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spk03: Good day and welcome to the ThredUP Q2 2021 earnings conference call. Today's call is being recorded. At this time, I'd like to turn the conference over to Lana Adair, Investor Relations. Please go ahead.
spk05: Good afternoon and thank you for joining us on today's conference call to discuss ThredUP's second quarter 2021 financial results. With us are James Reinhart, ThredUP's Chief Executive Officer and Co-Founder, and Sean Silvers, the company's Chief Financial Officer. We posted our press release and supplemental financial information on our investor relations website at ir.spiteup.com. This call is also being webcast on our IR 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 our 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 our 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 our operating results in our SEC filings earnings press release, and supplemental information posted on our investor relations 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 or in isolation from GAAP measures. You can find additional disclosures regarding these non-GAAP measures, including reconciliation with comparable GAAP measures in our earnings release. Now I'd like to turn the call over to James Reinhart.
spk02: Good afternoon, everyone. I'm James Reinhart, CEO and co-founder of ThredUp. Thank you for joining us for ThredUp's second quarter 2021 earnings call. With two quarters behind us as a public company, we're excited to share financial results and business highlights from our second quarter, including ThredUp's anticipated entry into the European resale market. I'll also provide commentary on our ninth annual resale report with our first ever ThredUp impact section. This section details how ThredUp is creating positive change in the world. I'll then turn it over to Sean Sobers, our Chief Financial Officer, who will walk through our financials in more detail and provide our outlook for the third quarter and fiscal year 2021. For the second quarter in a row, we achieved record revenue, record gross profits, record gross margins, record active buyers, and record orders. Our growth metrics indicate that our business continues to rebound from its pandemic slowdown, and we believe we're on a clear path to sustainable growth. Given we're a managed marketplace, let me comment in turn on both the demand and supply trends we're seeing. On the demand side this quarter, we benefited from a return to some degree of normalcy given increased vaccination rates. In late spring, restrictions were lifted across the country, global guidelines expanded, and most states went back to business as usual, enabling consumers to reengage in everyday activities outside of their homes. While the Delta variant has created some new wariness in parts of the country, many of us are still preparing for in-person school and the return to in-person work this fall. And as such, we expect consumer spending to be resilient through the end of the year, edging back to pre-pandemic levels by some projections. Purchasing behavior on ThredUp supports this trajectory. Kids' sales were up 50% in July compared to June, while sales for women's items like dressier working pants saw a 32% month-over-month increase during the same period. In addition, sales for both midi dresses and formal dresses grew by 16%, and sales for heels experienced 21% month-over-month growth. So while we entered the second half of the year with the enthusiasm that demand for consumer apparel is, quote-unquote, back, as many are saying, we also anticipate challenges from the Delta variant to linger and competition for consumer wallet share to be fierce. On the supply side, we are continuing to build selection in our marketplace to historic levels to capitalize on the growing number of sellers entering the resale market. While our second quarter 2021 financial results were better than expected, one area where we did not make as much progress as we had hoped is in the reduction of bag processing times. Even though we have accelerated overall processing capacity by more than 40% since this time last year, Regular bag processing times have increased to 12 weeks on average across our distribution network. We continue to provide VIP expedited service for those who are focused most on earning money. We have continued to see incredible interest for our clean-out kit service, resulting in a seemingly endless amount of supply. We plan to continue to invest in processing capacity and automation to reduce this backlog and expand our item selection. Now let me turn to our Resale as a Service program. We've recently launched four new RAS clients, including Farfetch, Madewell, LG Electronics, and Fabletics. Of note, Madewell debuted the first white-label resale shop enabled by ThredUP's 360 RAS platform, bringing to life our robust 360 capabilities to deliver a fully customized resale experience. We will continue to roll out more features for our RAS partners in the coming months. In addition, Our deal with LG Electronics signals that any consumer business, not just fashion retailers, can leverage ThredUP's resale platform to empower their customers to do good in the world. These RAS deals are primarily structured to include upfront integration fees, as well as ongoing service, usage, and or revenue sharing fees. We are in the nascent stages of implementing this structure for new client agreements, as well as ongoing client renewals, but we believe this is an exciting part of our future. In late June, we published our ninth annual resale report, which measures the U.S. second-hand market and assesses current consumer trends. According to the report, conducted by independent data provider Global Data, the second-hand market in the U.S. is projected to double $77 billion in the next five years. Within that, resale is expected to grow 11 times faster than the broader retail clothing sector during the same time period. This predicted growth is driven by sellers putting record amount of product into the market. 76% of people who have never resold clothing are open to trying it, meaning that there are nearly 120 million anticipated future sellers who will continue to drive industry growth as it becomes easier to sell clothes online. This new data only confirms for us that we must continue to invest in our platform, infrastructure, technology, data science, to capitalize on the resale opportunity in front of us. Although we are still in the early stages of this transformation in resale, there are emergent signals suggesting that secondhand is displacing traditional retail. In particular, resale is expected to be twice as big as fast fashion by 2030, as thrifters replace fast fashion purchases with secondhand clothing. Consumers say they care more about wearing sustainable apparel than they did before the pandemic, and also have a growing disdain for both eco and financial waste. The environmental impact of these behavioral changes is significant, and that impact will only amplify as more people participate in thrift. Also included in this year's report for the first time is a section on ThredUP's impact. At ThredUP, we do well by doing good. We are creating positive change by transforming the way we shop and consume. By enabling resale at scale, we're ushering in a more circular future for fashion and helping new waves of consumers, brands, and retailers take positive steps towards sustainability. To date, ThredUp has processed more than 125 million unique secondhand items and displaced an estimated 1.1 billion pounds of carbon emissions. When you buy a secondhand item instead of a new one, you reduce its carbon footprint by 82%. 82%. I'm proud that by giving new life to millions of used clothes, we are offsetting the environmental and financial cost of fashion. The fashion industry can and will do better, and ThredUp is committed to being part of that change. We believe this is just the beginning. You can view our full report at www.thredup.com backslash resale. Finally, last month we announced the initial phase of our international expansion strategy with the agreement to acquire Remix. one of Europe's leading fashion resale companies. The deal is expected to close in the fourth quarter. The acquisition will accelerate ThredUP's international growth plans in Europe, where the secondhand market size was estimated by global data to be 21 billion in 2020, growing to 39 billion by 2025. Much like ThredUP's own proprietary operating platform, Remix has built custom single-skew logistics that can process millions of unique garments efficiently. With this acquisition, ThredUp adds a complementary operational engine and an experienced management team to springboard its expansion to Europe. We plan to invest in Remix product offerings, processing infrastructure, and go-to-market strategy to accelerate its marketplace growth. The Remix acquisition also allows ThredUp the potential to extend its RAS platform beyond the U.S., enabling brands and retailers to deliver customized resale experiences to their customers in Europe. A number of the world's leading brands and retailers already rely on ThredUp's RAS platform to power their resale channel, and international expansion opens the doors to potential future growth. We're bullish about the massive opportunity in the European resale market, and we're thrilled about the chance to build upon Remix's technology and operational expertise. In closing, we are continuing to invest in the future. Our acquisition of Remix, our ongoing technology investments in RAS, the scaling of our distribution and processing network, all of this is part of our strategy to build the leading resale company in the world. We believe these investments will pay dividends over time, and we're confident that given our strong unit economics, now is the time to be more aggressive. Consumer behavior, especially among young people, is shifting in such material ways that we must go big and we must go fast to inspire and capture this new generation of consumers who are shopping secondhand.
spk11: With that, I'd now like to turn it over to Sean to walk through the financials. Thanks, James. And again, thanks, everyone, to joining us for our second quarter earnings call. I'll begin with an overview of our second quarter results and follow on with guidance for the third quarter and the full year 2021. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and a reconciliation between GAAP and non-GAAP are found in our earnings release, supplemental financials, and our 10-Q. As James shared, second quarter 2021 revenue exceeded our expectations. Our second quarter revenue of $60 million represented a 27% increase year over year. As we continue our transition from direct product revenue to consignment revenue, we are pleased to report that consignment revenue comprised 81% of our total revenue, up from 74% for the same period last year. As a reminder, given the ongoing transition to consignment revenue, we think gross profit growth is the best indicator of our underlying growth. Second quarter gross profit totaled $44.1 million, representing growth of 33.7% year over year. All-time highs for both active buyers and orders were key to our second quarter financial results. Active buyers is a key performance indicator for us and highlights our success in attracting new buyers who return and make repeat purchases. For the trailing 12 months, active buyers rose 8% to 1.34 million. Keep in mind that active buyers grew 71% in Q2 of 2020. Orders are another important KPI and provide insight into our marketplace. Compared to the same period last year, orders increased 22% to 1.22 million. As I mentioned, second quarter 2021 gross profits grew 33.7% year-over-year, and this exceeded total revenue growth for the quarter. Gross margin expanded to a record 73.6%. This is a 390 basis point improvement over 69.7% gross margin in the same quarter last year and a sequential increase of 230 basis points over Q1 2021. Scaling and increased automation across our DCs plus the closure of our last manual DC helped drive the improvement in gross margin. In addition, higher items per shipment coupled with higher ASPs helped improve Q2 gross margins. Total gap operating expenses were $58 million, an $18.5 million increase year over year, and included $2.9 million of stock-based compensation. While we are relentless in our approach to driving long-term operating leverage, at this time we are actively investing in our business. We're investing to extend our automation capabilities, increase our bag processing capacity, and grow our new customers, as we believe the combination of these three activities will enable us to compound growth over time. Approximately half of the total OPEX increase was in operations, product, and technology. This related to the expansion of our overall DC network and the related increase in bag processing. As we noted on our last call, our Atlanta DC is coming online as expected and will soon have the capacity to hold 3.5 million items. We continue to believe that further automation opportunities exist across our DC network, and we will invest in that direction. I did want to take a moment to point out and remind you how inbound expenses and sales are accounted for in our P&L. Items processed in the quarter result in operating expenses in the period of processing, and then it is expected these expenses will generate revenue over future periods. As we process more items through our DC network, operating expenses will increase in advance of the anticipated revenue growth. Depending on the time of year, we may process more items than we sell in a quarter and vice versa. For example, A seasonal demand for secondhand clothing ebbs in December. We can flex our DC associates to inbound processing, which creates an operating expense headwind in Q4, and an expected favorable sales tailwind as we move into Q1. Turning your attention to marketing spend for a moment, we continue to feel confident in our ability to repeatedly scale marketing spend while meeting our 12-month payback target. We believe this payback target ensures that our cohorts remain predictable and stable over time, even while expanding our growth spend to capture the opportunity in front of us. This quarter's increase in SG&A compares against last year's COVID-related employee furlough and our 20% reduction in payroll. In addition, we have new public company costs of approximately $2 million in Q2. Finally, our year-over-year stock-based compensation rose 47% to $2.9 million, primarily due to the recognition of performance-based stock options that triggered in conjunction with our March 2021 IPO. Our second quarter adjusted EBITDA loss of $9 million was 15.1% of revenue. In the same quarter last year, our EBITDA loss was $3.3 million and 6.9% of revenue. As a reminder, in Q2 2020, with the uncertainty of the pandemic, we severely cut back growth expenses, implemented an employee furlough program that reduced corporate salaries by 20%, and were unable to process bags due to the impacts of COVID-19 in our DCs. Second quarter basic and weighted average shares were 94.4 million and included the shares of our initial public offering in late March. Shares issued by us in our recent July follow-on offering are not included. Turning to the balance sheet, we began the second quarter with $249.6 million in cash, cash equivalents, restricted cash, and short-term investments, and ended the quarter with $233.5 million. The Q2 cash ending balance does not include the $45.3 million of net proceeds from our July 21 follow-on offering of 2 million shares. Our recent agreement to acquire Remix is an exciting development for ThredUP. This acquisition provides a unique opportunity that we believe gives us a head start in our European expansion. We expect that Remix will provide an advantage for us in the near term by establishing a European footprint without starting from scratch. Similar to us, Remix operates a single-skill logistics platform with the ability to process millions of unique items. We'll share more information and guidance about the financial contribution of the Remix acquisition after the transaction closes. The acquisition is expected to close during the fourth quarter of 2021 and is subject to the customary and deal-specific closing conditions. As James mentioned, as we look ahead to Q3 and Q4 of 2021, we are actively investing in the business. We see opportunities to acquire more new customers and plan to increase our marketing spend while staying within the 12-month payback target that we have outlined. With the final phase of Atlanta, our most automated facility, coming online and a seemingly endless supply, we will continue to invest in processing capacity with the goal to have more fresh items online and available for sale than ever before. We believe this will improve selection meaningfully as we head into 2022. As of the end of Q2 2021, our capacity in our DC network was up more than 18% as compared to the beginning of 2021. As the pandemic drags on, like many businesses, we are seeing near-term wage inflation for our DC staff that is likely to impact both gross margins and EBITDA in the back half of the year. Now I'd like to share our financial outlook for the third quarter and full year of 2021. Note that our guidance does not include the planned remix acquisition. For the third quarter of 2021, we expect revenue in the range of $60 million to $62 million, gross margin of 71.5% to 72.5%, an adjusted EBITDA loss of 19% to 17%, and basic weighted average shares outstanding of approximately 97 million shares. For the full year of 2021, we expect revenue in the range of $236 million to $241 million. Gross margin of 71.5% to 72.5%. And adjusted EBITDA loss of 16% to 14.5% of revenue. And basic weighted average shares outstanding of approximately 77 million. In closing, we are very pleased with our second quarter performance. We had record sales, meaningful gross margin expansion, and all-time high active buyers and orders. We continue deliberate investment in our infrastructure to position us for accelerating growth, both in our core marketplace as well as our emerging RAS business. Finally, we are excited about our international growth trajectory with the Remix acquisition, and we'll share more about our plans once the acquisition closes. James and I are now ready for your questions. Operator, please open the line.
spk03: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow us to no-treat your equipment. We ask that you limit yourself to one question and one follow-up, then you may reprompt for additional questions if time permits. Again, press star 1 to ask a question. And we'll take our first question today from Ike Baruchow with Wells Fargo.
spk08: Hey, guys. Congrats on the quarter. Two questions. For Sean, can you talk a little bit more about the near-term investments? Just kind of curious about You mentioned wages and some other things. I'm kind of interested in what you're doing to reinvest. Obviously, the top line is great, but I wanted to understand that part of the equation. And then, James, on the processing, I think you were at eight weeks last quarter, now 12. I think last quarter you were targeting to get back to two to three by the end of the year. Is that still on the table? And can you kind of walk us through what exactly is leading to that kind of step back there?
spk02: Great. Yeah, thanks, Ike. Yeah, I can actually handle both of those because they're related. I think the big investments are in how do we scale processing to meet just what appears to be incredible demand for our clean-out service. It's like we have a restaurant with a line out the door. We have a concert where scalpers are scalping tickets. We have such demand for our clean-out service that We just feel like it's incumbent on us to continue to scale our processing capacity. And so I think a lot of the investments we're going to make is continuing to build bigger, better, faster distribution centers, continue to staff up on our associate accounts. continuing to invest in the technology that helps us process items faster. You saw some of that in our gross margin expansion this quarter. I think we'll do some more of that. But I think it speaks really to the fact that we have hit a nerve here with the American consumer. They love our service. They love how convenient it is. And so we want to aggressively go after trying to capture that mind share and that opportunity. So I think that's sort of where our heads are at, that the resale market's bigger than ever, and our opportunity to really capture it has never been more exciting. So that's how we think about those investments. And as far as the processing times, we had hoped to get to two to three weeks by the end of the year. Realistically, I don't see us getting there by the end of the year. I think that's our goal as we move into 2022. You know, part of it is the organic interest in our clean-out service, and then part of it is, you know, our RAS partners and, you know, all the momentum we're having in our RAS business is manifesting itself in just a lot of demand for our clean-out service. So I think the combination of those two things means, you know, we're unlikely to hit that two to three weeks by the end of the year.
spk03: Thanks so much, man.
spk01: Thanks, Mark.
spk02: Thanks.
spk03: Next, we'll hear from Ross Sandler with Barclays.
spk01: Hey, guys, just a question on the Europe business. So what attracted you to them specifically? And I guess we'll hold off on getting into the overall master plan here. But could you help us just frame the size of the business in terms of maybe their 2021 REV? And then, Sean, revenue and gross profit are growing a lot faster than order. So your REV for order, gross profit for order is up a bunch. this quarter. What's driving that? Is that AOV? Is that more items per order? Any help on that metric? Thanks a lot.
spk02: Yeah, Russ, I'll start on the Remix side. This is a team that I've known for about five years now and have been incredibly impressed with the quality of the team, the operations and the processing, and the fact that they operate in, I think, an area of the European market that I think has been overlooked in but I think is really exciting, which is Central and Eastern Europe. And so I think the combination of the team and the ops really made us feel like this was a great, great opportunity to get started in Europe. I mean, the business did about $34 million in revenue on a trailing basis. And we were able to acquire the business for less than one times revenue. So we feel like not only did we get a great team and a great opportunity, but we got it at a very attractive price. And then we can invest in that as really a springboard to Europe, both Central and Eastern, and then as we think about moving into Western Europe. So be able to talk a little bit more about those investments once the deal closes and as we think about 2022. But that's a little bit of a high level.
spk10: And then, Ike, on yours on revenue and gross profit, you know, revenue's grown 27%, gross profit's grown 34%, orders grew 22%. So if you think about it, there is some improvement on the overall order economics that is helping the growth there. I mean, some of that you see that in gross profit, you saw the gross profit margin grow pretty significantly this quarter as we move away from our manual DC into our automated DC. So I think you're seeing that remainder that's above and beyond the order growth coming from overall order economics.
spk03: Thank you. We'll hear from Erin Murphy with Piper Sandler.
spk00: Great. Thanks. Good afternoon. A couple from me. I'd say first, James, can you talk a little bit more about if you're seeing any impact in demand from the Delta variant right now or if it's changing any of the category composition? And then I guess, Sean, for you on active customer growth in the back half, any help on kind of how you're thinking about the pace of that given what you've seen year to date?
spk02: Sure. Thanks, Erin. Yeah, I mean, I think on the Delta variant, we haven't seen anything immediate that's sort of changing or clouding kind of how we're thinking about the back half of the year. But I think it's something that our antenna certainly is up you know, relative to where it was a month ago. But, you know, at least our sense from where the consumer is, you know, kids going back to school, you know, people going back to the office. You know, I dropped my kids off at school yesterday. So, you know, in California, which tends to be most restrictive. So we do feel like there's still momentum in the consumer, but I think we're going to be, you know, we're going to watch closely, Aaron, to see, like, what, you know, what might change or how that might impact in certain regions. I'll let Sean talk a little bit about the other thing.
spk10: Yeah, then on active buyers, you saw for the quarter, we were up 8% year over year. I think to keep in mind is the Q2 20 growth was 71%. So as COVID hit, a lot of people stopped doing marketing. Marketing got cheaper. Customer acquisition was really low. We continued to basically invest there. And so we were able to capture more customers than we normally would at different prices. Same thing goes for Q3 of 20. So we do think it'll pick up in the back half of the year. But we do think 2020 was a unique year, obviously, in so many ways. But one of the things was the cost of acquiring a customer was pretty low. So we have added quite a few customers early in the first half as well as in the second half.
spk00: Got it. And then if I could just add one more on the LG Electronics RAS partnership. Can you maybe talk a little bit more about this is, I think, your first extension outside of the soft lines industry. So how does that specific relationship work and how open are you into extending into other categories outside of the traditional apparel? Thanks so much.
spk02: Yeah, Aaron, I wouldn't say that it was, you know, it's where we're expanding outside of, you know, traditional apparel categories, but I think, you know, one of the things we found in our conversations with LG was, you know, the ways that they want to inspire their customers to do good, to think more sustainably, and so I think what's powerful about that partnership is it shows that anybody, right, who wants to do the right thing, you know, help their customers do the right thing with the clothes they're no longer wearing, can plug into the ThredUp machine and into our platform to do that. And I think, again, what it does is it just compounds our supply advantage in this industry. And again, it's really all about supply. If you think about all marketplaces, They're all driven by supply. It doesn't matter whether it's Airbnb or it's DoorDash or it's Uber, right? All of these marketplaces are ultimately about capturing supply. And so I think the LG example just shows another indicator of ThredUP's incredible supply advantage and how that compounds over time.
spk00: Thank you.
spk03: Next, we'll hear from Ed Yeruma with KeyBank.
spk09: Hey, thanks for taking the question. I guess in the short term, as you think about processing time, is it a function of needing to add more staff? Is there something you can do from a process perspective to get bags through more quickly? And then I guess just in terms of some of the products you're seeing sell strongly, have you seen the anticipated shift to kind of return to school, return to work that I think you were maybe looking for in the back half thus far? Thanks.
spk02: Yeah, thanks, Ed. I'll start. I think on the processing side, what we're seeing is even though we're scaling processing as planned, we're just seeing incredible demand, Ed, for our clean-out service. So even though we've scaled processing 40% since the beginning of the year, capacity is going to be up more than 60% by the end of the year, we're doing all the things to scale processing. But at the same time, the consumer you know, is coming to ThredUP's clean-out service at higher and higher rates. And so I think it's incumbent on us, as I said, to keep scaling here and to sort of double down on our advantage But I don't think, as I said, you know, responding to Ike's question, you know, I don't think we're going to get back to those processing times we'd hoped for by the end of the year. But that's not because we haven't scaled our processing capacity is that we can't get people to stop sending us stuff. And so, you know, I think that's a good position to be in in the near term. As for the shifts in the mix, I think, as we noted, we're definitely seeing some increase month over month in what I would say return to office categories, things like heels, things like dresses. And so I think all of those things are nice tailwinds for us in the back half of the year. But I think it remains to be seen what happens with the Delta variant and whether those trends persist. Probably the last thing I would say is our kids Kids going back to school, you know, we saw a strong month-over-month growth June to July. In our kids' business, it was up 50% month-over-month, which is, you know, quite promising. And so feeling good about, you know, how Q3 will shake out in the rest of the year.
spk09: Thanks, guys.
spk03: Next, we'll hear from Dana Telsey with Telsey Advisory Group.
spk06: Good afternoon, everyone, and congratulations on the quarter. As you think about sales and the strength in the gross margin, what are you seeing in terms of AUR gains? How are some of the pricing algos changing? And any updated thoughts on the strength of the take rate?
spk10: Yeah, so Dan, this is Sean. I'll start, and Dan's going to fill in. You know, I think the interesting part about our business, you guys know how much we use data and our algorithms. So when we start seeing sell-through rates pick up, pick on something like dresses, as the pandemic was waning in Q2, we saw the sell rates pick up sell-through rates. And basically, at that point in time, we know there's pricing opportunity there. So the algorithms take over and start to price a little bit higher. So we're starting to see that AST climb, which obviously helps overall gross margin as well as that revenue. So I think that's one of the things that we saw as we were moving through kind of the slower periods of the pandemic, and we've seen that basically through the entities.
spk02: Yeah, I think, Dana, that also gets back to Ross. Your question earlier was around what's driving some of the unit economic expansion. In pricing power, because every item is unique on ThredUP, we can really treat everything like a snowflake. And that gives us the ability to leverage our data to extract as much as we can from each item. And so, you know, I think on the take rate side, the second part of your question, Dana, is, you know, we continue to iterate on, you know, how do we compensate sellers for the great clothing that they send us, you know, at the same time balancing, you know, our ability to arbitrage, you know, payouts to sellers and prices to buyers. But it really comes down to the data. And so if we see opportunity to raise prices or lower payouts, and still delight the customer, we're going to take advantage of those opportunities. And I think as we continue to have incredible supply and incredible demand for our cleanup service, I think that puts us in a real position of strength in the near term, but also over the long term.
spk06: Got it. And just one quick follow-up. On the mass platform with the additions that you've had this quarter, What are you seeing in terms of what you're looking for? Is there any limit to how many you could add and how your payment is off the RAS program?
spk02: Yeah, we added, as we said, a number of good partners this quarter, Fabletics, Farfetch, LG, Madewell. We continue to have a number of conversations with world-class brands, and so I don't think there really is a cap than on how many brands can be part of our platform. And I think the LG extension just shows that it isn't even just apparel where we could create value for brands and retailers over time. And so I think it's really exciting and I think it gets back to why we need to continue to invest in our infrastructure to capture this market opportunity because what's really driving the industry is sellers, right? Sellers wanting to participate in this ecosystem And we want to make sure that we continue to maintain our leadership in that area. So, no, I think there's lots of opportunity for us to continue to delight brands and retailers. We don't see any end in sight.
spk06: Thank you.
spk03: We'll now hear from Anna Andreeva with Needham.
spk04: Great. Thanks so much, and congrats, guys. Two quick ones for me. I guess to James, a question on some of the KPIs. You guys talked about the active buyers shopping, I think, six times a month previously. Just curious if any of those metrics have changed and anything to call out regarding frequency and what kind of trends are you seeing with the number of sellers on the platform, especially as supply opens up? And secondly, I guess to Sean, Just follow up on Remix. Can you maybe talk about how the business is trending so far in 21? Should we think of this brand as an opening beneficiary this year? Has supply for the brand opened up? Thanks so much.
spk02: Yeah, Anna, I mean, I think on the active buyers and the shopping sessions, I think You know, we continue to see strong, you know, active buyer engagement. I think that's what's really fed, you know, orders being up the way they are year over year. So you do see engagement, you see high conversion rates. You know, what drives that is selection. And so, again, I think, you know, the magic of the ThredUp marketplace is As we process more goods and import more selection online, that really drives buyer appetite. And so that leads to increased sessions. It leads to increased conversion rate. It leads to higher average order values. So I think everything in that flywheel of our marketplace is working. And we expect it to continue to work over time as we scale. We don't disclose the numbers on the sellers yet. you know, because it isn't a metric that we actively track, you know, other than to show, you know, to show folks that, you know, how strong, you know, our bag, the demand for our clean-out service is, you know, and kind of sticking to the fact that, you know, roughly 75% to 80% of our supply comes from repeat sellers, you know, and similar KPIs on the buy side. So that's a little bit about how the marketplace is breaking out. I'll let Sean... Say, talk about remix, which is to say nothing.
spk10: Yeah, yeah. Yeah, and we'd love to tell you more about remix, but I think we've got to wait until it closes. We need a little more insight. I think, you know, some of the things that we've told you, the $34 million, you know, in 2020 revenue, and that there'll be a little bit of headwind on gross margin and a tailwind on EBITDA. So I think that's kind of where we can give you information there. James can probably give you generic color on the company. But I think we want to be able to get this enclosed and then be able to open up and talk about what's growth, what's the opportunity, where are we investing, things like that.
spk05: Okay. That's fair. Thanks so much, guys.
spk10: Thank you.
spk03: Our final question will come from Dylan Cardin with William Blair.
spk07: Awesome. Thank you. I'm curious, Sean, you went through some of the puts and takes on when you book revenue, the expense versus when you actually book the revenue on the clean-out kits, just that sort of delay. But curious also if higher levels of pent-up demand in certain periods also portend upside to sales in later periods, or if there's a certain amount of staleness of inventory over a certain period of time if you can't get it processed. And then I was just curious on the resale report. You've now done it pre, during, and post the pandemic. Any large data points or incremental kind of things you're seeing in that work you do to kind of better understand resale demand coming out of the pandemic? I mean, clearly you're seeing it in your business, but I'm curious if there's a couple things that you can point to in that report that might be of interest, as you see it.
spk10: Okay, thanks, Dylan. I'll start, and I think Jan can probably take a recent report. You know, I think that the great thing about how ThredUP works is the data drives everything we do. So we understand when an item comes in, you know, what time of year it is, what the sell-through is in April versus what it is in November. That really drives how we do acceptance and how we do pricing. You know, there are certain things that are always going to be accepted. North Face jackets, regardless if you're in the middle of the summer, there's always going to be a market for it. But there may be less of a market for winter coats as you're heading into the summer season. That's pretty obvious. Or maybe pricing is just different. So that's how we drive the decision process, how to accept and how to price. So we still want the overall flywheel of the marketplace and, in particular, the inventory spinning like it always does, regardless of season, regardless of what we're getting in.
spk02: Yeah, and Dylan, the only thing I would add is just because we've continued to scale our processing capacity, we added our Atlanta facility, which will be fully built out by the end of the year. As we continue to scale that capacity, it just provides us more opportunities to invest in faster processing. And so I think to give you a lot of confidence that as we're opening these bigger facilities, we have the supply and we have the supply curve that's coming in right behind it. And so I think what we're really excited about is we can continue to expand capacity and feel very confident that the bags will come along with it. But again, we incur those processing expenses as we ramp up in the near term and those deliver revenue over time. As for what we were seeing in the resale report, I think there were two data points that really stood out to us that I think, again, speak to why this industry is so exciting. I think the one was you had 173 million consumers bought some sort of secondhand product in 2020, not just apparel, but some sort of secondhand product. And so I think the mindset and the mindshare that's evolving around secondhand is really powerful. And then the second data point interesting is that 86% of consumers have or are open to shopping secondhand in apparel. And so what that means to me is that what you have today is tens of millions of people that are sitting on the sidelines who are open to the idea of shopping secondhand. And so when you combine that along with the number of new sellers that are coming into the market, I think you have the ingredients for an industry that will continue to grow pretty rapidly, not over the next few years, but over the next 10, 15, 20 years. And so I think those are the structural tailwinds that are back.
spk07: Awesome. Really appreciate it. Nice work, guys. Thank you. Thanks, Dylan.
spk02: Thanks, Dylan.
spk03: That will conclude today's question and answer session. I'll now turn the conference over to James Reinhart, CEO and co-founder, for any additional closing remarks.
spk02: Well, thanks, everyone, for joining the call. I appreciate the good questions. You know, hopefully, you know, it's clear to you now, you know, how we think about our investments and how we think about the opportunity over time. And so I want to thank, you know, thank you, thank the ThredUP team for all the hard work. And we're going to keep working hard to, you know, continue to deliver on our mission. So... Thanks all very much. Appreciate it.
spk03: That will conclude today's conference. Thank you for your participation. You may now disconnect.
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