Good afternoon, and welcome to the Chewy Fourth Quarter and Full Year 2020 Results Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Robert LaFleur, President of Investor Relations. Please go ahead..

Thank you for joining us on the call today to discuss our fourth quarter and full year results for fiscal 2020. Joining me today are Chewy’s CEO, Sumit Singh; and CFO, Mario Marte.

Our earnings release and letter to shareholders, which were filed with the SEC on Form 8-K earlier today, have been posted to the Investor Relations section of our website, investor.chewy.com. A link to the webcast of today’s conference call is also available on our site.

On our call today, we will be making forward-looking statements, including statements concerning Chewy’s future prospects, financial results, business strategies, industry trends and our ability to successfully respond to business risks, including those related to the spread of COVID-19, including any adverse impacts on our supply chain, workforce, fulfillment centers, other facilities, customer service operations and future plans.

Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward-looking statements.

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.

For further information, please refer to the risk factors and other information in Chewy’s 10-K and 8-K filed earlier today and in our other filings with the SEC. 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 measurements are provided on our Investor Relations website, and in our earnings release and letter to shareholders, which were filed with the SEC on Form 8-K earlier today and in our 10-K. These non-GAAP measures are not intended as a substitute for GAAP results.

Finally, this call in its entirety is being webcast on our Investor Relations website. A replay of this call will also be included on our IR website shortly. I’d now like to turn the call over to Sumit..

Acquire new customers, increase share of wallet for existing customers, expand assortment, grow proprietary brands and health care offering, launch services, and when the time is right, expand the business outside of the U.S.

As we continue to successfully execute in each of these areas, we will also continue to invest wisely to grow our base of recurring revenues, scale our operating expenses and drive profitable growth over the long term. Let’s look at how our efforts are translating into tangible results. Increased wallet share is a truly powerful growth catalyst.

We captured 12% more initial wallet share from our 2020 new customer cohort than we did from their 2019 predecessors, and we accomplished this while absorbing our largest new customer cohorts ever.

An additional data point, which leaves us confident that our efforts are delivering results, is the fact that year one contribution profit per customer, which we calculate as gross profit less variable costs, has increased at an average annual rate of 16% over the past two years.

Reiterating what I mentioned earlier in my comments, these gains across share of wallet and profitability are being realized as a direct result of our efforts and reflect the impact of catalog extension, improved discoverability and the incremental contribution from high-margin verticals like healthcare, hardgoods and proprietary brands.

In the past three years, we have nearly doubled our total SKU count, including executing a sevenfold increase in higher-margin proprietary brand SKUs. Within healthcare, we are unlocking value for ourselves, our customers and our partners in this large and growing $35 billion market opportunity.

You will likely recall that we recently launched two services in the healthcare space, Connect with a Vet and Compounding. In 2020, these services were live just for a few months.

But in 2021, we will get a full 12 months of financial benefits these services provide as well as vital knowledge that we continue to accumulate as we operate and refine these businesses. In the year ahead and beyond, we will remain focused on expanding our customer base.

Sustained improvements in customer LTV continue to support our strategy of disciplined investing in advertising and marketing.

As we quickly and efficiently convert new customers into engaged active customers, our growing customer base, in turn, generates the profit that we then reinvest into acquiring even more customers, thereby completing the flywheel effect that drive both top line and bottom line growth. Additionally, we expect to continue leveraging SG&A.

Along the way, we may choose to make incremental investments to strengthen our employee value proposition. However, our playbook shows us offsetting these investments over time with efficiencies from the technology and productivity enhancements that we began implementing in 2020.

We are confident that these investments will drive long-term growth and profitability. More specifically, in 2021, we will invest approximately $60 million in higher wages and benefits, the bulk of which will be directed to our fulfillment and customer service team.

This investment is necessary to help us attract and retain team members, drive higher employee engagement and increase productivity over time. At the same time, we expect to see productivity gains accelerate in 2021 from the technology and automation investments we have made in our fulfillment center network.

You may recall that in October 2020, we opened our first fully automated FC. A month earlier than that, we began realizing a different style of efficiency when we opened our first limited catalog, high velocity FC. Given their launch timing, these FCs provided only modest ramp benefit to us in fiscal 2020.

In 2021, we expect to realize accelerated productivity gains from their full year operations. We also expect to open our second automated fulfillment center in Q2 2021 in Kansas City, and another limited catalog facility in Q3 2021. Additionally, in 2022, we will begin automation retrofits at select fulfillment centers.

We will keep you apprised of the specific timing of these events on our upcoming calls. We believe these investments in our people and automation are not only prudent, but they also have the potential to drive step function changes in our variable cost structure and contribute meaningfully to effective SG&A leverage.

Finally, I would like to share that having achieved our first full year of positive adjusted EBITDA in 2020 and our first quarter of positive net income in Q4, we have taken a meaningful step forward on our path to profitability and in demonstrating our ability to get big fast and get fit costs.

Going forward, our margins may fluctuate quarter-to-quarter, but we believe our profit trajectory is clear and positive. I will end my comments by reiterating that 2020 was an incredibly challenging and unpredictable year for all of us. During this time, Chewy performed exceptionally well and made significant strategic and operational progress.

We navigated the safety concerns of the pandemic and kept delivering for our pet parent and business partners. We proactively grew our market share by offering a wide level of service to the millions of new customers who adopted pets during the pandemic.

Further, we capitalized on the accelerated and sustainable shift of consumers to e-commerce channels. As a result, we grew our customer base by 43% and ended the year with 19.2 million active customers. Perhaps most importantly, we dramatically increased our market size by launching new services in the pet health and wellness space.

These expanded offerings help us reach additional customers and improve our ability to increase wallet share with our existing customers. We are entering 2021 with significant momentum, and we are confident in our ability to deliver. With that, I will turn the call over to Mario.

Mario?.

First quarter net sales of between $2.11 billion and $2.13 billion, representing year-over-year growth of 36% to 37%, when adjusting for the $70 million of estimated pantry stocking benefit we identified in Q1 2020; full year 2021 net sales of between $8.85 billion and $8.95 billion.

representing year-over-year growth of 25% to 26% when adjusting for the Q1 2020 pantry stocking benefit; and finally, full year 2021 adjusted EBITDA margin expansion of 50 to 100 basis points. As you update your models for 2021, here are a few other things to keep in mind.

You should expect to see our net active customer apps in 2021, returning to something closer to their pre-COVID levels, reflecting the normal retention patterns we see from any given cohort from the first year into the second year, and this will be especially pronounced this year given the size of the 2020 cohort.

At the same time, we expect NSPAC to increase in 2021 versus 2020 as pre-2020 customer cohorts continue to mature, and we capture a greater share of wallet from the 2020 cohort. And one final note.

With the PetSmart separation complete, we will bring a limited number of administrative functions like tax and insurance in-house that were previously run under a shared services agreement with PetSmart. Even with this change, the operational and financial impact of the separation is de minimis.

2020 presented us with many challenges, but it also brought about many beneficial changes in our marketplace. We were well positioned to meet these challenges and were flexible enough operationally to take advantage of the opportunities. As a result, our 2020 performance was strong across the board.

We added a record number of new active customers, produced strong revenue growth and generated four quarters of positive adjusted EBITDA, all of which demonstrates the clear progress we’re making on our path to profitability.

Looking ahead to 2021, we will continue to benefit from the evolving marketplace and our strategic execution should enable us to generate 25% revenue growth or more and further expand our adjusted EBITDA margins. With that, I’ll turn the call over to the operator.

Operator?.

[Operator Instructions] Our first question today will come from Nat Schindler with Bank of America..

I just really wanted to get a little bit more into deceleration you’re baking into guidance. I understand it was a pretty radical year this year in how things change.

But obviously, all those customers who got pets and all that new customer growth that occurred all throughout this year is going to be additive to growth for the bulk of next year at least, well, on average half of the year.

So, shouldn’t the deceleration curves, barring the 3 percentage point hit roughly that the pantry stocking did in 1Q of last year, barring that, shouldn’t be a much smoother slower deceleration in the subscription model like yours?.

Hey Nat, this is Sumit. I’ll take that one. So, our guidance has us adding $1.8 billion in top line sales this year on top of a record year in 2020. And I think it’s important to, first of all, say that we remain confident in our ability to execute through the current environment, which, in our opinion, remains challenging.

So, giving guidance to us contains reflecting on all of the headwinds and tailwinds and appropriately balancing the risk and opportunity to be able to provide a point of view this early in the year when we understand consumer behavior and the environment to be evolving and challenging at the same time.

So overall, we feel good about these numbers and our ability to execute towards them. And I think another thing needs to be said in the way that we should interpret this.

See, we believe that with this guidance of $1.8 billion incremental growth, we’re going to capture more than 50% of growth that will happen in the online channels in 2021, which is a powerful statement in itself.

So, we’ll continue to sort of evaluate this and continue to keep you updated on how we -- if we update our models internally at the right time..

Just a quick follow-up on that.

How much of the incremental growth in the online channel in 2020 do you think you captured?.

If you do the math, the way -- we believe that online grew roughly $6.2 billion year-over-year. And this year, buy online, pickup in store, which was a popular kind of mechanism is rolled up under online. And if you back that out, pure e-commerce, pure-play e-commerce grew roughly $4 billion.

And Chewy grew $2.3 billion off that $4 billion, so capturing 57% of pure-play e-commerce growth..

Our next question will come from Brian Fitzgerald with Wells Fargo..

Thanks, guys. A great quarter. The average annual increase in year one of the contribution profit at 60% over the past three years. Could you tell us what that was in 2020 and in ‘19, maybe more specifically? And then any thoughts on how that might continue to trend over the next three years? And then, I got one quick follow-up..

Hey Brian, it’s Sumit. I’ll take it. So, we haven’t broken down numbers. As you know, we don’t provide contribution profit level detail.

What we are observing and why we wanted to come out and share this is because it was indicative of the results that we’re observing as a result of the -- direct result of the efforts that we’re putting in to drive consumer LTV and profitability in the portfolio.

And so, when you sort of roll these back, they answer the second part of your question on a longer term basis.

These gains across share of wallet and profitability as we evaluate them internally are being realized and reflect the impact of catalog expansion, improved discoverability and the incremental contributions from higher margin verticals such as health care, hardgoods and proprietary brands.

As we mentioned in our in our remarks, I believe -- I believe we mentioned this. We’ve nearly doubled our total SKU count in the last three years, including executing a sevenfold increase in higher margin proprietary branded SKUs.

So, when you look at sort of margin growth from here on out, we believe we’re still sort of in early innings of what remains really focused roadmap on how we plan to execute our playbook and grow margins from here on out.

Less than a third or approximately a third of our total customer base is today buying a proprietary-branded product, which leaves an opportunity for two-thirds of roughly 20 million customers to be exposed to higher margin proprietary brands.

When you look at health care being a newer vertical, that number is far lesser than the one-third that I mentioned, providing us even more headroom to grow.

So, as we sort of continue to play out our playbook on putting more focus on innovation around products and services and the complementarity between them, you should expect us to drive incremental gradual profit from here on out. That’s how we think about that..

Great. And just kind of a related one for me is just the increase in wallet share you’ve seen during the pandemic.

Just wondering if you could talk us through maybe how many new pet adoptions and new pet purchases might be impacting that -- for example, if you have a higher mix of new pet parents, how that is influencing the wallet share, the purchases of kennels and bedding? Maybe said another way, within the life cycle of a pet, right, because maybe an odd analogy, but the newborn gets no holds bar, they get everything new and fresh.

And then, by the time they get old and you have you 2 or 3 or 4, you start to recycle clothes.

And just wondering if you’re seeing any impact from how you think that meters through the wallet share?.

I think that’s -- it’s a great question. So, for us, if you recall, a data point that we shared this round in the script, we said we’ve seen a 35% increase in creation of pet profiles for puppies and kittens. And a 40% increase in pet profiles for adoption. Well, I mean, that Chewy puppy, so sure, you might not recycle that crate as early as next year.

First of all, puppies grow out of crate, so you likely have to, depending upon the kind of puppy that you brought home. But let’s assume hypothetically that you didn’t.

Well, even then, I think what makes the category attractive to us is the fact that pet sales are mostly recurring in consumables and health care and the puppy is going to grow up and eat more food and shred more toys and require greater health care needs. And we are here to service all of them.

So, any kind of impact that we’re seeing right now, we do believe, ultimately, there’s sustainable momentum behind these kind of profiles or this kind of data that we’re capturing. Net-net, we have -- we kind of looked at our database last week.

We have over 170 million data points, across these pet profiles that are created that feed in into our recommendation and personalization services and engines and provide us a greater ability to engage customers from here on out.

So, the game is very much on, and we’re very much focused on continuing to engage customers and gain share of wallet there..

Our next question will come from Steph Wissink with Jefferies..

Thanks. Good afternoon, everyone. Congrats on a great year. Sumit, I have a question for you just on the multiyear. If you look back at the IPO model, it looks like you’re running more than 2 years ahead of your EBITDA target at that time.

So, I’m curious if you can contextualize for us how much of that is leverage related to the underlying gains of the food and supplies business? And how much of that is kind of the pull forward of some of the strategic initiatives that you listed in your script, like health and compounding and other things? And how should we think about the leverage in the model?.

Great question. So, I would say that we are -- first of all, we’re executing exactly the roadmap, we said we would. The scale benefits provide us an ability to drive more fixed cost leverage in our investments and higher variable cost scale in our fulfillment center network, given the density of volume that we drive through that network.

The shift in gross margins that you observed on top of the SG&A lever is primarily driven -- I would -- if I were to characterize the impact rate of contribution of net new verticals, I would say, 60% is driven by our work towards increasing assortment and choices across proprietary brands, health care and hardgoods and roughly 40%, just -- I’m just doing some loose math here, is driven by incremental scale across the totality of the business and the Autoship leverage that we get, given incremental sales that we push through the Autoship channel.

Mario, anything to add?.

I mean, I would add to the point on Autoship. But if you look at the sales for Autoship in last year alone, about $4.9 billion as we reported it, that’s greater than the entire sales -- total net sales in the previous year. So, you can see how that portion also is driving leverage.

And we said how that impacts not only our ability to better plan or inside our four walls of our warehouses, but across both, our incoming vendors or our OEMs, and then our logistics partners. So, it is a point of leverage and gross margin as well..

The way we think about it, what’s most important, what’s helpful is food is a staple. So, that makes up the necessity of why you would likely visit Chewy. Well, we’re changing that also. But if you just stick with the legacy logic, that’s what attracted you plus the proposition of high-touch, high bar customer service.

And then our ability to build a basket around that has significantly improved.

Well, now, we’ve actually -- with the choices that we’ve expanded and improved discoverability, you’re not only discovering food, you’re actually interacting with us via content channels and figuring out that Connect with a Vet is a service that’s available to you that you might have heard by word of mouth, and health care is an area that we service you effectively in.

We’ve got a Disney collection that is exclusive to us that nobody else has. I think we’re creating these sort of -- these differentiations and these advantages that we believe complement each other and ultimately go back and provide benefit to the entire basket and that that scale provides leverage to our fixed cost infrastructure..

Our next question comes from Doug Anmuth with JP Morgan..

Hi. Thanks. This is Katie [ph] on for Doug. So, hoping you can provide an update on your Connect with a Vet initiative. What have the early learnings been thus far? And how does this shape your expectations around monetization this year? And then, on pharmacy, last quarter, you laid out a target for $500 million of GMV in fiscal ‘20.

Curious where you came in relative to your expectation? And then, also how your thinking about the growth potential of pharma this year? Thanks..

So, Connect with a Vet is -- we’re pleased with the progress of Connect with a Vet.

As you -- just for the benefit of the audience, it’s a telehealth service, primarily tele-triage that we launched in Q3 that allows us to connect customers with licensed veterinarians to be able to service their needs on most commonly asked questions or health and wellness-related concerns. We’re pleased with the progress of Connect with a Vet.

At this point, we’ve completed -- we’re very much in learning mode. So, we’ve completed over 30,000 sessions with customers, and we’re learning a ton. Our Net Promoter Score remains high, above 85. 70% of the customers who’ve interacted with the service have provided a 10 on 10 rating, which we’re pleased about.

Very recently, we’ve expanded Connect with a Vet from purely a chat functionality to video capability, which we’re now leaning into progressively. And we’ve also expanded hours of operation -- or sorry, in about two weeks, we’re going to expand hours of operation from 8:00 p.m. to 11:00 p.m.

to add greater availability of the service to West Coast customers. Today, the service continues to remain available to Autoship customers for free. We do believe in monetization of the service and availability of it to our entire customer base. And I will come and share that with you closer in to the time when we’re ready to do that.

And then on healthcare -- or your second question was about pharmacy. Yes, overall, we did achieve the numbers that we had shared with you about the $500 million net sales for pharmacy overall. We did hit that. And your third question was our potential or future growth on pharmacy.

Yes, it’s just a vertical that we continue to remain excited in, right? Pharmacy is -- when you look at prescription as a vertical, we believe it’s roughly $7 billion to $10 billion in market size, growing at 10% CAGR, which would be even in a pandemic year growing at 2x the rate that food and supplies is.

And we are early stages of or early innings in that playbook and we remain excited about the upside potential here..

And Katie, this is Mario. Just to add one more data point to that. You’re right that we said about $0.5 billion gross revenue. But of course, not all that flow through our financials, about $360 million did..

Our next question will come from Oliver Wintermantel with Evercore ISI..

Mario, you just mentioned ownership and as a percent of sales, it looks like that continued to decline for the third quarter in a row. Is that just because people didn’t have yet the chance to sign up for Autoship, or is that the expansion of more verticals and more health goods.

If you could give us a little bit more details on that, please?.

Yes. So, you’re right, there was a small change, but that’s all within the variance that we would expect any given quarter. If you look at for the full year, it was 100 basis-point difference between last year and this year. But remember, this year, we also had a record number of active customers.

And as you pointed out, that is more about timing and when we expect those customers to sign up to Autoship to discover the benefits there. But, that is certainly within range of what we’d expect..

Got it. And a quick follow-up just on the gross margin line. You mentioned half of it was structural and sustainable, the rest was less promotions.

If I look into 2021, if that structural keeps on playing out and we get back to more promotion, should we -- is it that easy that we should expect another half of that gross margin expansion expected in 2021, or what are the other moving parts on that, please?.

So, I’ll start and maybe, Sumit, if you want to add something to it. But, we have said that the improvement that we saw in the fourth quarter, half of it was structural. None of that is any different than 2021.

When we think about the vectors that we’re firing against right now, continuing to grow our hardgoods catalog, healthcare proprietary brands, expanding share of wallet, and increasing what we sell to our customers, all those things are in place.

What you may find is quarter-to-quarter, there may be some fluctuations in gross margin, and that’s simply because we do see some activity in certain times of the year in terms of promotions and maybe some more advertising in the marketplace. But the reality is, structurally, those things, we don’t expect to change..

The only thing I would add is, at this time, we’re not baking in any top line or bottom line impact related to any material disruptions in supply chain or logistics networks. So far, we’re assuming recovery, and we’re assuming a quality of recovery that does not impede the momentum of the business.

And everything that we’re hearing right now seem that is an assumption that we’re comfortable with. In some instances, we have the proper amount of inventory and the inventory might be unevenly distributed through our fulfillment network.

And while that does not result in any out of stock situation, it does lead to higher levels of cross shipment or split orders that result in suboptimal shipping costs that rolls up to gross margin. So, I think there is some pluses and minuses.

But on the balance, we do expect customers to continue to engage and discover the higher margin verticals that we continue to focus on and therefore provide gradual structural changes to gross margin..

Our next question comes from Seth Basham with Wedbush Securities..

My question is around your fulfillment expense outlook. For 2020, with some of the additional costs that you called out, seems like you did deleverage your fulfillment expenses.

Should we think about the outlook for 2021 and the moving pieces with additional investment in wages, et cetera, would you expect out to leverage fulfillment expenses or not?.

Yes. So, Seth, this is Mario. I’ll answer that. We did in the -- on the prepared remarks and the earlier discussion points, we said that we were investing the $60 million in wages and benefits. Most of that is going to be in fulfillment and customer service. We also mentioned that we’re launching two new fulfillment centers this year.

And so, you would expect there, the same type of investments we made in the past, especially last year, because one of them is going to be a high velocity, limited catalog fulfillment center, just like the one we launched in Kansas City last year.

And the other one is going to be a fully automated or an automated facility, much like the one that we launched in October in Archibald, Pennsylvania. So, if your question is, do we expect those investments to be reflected in our SG&A this year? The answer is yes..

Got you.

Well, when we think about the composition on your margin expansion for 2021, are you expecting both gross margin and SG&A leverage?.

I think, Seth, we just provided guidance, and the checks and balances so far flow through the guidance that we provided for the full year. And as the quarter progresses, I think we’ll keep you updated and share more information on a granular basis..

Our next question comes from Peter Keith with Piper Sandler..

It’s Bobby Friedner on for Peter. Thanks for taking my question. I wonder if you could discuss what you’re seeing and how you’re thinking about price inflation of pet food in 2021.

And how should we think about retail pricing across the entire portfolio of products in inflationary environment?.

Your question is a little broad, Bobby. So, I’ll try to answer this as best as I understand it, and if not then, please clarify. As we’ve mentioned, pricing environment has remained relatively stable and prices -- the discounting levels are relatively muted on a seasonal basis. And that is driving some higher prices and inflation in the marketplace.

But, pet is a category that we believe is resilient towards recession or inflation. And in that particular manner, we haven’t really seen an impediment to demand our momentum in the business right now. We expect that to continue to be the case.

And as supply chains start recovering and inventory positions become healthier, we do believe this to abate and ultimately go back to the pricing environment that we were pre-pandemic..

Our next question comes from Lauren Schenk with Morgan Stanley..

Great. I guess, marrying a few of the previous questions. When we look at your guidance for the 50 to 100 basis points of margin improvement versus the revenue guidance, I think it implies a flow-through rate of around 6%, understanding the $16 million in wages, which brings you closer to 9.5%.

But, can you just help us think about if there’s any other sort of onetime investment, maybe the second automated DC that is holding back flow through or potentially offsetting some of the COVID costs that I would have thought would have sort of benefited flow through this year? And then, as a follow-up, maybe this is a piece of it, but we’re hearing from a variety of different retailers about shipping delays, freight cost increases, anything that you’re seeing there on sort of a like-for-like basis heading into 2021? Thanks..

Okay. Lauren, this is Mario. I’ll take the first part. So, when you think about the guidance we provided, there are several factors that go into it. And obviously, we’re providing the guidance based on the balance of risk and opportunities we see for the year.

So, if you think about the revenue, we mentioned we have positive demand trends that carry into the first quarter. Pricing promotions remain stable, which are going to be the pluses to the guidance range. On the other hand, the customer behavior itself is still -- post pandemic is still evolving.

And there are some industry-wide supply chain challenges for certain products. So, those are we consider the headwinds. So, I’ll give you the plus and minus on that to the -- on the revenue guidance range.

And then, to the adjusted EBITDA portion of it, we called out a few factors that we know this year or that we expect this year to be in a certain way, things like marketing, our investments there, then launch of the two new FCs that you mentioned, and then the incremental $16 million or so in wages and benefits for our team members.

And it is those factors that, depending how they materialize, it’s going to determine exactly where we end up in that guidance range, and then, what is the actual flow through to EBITDA? So, as we’ve said before, look, we operate the business over the long term.

So we, this year, may choose to make some short-term investments, including marketing and additional capacity. That may impact our profitability in the short-term but produce benefits over the long term. So, that’s all in the guidance range we provided..

Lauren, I think advertising and marketing is an interesting one in 2021, and it’s hard to predict sitting so far up in the year on how this line is actually going to play out. So, it’s helpful to sort of extract ourselves from the current and look at it as a 30,000 foot view.

We’ve been -- first of all, we believe 6% to 7% spend of net sales in advertising and marketing to be the right range for a business like this. And the past couple of years, specifically the last three years, we scaled marketing expense from 11% of revenue in 2018 to this past -- we were 8.8% in 2019 and then 2020 was 7.2%, 7.3%.

The 160 basis-point improvement, as we mentioned in the script, we believe half of that was driven by organic driven efficiency. And so that would have put the scaling at right about 8% of marketing.

And so, I think starting with kind of current inputs on how we scale marketing, how we understand evolving trends, how do advertising platforms evolve and the ambiguity around that plus any opportunity that we find to be able to invest in marketing and drive scale. It’s a tough area to talk to right now.

So I think as we play the quarters out, we’ll likely keep you more updated on our long term -- our yearly thinking here..

And let me just add one more item because I want to make sure that it’s clear how we think about the EBITDA for the year. But the guidance we provided would have us adding over $100 million of EBITDA to the bottom line, even while we grow $1.8 billion, both at midpoint of the guidance.

So, this is a pretty significant increase, both top line and bottom line..

And then, your second question was about shipping. The variability and peakiness in demand and forecasting in a business is punitive than planning a supply chain or transportation network.

And that is where we believe -- we’re proud of the teams for jointly planning our forecasts and coming through with a high degree of forecast accuracy, of course, supported by the fact that 70% of our sales, roughly 70% goes through the Autoship model.

And so, in some way, we provide a predictable and stable baseload forecast to our suppliers and transportation carrier partners that then enables them to optimize their micro and macro level asset utilization.

And that, combined with the strategic nature of our partnerships, I mean, it’s shielded us from any material changes in rate structure during the holiday season or present fleet..

This concludes our question-and-answer session. I would like to turn the conference back over to Sumit Singh for any closing remarks..

Thank you very much for the questions, everybody. Thank you..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..