Q4 2021 1-800-Flowers.Com Inc Earnings Call
Widely applicable statements for a detailed description of these risks and uncertainties. Please refer to our press release issued this morning, as well as our SEC filings, including the company's annual report on Form 10-K, and quarterly reports on Form 10-Q.
In addition, this morning, we will discuss certain supplemental financial measures that were not prepared.
Third in accordance with generally accepted accounting principles.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning.
The company expressly disclaims any intent or obligation to update any of the forward looking statements made in today's.
Days call any recordings of today's call. The press release issued earlier today or any of its SEC filings, except as may be otherwise stated by the company.
I'll now turn the call over to Chris Mccann.
Thank you all for joining us this morning.
We are very pleased to report a strong finish to what was truly an incredible year for aercap.
Our company.
Most important we are very proud of the achievements of all of our associates. They work diligently throughout the year to overcome the unprecedented challenges of the global pandemic to help millions of our customers stay connected with and express themselves to the important people in their lives.
Our fourth quarter.
We achieved continued strong double digit revenue growth and keep in mind. This is on top of the more than 60% revenue growth that we achieved in last year's fourth quarter will depend on the first protocol in our country and consumers begin to work on all to shelter in place and shifted much of their shopping online as.
As we noted back.
In our April call, our fourth quarter, along with the current fiscal first quarter represented our most challenging year over year comparisons despite.
Despite the challenging comps, both our top and bottom line results for the fourth quarter exceeded the high end of the guidance that we provided back in April.
This reflects.
Our focus on providing our customers with an expanded range of solutions combined with our ability to leverage our unique E. Commerce platform, which includes our all star family of brands, our advanced technology stack manufacturing distribution and logistics capabilities, our digital marketing expertise and.
And outgrowing customer file.
These factors helped us drive revenue growth of 42, 5% for the full fiscal year and achieved a significant milestone for our company by surpassing $2 billion in total revenue.
We have basically doubled the size of our business in the past three years.
Fact of.
Over the past several years, we have significantly transformed our company growing from a collection of specialty brands into unique e-commerce platform that inspires and enables our customers to express connected to celebrate.
As such we are well positioned to continue to deliver strong growth going forward.
We see significantly increased recognition and relevancy for our brands and products with everyday occasions, including birthday sympathy get well new baby anniversary in just because.
We further expanded our already broad product offerings to provide more solutions to our customers through the acquisitions of <unk>.
Strategic and highly accretive businesses cherries berries and personalization mall.
We grew our customer file significantly in fiscal 'twenty, one and we saw a continuation of deposits customer trends and customer behavior metrics in terms of frequency and retention that we've discussed in our past calls.
Our customer file is one of the most important assets and a driver of the strong growth that we see going forward. So to help illustrate the strength of this list I'd like to share some key metrics with you.
In fiscal 'twenty, one we added more than $6.5 million new customers.
One of the strongest.
Areas of new customer growth for us was with millennials, which increased at a double digit pace and now represents 24% of our total customer file.
Existing customers also grew at a strong credit.
Resulting in more than 13 million total active customers for the year.
Importantly.
<unk>, even within strong new customer growth.
Existing customers represented approximately 64% of total revenue.
And as we've noted in the past our best performing customer cohorts are customers, who purchase for more than one product category or brand and customers who belong to our celebrations.
<unk> passport loyalty program.
In both cases, we saw solid growth in fiscal 'twenty one.
Customer support for more than one product category or brand excluding people made up more than 13% of our total active customers and represented approximately 29% of total.
<unk> revenue for the year up significantly from the prior year period.
Further illustrated.
Important to this cohort the average spend of these customers in fiscal 'twenty, one was $330 more than doubled the spend of an average customer excluding paywall.
In terms of our celebrations passport.
Port loyalty program as we noted in April membership it surpassed $1 billion Mark back in early spring for.
For the year membership grew 112% to one 3 million members passport member revenue per customer was also up for the year at 284.
$4 nearly double that of the average customers.
These metrics really illustrate the tremendous value of our customer file a key asset and growth driver for our overall business and one that we will continue to develop going forward.
In terms of product development, we saw we significantly expanded.
<unk> and our product offerings with the acquisition of personalization mall, adding thousands of personalized gift items from wine glasses to picture friends. It doesn't personalization technology options from laser engraving and two customer embroidery and a highly automated operating model that provides industry.
Industry, leading order to ship delivery times.
This acquisition significantly extended our capabilities of our operating platform and clearly positions us as a leader in personalized gifts.
Now, we've only begun to scratch the surface in terms of what we can do with personalization mall's unique capabilities and their product offerings.
Offerings. So for example.
Paul you will see us rollout personalized products across our brand sites showcasing our new capabilities to millions of our customers and.
And we're equally excited by the tremendous opportunities we see in corporate gifting with personalized products can help out.
Customers stay connected with their clients and their employees.
Throughout fiscal 'twenty, one we also focused our product development efforts on creating more cross brand and cross category bundles gifts leveraging.
And our platform to create truly original and compelling gift combinations.
Give you. An example of this for mother's day, we bundled cherries berries Roses from one 800 flowers and award winning wines from Henry and David creating a hit product that we've now expanded into a growing collection that we call out delicious lead decadent series.
We've also created shop in shop experience as.
To take advantage of brand affinities, such as the one 800 flowers sharp on the Harry <unk>, David site, and the Moose Munch sharp on the popcorn factory site, introducing customers to our expanded product offerings with authentic inorganic experiences.
And for everyday gifting occasions, we expanded our birthday.
Sympathy collections that now features more multiple brand combinations.
And before I turn the call to Bill for his review of our financial results I'd like to program expanded initiatives to engage with our customers and build a community it goes beyond transactions.
Deepening the relationships.
Ships, we have with our customers through a combination of highly relevant content interactive experiences and platforms have promoted two way dialogue.
Will further enhance our position as our customers go to resource for all of their expressive and connective needs.
One way that we measure the success.
Some of our initiatives in this area is through specific touch points that we have with consumers across a broad range of communication and social channels.
In fiscal 'twenty, one we created nearly 80 million consumer engagements 80 million consumer engagements.
Any of these engagements happened around.
Our key holiday periods, such as mother's day, and father's day, where we build programs called MVP Moms and MVP tenants featuring popular chefs like Antonio the fossil and well known athletes like Ali Kreger and Ray Allen, we created video profile showing their roles at the heart.
Of that families and these videos reached more than 10 million consumers.
Throughout the year, we also work to create a growing range of online events.
Whose social channels like Facebook and Instagram.
For example, a breakfast at Wolf events series was a great success watch by nearly two.
2 million consumers and effectively introducing a new younger demographic to our wolfman bakery, Brad with the mix of lifestyle tips personal experiences and live recipe demonstrations.
<unk> also continued to innovate our digital experiences evolving our design and creative.
To better mix content with commerce, as we evolve both desktop and mobile channels.
There's many more interactive engagements.
And these are all helped us to introduce millions of people to our broad range of solutions for the connected and expressive needs. We plan to continue to broaden these efforts.
<unk> and extend our engagement reach going forward.
Now I'd like to turn the call to Bill to review the financial metrics.
Thank you Chris we are very pleased to have finished a very challenging and very successful fiscal 2021 with solid performance in our fourth quarter.
As Chris noted last years fourth quarter results posted.
A particularly challenging comparison.
The initial impact of the pandemic and the prior year period.
Nonetheless, we were able to deliver results above the top end of our guidance for revenues adjusted EBITDA and EPS.
We achieved overall revenue growth of 16, 5% and organic revenue growth of three 8%.
Compared with the prior year period.
Put out revenue growth for the quarter in perspective, compared with our fiscal 2019 fourth quarter. Our overall revenue growth was 88% and organic growth is 58%.
Our results for the quarter and full year reflect the decisions we've made over the past several years to manage the various.
Headwinds, we are facing and to lean into the growth opportunities that we saw.
We made the decision to invest in expanded digital marketing programs that have helped us accelerate new customer growth significantly grow our membership and our celebrations passport loyalty program and increase awareness around our all star family of brands, both holiday and everyday occasions.
We made the decision to acquire <unk> berries in August of 2019 and to acquire personalization mall in August of 2020.
Both acquisitions have proven to be highly accretive top and bottomline illustrating the strength of our unique business platform that we have built.
We continue to see significant opportunities.
<unk> to drive growth in these businesses and across our family of brands by leveraging our platform.
Now breaking down some of the key metrics for the fourth quarter and year.
For the fourth quarter total revenues increased 16, 5% to $487 million compared with $418 million in the prior year period.
For the year.
Total revenues increased 42, 5% to $2, one 2 billion.
Strong growth across our three business segments as well as contributions from personalization mall.
Excluding presentation mall total net revenues grew 26, 6% compared with the prior year.
Gross margin for.
The quarter increased 20 basis points to 47% and for the year increased 40 basis points to 42, 2%.
For the quarter operating expenses as a percent of total revenues improved 10 basis points to 37, 5%.
Excluding the impact of the company's nonqualified deferred foreign K compensation plan.
And in fiscal 2020, the costs associated with closing.
The Harry <unk>, David retail stores, and the acquisition cost of personalization mall operating expenses as a percent of total revenues increased 180 basis points to 37, 2% for the quarter compared with 35, 4% in the prior year.
This increase reflects the higher digital marketing and advertising costs compared with the prior year period.
For the year operating expenses improved 120 basis points to 35, 2% compared with 36, 4%.
Excluding the aforementioned one time cost operating expenses improved to 100.
10 basis points to 34, 7% compared with 35, 8% in the prior year.
This despite the numerous cost headwinds we incurred shows the leverage in the model as we grow.
For the quarter adjusted EBITDA was $30.2 million compared with $32.5 million in the prior year period.
Hundred adjusted EBITDA for the quarter, while down slightly compared with the prior year period, primarily reflects higher revenue and gross margin achieved somewhat offset by the increased marketing costs compared to the record low marketing weights in the life and the prior year period.
For the year strong revenue growth combined with enhanced growth.
Gross profit margin and lower operating.
Expense ratio resulted in adjusted EBITDA growth of 64, 5% to $213 million.
Net income and adjusted net income for the quarter of $13.3 million or 20 cents per diluted share compared with net income of $9.8 million or <unk> 15.
<unk> per diluted share and adjusted net income of $15.1 million or <unk> 23 cents per diluted share in the prior year period.
Net income for the year was $118.7 million or $1.78 per diluted share compared with $59 million 89 per diluted share in the prior year and adjusted net income for the year.
It was $122.6 million or $1.84 per diluted share compared with $65 million or 98 cents per diluted share in the prior year period.
But in our segment results.
In our gourmet food and gift baskets revs.
Revenue for the quarter was 150 to $552.2 million down $1.
Compared with the prior year period.
For perspective revenue for the quarter was up 110% compared with our fiscal 2019 fourth quarter.
For the year revenue in this segment increased 21, 6% to $955.6 million compared with 785 million.
In the prior year period.
Segment contribution margin for the quarter was $4.2 million compared with $10.1 million in the prior year period, and adjusted contribution margin of $15.3 million in the prior year period.
Decline in the quarter reflected the higher year over year marketing weights as well as higher labor and shipping costs.
<unk> adjusted segment contribution margin for the year.
It was $148.9 million compared with $115.8 million in the prior year.
Strong revenue growth along with enhanced leveraging of operating expenses.
In our consumer floral and gift segment.
Revenue for the quarter increased 27, 2%.
Sent a $297.7 million compared with $234.1 million in the prior year period.
This primarily reflects the contributions of personalization mall combined with solid growth for the mother's day holiday.
Excluding the contributions for presentation more revenue growth in the segment was four 4% for the quarter.
For perspective revenue growth for the quarter, excluding constellation mall was up 53% compared with our fiscal 2019 fourth quarter.
And for the year revenues increased 72, 8% to $1.3 billion compared with $593.2 million.
In the prior year.
Excluding contributions from presentation mall revenue. This segment was up 33% for the year.
Segment contribution margin for the quarter was $41.2 million compared with $39 million in the prior year period and for the year segment contribution margin.
Well the hunt.
Hundred and $28.6 million compared with $73.8 million in the prior year.
This reflects the contributions from presentation more combined with the continued robust performance in the segments flagship one 800 flowers consumer floral brand.
In alumina segment.
Revenues for the quarter increased 23, 5%.
At $37.3 million compared with $30.2 million in the prior year period.
For the year revenue increased 27, 9% to.
$142.9 million compared with $111.8 million in the prior year.
Segment contribution margin for the quarter.
Was it $11 three.
<unk>.
There was $7.6 million in the prior year period in part due to the decision in the year ago period to waive certain fees.
Help support our florist members.
Segment contribution margin for the year was $45.9 million compared with $35.1 million in the prior year driven by strong topline.
<unk> million dollars.
That was a corporate expense.
For the fiscal fourth quarter corporate expense, including stock based compensation, but excluding the impact of the company's nonqualified deferred foreign K compensation plan was $29.1 million compared with $31.3 million in the prior year period.
Growth for the year corporate expense, including stock based compensation, but excluding the impact of the company's deferred fallen K plan and one time costs associated with the acquisition of PMO.
$121.2 million compared with $103.5 million in the prior year.
The increase in corporate expense for the year was primarily related.
Increased support services personalization mall overall company growth and Covid related expenses.
Regarding free cash flow.
We generated free cash flow for the year of $118.1 million for the $104.7 million in the prior year.
Okay.
Turning to our balance sheet.
At the end of the year, our cash and investment position was $173.6 million.
Inventory was $153.9 million, primarily reflecting the acquisition of personalization mall and our conscious decision to build inventory ahead of the new fiscal year.
Our term debt balance net of deferred financing cost was one.
$81.5 million and we had zero borrowings outstanding under the working capital line within our revolving credit facility.
As a result total net debt at the end of the year was $7.9 million.
Regarding guidance for fiscal 'twenty two.
Last year due to the significant uncertainty.
And the overall economy related to the early days of the COVID-19 pandemic, we did not provide guidance for the full fiscal year, instead of providing guidance on a quarter by quarter basis.
This year, while there remains considerable uncertainty in the economy due to the ongoing pandemic, we are moving back to the practice to our prior practice of providing full year.
Year guidance.
This is based on both the improvements, albeit uneven and the overall economy and we have been seeing for some months now as well as the macro economy trends and the factors, we see in our business that support our growth outlook, including the.
The significant shift of consumers to E Commerce shopping, which we believe will continue.
Along with our expansion of our product offering both organically and through strategic acquisitions, like cherries berries and personalization mall.
The strong growth and positive behaviors in our customer file, including strong new to file customer growth as well as increased demand from existing customers.
And continued strong growth in our celebrations passport.
Last point loyalty program, which is helping drive increased frequency retention and cross category Crossband purchases.
For fiscal 2022 full year, we anticipate total revenue growth of 10% to 12% compared with the prior year.
Adjusted EBITDA growth of 5% to 8%.
EPS.
In line with fiscal 2021 as improved EBITDA is offset by higher depreciation and a higher effective tax rate.
And free cash flow to again exceed $100 million.
We are well aware of several headwinds affecting our business as we enter the new fiscal year, including a <unk>.
<unk>.
Labor market with both limited availability and rising wage rates and.
Siggi.
Significant increases in both inbound and.
And outbound shipping rates as well as certain commodity costs.
We are confident in our ability to manage these headwinds and continued to leverage the strength of our business platform to drive to drive strong.
Strong revenue growth and solid bottom line performance in fiscal 2022 and over the longer term and continue to enhance shareholder value.
Regarding our current fiscal first quarter, our smallest in terms of revenue we anticipate.
Modest revenue growth, reflecting the comparison to last year's Covid driven.
Given summer months when most of the countries within near complete Lockdown and consumers are moving their purchases online as well as reduced operating leverage reflecting the increased labor and transportation costs and higher digital marketing rates compared with the prior year period, when the impact of the pandemic reduced marketing cost to historic lows.
We anticipate significantly improved performance in our fiscal second quarter and in the second half of our fiscal year, which drives our strong growth guidance for the year.
I will now turn the call back to Chris. Thanks, Bill fiscal 'twenty, one was a record year of top and bottom line results, which illustrate the strength of the unique business.
This platform that we've been building over the past several years I'm. So proud of our team's efforts to transform and once again, we invent our company, whom our collection of specialty brands to become a leading e-commerce platform that inspires our closeness to express connect and celebrate.
Looking ahead, we are extremely well positioned.
And to deepen the relationships, we have with our customers by engaging with them across a broad range of communication channels as we work to build a true community and offer our customers. The most robust online gifting assortment.
Our success can be seen by our strong growth rates in our customer file and a sharp.
When a new customer base.
As a result of aster TG initiatives, we've seen tremendous growth driven both organically and through strategic acquisitions.
We have an exciting runway ahead of us, which will enable our company to drive solid sustainable double digit revenue growth.
Rising cash flows in fiscal 'twenty, two and the years beyond.
We are confident that we will drive long term shareholder value as we continue to leverage the strengths of the unique business platform that we built.
Now I'd like to turn the call back to the operator, so we can take your questions. Operator, please we compete.
Strong Q&A instructions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Our first question.
It comes from Anthony.
<unk> from Sidoti and company. Please go ahead.
Yes, good morning, and thank you for taking the questions. So.
So certainly.
<unk> as you said.
You know kind of looking forward to.
Fiscal 'twenty two.
Question do you.
Revenue growth implies you know certainly continued solid trends now.
Chris you touched on a little bit on the expanded product offerings that you expect as well as continued growth from your active customer base can you just further give us some of them.
You know a little bit more.
Details as to the expanded product offerings, so that youre looking to do.
How will that drive them.
Yeah, I think the engagement and growth.
Sure Anthony and thank you for their comments. This is a couple of things here as we look at expanding the product catalog.
We see as.
Expand our product offerings, our product catalog and our.
Customers are seeing more and more options and more solutions for more of their gifting and connected needs that helps increase their frequency and their retention rates with us, especially when they join our passport program or even if they don't then they are more of a cross category purchaser. So.
As we have simultaneously, while we're expanding the product catalog were also working on more cross merchandising capabilities like the shop. In shop example, that I gave was a bundled gifts that I gave in the formal remarks, we would combine why in some areas David with cherries berries with flowers. So those two efforts simultaneously.
Well, what will really drive the growth going forward and as we look at expanding our product catalog and we really love to do it three ways.
Okay, Annick development from our existing brands and our existing capabilities.
Having David Gourmet line was a good example of that the bundled gifts that were now doing the combined.
So that when they are doing are good examples of that.
We'll look to also do it through acquisition as we mentioned.
We've expanded our catalog significantly by bringing on all the cherries berries products as well as the thousands of products that we brought on in the personalized gifting category with our acquisition of personalization.
And then to more of a marketplace strategy, where we have hundreds and growing makers and sellers on our platform, bringing that product into our <unk>.
Our catalog so we can put those products in front of our customers again, our philosophy is to help our customers express themselves and connect them to celebrate.
And that's to do that we have to have more and more product solutions and not only products that we own but more from third party products as well.
Got it okay. That's very helpful. Chris Thank you Barry.
And then.
In terms of Q1.
Sorry.
Certainly the comparison, but then.
Last year, if I recall I think the wholesale piece of the business was still hurt because of the initial uncertainty because of what are you seeing the wholesale piece of your business coming back and just wanted to get some more color on that.
Yeah sure I think really as we looked at again.
We're very pleased with the guidance that we're providing next year for double digit growth.
Next year on top of what was a phenomenal year. This year as you pointed out.
I was looking at that growth of 10% to 12% as we get into Q1 is clearly our most difficult comparison quarter.
Bill why don't you speak specifically to what was seen in the wholesale.
<unk> side of things some of that impact Q1, but also moves into Q2.
In fact, Anthony most of that is Q2, it's all the you know the wholesale.
Baskets that we delivered to the big box guys, mainly in Q2, and we do have some crossover between.
September and October sometimes that that you know will affect some of the.
The timing, we will have a much stronger wholesale business. This year is a rebound from.
From last year.
We've had some challenges on the on the margin side with the Ocean freight and probably everything you read with about two ocean freight and getting that getting product income in Asia.
They have a very robust wholesale.
Failure.
Got it that's great to hear and then just you know bill as far as the guidance.
You put out for fiscal 'twenty two so what is your expectation for the tax rate and depreciation expenses.
Yes.
We got the benefit in fiscal.
<unk>, our effective tax rate was around 20% a little over 20%. This year. So we had the benefit of some of the discrete items some of which came out of it.
The jobs.
Jobs Act and tax cut but also some other discrete discrete items. This year that will not repeat in fiscal 'twenty. Two so effective tax rate should be in that 23, 24%.
Paul.
In fiscal 'twenty two.
Depreciation.
Depreciation is going to be up as our capex is going up.
To support the huge growth that we have.
We've been experiencing and we've had to continue to invest in our infrastructure. So both the combination of adding people to the business.
As well as the.
The strong growth, we had last year and the expectation of strong growth.
Going forward from here for multiple years.
Investing capital behind the infrastructure of the business as well as the technology behind the business. So so as a result, you saw capex.
At $55 million.
Business off the fiscal 'twenty, one and you'll have that.
Going out to fiscal 'twenty, two and beyond beyond that so.
Depreciation will be will be up.
No the $10 million or so in fiscal 2012.
Got it okay and the Capex should it should be also in that 10 million plus range versus fiscal 'twenty.
Yes, that's right you are in that $60 million to $65 million.
Got it okay. That's very helpful. All right well, thanks, a lot and best of luck.
Thanks.
The next question comes from Michal Krupinski from Noble capital markets. Please go ahead.
First of all.
Gratulation done a solid quarter and a great year.
Obviously, it was a very good quarter.
In terms of our consumer floral the operating expenses had a meaningful jump in I was just wondering you mentioned about marketing expenses.
When you look at the expenses it was about 27% of segment.
When the revenues and in fact, that's still below 2019 Q4 levels on a percentage of revenue basis, but I was wondering if you can just give us some color on the expense increase how much was labor how much is increased marketing. If you can just give us some color there.
Yes, Michael the large increase on the consumer floral almost.
Segment really driven by marketing again, as Chris mentioned earlier last year in Q4, and ultimately came into Q1 of this year and we saw marketing marketing rates dropped to historic historic lows as many companies were closed and had to lead to the advertising.
So we got the benefit of that we saw we.
Entirety of $5 million increase in EBITDA in the fourth quarter of Europe, Thats, what created that kind of a tough comp that we had this year and a lot of that was not only driven by the strong top line growth at a year ago.
Joining Rachel.
Walking me through at 50% of what they were historically and that was because we saw.
We saw opportunity and leaned into it so we took advantage of those rates.
Those rates change pretty quickly bill.
And so by Q Q2 of this year, our fiscal 'twenty. One we saw that bounce back. So we had about a six month window, where marketing major a significant low Q4 of fiscal <unk>.
The up in Q1 of fiscal 'twenty.
And then just.
By Q2 as opposed to a big quarter advertising rates bounce right back up.
And are you seeing any intense competition is competition and increased or is that just purely just related to two rates I'm just trying to get it.
<unk>.
The competitive landscape.
And it's really just related to rates, we haven't seen anything in the competitive nature, whether in the floral category Gourmet food category on the personalization nothing different nothing special so it still gives us opportunity to continue to what we're doing focusing on our brands.
20th leaning in where we see opportunities expanding market share in all of the categories and continuing to grow our platform.
The increase in marketing expenses that I know Bill you had mentioned that you felt that as the company grows and scales that you felt.
That's one of the benefits of that scale would be.
Net marketing expenses would not.
We do not materially increasing that you would see an expansion of margins.
And that basis I was just wondering if youre still thinking that the scale would it would actually give you that type of leverage on the marketing spend.
Yes, Michael I think.
Every time, we spoke about that that was over the long term.
Horizon that eventually more and more of the revenues and our growth will come from existing customers as frequency continues to.
The increase in as a result, we'll be leveraging the marketing side right now we're facing tough comps again.
Quarter, we just reported in Q and in Q1, so that's more of a longer term vision that will.
We'll get leverage on the marketing expense side and if you look at the metrics that we reviewed supporting that long term vision.
You look at the customer file when we built the growth in the passport program and the growth in customers buying from more than one category.
Those all come with significantly increased retention rates. So the value of that customer file is continuing to grow which will help out marketing spend going forward.
And just a clarification on the guidance I think you mentioned that the guidance in fiscal 'twenty. Two is also based in part from strategic acquisitions like cherries berries.
Some color on the prospect of acquisitions and what areas seem interesting at this point.
So no the guidance that we gave as long as purely organic that does not contemplate any additional acquisitions.
We don't do that sort of 10 to 12 is purely organic.
Do pointed to a degree the acquisitions that.
Can you give me over the past 18, plus months of Savage berries, and personalization mall, we stay active in the M&A market looking to see what's appropriate out there that can either add to our platform like personalization mall did significantly leverage our platform like cherries berries did so.
As we continue.
We've done we will look for opportunities where products capabilities.
We're just looking for things that add to the platform add value to the consumer add value to our passport program Green.
Bring more products into our catalog expanded as I've mentioned it to Anthony the more we grow that product catalog the war.
Continue to be our customers to have to have to buy with us. So I think that's what you'll see us continue to look from an M&A perspective.
Congratulations again.
Great. Thanks, Mike.
The next question comes from Dan <unk> from the Benchmark Company. Please go ahead.
Yeah good morning.
Good to see you guys keep the guidance sort of intact I don't think really any surprises.
On either front here.
Chris or Bill just as we go I know you just gave September quarter, but we're all trying to kind of get a gauge on sort of how the holiday quarter.
Is shaping.
Just in terms of inventory availability product availability. How you guys are already planning ahead to.
Try to mitigate shipping costs, we've heard some of the driver costs coming back down you guys have used.
The Hoover's indoor Dash is the world of circumvents.
Some of the shipping costs.
Our last mile anyway, there is an increase in postage coming as well. So maybe if you can kind of just talk through sort of the puts and takes how you're sort of planning for the holiday season, now and just sort of your assumptions on your availability of inventory depending on consumer demand.
Sure so to start off Dan thank.
First of all and as we look at the guidance going forward you know, we're real proud of the double digit guidance that we've given for next year on top of what has been a truly tremendous year for us. This this past year.
And Bill pointed out and we'll get into some of the headwinds and the challenges that we have but I think.
As we go through each of the different challenges.
Isn't the cost challenges that we have on the street the capacity some of the product cost which face.
I'm very very proud of the team that we have in place it's proven over the past several years to be very capable of helping to really mitigate these costs.
Cost increases that we get faced with from time to time.
Time, and how to manage around that and mitigated to the best we can whether it be labor, whether it'd be shipping costs et cetera.
Let me give a little more color on what we're seeing and then maybe how exactly we're going after it.
First of all Dan we are bullish on the holiday quarter.
Sure.
Hum.
On.
With that guidance.
Kind of spoke about in our formal remarks, and as Chris was referring we do have headwinds.
There continues to be a buff availability and labor rates continue to be a challenge we've talked about in some of the increase in Capex is all about automation both in our manufacturing of dish.
Distributions self service on customer on our customer service platform to help address that and reduce the number of seasonal helpers that you know that we have advertising as we discussed as a headwind in Q4 and Q1, but that's self correct.
When we get to Q2, because last year with the political campaigns.
Investing heavy both on digital as well as TV advertising rates came back in October to more normalized levels. So we won't have that negative comp as we go into into Q4.
From a.
From a shipping perspective, you've seen a lot of stories on the ocean on Ocean freight trucking rates are often and.
And the third party carriers wall.
In the driver's seat and driving higher you know higher of course, so we continue to you know.
Work with our work with our partners to manage through kind of a cost aspects of these things we will be putting through some strategic pricing.
Increases to pass along some of those costs to the consumer to help offset some of those costs, but.
So I think we've done a good job in the past I think we've demonstrated a good job in the past managing through a lot of the headwinds that we face and we anticipate we'll be able to do so again.
In fiscal 'twenty two.
Yeah, I mean, the guidance clearly implies expectations for a strong holiday quarter, if you're looking at sort of modest growth.
And in fiscal Q1 so.
That's helpful color and just to be clear here I mean look given your expectations for P mall.
Or P mall in the bucket and hearing David continuing to grow nicely, even though probably in the near term. There was some tough comps would you you know I.
I don't want to put you put you on a put put it out there, but maybe a trough next year and adjusted EBITDA on the headwind cost without a crystal ball based on kind of a mix shift that you expect going forward.
Well I mean, our EBITDA guidance does give.
Growth of 5% to 8% so we're expecting.
In fact in growth in both top line double digit from a margin perspective, bill sorry, not from them.
It'll dollars.
Yes, some of that will because.
Because of those headwinds.
Gross margins will be a little more challenge than they've been because most of these headwinds do affect gross margin.
Okay I'll follow up with you.
After.
Chris just one other thing and thanks for all the help on all the Kpis.
Can you maybe just talk through what you're seeing.
And I think he mentioned this before but just kind of what youre continuing to see from sort of pre COVID-19 cohorts versus cohorts you picked up during the pandemic.
<unk> and then cohort you pick up after the pandemic.
Turns of repeat or anything that you could just kind of parse through there.
First of all we're really happy with the customer metrics that are reported and you know the growth that we're seeing in passport at $1.3 million members you see the average revenue per member there.
And the new membership.
Passport new.
Customer counts on people buying from more than one brand and more category are both continuing to grow at significant rates. You know we had great growth in each of them last year as evidenced by growing to $1.3 million members. We're seeing growth rates continue very strong and we're seeing.
The behavior metrics of customers.
Post pandemic to pre pandemic holding up like we saw in the early days, whether at least even if not slightly better performance metrics than those from pre Covid days. So it's a.
I think that's reflective of the new type of consumer.
Example.
The reason I gave the color that about new customer growth a significant number of them were millennials, which now make up 24% of our 12 month active file. So those those are newer types of customers on our platform that are more inclined to be more sticky.
Enjoying passport and utilized.
Platform. So everything were seeing there just gives us real great confidence going forward.
Yeah.
Got it thanks for all the color, Chris we'll wait for the new vegan eco friendly options coming out to address that customer base.
The next question comes from Doug Lane from Lane Research. Please go.
Yes, hi, good morning, everybody.
He used to me that last year during the holiday season, the big concern was really not on demand but on capacity.
So can you sort of.
One is through what you've done to try to alleviate the capacity constraints in your peak season there.
Sure Doug.
Go ahead, a couple of things Bill has been a little bit closer to or from the operation side. So Bill why don't you hit on those.
Well first of all if you saw it on our balance sheet a.
Our year end inventory is okay.
$55 million more than it was a year ago. So.
We have such a strong balance sheet with utilizing that balance sheet to put ourselves in a better position.
You know part of that increase.
Increase was due to the acquisition of personalization mall, but it really was a conscious effort on our part.
To build more inventory going into the fiscal year.
Really right at holiday time last year, we had challenges.
Both with inventory availability, so we're addressing we're dressing that.
Plus all the you know the news that you read about.
It's been in the same challenges and everything else. We wanted to get ahead of that so that's what we've done in U S.
Using our balance sheet to get ahead of it.
To get ahead of that we're still working with a third party carriers I mean.
<unk> from delivery capabilities.
With our carriers.
Continues to be a challenge they eliminating.
The supply from customers as to what their volumes could be with it.
Continued very strong e-commerce numbers that are out there we're working with all our carriers did too to address that and and we're confident we'll be able to work through that.
Great. That's helpful. And then can we just step back and take a look at where we are with personal.
So they should mall year into it where would you rank the level of integration with your business.
Do you see going forward that you can add to the continued growth because it's obviously a tremendously exceeded your original expectations. So the question I guess is where do we go from here.
Okay, great. So I think you know.
Personal as we've said, we're thrilled with the acquisition of Piedmont the performance since its really become part of our platform.
I would say just from an integration point of view, we took a slower approach than we normally would on integrating this business mainly because it was right in the middle of the pandemic and all of the other things that we're focused on.
And the priorities that we had to pay attention to that's why in this in my formal remarks I pointed out that we're just beginning to scratch the surface I think the things that we're doing now is getting the person with personalized products up across all of our all of our sites. This fall that ties into more of the marketplace kind of things that we're doing.
As well, where the collections will now be more in multi branded will be exposing more and more of our product catalogs, including personalization mall into more of a everyday birthday collections is simply collections. The search results that you get on our side as we significantly improved our search capabilities. So you'll see.
Benefits from cross brand.
Merchandising really helping to drive that.
And cohort that I spoke about of customers, who buy from more than one category, which represented 13% of our customer active customer file and 29% of our revenue and those customers come with significantly enhanced retention.
And rates as well once they are doing that so people were just really getting into the early stages of doing that and beginning to do that.
So we see tremendous tremendous opportunities with T. Mo going forward as we continue to integrate the other example, I referenced was corporate gifting. We're seeing you know that was a small business of tmall.
We've seen some good growth there this year and as we integrate that capability across all of our corporate sales teams across the brands, we see significant opportunities.
Thank you that's helpful and just lastly, your balance sheet now is back to being under leveraged in the acquisition market.
It is difficult to predict by imagine prices remained high there can we look for an accelerated stock buyback here in the meantime until the right acquisition comes along.
Well I think one of the things that you've seen and from last quarter, we announced the authorization.
New authorization and the increased authorization from our board to $40 million.
The stock buybacks, which we've been utilizing we feel certainly at these rates. It's a very good investment and a good way for us to return shareholder value with that said the most important focus for us to utilize our cash is to grow our business and I think we've demonstrated a great ability to do that through the strategic acquisitions that we.
We've been doing as well as the internal investment is that what you saw.
Sure.
You know in the press release on that.
Given the cash flow, we spent $22 million on stock buybacks. So that was sort of a step up.
And buybacks you bought back about 820000 shares.
As you know this past year.
And then at that time in the April timeframe, we got the authorization to increase the.
The buybacks of $40 million.
$40 million.
Yeah.
Great. Thank you.
Thanks, Doug.
The next question comes from Linda Bolton Weiser from.
From D. A Davidson. Please go ahead.
Yes, hi, thank you.
Congratulations on the great performance. So can you just talk.
About.
Some metrics on the cross brand bundles.
Are you doing.
<unk> for your product how are the margins on our cross brand bundle I would think it's a little more expensive to put the bundle together et cetera, but how are the margins on those products.
Right. So we didn't really give any metrics on those Linda but we've talked about the early success that we're seeing and really leverages the platform by putting.
Those bundles together when we do so we.
We actually can increase to gross margin.
And those are taking some especially if you'd looked at taking share as berries roses from one 800 flowers combining that with Harry <unk>, David one when you combine that you can get more pricing power.
So we were able to increase the gross margin.
So we're very happy with what we're doing there.
And as we continue to develop distribution capabilities youll see more and more of those bundled products, which customers are just loving.
That's why we're really getting behind those and we think that will really help drive more of that cross category purchases.
That's great.
And then.
Can you talk about you you kind of said modest revenue growth in the first quarter.
I assume that means below that 10% to 12% for the year is that correct.
And then do you expect EBITDA to.
Would be positive or negative in the first quarter.
Yes.
No guidance on a corner by corner basis, while we wanted to do is go back to our prior practice of giving annual guidance, but give you some kind of paid for Q1, because you know it is a tough comp year over year.
Because of the you know the reasons, Chris outlined not only.
Do we have the cost inputs at the tough marketing cost inputs your year over year again.
Headwinds that were that we've talked about and I'm seeing.
And again remember the environment of a year ago, everybody was in kind of a lockdown mode in there.
In their homes during the summer months.
Not seeing anybody and so they were they were.
Gifting is the shift people around about which is which is great for the overall economy.
But obviously if it makes it a tough comp for us, but they didn't keep in mind. You know this is in context of the full year guidance that we gave a 10% to 12%.
The Senate. So so we're very confident that we're looking at this as really being a fantastic year on top of what was a tremendous year this past year.
Great and then you you are referring again to the waiving of the Bloom that sees for Florida.
In the prior year.
Air can you remind us how long how many quarters did you waive those fees.
That was just in the fourth quarter of a year ago at one time it was just a onetime.
Okay.
And then.
Finally, I'm you know I guess, you said, 13%.
None of our customers are multi brand customers what would that percentage be for passport members I would think it would be quite a bit higher.
No passport customers I forget the percentage of active customers, but if I compare the 29% of revenue from multi category purchases.
Last year a passport.
Customers would have accounted for about 19 or 20% of revenue.
Sure.
Let's keep in mind the passport customer could also be a single brand customer and then you guys you could see they have a passport customers still have a lower average order value than those multi category customers.
Okay.
Thank you very much thank.
Thank you Linda.
The next question comes from Alex Fuhrman from Craig Hallum Capital Group. Please go ahead.
Hey, guys. Good to talk to you. Thanks for taking my question I.
Wanted to ask about the holiday season coming up.
Strikes me.
Of that over the past year as everything has been in blocks do you guys have done a really good job of responding to demand as it started to increase or are you still going to be in a position to do that if demand is a lot higher than your forecast for any given week of the holiday just given all of the pressure points.
Points here with labor and freight what is your strategy. If there are days and weeks during the holiday season, where demand really accelerate but what can you do to really lean into that.
Thank you so there's a number of things Thats really how we go into the planning and the holidays, Okay. Here's what we could expect in <unk>, how do we react.
Demand opportunities there is.
It was greater than we originally planned so there's a lot of flexibility built into our system with that said you know as bill pointed out we do run into different challenges without third party carriers et cetera, but that's all about working with them on a day in day out basis forecasting on a daily basis.
Adjusting that out twice a week basis as we go through the holiday and we see where the demand opportunities are.
Keep in mind last year, we were really tight on inventory because sales were a little bit ahead of what we expected we expect that to be in a better position. This holiday. So there's several areas.
I always identify okay. As we look at the plan wasn't a risk, but what are the opportunities and when can we react to that.
Yeah. My only other comment is just kind of look at our history. I mean, we've been operating out 18 months and the pandemic.
It created a lot of challenges right, but when performed extremely extremely well.
So we've been fairly nimble and we've been able to create and work environment safe for our employees and execute against that but.
The pandemic is still with us and we still have challenges.
Challenges going public.
Hum.
We react and adapt pretty well.
Yeah.
That's really helpful. Thank you.
The next question comes from Tim for angle from Northcoast Research. Please go ahead.
Good morning, and thank you for taking my question.
I was hoping you guys could give us a little bit more color on where you stand in your various auto auto.
Automation initiatives I think it's two and a half years and talking about some of these things are targeting two things, one reducing labor hours to kind of improving your fulfillment capabilities.
So first of all it was a one just could you give us an update where you think you are in this process there were at versus where you're going to be and then too.
What are you prioritizing board, what's the what's the biggest opportunity with automation is it reducing you think it's reducing labor hours or do you think it's really approving those capabilities. Thank you.
Sure I'll ask bill to comment more on some of the kind of operational automation that you're referring to but keep in mind when we talk about automation.
We are also looking at how do we automate customer interactions as well so utilizing conversational commerce capabilities to really helping our customer contact our customer care platform that not only helps reduce labor, but what we find is it increases the customer experience as they get a good <unk>.
System response from whether.
And AI driven interesting though.
<unk> types of product, whether it be AI driven chat capabilities that we have parts that we utilize in certain platforms like Apple business chat et cetera. So we're always looking to automate on that side as well, but bill why don't you give a little bit more update on the operational automation.
It would be.
<unk> been talking about it for a few years, but this is this is an ongoing effort and this is a multi year and I think we always positioned it as multiyear.
Our largest distribution center.
And southern Ohio.
That will be.
Fully automated coming into this this holiday.
But we wanted to opening up a new distribution center in Atlanta.
This year in that.
That still has to be.
Automated so this is going to be ongoing for multiple years, that's where some of it is.
Step up in Capex is going.
You know the benefit of our personalization mall is they will fully automate.
Holiday when we when we acquired them. So we're trying to replicate some of them today are actually ready to go there and some of our other distribution centers and we continue to look at manufacturing we talked about you know kind of you know the automated editing machine at <unk>, a few years ago that was a startup if I said.
That allowed us to do increased production significantly with significantly less.
Our employees. So we continue to look at.
Bottlenecks or areas of the manufacturing and distribution.
Seidman, mainly on the distribution side.
Because of the peak days that we have around the holiday, we need to be able to handle significant volumes and.
That's an ongoing.
You know pace.
Next one.
Okay.
Alright, guys. Thank you so mark with what I had.
Tim.
Yeah.
There are no more questions in the queue. This concludes our question and answer session I would like to turn the conference back over to Chris Mccann CEO for any closing remarks.
Thank you for joining us and thank.
Thank you for your complements our we're very proud of the company and the team what they've done throughout this challenging environment to really make it a record a record year for our company and really transforming our company and as we've said crowded we've doubled the business over the last three years transform the company into really the E Commerce platform.
We thank you for joining us this morning, you'll have any additional questions or any follow ups.
Please don't hesitate to reach out.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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