IAC at JPMorgan Conference: Strategic Focus Amid Market Uncertainty

On Wednesday, 14 May 2025, IAC/InterActiveCorp (NASDAQ:IAC) presented at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference. During the conference, IAC’s leadership highlighted strategic initiatives aimed at unlocking shareholder value while navigating mixed economic signals. The company emphasized its focus on execution, capital allocation, and strategic catalysts, despite challenges such as tariff disruptions.

Key Takeaways

• IAC is prioritizing execution, capital allocation, and strategic catalysts to distill shareholder value.
• Dotdash Meredith’s cookieless targeting solution, Decipher, is a significant focus, showing potential to outperform traditional cookies.
• Chewy is concentrating on growth through customer engagement and profitability improvements, with a focus on health and wellness categories.
• IAC completed $200 million in share repurchases this year, with a strong cash reserve of $900 million.
• Chewy aims for 10% EBITDA margins driven by gross margin expansion and operational efficiencies.

Financial Results

• IAC Financial Performance:

- Dotdash Meredith’s digital revenue exceeds $1 billion, with $300 million in adjusted EBITDA.

- IAC holds $900 million in cash and $800 million in Net Operating Losses to offset gains at MGM.

- $200 million in share repurchases have been completed year-to-date.

- Premium advertising at Dotdash Meredith remains strong, though tariff disruptions pose potential Q2 and Q3 slowdowns.

• Chewy Financial Performance:

- Chewy projects over $1.2 billion in net sales for fiscal ’25.

- Anticipates nearly 5.5% adjusted EBITDA margins and approximately $525 million in free cash flow this year.

- $950 million was returned to shareholders last year.

Operational Updates

• IAC Operations:

- Completion of the Angie spin-off and management restructuring with Joey Levin as Executive Chairman of ANGI.

- Focused on reducing the market value discount of its holdings through strategic divestitures.

- Dotdash Meredith’s core traffic declined 3% in Q1 but showed growth in March.

• Chewy Operations:

- Chewy is the third-largest direct-to-consumer shipper in the U.S., with 80% of revenue from subscription-based auto-ship customers.

- About 85% of revenue comes from nondiscretionary categories, and healthcare represents 30% of sales.

Future Outlook

• IAC Strategic Direction:

- Continued focus on M&A opportunities and leveraging strategic catalysts like spin-offs.

- Aims for growth from core sessions and improved monetization through initiatives like Decipher.

• Chewy Strategic Direction:

- Focused on increasing the NEST pack by introducing customers to more categories.

- Expects approximately 80 basis points of year-over-year EBITDA margin expansion.

Q&A Highlights

• The pet industry remains stable in terms of household growth, with Chewy reducing churn across categories.
• New clinics are attracting a significant percentage of new customers, contributing to growth.

For more detailed insights, please refer to the full transcript below.

Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:

Corey Carpenter, Internet analyst, JPMorgan: right. Good morning, everyone. Welcome to day two of the conference. Corey Carpenter, Internet analyst at JPMorgan. Pleased to have Chris Halpin, IAC’s COO and CFO with me today.

Chris, thank you for joining.

Chris Halpin, COO and CFO, IAC: Thank you for having me, Cory.

Corey Carpenter, Internet analyst, JPMorgan: So just starting off higher level, IAC is a different company every year, constantly evolving. You just spun off ANGI. So for those who haven’t followed the story closely, could you just level set what the IAC portfolio looks like today?

Chris Halpin, COO and CFO, IAC: Sure. And for those interested, we’ve posted a comprehensive new investor presentation on our website. There are a mix of fully owned consolidated companies as well as minority holdings and then other assets. We’ve got Dotdash Meredith, the number one digital Internet and print publisher, over $1,000,000,000 of digital revenue and $300,000,000 of adjusted EBITDA on a trailing basis. We have our 23 stake in MGM Resorts International, a leading operator in gaming experiences, both in person and digital worldwide.

We have Care.com, which we fully own, number one provider of online access to caregivers for your child, senior and pet. Our 32% stake in Turo, the number one car sharing platform. Vivien, leading health care staffing platform. Our search business and The Daily Beast and then $900,000,000 of cash at parent IAC. Okay.

Corey Carpenter, Internet analyst, JPMorgan: And so along with the Angie spin, you also made some changes to the management structure. Hoping you could talk about those, and is this something you think of as more permanent or a temporary shift?

Chris Halpin, COO and CFO, IAC: Yes. When we spun off Angie at the March, our CEO, Joey Levin, transitioned out of IAC into Executive Chairman of ANGI, where he’s now working with Jeff Kipp, CEO at ANGI to build that company. We do not have a CEO at ANGI sorry, at IAC. Barry Diller, our Chairman and Senior Executive is active in the company, and he has three direct reports, COO and CFO. Kendall Handler, our Chief Legal Officer, reports to Barry as does Neil Vogel, CEO of DDM.

Barry is active in DDM, in MGM and in capital allocation as well as The Daily Beast. I run IAC day to day and have the CEOs of Care, Vivian and Search report to me and then also oversee our holdings in Turo. And that’s what we’re doing. It’s not unprecedented for IAC to not have a CEO. In fact, it was true ten years ago.

And also it’s pretty similar to how we ran things a couple of years ago when Joey was CEO of ANGI and heavily invested in spending his time there. Barry and I were overseeing DDM and working with Neil and team during that period. And I’ve had other companies report to me over time. So it’s working well. We’re energized and pretty clear on where we want to go.

Corey Carpenter, Internet analyst, JPMorgan: So two kind of higher level questions, and we’ll go into each of the portfolio businesses. Maybe just first across the portfolio, what are the priorities for IAC in this post ANGI world?

Chris Halpin, COO and CFO, IAC: Yes. We when we look at ourselves, even with the some run up in the stock recently, When you net out the value of our MGM stake of 64,700,000.0 shares there and the $900,000,000 of cash at IAC parent, all of the other things I listed earlier are essentially trading for no value. And as a reminder, we have $800,000,000 of NOLs at IAC we can use to offset gains at MGM, etcetera. So our focus as shareholders would want it is shrinking that discount, distilling value and making it inarguable the value of those private holdings. There’s really three prongs to that priority: execution, capital allocation, and then what we call catalysts.

Execution is our businesses, DDM, MGM, Care, Turo, Vivien, etcetera, just driving revenue growth, free cash flow generation, building the best products, content, marketing, sales, etcetera, and demonstrate the value, continue to delever at DDM. We were thrilled to get below 4x leverage there last year and continue to build cash flow there, both to delever and for corporate purposes and build equity value and also reduce corporate costs at IAC, which we’ve been active on and we’ll continue to provide information there. Second step, capital allocation. That’s capital return. We bought back $200,000,000 of shares so far this year.

We will continue to look at that. We get the question, would you buy more this year? We could. We’re also the second step is M and A. We’re actively looking at opportunities there to either invest through our existing portfolio companies or buy new platforms, large or small, but create equity returns there.

And then the third element of capital allocation are strategic divestitures. We said we would pursue attractive transactions involving our smaller companies. Should they arise, we know they’re strategic assets and they can play into consolidation, and we’ll keep looking at that to free up cash. And then the third step is catalysts. We spun ANGI last month or two months ago.

We will we’ve done that throughout things like that throughout IAC’s history, and we will pursue catalysts if we think they will distill down value and create value for shareholders.

Corey Carpenter, Internet analyst, JPMorgan: So you typically have a unique view on the economy just given your exposure to a number of different end markets. Maybe at a high level, what are you seeing in the macro environment and how is it impacting your portfolio?

Chris Halpin, COO and CFO, IAC: We spent a lot of time looking at this. And in my time here did the same thing in ’twenty two when the various inflation, the Ukraine war, etcetera happened. Right now we’d say it’s unclear in the sense that we stare closely at the data, we look for patterns, we look for trends. There’s nothing that specific you’d look at and say, you see a downturn coming. It’s more of an apprehensiveness that things may lead to a slowdown.

In DDM, we’ve got a pretty good picture. We’ve said last week on earnings, premium advertising, which is direct and is the biggest part of our advertising business, has hung in well. Brands are still committing, spending, agencies are. And we’ve had this is a great fact about our diversification. We’ve had categories like health and beauty and even travel offset softness in categories like food and bev and home where you would see more of tariff concern.

But that’s held in pretty well. Algorithmic pricing, which was up strongly in the first quarter, has slowed down and is kind of flat to up a few percent. That’s the spot market and has the quickest impact. And then on performance marketing, consumers are still spending strongly and sort of aligns with what we heard from Visa and Bank of America and others maybe being pulled forward or represent real solidity, but we don’t see any signs of weakness there. Other businesses, MGM talked about how they feel well positioned for the year.

Care, we sort of squint and worry about changes in conversion or the such. But the more we look at it, it’s hard to notice any pattern there of softness. And then we are continuing to talk to other competitors, to other companies, partners, etcetera. What we built into our guidance was a slowdown in Q2 or in Q3. I think the key thing and when I say we talk to partners, CPG companies, brands sorry, retailers, they are wondering what their inventory position will look like in July, August.

And that’s due to the trading disruption, which hopefully with detente on tariffs will improve. That’s where there’s uncertainty right now, where we would think, given the detente and the strength of the consumer and other things, fourth quarter would be in good shape right now. And we were steaming along well headed into the up until the economically until the tariff disruption. So what we’ve assumed in our guidance is a bit of a slowdown in Q2 and Q3 and then but no significant recession and what we see aligns to that.

Corey Carpenter, Internet analyst, JPMorgan: Okay. So let’s spend some time on Dotdash Meredith specifically. Starting high level, it’s been over three years now since you acquired Meredith, merged with Dotdash. A lot has changed in the digital publishing space during that time. How are you feeling about just the state of the business today?

Chris Halpin, COO and CFO, IAC: We feel very good. The collection of assets and capabilities at DDM are a true differentiator in the digital and in the publishing world. Huge scale, both in sessions, in reach. We’ve got the leading brands and sort of unrivaled segmentation ability and scale across food, entertainment, beauty and style, home, also leading properties in health, travel and finance. We’ve got exceptional content machine that continues to produce timely both timely and new content and evergreen content and serve a variety of users the number one ability to test, review, rate, recommend products, which drives our performance marketing engine.

And then we feel like we’ve got the best ad tech stack and site technology stack anywhere. And we’ve got Decipher. I’m sure we’ll talk a lot about that. But our ability to guarantee performance and offer intent driven ad targeting across our sites and now across third party sites, we view as a real competitive engine. We’ve got a great sales force that sells it.

And we’ve just continued to make progress there. And then it gets less attention, but the team has done a great job managing print. That’s outperformed honestly our expectations. We’ve got our magnificent seven titles that we invest behind that are we’ve got quality, and we use that profitability to offset our corporate costs, and we’ve continued to chip away at those. So feel very good about the property growth opportunities and free cash flow generation.

Corey Carpenter, Internet analyst, JPMorgan: So I think two of the priorities you talked about this year are Decipher and going to direct to consumer, maybe starting with Decipher, your cookie less targeting solution. What type of impact is this already having on the business? And could you talk about your plan to roll it out across the open web?

Chris Halpin, COO and CFO, IAC: Yes. So Decipher is a great example of using proprietary data and analytics and AI to take a totally different approach to ad performance and monetization. Our properties are overwhelmingly intent driven. So you’re going on food and we have signal within those properties, whether it’s food, home, beauty, etcetera, that we don’t need to rely on cookies to drive performance. We do predictive analytics around the behaviors, the interest and the consumption patterns of people on those sites.

Our OpenAI partnership, which we announced a year ago, has further augmented that, One, through we’d mapped a number of third party sites historically, but we were able to weave in much broader selection of the Internet. And then secondly, we can weave in video and image, which OpenAI can do, but we never would have been able to do into our scoring and predictive analytics. So we go to advertisers with Decipher, and we took a crawl, walk, run approach as we ramped it up, have them test it, have it perform, outperform cookies. We’ve got 40 plus case studies of it outperforming cookies and then blowing away uncookied platforms like iOS and then ramp up their spend. Decipher is part of over half our premium deals, and premium is twothree plus of our digital advertising.

And Decipher users spend significantly more than non Decipher users. So we will continue to ramp that up. It’s a great calling card. And then we’re rolling it out through Decipher Plus to third party inventory. And this is always part of the strategic roadmap where we have now scored comparable sites in our categories, food, travel, health, home, etcetera, and can use Decipher to identify underpriced attractive inventory.

We guarantee performance to our advertisers and generate attractive margins. And from our advertisers’ perspective, it’s getting them decipher performance on even more inventory, and we think it can be a meaningful contributor to growth in ’twenty six and beyond.

Corey Carpenter, Internet analyst, JPMorgan: So touching on your other initiative, direct to consumer, maybe why is this a priority? And could you talk about some of the initial offerings you’ve rolled out, like the People app and My Recipes and the response you’ve seen?

Chris Halpin, COO and CFO, IAC: Yes. Increasing direct consumer has been a major point of focus since we closed the Dotdash Meredith acquisition. Part of that was we now had exceptional brands within Dotdash and Dotdash Meredith, and it was on the advanced tech stack and performance stack. So we could combine exceptional trusted brands and infrastructure with best in class performance. We’ve said that when the deal closed, about 60% of DDMs aggregated traffic came through Google search and then another 10% plus came through Facebook.

We have transitioned that to today. It’s about onethree Google search and just a few percent coming from Facebook. And we’ve really used the power of the brands, direct relationships, things like e mail and also repeat traffic, direct nav as well as off platform traffic, which isn’t really captured in our sessions data, but off whether it’s social media, Apple News, etcetera, to enhance our consumer engagement. And you can do it when you have the brands, when you have the content generation and the innovation that we have. The desire to keep expanding direct relationships is also manifesting in our new products.

So we’ve launched the People app. There was no app before. It is we spent a lot of time Neil and team spent a lot of time making sure the product was much more in keeping with the sensibilities and experiences that users expect in entertainment content, think social media, etcetera. And it’s also an attractive platform for our advertisers as well. So that is a direct touch point.

We’ll continue to ramp it up, have proprietary content. We loved what happened around it with the Met Gala. And then secondly, My Recipes. And if you take a step back, in food, we have tremendous scale and we have segmentation from at the tip of the spear or the top of the pyramid of food and wine across various other properties. And then we have the massive Allrecipes, which is everything food and people posting and testing and rating recipes.

We built My Recipes, which is essentially a locker that you can keep your recipes on our platforms and others, a great engagement engine, a great discovery engine. And we’ll continue to roll out new products like that to drive repeat engagement, to have direct user relationships, and we’ve had a lot of learnings and feel like there’s more opportunity there.

Corey Carpenter, Internet analyst, JPMorgan: So I’ll skip around a bit.

Unidentified speaker: So I

Corey Carpenter, Internet analyst, JPMorgan: do want to ask about AI. Certainly a lot of debate and concern just around the risk generative search could hurt publisher traffic across the web. You’ve cut your dependence on search significantly, as you just said. But how are you thinking about this risk, and have you seen any notable impact to date?

Chris Halpin, COO and CFO, IAC: Yeah, we’ve been thinking about this risk since we first saw we actually had OpenAI, Sam Altman presented at our off-site in December ’2 and demonstrated ChatGPT three to us. And so was consciously we thought about the opportunities and risks there. We’ve been tracking the biggest step so far was when Google rolled out AI overviews about a year ago. They’ve been trialing different things. We’ve been tracking closely.

We’ve publicly talked about the frequency of AI overviews appearing in the top searches that are relevant for DDM’s titles. It’s about 35% right now, varies across property. So and then in terms of impact on click through, we’ve seen some decline, nothing massive, but we’re tracking it closely. We may be benefiting relative to other publishers that our brands are so trusted that we have better attribution and appearance in the AI overviews. And then also our a lot of our content areas, you’re not going to go off just a straight AI overview.

You want to get deeper into how do you renovate your home or do such decor, throw a party or go into this health issue. So we may have better experience. But when you think about onethree of our traffic or so coming from Google search, about 35% frequency and then some small deprecation in click through. It’s not a material percentage. We track it closely.

And I would say the bigger impact the Google search experience for consumers has degraded over the last few years. But in many ways, a lot of that happened in ’twenty three when a lot of Reddit was inserted at the top of the page. And we’ve been tracking it. It’s really been around diversifying and building other channels. But the value what we can do is build the value of our brands and also our repeat and direct relationships with consumers.

Corey Carpenter, Internet analyst, JPMorgan: Last one on DDM, given the time. So near term macro side, you talked about the programmatic changes, but you’ve talked also talked about double digit growth for the long term. What gives you confidence in getting there? And is there a certain algo you target in terms of sessions or monetization?

Chris Halpin, COO and CFO, IAC: Yes. We think about growing traffic. Q1 core traffic was down 3%. We expected weak traffic in January and February, tough comps, fewer day. We also were losing some growth for Easter in March, but also the fires had a bigger impact on entertainment than we anticipated.

And I think we’re going have to lap the news flow associated with presidential news this year at some point. But we were growing again in March, and we expect some element of growth in sort of our algorithm from core sessions. We also expect continued improved monetization, both premium and programmatic. And this is steady state medium term, put aside whatever happens, current macro. And Decipher aids in that.

And then we expect continued off platform growth via Decipher plus things like Apple News, other licensing, etcetera. So that mix, we see getting us to steady state 10% plus digital revenue growth.

Corey Carpenter, Internet analyst, JPMorgan: Let’s go to MGM. Your stake has grown to 23% since your initial investment in 2020, thanks to share buybacks that they’ve done. You’re well in the green on the investment today. What’s the rationale for holding on to it? What would cause you to potentially increase or decrease that stake in the future?

Chris Halpin, COO and CFO, IAC: Yes. Barry said Barry Dillard, our Chairman, said on the two earnings calls ago that it was a forever asset. The key message there is we are big believers in the embedded value in our stake in MGM. We talk to investors about this all the time, many of whom recognize it. But when you look at where the stock is trading and you take out the interest in MGM China, and they had this in their last earnings report, you’ve got a three plus four to 4x multiple on everything else.

And in everything else, you’ve got premier assets in Las Vegas, bless you, and where Las Vegas has developed into really the global leader in entertainment and leisure and is continuing to fill its calendar, maximize yield, we love our assets there. You’ve got BetMGM, where they reported solid Q1 results and have a management there has renewed focus and maintain our fifty-fifty JV partner, has done a good job delivering on product. Management has executed. And there’s solid we have a solid digital player there, including a great iGaming business. And then you’ve got international digital for MGM, which will be a continuing value creator, be it in Europe, Brazil, etcetera.

So we love the mix of digital and facilities and live experiences, the international opportunities, and we think the company is highly undervalued.

Corey Carpenter, Internet analyst, JPMorgan: So one question on would be just what’s your kind of longer term, bigger picture outlook on the company? And then could you talk about the different dynamics impacting consumer in the enterprise segments right now?

Chris Halpin, COO and CFO, IAC: Yes. So IAC bought Care in Q1 of twenty twenty, immediately went into COVID. There are two core segments to the business, consumer and enterprise. Enterprise got a huge boost immediately out of COVID as employers wanted to get their employees back in the office and invested in backup care as a service. That that led to a strong run up in ’twenty one, ’twenty two and then some tepid growth as we lap that and now is growing strongly.

And you can look at the competitive environment there. We feel very good about our place. That business, consumer employee provided backup care has become a base benefit for most employers. There’s still a lot of opportunity to acquire new logos, whether everything from Fortune 500 to small businesses, and we’ve got the offerings to serve all those. And the employer side is just around execution, sales, continue the product, continue to improve the product and serve great tailwinds.

The consumer side, we also got a later COVID benefit, I think, the ’twenty two period, where people wanted to get out and go to restaurants and that were more comfortable having people in their home for nannies, etcetera, and senior care. That tailwind in many ways masked core deficiencies in the product. And as those tailwinds abated, it became clear we brought in a new management team in late ’twenty three, Brad Wilson, as CEO. And as he was taking the reins, it became clear there were core deficiencies in the product, which hurt conversion, recapture, retention, and also we needed to make certain improvements in the platform, such as payments and other, to really enable the product to be where we wanted it. We they have put it in the hard yards.

On a go forward basis, priorities there are product messaging, matching and fulfillment. That’s going to be rolling that is rolling out this year. We launched messaging a few weeks ago. Second step that we have is improved marketing, and we’ve held off on bigger marketing spend until we had the product where we wanted. And then third is the element of pricing and packaging and offering different price points across pet consumer or child senior.

So that business should be growing 10% plus. It’s an industry leader. The sectoral tailwinds there are inarguable. Everything is within the four walls of care to drive that growth, and the margins are good. We generated $45,000,000 of EBITDA last year on about $370,000,000 of revenue.

They should scale as we get it growing, and it’s a solid business.

Corey Carpenter, Internet analyst, JPMorgan: So maybe we’ll do one final question just on the rest of the portfolio, then save the final five for capital allocation. Anything notable that you’d want to highlight across Turo, Search and the emerging segments?

Chris Halpin, COO and CFO, IAC: Sure. Turo is the leader in car sharing. They got a huge tailwind out of COVID and the limitations that the rental car companies had, but that’s now the base. And they were disclosing information through a public S-one, one of the only companies I know that flipped to a public S-one right when they were when they’re not on the doorstep of going public, but they did it, so they were updating their data. Dollars 900,000,000 plus revenue, real liquidity on both sides of the platform between guests and hosts.

The they pulled the S1. We are very supportive of that. We’ve always said we were indifferent to them going public. What we want them to do is execute on the opportunities in front of them to disrupt the car rental space, to take share and also innovate within access to cars with new offerings, long term usage, car testing. If you’re thinking of buying a car, you can test it on Turo.

You know exactly the car you’re getting. There’s a number of applications. The biggest limitation there has been marketing. Unaided awareness at Turo is 18%. And if you anecdotally test and you’re at your next dinner and you ask people if they know Turo, I guarantee you, two out of 10 will have known Turo.

They almost certainly have used it. They will have high NPS, quote unquote, and the rest will have not heard of it. So getting more people into the experience, more people into the funnel, and just driving it forward is key. And they are heads down focused on that, and we support them in that effort. And then Search, Vivian.

Search has gotten to a period of stability after a tough couple of years. And Vivian’s a real leader with 2,000,000 clinicians on its health care staffing platform and using AI in truly innovative ways.

Corey Carpenter, Internet analyst, JPMorgan: So closing on capital allocation. You’re repurchasing shares right now. Maybe on the M and A side, could you just talk about what are you looking for in potential targets in terms of size, business model, new businesses versus add ons to existing businesses? And maybe kind of a direct question is, are there ways you can leverage your MGM stake should a larger opportunity arise?

Chris Halpin, COO and CFO, IAC: Sure. I’ll try to answer all those. So we’re definitely looking through our existing businesses. We’ve been pronounced in saying DDM. We are looking to add there, looking at ad tech elements that would accelerate Decipher or our performance marketing capabilities.

Those would be smaller bolt ons and bring strategic elements. New platforms, we’re looking Russ Farsh, our Head of Strategy and M and A, has actively been actively driving our process there, and Barry is involved there. We’re looking at new names and ideas constantly, companies in all different elements of growth. Mean think about our portfolio. We bought Vivien for a few million dollars all the way up to Meredith, which was an unusual deal, but a couple of billion mature companies.

So we look at all different stages. We’re really looking for things that will have real growth opportunities and create value. We’re not a private equity firm trying to buy something, double cash flow and make 2.5x. We do have a cash flow bias that is inherent. We skew more towards control.

People ask about minority or public investments. I’d say both MGM and Turo were specific situations where we saw elements that worked for us in terms of being the biggest investor in control not control, sorry, in influence and we definitely don’t have control, but in alignment with management. We’ll look at some minority investments, some growth things, but I think our bias is generally towards having control.

Corey Carpenter, Internet analyst, JPMorgan: So I have a closing question, unless anyone in the audience wants to ask a final one. All right. So ending bigger picture, Chris, maybe the one or two things you’re most excited about or you think could be most transformative across your business in the years ahead?

Chris Halpin, COO and CFO, IAC: Yes. I’d say two things. One, if you take IAC as a whole, I think the clarity we have right now on in our businesses on strategic elements, getting Angie spun and on their own, and we knew they were in a good spot to with Jeff and Joey to be stand alone. Driving greater clarity, greater focus on capital allocation and creating value for shareholders. In my period here, it’s the tightest, clearest game plan we’ve had, and I’m excited, and I know all of IAC is excited to be executing on that.

The second is I am a real believer in Decipher. And when the first time I had Decipher explained to me, I came from the NFL where we had a large premium digital advertising. I said this is exactly what everyone’s looking for, which is intent driven focus rather than guessing based on cookies and previous site searching. With the quality of our sales force, the scale of our properties and the ability to go off platform, it’s something very different. And I don’t think any other publisher can do that.

It really is an example of proprietary data inventory testing with really smart PhDs and mixing in some AI and predictive analytics. And I view it as a major competitive advantage.

Corey Carpenter, Internet analyst, JPMorgan: Okay, great. We’ll stop there. Thank you. Thank you, Corey.

Doug Anmuth, Internet analyst, JPMorgan: All right. We are going to go ahead and get started. I’m Doug Anmuth, JPMorgan’s Internet analyst. We’re pleased to have with us Chewy’s CFO, David Reeder. Chewy is the largest pure play online pet retailer in The U.

S. With more than 20,000,000 active customers. We estimate more than $1,200,000,000 in net sales in fiscal ’twenty five. More than 80% of revenue is generated by subscription based auto ship customers and about 85% comes from nondiscretionary categories. Chewy’s profitability continues to improve.

We expect almost 5.5% adjusted EBITDA margins and about EUR $525,000,000 in free cash flow this year. David joined Chewy as CFO in February of twenty twenty four. He previously was CFO of Global Foundries and prior to that, CEO at Tower Hill Insurance and President and CEO of Lexmark’s,

Unidentified speaker: among various other roles. So welcome, David.

David Reeder, CFO, Chewy: Thanks for having me. Great conference.

Doug Anmuth, Internet analyst, JPMorgan: All right. So kicking off, Chewy announced this week that you will be departing in several months to return to the semiconductor industry as a Chief Executive Officer. The company also reaffirmed 1Q guidance. So maybe you can talk about the rationale around your departure after just over a year as CFO. And then what are some of your key observations about the business during that time?

David Reeder, CFO, Chewy: Sure. So I grew up in semi more than thirty years ago as a chemical engineer. And while I love Chewy, it’s a great platform. It’s a platform that has continued growth in active customers as well as net SPAC growth, high predictability with respect to more than 80% of the revenue coming through subscription and then increasingly profitable as we continue to build out the pet ecosystem. So it’s been a pleasure and a privilege to be a part of Chewy, but being able to take a CEO role back in kind of my old stomping grounds of semi was too good to pass up.

In terms of key observations since I’ve been at Chewy, I think there’s two really big observations that stand out to me. And if you were to cast your lens kind of back in time, you would have seen a company that grew to more than 20,000,000 active customers. And as those active customers continued to grow and Chewy continued to build out its pet ecosystem, you saw the company begin to continue to become more profitable as well as generate more free cash flow. And so I think the two biggest observations I would make is, number one, the leverage that is built into the topology of the fulfillment center footprint. Most investors and most customers don’t know this, but Chewy is the third largest direct to consumer shipper in The United States.

And our topology in fulfillment centers, we have the ability to deliver to pet parents and customers all over The United States in a very, very efficient way from both a first mile as well as a last mile basis. And then the second thing that I would highlight is I would highlight the nature of the pet industry and the category itself. Pet is an emotive category. It’s one of the few categories in which you talk about your pets and yourself as a pet parent. And so there is a large and very loyal following for companies that are trusted in this space.

And Chewy has built that trust, and we’ve built that trust across the entire ecosystem. It’s everything from being able to provide health and wellness to the largest pet pharmacy in The United States to now providing veterinary services, and then of course to provide all of those things where we started, which was in consumables and hard goods. So those would be the two big observations, the very efficient fulfillment center network that allows us to grow at scale and get leverage, and then the ecosystem that allows us to capture more share of wallet and continue to build that trust with customers.

Unidentified speaker: Okay. Great. Maybe you can help us understand the overall state of pet spending. PackageFacts estimates about 38% of pet food and treats spend in The U. S.

Occurs online. What do you think drives that next leg of digital penetration gains across the industry?

David Reeder, CFO, Chewy: So I’ll remind you that The U. S. Pet industry is about $150,000,000,000 industry here in The United States. And if you go back to our Capital Markets Day in December of ’twenty three, we articulated that about 30% of that market was online. And so the rate and pace of the market continuing to move online is continuing.

And so we don’t believe that you’re going get 100% of this market online. I think you’re always going to have some of this market that’s satisfied through brick and mortar. But we do think that there is a lot of room to grow from 30% up to whatever that ultimate number is at the top end of that range. And as that market moves online, Chewy is disproportionately a winner of every dollar that moves online. And so whether that’s in the pharmacy space, whether that’s in the health and wellness category or the 85% of our total revenue that’s consumables, we continue to pick up share of dollars as it moves online.

Unidentified speaker: Okay, great. All right. In terms of macro, the pet industry was pretty resilient in ’eight, ’nine. I mentioned earlier about 80% of net sales coming from auto ship customers, 85% from nondiscretionary categories. How do you think Chewy is exposed in terms of macro softness?

David Reeder, CFO, Chewy: The pet industry is incredibly recession resilient. I don’t think any industry is recession proof, but if there is an industry that is recession resilient, it is pet. I have two dogs and a cat. I don’t feed them any more or any less depending on what’s happening in the macroeconomic economy. And most pet parents think of themselves in the same way, in the same vein of there’s a trend towards humanization of pets.

There’s a continued trend towards the health of pets. And so even though there may be pressures economically depending on the environment that you’re in, this is usually one of the last categories to get hit. And then I would also say that with about 85% of your business in consumables, like at Chewy, that’s a category that because it’s recession resilient and because it’s recurring, tends to create some level of predictability around the company’s revenue.

Unidentified speaker: Okay.

Unidentified speaker: Great. You sized tariff exposures in the high single digit to low double digit millions.

Unidentified speaker: Yes, low so

David Reeder, CFO, Chewy: high single digit millions or low double digit. That’s right.

Unidentified speaker: Okay. Has this evolved at all just with ongoing shifts in tariff narrative implementation, any No, we

David Reeder, CFO, Chewy: feel the same way that we felt when we made that guidance. Again, the majority of the business being consumables means that you have domestic and local sources for the majority of those consumables. We do have some small exposure to China primarily on private brands for hard goods. It’s very small exposure, and we have an incredible supply chain team that has built that fulfillment center network that I spoke about earlier. And we have, through the course of strategically placed inventory to even help mitigate that very small portion of exposure.

Unidentified speaker: Okay. Great. Let’s shift gears a little bit, talk about active customers and NESBAC. So Chewy’s return to active customer growth, albeit still at low levels. What drives your low single digit year over year growth across active customers in fiscal twenty twenty five?

How should we think about that interplay between gross adds and reactivations and churn?

David Reeder, CFO, Chewy: Sure. Great question. First, our return to active customer growth, I would say, is a result of Chewy’s efforts. So the market itself is still flattish in terms of pet household growth. Maybe it’s slightly up, maybe it’s slightly down.

There’s a lot of data points in the market, but let’s characterize pet household growth, at least at this point in time as being flattish. And so the growth that you’ve seen at Chewy in active customer growth has really been on the back of the good work that the team at Chewy has done. And specifically, it’s been across multiple categories. So when you think about active customer growth, you have three elements. You have gross adds, you have reactivations and you have churn.

And we’ve actually made progress across all three of those categories over the last year. And so we’ve increased gross adds, we’ve increased reactivations of lapsed customers for whatever reason, and we’ve reduced churn. So how have we done that? Well, one of the ways in which we were able to do that is we kind of rebuilt some of our foundational systems so that we can now target customers much more directly and uniquely to that customer. So it’s no longer we’re identifying a reactivated customer as a customer that’s a new customer.

We’re treating you very different. We’re looking at your buying patterns. We’re looking at any information that you’ve uploaded into your pet portal about your pet. And we’re now able to tailor offerings specific to you. So it’s not a blanket offer to perhaps a category of people.

We are able to tailor offerings directly to you as a consumer, as a parent of a pet.

Unidentified speaker: What’s driving that?

David Reeder, CFO, Chewy: Chewy is firmly in the tech space from a tech stack perspective. So most of our software is first party. A large majority of the population of corporate overhead is actually engineering. And it’s software engineering. It’s the ability to write our own systems, to control our own data structures, to be able to take those data structures and be able to then use that data in ways that perhaps if you were on a third party system, you would be unable to do.

And so that’s where we’ve put a lot of work in. We’ve put a lot of work in our ability to speak to customers wherever they are. We’ve put a lot of work in our digital storefront, which has been updated. We’ve put a lot of work. We’ve talked about it more recently in our app.

So if we can convert you to our app, now that engagement has no layer of interference in between. It’s more of a direct one to one conversation through the app and not through some third party layer. And so that becomes even more powerful. And then of course we’ve gotten very sharp on customer conversion and we’ve connected kind of the top part of the funnel to the conversion part of the funnel. So all those things have come together in active customer growth.

And to the extent that the pet industry returns to pet household growth of kind of the low single digits, which is what it’s been for the last fifty, sixty years, that’s just additional tailwind to the trends we’re already seeing internally.

Chris Halpin, COO and CFO, IAC: Okay.

Unidentified speaker: Any differences to call out just in terms of trends by cohort that you’ve seen

David Reeder, CFO, Chewy: more recently? Cohort trends remain very good. So to remind everyone, the average pet parent will spend somewhere between, let’s call it, 1,200 and $2,500 depending on the size and type of pet that you have. We reported that our NEST pack at the end of fiscal year ’twenty four was about $578 So we have about rough and tough numbers, about onethree of that wallet share. And so with our oldest cohorts, those cohorts are spending well over $1,000 With our newest cohorts, those cohorts are spending obviously at the very low end of the range, and you’ve got the NES PAC number kind of there in the middle.

And so those cohorts have been very consistent. The maturation and the profiles And over time, we’ve been able to consolidate wallet share.

Unidentified speaker: Okay. Great. Just in terms of somewhat more stable industry trends, I know you talked about it a little bit that more of the active customer growth driven through Chewy’s specific efforts. I guess what other drivers do you see kind of on the company specific side relative to more just pure macro execution? Sure.

If you take

David Reeder, CFO, Chewy: a step back, there’s if you look at Chewy’s growth algorithm, there’s three elements that drive revenue growth for Chewy. Number one would be pricing, and we would characterize the pricing environment as relatively flat. So we’re not seeing the large inflation that was kind of passed through a few years ago that moderated throughout the course of last year. And as we talked about in our guidance, it looks like at this point for fiscal year ’twenty five that inflationary pressure on pet is going to be relatively flat. So not a lot of pricing benefit flowing through the system.

We’ve talked about active customer growth growing in the low single digits in 2025. That was the guidance that we provided in late March. We still believe that to be true. We think that’s largely on the back of our own efforts, not a return to growth for the industry itself. And then finally, Nest Pack, this kind of consolidation of wallet.

So irrespective of how customers come into Chewy, whether you’re coming in and you’re buying your consumable, your pet food, your pet supplies, your hard goods perhaps, over time, we’ve been able to build trust with those customers. We’ve been able to consolidate their share of wallet, and we continue to grow that in SPAC. So active customer growth, low single digits pricing for this year, relatively flat very low single digits, if not zero and then of course, SPAC kind of continuing to grow in that mid ish single digits, and that’s where you get the guidance for the year that we provided.

Unidentified speaker: Okay, great. Hard goods net sales returned to growth last year fiscal ’twenty four after a couple of years of declines. What will it take to drive hard goods growth over time? And do you view that part of the market as any more sensitive to macro softness?

David Reeder, CFO, Chewy: That part of the market is a bit more sensitive to macro just because it’s more of a discretionary purchase. But we have seen, at least for Chewy through our own efforts, some green shoots in that part of our business. I think we would characterize this as brilliance in the basics, right? So when you have a hard good market and it is a discretionary purchase and you have customers that are already on the platform that are purchasing their consumable, then you want to present to them a very fresh selection of hard goods, again uniquely tailored perhaps to that individual customer. And so hard goods for us, at least the more recent term kind of renaissance for us in hard goods has been about refreshing that portfolio of products and then making sure that we’re able to present that portfolio of products to the customer at the time of purchase decision.

And so we’ve been able to make some good headway there. I don’t want to draw a line through just a couple of points of a couple of quarters of growth on a year over year basis, but we are quite encouraged by the trends.

Unidentified speaker: Okay. On Nesteck, I know you mentioned essentially flattish for this year. We’re seeing inflation and pricing tailwinds kind

David Reeder, CFO, Chewy: of I would say inflation flat, low single digit active customer growth and then NES PAC kind of low to mid single digits.

Unidentified speaker: Okay. Sorry. Thank you for clarifying. Maybe just call out a little bit of the puts and takes on Nest back when we think about kind of cohort maturation, cross selling, new verticals, maybe map So

David Reeder, CFO, Chewy: if you were to take down or if you were to take our roughly 20,500,000 customers that we reported at the end of last year, and you were to look at that subsegment of customers, the way you grow nest pack is you start to introduce those customers to more categories. So if that customer comes in as someone that’s buying consumables, perhaps dog food, cat food, toppers, bird food, horse food, you want to introduce them perhaps to hard goods. You also want to introduce them to pharmacy. So only about 20% of our active customers have been introduced to pharmacy. And so I don’t believe we’ll get 100% of our customers shopping pharmacy at Chewy, but I think it could be a lot more than 20%.

And so when you look at these cohorts and as we consolidate their share of wallet over time, again, the oldest cohorts are spending over $1,000 a year with Chewy. And the newest cohorts are spending perhaps hundreds of dollars with Chewy. And so as customers come into Chewy, we want to make sure that we are presenting to them the full range of products and options that we can offer. Pharmacy is a big part of that. Hard goods is increasingly a bigger part of that.

Private brands on a longer term timeline becomes a bigger part of that. And then of course, where we’re very well known on our consumable side, which is, as I mentioned, about 85% of our business.

Unidentified speaker: Okay. Let’s talk about health care and some of the newer verticals. You mentioned 20% of customers essentially buying on the health care side. Health care overall makes up about 30% of sales, has considerably higher gross margins than core retail. Maybe you can talk about what you’re seeing in that business, kind of growth rates, where you think that can go over time.

David Reeder, CFO, Chewy: So first I’ll start let me start at the highest level and kind of work my way down. And the trend in wellness for people, that same macro trend is getting applied to pets. And so that’s why you’ve seen a focus on better foods, healthier foods, fresher foods, and you’ve seen a focus on health and wellness and supplements. You’ve seen a focus on making sure that the pharmaceuticals that they’re getting provided are the right pharmaceuticals for that specific thing for the pet and not like a generic pharmaceutical, so more tailoring for the pharmaceuticals. And so all the trends that you’re seeing for health and wellness for people as you humanize pets gets applied concurrently to pets.

And so this health and wellness category for us, which as you described was roughly 30% of revenue, This category for us, which carries roughly 1,000 bps higher gross margin, is a category that is a long term tailwind for us. We mentioned earlier that pharmacy we were the largest pet pharmacy in The United States. We disclosed that it was over $1,000,000,000 at Capital Markets in December of ’twenty three. It is growing significantly faster than the core business. And we continue to extend our offering in that category.

So we’ve invested in compounding. We do our own compounding of pharmaceuticals. We actually have these internal pharmacies either near or perhaps even in some of our distribution centers so that we can satisfy your pharmaceutical order as well as your food order or perhaps hardgood order as well. So we have the ability to provide to you your pharmacy. We have the ability to provide to you your food.

We have the ability now to provide veterinary services in select locations. And so we’re continuing to build out this virtuous cycle of pet ecosystem.

Unidentified speaker: Okay. Let’s talk about vet clinics a little bit. You opened eight vet clinics, plan to add another eight to 10 this year. How is that driving active customer growth? What are you seeing in terms of activity from those visitors to the clinics afterward?

And what do you see in terms of retention?

David Reeder, CFO, Chewy: Right. So obviously, when you look at the broader veterinary landscape, there’s about 30,000 slightly more than 30,000 vet clinics in The United States. We’ve rolled out eight so far last year with plans to kind of roll out eight to 10 again for fiscal year ’twenty five. And so our engagement with vet clinics isn’t just what we’re building internally. It’s also this broad engagement we have with vet clinics with our pharmacy offering.

So through our practice sub platform, we’re actually integrated with more than 15,000 of those vet clinics, where essentially they can write and satisfy pharmacy orders digitally with a digital script to be able to satisfy those customers. And so veterinary services doesn’t just start with what we build. It also starts with those partnerships that we have throughout the entire veterinary services ecosystem. But getting back to the ones that we build, we’ve had a lot of requests over time to provide vet services to this very loyal customer base that we’ve spoken loosely about. And so we started building those clinics, and we had some ideas.

We thought that we would mostly satisfy only current Chewy customers. We are actually satisfying current Chewy customers as well as a much higher percentage of new customers that are coming into those clinics. So those clinics are satisfying our current loyal base as well as it’s a funnel, a sales funnel, if you will, to then talk to pet parents we’ve never spoken to before. And as we speak to those pet parents we’ve never spoken to before, more than half of them within thirty days go to chewy dot com and place an order. And so not only are we attracting new customers through our veterinary service offerings, but those new customers, the services and the level of care they were provided was high enough to where they’ve now developed a relationship with us and they’re going back to the Chewy.com platform to order other services and products.

Unidentified speaker: Okay. Maybe you can talk about unit economics a little bit. I know that was kind of a big discussion at the time that clinics were announced. But just in terms of the kind of the how long it takes to reach scale, some of the dynamics around cost to build. Right.

David Reeder, CFO, Chewy: So we disclosed exactly what our unit economics are. But there are a lot of units in the market. And so I do think that we can speak broadly about the market, which is what we’ve done before. If you were to look at kind of the average vet clinic in the market that is mature, you would see revenues kind of north of $2,000,000 You would see four wall EBITDAs of kind of around 20%. And you would see CapEx investments required to build that clinic of somewhere between, call it, dollars 1,000,000 and $1,500,000 And so that’s what you would see if you went to the general marketplace and you looked across veterinary clinics.

Again, there’s more than 30,000 veterinary clinics. That’s what you would see in terms of kind of unit economics. What I would say is that Chewy doesn’t aspire to be average in anything that we do. And so while that’s the average of the market, I think you can rest assured that we would not be happy to just be average with the market.

Unidentified speaker: Okay. Great. Chewy Plus membership program remains early. How do you think about it as conversion funnel into auto ship over time? What should we expect in terms of broader rollout for Chewy Plus?

David Reeder, CFO, Chewy: So Chewy Plus, for those of you that don’t know, is an annual membership program. It’s a little under $50 today. And it provides the ability to get free shipping with your Chewy orders. There is no minimum value for that free shipping to occur. You also receive 5% back.

And then of course you get special offers that come periodically that are kind of curated for Chewy Plus members as well as potentially specific to you. And so that’s the Chewy Plus offering. Chewy is a very scientific method type culture. So it’s very much a have I observed something in nature, I have a hypothesis, I put together an experiment, I test and learn and then rinse and repeat. And so we didn’t roll Chewy Plus out without a lot of testing.

So the testing went on kind of from, call it, the early part of ’twenty four all the way through kind of the early part of ’twenty five. The results were quite good. We saw higher engagement with the app. We saw higher frequency of orders. We saw higher average ticket orders.

And we saw an acceleration of consolidation of wallet. And so we actually think Chewy Plus with our auto ship program, these programs can live independently and they can also live together. And what we’ve been able to do is we’ve been able to get what used to be perhaps infrequent customers that were having low ticket orders, they’ve become much more frequent purchasers and they started to consolidate share of wallet. So very early days, very, very early days for Chewy Plus. It’s on a much longer term arc over time with respect to when it starts to contribute meaningfully.

But we’re encouraged by the program, and we were encouraged enough to roll it out publicly.

Unidentified speaker: Okay, great. Let’s move on and talk about profitability. So Chewy expects to expand adjusted EBITDA margins about 60 to 90 basis points this year. So with about 60% of that expansion likely coming from gross margin improvement, how do you rank the drivers in there across automation, sponsored ads, new verticals and then just overall cost discipline?

David Reeder, CFO, Chewy: Okay. Let me actually provide a little context, go back in time just a little bit. You go back in time to 2023, and EBITDA margins were sitting a little north of 3%, three point three % if memory serves. And we were at Capital Markets Day, and we were talking about our path to 10% EBITDA margins. And I think there was a great desire from both the internal community as well as the external community to help chart that path.

How do we chart that path to 10% EBITDA margins? And perhaps there was a little bit of skepticism along the way. In 2024, we delivered 150 bps of EBITDA margin expansion on a year over year basis. We went from 3.3% to about 4.8%. About twothree of that or roughly 60% of that was driven by gross margin expansion, the remainder through OpEx leverage to the P and L.

And then we guided for this year that at midpoint, well, we guided 5.4% to 5.7%, so midpoint of 5.5%, call it roughly 80 bps of year over year expansion of EBITDA margin this year with a similar profile of contribution, so about kind of twothree gross margin and onethree OpEx leverage. The drivers of that will be the continued expansion of sponsored ads. It will be the continued product mix shift into higher, more accretive categories like health and wellness. And then it will be continued fixed cost leverage that we get through the system, the topology of the network, the freight and packing, shipping, etcetera, that we talked about that network very early in the conversation. So that’s where the growth through gross margin will come.

And then of course your OpEx leverage, we’re leveraging those first party systems that I mentioned. We’re going to continue to leverage the automation that we’re building throughout the company. And there’s just a very maniacal focus on making sure that as we allocate our capital in our dollars that we’re getting the highest return irrespective of where it fits exactly geographically on the P and L that we get the highest ROIC on those dollars. And so we feel quite good about our ability to deliver EBITDA margin. We feel quite good about the trajectory that we’re on to ultimately get to that long term target of 10%.

And the team has done a lot of hard work to start to prove out that we can get there.

Unidentified speaker: Okay. Sponsored ads, about 1% of sales. The 1P ad stack should ramp through the course of this year and then support new channels and formats, more off-site video, better measurement, easier onboarding. What’s the path to get sponsored ads to 2% to 3% of net sales over time?

David Reeder, CFO, Chewy: I think we have all the elements now just execute. In ’twenty three, we were building out the sponsored ads team. We were doing a lot of manual work to start to take sponsored ads and be able to work with our supplier partners and take their media and their content and be able to kind of like manually port it onto our site. That was late ’twenty three. In ’twenty four, we were using a third party system.

It was good, but it wasn’t what we needed to be able to be efficient with respect to onboarding our suppliers. And it didn’t have a lot of those elements that you just mentioned. We could do on-site, but we couldn’t effectively do off-site. We could do static media. We weren’t able to do video content or dynamic content the way we wanted to.

And so we built our first party system throughout 2024. We launched it in early twenty twenty five. And now it’s about execution in 2025 through the remainder of the year.

Unidentified speaker: Okay. Great. Beyond gross margins, you talked a little bit about automation. Maybe you can just talk more about a little more update on automation, kind of where the company is, but also just where do you see other opportunities to drive incremental SG and A leverage and how variable is the current expense base?

David Reeder, CFO, Chewy: So when I think about automation, what immediately comes to mind is our fulfillment centers. You have these fulfillment centers, this topology of network that’s across The United States that’s located in areas where we have dense areas of pet parent owned and pet parent consumers of Chewy products. And so we’re able to make that last mile efficient. We are automating those networks. When we do automate those fulfillment center networks, so a two gs or second generation versus our first gen, we’re getting about 30% more out per square foot of space.

So it’s significantly more productive. The current network is about

Chris Halpin, COO and CFO, IAC: it’s

David Reeder, CFO, Chewy: about three quarters utilized today. So there’s plenty of capacity within the network. And then of course you can do discrete automation of the first generation facilities to then produce even more output and more efficiencies and more fixed cost leverage. With respect to the other lines of the P and L, like others, we have some AI initiatives across the company. Those initiatives are early in their maturity.

But being able to manage 115,000 SKUs with all of the content that those SKUs consume, so the photos, the product listing pages and descriptions, being able to onboard suppliers. So there’s a lot of areas both within all the functions, but also on some of the customer facing portions where you can utilize today’s tools and LLMs to be able to have a much more seamless and a much more rapid in terms of update product that is presented to the customer.

Unidentified speaker: Okay.

Unidentified speaker: Chewy continues to opportunistically repurchase shares. Maybe you can talk a little bit about the capital allocation philosophy going forward.

David Reeder, CFO, Chewy: Yes. So when we talk about EBITDA, it’s very high quality EBITDA. 80% of it’s converted to free cash flow. We generated a significant amount of free cash flow last year, which we returned to shareholders. About $950,000,000 was returned to shareholders last year.

We were able to purchase a significant piece of shares from our sponsor that’s selling down BC Partners. So we made great progress there. We continue to generate a lot of free cash flow and expect convert more than 80% of our EBITDA to free cash flow into the future. And so I think we have the full menu card of options in front of us with respect to capital deployment on a go forward basis.

Unidentified speaker: Okay. All right. Quick word association?

David Reeder, CFO, Chewy: Okay.

Unidentified speaker: All right. Cool. First thing that comes to mind. Active customers?

David Reeder, CFO, Chewy: Autoship. Healthcare. Accretive.

Unidentified speaker: NESBAC. Wallet share. Means Stable. AI.

David Reeder, CFO, Chewy: Opportunity.

Unidentified speaker: Vet clinics?

Unidentified speaker: Services. Gross margins? Growing.

Unidentified speaker: Free cash flow? Strong. Autoship?

Unidentified speaker: Sticky. And pets? Parents.

Unidentified speaker: All right. Cool. Leave it there. Thank you, David.

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