Earnings Call: Q1 2021

May 12, 2021

Ladies and gentlemen, thank you for your patience in holding and welcome to the threat up First Quarter 2021 Earnings Call. Please be aware that each of your lines is in a listen only mode. At the conclusion of the presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask an audio question. It is now my pleasure to introduce today's first presenter, Ms. Lana Adair. Good afternoon and thank you for joining us on today's conference call to discuss thredUP's Q1 2021 financial results and our first earnings call as a public company. With us are James Reinhart, ThredUP's Chief Executive Officer and Co Founder and Sean Sobers, the company's Chief Financial Officer. We posted a press release and supplemental financial information on our investor website at ir. Thredup.com. This call is also being webcast on our Investor Relations website and a replay of this call will be available on the website shortly. Before we begin, I'd like to remind you that we will make forward looking statements during the course of this call, including, but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects, business strategies and plans. These forward looking statements involve known and unknown risks and uncertainties and actual results could differ materially. Words such as anticipate, believe, estimate and expect as well as similar expressions are intended to identify forward looking statements. You can find more information about these risks, uncertainties and other factors that could affect operating results in our SEC filings, earnings press release and supplemental information posted on our IR website. In addition, during the call, we will present certain non GAAP financial measures. These non GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from GAAP measures. You can find additional disclosures regarding these non GAAP measures, including reconciliations with comparable GAAP measures in our earnings release. Now, I'd like to turn the call over to James Reinhart. Good afternoon, everyone. Thank you for joining ThredUp's Q1 2021 earnings call. I'm James Reinhart, Co Founder and CEO. With our IPO on March 26, thredUP entered a new chapter in our company's history, and we're excited to share our results in this first earnings call. This most recent quarter, we achieved record revenue, record gross profits, record gross margins and record active buyers. Given the strong growth we observed in Q1 2020 prior to the onset of the pandemic, we feel like the growth metrics this quarter are an indicator of the reacceleration in our business, improving macro conditions and the momentum in the broader resale category. Our Q1 2021 results were better than expected in both internal and external factors played a role. We continue to benefit from ongoing investments in our platform, our growing and dedicated base of active buyers and sellers, strong unit level economics and expanding competitive advantages and operations. This quarter, we also benefited from 2 rounds of government stimulus that helped buoy the American consumer. And while we expect the stimulus checks are over, we believe shifting consumer behavior during the pandemic will create long term tailwinds for our business and for the resale industry at large. Because this is our first earnings announcement and many of you might be new to thredUP's story, I'd like to take a step back and refresh you with our mission and vision. The idea for thredUP came to me in 2,009 when I tried to sell some of my clothing at a local consignment store. Every item was rejected. And that was shocking to me because I knew my hardly worn clothes must be worth something to someone. I realized that the selling of clothes was a ton of work and much of what we all end up donating ends up in landfills. I just thought there had to be a better way. And so my co founders and I set out to transform the resell industry with a mission to inspire a new generation of consumers to think secondhand first. This transformation is well underway and thredUP is well positioned to capture the growth in this sector. As a reminder, according to independent data provider Global Data, the resale industry is expected to grow 25 times faster than traditional retail over the next few years. As it becomes easier for consumers to sell their clothing, we expect the industry's growth will be driven by a surge of new secondhand products coming online, And we believe that surge will create opportunities for more and more customers to find great secondhand product online. In Global Data's 2020 research, they found that 2 out of 3 consumers reported now being comfortable with purchasing secondhand clothing. We expect to be an ongoing beneficiary of people coming into this market for the first time. Market demand is driven by attractive demographics, including millennial and Gen Z buyers who now value sustainably more than ever, as well as all consumers continuing to prioritize value. Our team wakes up every day working hard to deliver great brands at great prices, but importantly in a sustainable way. And not only are we inspired to build a great business, we are doing good in the world. Given we believe there is massive opportunity in this market, we have been building a differentiated and defensible operating platform to enable resale at scale. I thought I would spend a moment here detailing the key differentiation in our model and how we think about our strategy over time. If you listen to these calls long enough, you'll hear me talk again and again about our strategy and our investments to deepen our moat and widen our TAM. I am a deep believer and my team, they're deep believers that good strategy is key to building lasting advantages over time. So here are the 3 elements I think you should take away. First, it's all about supply. We've never spent a single dollar directly acquiring sellers and we expect that to continue. We are constantly working to improve the consumer experience for sellers, making our signature clean out kits available online and offline through our own website or those of our resale as a service partners. We are also accelerating processing capacity to reduce wait times and constantly evaluating how to pay fairly for the clothing we can resell. Since the peak of our bag backlog in Q3 2020, we've reduced processing wait times by more than 50% and we are well on our way towards our stated goal of 2 to 3 week processing time by the end of the year. Given we estimate that there are potentially 1,000,000,000, that's with a B, 1,000,000,000 clean out kits out there in the U. S. Every year and that we processed just 1,000,000 last year, we are confident in the long term supply opportunity for thredUP. 2nd, we are relentlessly investing in the technology and software that powers our managed marketplace infrastructure. Our single SKU logistics technology and distributed processing allows us to ingest and make available large amounts of secondhand clothing, each undergoing a rigorous 12 point quality inspection. We've processed over 100,000,000 items to date, saving our customers more than $3,300,000,000 off of estimated retail price and displacing £1,000,000,000 of CO2. But to be honest, we aren't thinking about the next 100,000,000 items. We're thinking about the next 1,000,000,000 items. We're building the backbone for resale on the Internet, 35,000 brands across 100 categories and our goal is to power a disproportionate part of this industry over time. Our plans for our next distribution center are well underway and we expect it to come online in mid-twenty 22. We will have more to share on a future call, but keep in mind that every facility we build tends to be larger and more automated than our previous facilities. Size and automation translates into increased revenue capacity and higher operating margins. 3rd and final here is that our proprietary resell data makes us smarter every day. Each day we ingest millions of data points on items that we process, items that we sell, items we reject, items that are favorited, items added to cart, removed from cart, returned, etcetera. This vast trove of data combined with the algorithms and the models we've built that sit on top of that data help us improve our acceptance, merchandising, photography, pricing and marketing capabilities so that we can consistently grow our active buyers, expand margins and drive increased sell through. And I think as you see from our results, this data science work is one of the reasons that has allowed us to expand margins and add active buyers in our most recent quarter at a record clip. Keep in mind that a key advantage of a managed marketplace like BreadUp is that we can leverage our data across the buying and selling experience, adjusting prices and payouts, incentives and fees to consistently drive sell through margins and growth in our business. These three investments unlocking supply, building infrastructure and leveraging our proprietary resale data have positioned us well to continue serving our buyers and sellers, but also to power resale for some of the world's leading fashion brands and retailers via our resale as a service platform. We're still in the early days of our RaaS model and our brand partner strategy, but we see opportunity for growth and meaningful high margin revenue over time. We envision 100, even 1,000 of brands having dedicated resale strategies powered by thredUP. And I'm looking forward to sharing more of that on a subsequent call. Hopefully, that provides you with a high level reminder of the key competitive advantages in our business and the broader market in which we operate. We will continue to update you as we make investments in furtherance of this strategy. In closing, let me say that our team is cautiously optimistic about post pandemic long term trends. COVID-nineteen meaningfully impacted internal operations in the back half of twenty twenty. So the further we get from that, the better our business continues to look. On the supply side, we believe that our convenient clean outfit model is poised to benefit as people cycle out of pandemic clothing and refresh their looks, adventure out of their homes to have fun and go to work and have less free time on their hands. We are ready to meet this opportunity. On the demand side, as the weather continues to improve and opening restrictions ease, we still expect apparel budgets to remain constrained given the broader economic toll the pandemic has wrought. But what we do anticipate is that people will prioritize value when shopping for seasonal apparel and heading back out into the world and we feel very well positioned for that consumer environment. And so with that, I'd like now to turn it over to Sean, our Chief Financial Officer, to walk you through the financials. Thanks, James. And again, thanks everyone for joining us for our first earnings call as a public company. I'll begin with an overview of our Q1 2021 results and follow with guidance for the Q2 and the full year 2021. I will discuss non GAAP results throughout my remarks. Our GAAP financial results along with a reconciliation between GAAP and non GAAP are in our earnings release. First, let me remind you, we shifted to a primarily consignment based revenue model in 2019, meaning greater portion of our revenue is recognized net of seller payouts rather than on a consignment basis. Because of this, we focus on gross profits to help normalize for this mix shift and we track gross profit growth as a key indicator of the health and growth of our marketplace. We expect to be through this transition to a mostly consignment based business by the end of the year. As James mentioned, we had a strong Q1 in 2021, comping against a very strong quarter in Q1 2020. Revenue for the Q1 was $55,700,000 which represents growth of 15.2% year over year. We saw an acceleration of revenue growth in the last month of the quarter with an increase in both active buyers and orders coinciding with the 3rd round of stimulus checks. Each quarter, we plan to provide data for active buyers and orders, which are our key operating metrics. Active buyers highlight our success in attracting new buyers who return and make repeat purchases. Orders are another important operating metric and give insight into the sales activity of our marketplace. As mentioned, we started to see more strength in our business as the quarter progressed. We had a record 1,290,000 active buyers at the end of the Q1, which is a 14% increase over the same quarter last year. Repeat fires represented approximately 80% of our orders. 1st quarter orders were another record and totaled $1,130,000 which was 18% above the 956,000 orders in the Q1 of 2020. Let me talk about gross profit. Again, we think this is the best measure of underlying growth in our business until we are through the consignment transition. Q1 2021 gross profit totaled $39,700,000 representing growth of 21.7% year over year. Gross margin expanded to 71.3 percent, up from 67.5 percent in the same quarter last year, an improvement of 380 basis points. The main drivers of gross margin improvement reflects what James mentioned earlier, operating scale in our DCs and using our data to drive superior unit economics. On the supply side, our volumes have remained strong. As James already stated, we have significantly reduced clean out kit processing wait times by over 50% from last year's peak. We expect processing times to continue to come down throughout the year even while we significantly scale the total number of bags processed. There are currently no restrictions on customers sending in clean out kits. We are fully open for business, which feels great given how much we had to deliberately scale back processing last year during the height of the pandemic. In our distribution centers, we are well positioned to process and manage many millions of unique items per year at improving unit economics. Our newest distribution center in Georgia is less than a year old and continues to exceed expectations. This distribution center is our largest facility and has the highest processing capacity and is the most automated. We expect that our distribution center capacity will grow from 5,500,000 to 6,500,000 items by the end of 2021. We are getting bigger, but we are also getting better and moving faster. Operating expenses increased by $8,000,000 year over year. This increase was split equally between operations, product and technology, marketing and SG and A. The increase was due to additional processing labor in our distribution centers as we continue to ramp inbound processing, increased corporate headcount to support being a public company, plus increased marketing activities. Note that as we aggressively scale inbound processing from time to time, our inbound processing costs may exceed our forecast. Keep in mind that we expect increased inbound processing to ultimately lead to increased sales. Our first quarter EBITDA loss of $9,100,000 was 16.4 percent of revenue, an improvement in both dollars and percentage of revenue from last year's loss of $10,400,000 21.6 percent of revenue. EBITDA improvement was primarily due to revenue growth and thus increased gross profit outpacing spending and operating expenses. Turning to the balance sheet. We began the Q1 with $67,500,000 in cash, cash equivalents and short term investments and ended the quarter $250,000,000 which includes $175,000,000 in net proceeds from our March 26 initial public offering. We generated $1,000,000 in cash flow from operations, primarily due to the timing of payments to vendors. We do not expect to be cash flow from operations positive in the near term as we continue to invest in the growth and infrastructure of our business. Now I'd like to share our financial outlook for the Q2 and full year of 2021. For the Q2 of 2021, we expect revenue in the range of $53,000,000 to $55,000,000 or growth of 12% to 16% over the same period last year, gross margin of 70% to 72%, resulting in a gross profit dollar growth of 12% to 20% over the same period last year and adjusted EBITDA loss of 28% to 23% of revenue, and basic weighted average shares outstanding of approximately 95,000,000. For the full year 2021, we expect fiscal year revenue of $223,000,000 to $229,000,000 representing top line growth in the range of 20% to 23%. Gross margins of 70% to 72%, resulting in gross profit dollar growth of 22% to 29% over the prior year. And adjusted EBITDA loss of 20% to 16% of revenue and basic weighted average shares outstanding of approximately 78,000,000. In closing, we are pleased with our first quarter performance and the trends we're seeing in our business as we emerge from the pandemic. In the next few weeks months, we believe more people will get out of their homes, reconnect socially and travel with a desire to refresh their wardrobes. BreadUp is prime for the digital consumer who seeks an efficient, fresh and frictionless shopping experience. With that, James and I are now ready to take your questions. Operator, please open the line. Thank you. Our first question comes from Ross Sandler with Barclays. Hey, guys. Congrats on getting out there. Just two quick ones for me. Sean, can you talk about retention and frequency that you're seeing right now in the second quarter compared to what you were seeing maybe last year during COVID and maybe versus pre COVID? And then I think you mentioned the gross margins up 380 from automation and use of data. Can you just elaborate a little bit more on what drove the unit economics up in that gross margin in particular? Thanks a lot. Yes. Thanks, Ross. I'll start with gross margin and then I can let James talk about on frequency. On the gross margin side, we did improve fairly well sequentially. And it was really driven from the transition from the mix shift in direct and consignment to more consignment. So that's a big push As well as the overall order economics that we are driving using is really driven from our data. So if you think about the data usage, we're able to improve ASPs, improve sell through, get pricing more correct, and be able to improve what payouts are going to be. So using the data overall has really driven better overall order economics. In addition to that is the automation and really kind of the build out and move into DC56 improving overall order economics as well to drive gross margin. Yes. And just on the retention side, Ross, I mean, I think when you look at them active buyer numbers, which were very strong and orders, I mean, I think we had a very strong Q1 last year, as you recall, January, February. And then as the pandemic started, things slowed down. And so we're lapping a very strong quarter this quarter and are still seeing very strong retention. And we're also seeing new buyers come onto the platform at record rates. So feel very good about where our retention is. It's at our historical norms and things that should continue as we move further away from the pandemic. Thank you. Our next question comes from Ralph Schackart with William Blair. Good afternoon and great start as a public company. First one or 2 is for Sean and then I have one for James. Sean, you talked about stimulus helping out on the top line, I believe, in the prepared remarks. And then buyers are also very strong as well in the quarter. Just curious, were there any other factors contributing to the strong performance in the quarter? And then on the outlook, that's also better than expected. I think previously you had anticipated around September or so kind of reopening for the U. S. Consumer and if states are reopening again, is that still in contemplation for the full year or is that been pulled forward? And then I have a follow-up with James. Yes. I think the drivers are right. We talked about stimulus, but also supply really drives our overall results. So that supply increase and listings increase, that was driving it and as well as we were able to market more efficiently. We've talked consistently about doing marketing to or basically spending into marketing as long as we get a 12 month payback and those are the really big drivers as far as Q1 results. And Sean, just on the outlook as well. Can you say again? Sure. I think previously anticipated sort of a September or so timeframe for reopening. And then with the outlook being stronger than expected, just curious if that's still on contemplation or if you're seeing signals that the reopening or the closet, I guess, refilling is maybe happening? No, no, that's yes, thanks for reiterating. Yes, so I think like James said, we're cautiously optimistic that it's going to happen sooner. We're starting to see things that are positive. It's hard to really dissect out what stimulus was and wasn't as far as the impact of the business. We're still planning internally that it's going to be that Q3 recovery. We're starting to see some things that are a little more positive and being able to pull that in a little bit. Yes. Ralph, I wouldn't say I don't think we currently have in our forecast any sort of pull forward. I think we just have that the consumer is just feeling a little confident and had some stimulus money in their pockets. And so we saw this acceleration earlier than we thought. And I think as we think about Q2, I think the question is how much of that stimulus dollars are still in play. And I think what we're seeing, even the CDC coming out with their expectation for a surge of COVID in May, I think we're just trying to be thoughtful about what the quarter is going to look like, as we think about the guidance in Q2 and the rest of the year. Okay. That makes sense. James, maybe a follow-up with you, if that's all right. We get a lot of investor interest around your RaaS opportunity. And on the call, you talked about 100, not thousands of brands as sort of your opportunity. Any way you can help us or investors think about sort of sizing this market opportunity? And perhaps when do you think RAS might start scaling within the financial results? Yes, Ralph, I don't think we have put together kind of a size of the market, in particular on the RASK opportunity. But I think the way that we think about it and I think the way that retailers and brands are thinking about it as this is a new emerging channel. And so if you think about the current channels that exist out there, whether it's stores or e commerce or off price or outlet even as a channel, we think resale is another meaningful channel for these brands and retailers. And I think that's the way we're working to support them is what does it look like to build a new channel. And that's everything from point of sale to the supply chain, right? I think it's an end to end experience that we're trying to provide and I think we're being very deliberate around how do we put the pieces in play for our partners, such that they can really build the channel at scale, right? Because I don't think anybody cares about a few pairs of jeans here, a few pairs of yoga pants here, right? The idea is how do these become meaningful parts of a company's business and that's the work that we're doing today. So I'm hoping that provides a little bit of context. Yes, that's very helpful. Thanks, James. Thanks, Ron. Thank you. Our next question comes from Ike Boruchow with Wells Fargo. Guys, let me add my congrats on great quarter. I guess, James, high level, could you just talk more about supply, how you're thinking about the supply dynamics coming back the rest of this year and then beyond? Where is that opportunity kind of coming from bigger picture? And then as a follow-up to that for Sean, is there any way to kind of talk about how much you're still limited with the clean out kit issue that you have? Like what could you have grown revenue had that been completely cleaned out? Just kind of trying to understand the power of the business versus you kind of working through some of those headwinds from COVID still. Yes. Thanks, Zach. I mean, I think that as we noted, we were processing times have come down more than 50%. I mean, we're running right now about 8 weeks to process a bag where in Q3 2020, we were up around 20 weeks. So we've made a lot of progress. I think what gives us a lot of optimism is we've made a lot of progress in the process side, but we've also opened up the clean out kit experience so that anybody can get one. And so we've really scaled processing nicely in Q1. And I think if you think about how our business works, as we ramp processing and bring more supply online, that ultimately creates long term revenue opportunities. And we still haven't spent any direct dollars acquiring suppliers and we're having a lot of success there. And we still believe there are 1,000,000,000 as with the B, clean out gets out there every year and we've only scratched the surface. And so I think our model, right, our business model is set up to be very successful acquiring supply over time. So there's a lot of confidence there. I think it's hard to say if we have been able to process all of the bags in Q1, what that would have looked like. But I think we feel good that probably by the end of the year, at least that's the target, we'll be down at 2 to 3 week processing times. And I think get back and get to there on a steady state basis. Yes. And the only thing I'd add to is like as DC06 or our new facility in Georgia comes online, think of the processing power per week to be just that much more. So we're able to process that much more in our overall system of DCs. So it's not the same that we were processing a year ago or 24 months ago. So that 2 to 4 weeks is kind of a much higher number to where it will process than it was maybe a year or 2 ago. Got it. Thanks, Sean. And then just one quick follow-up on the RAS business. I mean, we saw another big brand, Lululemon come out and talk about their own resale business. Just kind of curious how you balanced the resale as a service component of your business as other brands are potentially attempting to do it on their own? Yes. I think it's really nice to see brands like starting to experiment here. And I think Lululemon was the most recent one. But look, I mean, none of these brands are really at the point where they're taking the channel seriously from a scale perspective. And so on the one hand, I'm glad that brands are dabbling. On the other hand, at the end of the day, like we have to build like a scalable opportunity. And so I think the way we're approaching it is, we love what Lululemon is doing, but it's for them to achieve their business objectives. And so a lot of the conversations that we are having with brands are how can this become a real meaningful channel for them given where the customer is moving. So I actually think it's really good that these brands are dabbling into it. And we feel really confident that they will come to the conclusion that working with a company like thredUP, who are experts in all of this is the right move to scale all of this. And I use the analogy sometimes like when brands try to open stores, what they don't do is go and buy all the real estate, right? They lease the storefronts, right? They use 3 P and Ls. And so we think about ourselves as an enabler and a software provider and these brands and retailers as customers. And I think that's the way we approach the opportunity. We think that's where the biggest prize is. Got it. Thanks guys. Thank you. Our next question comes from Erinn Murphy with Piper Sandler. Great. Thanks. Good afternoon. A couple for me as well. James, for you, on the category performance in the Q1, could you just share a little bit more about what are the categories that are really contributing to the growth the most? And is there any change as you've moved into the Q2, just as we stack up some of those reopening categories? Yes. Thanks, Aaron. Yes, I mean, we definitely saw we're definitely seeing sales of things like loungewear and sweats and leggings and what you would categorize as stay at home categories decline. They're down in our business about 10% as a percent of sales since March, whereas we're seeing strong performance in dresses. Midi dresses are up more than 20%. You have formal dresses as wedding season comes into focus, they're up 15%. So we're definitely seeing this rotation back to going out clothing. And I think what's good for us is those are the categories in which resale really wins and those categories also tend to have higher price points. So we feel like there's 2 factors that should provide some good tailwinds. Great. That's good to hear. And then I guess another question James for you and then I've got one for Sean quick is the primary market, if we about the apparel market, it's the cleanest it's been for years from an inventory perspective. You're seeing really strong AUR gains across the board. Is this a positive for the business just given how you price from an algo perspective? So maybe that's kind of a sneaky positive as we look forward into the next 12 months. And then Sean, for you, quick on the take rate. One question we've gotten from investors is, if you look at your take rate, it is like the highest in the industry. I mean, do you see variability or risk that that changes over time? Thanks so much. Yes. Erin, I think on the what we're seeing across the retail ecosystem, we're seeing the same thing you're seeing around inventory levels being clean and prices going up. And I think it provides us some ability to raise prices on items that are turning well. But I'll tell you that it all for us comes back to the data. And we let the machines, frankly, tell us how to price these things so that we're really delivering for the buyer and the seller. And so I think what we'll see algorithmically is, as turns go up in our business, you can see prices float up as well. But I think in general, I think it's great, especially from an environmental perspective, it's great to see inventories clean and brands not discounting as much. I think that's good for everybody. It's good for the planet. And so cheers to that. I'll let Sean talk a little bit about your other question. Yes. On the take rate, we don't really see a lot of pressure on that side. I mean, I think the only times when take rates are really fluctuating inside our business is when our ASPs go up. Obviously, they go in the mirror image with what's happening on the ASP side. And this is all really relative to the fact that, And this is all really relative to the fact that we believe we make the market on where we stand today. We're not talking about the luxury side, we're talking about mass market. So we think we're able to pay fairly from a take rate perspective, but we haven't seen pressure on that side. Great. Thank you both. Thank you. Thank you. Our next question comes from Edward Yruma with KeyBanc Capital Markets. Hey, guys. Congrats on becoming a public company. Two quick ones for me. I guess first, now that you're opening up distribution of the Cleanout bags, I know that historically you've used AI to help determine whether you would send someone a bag. I guess, any surprises in terms of kind of the good customers you're seeing come through that program? And then second, I know you were a little light on lower price point items. Just kind of catch us up maybe on whether you think you hit a more optimal assortment? Thank you. Yes. Thanks, Ed. Look, I feel like the clean out part of our business is very strong. So we continue to use our data to educate our customers and make sure that we're getting the right supply in the door. But we've seen nice uptake once we were able to open up the seller part of our business. If you remember, I mean, in the back half of last year, we were turning away 100 of 1000 of potential customers. We were able to reengage many of those customers because they put themselves on a wait list. So we have a nice steady stream of supply coming in from people that had been waiting for us. And so we feel good about where it's headed. And so don't see any pressure in the near term. To add on the lower price point items, we think that kind of the overall supply is really balanced out now. We've been able to get through and process and bring our processing power back up to speed. So we've been able to really kind of broaden that out. So we don't see that as a headwind any longer. Our next question comes from Dana Telsey with the Telsey Advisory Group. Certainly congratulations on this first conference call and the results. As you think about the operating expenses, whether it's operations, marketing, SG and A, can you unpack them for us? How do you think of it going forward? What the growth rates will look like? And as we head into the back half of the year and your ability to process more clean out kits, how do you think about the back half of the year with the gatherings recurring? Should that drive potentially higher than expected sales or on the end RAS businesses that you're looking at? Thank you. Yes. Thanks, Dana. I'll start and then I'll kick over to Sean for anything I missed. I mean, we definitely saw the operating expenses grow year over year. I mean, they grew about $2,500,000 year over year. But at the same time, Dana, gross profits were up $7,000,000 over that period. And so I think actually what you're seeing is the business able to drive real leverage as we grow operating products and technology expenses that really turns into gross profit expansion. And so I think you should see more of that leverage over time. And I think as we look to the future around our RAS partners and the high gross margin revenue that we're seeing there, I think it points to a good profile in line with the guidance that we've given for the back half of the year. And the only thing I would add on specifics maybe to those lines is on the G and A side, it's our 1st year as being public. So we're going to swallow that pill of things like D and O insurance and other public company costs that will happen in 2021 and then will be not really rising in 2022. So you'll see the leveraging start to happen in 2022 on the G and A side. On the marketing side, again, that's kind of the fuel to our growth. So we'll continue to do marketing and invest in marketing as long as the payback is in line with our 12 month payback because we really feel like that's a driver of the business and then James and then Kate on the other side. Thank you. Thanks, Anne. Thank you. At this time, we have no further questioners in the queue. So I'll turn it back to Mr. Reinhart for closing comment. Well, thanks everyone for joining our first earnings call as a public company. Appreciate the questions and your keen attention to the business. And I just want to thank the threat up team, the management team, folks in our DCs and across the world, who work hard every day to deliver a great experience to our buyers, our sellers and our partners. So thanks everyone and we'll see you next time. Thank you. Ladies and gentlemen, that concludes the threat up first quarter 2021 earnings call. We thank you for your participation. You may now disconnect.