and tries to solve an experiential gap via kind of mentality and technology both. And that's resonating. Sorry, happy to take a follow-up.

And Curt, if I could just build on Sumit's comment with respect to the brand. About half of the customers that have visited our clinics have subsequently placed orders at Chewy on our e-commerce site. And so, not only are we resonating with our vet community as well as our technician and kind of nurse community on the veterinarian side, but that service offering that has historically been very good at Chewy is flowing through not only on the vet care side, but then also it's synergistically flowing back to the e-commerce side as well.

Understood. Thanks for the insight.

Thanks, Kurt.

Thank you very much. We currently have no further questions. And this concludes today's call. Thank you to everyone for joining. You may now disconnect your lines. Thank you.