Q1 2021 ThredUp Inc Earnings Call
Ladies and gentlemen, thank you for your patience and holding and welcome to the threat up first quarter 'twenty to 'twenty one earnings call. Please be aware that each of your line is in a listen only mode and conclusion of the presentation that we will open the floor for questions at that time instructions will be given us to the procedure to follow if you would like to ask you and audio question.
It is now my pleasure to introduce today's first presenter, Mr La and Oh Dear.
Good afternoon, and thank you for joining us on today's conference call to discuss first quarter 2021 financial results.
First earnings call as a public company with US are James Reinhart, Chief Executive Officer, and co founder and Sean Sobers, The company's Chief Financial Officer.
We posted a press release and supplemental financial information and Orange.
And Rob site at IR, that's right at the Dot Com. This call is also being webcast and 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 and 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 and our SEC filings.
<unk> 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 and our earnings release.
And now I'd like to turn the call over to James Reinhart.
Good afternoon, everyone. Thank you for joining threat ups first quarter, 2020, one earnings call and James Reinhart cofounder and CEO.
With our IPO on March 26, the write up entered a new chapter and our company's history and we're excited to share our results and this first earnings call.
This most recent quarter, we achieved record revenue record gross profit record gross margins and record active buyers given.
And 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 and our business improving macro conditions and the momentum and the broader retail category.
Our first quarter 2021 results were better than expected and both internal and external factors played a role.
Continued to benefit from ongoing investments and our platform are growing and dedicated base and active buyers and sellers strong unit level economics, and expanding competitive advantages and operations.
This quarter. We also benefited from two rounds of government stimulus that helped buoy the American consumer and while we expect the stimulus checks are over we believe shifting and consumer behavior. During the pandemic will create long term tailwind for our business and for the retail industry at large.
Because this is our first earnings announcement and many of you might be new to threat up story I'd like to take a step back and refresh you with our mission and vision.
Idea for threat up came to me and 2009, when I tried to sell some of my clothing and get a local consignment store.
Every item was rejected and that was shocking to me because I knew my hardly war and close must be worth something to someone and real.
And if they're selling of close with a ton of work and much of what we all end up donating ends up and windfall I just thought there had to be a better way and so my co founders and I set out to transform the retail industry with a mission to inspire and new generation of consumers second hand first.
This transformation is well underway and threat up is well positioned to capture the growth in this sector.
And as a reminder, according to independent data provide our global data the retail 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 on line and they believe that surge will create opportunities for more and more customers to find great secondhand product online and global data 2020 research and they found it to under three consumers.
Ported and now being comfortable with purchasing secondhand clothing.
We expect to be and 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 and now value sustainably and 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 and are we inspired to build a great business. We are doing good in the world.
Given we believe there's massive opportunity and this market we have been building a differentiated and defensible operating platform to enable resale at scale.
And I would spend a moment here and detailing the key differentiation and our model and how we think about our strategy over time.
Listen to these calls long enough Youll hear me talk again, and again about our strategy and our investments to deepen our moat and widen our cam.
I am a deep believer and my team. They are deep believers that good strategy is key to building lasting advantages over time.
So here are the three elements I think you should take away.
First it's all about supply and we'd never spent a single dollar of directly acquiring sellers and we expect that to continue we are constantly working to improve the consumer experience for sellers, making our signature cleanout and kits available online and offline through our own website or those of our retail as a service.
Partners we.
We are also accelerating processing capacity to reduce wait times and constantly evaluating how to pay fairly for the clothing, we can resell pins.
Since the peak of our bag backlog in Q3, and 2020, we've reduced processing wait times and spend more than 50 per cent and we are well on our way towards our stated goal of two to three week processing time by the end of the year.
Given and we estimate that there are potentially a billion and that's what the b billions and clean out kids out there in the U S. Every year and that we process just a million and last year. We are confident in the long term supply opportunity for threat up.
Second we are relentlessly investing and the technology and software that powers, our managed market place and infrastructure.
Our single SKU logistics technology, and distributed processing allows us to ingest and make available large amounts of secondhand and clothing each undergoing a rigorous 12 point quality inspection, we processed over 100 million items to date saving our customers more than $3 $3 billion off or estimate.
Retail price and displacing 1 billion pounds and C O two but to be honest, we arent thinking about the next 100 money items, we're thinking about the next billion items for building the backbone for resale on the Internet 35000 brands across 100 categories and our goal is to power a disproportionate part of this industry.
Overtime.
Our plans for our next distribution center are well underway and we expect it to come online in mid 2020 two.
We will have more to share and a future call, but keep in mind that every facility, we built tends to be larger and more automated than our previous facilities.
He said and automation and translating into increased revenue capacity and higher operating margins.
Third and final here is that our proprietary retail data makes us smarter every day each.
Each day, we ingest millions of data points and items that we process items that we sell items, we reject items that her favorite items added to cart removed from card returned et cetera. This vast trove of data combined with the algorithms and the models and we've built that sit on top of that data help us improve our acceptance.
Merchandising photography pricing and marketing capabilities.
And that we can consistently grow our active buyers and expand margins and drive increased sell through and I think as you can see from our results. This data science work. It's one of the reasons that has allowed us to expand margin and active buyers and our most recent quarter at a record clip and.
Mind that a key advantage of and manage marketplace like threat up is that we can leverage our data across the buying and selling experience adjusting prices and payouts and incentives and fees.
We consistently drive sell through margin and growth and our business.
These three investments unlocking supply building infrastructure and leveraging our proprietary resell data have positioned us well to continue serving our buyers and sellers, but also to power retail for some of the world's leading fashion brands and retailers via our retail as a service platform. We're still in the early days.
The RAF model and our brand partner strategy, but we see opportunity for growth and meaningful high margin revenue overtime.
He envisions hundreds even thousands of brands, having dedicated retail strategies powered by throw it up 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 and our business and the broader market and which we operate we will continue to update you as we make investments and further into this strategy.
In closing, let me say that our team is cautiously optimistic about post pandemic long term trends COVID-19 meaningfully impacted internal operations and the back half of 2020. So the further we get from that the better our business continues to work.
On the supply side, we believe that our convenient clean and I'll get model is poised to benefit if people cycle out of pin down the clothing and refresh their lux and venture out of their homes and they have fun and go to work and have less free time on their hands, we are ready to meet this opportunity and.
The demand side as the weather continues to improve and opening restrictions ease and we still expect apparel budgets to remain constrained given the broader economic toll the pandemic is right.
But what we do anticipate that people will prioritize the 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 and turn it over to Sean <unk>, 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 first quarter 2020, one results and follow with guidance for the second quarter and the full year 2020 one.
I will discuss non-GAAP results throughout my remarks.
Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP are and our earnings release.
First let me remind you we shifted to a primarily a consignment based revenue model and 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 shifts and we track gross profit growth is 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 first quarter and 2021 comping against a very strong quarter and Q1 and 2020.
Revenue for the first quarter was $55 $7 million, which represents growth of 15, 2% year over year.
We saw an acceleration of revenue growth and the last month of the quarter with an increase in both active buyers and orders coinciding with a third round and stimulus checks.
Each quarter, we plan to provide data per active buyers and orders, which are our key operating metrics active buyers highlight our success and 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 and we started to see more strength and our business as the quarter progressed, we had a record 1.29 million active buyers at the end of the first quarter, which is a 14% increase over the same quarter last year.
Pete buyers represented approximately 80% of our orders.
First quarter orders were another record and totaled 1.13 million, which was 18% above the 956000 orders and the first quarter of 2020.
Let me talk about gross profit again, we think this is the best measure of underlying growth and our business and until we are through the consignment transition.
First quarter, 2020, one gross profit totaled $39 $7 million representing growth of 21 seven per cent year over year.
Gross margin expanded to 71, 3% up from 67, 5% and the same quarter last year and improvement of 380 basis points.
The main drivers of gross margin improvement reflects with James mentioned earlier operating scale and our D CS and using our data to drive superior unit economics.
On the supply side or volumes have remained strong as James already stated, we have significantly reduced cleanout and kid process and wait times by over 50% from last year's peak, we expect processing times and continue to come down throughout the year, even while we significantly scale. The total number of bags process.
There are currently no restrictions on customers, sending and clean out kids we.
We are fully opened for business, which feels great given how much we had to deliberately scaled back processing last year during the height of the pandemic.
And 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 has the most automated.
We expect that our distribution center capacity will grow from five five to six and a half million of items by the end of 2021 we.
We are getting bigger, but we're also getting better and moving faster.
Operating expenses increased by $8 million year over year. This increase was split equally between operations product and technology marketing and SG&A. The increase was due to additional processing labor and our distribution centers as we continue to ramp inbound processing increased corporate head count to support being a public company plus increased marketing activities.
Note that as we aggressively scaling inbound processing from time to time, our inbound processing costs may exceed our forecast EBITDA.
And mine that we expect increased inbound processing to ultimately lead to increased sales.
Our first quarter EBITDA loss of $9 $1 million was $16 four per cent of revenue and improvement in both dollars and percentage of revenue from last year's loss of $10 $4 million and $21 six per cent 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 first quarter was $67 $5 million and cash cash equivalents and short term investments and ended the quarter $250 million, which includes $175 million and net proceeds from our March 26 initial public offering.
We generated $1 million and cash flow from operations, primarily due to the timing of payments to vendors.
We do not expect to be cash flow from operations positive and the near term as we continue to invest and the growth and infrastructure of our business.
Now I'd like to share our financial outlook for the second quarter and full year of 2020 one for the second quarter of 2020, one and we expect revenue and the range of $53 million to $55 million or a growth of 12% to 16% over the same period last year.
Gross margin of 70% to 72% per.
<unk> and a gross profit dollar growth of 12% to 20% over the same period last year.
And adjusted EBITDA loss of 28 per cent to 23 per cent of revenue.
And basic weighted average shares outstanding of approximately $95 million.
For the full year 2020, one we expect fiscal year revenue of 223 million to $229 million, representing top line growth in the range of 20 to 23 per cent.
Gross margins of 70% to 72%, resulting a 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 million.
In closing we are pleased with our first quarter performance and the trends, we're seeing and our business as we emerge from the pandemic and the next few weeks and months, we believe more people will get out of their homes reconnect socially and travel with a desire to refresh their wardrobes.
And that up is prime for the digital consumer who seeks and efficient fresh and frictionless shopping experience.
With that games and are now ready to take your questions. Operator, Please open the line.
Yeah.
Thank you, ladies and gentlemen at this time and the Florida opened for your questions. If you would like to ask a question you may do so now by pressing star one on your Touchtone phones, if you're using a speaker phone. Please make sure that your microphone I'm sorry, Please make sure that your mute function is disabled to allow your signal to reach our equipment.
And again to ask a question. Please press star one now.
Our first question comes from Ross Sandler with Barclays.
Hey, guys. Congrats on getting out there just two quick ones from me I'm sure and concerns at all and retention and frequency that you're seeing right now and the second quarter compared to.
Well you were seeing and maybe you last year during COVID-19 and and maybe versus pre COVID-19 and then I think you mentioned are the gross margins up 380 from automation and use of data can you just elaborate a little bit more on you know what.
And what drove the unit economics.
And that gross margin and particular, thanks a lot.
Yeah. Thanks, Ross I'll start growth margin and then I can let James talk about the on frequency on the gross margin side, we did improve fairly well sequentially and it was really driven from the transition from the.
And the mix shift and and direct and consignment and more consignment. So that's a big push as well as the overall order economics that we were driving using you'd really driven from our data. So if you think about the data usage. You know we were able to improve asp's improved sell through and get pricing more correct.
And be able to improve what payoffs are going to be so using the data overall is really driven and better Oliver overall order economics. In addition to that of the automation and really kind of the the build out and move into improving overall order economics as well to drive gross margin.
Yeah, and just on the retention side Ross and I. Thank you you know when you look at them active buyer numbers, which were very strong and and orders and I think you know.
And we had a very strong Q1 last year as you recall.
January and February and then as the pandemic started things things slow 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 and record rate. So feel very good about wherever tension is it and it's at our historical norms and things that actually continue.
As we move further away from the pandemic.
Thank you. Our next question comes from Ralph Schuchart with William Blair.
Good afternoon, and a great start as a public company, our first one or two it's for Sean I'm and I have one for James Sean you talked about a stimulus helping out on the top line I believe in the prepared remarks, and then buyers and we're also very strong as well and the quarter. Just curious were there any other factors contributing to the strong outperformance and the quarter.
And then on the outlook. That's also better than expected I think previously you had anticipated around mid September so kind of reopening for the the U S consumer and and states are reopening of guidance that's still income.
And then the contemplation from full year or has that been pulled forward and then.
Follow up with James.
Yeah, I think I think the drivers you're right, we talked about stimulus, but also supply really drives. Our overall result, 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 two are basically spending and the marketing as long as we get to 12.
And payback and those are really big drivers as far as Q1 results.
And then sure and just on the outlook as well.
Can you ask that again.
Sure I think previously you anticipated sort of September so timeframe per reopening and then what the outlook being stronger than expected just curious if that's still and contemplation or if you're seeing signals that the reopening or the closet, I guess refilling and maybe how things.
Thanks, Peter and yes, I think like James said, we're cautiously optimistic and it's going to happen sooner. We're starting to see things that are positive and 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 gonna be that Q3 recovery and we're starting to see if it makes it a little more positive and being able to pull.
That and a little bit.
Yeah, and Ralph I wouldn't say I don't think we currently have and are in our forecast you know any sort of pull forward I think we just have that you know the consumer.
You know feeling a little confidence and you know how had some stimulus money and their pockets and so we saw this acceleration.
No earlier than we thought and I think as we think about Q2 I think the question is how much of that was stimulus dollars are still in play and I think what we're seeing and even the CDC coming out with you know their expectation for a surge of COVID-19 and May I think we're just trying to be thoughtful about what the quarter its going to look like.
As we think about the guidance and Q2 and the rest of the year.
Okay that makes sense and I.
James maybe a follow up with you if that's all right.
And we get a lot of investor interest around the <unk> opportunity and on the call you talked about hundreds if not thousands of brands and 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 crowds might start scaling with them the financial results.
Yeah, Rob I don't think we have put together you know kind of a size of the market.
In particular on the Ras 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 you know 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 you know even as a channel we think retail is another meaningful.
Channel for the for these brands and retailers and I think that's the way. We're 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 and end to end.
<unk> debt that we're trying to provide and I think we're being very deliberate around you know how do we put the pieces in play for our partners and.
And 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 are a few prs and yoga pants here right. The idea is how do these become meaningful parts of the company's business and that's the work that work that we're doing today. So I'm, hoping that provides a little bit of context.
Yeah, that's very helpful. Thanks, James and thanks Ron.
Hmm.
Thank you. Our next question comes from <unk> Bora child with Wells Fargo.
Yeah, So let me and my congrats on great quarter, I guess, James high level could you just talk more about supply how youre thinking about the supply dynamics coming back.
Rest of this year and then beyond you know where's the opportunity kind of coming from a bigger picture and then as a follow up with up and Sean and I was there any way to come and talk about.
How much Youre still limited would be cleaned out kit issue that you have like like what what could you have grown revenue has that been completely cleaned up just kind of trying to understand the power of the business versus you know you're kind of working through some of those headwinds from COVID-19 stuff.
Yeah, Thanks, Greg and I mean, I think that you know as we as we noted we were processing times have come down more than 50% I mean, we're running right now about eight weeks to process a bag ware and Q3 'twenty. We were 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 and the process side, but we've also opened up.
The cleanout kit experienced and that anybody can get one and so we've really scaled our processing nicely in Q1, and I think if you think about how our business works and 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 and where.
Moving a lot of success, there and we still believe there are billion, that's whether it be cleaned out gets out there every year and we've only scratched the surface and so you know I think our model our business model.
And it's set up to be very.
Successful acquiring supply over time, and so there's a lot of confidence there I think.
It's hard to say, if we had been able to process all of the bags and Q1, you know what that would've looked like.
But I think you know we feel good that probably by the end of the year you know at least that's the target.
And we'll be down to two to three week, our processing times and I think you know get back and get get to there on a steady state basis, yeah, and the only thing I'd add to it and I guess detail six our new facility and Georgia comes online and you get the.
Processing power per week to be just that much more so we're able to process that much more.
Overall system of D C and so it's not the same that we are processing a year ago or 24 months ago. So that two to two to four weeks is kind of a much higher number to worry about process and then it was maybe a year or two ago.
Thanks, Sean and then just a quick one quick follow up on the rest of business. I mean, we saw another big brand 11, and come out and talk about their own refill business just kind of curious how you balance.
The result of a service component of your business as other brands or potentially attempting to do it on their own.
Yeah, I think I I think it's I think it's really nice to see brands like starting to experiment here and you know I think Lulu Lemon was the most recent one.
Look I mean, none of these brands are really at the point, where they're taking the channel.
You know seriously from a scale perspective, and so on the one hand and I'm glad that the brands are gambling on the other hand, you know at the end of the day like we have to build a scalable opportunity and so I think the way we're approaching it is we love who M and is doing but if they really want to do it big they're going need to partner with like real meaningful scale for them to achieve there.
Our business objectives, and so a lot of the conversations that we're having with brands are you know how can this become a real meaningful channel for them you know 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 threat up you know who.
Experts and all of this is the right and moved it to scale all of this and I use the analogy sometimes like of you know when brands try to open stores you know what they don't do is go and buy all the real estate right. They leased a storefront right. They use three P and L. A and so we think about ourselves as a 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 prizes.
Thanks, guys.
Thank you. Our next question comes from Erinn Murphy with Piper Sandler.
Great. Thanks, and good afternoon, and a couple from me as well.
For you on the category performance and the first quarter could you just share a little bit more about what are the categories that are really contributing to that growth. The most and is there any change that you've moved into the second quarter adjusted would be things stack up from it is reopening and categories.
Yeah. Thanks, Erinn, Yeah, I mean, we definitely saw we're definitely seeing sales things like loungewear, and sweats and leggings and what you would categorize as stay at home categories decline, they're down and our business about 10% as a percent of sales since March whereas we're seeing you know strong performance and dresses.
You know many dresses are up even.
More than 20% of your formal dresses.
Wedding season comes into focus they're up 15%. So we're definitely seeing this rotation back to going out and sort of thing and I think what's good for us as those are the categories and which resale.
And really wins.
And and those categories also tend to have higher price points. So we feel like there's there's two factors that should provide some detail wins.
Great. That's that's good to hear and then I guess another question James for you and about one for Sean Quake is you know the primary market and we think about the apparel market. It's the cleanest that's been per 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 and Alco perspective, but maybe that's good.
And of a sneaky positive it would be look for it and to that the next 12 months and then Sean for you click on the take rate. One question, we've gotten from investors and you know if you look at your take rate and it is like the highest and the industry. I mean, do you see variability or risk that that changes over time. Thanks. So much.
Yeah, and I think on the on the what we're seeing across the retail ecosystem and we're seeing the same thing youre seeing around inventory levels being clean and prices going up and you know I think it provides us some ability to you too.
As prices on items that are that are turning well, but I'll tell you that at all for us comes back to the data and.
And we let the machines frankly talent 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 and turns go up and our business you can see prices flow up as well, but by and in general I think its great, especially from an environmental perspective, it's great to see inventory.
He is 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 and I'll, let Sean talk a little bit about your other questions. Yeah on the take rate, we don't really see a lot of pressure on that side and I think the only times when take rates are really fluctuating inside our businesses when our Asp's go up and obviously they go and the mirror image with what's happening on the ASP side and this is all really relative to the fact that.
We believe we make the market from where we stand today and we're not talking about the luxury side and we're talking about mass market and 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 Beth.
Thank you.
Thank you. Our next question comes from Edward and rumour with Keybanc capital markets.
Hey, guys congrats on becoming a public company two quick ones from me I guess first.
Opening up distribution of the clean up bags and I know that historically you used AI to help determine whether you would and somewhat a bag.
Any surprises in terms of kind of day are good customers youre seeing come through that program and and second I know you were a little light and lower price point items, just kind of catch us up maybe and whether you think you've hit a more optimal assortment and thank you.
Yes, Thanks Ed.
Look I feel like the clean out part of our business is very strong. So we we continue to use our data to educate our customers and make sure that we're getting the right supply.
Supply and the door and but we've seen nice uptake once we were able to open up.
The seller and part of our business. If you remember I mean and that back half of last year, we were turning away hundreds of thousands of potential customers.
We were able to reengage and many of those customers because they put themselves on a waitlist and 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 you know, where it's where it's headed and and so don't see any pressure in the near term.
And on the lower price point items, we think 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.
Thanks.
Thank you. Our next question comes from Dana Telsey with he tells me Advisory group.
Good afternoon, and certainly congratulations on on this first conference call and and the result is.
Do you think about the operating expenses, whether it's operations marketing SG&A can you unpack that and unpack.
Unpack them for us how do you think of that 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 kids. How do you think about the back half of the year with the with the gatherings recurring should that drive from potentially higher than expected sales or.
And the and Ras businesses that Youre looking at thank you.
Yeah, Thanks, Dan and I'll start and then I'll kick it over to Sean for anything I admit I mean, we definitely saw the operating expenses grow year over year I mean, they grew about two and a half million dollars year over year, but at the same time getting our gross profits were up $7 million over that period, and so I think actually what youre seeing is the business able to drive.
We'll leverage as we as we grow operating process and technology expenses that really turns into gross profit expansion and so I think you should see more of that leverage over time, and and I think as we and we looked at the future around our RASK partners and and and the high gross margin revenue that we're seeing there I think it points to you.
Yeah, two good profile in line with the guidance that we'd get into the back half of the year and.
The only thing I'd add on specifics maybe to those lines on the G&A side. You know it is our first year of being public. So we're going to swallow that pill and things like D&O insurance and other public company costs. It will happen in 'twenty, one and then will be not really rising and 'twenty. Two so you'll see the leveraging starts to happen and 22 on the G&A side on the marketing side again, that's the kind of the fuel too.
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 get on the other side. So.
Thank you.
Thanks Dana.
Thank you again, if you would like to ask a question. Please press star one now.
Okay.
At this time, we have no further questioners and the huge swell from <unk> back to Mr. Reinhardt for closing comment.
Well thanks, everyone for joining our first earnings call as a public company I appreciate the questions and you know your your.
And you're keen attention to the business and you know this.
And I think that the threat of team and the management team you know the folks and our Dcs and cross across the world and.
Who work hard everyday to deliver a great experience to our to our buyers or 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, 2020, one and earnings call. We thank you for your participation you may now disconnect.
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