Q1 2021 Wayfair Inc Earnings Call
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Okay.
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Good day and thank you for standing by welcome to the weight per Q1, 2021 earnings release and conference call.
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I would now like to hand, the call over two hours per day, and Gil said shield kit and Investor Relations corporate development and capital markets. Please go ahead.
Good morning, and thank you for joining US today, we will review our first quarter 2021 result.
With me are neared Shah cofounder, and Chief Executive Officer, and co Chairman, Steve <unk> co founder and co Chairman and Michael Fleisher, Chief Financial Officer.
We will all be available for Q&A following today's prepared remarks.
I would like to remind you that we will make forward looking statements. During this call regarding future events and financial performance, including guidance for the second quarter of 2021.
We cannot guarantee that any forward looking statements will be accurate, although we believe that we have been reasonable and our expectations and assumptions.
Our 10-K for 2020, our 10-Q for this quarter and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward looking statements made today.
Except as required by law, we undertake no obligation to publicly update or revise any of these statements whether as a result of any new information future events or otherwise.
Also please note that during today's call we.
We will discuss certain non-GAAP financial measures as we review the company's performance.
These include measures such as adjusted EBITDA and free cash flow.
These non-GAAP financial measures should not be considered replacements for and should be read together with GAAP results.
Please refer to the Investor Relations section of our website to obtain a copy of our earnings release, which contains descriptions of our non-GAAP financial measures and reconciliations of non-GAAP measures to the nearest comparable GAAP measures.
This call is being recorded and a webcast will be available for replay on our Investor Relations website I would now like to turn the call over to Europe.
Thanks, Jane and good morning, everyone.
And to share the details of our first quarter results, which were again characterized by strong revenue growth solid profitability and positive free cash flow.
While macro conditions are always changing and promise to be especially dynamic in 2021 wafer us focus remains squarely on connecting all of the industries customers and suppliers on our unique platform, which is custom built to address the specific needs of shopping for the home.
As a reminder, we refer to ourselves as a platform because we bring together the best aspects of a marketplace model. While also incorporating the benefits of a first party or one P retail experience for the customer.
Jumping to the category is fundamentally unlike nearly every other vertical retail.
Each purchase is a personal highly emotional expression of one's feelings of home and much of the category is unbranded and differentiate it.
These are high consideration purchases and require a one P experience for the customer.
Shoppers need inspiration through relevant content discovery through a wide assortment and confidence that has built through strong merchandising fair prices reliable delivery and effortless customer service.
Our aim is to set the bar ever higher on each of these dimensions with our best in class customer experience is our north star.
And the process, we are building the preeminent destination for shopping for home and <unk>.
And trusted and household brand with tens of millions of customers return to again and again, hopefully seek inspiration and explore vast selection and discover the products stay low.
And this effectively wafers flipped the script on what powers the business and adopted the most attractive aspects of a marketplace model when it comes to our suppliers instead of working with a select few suppliers, we embrace and inventories like third party model and instead focus on building the tools and services to allow every supplier to easily.
And productively access our customers.
Net suppliers do what they do best.
Aviation design and manufacturing.
And we delivered on our solutions like India, and logistics services technology, and media and merchandising tools that they use to enhance their reach to the customer and grow their business.
Years of investment and have put us on the position to fundamentally leverage our scale for the benefit of both our suppliers and on customers, creating a hole that is greater than the sum of its parts.
And our Investor presentation, we show this platform as a flywheel, where scale begets growth, which leads to further efficiency.
We see this and action each quarter and Q1 was no exception first quarter net revenue and grew to $3 5 billion.
Up $1 $1 billion and 49% year over year.
Our active customer count grew by 57% over the first quarter of last year to reach $33 million.
And we delivered $14 7 million orders, 49% more than a year price.
Our shoppers love the experience they have on wafer, which keeps them coming back and Q1 marks the first time that 75% of our orders came from repeat customers.
<unk> order growth year over year accelerated versus Q4.
And order growth once again outpaced growth and new orders, which were approximately 800000 to higher year over year and.
Accelerating growth and repeat is in part a reflection of those newer customers acquired in 2020 coming back and becoming more and loyal.
You may ask what we are doing to keep this flywheel and motion and to accelerate it.
Ambitious and going after our 800 plus billion dollar total addressable market, we continue to invest with conviction and all aspects of the platform improving both customer and supplier experiences expanding our reach and testing new concepts and failing and learning and scaling quickly.
A couple of examples to demonstrate what I mean on each front and.
And when it comes to the supplier experience. These endeavors have recently included scaling up our Asia based logistics operations and freight forwarding business.
And this has been especially powerful given the upheaval and congestion and the ocean container market and has allowed us participating suppliers to maintain a steady flow of goods to the us and Europe and keep their businesses on track sales.
So continuing to invest and successfully expanding our reach and Canada and in Europe.
Since the onset of the pandemic, our active customer count has increased by nearly 70% and international and orders from repeat customers are up more than 800 basis points as a percentage of total order mix.
We're adding additional castigate capacity and Germany to accommodate our growth and to open the door to further market expansion and Europe.
And when it comes to experimenting with new concepts, we push ourselves to be forward looking unbiased and methodical.
And 2021, among our many ongoing initiatives, we're laying the groundwork to test into physical retail and introducing new customer face and creative rift.
Refining and unique positioning of each of our brands and developing new supplier facing services.
We are balancing our various endeavors with continued profitability and free cash flow generation.
2020, and marked the first year of profitability for wafer and since we went public and we.
We expect to remain profitable quarter in and quarter out in 2021.
With Q1 gross margin of 29% and $206 million and adjusted EBITDA of 6% margin, we are demonstrating the structurally profitable nature of our platform model.
We generated over $200 million and adjusted EBITDA this quarter, while simultaneously and ambitiously investing for the future, including thousands of people who are working on exciting multiyear initiatives.
While the magnitude of margins will move quarter to quarter, and the various tailwind and headwinds with which we contend will change over time, we're confident that strong profitability. We will continue and will expand over time as our various investments continue to bear fruit.
Like many of you we are eager to see the world move post pandemic.
We have been encouraged by the early signs of normalization and vaccinations are increasingly made available to the general public.
Many have asked us what this new normal will look like for wafer and shopping for the home.
Well time will tell some of the early data points, we've seen paint a picture that looks very promising for our business over the long term.
And the early innings of the pandemic, we saw a shift and shopping behavior as customers rushed to outfit their home offices and homeschooling environments. However.
However, this demand surge very quickly extend and across the many many classes that we sell a phenomenon that has persisted through today.
More than a year into doing nearly everything from our homes has only intensified and emotional value we place on our personal spaces as we have re imagined what we want our homes to look like and have expanded our to do and wish lists to achieve these patients.
While demand for COVID-19 impacted categories like travel and entertainment is returning and we hope.
And so believe the pandemic fundamentally increase the share of wallet customers will spend on their homes and the future.
And the amount that we'll spend online.
That's partly because as we sit here today and the world begins to reopen and many people know that they will still be spending more time at home and have become much more comfortable shopping online.
Remote work will continue to be a reality for many.
And even as companies began the process of returning to offices new norms around flexibility, we'll give people the opportunity to spend more time at their homes.
We are all eager to host friends and family again, too and to meet those occasions extra special.
We're closely watching category demand trends in those countries that have had greater relative success and reopening even when we don't operate there. We're also paying attention to how demand on our platform evolves state by state and the United States, given various levels of vaccinations restrictions and adherence.
The board thoroughly takeaways suggests that even in geographies, where the economy is largely reopened and spending on the home has remained elevated compared to pre pandemic levels.
Most importantly for wafer and ecommerce demand is now structurally higher for our category, though still quite underpenetrated and could well accelerate more quickly going forward and pre COVID-19.
All of these trends are encouraging though it is still very much early days.
As you know this persistent level of demand has brought some challenges to the industry as multiple points of strained have emerged across the supply chain.
Earlier, and the pandemic inventory availability and outbound bottlenecks for the biggest sources of stress.
More recently inventory constraints have been magnified due to inbound issues, namely ocean container availability and port congestion.
These are challenges faced by the entire industry driven by broad macro pressures.
<unk> sales remain more elevated broadly and suddenly and dramatic shifts to ecommerce and produced intense demand on existing logistics infrastructure across the spectrum on.
And on the whole for our categories inventory availability and delivery times are sequentially improving.
And it is in fits and starts and will likely take towards the end of the year to fully normalize.
Though we cannot entirely avoid some of these challenges our platform model and years of logistics investments for us and are positioned to weather the better than most.
And more significantly to help extend these benefits to our supplier partners.
Having a virtually limitless catalog and gives us the flexibility to ensure customers see the products. We know we can get to them quickly.
Our logistics network and scale has given us a uniquely advantaged C. As we deal with major providers and transportation, which translates to better terms and our position on priority, which we can effectively share with our suppliers.
And as relative advantages allowed us to move weighted back towards strategic timing and the spring.
We just hosted the annual event last week and now it's too early to give you a full accounting we were very pleased with the customer and reaction to the truly great deals we were able to lineup.
The event setting new way day record and we saw broad based momentum with particular emphasis on outdoor upholstery and bedroom and classes.
Wrapping up some of you have asked whether we will change the way we operate as we exit out of the pandemic environment.
The answer is both yes and no.
No in the sense that we have always run a long term oriented business. The way, we acquire service and retain our customers is inherently dynamic and optimized around customer lifetime value. The way we work with our suppliers is also about establishing collaborative productive and ongoing relationships.
We're not focused on any single quarter, but instead on a longer term vision for wafer and the sum total of all of this work is also what gave us confidence to effectively raised our long term profitability targets earlier this year and.
Yes, and the sense that nothing at wayfarers static and the amount of change we pursue gets larger every year.
And as this energy that elevates every dimension of the platform experience and ultimately creates and widen our competitive moats.
We know that the home will remain a major focal point for everyone even post pandemic.
We're just getting started helping them capture that unique feeling at home.
And we have a long runway ahead.
Now I'll turn it over to Steve to talk a bit more about our supplier service.
Thanks, <unk> and good morning, everyone.
What are the key enablers to our supplier success on the wafer platform and frankly per wafer itself or the services and tools and we developed for their use.
And these currently expand offerings across media merchandising and logistics with more to come.
Rather than speaking the abstract and I wanted to use our time today to bring each of our current offerings to life.
So through some real examples on how these services have benefited individual suppliers over the last couple of years.
I'd like to start with our media business to which our suppliers can purchase advertising to enhance their competitive positioning on our platform.
We take a different approach here than other ecommerce retailers because of the very unique nature of the home category requires browse oriented customer shopping journey.
Our foundational guiding principle is that advertising done right should be accretive to the customer experience.
As a result, we have been very deliberate about our media inventory.
Including the tight quantity and the pace of which we released at.
And we first launched media services and the us and a few years ago, consisting predominantly of our on site display ads. We followed in late 2018 with the launch and weigh out our sponsored products format. Today, we continue to expand the sophistication of our media services, including by adding functionality like keyword bidding and.
Options to display several related skewed to a single promotional unit.
We are driving education across our diverse supplier base to encourage adoption and our <unk>.
Pleased to report that the media business has scaled quite nicely over the last two years with a lot more to go.
We are just starting to launch a similar suite of services and Europe, leveraging the same technology and playbook that has proven successful in the us.
There are more than 4000 and suppliers, giving on media services today, a figure which grew by Forex over the last 12 months, even our earliest adopters many of whom have sophisticated digital marketing capabilities continued to see strong ROI through sponsored listings and are increasing spend with us.
One such early adopter of sponsored products was the large rug supplier. After a set of initial media campaigns earlier and the year the supplier quickly ramped its budget with us across both onsite display and sponsored products and late 2019 net.
They did so on the back of very competitive returns on AD spend and the clear value of being able to differentiate their products on our platform over the course of 2020, the supplier spend increased by nearly 400% and a number of promote us skus increased by more than twofold.
More recently the supplier has also become a valuable and willing partner for experimenting on new media products with us.
And of testing is leading to interesting learnings and ideas, which we are beginning to share with our broader supplier base.
We are also just beginning to scale, our merchandising as a service offering which you can think of as Judy visual asset creation.
Product imagery video and other visual assets are some of the most important elements to selling home products online and they drive more traffic higher conversion and fewer returns and happier customers traditionally suppliers and retailers rely on physical photo studios to create the symmetry, which is costly and logistically complex.
Have made multiyear investments and three D imaging technology, great virtual inventory and that is significantly cheaper faster and of higher quality and through traditional photography studios on.
All of the supplier has to do is send us some referenced and derivative products, we handle the rest to make and ecommerce ready.
Our supplier partners are excited and hunters are already using and service.
And the imagery, we create and drive significant product sales through increased clicks and conversions, while also reducing supplier costs.
This offering proved particularly useful during the pandemic and 2020 suppliers were very motivated to create digital inventory, but were constrained and their ability to do so given many photo studios were closed and locked down.
For example, one of our leading suppliers approached us to help them create imagery for several products and their catalog and drew.
Merchant with service the supplier was able to create photo realistic treaty models of its products and select a variety of virtual room seems to visualize the men.
And the resulting lifestyle images were higher quality and will produce more quickly and cheaply and then any traditional option all without having to move the product to another location.
The early results have impressed and the supplier now intends to use merchants and service for hundreds of their top products.
And just as we can leverage our technology from the benefits of suppliers and we also leveraged our scale through our fulfillment platform.
We've talked about our different logistics services for several years now, but it's worth painting the picture again and the context of our offered today.
And our earliest investments were across our castigate warehouses and wafer delivery network as a reminder, the WD and as our proprietary middle and last mile delivery solution for the vast majority of large parcels.
Bulky us to products, which cannot pay through the common carrier networks.
And concert, we built out our own set of fulfillment centers, which we call Castle gate.
The Castigate network consists of 17 warehouses and over 18 million square feet across North America, and Europe cash.
<unk>, let suppliers forward positioning their products close to the customer improving delivery times, and optimizing inventory management and enabling Dan introduction.
The third and newest pillar of our logistics business the international supply chain.
C office consolidation and ocean cargo and drayage services to suppliers, moving Asia manufacturing inventory to North America and Europe low.
Virginia, our scale, we purchase bulk cargo capacity from some of the largest freight providers and the world and pass on both the savings and the assurance of guaranteed space to our suppliers we.
And we can offer this for full containers bound for either castigate locations or suppliers' warehouses across multiple suppliers. We can also break bulk and construct optimize consolidated containers on for each of our castle and great locations on lucky speed and lower supply chain costs.
<unk> completed the puzzle for our full suite of door to door services, helping suppliers get products from their manufacturing sites directly to the customer's door step through wafer.
Suppliers valued the end to end convenience and the ability to scale quickly on the wafer platform. For example, we have a us based supplier of bedroom furniture that previously imported products from our manufacturing site and southeast Asia to a single warehouse located in the Midwest and <unk>.
Supply and will then drop ship at a high cost all over the us and as a result had low two day badging across the catalog.
The supplier started force positioning its most important products across castigate locations and 2019 and integrated ISC by year end.
This drove inbound transportation costs down by a double digit percentage free supplier.
Led to a one third improvement in order to delivery day, and introduce <unk> to more than 40% of its catalog.
Between multiple ocean carriers and related middlemen and drayage providers warehouse operators customs brokerage and last mile delivery. This supplier would normally have to interface with five to 10, sometimes unreliable length and the supply chain, we consolidated that down to one solid relationship with us and we.
We were able to help the supplier more than quadrupled its business on the wafer platform 2020.
As you can see we have invested in building the tools that our supplier partners, regardless of size of sophistication and need to grow and scale their businesses.
Our interest are mutually aligned here and a myriad of ways.
All of these services save our suppliers time cost and hassle, they all surface product to the customer and enhanced ways, whether it's through better merchandising or more reliable delivery and.
Several of these offerings are accretive to the bottom line.
Our win win win elements of our platform model with strong supplier interest and adoption to date.
I will now turn the call over to Michael.
You, Steve and good morning, everyone.
Let's take a look at the financial details for the first quarter before discussing the forward outlook.
And you saw in our press release. This morning, Q1 total net revenue was $3 5 billion.
This was $1 $1 billion more and the first quarter of last year, representing 49% growth year over year.
We saw strong growth and sequential acceleration and the growth rate year over year in both the us and international segments.
The U S reported revenue growth of 43% over Q1 of 2020.
$846 million.
As we mentioned and back in February we did see some benefit from stimulus and both January and once again in March.
We estimate the net lift from the two was relatively mild.
International momentum was also very strong at 85% growth over the prior year.
And with lower vaccine rollout and continued COVID-19 related restrictions across Canada, the UK and Germany on likely contributed to the results.
And reported growth also benefited from a weaker us dollar year over year.
On a constant currency basis international revenue grew 73% from the prior year.
Okay.
<unk> discussed our Kpis earlier, so I'll now move further down the P&L.
As I do please note that I'll be referencing the remaining financials on a non-GAAP basis, which includes depreciation and amortization, but excludes stock based compensation related taxes and other adjustments.
Q1, gross margin was 28, 9% showing 400 basis points of leverage compared to last year.
Positive year over year drivers included merchandising gains and strength and media supplier services.
These gains were partially offset by category mix and outdoor got an earlier start than expected and tends to operate and a lower gross margin profile.
While we are not totally immune from sequentially higher shipping costs.
We believe wafer is better insulated than much of the industry, thanks to our scale and business model.
And we were also continuing to drive underlying logistics efficiencies.
And therefore expect the net impact on any shipping inflation will not be overly meaningful this year.
Customer service and merchant fees were four 1% of net revenue and the first quarter in line with our outlook.
Advertising as a percentage of net revenue was right in line with guidance at 10, 5% or about 130 basis points lower than last year.
Our selling operations technology, and G&A or Opex expense line came in at $373 million.
This was a little lower than we expected this quarter and is mostly timing as our pace of hiring started the year, a little more slowly and us now picking up.
Through the first quarter, adjusted EBITDA was $206 million or five 9% of net revenue.
This adjusted number does not include the $12 million charge related to the consolidation of several of our customer service centers, which we undertook in March.
And the U S. Adjusted EBITDA was $227 million for an eight 1% margin while the international segment booked slightly negative adjusted EBITDA and negative $21 million were.
<unk> three 3% of net revenue.
Capital expenditures and the quarter were $65 million. This was somewhat lower than we originally forecast as we purposely delayed some racking projects.
We ended the quarter with $2 7 billion of cash and highly liquid investments on our balance sheet and.
Free cash flow generation for the quarter was $111 million.
And we've now posted four straight quarters of positive free cash flow, including in Q1, which historically tended to mark a seasonal low point for cash flow.
Themselves to deal with this new reality, it also and spending a good portion of the cares that stimulus checks, which had checking accounts beginning and early April.
While demand across the classes was broad there were certainly spikes and so-called COVID-19 classes like home office and play room.
And some of this very specific spike demand is what we are currently anniversary.
With all this and mind, we're not surprised by a negative year over year gross revenue trend quarter to date, which is currently showing down and the high single digits.
That said year over year comp, though it is trending is expected is not pretty meaningful and a period like this.
We are instead closely watching revenue trends for sequential stability and growth and are quite pleased by what we're seeing thus far.
The sequential trend is the best reflection of how are now much larger base of 33 million active customers is repeating and contributing to a very strong net revenue performance.
A quick side note.
Some of you may also be wondering how much way day would have added to the quarter to date growth rate.
But I'll just remind you that we hosted the save big give back event, which ran for a week and was very successful in lieu of way day last year and be comped that in April.
So we are effectively lapping a week long event last year with a strong two day event this year.
Turning now to profitability cute.
Q2 should clearly demonstrate our ability to remain strongly profitable, even while continuing our ongoing ambitious investments and while comparing against and extraordinary period last year.
Moreover, we have good visibility and to multiple drivers, which should continue to benefit and margins over the coming years.
This is why we're indicating that are original longterm EBITDA margin goal of 8% to 10% is now no longer appropriate and too low.
You'll recall, we originally set this range of the time of Wayfarers IPO.
To $80 million.
Capex and an $80 million to $90 million range again subject to timing.
You will notice that we adopted a new standard for that accounting this quarter.
And our current capital structure. This will mean that our P&L interest expense will be lower at approximately $8 million to $9 million in Q2 and will more closely reflect the coupon rates on our outstanding converts.
Also at our current capital structure, we expect basic weighted average shares outstanding to equal approximately 104 million shares.
As a reminder, our fully diluted weighted average shares outstanding will ultimately be driven by the net income result in Q2.
And the result of applying the if converted method to our converts.
To wrap up and we'll go back to one year and started there was some volatility. This year is unavoidable. We are all focused on a much bigger future and are convinced that wafer and unique platform positioning our strategic investments and our long term orientation will equate to continued strong <unk>.
<unk> and improving profitability for many years to come.
In the context of a huge Tam and a long runway for further e-commerce penetration.
And nice growth. The two that are the farthest along that are growing nicely and they are.
All grown and actually that the two that are farthest along would be what we're doing on logistics, which is both the warehousing offering which is the traditional castigate offerings, but then what we're doing with the COVID-19 cash state the logistics inbound services, the IFC Ocean freight free brokerage business.
And then the other one is what we're doing on advertising supplier advertising on our site, which we can call immediate.
That said I would say all of these are still very much and the early days. So while they show really nice percentage growth and they are quite small relative to potential and then what I would say, we're we're doing on other supplier services like merchandising, it's still very much super early so that they're all working really well, but from a contribution to the total I would say the best.
And the runway is really all still in front of us.
Yeah, I don't have anything to add to that and <unk>.
Okay. Thanks, maybe a question for Michael just on the gross margin guidance.
27 to 28 I guess.
Quarter on quarter. It seems like the the guidance continues to get a little bit better.
And we know there's concerns around maybe increased promotions coming down the pipeline could you just talk about the structural benefits that you're seeing that's giving you a little more confidence and that gross margin guidance.
Okay.
Thanks and Peter.
Yes.
And we've tightened arrange a little bit to 2728 and sort of brought up the bottom and and I think that's just during the confidence and now having delivered a few quarters consistently and about 29.
Look I think there's some potential here term for downward pressure from shipping costs I don't think we're worried about promotions and the promotional environment right now.
And so and and the same time as you know we've got you turn on logistics investments that are starting to bear fruit.
Per way that offset the.
Other shipping costs potential.
Potential pressure so.
27, 28, and a good place to target.
Particularly sort of and the environment and today.
Okay. Thanks, a lot guys. Good luck.
Your next question comes from the line and Brian Nagel with Oppenheimer.
And a good morning, great quarter congratulations.
So thank you my first question for Michael recognizing.
Recognizing obviously very fluid environment, you, you're not guidance revenue got sky and specifically revenue for Q2, but can you provide some colors for us as to how we should think about the full quarter and how it revenues and you should trend maybe through and through May and June.
Thanks, Brian.
And so you guys know, we called about giving net revenue guidance for about a year now cause the pandemic is created all sorts of volatility.
And orders grew 28 per cent. So we're getting a lot of new customers, but really where we make the ton of money day enjoy the experience they come back and we keeping the experience better and better so they come back more and more right. It's a real flywheel. So then what happens is what matters. The most for next quarter is really what we did this quarter.
And how many more customers that we get what was their repeat behavior and improvements that we make and that affects them that they do and the next quarter and then that affects what they do and the next quarter. So the sequential trends and I think actually even though they're particularly helpful. Because of the pandemic I think they actually tell you a lot more about the business and general.
And that's very helpful. I appreciate on what color and then.
Maybe quicker follow up.
And I can't remember, where it was mentioned prepared conferences on stimulus and and I think the comment you made us that you think any benefits and if the stimulus and I guess, it's most round most recent round of stimulus.
Mild.
And that seemed different than what I'm hearing from on and other companies that cover your benefits and be much more substantial so I guess a couple of questions here.
How are you looking at them and smiled and why why do you think that is in the case of wafer.
Yes, so I think there's a there's a couple of things so.
I think the first round and stimulus was very significant for.
Everybody, particularly based on their online business and if you remember the first on a stimulus brick and mortar was closed some brick and mortar retailers did and benefit from the person on the statement. So a brick and mortar based guy is going to talk about the current and was being great and they're going to set up on the first round was really and and that.
That is great, but it's because they closed other stores and they didn't have much going on on line. So they have a relevant difference if you're online you've been beneficiary through the whole thing to a significant degree so now you're comparing it to kind of the peak of the COVID-19. The very beginning of the lockdown were affected the all the money went back out if you look at what's happened with the stimulus probably over time us and.
Increasing amount has gone into savings when he drowned us stimulus and that's why the us consumers sitting with close quarterly and and savings and the and the bank up from 800 billion before COVID-19 right. So those who have money halfway more on the stage and increase in the mountains and those checks.
So I think if you look at how it plays out what we're describing the effect it had on us and were describing it relative to the effect of the one last April.
And you can kind of and if you think about really just focusing on on line, which is really where all the gains abandoned it's very significant.
Kind of you kind of get it all back out and the market vs. Less now, but if you're a brick and mortar guy obviously and you are benefiting from your stores being open now.
Basically I think the difference.
Got it really helpful Gratz again and best of luck here and thanks. Thanks, Brian. Thank you.
Your next question comes from the lineup and pulse with Bank of America.
Great. Thanks, a lot for taking my question just on and industry level.
You guys were innovators and the category and really got ahead of lot of the offline guys. They are definitely refocused on on on line. How do you think that could affect the overall industry and specifically as you think about marketing channels does that change anything and also the on line promote.
<unk> environment, how do you think about that and and do you think you can keep gaining share as we look forward over the next couple of years. Thank you.
Thanks, just book So I appreciate you, saying that we were innovators I would just like to argue my point, which is I think we are innovators and.
So I think we're doing a lot that's actually the more of us versus.
The main competitors, we have heard that.
Handful very large retailers now that the general merchandise guys and focus on growth free and.
And the homeroom and guys and focus on building materials, and obviously and generalist E Commerce platform.
That's really our main competition, even though it's a fragment and world and there's a lot of.
And it was out there one hundreds and hundreds and thousands of them.
And what we're finding is that none of them really focus on home and so they went home to just be and other category that they fit into the mix even down to how they think about logistics, even though that there's only there's only a couple of them are really investing and the logistics and significant way and give us a worthy investments are into these networks optimized for groceries networks that are kind of one hour delivery networks.
Or.
They are in the network that benefits the bulk of their business and if you look at what we're doing on home. If you look at our digital brokerage business for the inbound free and how it's optimized for our industry. If you look at what we're doing with.
The optimization around large parcels, you'll find that we're actually the motives widening similar.
Similarly, if you look at the merchandising that we're doing and what we're doing with imaging and rendering imagery and they are still significant differences of us vs.
The the large competitors, we have and it's all because we are specialized on this category and if you look at their innovation groceries delivered right into your refrigerator, they're doing very interesting thing. It's just not in the category that we are in and so I do think we're going to be able to to answer. Your question more specifically I think we're going to be able to keep taking share and it makes us right going forward.
It doesn't mean that these guys are going to go away and they're going to be around but remember, we have less and 2% market share and the market, we're focused on and even with the.
Very conservative Mac, we have and and IR deck, where it gives us to <unk> as big by 2030.
Which is like 112 billion the market at that point is 1.2 trillion and.
And so we would have less and 10% share and using three conservative assumptions on top of each other to get to that which is kind of imputed CAGR. If you back at out of 23% and if you look at the rate we've been growing and obviously moving granulate well in excess of that so I do think if you're if you're kind of look at health share Plaid I think you're going to see that we currently take share and.
And where a very big winner and a category that's still even if we beat that number handily and still we have a pretty small share and very pregnant and industry.
Great. Thank you.
Your next question comes on on line this death fashion with Weightless.
Thanks, a lot and good morning, and congrats on a great quarter.
Question is around the cohorts that you guys have acquired over the course of the pandemic and what you're seeing from Denmark Star in terms of the behavior. Your balance Capri pandemic cohorts are you seeing them on the hates and and really or are they turning out are spending less than pre pandemic cohorts.
US thanks.
We're seeing them play out very similar to any other customer cohort and the thing I would point you to where you really see that if you just look at the share of orders that Ah repeat verse, new and you see how that continues to pick up and installing and patterns that was there well before the pandemic, we just hit 75% of 74, and a half or something and if you.
And our IR deck, which are you a five year review that and you just see how it keeps cleanly picking up and it doesn't mean, we're not getting new customers. We just got whatever 3.75 million orders from new customers. This last quarter. So we're getting tons of new customers, but the growth is driven by the repeat and people coming back I was up 58% day at like 11 million repeat orders this quarter.
And that's that that's still have huge runway because as I mentioned, we have less and two per cent market share. So even with the customers. We had was still only getting about $500 per customer per year, which is a huge amount of running room and obviously, there's a lot of our customers to get.
Yeah, and it says you look at it down through the years start face and counter comparisons and searches customer growth and.
And expect those trying to be can you and you expect to continue to grow.
New customers a day material day like we saw on first quarter.
And the way I would encourage you to think about us.
And I was kind of touching on this earlier and the one on the earlier questions. If you just think about US sequentially. I think that gives you the way to think about it and model. It and you can back out and whatever you want to call it year over year and year over year doesn't really matter of the question is paid so we got this bunch of new customers. This quarter. Okay. So now we go into next quarter at 33 million active customers. What happens next quarter are they repeating at the <unk>.
And frequency or does the frequency and pick up a little and and continues to pick up a little every quarter right. And then are they are still new customers and yeah. Okay. Yeah. So the new customer number how many how many are going to be and market and so if you kind of take out those COVID-19 quarters, and you can see a clean line going back many years of how many new customers a tipping into the bucket and remember their new and the sensitive police their first order with us.
But they're not necessarily new entirely to us, meaning we have huge reached the customers. I mean, we have tens of millions of customers, who are on our email list and millions and millions customers and download the app, who haven't yet bought.
So what happens is those folks kind of eventually kept in and then of course, we're getting new folks into those kind of early stage assets of the final two so if you look at it sequentially and just kind of look at what trends were like and you say, okay. Hey on these guys and definitely things and make a customer for us better. So we'll repeat continue to slowly tick up will customers continue to tip in that that sort of gives you a way to.
Think about growth and then if you look at EBIT, we have all those structural pillars and talk about those four pillars that are going to keep driving up.
EBITDA margin and and maybe like some guidance of gross margin and that is still early too and so you can kind of get your head around well, if they can't get and and the scale that the customer kind of math tells you do you think that these these pillars will actually accrued and more margins pretty easy to see how that will happen and so that kind of gives us a way to think of that.
Got it helpful. Thank you very much and good luck.
And you.
Your next question comes on the line of Steven for Us.
Good morning, So near US maybe just a quick follow up right on on the sequential trends. If we look at sort of a LTM net revenue proactive customer strength and the first quarter.
And the commentary you're you're laying out here.
Lead to the expectation of continued strengthening sequentially and and that particular line and number.
What is what is all their visit stripe and millions of members who will download a and what does that mean for that that particular lot on them.
So I think you are asking and I think LTM revenue proactive customer of the number that would be like $461 right now.
Correct Yep.
So that's the number when I refer to like over only getting $500 per your that's effective and what I'm, referring to and when I talked about is ticking repeat keeps sticking up slowly you can look at that number and if you take a long view you see it's picking up and it takes up slowly and the reason it takes up slowly us you're getting tons of new customers and and who just made a purchase for the first time and you're mixing them with.
What's a significant number and absolute count, but it's smaller proportion who went from first and second and that's bigger than who went from second and third order and third or fourth order and fourth or fifth order, but these are each growing and as they grow they spend more with us and stuff that and number moves up but it moves up slowly because you have so many customers piling and the top of that funnel right and obviously that numbers and.
Weighted by the customers, who are and each tranche and how loyal they are and the age of the customers because they're mixing and customers and bought yesterday with customers, who bought a year ago right because it's us trailing metric.
So yes, we would look for that number to go up over time and bounces around a little bit but that number would be.
Basically the geezer number to look at I think is is the routine order growth and the new order growth and really think about it but this number will be impacted by that because as customers repeat more often and become more loyal they do spend more per year with us.
Yeah, the only other thing I think.
The only other thing I would have theirs could you look and the investor decorate.
Back over time and continued back and 2060 $395 right like it's near an extended day.
We're needing wallet share you're out and.
And we think there is a long time later that day.
And then just a.
Quick follow up.
And if you could provide some color on the anticipated cadence of international EBIT margin or or does it simplistically. If we should assume the first quarter and sort of a trough error in terms of the performance for 2021.
So I think the way to think about international is the same way I was kind of guy to you to think about the whole business, but effectively it's earlier stage meeting right. If you look at it we're getting tons and new customers. Because we have so few on a relative basis to the size of the market compared to the US and then in fact the repeat continue.
To expand and it's expanding nicely. So in other words, all those metrics underneath and the international sudden and keep going and romance of revenue will compound revenue should grow faster and international over time, and then it can and the U S. Even though both will grow at a very significant Ray and then so and then if you look at the EBITA. Your question on specifically I think on profit international profit.
You'll see there is.
Emily.
We basically.
We have been investing and international for our long term plan not for the near term plans, what I mean by that us when we really decided invest and international and 22014, we started and some are 14, we purposely just on the headquarter a business and Jermaine headquarter ourselves and.
Berlin, Germany, but the first market, we focused on with the UK. So it goes a lot so.
February and Berlin, why would you do that if you're focused on UK well. The reason is our long term plans to be expand throughout Europe, and have basically missed and north American playbook, but the UK with the first market well as we prove that out and became the leader and K today with a household brand and the UK, where the leader online and and home and the UK and that business continues to grow a very fast rate.
We then 2017 span and to focus on Germany.
And then this is so simple.
Why are you expanding more of us so whether we want to prove out Germany and certainly work. So now you will forward or two years and what's a four year cycle and build a brand and Germany, that's working really well.
And so now we're and up to this where it and give you saying what what's interesting is all the investments we've made that the Paneuropean transportation network, where we move goods from 30 different countries and we deliver them today and the UK and Germany. The country category teams, we have a team based in Berlin, and we have an Italian category seeing us native attendant and speakers who cover our suppliers and Italy, we have one of these for Spain.
And one of these for Poland, and they're all based in Berlin.
We've made all these investments overtime because of of what we're doing with our long term plan and Europe and.
For example, and just give you some contact with over 2000 people and you're holding 100 or and London. So it's really we built the same kind of operation and and Boston built in Berlin, and so from a leveraged standpoint, the way profitability and play out is you're going to see us on one hand, the ambitious and expanding Europe and and methodical manner. However, the economics will keep getting better and so.
And what how can the economic keep getting better and popular keep getting better over time as you expand the reason is it takes something that's more mature like the UK, where it started with really low gross margins those margins and rise over time, it's so much bigger than anything.
Newer right that it's growth outpaces, the growth and from and yourself.
Great alone long story short international EBITDA will keep getting better over time, but really where we are with a mature more mature piece, but it can still grow like welfare as the us so profitability and the driven by the us business, but international.
It's.
It's on the right trajectory I Dunno, Michael do you have anything on international EBIT I think of the question and had some near term question and aspect of it too.
No.
You're covered exactly how we're thinking about the trajectory there.
Robert knock on sort of died out international for reporters.
And the whole business the whole business international business continues to kind of greed trajectory and he's about.
And we're making investments on balanced and thoughtful way, there and you're continuing to see total leverage show up on.
On appeared pointed out the leverage show up on the Simpsons investment, we can speak and Internet.
National business over the last few years.
Thank you.
Thanksgiving.
And we have reached on a lot at times on questions. At this time I would like us.
For clothing remarks.
Well. Thank you all for joining for the call. We appreciate your interest and Wayfarer and.
We're really excited about the future we see a tremendous growth ahead and.
We move update yoga and next quarter. Thank you.
This concludes today's conference. Thank you for participating you may now disconnect.
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