Q2 2020 Earnings Call

[music].

Good day and welcome to the one 800 flowers dot com Inc. fiscal year, 2022nd quarter results Conference call.

Today's conference is being recorded after today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then too I.

I'd now like to turn the conference over to Joe Pititto. Sir. Please go ahead.

Okay.

Good morning. Thank you all for joining us today to discuss where there is always talk holdings' financial results for fiscal 2022nd core.

Those of you have not received a copy of our press release issued earlier. This morning release can be accessed the investor Relations section of our corporate website and wanting to do flowers zinc dotcom.

Our call today, we'll begin with brief formal remarks, and then well open the call to your questions presenting today will be Chris Mccann, CEO and Bill Shacey us all.

Before we begin I need to remind everyone that some of the statements. We will make today maybe forward looking within the meaning of the private Securities Litigation Reform Act of 1995.

These statements involve risks and uncertainties that could cause actual results could differ materially from those expressed or broadly applicable statements for a detailed description of these risks and uncertainties. Please refer to our press release issued this morning, as well as well does he see filings, including the company's annual report on Form 10-K quarterly reports on.

Form 10-Q .

In addition, this morning, we'll discuss certain supplemental financial measures that were not prepared in accordance with generally accepted accounting for instance, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning.

The company expressly disclaims any intent to Rob location to update any of the forward looking statements made in today's call any recordings of today's call press release issued earlier today or any of its FCC filings, except as maybe otherwise stated by the company.

I'll now turn call over the course Mccann.

Morning, everyone. Thank you all for joining us this morning.

As reported in this mornings press release, we achieved strong top and bottom line results for fiscal second quarter, reflecting strong operational execution across our company.

These results reflect continued revenue growth momentum across all three business segments, coupled with the increased operating leverage we have achieved from the investments we've made enough business platform.

Revenue growth in the second quarter was primarily driven by Harry <unk>, David the largest friend and then a largest segment called made foods and gift baskets, which represented more than 75% about total revenue for the quarter.

And David continues to benefit from the digital transformation about marketing programs complemented by strong merchandising programs. These initiatives continue to enable Harry <unk>, David to attract new customers, including a younger demographic well also deepening engagement with existing customers.

I mean, David also continues to benefit the expansion of its product offering in particular unique charitable gifts for both holiday and everyday occasions. As a result, we experienced significant strength and seasonal food gifts and holiday basically assortments everyday occasions collections for birthday sympathy and get well.

And the expanded having David called May lie, including award winning Harry <unk>, David wines cheese, Platters heat and serve prepared foods, all perfect for gifting and entertaining.

Other significant contributors to revenue growth Nicole May foods segment included strong demand in a wholesale gift baskets business fueled by innovative new product designs, and then expanded customer list and the addition about Newsprints Sharis berries, which we acquired this past August .

I'm pleased to report that Sharis berries performed well during the second quarter and has built nice momentum ahead of its peak demand periods that Valentine's day and mother's day.

As such we anticipate that it will be a modest contributor to our bottom line results during the second half and for the full year.

Yeah consumer floral business sentiment, we achieved strong results for the quarter was solid topline growth and increasing bottom line contributions during the quarter. The 100 flowers brand continues to extend its market leadership position leveraging our investments in marketing and merchandising programs to drive.

Revenue growth and increased its bottom line contribution.

Our merchandising programs focused on truly original product designs, resulting in strong demand for such holiday in every day guess as holiday themed centerpieces, our exclusive local lattus and collection.

Expanded line of specialty gift is focused on home decor, and finally, you know bloomnet business. The strong results for the quarter reflected our ability to drive sales of our expanded range of products and services, including advertising and digital directory AWS goods, such as bases in glassware and cut flowers and greenway.

As a result, whom that also continued to grow its market shares during the quarter.

So in summary, our results for the quarter reflects strong execution execution and continuing the momentum across all business segments before is built to share some insights on the quarter and an increased guidance for the Oh I'm going to spend just one moment on execution.

The results that we achieved over the past several quarters and the momentum we are carrying into the second half about fiscal year reflect our focus on building strong sustainable growth, while driving higher margins and expanding margins.

We have a clear strategy to win across all business segments, we have a deep an experienced management team and thousands of highly skilled associates, who are executing against that strategy everyday we are laser focused on continuously improving the customer experience.

You are investing in innovative technologies as well as marketing and merchandising initiatives designed to attract new customers and deepened our relationship with existing customers. We continue to gain market share across all three of them about business segments simply stated with firing on all cylinders while simultaneously.

I mean for continuous improvement every day I'm extremely proud of what our management team has accomplished over the past several years and even more excited about what the future holds for our company and for our shareholders with that let me turn the call over to build to share his insights on our results and discuss the drivers behind our raise guidance for the.

Bill.

Thanks, Chris.

As noted we're very pleased with us on top and bottom line results fiscal second quarter. After the first half all fiscal year.

You both for the quarter, 6% and 7% for the first half was driven by solid growth in all three of our business lines.

From an operating standpoint, all three business segments performed exceptionally well in the quarter in in the first half, enabling us to more than offset the headwinds we have discussed in the past, including a tight labor market and rising labor costs, Paris inherent uncertainty Alan the changes specifically the six fewer days between Thanksgiving and Christmas Advisory.

Transportation close.

As a result, we continue to see improving operating leverage across our business cycle.

This is illustrated by the contribution multi mode of 10% or more in all three business segments first half of the year.

This increase operating leverage combined with our expectation for revenue revenues to grow approximately 10% during the second half of fiscal year, enabling us to reaffirm our revenue growth guidance of 89% for the year and increase our guidance for EBITDA Escobal two ranges in the mid to upper teens.

Now breaking down some of the metrics for the second quarter, our revenue growth of 6% with like the solid growth in all three business segments.

Gross profit margin was down slightly at 44.4%.

Reflecting our ability to manage the head the cost headwinds I mentioned earlier as well as the highly promotional nature of the holiday shopping season.

Operating expenses as a percent of total revenues and adjusted improved 50 basis points compared with the prior year period.

The combination of these factors resulted in adjusted EBITDA growth of 7.4% Twangy 10.7 billion an increase in net income of 8.1% 74.2 million and increased S. A 7.7% to Dallas Walt Disney Chair.

In terms of category results and I won't make wouldn't get better segment, which represents more than 75% of total revenues for the quarter revenue increased 5.6% by nearly $25 million to 464.6 million.

As we previously noted a solid revenue growth New segment was driven primarily by having David combined with strong growth in a wholesale baskets business.

And contributions from our newest spread sharis berries.

Revenue growth in this segment also affected the impact of the shift of some gift basket shipments a certain wholesale customers into our fiscal first quarter, which we noted back in October call.

Combining the first two quarters of the year total revenue growth in this segment was 7%.

Gross profit margin for the quarter was essentially flat, 45.5% and.

And importantly, we achieved strong operational execution across our whole may food gift brands.

As a result segment contribution margin increased 7.5% 213.4 million.

Consumable.

Revenues increased 7% tall hundred 15.7 million gross profit margin was unchanged at 38.5% and segment contribution margin increased 11% to 10.9 million [noise].

As we stated at the start of the fiscal year, We expect second segment contribution margin and consumer flow will be up year over year each quarter. This year as we continue to gain leverage on the investments we've made to drive strong growth and extend our market leading position.

And our Bloomington segment.

Revenues for the quarter increased 9.8% a 25.7 million.

Acceleration of Bloomnet to revenue growth compared with our first quarter, that's our ability to drive sales of our expanded product and service offerings.

As we know there's no last call, we expect bloomnet to grow any upper single digits, how low double digits. During the second half of the current fiscal year.

Gross profit margin in the second quarter was 51.2% down slightly due to product mix.

Segment contribution margin increased 10.6% a 9.1 million.

In terms of corporate expense.

Fiscal second quarter corporate expense, including stock based compensation was 26 million compared with 20.9 million in the prior year period.

This increase is primarily due to higher stock based compensation attributable to the company strong performance over the past few years as wasn't compensation charge related to our deferred comp plan, we've had an equal offsetting benefit and interesting huh.

Turning to our balance sheet.

At the end of the second quarter, our cash and investment position was 295.6 million compared with 173 million I don't fiscal 2019 year ended June and 258 million at the end of the fiscal second quarter last year.

Our term debt balance.

Net of deferred financing costs was 94.7 million and lead zero borrowings outstanding under our working capital line within our bobbing credit facility.

As a result total net cash at the ended the quarter was approximately $200 million.

Inventory of approximately 68 million was in line with our expectations.

Regarding guidance for the full fiscal year.

Based on our results for the first half fiscal year and our outlook for continued strong performance in the next two quarters, including revenue growth of approximately 10%. We're updating our guidance as follows we are reaffirming our guidance for total consolidated revenue growth for the year of 8% to 9%.

We are increasing guidance EPS growth to range of 15% to 17% from previous range of 8% to 10%.

We are increasing guidance.

Adjusted EBITDA growth to a range of 13% to 15% from a previous range of 8% to 10%.

We're also increasing our guidance for free cash flow for the year to arrange a 45 to 50 million from a previous talking of approximately 45 million.

Ill now turn the call back to Chris Thanks.

So to sum up we're very pleased with our results through the first half of the fiscal year, we continue to drive strong revenue growth and expand our market share position across all three about business segments. We continue to enhance our operating leverage focusing on constantly improving our execution across all areas that business platform.

We are growing our customer file attracting increasing numbers of new customers well deepening relationships, we have with existing customers, helping to drive Minnesota celebrations passport loyalty program, which provides free shipping for members and our initiatives to grow multi brand customers.

It's performing customer cohort two expanded cross brand merchandising and marketing programs throughout the first half about fiscal year. We saw continued double digit growth in passport members as well as strong growth in the creation of new multi brand customers. As a result, we continue to see improvements in the behavior metrics.

About customer file helping to drive increased lifetime value.

As we move into our fiscal third quarter, we are well positioned to continues a positive trends, we see across our platform. The wanting to under flowers brand as a commanding position as a leading destination for the Valentine's day holiday.

Among the truly original product designs, we are unveiling for the upcoming holiday or a new romantic medleys collection that elevates the traditional Valentine's day flow arrangement was striking combinations of different blooms.

And a vibrant gerber daisies, which we have named as well as the year.

In terms of marketing innovation, we are introducing numerous new enhancements to our customer experience, including a new augmented reality capability to help customers visualize the selections in their whole office environment, a redesigned mobile app with one tapped by great gifts to find the tool that our new.

Hi powered intelligent virtual assistant.

Our focus on innovation to enhance customer engagement and customer experience positions us well to deliver continued strong performance in the current quarter and for the full year before I turn the call over the Kt to begin QNX I'd like to thank all of our associates for their hard work the innovative thinking.

And their commitment to helping our customers express connect celebrate and deliver smiles.

With that Katy would you please repeat the instructions for queuing it.

We will now begin the question and answer session.

Question, You May press Star standpoint on your Touchtone phone, if you're using his speakerphone. Please pick up your handset before pricing.

To withdraw your question. Please press Star then too.

And that is star wanted to ask a question at this time of health momentarily to assemble our roster.

My first question will come from Alex Fuhrman with Craig Hallum Great.

Great. Thank you very much for taking my question and congratulations on a really strong quarter here I wanted to ask about your your outlook for for Valentine's Day. It's it's you know really right around the corner. So I know I know, it's too early to say, what you've seen so far but you obviously see nice strains in the consumer floral segment over the last couple of quarters.

Can you talk a little bit about just what you're seeing in the competitive landscape and and what we should expect to be in terms of marketing spend behind the keep loyal segment here heading into Valentine's day.

Great. Thank you. So I think as we look at the Valentine holiday you're right. It's really too early to go to read all the things yet other than the fact of the or we just said we feel with the momentum that we've built over the past couple of years now in the floral category coming out of the good quarter of 7% growth. This past quarter as we move into the second half of the years now.

Between both the consumer floral side, performing well and the momentum we have there and bloomnet performing well, we feel that the floral businesses is really set up for a good second half of your really helping to drive what would.

Forecasting this a 10% growth really for the second half putting us back into that guidance position that we that we spoke about earlier really as we look at the competitive landscape. So I look at the position that we're in that we remain as we're wondering what your flowers and the things that we focus on on a regular basis.

You know really making sure that we focus on what's what is it that's giving us the momentum we have we focus on our customers refocus on our brand strength focused on the truly original product designs we have.

Our category best customer experience. So we think we're extremely well positioned from a competitive point of view to just keep focusing and doing what we've been doing that's getting into market shares that we have over the past couple of years.

Great. Thanks, that's that's really helpful. And then if I could also asked a series berries. It sounds like that's going to you know as well or better than than you could have hope for when when that transaction first close if I, if I heard correctly. It sounds like that brands now expected to be profitable for the full year get can you just talk about what what has gone right.

There and then just thinking about the fact that that obviously your guidance for revenue for Sherri's berries is you know a fraction of you know the revenue that that brand had done in years past, maybe what kind of could we expect to see over the years I'm as you look to grow that brand I know they had a lot of unprofitable revenue streams pretty.

Obviously that that that you know probably won't be repeated but if you could just help us think about the potential for that brand over the next couple of years that would be helpful.

Sure I'll start the bill chime in if you have any additional thoughts from those we look as we think things are going very well with the sharis berries integration. We know those that we talked about how is how quickly. We are there wasn't easy, but how quickly we integrated across our platforms to begin with and really what we stated is I would tell US is do we size and reposition that business and that's what.

We're doing so we're still working on repositioning the brand and the product and that'll take a little bit of time.

But the operational integration has gone very well and as we look to grow that business now he really has to grow its distribution capabilities along with this revenue growth is the same time in your balance that what are the things that we always caution and take a cautious approach is that we don't get out front about skis on the operator.

Hello capabilities before demand is there the match it so it's managing that so as we grow the business. That's really the two step system that we have to grow the business.

Yeah, I think you know you know Sherri this performance in the second quarter. The first half of the year kind of inline with what our expectations more from a help on the topline perspective, you know contributed.

You know approximately 1% of the other revenues in Q2 until the first half the year you know as we've indicated peak revenue period, no around Valentine's day mother's day. So we expect the majority of the revenue from surely very funny, we should see year. It was really the second you know the second half of the year and you know yeah, we continue to expect to see Sherry.

I was getting about.

Two percentage points or 8% to 9% growth with the year as Chris mentioned, where we're very pleased with the ill, which is the with the performance of show isn't where you know, which you know.

Weird shaking out so that as a result, where we're comfortable saying that is gonna be contributor. This year I think on regional guidance was you know is that we'd be breakeven in flat.

In line.

Hi, Mike.

[noise]. Okay. Thanks, Thanks, very much that that was very helpful. Thanks, both that Chris Chris Sun belt.

Thank you Alex.

Okay.

Your next question comes from Dan Kurnos with the benchmark company.

Great. Thanks, good morning.

Well I don't know if I caught this or not but did you put a number around what you thought maybe the lost revenue opportunity was from the six fewer holiday days this quarter and how demand kind of.

Ended in the period and I just want to get a sense.

If you guys.

Made some kind of trade off in the quarter, maybe due to potentially increased shipping costs or lower LTV to trade off some revenue and take higher profits just due to some of the the calendar challenges.

Hi, Dan we Didnt get yeah, we didn't give a specific number two is how we knew you know kind of going into this year and interest corridor that the six flags shopping days would have an impact on us. We knew you know kind of the revenue growth and this quarter would be lower than our annual guidance and pick up you know the second half the year, especially with.

Sure I mean being a bigger contributor from that we have to you know we continue to monitor as we went without the holiday what promotions work and you know and Didnt work I mean wanting to actually you know demonstrates some of the leverage that we have you know in you know in the model one obviously.

What ended up we outperforming on not you know on the bottom line, we certainly didn't reach for revenue, but it wasn't promotional environment.

We're operating in and obviously that content shopping season, not help feed into that and even with those you know those we said the six fewer less shopping days than we anticipated those obviously going in and the other headwinds. We had we're extremely pleased with the 6% growth that we have for the quarter and when you really break it down and look at the revenue growth for the first half.

A year, 7% a you know then again if you jump into the quarter you had the gourmet food category growing almost 6%, we have consumer flow growing 7% bloomnet growing 9.8% looking to grow approximately 10% in the second half yeah.

We think from a growth perspective, and then the operating leverage that we're getting puts us in a really strong position yeah and then one of the point that degrees you know, we referenced and you know in the call.

I mean deficit in the call. There you know back in October was that we did pull forward right you know about $3 million, we've only one $3 million of wholesale revenues in the first quarter, how private double digit growth in the and the first quarter, but as a polled rolled out this quarter. That's why it's really important to remember were about 7% growth there.

For the first half a year and a woman who is would be closer to six and a half a cent you know growth if not for that timing differences in the cool.

Got it that's helpful. And then just on the EBITDA Guide raise you know you're basically bringing the midpoint up by 4 million I think you know probably against consensus about 3 million in this quarter I'm. Just I think bill you actually said that you still are anticipating sharis berries flattish. So I you know I I'm assuming.

None of the increased guidance from sherri's.

So what's kind of driving incremental operating leverage in the back half of the air.

Well I mean, sorry, just like we said, it's only a modest contributed to you know to want to the year end to the to the second half of a into the second half of the year. So it is it's a piece of the overall increase but.

But not certainly on the dryer.

[noise] and what what is the driver of the Op love increase in the in the back half here.

I think its continued leverage I think we're gonna get some operating leverage in the second half. The are you saw 50 basis points improvement in Opex in the first half the year, that's going to accelerate a little bit in the second half the year and we're expecting overall opex.

You know leverage to be for the year to be L. about 70, 70 basis points or so.

Okay, and then just last on on capital use obviously now you're past the quarter. The big holiday quarter, you do still a Valentine's day. You know you guys had been linked obviously with T Mall, a you know how much is it at this point with the stock where it is.

Are you thinking about stepping in here versus keeping the powder dry to make a larger acquisition.

[noise] effective.

So the question that we have a we happened in the market buying back shares we put in a Tenbfive plan you know earlier and earlier in the year. So it shows up at all it's no secret of cash flows, but we have we haven't buying back we will talk about 400000 shares in the first the first you know first half the animal and we'll buy back shares in the second half do you.

As you know our stated goal that you know stock buybacks, you know is to offset any sort of share creep on from stock based compensation. If you look at our share count.

Yes calculation pretty flat year over years, we'll accomplishing that thing from a capex overall point of view will continue to make the investment to that business, where we see appropriate investing in automation testing to improve distribution capabilities. So we'll do that is kind of normal course of business I think what the strength of our balance sheet cash position that we have.

Plus the the borrowing capacity that we have just gives us the flexibility to to continue to maintain the business improved business at all so still have appropriate powder as you point for anything that may come along.

[noise] Alright fair enough. Thanks, guys appreciate the color.

[noise]. Thank you. Our next question comes from Michael Kupinski with Noble capital markets.

Thank you for taking the question and congratulations on your quarter I was wondering if you can tell me if our cherries berries, just kind of going back to that for a second did you already implement your price increases for sure you Sperrys and then secondly on it are you seeing that you're.

Putting sharis berries on your infrastructure is actually giving you better benefit than you expected and that might be the reason for the improved our contribution. This year I was wondering if you could just add a little bit more color on that.

So as the cycle in the Sharis berries on the pricing I would say, we're still in the midst of finding wants to write price positioning as we look at the product we look at the brand positioning et cetera, so continuing to test and optimize appropriately there.

And I do then yes, I do think that the operating leverage that we've been able to bring to the business for putting it on our platform as we have using the distribution resources that we have especially the same day distribution resources for Sharis berries throughout Bloom that go amazed at work or that we use for fruit bouquets, certainly helped us to drive some opera.

Getting improvement that's why we do believe.

It has been a contributor and it will be a modest contributor for the for the full year.

The marketing or.

I'm sorry, I was just because they are this is still very much a test year for sharis berries, or you know what testing different pricing, we're testing kind of the repositioning of the of the brand. So you know that a lot of learnings going on this you know this fiscal year.

And you haven't gotten any response is back from in terms of Mike from customers at this point using your product what their you know.

You know whether or not there are more favorable or less favorable than what they happened before.

Boy.

Uh huh.

Not specifically Michael you know it did step would just be part of our ongoing customer sat program that we have of customer follow up and what we're hearing and seeing there is positive and that's continuing to guide us as we position the birth.

Gotcha and then in terms of you know you have really favorable economic conditions at this point and I was just wondering if if it basically it if you know your <unk>, if you're seeing really favorable momentum at this point based on just the economy. I mean, you know obviously consumer confidence is getting a new.

Hi here was just wondering it seems like you have a goldilocks kind of economy for your product.

What is your sense about what's driving that momentum going into the second half of the year do you feel like the conditions. The economies right. You have obviously been proving share I was just getting tried to get a sense of the momentum that you're seeing in your business, possibly related to the economy [noise].

So I think you know when you.

Certainly economy is always good strong consumer confidence as you pointed out as for is very good for our business and how flow business really in the new overly performs well in a slowing economy for sure but what we've always said is that into strong economy. We don't participate in the real high cost we benefit but it doesn't we don't.

Before robustly, but we also performed.

No real those of us down economy, either it, especially as we look at the potential of the down economy to come we think we're better positioned than we ever have been in the past because what we've seen is that people will trade off from certain products trade down into our category, whether it be floral, but even more so the food brands.

A more stable going it down economy, then floral even now there's more than half about business 50 to close but said about business is growing food. We think from a mix point of view, we're well positioned for both the slowing economy. We're in today as well as a down economy. However below the macro environment, we really thinking we if you look at what we.

Done over the past couple of years, especially on the floral side of the business, which is important as we go into the second half of the you know I mean, we really performed well we from a competitive point of view, we've we've really out shined on competition, taking market share from them and we do that but really focusing on a brand focusing on our digital marketing Kate.

Deliveries focusing on passport program, the multi brand customer initiatives that we haven't going in I mean, these are things that have been driving the momentum that has put us into any you know sustainable competitive position that we're in today.

Thank you for that color and I was just a follow up on Dan's question in terms of at this point I know you're always looking for acquisitions, but how do you look at the M&A environment. At this point I mean is or is it strong is it do you think that there's opportunities there or do you think that you're still.

Looking at this point and looking for opportunities can you actually sensibly M&A environment.

Yeah, well, what we look out as a good we're in a very strong position with the balance sheets that we have in the flexibility that we have for it and we're always making sure that we will be good stewards of that balance sheet utilizing the capital that we have to invest in our current business, whether it's the to drive more customer acquisition to make.

Capital investments in technology or distribution capabilities that we have but did today. Our goal is to put our cash in our underleveraged balance sheet to work for our shareholders through acquisitions that can help accelerate the top and bottom line. We used 20.5 million this year to buy Sharis berries, that's been a nice tuck in and we think that's got nice.

Long term opportunity for us well continue to look for opportunities like that or larger opportunities as well things that can leverage our operating platform that we feel well things there can add to that platform that can leverage across all of our customer base. So we're staying active and again our goal is to accelerate the growth through the appropriate acquisition.

Yes.

Great. Thank you that's all I have thank you.

Uh huh.

Thank you our next question from Linda Bolton Weiser with D.A. Davidson.

[noise] hi, congratulations.

Sure.

I could you.

Please comment on when you talked about Tee up TB, you mentioned in wholesale gift baskets. The strength there and you I think you mentioned an expanded customer less can you comment on it is that I knew I knew channel or said another club a warehouse club customer or can you just kind of comment on what your.

By the expanded customer list there.

So thank you Linda thought, yes, we got especially on the wholesale gift basket side, a wholesale food growth side. We've had good results. This holiday season, that's been a combination a really good product design and the team does a fantastic job on product innovation and product design. There. That's also helped US just simply to gain new customers that we sell too so it's not a.

New channel, but it's a number of new customers in that we sell a wholesale products too.

Yeah.

Great and then you were talking about your outlook for Valentine's day, although it's so early can you just comment in general the competitive landscape and you know I guess FTD has been Oh now for several months by private equity firm are you seeing any changes with regard to how after he is behaving.

Anything that is affecting your thinking about about the upcoming big holidays.

Yeah, you know lender, we we believe we have a very sustainable competitive advantage that we've learned over the last couple of years does we looked at the competitive landscape, especially going into Valentine's day, we expected to be a highly promotional holiday as it always is in the floral category.

But as we do that and as you've seen us, especially the last couple of holidays, you see us continue to grow continued to improve our bottom line continue to improve our market share by focusing on our custom is focusing on the customer experience. The truly original products some of which I pointed out the romantic medley collection Gerber These et cetera, we think.

We have a really good merchandising and product development team that's been winning in the category or the different products. We brought to the table. So when we look at the competitive landscape. We expect hard competitions, we expect promotional activity, but we think was well positioned as we've ever been to wait in that category.

Great and then finally in Blue that you have you had really strong revenue growth.

Are you in the phase yet where do you believe that you're gaining new members in the network and can you remind us how that works I thought there was some seasonality where maybe that activity actually takes place more in the summer can you just talk about whether that's occurring yet or is that still to come.

So I think if you look at the revenue as we pointed out a lot of the revenue growth that we saw this quarter came from increased sales of products and services to a membership and that helps tremendously, but you're right. There is a seasonality aspect to growing membership in our wire service. It during the big holiday. So the Valentine's day mother's day people are light shop.

Bone is all are likely to make major changes, but then they will during this month during the summer time period. So sales Blitz is for US you know example to gain more membership would normally happen during the summer months.

But I think Bloomnet is really is well positioned to heal none of it continue its momentum going forward and he would say take market share. Please sir.

Okay. That's all for me. Thank you so much that June .

Thank you. Our next question comes from Doug Lane with Wayne Research.

Hi, good morning, everybody.

Thanks for taking my call.

I'm staying on the on the balance sheet and they cashier you mentioned some technology investments is there anything on the horizon. It would take you off this kind of.

30 $334 million in Capex annually, a down the pike year.

So from a capex do perspective, we've been in that you know that range for you know a couple of years I talk items for you know you know for this year certainly we expect to continue to invest on the technology side, while we've been a leader in innovation.

And how we use the for kind of the front end of our systems and how we.

Having reached you know retail customers, but it also you know there's also backend then manufacturing and distribution we've made some.

You know efforts over the past couple of years.

Published some automation projects both on the manufacturing side and we have I only have plans in place for automation on the distribution side. Some of our you know in some of the Hologic distribution center. So we're expecting that you know that range to you know to up to continue to see looking just for clarity on the technology such as this is Phil.

So that's something that we're always making sure. We're on the forefront of it will continue to do that but there's no major hurdle coming up in front of this from a technology point of view.

Okay. That's what I was looking for and then I'm kind of knew the story here, but what's your attitude or approach on dividends.

Well as we look into use about cats and dogs religious about cash first and foremost we want to use our cares to grow to grow the business or whether it be through investments into organic growth through capital on through acquisition M&A activity as we just discussed so that's a primary use.

Cash focus in addition to that Bill referenced earlier, we do have a style of stock buyback program in place dividends is something that we don't see on the short term horizon for US right now we feel there's better opportunity to utilize their cash to grow the business and take more market share yeah sure that makes sense and then.

Just looking again.

During the quarter it looks like execution was spot on but just looking at some of the trends here, particularly in the variable expenses, where gross margins tick down a little bit and your marketing spending picked up a little bit and again not big moves, but just directionally are these going to be sort of ongoing pressures here is as I look at the rest of this year in front of big.

About fiscal 2021.

Yeah, I mean, I think on you know gross margins do you know you know do fluctuate anywhere we all operating are extremely efficiently. We do have headwinds, but that impact gross was watching very pleased with her most margins you know have come out I don't have come in with talked about a lot of these headwinds, but you know rising labor costs and.

Tariff in the tariff on tower uncertainty.

The promotional nature of the holiday season whitening transportation costs. So these are kinda ongoing items that a and headwinds that we know that we have to page offsetting that to automation initiatives and operational no operational performance you know two ways that but.

No the fluctuation you're seeing a little fluctuations are saying in some of the you know the segment. Some of that is product mix Bloomnet. When did you go in that we're starting to accelerate its growth again with expanded products and services. Some of those are at lower margins on that has a mix of high margin products and services and low margin products and services.

And that does fluctuate from quarter to quarter, we're really very focused on having topline growth gross margin dollars and bottom line and bottom line.

My contribution I think from a OPEC standpoint, as I mentioned in you know a little earlier, we think we'll continue to drive some leverage on that on the Opex on the Opex side, we want to invest on the marketing side, we want to continues to drive topline vote, but looking for leveraging although at you know other aspects of the Oh operating instruction to drive some leverage.

Sure and on the marketing expenses should we just look in marketing expenses is basically moving in Lima sales or are there any changes on the horizon there.

Yeah, I think over the last two years, we've we've actually invested incremental marketing dollars out when you look at the marketing and selling line and a lot more cost snap interest to straight happened high anything else. You know you know marketing dollars. So we're offsetting some of the increased marketing spend with saving you know with savings on what's happening elsewhere, but that's.

Spin you know part of the guidance that we've provided over the last couple years, we were investing in kind of new customer acquisition called especially within the 100 flowers and the having David when you drive.

You know.

Accelerating topline rolled and building kind of a sustainable topline you know volt model, yeah, there that ties back again to the competitive positioning we fill in a really strong position. So it makes sense for us to accelerate that a little bit.

Great. That's helpful. Thank you.

Thank you. Our next question comes from Dan <unk> with the benchmark company.

Yeah, just one quick follow up guys. It's a good segue bill from that last answer I'm, just kind of maybe structurally now or do you think that were with all of your investments in sort of reaping. The benefits is that do you think we're back to you know kind of where are you guys used to be in sort of let's call. It 30 40 basis points of annual margin expansion.

I'm not trying to be tongue in cheek, but obviously your guide this year and then your Investor Day Guy bundled imply 10 basis points of expansion next year. So you know I don't know I doubt, there's incremental investment and I suspect you, we're being conservative, but just want to get a sense of where you feel structurally with the company at this point.

[laughter].

But then we haven't quite guidance for 2000 formal 2021 other than what we talked about I don't last Investor Conference with but you know with 100 million dollar you know number and that it didn't include the contribution from cherries, and so that obviously, but the expectation is that number which would increase I mean, we're going to continue to drive.

Sustainable topline topline growth, we've had a couple of years of incremental investments on the marketing side. We think thats been successful. We haven't made final decision is off 2021 plans on on that but that has been successful that you know that investment in marketing so might you know.

Chances are that selling everything that's going continue and that was looking to leverage other aspects of our platform to drive you know did drive operating leverage or we are seeing the benefits of the celebrate story Echo system platform that we've built all these years leveraging technology leveraging the distribution capabilities leveraging some of the marketing programs like.

Passport et cetera, all of that is helping to drive both the topline and the operating leverage.

Yeah got it I was looking more directional that's that's helpful. Obviously, not looking for solid 21, but you know feels like we're kind of getting back to where we used to be with sort of consistent leverage and stable to improving top line, but you've got thanks guys.

Have you done.

Again, if you like to ask a question. Please press Star then one our next question comes from Anthony Lebiedzinski with Sidoti and company.

Yes, good morning, a gentleman. Thank you for taking the questions I'm.

Just wanted to follow up as far as a new customer growth or could you, perhaps give us some color as far as how much of your revenue came from new customers to the business and also was it was wondering about your ASV for the quarter as well.

So so on the new customer growth, we can hear we continue to look in.

Mentioned, a couple of times, you know increasing new customer acquisition, but also deepening the relationship we have with existing customers and I think if you look at the quarter revenue from repeat customers was I think 62%.

66% actually in Q2, so it's showing the benefit of while we're increasing new customers were also deepening the relationship with our existing customer basin, and we're really happy with that again looking at the programs like passport multi brand customer initiatives, what they're doing the drive those healthy metrics for us. So the bank the more we can keep a nice.

Balance like that Anthony just better off we are familiar with elite perspective, most of the revenue growth for the quarter was driven by order worried about April the ASV was up about a <unk> percent and order growth was the.

Restaurant partners [laughter].

Got it thank you for that but.

As far as tariffs I'm, just wondering if the a phase one trade deal did that have any meaningful impact as far as your tower.

Tariff.

For this year, but as far as your guidance change.

Well I mean, the agreement with China, you know seems to eliminate the threat of new towers, you know that would impact our business going forward. However were still absorbing the impact of the parents, who already have there already in place I have not been.

It was that have not been removed we continue to as Weve discussed we take initiatives to mitigate the impact of out of terrorists, but it's still you know representing year over year. This kind of been building their tariffs that were in place back in 2018 before you know a fall and you know the news on towers to new and towers came into.

Play.

Incrementally this year, it's still was several million dollars more than it was a year ago yoga, what we continue to look at ways to offset you know that you know a deal the impact that.

Got it okay, well, thanks for that explanation and you're looking at the next few quarters. So there are some calendar shifts. So you know Valentine's day is now on a Friday. This year Easter is a little bit earlier, then Christmas then will fall into actually will be on a Friday.

At least.

This year than a Valentine's day that moves to a Sunday next year. So.

As we.

Just or models.

How should we think about these calendar changes over the next few quarters, just high level perspective would be great.

Yeah go ahead go who will give you that from a high level not obviously as we get into next year will be given a little more guidance on the count as of next year, but you're right Christmas moving to a Friday is a nice benefit.

Yes. So the first this year you know you know Easter moves Oh about a week earlier this year, but it's all within the until the fourth quarter. So most of it doesn't impact really the revenue that we that we generate because it's a little earlier now the way the accounting rules work and some of our catalog horse on last year hit in Q4 in Q3, so while not generate.

In the revenue what those catalog expenses, we are booking we have to book that expense in Q3, but that does happen a little impact on Q3 versus you know you know Q4 with taking on more marketing spend your revenue kind of stays and in Q4.

Point of next fiscal year, Justin at a very macro level, you know the calendar shifts Oh happened this year being a leap year at holiday time, we clearly turns from kind of a headwind this year with the six less shopping days you know next year, we get a little bit of it you know a tailwind we pick up two days a from a from a selling season.

As Thanksgiving moves from the 28 to the 26 and with Christmas moving from a Wednesday to a Friday, that's a great day from a logistics standpoint being at the end you know at the end of the weak and getting all those packages you know and getting all those packages out to fully up a tailwind in Q in Q2 that we Ben Yeah. We pick up next you know pick up next year with that.

Valentine's day, and Friday's a good.

Very good day whenever Valentine's day is towards the end of the week.

That's a positive for us in such a late ordering customers you know order late for Valentine's day, and so having that that whole we to get to you know to grab that demand is up you know is a benefit until Thursday, and Friday off on a better days for Valentine's day next year when that shifts to a Sunday ill that that that will have an impact on us so we get the.

Tailwind in the second quarter with up with with Christmas, We do have a headwind in the in the third quarter next year I would Valentine's day, moving from Oh right into a Sunday.

Got it alright, thank you very much best of luck.

Thanks.

Thank you. This concludes our question and answer session I'll now turn the conference back over to management for closing remarks [noise].

[noise] Okay. Thank you everyone. We appreciate your interest in your time here. Thanks, very much if you have any additional questions. Please don't hesitate to contact US and of course don't forget Valentines is coming soon so don't waste visit any of that almost all lined up with friends, who express your heartfelt sentiments catch up.

On on Valentine's day, Thank you very much.

The conference has now concluded thank you for attending today's presentation.

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