A：The highlights of Tui's third quarter 2025 earnings include consistent year-over-year profitability gains, an 8% year-over-year net sales growth to $3.12 billion, and a 5.8% adjusted EBITDA margin, representing a 100 basis point expansion. This was supported by strong customer sales growth, a 13.6% increase to $2.61 billion, and an active customer growth of nearly 5% to 21.2 million. Additionally, the company expanded gross margin by 50 basis points to 29.8%, and generated approximately $176 million of free cash flow.

A：For the third quarter, customer performance indicators included a 13.6% year-over-year growth in customer sales to $2.61 billion, a 5% year-over-year growth in active customers to 21.2 million, improvements across all parts of the active customer funnel, and a 15% year-over-year growth in mobile app orders. Net sales per active customer reached $595, up nearly 5% year over year.

A：Profitability and free cash flow performance in the third quarter were robust, with a gross margin expanding 50 basis points to 29.8%, adjusted EBITDA reaching $181 million (up 30% year over year), and an adjusted EBITDA margin of 5.8%. Free cash flow generation was approximately $176 million, up nearly $70 million sequentially. The company also repurchased $55 million of shares during the quarter.

A：Updates on ongoing initiatives included strong performance from Chewy Vet Care (CBC), which supports ecosystem engagement and customer loyalty through recurring high-margin services. Since the last earnings call, two additional CBC practices were opened, bringing the total to 14 locations across five states, with plans to open 8 to 10 locations for the fiscal year. Furthermore, the acquisition of Smart Equines was announced, which is expected to be accretive to adjusted EBITDA margins upon closing and will enhance the health and wellness mix. The paid membership program, Chei Plus, continued to outperform expectations and now has members delivering gross margins in line with the overall enterprise.

A：Q3 adjusted net income was 135.7 million, representing a 59.6% year over year increase. The adjusted diluted earnings per shares landed at 32 cents, near the high end of the prior guidance range.

A：The adjusted EBITDA for Q3 was 180.9 million with a 5.8% adjusted EBITDA margin, up 100 basis points year over year. For full year 2025, capital expenditures are now expected to be around 1.3% of net sales, which is below the low end of the prior target range of 1.5 to 2% of net sales.

A：During the quarter, approximately 1.5 million shares were repurchased for $55 million, leaving a remaining authorization of 304.9 million under the existing repurchase program.

A：The full year 2025 net sales outlook has been narrowed to between 12.58 and 12.6 billion, indicating approximately 8% year-on-year growth. The adjusted EBITDA margin outlook has also been narrowed to 5.6% to 5.7%.

A：The expected advertising and marketing expense for the full year 2025 is approximately 6.5% to 6.6% of net sales. Other financial expectations include share-based compensation expense of approximately 315 million, a weighted average diluted share of outstanding of approximately 430 million, and net interest income of approximately 15 to 20 million. The expected effective tax rate is between 16% to 18% for 2025.

A：In 2026, the plans are to leverage the company's competitive advantages and continue pursuing scalable, self-defending initiatives that enhance profitability. The company intends to maintain a customer-centric growth approach while delivering consistent, durable EBITDA expansion over the next several years.

A：The long-term framework remains unchanged, and the company is firmly on track toward the long-term margin profile of 10% adjusted EBITDA outlined at Investor Day. In 2026 and beyond, the company is highly disciplined in capital deployment, making temporary and structural investments based on clear ROI thresholds and measurable payback periods. As they move into 2026, they expect the balance of investment to shift towards operating leverage.

A：Chei Plus aims to grow Net P&L for customers spending between $300 and $700 with Chewie by providing them with a larger basket size. It also expands the Total Addressable Market (TAM) to an additional $40 billion in health services and creates an entire health ecosystem, allowing customers to start their journey online or offline.

A：The mobile app for Chewie provides a closed loop system that increases direct traffic, offers personalized interactions, has higher repeat purchase rates, stronger AOV, and improved auto ship subscriber rates. There is also a complementarity between the Chei Plus program and auto ship inside the app.

A：The recent performance drivers for active customers in Q3 include improvements across the customer funnel, strengthening of gross adds and lowering of churn (improvement in retention). Specific data points include lower first-time to app conversion, increased daily active users, and double-digit gains in SEO performance.

A：The company expects retention to continue to strengthen as customers deepen their engagement, especially in categories like premium consumables and healthcare goods. There was a year-over-year growth of 18% in the same category.

A：The company expects the durability in net adds to continue increasing in Q4. Q4 implies a moderate decrease in active customers, estimated to be in the high end of low single digits, possibly offering some moderation from Q3. Net adds in Q4 are expected to be below the comparatives from last year due to a tougher comparison.

A：The company views 2025 as an investment year with strong top line growth and meaningful margin expansion. In contrast, the expectations for 2026 are to take share with more structural and durable investment levels, continuing to self-fund temporary investments. Investments will be made in a more strategic manner, focusing on structural investments while pulling back on temporary investments.

A：The expectations for the industry normalization in 2026 are for a growth at low single digits or perhaps the low end of mid single digits in net household formation, which is currently remaining flattish.

A：The current industry view on pricing growth is that typically there should be 1 to 2% improvements year over year. For 2026, the signals are not yet clear, and the company plans to bring forward a share-taking plan, with more details on pricing expected in March when they report Q4 and discuss 2026.

A：The factors contributing to marketing efficiency and customer acquisition include the past two years of work on connecting the marketing funnel, being mobile-first, improving the mobile app and overall customer retention through the mobile ecosystem, rebuilding the CRM engines, and enhancing the customer experience.

A：Q4 is typically an investment quarter for the company with higher promotional levels, less helpful pricing, and increased units processed, which reduces the leverage seen in other quarters. Marketing intensity and media rates are also elevated in Q4, making it hard to evaluate on a sequential basis. Despite this, the company is delivering with momentum and quality execution, showing a profit increase that is three times the growth rate.

A：When considering gross margin trends for 2026, it's important to note that it's not typical to view Q4 as an investment quarter due to various factors such as higher promotional levels, less helpful pricing, and increased units processed which reduces leverage. The specific impact of 2025 on 2026 trends will be discussed in more detail in March.

A：The drivers of customer ad retention and growth adds for 2026 should be considered carefully. The exact contribution of each factor—retention or growth adds—will determine which one is a more significant contributor. The company intends to provide further clarity on these factors when discussing the results for Q4 and 2026.

A：The expected contribution to reaching the 10% long-term EBITDA margin goal is that roughly half of it will come from gross margin and the other half from operating expenses (Opex).

A：The expansion opportunities that are expected to increase gross margin on a structural basis include advertising growth, premium category mix consolidation, and strengthening private label with new launches.

A：Significant progress with the private label includes consolidation of share and strengthening with new launches. More exciting news on private label is expected to be shared in the March April call.

A：The company is positioned to have durable customer ads due to a market outlook resembling the current year. The performance shown this year and improvements in marketing, the engine, and innovation are expected to be durable as the company moves into 2026. This suggests that gross margins will be influenced by customer ads, with the trajectory expected to be positive.

A：The company's strategy is to focus on both acquiring and retaining customers, viewing them as both ends of a mathematical equation rather than exclusive focuses. The market has a large set of households that can be reached, and the company's internal engines like Chirpy, auto ship, app, and the health ecosystem help improve retention.

A：The results of the price increase for the Kiwi+ program show strong conversion elasticity, exceeding internal expectations. The program is now delivering gross margins that are in line with the enterprise and will become more efficient as it scales, with initial investments being recouped very quickly, especially with increased pricing. The program is also showing strong member penetration in categories like hard goods and specialty, driving basket building and nest consolidation. The member mix is now 80% paid, suggesting that the program will continue to scale efficiently, and the conversion is holding better than expected.

A：The company's expectations for program penetration have not changed since the last quarter. The program continues to show strong member penetration in categories that aid basket building and drive nest consolidation. The signals received are positive, and the program is acting as a complementary driver of discovery across the platform, especially in discretionary categories.

A：The 4Q guidance is running ahead of plan, with a strong performance during the recent peak period, which was very much in line with expectations. The team performed exceptionally well with strong execution, healthy supply chain backlogs, and maintained high stock levels. Promotional discipline and marketing efficiency were maintained throughout the holiday event. Net sales and engaged sessions were up year over year, while total event spend and customer acquisition costs were down year over year.

A：The relationship between auto ship customers and plus customers is that the number of auto ship customers could potentially equate the number of plus customers, with the goal of expanding the basket and reaching into more discretionary categories.

A：The scalability of the True Plus program, despite not moving the needle much due to the current scale, implies that it has broader ecosystem implications and benefits. However, specific numbers on box productivity were not provided in the transcript.

A：The broader ecosystem implications of the True Plus program include increased discoverability, faster consolidation of baskets, improved order frequency, and a multi-fold increase in repeat traffic on the website. The program also aims to improve retention rates from strong current levels. The open markets for the program are suggested to be areas where these benefits can be expanded, but specific markets were not detailed in the transcript.

A：The True Plus program targets members who spend between $300 to $700, aiming for incremental spend, while also driving the consolidation of baskets. In contrast, the auto ship program is not dormant, resulting in continued activity among participating customers from core seasonal events. The auto ship program also benefits from the True Plus program as it's applicable to customers who may not necessarily fall into the $300-$700 spending range.

A：The purposes of the True Plus program are to drive discoverability, accelerate brand consolidation, and improve retention rates. These goals are supported by the complementary nature of the True Plus and auto ship programs.

A：The company anticipates conducting a detailed review/memo on the performance and future expectations of the CBC program in the next few months. This will involve examining customer incrementality and retention rates, among other metrics. At the time of the speech, positive customer feedback was highlighted with a Google rating of 4.8 for CSAT and high retention rates. The company expects to be in the 16 to 18 range for growth.

A：The expected growth range for the True Plus program by the end of the year is in the 16 to 18 range, as per the original forecast.

A：The transition from auto ship to plus membership is not a simple mathematical possibility. While there is an overlap between the two programs, the True Plus program allows for targeted and segmented marketing strategies using digital platforms and unified data signals to identify customers who will benefit from the program. The auto ship program may not apply to all customers, and the benefits of both programs must be considered in the context of each customer's spending habits and interests.