Chewy's (CHWY -2.90%) revenue growth slowed in the second quarter as it lapped the surging growth early in the pandemic. But the good news for investors is that profitability is moving in the right direction as EBITDA grew by 50%, and it posted positive free cash flow.

Motley Fool contributors Jeremy Bowman, Jason Hall, and Trevor Jennewine break down those numbers and more in this Sept. 1 segment from Beat and Raise.

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Jason Hall: OK, I'll hit the numbers while he's going through them and we'll give Jeremy a chance to see if his internet stabilizes: $2.16 billion in revenue in the quarter, up 27 percent. Gross margin, 27 1/2 percent, that was up 200 basis points, so that's really good when you see those expanding margins there. Still losing money, but it looks like the net loss is probably trending in the right direction. Net margin: still negative, but it improved. It improved to just about breakeven on net margins. That's pretty good. Jeremy, are you back with us?

Jeremy Bowman: I think so, yeah.

Jason Hall: You're good, yeah.

Jeremy Bowman: Yeah. They had a GAAP net loss of $16.7 million , which was an improvement from the prior year. But adjusted EBITDA, which is a bit of a squirrely profit figure, that was positive. For a long time, they've been losing money on an adjusted EBITDA, so I think the pandemic has helped them get out of the red at least on one metric, so I think that's a good point. Margin is also improving, which is up 200 basis points or 2 percentage points at 27.5 percent, so that's a great sign for long-term profitability as well.

Jason Hall: Yeah, one thing they don't put in their press release. It will indefinitely be in their 10-Q, and they might put it in their presentation as cash flows. I'd be interested to take a look at the cash flows and see where the trends are there, so maybe that's something we can take a little bit of a look at. If we don't have time today, maybe we can take a look at it because I know we're going to talk about this company tomorrow. Jeremy.

Jeremy Bowman: Yeah, I got their shareholder letter open actually.

Jason Hall: Yeah. I just looked at it, too. Hit it.

Jeremy Bowman: Free cash flow is $60.2 million, so about a 3 percent margin there, which is good for them. And they actually had a pretty big loss in the year ago of $56 million, so definitely improving there, which you have to like if you're a shareholder.

Jason Hall: Yeah. Because again, we talk about this a lot on Beat and Raise because so many of our favorite investing ideas are companies that are still getting to scale, and they are aggressively spending money to build out that scale. A lot of times we see large losses on a GAAP basis and even operating losses. Not just the total GAAP basis or the total financial picture, but just looking at the operating results. But then you start looking at cash flows, and sometimes cash flows are already positive, and that's a really good sign. And the big thing is the trend, Jeremy, like you were hinting at is. Is it better than they were a year ago? Is it better than it was the sequential quarter? It looks like, just from this quick take, I think we're seeing that with Chewy.

Jeremy Bowman: Yeah, Jason, I think you can definitely see the business scaling, which is a good sign. Like you said, the GAAP, they're still losing money on a GAAP basis.

Jason Hall: Trevor, I'm curious: Do you follow Chewy or know anything about the company or have any questions or thoughts?

Trevor Jennewine: I don't follow it that closely as stock. I am a customer, though.

Jason Hall: Which is the side we need to hear right here.

Trevor Jennewine: Yes, I really like it. Just as convenient as anything like Amazon is, and I should say my fiance really likes it. We get packages, seems like every single day, so very convenient, great service. From the customer perspective, I really like it.

Jason Hall: How many excess, thinking about channel stuffing here? Too much inventory has already been pushed out. How many excess bags of pet supplies are there in the Jennewine household?

Trevor Jennewine: You don't even want to know. There's a lot. [laughs] I was just looking at it earlier, there's so much extra stuff here.

Jason Hall: That's awesome. It says a lot about the business, but I think it's also worth pointing out, could there be some aspect, not necessarily a risk, but could it say that maybe they really did pull more business forward than they necessarily are going to continue to be able to grow into? We'll see. I think that'll be fun to follow. Jeremy, I know we've only got another couple of minutes before we need to hop off. Any final initial thoughts on Chewy?

Jeremy Bowman: Yeah, I think, over all, I just want to do a quick glance of the report. I think it's all around a good quarter. I think you have to be happy with this. This is a high-priced stock, so I'm not sure what we're going to see as far as movement, but I think the company is definitely executing on its goals.