Q1 2021 Casper Sleep Inc Earnings Call
Good morning, and welcome to Casper sleep first quarter 2021 conference call.
Today's call is being recorded.
I would like to turn the conference over to Roberto Otero Investor Relations for Casper, Mr. Alger may begin.
Thank you operator, and good morning, everyone acreage joining the Casper sleep 2021 first quarter conference call.
We'll get started in just a minute with management's comments and your questions, but before doing so let me take a minute to read the safe Harbor language.
This call taking place on May 13th 2021 will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
All statements made on this call that do not relate to matters of historical fact should be from certain forward looking statements, including statements regarding management's plans strategies goals and objectives, our anticipated financial performance and the expected impact from COVID-19 on our business.
These statements are neither promises nor guarantees, but involve known and unknown risks.
Certainties and other important factors that may cause our actual results performance or achievements to be materially different.
Any future results performance or achievements expressed or implied by the forward looking statements.
Factors discussed on our annual report on form 10-K for the year ended December 31, 2020, and other filings with the Securities and Exchange Commission.
Cause actual results to differ materially from those indicated by the forward looking statements made on this call today.
Any such forward looking statements represent managements estimates as of the data on this call.
While we may elect to update such forward looking statements at some point in the future. We disclaim any obligation to do so even if subsequent events concert views to change.
We may also reference certain non-GAAP metrics, which are reconciled to the nearest GAAP metric on the company's earnings release, which can be found on our investor Relations website at IR Doc Casper Dot com.
With me on the call today is Philip Krim, co founder and Chief Executive Officer of Casper.
Earl President and Chief Commercial Officer, and Mike Monahan, Chief Financial Officer. Following their prepared remarks, we will open the call for your questions.
With that I would now like to turn the call over to Philip Krim Casper as Chief Executive Officer Phillip. Please go ahead.
Thank you Norberto and good morning, everyone welcome to Casper as first quarter conference call Casper as first quarter financial performance exceeded our expectations, marking an exceptionally strong start to the year. The team has been executing well and the results reflect that our first quarter results demonstrate our ability to drive strong.
On top line growth deliver robust margins.
Additional innovative products to market drive additional leverage in our marketing spend grow our retail partnership business and improve foot traffic across Casper stores together. This paints a clear path to accelerating revenue in the coming quarters as well as achieving adjusted EBITDA profitability in the second half of 2021.
Our plan is working well and we continue to prove our ability to execute on that plan successfully.
During the first quarter, we saw industry wide shortages and raw materials needed to produce mattresses. Despite this our inventory management strategies and third party manufacturing model enabled us to effectively navigate these supply chain challenges, we reallocated production and worked with our partners to remain largely in stock is.
These shortages subside, we expect to capture more of the increased demand we're seeing in the market.
North America revenue increased 20% year over year to a first quarter record, including 54% growth in retail partnership revenue.
Our gross margin of 52, 2% expanded 540 basis points year over year, resulting in improved bottom line performance that surpassed the high end of our guidance range for the quarter.
Our first quarter results reflect strong momentum across product categories and sales channels. Our growth continues to meaningfully outperform the broader mattress industry and we continue to gain real market share with the strong demand signals. We are seeing across our business. We expect top line growth to accelerate in the coming quarters, reinforcing our expectation that Casper will reach adjusted.
EBITDA profitability in the second half of 2021.
As a result, we are raising our full year 2021 financial outlook to reflect these favorable trends.
Mike will take you through those numbers in a moment.
Before that though I would like to briefly touch on the progress we are making across our three core strategic priorities, which we previously outlined as one expanding our product offerings to.
Two increasing our brand awareness and three growing our points of distribution.
With the sleep economies total addressable market estimated to be nearly $80 billion in the U S alone, we see tremendous runway across each of these strategies, which is why I continue to believe the Casper is still in the early days of building, a very large company and brand.
Starting with our product offerings innovation quality design and customer service continue to be consistent hallmarks and true differentiators of our products and services.
All of our products are developed by our Casper labs team.
Researchers designers and engineers. In addition to our lineup of award winning mattresses, we continue to broaden our product offerings across the sleep arc and diversify our revenue streams with the successful introduction of products, such as pillows sheets weighted blankets and other accessories.
In late April we unveiled the Casper cooling collection, a new premium line of innovative cooling mattresses and sleep products with the brand's most technologically advanced temperature solutions for nighttime overheating one of the leading concerns among consumers shopping for a mattress the.
The cooling collection features our proprietary snow technology. The result of 18 months of rigorous research testing and strategic design that we're confident will help people achieve on more comfortable and restful sleep.
We initially launched the new lineup exclusively through our DTC channel and while early the results are encouraging for example in just the first week of our launch nearly one third of all of our wave mattress customers upgraded to the snow technology and our lineup hyper like sheets. We're the number one seller for us in that category.
To further leverage our success, we plan to begin offering our Nova snow and waste snow mattresses through our retail partnership channel later this quarter.
As we've talked about in the past expanding our mattress offerings to include an assortment of premium products at premium price points is a strategic step in driving higher average order values across our sales channels and further elevating the visibility and appeal of Casper as brand, particularly in our trial doors. The initial response to the launch has been overwhelmingly positive and we look forward.
Updating you on the success of our new cooling product line in the coming quarters.
Moving on to brand awareness in conjunction with the cooling collection launch we introduced our new Love Your Tomorrow brand platform. The new campaign utilizes humor and unique product storytelling to drive awareness of our brand and our new suite of cooling mattresses and sleep accessories, we developed an integrated marketing strategy around the campaign with focus places.
Across multiple media channels to maximize consumer reach and engagement the launch of the Lumpier Tomorrow platform was even featured prominently on the today show a claim few brands can make and another example of how Casper is becoming a truly leading consumer brand even outside of the sleep economy.
Finally, we have made significant progress in growing our multichannel distribution network through the new retail partnerships.
We are very focused on expanding our trial presence, bringing more trial opportunities to consumers is a key factor in our ability to capture more market share and to drive customer conversion within the mattress segment.
In particular for high end premium price products in 2020, one you'll see us continue to focus on bringing more partners online with an emphasis on trial opportunities where consumers can experience in comparable products.
We will provide you some additional color on a moment, but we expect to have more exciting announcements on this front in the coming months looks.
Looking ahead, we expect 2021 to be a pivotal year in Casper as growth story, while much of the world has changed in the past year. So much of what makes Casper exceptional has remained the same we leverage cutting edge technology data and consumer insights to develop best in class products and experiences that improve the way people sleep.
To deliver on that we have assembled a world class team at Casper, including an extremely talented and experienced group of senior executives, who are working together with a shared goal of developing best in class sleep solutions for our customers, while creating value for our shareholders.
In closing Casper recently celebrated its seventh anniversary and I could not be more pleased with and proud of what we've achieved to date.
And I am excited about our future and the many growth opportunities in front of US. We are in the early stages of capturing market share and we are working harder than ever to reinforce and grow our leadership position in the sleep category by capitalizing on our on our R&D capabilities and strong brand recognition.
Broadening product lines and growing our distribution footprint as.
As we build on our recent progress to best position Casper for the future. We are confident in our ability to achieve our growth and profitability goals, while creating significant shareholder value I will now turn the call over to Emily Emily.
Thank you Philip and thank you everyone for joining us today.
Events of the past year have accelerated trends that we were already seeing and have clearly changed the way consumers want to shop.
More than ever they want the flexibility and convenience to be able to shop anytime and anywhere.
As such we remain focused on our multichannel distribution network, creating consistent touch points across our ecommerce experience a retail partner footprint and then our Casper story is this approach continues to resonate strongly with consumers.
During 2020, we made significant progress on expanding our distribution through new retail partnerships, including Sam's club, Denver, Mattress Mathis brothers and Nordstrom.
On a Q1 with more than 20 retail partnerships and are hard at work to further expand our reach and position us for accelerated profitable growth on the back of that 54% in North America revenue increase in this segment in Q1.
Late last year, we launched our in house the L team to better support our retail partners and helped drive increased customer conversion.
Our field teams tailor approach ensures that our brand equity holds once a customer walks into one of our retail partner locations and empower sales associates to have informed conversations with customers about path first products on technology.
This strategy has been a real unlock for us at our partner trial doors.
Regarding direct to consumer this segment was driven by strong results across our E. Commerce platform. Both in terms of traffic as well as a L. E. We saw robust organic traffic to our website, reflecting efficiency and strong brand proposition.
In Q1, we tested new promotions charterers on ways to provide enhanced value to the consumer which had favorable results.
Casper retail stores continue to navigate the changing COVID-19 regulation landscape and are gaining traction as the economy further normalize it.
As we entered the second half of 2021 that we are excited to welcome more and more consumers back to our Casper stores and share with them, our great products and the important sleep plays and their wellbeing.
Trial opportunities or trial doors are not only a key conversion driver, but they also represent the best opportunity for us to both upsell and cross sell.
Trial is particularly important with regard to new and are higher priced items and.
In addition time on time again, we see higher Ao vs that both our Casper retail stores in our retail partnership trial doors customer.
Customers can see the entire sleep experience between the mattress sheets pillows blankets and room on behinds come together they can experience the technology see the design feel the curated materials and immerse themselves in the world will be created.
Touching on new product on product expansion, we recently unveiled the Casper cooling collection the.
The collection includes new mattresses, but the technology and the wave and Nova product lines and new line of hyper late sheets made with Tencel fiber woven and a unique grid to create like structures that increased air flow consistently throughout the night, providing maximum breathability as well new lightweight two days and breathable mattress protector.
Or is that provide temperature and humidity control without sacrificing comfort and improve the aeration and coolness of the bad debt, allowing air to flow between your body and the mattress.
Some of the more interesting facts about the technology include non.
Another technology has undergone over 150 task that Casper labs and utilizes the proprietary technology designed to help consumers achieve a cooler more comfortable and basketball sleep.
Our Casper labs team has substantiated through rigorous testing that when compared to the way of hybrid snow technology combined with air escape film a top layer perforated breathable film that increases the air flow and reduces heat provides an overall six degree cooler sleep through the inclusion of heat to lead band which were.
Ex removed, 34% more heat away from underneath the body for over 12 hours of sleep and our quick who'll cover which delivers a 24% cooler to the touch feeling upon climbing and bad.
As Philip mentioned early feedback has been overwhelmingly positive and within the first couple of weeks of launch we're seeing immediate adoption within the wave and know the families at a 500 dollar premium.
Customers continue to be excited about the entire cooling collection from the mattresses to the hyperlinked seats and the benefits of this innovative technology.
This is yet another example of how Casper truly brings together, leading research cutting edge technology thoughtful design and curated materials that together make for the most innovative products in the industry and there is more to come.
Taking a look at our consumer outreach initiatives, we continue to leverage the power of the Casper brand and look for strategic and fresh ways towards all of our dialogue with consumers across various mediums and touch points.
Our recently launched brand platform Lovelier Tomorrow is a great example of that.
The campaign elevates the visibility and appreciation for our mission of helping people achieve their best Night's sleep for a better tomorrow and does so in a very powerful yet humorous unrelated but way.
The narrative for a lot of your tomorrow comes to life through accretive broadcast campaign, featuring Emmy Award nominated actress, Vanessa Behr and award winning director Wayne Mckamie that Reframes the notion of how we get a better night sleep through the eyes of an eccentric personified character of tomorrow, who visit the various cranky exhausted and hopelessly.
<unk> characters to help them achieve a perfect night sleep with products from the cooling collection.
Initial reaction to the campaign has exceeded our expectations with over 54 articles across various media platforms, and reaching millions of potential new cost or a customer.
We are very pleased with the momentum we are seeing from our brand efforts and are laser focused on continuing to build the Casper brand by taking a dynamic and strategic approach to our sales and marketing spend and ensuring that we are creating added brand equity deepening consumer connection and building brand momentum to improve how consumers can access.
The brand across platforms.
All of which helps us make our sleep products accessible to a larger market.
Looking ahead I sure fill ups in our entire team's enthusiasm and excitement for Casper feature an increasing number of consumers value wellness empty sleep and Ross is a key pillar along with nutrition on exercise a trend, which we feel is here to stay.
We have long term strategy to build an enduring brand the foundations are amazing products and engaging multi channel presence a healthy industry and most important is all we have a group of world class people, who believe in our mission to improve people's everyday wellbeing as.
As such we are confident that we have a significant opportunity to leverage this demand by designing sleep and wellness products that consumers want theatrically embraced.
With that I would like to turn the call over to Mike Mike.
Thanks Emily.
We are pleased with the progress we are making on our growth and profitability goals and the direction in which we are headed we reported first quarter revenue of $127 7 million or 13% increase compared to Q1 2020. It's.
It's important to remember that we did not have any revenue outside of North America. In Q1, 2021, while we had approximately $6 $7 million in revenue from our now discontinued European operations in the first quarter of the comparable prior year period.
Q1, 2021, North American revenue grew by 20% versus Q1 2020 on.
In North America direct to consumer channel revenue was $93 $2 million or an 11, 1% increase versus the prior year period, while retail partnership revenue for Q1, 2021 was $34 4 million or 53, 7% increase as compared to Q1 2020.
This led to gross profit of $66 7 million or 25, 9% improvement compared to the prior year period and resulted in gross margins for the quarter of 52, 2% or 540 basis point improvement.
The expansion in gross margin was primarily driven by efficiencies on our logistics network and improvements in our product costs.
Top line growth remains a key priority, we will continue to be focused on preserving our margins of 50 plus percent and managing our cost of goods are strategically as possible.
Moving down the income statement overall general and administrative expenses, including store operating costs, but excluding depreciation declined by seven 2% to $40 7 million or 31, 9% of revenue versus $43 8 million or <unk> 38, 8% of revenue in Q1 2020.
This was primarily driven by declines in corporate G&A payroll and one time items.
Marketing expenses increased eight 2%. However, we continue to achieve leverage in our sales and marketing spend as a percentage of revenue sales and marketing expenses declined 31 point declined to 31, 7% compared to 33, 1% in Q1 2020, reflecting improved efficiency.
From our standard distribution and multichannel strategy.
Depreciation and amortization of $3 8 million for the first quarter of 2021 decreased from $4 1 million in the first quarter of 2020, while interest expense increased to $2 5 million from $2 2 million.
This led to our first quarter operating loss of $18 8 million a significant improvement from an operating loss of $32 8 million in Q1 2020.
Earnings per share was a net loss of 52 in the first quarter.
Our adjusted EBITDA loss narrowed to $10 6 million in the first quarter of 2021, representing a 53, 5% year over year improvement versus the first quarter of 2020.
Moving to the balance sheet and our liquidity position as of March 31, we had cash and cash equivalents of $61 6 million compared to $88 9 million as of December 31, 2020, we feel comfortable with our liquidity position and the health of our balance sheet.
As we mentioned on our prior call. The first quarter has been the seasonally softest quarter for us historically, and we expected that to be the case in 2021.
As a result, we continue to expect accelerated topline growth as we move through the remainder of 2021.
Regarding our outlook for the second quarter of 2021, we expect to deliver $146 million to $153 million of revenue at the midpoint. This revenue range represents 36% growth.
And 42% North American growth in the second quarter of 2021.
This would lead to a net loss of approximately $18 million to $15 million in Q2, adjusted EBITDA loss of approximately 7% to $4 million.
For the full year 2021, we continue to expect revenue growth to accelerate over 2020.
We are increasing our outlook for full year 2021 revenue to be within the range of $580 million to $610 million, reflecting challenge foot traffic trends in our retail stores offset by continued growth in our E Commerce channel along with strong growth in retail partnerships.
At the midpoint. This revenue range represents 20% overall growth and 23% North American growth for 2021.
We also expect capital expenditures to be below $10 million in 2021, as we planned to open fewer than 10 Casper stores. This year.
As previously communicated we expect to reach adjusted EBITDA profitability in the second half of 2021.
Looking ahead, we are pleased with our results and the overall trends, we're seeing across the business, including adjusted EBITDA.
We also understand there is work ahead of us in areas, where we can improve as a result, we continually look for ways to make Casper, a more effective and efficient company.
In closing we are doing what we said, we would do and successfully making progress towards our goals of gaining market share expanding our retail footprint and trial doors, improving our operations and more strategically leveraging our resources. We will continue to focus on what we believe is in the best interest of our shareholders our customers and our brand I would now.
Like to turn the call back to Philip.
Thanks, Mike we are excited and optimistic about the future of our business as we build on our recent accomplishments I'm encouraged by the work our teams are doing to emerge from the challenges of 2020, even stronger than how we came into it.
Diligently working on elevating our brand, bringing amazing products to market further refining how we engage with consumers investing in key strategic areas and surrounding ourselves with the best people and partners possible.
Casper has made great progress in our short life as a public company a period largely marked by one of the most unprecedented periods in human history as the world further normalizes, we see significant and growing opportunities to gain market share achieve profitable growth and create significant shareholder value I will now turn the call over to the operator for questions operator.
And once again, ladies and gentlemen, if you would like to ask a question simply press Star then the number one on your telephone keypad.
Once again for a question over the phone lines at a star then the number one.
And we'll pause for just one moment compile the Q&A roster.
And your first question comes from the line on Peter Keith with Piper Sandler.
Hey, good morning, it's Bobby free neuron for Peter Thanks for taking my questions and nice results.
First wanted to ask about our wholesale growth in Q1.
You know accelerated nicely from Q4.
Could you speak to the drivers here.
Is it a function of rolling out some more doors or are you seeing material improvement on a per door basis.
Hey, Bobby Thanks for the question, it's honestly a little bit of everything we saw really strong demand from our existing retail partners Inc.
In particular, we saw great business in March.
Ross the entire.
Distribution.
Set of channels. We also have been standing up new partners and expanding our door presence and focus on those trial opportunities.
We also talked about on the last call that we launched a team of folks that are in the field, helping our retail partners optimize their business that continues to work really well and pay dividends for us. So it was pretty broad based strength that drove the overall growth on the retail partnership channel.
Okay. Thanks.
Bidding too.
Actual casper stores.
How would you describe the state of play right now given.
Over a year into the COVID-19 impact.
<unk> seen sequential week on week improvements.
Traffic plateaued any.
Any strategies, you're reevaluating love any insight there.
Yeah, we are seeing the sequential kind of week to week improvements, but maybe I'll turn it over to Emily to talk a little bit about what we're seeing and doing within our Casper owned retail stores.
Yeah, Hi, good morning, we continue to see variations in performance regionally across our store base and really continuing to see traffic pick up as consumer confidence picks up with a vaccine rollout.
COVID-19 restrictions lifting across North America, so our team, they're very focused on communicating the benefits that our products bring to our cause sleep on.
Really focused on spending the time with the consumer to make them feel safe in the store and communicate all those benefits. So we continue to stay focused on our core strategies and welcome consumers into the store as the regulations left.
Okay. Thanks Emily.
And your next question comes from the line of Seth Basham with Wedbush Securities.
Thanks, a lot good morning, and nice results and outlook on life questions around gross margin just thinking about the strength that you guys posted this quarter.
Despite the fact that lower margin wholesale channel grew much faster than on DTC channel. How should we think about gross margins going forward I know you guide to 50% plus I think even as you annualize the new shipping contract.
And you're a.
Wholesale channel retail partner channel continues to outpace DTC you guys.
<unk> seen strong benefits from product mix with the launch of.
The new cooling line.
And we should be able to see gross margins well over 50% can you give some more color there. Please.
Yeah. Good morning. Thank you I am glad you highlighted gross margins I'll talk about kind of just what we saw currently and then maybe turn it over to Mike to talk about how we're thinking about gross margins going forward, but to me showing the strength in gross margin is really big.
Sign in and win for Us because it shows that the brand continues to have real value in the marketplace and you know that we've been able to consistently expand our gross margin, which also is why we were able to grow our gross profit dollars by almost 25%. So we were really pleased with achieving the gross margin that we did.
Posts here and I'll turn it over to Mike who will talk about kind of what we're seeing on the puts and takes for gross margins going forward.
Sure. Thanks, Bob.
On the two largest drivers are the channel and product mix as you mentioned to gross margins over the long term, we talked about in the script that we.
To keep our blended.
Overall margins above 50% the DTC channel has margins in the mid 50% range, while retail partnership margins tend to be a little bit lower but the retail partnerships drive pretty meaningful adjusted EBITDA, because they require less marketing and G&A spend and so both of those we're seeing improvements kind of.
Hum.
Throughout the underlying product costs as well.
As I think about products in general right now mattresses drive our highest product our highest margins, but our goal is to get our mountain non mattress margins up to where they're on par with with the overall mattresses mattress margins. So that as we grow those our overall product mix on a stand that that'll be accretive to <unk>.
<unk> as well.
That's helpful color just a follow up on the product mix benefits going forward with the new cooling line. If you could repeat the comment you made in the script around how the line is performing performing I think you said that one third of mattress customers upgraded on your DTC channel in recent weeks since launch and where do you expect.
Penetration of that line to be in mattresses for the balance of the year.
Yeah. So we launched the cooling collection in April so its recent data, but we were ex.
Pleased and exceeded the adoption that we saw out of the gate and we expected the ramp into the snow line to take longer.
And what we saw is immediately out of the gate something like a third of the wave customers immediately upgraded to include the snow technology and so they were buying the wave hybrid snow model.
And so that that adoption happens faster than we expected when we launched hybrids. The adoption took a little bit longer for people to understand what we're doing so we were really pleased that they were doing that and then in case you didn't see the upgrade to the snow technology was a 500 dollar kind of incremental consumer cost and so that's driving.
Hi, Ray Ob its good for margins and so that the new lineup, we think will be a strong driver of performance going forward.
Got it thank you very much.
Thanks Beth.
And your next question comes from the line of that tool my history with UBS.
Good morning, Thanks, a lot for taking my question.
So your implied guidance for the back half would imply a deceleration to Twitter on a 15% revenue growth to at least at the midpoint.
Why would revenue decelerate in the back half given you have easy comparison to third quarter NIM from lunch, though.
The new cooling collection.
Or are you simply being conservative here or is there something else going on that's maybe causing you to take on more consumers, taking a conservative stance on the back half.
Sure Mike do you want to talk about the guidance.
Sure.
So last year until we had a strong Q4 for 2020.
Q4, 2021 subject to the timing of shipments on a retail partnership channel and so as we get more insight around supply chain capacity.
We can update the market on.
What our expectations are for Q4, but right now we just don't have clear visibility between the timing at the end of the year between Q4 and Q1, so we factored that into our guidance.
Understood. That's helpful. Thank you and then a near term question. So you provided your your first quarter guidance sometime later in February and now your erection numbers are above your guidance. So assuming you had a stronger than expected March.
What would you attribute that would you attribute that stimulus or or was there something else.
Certainly I think stimulus was part of it March was a good month, both in our DTC channel as well as our retail partnership channel I would also comment that our store business has improved kind of week over week, just as Emily mentioned consumers are gaining confidence and we've seen that happen.
Differently throughout the country, but.
The south with states like Texas and Florida.
We've seen improvements in our Casper own stores as well throughout the quarter in Q1 and continuing into Q2.
So I think there were several drivers that kind of accelerated the business in Q1, but no doubt stimulus was a factor as well.
Thank you and is there a way to quantify the stimulus benefit have you.
We're able to do an analysis around it.
We looked at it from several different angles, but nothing that would give us confidence on how to quantify it other than we just saw demand increase.
Kind of immediately as a check to bank accounts, we saw traffic increase across our web property.
Traffic increase on on foot traffic in stores and so it was just broad based demand that happened and we see the increase on when Chuck started to hit and but is it kind of hard to quantify business was good in Q1 generally speaking demand has been strong.
You know from Q4 into this year and continues to be strong. So we don't think it's only attributed to stimulus by any means but there definitely was a step up from check started to hit.
Got it.
Helpful color and.
Good luck with the rest of the year. Thank you.
Cool.
And your next question comes from the line of Bob <unk> with Guggenheim.
Yeah, Good morning, guys.
Just a couple of questions from me.
The first one is when you look at your customer base.
Are you seeing repeat customers any update to those numbers I think would be very helpful. And I think the second question is can you just talk a little bit more on the supply chain and pressure points that you have had sort of what you think is getting better or what youre still really concerned about as you think about what's happening.
In the manufacturing process today. Thanks.
Sure. Thanks, Bob so on repeat customers.
Been a very strong part of the business.
Obviously, we don't break out specifics around repeat versus new customers, but the repeat business from customers, who transacted with Casper previously has been notably strong in in kind of a standout and I think a key part of that is continuing to launch new products.
So when we launched the hyper light sheets, which we feature they immediately became our best selling sheet within our bedding program and a lot of that is driven by customers looking to Casper for the latest and greatest.
Quality products to help elevate their sleep and so we continue to be very focused on how to.
Drive ongoing optimization with previous customers, but that has been definitely an area of strength. So far this year.
And then on the supply chain question.
It continues to be a challenge supply chain backdrop chemical shortages continued to impact different pole manufacturers, but I do think we've largely sidestep those issues because of our third party manufacturing model. So as we've talked about previously we've been building capacity within our supply chain really since Q3 of last year, we continue to build capacity.
Within our supply chain and that's what I think is is allowing US decides that most of the industry issues and I think long term debt will be a critical benefit to us because the industry continues to build capacity throughout the manufacturing base and that capacity will give us pricing power once chemical start to flow in and we do believe that the.
Picture is getting better not worse and so we think our chemicals are flowing now and that the problem will be behind US later this year, but.
But for now we continue to work with all of our suppliers very closely and make sure that we're getting the goods that were expecting and are largely able to fulfill the demand that we're seeing across all channels of business.
Thanks, Phil.
Thanks, Bob.
And your next question comes from the line of Matt Koranda with Roth capital.
Hey, guys. Thanks.
Just for the <unk> revenue guidance, obviously, it implies an overall acceleration on revenue, but just wondering if you could speak across the channels and talk about what youre seeing in terms of.
Growth and maybe split out the revenue guide by.
Channel between DTC and wholesale.
I'll talk about it broadly and then Mike if you want to add any color on the guidance specifically, but just the start of Q2 has gone well, we see good demand on the.
Product launch as we said has gone better than expected from you know on adoption standpoint of the new products, which drive.
Good expansion of a O vs on Casper retail stores, we do see kind of week over week improvements on foot traffic and sales.
And we're seeing that now across the country as opposed to where we saw it in Q1 be more regionally focused.
Our retail partners are continuing to see strong business. So I think that the backdrop is just that consumer demand is strong. It's a good time to be on the mattress business we.
Continue to be a brand that is sought after and where we're seeing strength across all channels. So E com Casper owned stores and a retail partnership.
I know on guidance, we didn't break out specifically between the channels, but Mike any color you'd want to add on on kind of Q2 guidance on what we're seeing.
I would just say it's balance between DTC and wholesale.
A driver wholesale continues to be.
A growth area for us so similar to what we saw in Q1.
Our partners, we're seeing good sell through through our existing partners and we anticipate that will continue through Q2.
In the second quarter in terms of our comp if you look at the retail stores, where we are seeing foot traffic come back.
It's not back to the levels that debt, we saw kind of pre pandemic, but when you look year over year.
Retail is growing retail stores Casper on stores or growth in nicely and we're also seeing kind of it.
Solid performance on the E comm side as well so in general I would say no specific outlier in pretty reasonably balanced across both of our key channels.
Okay. That's helpful and then when I look at the EBITDA Guide I guess it.
It implies either gross margin sequentially, you have to get a little bit worse or are we need to step up opex could you just speak a little bit to the mix there Mike in terms of how we should be modeling this for the next quarter.
I would view I would think about gross margin to be calm.
Comparable maybe a little bit less or a little bit more than kind of Q1, as you think of quarter over quarter, but in the same kind of general range.
On the G&A side, we did have.
Lower G&A in Q1 part of it is due to the.
Retail stores as we're kind of managing costs, there, but as we start to open up we're bringing staff back and Theres. Some some more expenses that go through that line and.
And we did have some one time smaller, but one time items in G&A in the first quarter that we didn't guide to two in the second quarter.
Okay. That's fair and then just last one on the new Snow line I'm curious.
It's available obviously in the DTC channel right now and benefiting it'll be it sounds like why not introduce that to the wholesale channel what's the timing like in terms of rollout there just given that it seems to have improved quite a bit on the DTC channel I would assume it would do the same with your retail partners.
I would assume that too, but Emily do you want to do you want to talk about that one.
Yeah. We are really excited I'm personally I would have had some of our retail partners and you'll see that late in the quarter and then into Q3 as we find the right partners to really showcase the snow technology, along with some of the other items for the cooling collection.
To consumers and our partner locations.
And your next question comes from the line of Curtis Nagle with Bank of America.
Good morning.
Just a quick one on.
On your supply chain.
It doesn't sound like it but do you guys anticipate any any issues in terms of sourcing with third party.
Manufacturers is as more production starts to.
Theory in short due to the anti dumping actions that were taken earlier in the year.
Hi, Good morning, Curtis I know, it's a good question.
The entering has been kind of well telegraphed and well known I think we have been trying to get ahead of it for some time now and so that goes to what I spoke about earlier with just regards to.
Increasing capacity within our supply chain.
So we've been focused on doing that with domestic producers and we feel like we're in a pretty good spot and we think most of that ensuring has happened and if you look at imports.
And the data around that.
That shift is I think largely behind us.
If anything I would expect kind of more just from the industry more offshore manufacturing facilities to emerge just.
Just as is.
The demand continues to look for more places of production, but for our business. We feel like we have good capacity within our domestic footprint to produce for the demand that we see coming.
Got it.
And then I guess, if you could at least for the quarter could you break out the contribution between ticket volume growth, particularly with some of the higher ASP products coming in.
And then I guess just remind us.
What the history has been true for price increases over the past couple of quarters or so and.
I think more plants going forward.
Yeah sure Mike do you want to talk about the first question on maybe you could talk about prices.
Sure.
We did see a bump year over year and in.
In terms of our average price per unit.
On a piece of that is somewhat driven by by pricing, we tend and Emily from correct me, we tend to do about one price increase per year one to two.
And so on a year over year basis, Youre seeing a little bit from raw pricing, but the majority of it has to do with the product mix within the mattress category. We're seeing consumer we're seeing a lot of success on more premium products within each channel.
That's driving that.
To your first question a lot of the majority of our growth that we're seeing while it's being complemented by increases in <unk> on a price per unit, where we don't break it out, but it's largely volume driven and we're seeing really good demand and were moving product.
Where we're selling product to end consumers that a good range.
And on your price increase question, we did take a price increase in Q1.
And we are continuing to look at the balance of the year, where it makes sense to look prices on mattress and other items in the portfolio and since we just launched now at the end of April which as I've said before is a 500 dollar price premium and then they'll then it's family we're seeing how everything that's out.
Over the next couple of months as we look at the beginning of the launch and that wont continue to to look at prices and see if we want to make any movement in the back half of the year.
Okay. Thanks very much.
And thank you ex questions.
Yes on your next question comes from the line of Nick Jones with Citi.
Great. Thanks for taking the questions.
Just kind of one around your marketing plans to the rest of the year how are you thinking about.
Deploying marketing dollars, particularly of e-commerce or to revert I think there's a kind of a broader view that as things reopen.
Broadly ecommerce will start to revert to pre COVID-19 levels to some extent.
So how does that come into play in terms of how you're thinking about deploying that at all or maybe in the back half ex.
Yeah, Hey, Nik.
I think the trend that you saw on Q1 is something that will likely continue which is deploy more dollars on a dollar basis, but continued to drive sales and marketing leverage on a relative basis debt to net revenue. So we're going to keep trying to drive efficiency in our sales and marketing line.
Overall, we obviously are watching demand across different channels you.
I think we believe that e-commerce will be higher than pre COVID-19 levels and in some of this will create a new buying behavior and so we do think E. Commerce will still be a great channel for Casper and and a strong channel.
Industry, albeit not as strong as 2020 was I think in that regard, we're actually set up well to navigate 2021 because of how we navigated 2020, and so overall, we believe that we can drive strong DTC growth across both e-commerce, and our owned and operated stores.
The industry will see kind of elevated levels within e-commerce for the year above where we were pre COVID-19, but certainly not growing like it did over the last 12 months.
Great. Thank you.
Thank you.
And your next question comes from the line of Randy <unk> with Jefferies.
Hey, guys. How are you sorry, I had to dial in late did you talk still up did you talk about just kind of on the progress of improvement that you're seeing on the storage side of the business or if not how do you expect that to kind of play out over the balance of the year in terms of traffic levels.
Version et cetera, just just give us some thoughts on just what you're talking about there.
Yeah, Hey, Randy good morning.
Mentioned earlier, just about how we're seeing kind of week over week improvements in our store performance and how in Q1, we saw improvements, but they were more regionalized, So states like Texas, and Florida, we started to see improvements.
More notably in Q1, and now we're seeing it kind of across the board and our view is just as consumers get more confident as vaccines.
Get out there more prevalent prevalent Lee on but that's going to continue to drive strong retail trends.
Trends in and we're seeing that in our business with higher foot traffic higher sales and it looks to us like kind of week over week, it's just getting better and better and so we're excited about where we're positioned going into memorial day weekend.
And hopefully that continues to strengthen throughout the summer.
And just one geographic perspective penetration perspective, do you have a disproportionate number of the stores in the regions that were more kind of close off if you will let's say New York for example, I'm.
Just curious on just where that's the the stores kind of sit geographically because theyre more in the north door closed up areas. If you will it seems like there'll be more.
Obviously pent up demand coming on the way in those regions to help it disproportionately accelerate the sports business towards the back half of the year just wanted your thoughts there.
Yeah, I think you're exactly right, we do over index to kind of the northeast and California and so.
Those have those reasons have lagged other parts of the country and so we expect those to strengthen just as we've seen.
On the Texas, and Florida market strength, and so youre right that that will that has been lagging other parts, but we expect that to continue to pick up as those parts of the country reopens.
Got it got it and one last thing if I may you know the one thing that you continue guys to show in the last few quarters as this.
Accelerated.
Path towards the profitability showing nice improved improvement there and just the heightened level of discipline around the expense structure and so on and so forth. So just kind of give us some thoughts on that path to profitability.
What kind of things you've been continuing to change and becoming more efficient and effective in the business and across the two different teams in the organization.
Sure. Thanks, Randy Mike do you want to talk about our focus on that one.
Sure Randy it's it's a it's across the P&L. So if you work your way down the P&L, we're focused on gross margin and we're seeing we're seeing.
Nice improvements kind of year over year around kind of our supply chain getting more efficient with with logistics and product input costs youre seeing efficiency as we kind of expand our channels and execute against that channel that strategy, where we're getting leverage out of our media spend as we extend our reach.
They'll partnerships points of distribution and get get leverage across the Casper owned retail stores and we're being very disciplined around G&A really trying to hold that we're obviously still investing in the business.
But we're very much focused on how to continue to get leverage as we drive revenue out of that G&A line and so as we look forward into profitability really the growth in our retail partnership channel is a key component to that because.
The retail partnership channel, we're getting leverage out of all the media spend that we invested behind the brand and as we continue to expand our partnerships and drive more more sales through our existing partners that doesn't require additional marketing spend or G&A, so youre seeing more of that.
<unk> profit contribution dropped down to adjusted EBITDA.
Super helpful. Thanks, guys.
Thanks Randy.
And your next question comes from the line of Laurence Inc. With Morgan Stanley.
Great. Thanks, I guess sort of a bigger picture question, but I did I understand you don't disclose e-commerce growth separately, but sort of back the envelope. It looks like it perhaps curious sort of mid single digits in the first quarter on top of net negative mid single digits last year, and I would see March as sort of an easier compare so I just guess thinking a whole lot.
Typically about sort of the last 12 months the strength that we've seen broadly ecommerce on the strength that we've seen in and home furnishings, I guess, what would your diagnosis or hypothesis as to why you didn't see sort of the same magnitude of uplift in your in your ecommerce business. Thanks, so much.
Hey, Lauren.
I actually I don't think you have the math right on that one.
Our ecommerce business grew nicely and we don't break it out, but just broadly speaking our ecommerce business has grown.
It grew well above kind of what you just spoke to are in Q1 that the weight on the DTC channel performance has been our stores. So we ended 2020 with 67 stores we.
We had 70 stores at the end of Q1 this year and the retail channel the owned and operated retail channel for Casper has been under pressure because of COVID-19 and so that's dragged down our DTC performance pretty notably.
We've talked about we see strength, there and we see things improving but Q1 of 2020 it was a really strong.
Casper own store quarter, and so that was a strong quarter.
On a comp basis, we had a tough Q1 for our own stores.
We do think that that's going on improved throughout the course of the year, but that's really what's driving down our DTC performance not E. Com E. Com performance has been strong.
And we've continued to kind of tweak our playbook and look at how we're investing and allocating capital within the sales and marketing side of things to drive that E Com performance.
But overall, we think that we made some changes starting really in Q4 of last year, we talked about Q2, we messed up on the Q2 of 2020, we did not spend appropriately we started to spend up in Q3, but we didn't have supply to fulfill that and then starting in Q4, we really able to start to lean into the demand that we're seeing drive e-commerce growth debt.
Continued in Q1, and we believe will continue for the rest of the year.
Okay. Thank you.
Thanks, a lot.
And there are no further questions at this time I'll now turn it back to the team for closing remarks.
Thank you operator, and thank you all from the time today and for your continued interest in Casper and have a great day. Thank you.
And this conclude today's conference call. Thank you for your participation you may now disconnect.
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