Can we start? Yep. Johnny on the spot. Thanks everyone for being here. My name is Dylan Carden. I'm a consumer analyst here at Blair. All our disclosure is on williamblair.com. That's literally why that guy walked in the room. 'Cause I miss that typically. Yeah, yeah, right. And so today, as you know, we have ThredUp, James Reinhart, Sean Sobers, CEO, CFO, respectively, and we're just gonna have a conversation here.
Great.
So, I think the place to start. I always sort of suggest that there's sort of a steep learning curve on the resale space in general.
Yep.
There's been a lot that's happened in, you know, the three or so years since you've come public: bankruptcies, divestitures, acquisitions. Can you just kind of give us a lay of the land as to sort of where resale is, both as an industry and the mindset of the consumer, and kind of your place within it?
Sure. Thank you. Thank you, Ryan. Great to be here. Look, I mean, resale's been around as a concept for a long time, right? Thrift stores, for-profit, nonprofit, Salvation Army, Goodwill's over a hundred years old, right? So secondhand has been part of the-
Yep
... the global economy for a very long time. I think in the '90s, right, we had eBay, we had Craigslist were founded, and you had these sort of first-generation resale players, and those guys built big businesses. And then I think beginning in sort of the late, you know, 2000s, you had all these new consumer experiences: Spotify, Netflix, Uber, Airbnb. And that was the time that ThredUp got started, because I fundamentally thought that secondhand was trapped in the, trapped in the '90s. And so, how would you build a modern resale experience? And so fast-forward, you know, over that, over the past 10 years, you've had the emergence of luxury players like RealReal, you've had peer-to-peer players like Poshmark that was big and public and now private, and you have, you have a company like ThredUp.
All of which is to say, I think the resale industry is ascendant. I often say that once people start shopping secondhand, they don't wake up one day and say, "I'm gonna not do that." Right? It generally is an industry where people buy more and more over time. You know, we publish a resale report every year. It's 13 years now running. It shows the resale industry, it domestically is growing 11% a year, which is 10 times faster than traditional apparel. So we think it's a big industry. We're certainly excited to be a pioneer in it. I don't know. How's that for 90 seconds on resale?
It's good for 90 seconds on resale, but I, I think, you know, just to prod you a little bit, you hold a unique space in that, in that matrix, in that you are addressing a very complicated-
Mm-hmm
... lower A, you know, average value.
Yep.
Yeah.
Yeah. Yeah, so our thesis was that... So how many people in here, and there's a lot of men, we don't sell men's clothing, but how many of you have sold a piece of clothing yourself, like on eBay or Poshmark or something in the last year? You've sold something to yourself in the last year. Raise them high. Raise them. Okay.
All women.
Now, how many of you have given something away? Same, same, you could be in both camps, have given something away to Goodwill over the last year or so, right? So the reason why we exist is we think that the market opportunity for people who are busy and just wanna sort of recycle in a responsible way their clothing is really massive. And so we think it's actually, like, 100 times larger, the giveaway and recycle part. So what we've done is we've built the infrastructure for resale on the internet. So we run 4 distribution centers all around the country. You print out a label or order a bag, you send everything to us. So it removes all the friction for people of selling their own things.
We take all that stuff, and through a bit of alchemy, take all of that and turn it into great product that people can shop. Because the other piece is... So how many people have shopped and bought something on eBay in the last 12 months? What about have you bought something on Amazon in the last 12 months?
That's everyone. Everyone.
Right? And so I just fundamentally believe that, like, we have created a better buying experience. It's managed, your orders arrive in three days, there's nobody on the other end that you gotta deal with, we take returns, have great customer service. So we're trying to build that managed experience, Dylan, that I think ultimately is, makes the TAM so much bigger.
Yeah.
But way harder. More CapEx, takes more time, more technology, more software. But I often joke, you know, would you have preferred to have been owned eBay in 1995 or Amazon in 1995, right? And I think that the market has spoken, right, on building a great customer experience, and that's what we're trying to do.
Well, then talk about that then. So the logistics aspect of it, I often tell you guys, is a logistics play.
It is, for sure.
How has that evolved over time? Kinda, you've got your sort of, what, sixth-generation distribution now?
Yep. Yeah.
Right?
Yeah, yeah.
You've closed as many distribution centers as you've opened-
Yep
... more or less.
Yep.
You know, kind of what does the process look like, and where are there still kind of friction points that you can remove?
Yeah, I mean, we are in our multi, I don't know, nth generation, maybe it is sixth generation. Look, every way we, the way we think about the distribution center is, how do we strip, we count the seconds in the process. So the way it works is: How do the items come in? How are they inspected, authenticated, processed, photographed? And, you know, it used to, we used to be a 20% gross margin business. Now we're an 80% gross margin business, right? And so, in the US, and so. And we can talk about Europe in a moment. But that has all been process improvement, so automating everything in our DCs around intake. We're now using AI in multiple steps of the process to tag imagery, improve photography.
And so but it looks like a massive, it's like a Willy Wonka-style, you know, factory of charac-
Dry cleaner.
Dry cleaner, yeah. It's like the... Yeah, we've joked, it's the largest dry cleaner system in the world that doesn't do any cleaning.
Right.
Right? But carousels, conveyors, we were just in our Atlanta facility, looking at a new automated photography studio. Sean and I were like, "This is awesome," right? And so it's just constant process improvement that increases margins and improves the customer experience.
The interesting thing on that photography studio is it. I'll put our ops team on the hook here a little bit. It's supposed to cut processing time by, like, 30 seconds. 30 seconds may not mean much, but we're gonna do 20 million items processed this year- and so it's a significant improvement.
Yeah
... to the bottom line.
Well, how does AI help the model? I mean, how does new technology generally help the model? I mean, there's thought of like, you know, tags are gonna have RFID at one point, right?
Yeah.
I mean-
Yeah
I didn't realize that. I thought photography was gonna be, like, the last hill that was still gonna be human.
We thought that, too, until we watched it be done by, effectively, a robot that we built. I think on the AI side, what's amazing is that we've been using photo technology that we have built to take a photo of something, tag it appropriately. Now, what AI is doing is, it's saying... So we would've tagged, I'm just gonna use you as an example, right? We would've tagged this as a white long-sleeve blouse, V-neck. I don't know, maybe it's a dress. From here, it looks like it, right? We would've tagged, like, four or five things about this thing. AI will look at it, it'll tag 150 things. It'll add all these attributes about it that we could not, literally, we could never have known.
It might identify it as it's a particular style worn by a celebrity. Like, and so it'll add all this stuff, and then so when a consumer is browsing, it'll just make the browsing experience so much better. You can go onto ThredUp right now, it's kind of crazy. You can put in stuff like Gwyneth Paltrow—like, into the text box, and get stuff that would be like, that looks like a Gwyneth Paltrow look. And so again, all this stuff is rapidly emerging. We now have a new AI lens. You can't call it lens, 'cause Google has trademarked that, so don't put that in your notes.
The word lens?
Google Lens is a trademarked thing.
What do you guys think about monocle? No.
But, like, you can now use the photo app to take a picture of any outfit in print, on someone, on the street, wherever. Quickly, one tap, load it into ThredUp, we can show you that exact outfit and all items similar to it to shop it secondhand.
Apparel Shazam.
Yeah. Yeah, yeah, exactly. Exactly. And so-
Oh, we're stealing that.
Yeah, no, I like that, actually. That's probably-
Shazam might have an issue with that.
That's probably trademarked, too. But I think AI is so powerful for us, and so I'm quite bullish on, like, how it, how we uniquely benefit from it relative to others. Like, I don't think for your average retailer, if you've got 900 SKUs, I'm not sure it's really gonna matter.
Mm.
For us, we've got 4+ million, and we're processing 100,000 items every day. It's hugely powerful.
Like, before we leave that, if you guys wanna see this, go to thredup.com/concept, 'cause it's rolled out to about 10% of the customers, but you can get there by way of this.
Yeah. It's a concept, and it has the two products, sort of a chat styling search, and it's got the Google Lens thing, but you can't find it just natively. We're sort of, we're in testing mode.
Why is that? Just 'cause it's not-
We just wanna, we wanna make sure that it's producing high-quality results. The feedback, we wanna have a small group of users where we're getting constant feedback. So for example, one group is like, when you do shop that look on the Google Lens product, a lot of the feedback is, "Hey, I wanna add it all to my cart.
Mm.
We don't do that yet, right? So we're, like, constantly iterating on the customer product experience.
Seems like low-hanging fruit.
Yeah.
I wanna get to data more broadly, but first, I think just backing up a little bit. You've kind of played around with your model in and around throttling clean-out kits, right?
Yeah.
You have a lot of control on the supply side, charging fees.
Yeah.
Who is this customer? Who, who's actually... It seems like you're kind of trying to gear towards a higher-income, older consumer. So who's, who's actually out there sort of using this site?
Yeah, it's definitely higher income than I think people often think when they think thrift. I think there is a natural association to sort of a lower of a lower-income customer. But our average household income is over $100,000. These folks are often they have kids, often they're incrementally more urban, they're more sustainably minded. Age is kind of the sweet spot of our best customers, 30-39. But I would say it you know from 25-45 is probably half of the customer segment, and then sort of concentric circles out from there. And the idea is that we really don't wanna compete with $5 and $6 and $7 items. Like I think there's plenty of product pollution out there across fast fashion and big-box retailers.
We wanna help people find brands that are aspirational for them, that they may not have been able to afford new. So we want a woman to find a Kate Spade handbag for $90 and not $300. We want her to be able to find a J.Crew dress for $38, not for $138. And so we think that that is really the spot where we can create a lot of value. I will say, just to, and you haven't asked this, but you're probably going to. I think that customer, though, is really challenged right now. Like, I think that customer is living paycheck to paycheck.
Yeah
... and, and so we're definitely in a fight with that, for that consumer discretionary dollar. So it's tough out there.
Well, I mean, I think there was some confusion, particularly around 2020, 2021, that you should have benefited more because you are perceived as value. You are value.
Yep. Yep, yep.
You are a value option.
Yep.
So why, why would you not benefit in that type of an environment?
Well, I think we definitely benefited. I mean, I think our business grew 20%-30% back... I mean, it's not like we weren't-
Not 2020 specifically, but, like, in a challenging economic backdrop...
Yeah
... you would think there would be... Everyone talks about trade down or, right?
Yeah, yeah.
I mean, I get that wallet shrinks, but you theoretically would be an option. If I'm gonna buy Patagonia-
Yeah
... 50% versus, you know.
Yeah, I think the thing is that the biggest, the most acute pain that's being suffered, I think, across the consumer right now in the U.S., the people who have never even thought about buying a Patagonia jacket in their life, right? I think these are folks for whom apparel is very discretionary, and they're shopping at Goodwill and or they're shopping at Savers, where the price point is $6. And-
Or, or they're not shopping.
Or they're not shopping at all. And so I think that there is this misconception that somebody who's living paycheck to paycheck and who is a constrained shopper is still shopping apparel.
Yeah.
I think it's similar in furniture, right? I think we gorged a lot on furniture. I think we've gorged a lot on apparel, and so I think on the margin, people are just buying less, less clothing. The only category, I mean, you probably know better than we do, I mean, the only category that, in apparel, that appears to be going well is specialty running. Right?
Yeah.
You know what it turns out? You've got to buy running shoes every 6-9 months if you're serious about running.
Yeah.
Everything else, we can keep wearing. And so I, I think there's a little bit of this misconception that there's a forced replacement cycle in apparel, and I think that may be true for the most fashion-forward of us, but the average American can keep wearing stuff-
Yeah
... for a while, until rates come down, and they feel a little better about where the company- where the country's going. And so I can go on and on about this, but I'm not an economist.
Well, no, keep going, 'cause it's tangential to, I think, the real kind of strategy here. So my, my gripe is that we've spent 30, 40 years shoving things down people's throat-
Yeah
... that they don't need.
True.
the other side of that, now that we've sort of diminished their buying capacity through inflation that's been positive entirely in three categories, healthcare, housing, and education, is that the... your optionality as far as unlocking value from those goods and buying, being able to sort of buy the same brands at value, is compelling.
Yeah.
Do you have a sense of just sort of the scale of closet inventory that's-
Yeah, yeah, yeah, yeah.
I know you've wanted to do this analysis-
Yeah, yeah
... and sort of fallen in doing that. But do you have any sort of greater information as to sort of what's out there and what could kind of be coming from the supply side?
Yeah, I mean, the last day I looked at it, I mean, you could clothe all of America for something like the next 25 years with just the stuff that already exists in our closets. Like, there's so much stuff, and I think what's frustrating, and I know you share this sentiment, is sort of the ultra-fast fashion world of Shein and Temu. They're putting even more pressure, you know, on this. Not only can you buy a dress for $6.99, you can buy a three-pack of dresses for $9.99, right? And the reality is, like, these guys don't make stuff because they can't sell it. They make stuff 'cause they can sell it, and so we only have ourselves to blame for this sort of race to the bottom.
So I think for the mission-driven part of what we're trying to do, is we are trying to help people buy more aspirational brands. We're trying to help people... help brands understand how to make stuff that's slightly more durable. And we need a consumer mind shift, the same way there was a consumer mind shift towards electric vehicles and solar energy and recycling, and all these things are things that take time, I think. And I think we're on the right side of history, but I think it's a hard moment, and so... But I think we're up to the challenge.
And so then, how... I mean, that sort of leads into a conversation of engagement, marketing spend.
Yeah.
What is your philosophy on the value of marketing, performance marketing? Sort of where are you on that journey?
Yeah, I mean, certainly, the Meta and Google tax is higher and higher. I think what we are trying to figure out, and I think making some progress, is there needs to be differentiated ways to stay top of mind-
Yeah
... for consumers. Because I think this treadmill, the Google, Facebook, Meta treadmill, appears to only be running faster in the wrong direction.
Yeah.
And so I think that for us, it's ultimately about storytelling, it's ultimately about mission, it's ultimately about giving people, like, something that's, like, slightly more emotional around why they should shop on ThredUp. We've been doing a number of those things, and we're gonna do more of it soon that I think helps break through some of that just pure direct response marketing. The thing I hate the most is when we do some customer surveys of people who shopped on Google, they literally can't even remember they bought it on ThredUp. Right? Because it's just like, "I bought it on Google." It's like, no, that's totally broken.
Yeah.
I think there's a lot of brands out there, right? So I think we can break that cycle, but right now, we have to keep innovating.
Yeah. Maybe let's switch to international. You know, you've got your business out there. You're switching that over to a consignment model.
Yeah.
You know, timing around sort of when the margin improvement of that business as you go through that transition. For the European market, generally, kind of what that looks like compared to the U.S. market.
Yeah, I mean, I think Europe itself, it's the... In inflation, if you see what's happening in the U.S., it's twice as bad in Europe. So it's been-
Germany in particular, right?
Yeah, it's just-
Yeah. Yeah.
Eastern Europe has been tough as well, and that's where we are. I think that from a consignment transition, we essentially had nothing in consignment in 2023. We'll end up the year in 2024 around 20%, and then march our way above that. But I think it's tricky. That's a whole area that we haven't done in Europe before, so doing it in a way that is sensical, you don't lose the suppliers, you keep the customers, because you're selling slightly different goods, it makes it tricky. But the opportunity for margin growth there is big, right? Not only do you get the normal, like, accounting push, and by that I mean the payouts for goods on a consignment model go as contra revenue, versus on an owned model, it's COG. So you inherently just get better gross margins there.
It's the knowledge of, you know, exactly what it sold for. You don't have to guess.
Yeah.
You have no inventory risk, right? Because it's not your inventory. It's a huge payoff, but we'll start to see those margins improve throughout Europe in 2024.
The demand environment in Europe, I mean, is it the same? It's, it's a different customer, fundamentally. I mean, what, what is the, what is the proposition to the European, is it the same as the U.S. customer? I mean, they're more environmentally conscious, I think, generally.
Yeah, they're also generally more fashionable, right? And so I think there is a more of a need for fashion there than in the US than in the US. But look, I think the customer is. I think to Sean's point, we should be clear, like, it is more challenging there, right? Like, when we look at our-
Just the demand environment.
The demand environment.
Yeah.
Look at both businesses, like our U.S. business is definitely in better shape than Europe, and... But we're sort of, you know, committed to figuring out how to turn some of that around, consignment and the demand environment, but it's definitely more challenging.
I think to give you like a comparison of the U.S. to Europe, if you look at our unit economics, and you can do this by proxy, our gross margins in the U.S. are 80%.
Right.
80% of the business is the U.S. Our consolidated gross margins are 70%, so you clearly know it's taking it down. But I think if you looked at unit economics in the U.S., you'd be... I think everybody here was like, "Okay, just sell more stuff." If you looked at them in Europe, you'd be like, "Let's make these better first before you sell a lot more.
Yeah. Yeah, yeah, yeah.
I'm curious, just kind of jumping back to sort of, is there an opportunity to do better in all types of weather? I mean, you look at like off-price.
Mm-hmm.
I think off-price is a proxy. I often-
Yep
... joke that I think TJX should buy you.
Yeah.
You know, is there an opportunity as you kind of scale, grow awareness to have a more stable business in, you know, different economies?
I think the business would. So what I would cede you is that if we started selling a bunch of off-price goods on ThredUp, our business would grow faster in the short term. I would stipulate to that fact pattern. But we have seen off-price online; we've seen this story before. You probably covered The Gilt-
Yeah
... and Rue La La's, and HauteLook's, and Nordstrom Rack online, right? And I just think over time, that market is so competitive. I think trying to compete with the T.J. Maxx's of the world in those categories seems like something that we could get ourselves into trouble. And so I'd rather methodically grow the business double digits, expand EBITDA at the rate that we're expanding, and feel like we have a differentiated and sustainable growth strategy. Because I think you could very well wake up one day, and the cost of goods for that off-price product goes like this, and your customer is like, "Well, I can just shop that in any one of a dozen places.
Interesting.
So I don't know, it's the old Bezos thing, and I'm willing to be misunderstood for a long time. Like, I just generally feel like we have a differentiated strategy. We're on the right side of history with sustainability and what that customer wants over the long term, and I think we just gotta keep doing that. And we gotta do it better in the U.S., we gotta do it better in Europe. But I'm not willing to kind of compromise that.
Yeah
... for effectively more product pollution.
Yeah.
Right?
Yeah.
Which is sort of part of the problem.
Yeah.
Like, if it's another channel for us selling it, they're gonna make more of it, make more of that crap, and I want us to buy less of it.
I like it. Non sequitur, the Resale-as-a-Service business.
Yep.
Sort of the economics of that as it relates to demand generation, why brands would even engage in, maybe actually define it for people here that wouldn't really know about it.
Sure.
I think it's a compelling part of this.
Yeah. So Resale-as-a-Service, RaaS, is what we call it. One of the things we've learned over the last few years is that to continue to sort of execute on the mission, we need to help brands, like, get involved. And I think brands are starting to figure out, you know, how do we, how do we get involved in this resale thing in a smart way? Because we know our customers are doing it. So we do two things. One is we provide a take-back program for brands. So you can go into one of, at this point, I think 900 stores, across the U.S., and pick up a co-branded cleanout kit. So we work with J.Crew, Athleta, Reformation, Kate Spade, Madewell, 50 other plus brands.
You can pick up this Clean Out Kit, same way you would in ThredUp, send it back to us, we process it as normal. But instead of giving you cash or credit on ThredUp, we give you a credit to the brand. So if you get it at the Kate Spade store, you get Kate Spade credit to shop on Kate Spade. Brands love that piece. They love that because it's real, like sustainable, like, we're helping people clean out their closets. It makes brands feel good, puts money in their pocket. We love it because that's all product that we can sell.
Yeah.
We obviously work with brands that we think have great stuff. So that's like a win-win, and I think we published this in our impact report last year, but I think investors sort of maybe hadn't read that as closely. But so to clarify, like, that's close to 20%-25% of our supply in our core business. It's coming from our RaaS partners.
It's not, you partner with, like, Gap. It doesn't have to be Gap goods.
It has nothing to do with the-
Yeah
... with the Gap goods, right? It's just-
The Gap customer.
It's the Gap customer.
Yeah, it's really important to think about it. It is not Gap, it's the customer of Gap that fills that bag up. When we take everything, it doesn't have to be Gap goods, but it... And you can kind of equate it to if it's Fabletics or Athleta. What do you think you're gonna get from a customer from Athleta? You might get Lululemon, you might get Fabletics-
Yeah
... you might get Adidas, you might get Nike. We want all that stuff.
So that's kind of the takeback part, and then we power resale shops for brands. So if you go to J.Crew.com right now, you can scroll over in the navigation and see a Preloved section. That Preloved section is all secondhand product sold on J.Crew that is powered by ThredUp.
Right.
And so-
You're listing in two places.
We're listing in two places. What I would tell you is that, like, I think our point of view is that the resale shop part of the, the RaaS ecosystem, I think will always be modest. Because I think brands want to sell some secondhand product, but I think we'd all agree they don't want to sell too much secondhand product. And so I think our point of view is we wanna support brands in their resale shop world, whether that's, you know, expanded selection or vintage, and we wanna really double down on take-back. And so I think you'll start to see more and more take-back programs with brands, and
What does that look like? What do you mean?
Meaning like I think you can imagine a world where, you know, we may have 150 or 200 brands that they work with on a take back basis, but maybe only 50 resale shops.
On their actual website?
Yeah, because I think brands really see the economic value in, in the take back program, and I think it's sort of mixed, depending on the brand, on the resale shop.
Yeah, 'cause cynically, my view of it has been that Gap, you know, there's no way that Gap can ever purport to be sustainable. I mean, the process of making apparel, it's like the second most wasteful industry in the world. So-
Yeah
... any world where they have to sort of, you know, appeal to investors from an ESG standpoint, they have to support this ecosystem.
Yeah. Well, I mean, I think what they're trying to do with resale is, yes, part of it's sustainability, but I think the take back is actually drives more of their sustainability goals, which is how do we get product back, you know-
Yeah
... from our customer, make sure it doesn't end up in a landfill? And then the resale part is more of, you know, Gap has a wonderful 30-year heritage, right? And so they can provide a resale experience that has Gap through the ages, that's actually incrementally valuable to their merchandising, to their customer strategy. So I think that's where I can see resale and brands working more and more together over the next 10 years.
Interesting. All right, Sean, nuts and bolts, 80% gross margin. How do you make hay with that? You know, you guys have a 20%-25% EBIT margin and, you know, break even this year.
Yep.
Kind of walk us through both paths, break even this year, and then kind of how you... I'm not gonna commit you to those targets, but how you kind of flow through-
Oh, we can commit to the targets this year.
Great.
For sure. Well, I think it's good to look back at Q1, where our EBITDA was minus 0.9%. So it's like we're just-
You're there
... right there.
in the U.S.-
We will be there and beyond.
The U.S. was positive.
The U.S. was positive-
Yeah
... for the first straight quarter.
Yeah.
80% gross margins in the U.S., we talked about how it gets down to about 70% with Europe. And then as you migrate your way through the rest of the year, we'll be break even for Q2, we'll be free cash flow positive for the full year. I think the full year guidance is 3%, EBITDA, so we'll flip over to the positive side. But I think we do that by revenue growth, revenue growth in the U.S., the transition to consignment in Europe, even at the 20%, and then we continue to leverage SG&A. So being a marketplace, we don't need more lawyers, accountants, finance people, always pick on me-
'cause James will, if I do.
True, true story.
As we increase revenue, and so it just becomes a leverage and leverage more. We've already leveraged marketing a little bit. We'll leverage, I would say, some of the operations, OP&T is what we call it, and that's really around improvements around automation and continued expansion around how we use AI. And all of those things are the same reasons how we get to the 20%. Because I think at scale, you just add incremental revenue dollars, and it just gets more impactful to the bottom line because the drop-through is really good.
Yeah, yeah.
A big piece of it there is that you're built out from a distribution-
Correct
... for what, 3 years? I mean-
Yeah, no, I, we don't need to add, like, incrementally large CapEx spend for till, like, 2027. I don't think it's gonna be large then, but it's about $2 million in what we call maintenance CapEx on a quarterly basis, between now and early 2027. I think we feel good about that. Our DC infrastructure is set up and ready to go, and I think it's just getting better.
Got it.
Yeah.
'Cause the redundancy at this point is 50%, right? More or less in Texas.
Redundancy, what do you mean?
You mean utilization?
Utilization.
Utilization.
Yeah.
Yeah, yeah, we have plenty of capacity-
Yes
... in Texas, plenty of capacity in the other facilities. Even the CapEx we would have in 2027, for example, you know, we already have the building and the large part of the infrastructure, so that CapEx is modest for the amount of revenue growth it can support. Yeah, so to Sean's point, it's. You're gonna see a lot of leverage in every incremental revenue dollar really flows through nicely to EBITDA.
And I was always curious, I mean, the 25% target was done three years ago before you even thought photography was-
Yep, yep
... automationable.
Yeah, yeah, yeah. And-
No Europe either at the time.
No, yeah. So I mean, it seems like there's some upside even-
Yeah, yeah. I mean, I think if you go back to that detail of how we get to the 20%-25% is gross margins will be 75%-78%, and we only had a U.S. business, and we're at 80%. So I think there's things that happened that are like, "This is already better than what we thought it was gonna be.
Yeah.
Well, and part of, like, why I have been very public and bullish about AI is that these were all things that I thought ultimately we would have to build ourselves. Right?
Yeah.
And then all of a sudden I was like, "Here you go. Here's an open AI model that you can build on top of," right? And so-
You just can't use the word lens.
You just can't use the word lens. Yeah, you can use Shazam, though. So, you know, I think what's interesting is like, how the P&L will change with some of these technologies that ultimately not only be good for the business, it's gonna be incredible for the customer.
Right.
Um, so...
I'm gonna leave it at that. Thank you.
Thank you.
There's a breakout, Jenny A, which overlooks the atrium on the second floor. Thank you, everyone.