Q4 2019 Earnings Call
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Good day welcome to the <unk> hundred flowers Dot com Inc. fiscal year, 19, Q4, and full year results conference call.
Today's conference is being recorded.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two I'd now like to turn the conference over to Joe Pititto Senior Vice President of Investor Relations. Please go ahead.
Hi, Andrew.
Good morning, and thank you all for joining us today to discuss what is your flowers dot coms financial results for our fiscal 2019 fourth quarter and full year.
For those who would love to see the copy of our press release issued earlier. This morning. The release can be accessed at the Investor Relations section of our web site at one 800 flowers dotcom.
If you correct, if I'm, sorry, I had a call today.
We will begin with formal reforming remarks, and then we'll open the call to your questions presenting today will be Chris Mccann, CEO and Bill Shacey awful.
Before we begin I need to remind everyone that certain statements that we will make today, maybe forward looking within the meaning of the private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements for a detailed description of these risks and uncertainties. Please refer to our press release issued this morning.
As well as our FCC 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 in accordance with generally accepted accounting principles definitions of these non-GAAP financial measures can be found in the definition section of the company's press release issued this morning.
Well, that's all where applicable reconciliations of certain non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the tables accompanying this mornings press release.
The company expressly disclaims any intent or obligation to update any of the forward looking statements made in today's call any recordings of today's call. The press release issued earlier today worn idea, but you'll see some filings except as may otherwise be stated by the company.
I'll now turn the call over to Chris Mccann.
Thank you.
Let me begin by saying that fiscal 29 chain was a very good year for the company. We ended the year with a plan to invest behind our leading brands to accelerate revenue growth and we exceeded our goals with total revenues increasing more than 8%.
To 1.25 billion.
Gourmet food and gift baskets segment, we invested in digital marketing programs for Harry <unk>, David to build on the strong growth momentum we saw beginning in fiscal 2018, particularly in everyday gifting.
As a result, Harry and David E Commerce business grew more than 9% for the year.
Yeah, <unk> consumer floral segment, we invested behind a one 800 flowers brand to take advantage of market conditions and accelerate revenue growth.
As a result, when you have your flowers revenues grew 9% further extending our market leading position.
We also continue to invest in bloomnet to capture more order volume and expand our offering of products and services designed to help professional florists grow their businesses profitably.
As a result, <unk> grew its revenues nearly 15% for the year, passing the $100 million milestone in gaining significant market share.
Our results for the across all our businesses reflect our continued focus on innovation and execution.
Digital marketing programs, including our mobile first strategy.
Merchandising programs did emphasize new and truly original product development and any adoption of innovative technologies, such as PD L. the way voice recognition and chat bots that help enhance our number one product the customer experience.
In addition to strong revenue growth this focus along with the investments we made during the year hope to drive significant growth in our customer files for the year, new customer growth across the enterprise was up more than 10%, reflecting double digit increases for both Harry and David in the one 800 flowers brands.
We also drove solid double digit growth in membership in our passport program and in multi brand customers, which we define as customers who buy from more than one of our brands within the year.
As we have noted in past calls both multi brand customers and passport members represent the best performing customer cohorts with the highest purchase frequency retention and lifetime value metrics in our customer files.
Importantly, we saw these customer growth trends, continuing and gaining momentum throughout the fiscal year.
We expect to carry this momentum into fiscal 2020.
Before I turn the call over to Bill for additional details of our financial results I'd like to highlight a few of our key strategic initiatives in fiscal 19.
Tens of technology innovations.
We expanded our category leading position in conversational Commerce, where we are now one of the few companies that has applications running on all five of the leading platforms, including Apple Samsung Facebook, Google and Amazon.
We continue to roll out PW week technology across our mobile and desktop platforms significantly increasing sites speeds and enhancing the customer experience.
We expanded our integration with smart good a highly personalized experiential gifting feature that allows customers to notify the recipient via text email or many met messaging platform that a gift is on the way and it gives the recipient the option of modifying the delivery preference further involving them into total gifting experience.
We launched an interactive telephonic virtual assistant.
Integrating artificial intelligence in human understanding to improve average speed to answer and increase our already high customer satisfaction metrics.
And we continue to test new technology innovations designed to help our customers express themselves with the launch of smart message and augmenting reality gift messaging feature available in our iOS mobile app.
In merchandising, we continue to focus on developing truly original gifts at both entry level and luxury price points. So if the customer favorite hits. During the year include included the expansion of our Unicorn line based on the success, we're having chanting unicorn floral arrangement, including magical Unicorn truffle cake Pops and the dazzling Unicorn food okay.
Hi, Woody Hundredflowers Succulents collection were a big hit with millennials.
New flavor profiles, including cereals, chocolate chip cookie, a unique brownie cookie combo and the popcorn factory is cookies and cream in Texas Toast flavors and the continued expansion of Harry <unk> David's Gourmet line, including award, winning Harry and David wines that customers have embraced football gifting and home entertaining.
We also introduced our enterprise wide gifts that give back collection in support of a smile phones philanthropic initiative, which is focused on creating meaningful employment opportunities.
Individuals with developmental disabilities, a program that we are proud to have founded in one where we are seeing exciting growth.
And just this past week, we further expanded our celebrate Tory Echo system with the acquisition of Sharis berries as we noted in our press releases regarding the acquisition.
Cherries berries has strong brand awareness as a leading provider with dipped berries and other gourmet treats and we see it as an excellent fit in our all star family of brands.
I'd really like to take a moment to offer a shout out to all of the teams across our organization, who worked so hard to help us not only close this deal in record time, but to fully transition sharis berries onto our multi branded platform a truly impressive accomplishment that speaks to our culture of teamwork and focus on execution I'd now like to turn the call over to bill for more specifics.
Thank you.
As Chris noted fiscal 2019, it was a very good year for our company.
In the guidance, we provided last August .
We said, we were going to invest behind our brands to accelerate our revenue growth rate to a range of 5% to 7%.
We increased our guidance twice during the year as we saw growth momentum building and ultimately exceeded our increased guidance with total revenue growth of 8.4%.
We also provided guidance for Bottomline results to be essentially flat [laughter] selecting the investments we were making.
Well as the catch up in year over year bonus expense.
We exceeded this guidance with solid growth in EBITDA, EPS and free cash flow.
This reflects the effective leveraging all business platform combined with the strong revenue growth for the year.
As we begin fiscal 2020, we expect to carry over the momentum we have you know revenue growth and accelerate our bottom line growth.
Breaking down the fourth quarter and full year results.
For the fourth quarter total consolidated revenues.
12.8% to 259.4 million, reflecting solid growth across all three of our business segments, including the benefit of the Easter holiday shift.
For the second half of the year.
Which combines our third and fourth quarters, eliminating the impact of Easter shift total revenues increased 8.4%.
For the full year as we already noted total consolidated revenues also increased 8.4% to 1.25 billion.
Gross margin for the fourth quarter was 40.6% compared with 40.5% in the prior year period.
It was margin for the year was 42.1% compared with 42.5% in the prior year.
Primarily reflecting higher hourly labor, particularly seasonal labor, which impacts us in the first half of the fiscal year.
For the fourth quarter operating expenses as a percent of total revenues was 45.2% compared with 45.4% in the prior year period.
For the year operating expenses was 38.5% compared with 38.9% in the prior year.
This was a nice accomplishment considering we were absorbing the investments to accelerate revenue growth and the catch up in the year over year bonus expense.
Adjusted EBITDA loss for the fourth quarter was 2.7 million compared with a loss of 1.8 million in the prior year period.
This reflected the year over year marketing investments to accelerate revenue growth and the bonus catch up.
Which more than offset the benefit of the Easter shift.
Adjusted EBITDA for the full year was 82.1 million compared with 78.9 million in the prior year.
Generally, reflecting the strong revenue growth.
Net loss for the quarter was 8.3 million or 13 cents per share compared with a net loss of 8.2 million or 13 cents per share in the prior year period on a comparable basis net loss for the prior year period was 7.6 million or 12 cents per share.
Net income for the full year.
Was $34.8 million or 52 cents per diluted share compared with 40.8 million or 61 cents per diluted share in the prior year.
As a reminder, net income and EPS in the prior year included a onetime tax gain associated with the tax cutting jobs Act.
Therefore on a comparable basis adjusted for the tax gain fiscal 2018 net income was 29.3 million or 44 cents per diluted share compared with fiscal 2019, net income of 34.8 million or 52 cents per diluted share.
Free cash flow for the year was a very strong 45.5 million.
Tens of category results, you know gourmet food and gift baskets.
Fourth quarter revenues increased 20.5% to 72.5 million compared with 60.1 million in the prior year period is primarily reflects the shift of Easter holiday combined with strong everyday gifting.
For the full year revenues in this segment increased 7.1% to 648.4 million compared with 605.5 million in the prior year.
Gross profit margin for the fourth quarter improved 200 basis points to 38% compared with 36% in the prior year period, primarily reflecting.
A combination of strategic pricing initiatives as well as efficient promotional programs.
Gross profit margin for the year increased 30 basis points to 42.9% compared with 42.6% in the prior year.
Contribution margin loss for the quarter improved 21.7% to 6.9 million compared with a loss of 8.8 million in the prior year period benefiting from the Easter shift.
Contribution margin for the year increased 16.1% to 82.3 million compared with $70.9 million in the prior year.
Oh consumer flow.
Fourth quarter revenues grew 10.2% to 159.8 million compared with 145 million in the prior year period, reflecting a strong mother's day and everyday gifting performance combined with the benefit of the Easter shift.
Gross profit margin for the quarter was 40% compared with 40.2% in the prior year period.
Contribution margin for the contribution margin for the quarter was 17 million compared with $16.8 million in the prior year period.
For the year.
Revenues increased 8.8% to 497.8 million compared to $457.8 million in the prior year.
Gross profit margin for the year was 39.2% compared with 39.7% in the prior year.
Contribution margin for the year was 49.7 million compared with 50.8 million in the prior year period, reflecting the marketing investment we made in the period to drive accelerated revenue growth as well as the bonus catch up.
We expect contribution margin in this category to increase in fiscal 2020, as we leverage the investments we made in fiscal 2019 and continued to drive strong revenue growth.
In our Bloomnet business fourth quarter revenues increased 9.3% to 27.3 million compared with 24.9 million in the prior year period.
For the year revenues increased 14.9% to 102.9 million compared with 89.6 million in the prior year.
Gross profit margin in the quarter was 50.1% compared to 51.8% in the prior year period was margin gross profit.
Margin for the full year was 50.5% compared with 54.3% in the prior year, the lower gross margin for the quarter and year looks like product mix as well as the investments to accelerate revenue growth.
Contribution margin for the quarter increased 5.4% to 9.3 million compared with 8.9 million in the prior year period and contribution margin for the full year increased 9.5% to 34.7 million compared with 31.7 million in the prior year.
We expect bloomnet to grow its revenues at a high single digit pace in fiscal 2020 with continued strong bottom line contribution margin growth.
In terms of corporate expense category contribution margin results exclude costs associated with the Companys enterprise shared services platform, which includes among other services I T HR finance legal and executive.
These functions are operated under a centralized management platform, providing support services to the entire organization.
For the fiscal fourth quarter corporate expense, including stock based compensation as adjusted was 23.9 million compared with $19.5 million in the prior year period.
For the full year corporate expenses, including stock based compensation as adjusted was 90.9 million compared with 78.2 million in the prior year the increase in corporate expense for the quarter and the year affects the bonus catch up higher stock based compensation health care cost increases and investments in <unk>.
Now turning to our balance sheet at the end of the year, our cash and investments position was 172.9 million.
Term debt balance net of deferred financing costs was 97 million and we had zero borrowings outstanding under our working capital line within over bobbing credit facility.
As a result, our net cash position at the end of the year was 76 million.
Inventory of 92.4 million reflects our strategy to Prebuild some holiday season inventory during off peak season, using a core manufacturing associates and expanded cold storage capacity to somewhat mitigate the impact of the tight labor pool and rising labor rates.
Also worth noting is the fact that during the fourth quarter of fiscal 2019, we entered a new bank credit facility that provides more favorable terms extends our term for five years and reduces our interest rate going forward.
Regarding guidance.
As indicated in our press release, we plan to continue to invest in strategic marketing and merchandising programs to take advantage of market conditions and to continue the revenue growth momentum that we're seeing across all three of our business segments.
In addition, we expect to accelerate Oh.
Our year over year bottom line growth as we leverage our operating platform.
Based on these factors our guidance for fiscal 2020 are as follows.
Total consolidated revenue growth of eight point.
8% to 9%, including approximately 6% to 7% organic revenue growth combined with the anticipated contributions from the acquisition of the Sharis berries brand.
Adjusted EBITDA and EPS growth in the range of 8% to 10% and free cash flow of approximately 45 million.
We continue to target EBITDA of approximately 100 million for fiscal 2021.
With that I will turn the call back to Chris.
Thank you Bill so to wrap up we had a great year in fiscal 19, we ended the year with a plan to accelerate our revenue growth and we significantly exceeded uncle.
We also exceeded our bottom line goals EBITDA EPS and free cash flow all significantly ahead of plan.
We invested behind our leading brands, Harry and David and one 800 flowers and we drove strong revenue growth in both.
We invested in programs to grow our customer files across the enterprise and achieved double digit growth in new customers, while concurrently deepening relationships with our existing customers.
We grew our passport program and the number of multi branded customers. Both key strategic priorities that provide a strong base for near and long term growth.
We continue to invest an experiment with innovative new technologies on the merchandising front, our focus on truly original product designs yielded multiple hits that our customers have embraced for their gifting needs.
As we enter fiscal 2020.
This means we are making in these initiatives will help position us to continue our strong revenue growth and accelerate our bottom line results for the year.
We plan to keep our foot on the pedal to continue to take advantage of market conditions and further expand market leadership for the one 800 flowers brand.
To continue to grow our market share for Bloomnet and to keep our strong everyday gifting momentum going in Harry <unk>, David and I, rather gourmet food and gift basket brands.
Looking ahead, we are excited by the many opportunities we see to further expand our celebrate Tory echo system and provide our customers with the innovative products and services that inspire more human expression connection and celebration.
Before I turn the call over to James to begin culinary I'd like to take this opportunity to thank all of our associates across the company.
For their unwavering focus on our customers and enhancing the experience we provide them for their hard work and dedication to constantly innovating.
And for their passion and helping our customers deliver smiles.
James would you please repeat the polling instructions for queuing resection. Please.
Thank you Mr., Ken we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speaker phone. Please pick up your handset before pressing the keys switch. Our your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
And we'll take our first question today from Dan Kurnos with benchmark company.
Great. Thanks, Good morning, I'm just.
Let's start with with Sherri's, just its more housekeeping just to get it out of the way you know Chris you talked your prepared remarks about getting on the multi brand.
Just how are you guys thinking about sort of the ability to grow that asset return it to profitability in just the impact on margins over the next to 12 months.
Thank you.
We're very excited to have the ability to acquire sharis berries, and we see this really is an excellent fit.
All star lineup.
This acquisition clearly will help us further expand our authority position as a leader in <unk>.
That's really growing in the gourmet food side of our business.
Oh, so we've already.
It shows not just the technology stack about platform, but to <unk> distribution capabilities of our platform. So it was really was a great integration mean, we closed last Wednesday that afternoon, we were taking orders on our new platform in full for the most part fully integrated.
Our plan going forward really is to focus on improving improving the bottom line performance of Sharis berries. So we're going to eliminate a lot of the unprofitable marketing that we saw being done with that brand. Some of the unprofitable marketing partnerships that were just focused on growth I think we're going to focus on improving the product quality moving the brand back into more of a premium brand you'll see less promotional discounting from US then that brand is seen in the past.
Position that brand more in line with our other gourmet food brands that you see today, so as we get the business integrated start to look at growing the business look at the customer file or you will see us manage that business and grow it similar to what we've done with our other brands, where we look for growth opportunities and then from each brand profitable growth opportunities. But then also really leverage the platform leverage our eco system to interest of a multi brand customer introduction utilization of our passport program et cetera. So I think that's really you know that is the strategy as we reposition this brand going forward.
Got it that's helpful. So sort of sherri's, if I read your rate of share is not really a drag anymore than let's just address kind of the elephant in the room on the on the forward guide, especially EBITDA, which is whats hurting you. Today. So you know I I get you guys have made several hundred millions of dollars of investments in Tac in the last few years. Obviously, you guys have taken significant marketing share and accelerated your revenue there's no doubt about that Youve got FTD kind of in pieces now although there are some obviously concerns that nexus will be maybe a more rational and reasonable player against you guys. So how do we view the long term sort of balance between growth do we return to a improving or leverage situation you guys used to generate about 30 to 70 basis points of margin expansion a year.
How do we view that over sort of the short and the long term, especially with relation to your expectations for the competitive backdrop.
So those are things we look at the competitive landscape, we continue to believe that strategy.
One is working very well.
To accelerate our growth guidance for this coming year.
We focus on what we do well we focus on building celebratory ecosystem, adding sharis berries is a good example of that it provides us operating leverage and bill can speak to that a little bit more.
And again, we've upped our guidance now several times last year.
The guidance again this year to 9%.
Range.
So we think we're in a really good position to not only continue to growth momentum, we have but to accelerate the bottom line results that weve been producing it Dan.
Yeah. We think are we believe our guidance is very strong with the 8% to 10% bottom line guidance that you know that we provided you know remember.
It absorbs the impact of.
You know of a tight labor market and the seasonal labor costs that are that we bear it and includes the impact of of tariffs. Both the you know the carryover impact of last year's tariffs as well as the you know the contemplated tires at September one in December 15th of Oh.
With the things that we provided.
You know with the 8% to 9% overall growth and organically, 6% to 7% and specifically then with with charities, we really didnt upped our guidance bottom line guidance with regard to.
Share is at this point in time as Chris described were repositioning the brand we want to position. This brand for long term, both topical topline growth and long term profitable growth in line with where we where our goal my food and gift baskets segment.
Operator, we have to absorb the deal costs and the startup cost associated with that with shares. This year. So we havent upped the bottom line guidance.
Over what we probably would have done even without the sherri's.
Act.
Acquisition. So we are showing some leverage on the organic growth at that were provided and that's due to your point on the guidance of shares and not really.
Adding anything more to it at this point, we've had a business now since last Wednesday. So it's based on what we know now as we move forward. If we see more opportunity you can rest assured we're going to go after it.
And so just to be clear guys. You know on a longer term trajectory you still see leverage in the business and being able to sustain sort of an elevated growth rate.
Yes, yes.
All right fair enough. Thanks, guys.
Our next question will come from Anthony Leap engine, Zinski with Sidoti and company.
Good morning, and thank you for taking my questions. So just a follow up on Sharis berries I was just wondering if.
You guys can comment on the seasonality of the business that you expect it is going to be similar to the rest of the g., if she'd be business or not and also.
In regards to Sharis berries. So just wondering how many incremental customers that did you guys pick up.
Thanks to the acquisition.
So the seasonality is not exactly like how it's more like the floral business than it is the gourmet food gifting business and that's kind of been build the way. It's been managed you get your holiday spikes more around Valentine's day, and mother's day doing your due amount holiday season. So the seasonality is more geared towards floral and gourmet food and I think as we look at that business, we will determine the seasonality curve as well again as I mentioned some of the unprofitable marketing that we saw in that business was really done at holidays, just try and drive peak demand for growth sake, we won't chase demand like that you've seen that from us in the past you see us be very disciplined in the growth that we get.
Ah So you won't see us doing.
You know just crazy holiday growth rates.
That's what I was looking at the number of customers. Its you know a couple of million customers that come with the list now we really need to go through that and understand the profiles of those customers. How many of those customers are really profitable customers. So that speaks to some of the partnerships that I mentioned, if you know how many of those were groupon customers, though that I'm not repeat customers et cetera that are just discounts.
So that so on a long term basis, we need to determine that yet to see really how much.
That was the file is core one of the early signs that we are encouraged by is that while there is some overlap with our enterprise wide customer base. It's similar to when we acquired Harry and David There's enough overlap to tell as these customers can be migrated to multi brand customers.
But not too much said, there's still a lot of opportunity for us to do so so we're pretty encouraged that perspective looking at their customer file.
Not that the holidays are not important for this for this business. They clearly they clearly are but like with all our businesses. We are emphasizing every day.
Everyday gifting within this brand.
Got it Okay. That's very helpful and the Bill you commented on the rising labor rates or is this impacting your costs are also so just wanted to get a better sense as to the impact of that and are there any other cost issues you mentioned tariff or tariffs also affecting you I was wondering if perhaps you could quantify the impact of the tariffs as well.
Well you know like all businesses, we are dealing with a tight labor market rising labor rates because of the seasonal nature of our business and and the fact that we bring on so many seasonal employees it.
Does have a you know a decent size impact on on our business. You know we've increased our hourly wages where necessary, we all lots of programs to attract and retain our seasonal workers on product discounts special sweepstakes retention bonuses travel vouchers etcetera, because it's better for us to get the peak seasonal a worker because it improves on our productivity we've included.
This incremental cost on you know on on Labor you know guidance. Just says we've included in our guidance you know the impact of of the tariffs again, both last year's tariffs on the full year impact of last year's tariffs as well as the contemplated tariffs that have been announced.
Effective September one and December 15th both these impacts I mean in the multi million dollar you know you know range on any one year over year cost included in our guidance, but they are included in our.
Got it okay. Thanks for that and lastly, when I look at your organic revenue guidance of 6% to 7% growth.
Is that expected to be more or less kind of evenly spread across your main segments or do you anticipate that perhaps some of your <unk> and one or more of those segments to grow faster than the others.
Yeah I think.
We were remarkably consistent throughout the year, you know with all growth rate you know.
Previously we reported our first three quarters in the first half of the year. We grew at eight you know 8.4% second half of the year. We grew at 8.4% you know and we grew at 4.1% in Q3.
And 12.8% in Q4.
Because of the Easter shift.
Overall, you know if you back out you know you back out the impact of the Easter shift both those quarters grew at kind of the end you know the annual rate. So this you know this past year. We grew it about you know about 9% in consumer flow, we grew about 7% in.
You know going food, you know you know business and 15% in Bloomnet.
From that perspective.
Hey, remarkably it was pretty consistent throughout the especially on the direct to consumer direct to consumer brands as we move forward. This year, we are expecting nice organic growth within all.
All three of our business.
So fairly consistent to net up of mid single digit range.
Got it okay well. Thank you so much best of luck.
[noise].
Again, if you have a question. Please press Star then one.
We will now hear from Alex Fuhrman with Craig Hallum Capital Group.
Great. Thanks, very much for taking my question. It looks like you had a really big increase in new customers in the fourth quarter more so than than in prior years I'm curious, what specifically has been driving that if there is a more and more so on the gourmet food side of the business or the floral side or if that was a pretty pretty even between the two segments.
Yeah, so overall from a.
It's been one about key focuses.
Well, it's to drive new customer growth and for the year.
Double digit customer growth across the brands, especially to wander into flowers in Harry <unk>, David brands specific to Q4, I think part of that probably would be some of the Easter shift.
But then.
So it would be mainly driven by the floral business starting in Q4.
Okay. That's that's helpful. And then just a couple of more sort of follow ups on on cherries berries I should we expect to see some type of a of an acquisition related charge here in the first quarter related to closing that deal and then just as you think about Relaunching. The brand you know are there going to be any investment costs that we should expect to see over the course of the year as you position that brand for further further growth.
Yes.
Yeah again, our guidance and that is the reason, we didnt og or planned guidance of 8% to 10% EBITDA growth beyond that with the show was acquisitions, we'd absorbs that.
No okay who's in charge.
Okay. That's very helpful. Thank you.
And everything else right okay. Good.
Mr. Ferman do you have anything further.
Nope that's it thank you very much.
Thank you, we'll now hear from Michael Kupinski with noble capital markets.
Thank you just a last question on cherries berries.
Right I know that you are maintaining your fiscal 21 guidance at 100 million, but would you expect that cherries berries will have a contribution to EBITDA by 2021.
Yes, we would yes, okay and then.
I'm sorry.
<unk>, just going talking a little bit about the consumer floral business again.
I know that there's a heightened expenses related to you know the heightened competition or possibly for search words, and so forth. I was wondering if you have any visibility on whether or not that it's kind of.
Kind of waning, a little bit or you still see those types of competitive pressures.
Just kind of see Oh, I'm wondering if you're starting to anticipate that there might be some sort of moderation in that the expense there.
Oh, the consumer floral it's still a very competitive space and its continued through the last set of holiday seasons, even through and into the summer.
From a competitive point of view, but also Michael I think to your point rising input costs.
They are a factor as well so it's really <unk>.
You know on our notes to really make sure that we're driving efficiency in our marketing programs, we're very happy with what we've seen especially in our investment in a new customer acquisition and their customer acquisition costs that we've gone from the flowers brand and that's why we've stayed with that bring in a number of new customers to really bolster the file that helps us now migrate more people into the passport program multi brand customers et cetera. So we're continuing to do that and continuing to keep out foot on the pedal on customer acquisition on flowers, even though there are some heightened cost there because we're seeing the effectiveness of it.
Gotcha, and then the elevated spend in technology and development, it's due to your investment conversational commerce and such.
Well, that's spending moderate as we go into fiscal 2020.
Yeah, we do we look at the technology spend we were in E. Commerce first driven business and that requires a lot of technology spend I think you've seen our technology spend fairly stable for the last several years and I would expect it will remain in that range.
It really is on track things like that as a differentiator, we must amongst the competitors and a leader in technology and transformational technologies like you mentioned in conversational commerce.
Most definitely and and I'm sorry, if I missed this but can you give me the cap spend pretty well this quarter and what do you project capital expenditures to be in fiscal 2020.
Yeah, It's a cap spend last year was a little over 30 to 32 million might if we want to talk off line I can give you the quarterly breakdown of all of that it is you know there is a decent spend in the fourth quarter as we start prepping to the summer months or so fourth quarter first quarter, a little higher spend on getting ready for the next you know you know for the next holiday season, we expect cap spend to be up a little bit next year as we continue to look at automation initiatives within our distribution centers to help and address some of the you know the seasonal labor issues that weve talked about.
Perfect. That's all I have thank you.
Thank you Michael.
This concludes our question and answer session I would like to turn the conference back over to Chris Mccann CEO for any closing remarks.
Well. Thank you everyone for joining us and thank you for your questions or if you have any further questions by all means please follow up with us and if I could urge you all to just please.
Yeah, we're very excited about the new acquisitions Sharis berries.
Coverage you to try the product and support the beverage business. Thank you very much.
The conference has now concluded thank you for attending today's presentation.