More than sweet treats, Chewy (NYSE: CHWY) beats profit estimates as revenue grows 7.7%

Chewy Inc. (NYSE: CHWY) reported first quarter results that exceeded analyst expectations, sending shares around 1.8% higher premarket on Wednesday.

Adjusted earnings per share of $0.43 beat the consensus estimate of $0.24 by $0.19. Revenue reached $3.36 billion, slightly above the $3.35 billion analyst estimate, representing a 7.7% increase YoY from $3.12 billion in the prior year period.

The company’s adjusted EBITDA rose 31.3% to $253.1 million, with adjusted EBITDA margin expanding 130 basis points to 7.5%. Gross margin improved 50 basis points YoY to 30.1%. Chewy added nearly 200,000 net customers during the quarter, bringing total active customers to 21.5 million, up 3.6% YoY. Shares rose 1.8% following the announcement.

“Chewy continues to outperform the pet category while expanding profitability and free cash flow,” said Sumit Singh, Chief Executive Officer of Chewy. “Our first quarter results demonstrate the resilience of our business model and the strength of our execution, as we delivered 7.7% net sales growth, nearly 200,000 net customer additions, and record profitability in the quarter, despite a more dynamic consumer backdrop.”

The company generated $108.5 million in operating cash flow and $70.8 million in free cash flow, up 25.6% and 45.4% YoY, respectively. Autoship customer sales, which represent recurring subscription revenue, grew 10.5% to $2.83 billion and accounted for 84.4% of net sales, up from 82.2% in the prior year period.