Q1 2024 ThredUp Inc Earnings Call
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Speaker Change: Good day, everyone and welcome to today's threat up Q1 2024 earnings call. At this time, all participants are in a listen only mode.
Speaker Change: You had the opportunity to ask questions. During the question and answer session. You May Register ask a question at any time I personally star and one on your telephone keypad you may withdraw yourself in the queue at any time by pressing star. Two. Please note. This call is being recorded I'll be standing by if you should need any assistance is now my pleasure to turn the conference over to Lorne fresh head of Investor.
Lorne: Relations. Please go ahead.
Lorne: Good afternoon, and thank you for joining us on today's conference call to discuss <unk> first quarter 2024 financial results.
Lorne: With me are Jim Reinhart, CEO, and co founder and Sean O'brien CFO.
Lorne: Our press release and supplemental financial information on our Investor Relations site IR Dot Dot com.
Lorne: This call is being webcast on our IR website in a plant that's called vehicles.
Lorne: Thanks shortly.
Lorne: Before we begin I would like to remind you that we will be making forward looking statements. During the course of this call, including but not limited to statements regarding our earnings guidance for the second fiscal quarter and full year 2020 for future financial performance market than land growth prospects business strategies and planned investments in AI technologies.
Lorne: Reorganization activities and our ability to cost effectively attract new buyers.
Lorne: Words, such as anticipate believe estimate and expect as well as similar expressions are intended to identify forward looking statements.
These forward looking statements are not guarantees of future performance involve known and unknown risks and uncertainties, including our ability to provide new and evolving technologies, such as artificial intelligence and machine learning and our offerings and the effects of inflation increased interest rates changing consumer habits climate change and general global economic uncertainty.
Lorne: Our actual results could differ materially from any projections paper sure performance, a result expressed or implied by such forward looking statements.
Lorne: You can find more information about these risks uncertainties and other factors that could affect our operating results SEC filings earnings press release, and supplemental information posted on our IR website.
Lorne: Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
Lorne: 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.
Lorne: Can find additional disclosures regarding these non-GAAP measures, including reconciliation comparable GAAP measures in our earnings press release and supplemental information posted on our IR website.
Lorne: Now I'd like to turn the call over to James Reinhart.
Lorne: Good afternoon, everyone I'm, James Reinhart, CEO and co founder of fed up. Thank you for joining threat ups first quarter 2024 earnings call.
James G. Reinhart: We are pleased to share threat of its financial results for Q1 and have important news to share about how we expect our business financial to improve in the back half of the year. We will provide update on adjusted EBITDA margin expansion adaptations for free cash flow in 2024, and key company specific initiatives around AI, we are excited to announce today.
James Reinhart: For the first time.
James Reinhart: I will then hand, it over to Sean Sobers, Chief Financial Officer talk through our first quarter 2020 for financials in more detail and provide our outlook for the second quarter of 2024, and the remainder of the year.
Sean Sobers: We will close out today's call with a question and answer session.
Sean Sobers: Let me start with our Q1 results, which were in line with our expectations. Despite an ongoing difficult consumer backdrop, our revenue was $79 6 million representing a year over year increase of 5% consolidated gross margin came in at 69, 5%, representing 8% gross profit growth year over year recall we.
Sean Sobers: Believe gross profit growth is the best way to measure the underlying growth in our business due to our continued transition to consignment, especially in Europe U.
Sean Sobers: U S gross margins reached a record high of 81%.
Active buyers reached $1 7 million, increasing 4% year over year, while orders reached $1 7 million growing 9% compared to the same time period last year of note adjusted EBITDA totaled negative $736000 or minus <unk>, 9% of revenue due to ongoing leverage in our business as well as some.
Sean Sobers: Reorganizing that we did in March our U S business with adjusted EBITDA positive for the third quarter in a row and with free cash flow positive for the quarter.
Sean Sobers: Now, let me turn to the future as we have important context to share about how our business is transforming into an AI powered <unk> company and what the year ahead will look like in March we reduced head count and reorganized several parts of the business, enabling us to win more in AI product development.
Sean Sobers: <unk> processing in our distribution centers and increased marketing spend we cut approximately $13 million in operating expenses.
Sean Sobers: And reinvest in roughly half of those savings into high potential growth areas.
Sean Sobers: As a result of these changes is that we expect to achieve positive adjusted EBITDA in Q2, nearly triple our full year adjusted EBITDA results compared to our last outlook and to generate free cash flow on a full year basis in 2024.
Sean Sobers: We've now pulled forward, our free cash flow expectation by a full year.
Sean Sobers: We view this to be an important milestone for the company as we turn the page from answering questions about profitability to focusing on how we expect to invest earnings over time and growing our business to capture the long term opportunity in retail with that in mind, Let me turn to the progress we've made across our product investments that are improving the customer experience.
Sean Sobers: Planting new seeds for sustainable long term growth.
Sean Sobers: And just the last 60 days, we have launched a new AI search experience and create two new AI powered tools that allow consumers to thrift any style that inspires them.
Sean Sobers: These tools makes it right up the easiest place to threat no matter when the inspiration strikes whether thats from the high Street when they see their favorite outfit when shopping online in any of their favorite stores or even if they want to tell us about an event that they're shopping for and have us do the work to inspire them. All three of these features are now live in beta form.
You can try the new visual search and our search bar and you can visit our threat up concept store on your smartphone or threat up dot com forward slash concept to see the other new tools in action.
Sean Sobers: The competitive advantages that we have been talking about for many years, our supply chain infrastructure proprietary data and marketplace dynamics are now being amplified by AI technology breakthroughs that have only recently started to take shape.
Sean Sobers: I want to emphasize my belief that AI strengthens the advantages we already have in place and deepens the long term defensibility in our business.
Sean Sobers: With our business is expected to generate free cash flow. This year, we remain ever committed to investing in new vectors of opportunity to grow our business faster with an eye towards creating stronger long term earnings and this goes beyond just AI and.
Sean Sobers: In Europe, the transition of consignment continues and we're making progress across our key strategic areas.
Sean Sobers: Of note, we set new records in Q1 for the number of back for question a week. The number of bags returned in a week and the number of consignment banks profit in a week.
We processed more consignment bags in Q1 than we did in all of 2023 combined.
Sean Sobers: After concluding our write off at the end of 2023, we believe our assortment strategy is paying off our sell through rates are among the strongest they have been since we acquired <unk> in late 2021.
Sean Sobers: We also announced last week that we have hired foreign flotek as our GM of Europe. He is relocating to our European headquarters in Sofia Bulgaria.
Foreign Flotek: Born brings two decades of experience building and scaling marketplaces and we believe he is absolutely the right person to continue scaling topline revenue and driving margin expansion in Europe.
Foreign Flotek: We will run our EU business, while sitting on our U S based executive team I'm off.
Foreign Flotek: So just as excited that Dan Neumeyer, who previously was running our EU business, while being based in the U S will return to the U S business as chief product and Technology officer, as we scale all of our tech and AI products.
Next we've continued to scale our resale is a survey or RAF business in Q1, we added eight new brands to our client roster and you can now get a threat up co branded cleaned out get in 800 retail stores across the country.
Foreign Flotek: And with some clients, we begun natively integrating the ability to order a cleanout kit right from their E Commerce checkout page.
Foreign Flotek: We're also looking to expand our RASK footprint in Europe, and believe commercial agreements with brands and retailers, there and further accelerate our transitioning environment.
Foreign Flotek: Now, let me turn to our impact as we remain committed to balancing purpose and profit. It's also worth noting how we're driving impact beyond our core business. We have recently started to see our advocacy efforts take shape at the federal level as a founding member of the American circular textiles coalition, we helped advocate for the inclusion of <unk> 14.
And incentives for textile Circularity and the Americans Act a bipartisan trade Bill that was introduced by U S. Senators Bill Cassidy and Michael Bennett in March. This is a historic moment as it's the first time federal Legislative legislation is contemplated circular fashion.
Foreign Flotek: We believe recognizing circularity as potential to strengthen the U S economy from both an environmental and international trade perspective is a huge step forward for the industry.
Foreign Flotek: Until fashion is no longer one of the most damaging sectors of the global economy. We will continue to advocate for the government to provide resources that make fashion and textile industry more sustainable and planet friendly.
Foreign Flotek: In conclusion before I turn it over to Sean I want to emphasize a few milestones and guiding principles.
Sean: We think of our earnings this quarter being a reestablishment of who we are and where we're headed along these four dimensions.
Sean: First over the past two years, including the midpoint of our 2024 guidance. We've expanded adjusted EBITDA 800 basis points and now expect free cash flow on a full year basis in 2024.
Sean: Second while driving adjusted EBITDA margin expansion, we have not compromised driving growth at the midpoint of our 2024 guidance the underlying growth rate of our business over the past few years, which is gross profit growth due to the confinement ship is 24%.
Sean: This represents annual double digit growth, despite an ongoing volatile consumer environment.
Sean: Third we now have the ability to more rapidly improve their customer experience, especially with emergent AI technology and invest in growth while simultaneously achieving our free cash flow goals. We believe we are in a position to manage the magnitude of growth and profit effectively regardless of where the consumer environment goes.
Sean: Finally, we want to reestablish the trust of the investment community that we're great stewards of capital that our most innovative days are ahead of us.
Sean: And that we do not want to just meet our expectations, we want to exceed them that is the journey, we begin a new today.
Sean: With that I will now turn it over to Sean to go through our financial results and guidance in more detail.
Sean: Thanks, James I'll begin with an overview of our results and follow up with guidance for the second quarter and full year of 2024, I will discuss non-GAAP results throughout my remarks, our GAAP financials and a reconciliation between our GAAP and non-GAAP measures are found in our earnings release supplemental financials in our 10-Q filing.
Sean: We're very proud of our Q1 results and our ability to navigate a challenging consumer environment for the first quarter of 2024 revenue totaled $79 6 million, an increase of 5% year over year.
Sean: Additionally, active buyers continue to grow reaching $1 7 million up 4% year over year.
Orders also increased up 9% year over year to $1 7 million.
Consignment revenue grew 32% year over year, while product revenue shrank by 38%.
Sean: We are pleased with the growth in consignment revenue driven by the final stages of our U S transition and our accelerated transition in Europe.
Sean: We would expect to continue to see outsized growth in consignment and declines in product revenue throughout 2024.
Sean: While the transition to a consignment should be a tailwind to gross margins over time, we expect it to slightly mute revenue growth simply due to the accounting treatment.
As a reminder, our consignment payouts reduce net revenue, while one payouts aren't cogs and reduced gross margin.
Sean: As a result, we looked at gross profit as the most relevant measure to evaluate the underlying growth rate of our business and we are pleased to report that our Q1 gross profit grew 8%.
For the first quarter of 2024 gross margin was 69, 5% a 220 basis point increase over the same quarter last year.
Sean: We are proud to report that consolidated results were driven by our record U S. Gross margin of 81%, a 560 basis point improvement over last year.
Sean: The global outperformance was the result of the transition to consignment in both the U S and Europe and continued operational improvements in our Dcs.
Sean: We're pleased to see higher items per order in the U S as well as ongoing improvements in our logistics network.
Sean: For the first quarter of 2024, GAAP net loss was $16 6 million compared to GAAP net loss of $19 8 million in the same quarter last year.
Adjusted EBITDA loss was just $736000 or negative <unk>, 9% of revenue for the first quarter of 2024.
Sean: The quarter proved to be more challenging to unexpected we significantly reduced our adjusted EBITDA loss in Q1 by more than half versus last quarter and by nearly $6 million versus last year, representing an approximate 780 basis point improvement, reflecting significant progress towards profitability.
Sean: Turning to the balance sheet, we began the first quarter was $69 6 million.
Sean: And cash and securities and ended the quarter was $67 $9 million using just $1 $7 million in cash in Q1.
Sean: As a reminder, we used $11 million in cash in Q1 of last year illustrating the enormous progress we've made over the last four quarters.
Sean: Our significantly reduced cash burn is due to generating a record $1 $4 million of cash flow from operations.
Sean: Now I would like to turn to our outlook as James discussed earlier, we are making significant structural changes to support our AI driven strategic priorities. We expect these new priorities to enable a superior online retail experience and unlock efficiencies in our operations that were not possible before including structurally higher gross margins.
Sean: We are shaping our organization so that our resources are fully aligned with this objective in a way that we expect to accelerate decision, making eliminate redundancies drive stronger operating leverage and free cash flow importantly, we do not expect to require any additional capex to do this.
Sean: This reorganization included an approximate 20% reduction in our global corporate workforce incurring approximately $3 million of nonrecurring charges. In Q1, we expect this action plus other cost saving measures to deliver $13 million in savings in 2024 or $17 million annualized mostly realized in SG&A expenses.
Sean: We have made meaningful progress over the past year on our path to profitability and our recent actions have significantly accelerated our progress. We now expect to achieve quarterly adjusted EBITDA profitability in Q2, and going forward plus we expect to be free cash flow positive on an annual basis. This year.
Sean: As a reminder, our favorable negative net working capital dynamics should prove to be a further tailwind to cash flow as we scale our model.
Sean: In addition, we continue to expect maintenance capex levels of approximately $2 million per quarter until 2026.
Sean: Given the meaningful improvement in our adjusted EBITDA and free cash flow the accelerated consignment tradition in the U S and Europe and the timing of how we expect to rollout new AI products. We are updating our guidance to better match, how we're running the business on a day to day basis.
Sean: We significantly reduced operating expenses, we are committed to investing in the parts of our business that are key to our long term success.
Sean: With clear line of sight to profitability and free cash flow, we have turned our attention to investing in new product experiences amplifying those products with marketing spend and ensuring we have the widest and deepest assortment of second hand clothing online anywhere.
As I noted earlier, our reorganization is expected to say $13 million in 2020. However, we're also reinvesting six $5 million into a better customer experience.
Sean: We are ramping processing in our operations. The most since early 2022 deploying new AI features across our product experience and increasing marketing dollars to drive new customers.
Sean: Each of these areas have driven revenue growth, what we're choosing to be prudent as it relates to guidance as we execute in this unique consumer environment and ramp our strategic investments.
Sean: Furthermore, although the discretionary apparel environment remains challenged for our consumer this updated range provides us with a high level of confidence that we can achieve our outlook regardless of macro trends in the balance of the year.
With all this in mind in the second quarter, we expect revenue in the range of $81 million to $83 million gross margin in the range of <unk>, 71% to 73% representing gross profit growth of 6% year over year positive adjusted EBITDA of one 3% of revenue.
Basic weighted average shares outstanding of approximately $112 million.
Sean: For the full year of 2024, we now expect revenue in the range of approximately $328 million to $338 million.
Sean: Gross margin in the range of approximately 71% to 70% representing gross profit growth of 11% year over year 100 basis points higher than our previous outlook due to the accelerated consignment shifts and improved operations.
Sean: Positive adjusted EBITDA of 2% to 4% of revenue three times, our previous outlook and basic weighted average shares outstanding of approximately $114 million.
Sean: Okay.
Sean: In closing, we're excited for our accelerated path to profitability free cash flow and being a self funded company. All we spent the past few years and a profit first mindset. We are now turned our attention to growth, while continuing to expand adjusted EBITDA and free cash flow.
James and I are now ready for your questions. Operator, Please open the line.
Speaker Change: Yes, Sir at this time, if you would like to ask a question. Please press the star and one on your telephone keypad, you may remove yourself from Q anytime a person who start to once again that is star one to ask a question.
Speaker Change: Pause for a moment to my questions to queue.
Speaker Change: Our first question comes from Matthew Borsch Huh.
Matthew Borsch: Wells Fargo.
Matthew Borsch: Alright.
Matthew Borsch: Good good good to hear from you guys. Just two questions first one for me.
Matthew Borsch: It is good to see the guide the profitability in Q2, the increase in profit, but it looks like you're getting some scale. There maybe just help us understand a little bit more just the building blocks for us to kind of take the you know the.
Matthew Borsch: The revenue the EBITDA to the free cash flow positive for this year.
Speaker Change: Yes sure.
Speaker Change: But let me start with.
Speaker Change: On the profits and the full year guide I mean, we made a number of changes structurally to the business in Q1.
Speaker Change: I mean, it doesn't always line up with with.
Speaker Change: The earnings calendar, but we are focused over the last six months on this.
Speaker Change: Real transformation in the business and so that came to fruition.
Speaker Change: Towards the end of Q1, it became clear that the magnitude of the savings and how we were going to reinvest those dollars was gonna really flipped the script on EBITDA for Q2 for the full year.
Speaker Change: Four.
Speaker Change: Free cash flow and so that's.
Speaker Change: That's even despite lowering the revenue and so shocking to eat through some of the building blocks, but we feel very good about that switch in and excited about where it's going to take us I think it is pretty simple as.
Speaker Change: We're guiding about $10 million at EBITDA at the midpoint and if you think about we're going to spend around $8 million in capex.
Speaker Change: Simple math there is EBITDA is pretty close to our cash flow from operations subtract out of that.
Speaker Change: The capex in your free cash flow positive at that point, and we kind of expect to be on the EBITDA side, obviously as we guided positive in Q2, and then for the quarters there going forward.
Speaker Change: Got it Super helpful. And then just follow up.
Speaker Change: And I understand the lowered revenue range.
Combined with the.
Speaker Change: <unk> investments you are making but maybe just talk about the puts and takes.
Speaker Change: Always see office going up when when revenues are coming down so just trying to understand a little bit better.
Yes sure.
Speaker Change: Part of it is that.
Speaker Change: We are really focused on some of these new AI product development, but there are only rolled out to a portion of customers.
Speaker Change: And then we're restraining some of the marketing dollars behind those products and so the timing of how the marketing is going to play out for the year or something we want to be a bit more cautious about we're also adding processing in our dcs in ways that we haven't done since early 2022.
Speaker Change: So what I would say is that there is a number of things that are in transition.
Speaker Change: We feel very very good about but we prefer to see a little bit more data.
Speaker Change: Round those before.
Speaker Change: Before we sort of declare victory on the AI products to marketing growth the processing growth. So I think there is there are some caution there I think second to that is that I think Q1 was I would describe that as like a little softer than we anticipated I think April has been fine.
Speaker Change: Sure.
Speaker Change: Key around how the year is going to shake out I think youre seeing inflation seems like a little stickier, we think rates are going to be higher for longer and.
Speaker Change: And so I just think we want it to be a little bit more cautious around how the year is going to play out given we feel very good about the profitability and free cash flow numbers.
Speaker Change: Kind of how we came to you being more conservative on the top line.
Speaker Change: Great. Thanks, guys.
Speaker Change: Our next question comes from Dylan Carden with William Blair.
Dylan Douglas Carden: Thank you, yes, just curious kind of I guess, where I'm going down the P&L on the gross margin line, taking that up for the year.
Dylan Douglas Carden: What it is.
Dylan Douglas Carden: The drivers are there Sean is latching onto a comment you had about potentially being a structurally higher gross margin business.
Dylan Douglas Carden: Yeah.
Sean: Elaborate on that or extend it.
Sean: Right.
Sean: Yes, no Dylan this Sean I think from a gross margin perspective, the biggest driver was overall improvements across the operations team. So things like more items per order improved logistics costs more automation in general and then overall yeah all of the investments of the past starting to come to fruition.
Sean: Continuing to build up on that so I think those are like the big drivers towards gross margin expansion. Then I think it comes to you just in general the future is where the nexgen AI investments can lead us and improve margins from there so want to lean too far on that because we're still at the early days of that but I think there's lots of opportunities there for us to really hasnt really changed.
Sean: The gross margin see even better.
Sean: And then you also sort of consignments.
Sean: And you have to do and which is sort of a tailwind to all of this and I think it's kind of a.
Sean: <unk> of the operations improvement and the accelerated consignment I think makes us feel like.
Sean: Structural higher for some time.
Sean: The AI investments are mostly front were looking customer base at this point, you're not really doing much on the back end fiscal is incremental.
Sean: And a piece of it.
Speaker Change: Yes, I think the ones that we announced today for the first time are really on the customer facing side, but there is a number of things that we will prototyping today that we think can be really.
Speaker Change: Create some foundational improvements on the backend.
Speaker Change: Still pretty early and I think the same thing on the consumer side now those products are rolled out to just 10% of customers as we continue to iterate and they really are beta products and so I think we will get a lot of feedback over time and I think part of why we're being a little bit more cautious as we want to see those products and consumer response.
Speaker Change: Our response or take shape before we lean in more on the growth side.
Speaker Change: Got it and sorry, if I can sneak one more just the marketing line.
Speaker Change: <unk> came in kind of much later than I had thought was that sort of is it a reflection of the environment.
Speaker Change: Cutting some of these cost latency or invest in marketing or it sounds like in the latter part of the year and is that at all related to maybe you sort of mentioned a little bit of a softer quarter.
Speaker Change: It doesn't seem to be some relationship there as well.
Speaker Change: Yes, it's a little bit of timing doing around the sort of back half of the year versus Q1, I think overall, our expectation is to grow marketing dollars. This year for the first time since 2021. So we are we are planning to invest.
Speaker Change: But what we saw in Q1 relative to Q2 is a little bit of timing, especially as we started to make these transitions in the business.
Speaker Change: In the first part of March though.
Speaker Change: Those are the two reasons why.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Rick Patel with Raymond James.
Thanks, guys good afternoon.
Rakesh Babarbhai Patel: Can you talk about the outlook for active buyers it looks like it was down quarter over quarter in the first quarter. So just curious if that's attributed to the business model changes or if theres something else going on there.
Rakesh Babarbhai Patel: And how we should think about what's embedded for buyer growth as you think about the guidance for the rest of the year.
Speaker Change: Yes sure Rick.
Speaker Change: I think buyer growth generally lines up and tracks with with revenue growth.
Speaker Change: I think you have some sort of seasonality effects Q4 to Q1 and as we just mentioned earlier, we did pull back.
Speaker Change: In spend in Q1 on a timing basis.
Speaker Change: But you should see those numbers sort of Reaccelerate I think as we move through the year.
Speaker Change: But I think active buyers are really key to our long term growth strategy and so they should track pretty closely with the underlying growth rate of the business and so.
Speaker Change: Double digit.
Speaker Change: Growth in the business.
Speaker Change: Again based on gross profit growth.
Speaker Change: We expect active buyers would be in that range, which has been true over the last years.
Speaker Change: And can you provide more color around customer behavior just curious.
Speaker Change: Seeing transactions.
Speaker Change: Tilted more towards higher income versus lower income consumers.
Speaker Change: Any changes in behavior in general versus what you saw three months ago.
Speaker Change: I think that the consumer I think is continuing to be.
Speaker Change: It's challenging out there I think we have strategically.
Speaker Change: Strategically moved our assortment to be incrementally more premium over the last couple of years and so I think that customer is doing okay.
Speaker Change: And I think the more budget shopper I think still remains.
On the sidelines.
Speaker Change: Are seeing more items per order.
Speaker Change: You see some of that growth in revenue per customer.
Speaker Change: So potentially Rick Youre seeing some of the effects of a trade down environment.
Speaker Change: Given how well resale I think it's positioned from a value perspective.
Speaker Change: But look I think our perspective is that the consumer consumer confidence is actually now down right. I think if you look at the numbers that down to three months in a row I think the consumer is is a little bit more cautious and I think thats rolling into how we're thinking about the rest of the year.
I appreciate it thank you.
Speaker Change: Yeah.
Speaker Change: Just a reminder to ask a question. Please press star one our next question comes from Anna and Greasy Griffin.
Anna: We need them.
Great. Thanks, so much good afternoon guys.
Anna: Two quick ones from Us I wanted to follow up on the software sales guide and it sounds like you're being just more conservative there, but are you seeing softer trends for more value consumers specifically.
Anna: As of late or is the premium customer and more discerning as well.
Anna: To kind of explain the softer <unk>.
Anna: <unk> guide for <unk> and also for the year and then secondly, what are you seeing in Europe should we still expect.
Anna: And then at 20% of them, they're there for the year. Thanks.
Sure well, let me start with Europe, which is I think we feel.
Anna: Barry.
Anna: Yes.
That we're making there I think as we noted.
Anna: Record Tonight.
Anna: Bags.
Anna: Receipts processing in Q1, and so I think that that journey is omron and I think the expectation is consistent with that 20%.
Anna: And I think the demand environment. There remains challenged inflation is higher there.
Anna: So we think that.
Anna: That's going to continue to be the case.
Anna: But we're thrilled with with Florida.
Anna: GM, there I think he's going to be great.
Lots of experience in marketplace and scaling.
Anna: On demand and so I think we feel incrementally better about where Europe is headed.
Anna: In the U S on the software sale value versus premium piece.
Again.
Anna: Given the number of things changing in our business over the last 90 days the reorganization and the launch of three new pretty significant products and then how we're thinking about timing around marketing.
Anna: And profit just leaves us in a position where we want to just see a little bit more data on how these things come together.
Anna: And so I think given the given the demand environment.
Anna: We just think we should be a little smarter as.
As we think about the rest of the year. So I don't think that it is necessarily about value customers are or premium customers.
Anna: We think that the macro environment is more challenged than we think in the four walls of the business. There are a number of things we've got in the Hopper and we kind of want to see those things come together.
Anna: Okay. That's very helpful and James I think you said marketing dollars should be growing for the year should we expect increase in marketing for <unk>.
James G. Reinhart: Yes, yes marketing dollars are growing for the first time since 2021 year over year.
James G. Reinhart: They are definitely growing in Q2.
James G. Reinhart: And I think the timing of those on a I think for Q2 Q3, and Q4 is that going to be related to you the new product investment that we're launching.
James G. Reinhart: Sort of the AI products and so I think again, that's where we're not quite sure. How all of those are going to land from a timing perspective, and I think driving us to do a cautious alright.
Speaker Change: Alright, it makes sense. Thank you guys.
Speaker Change: We have no further questions at this time I'll now like to turn the call back over to today's presenters for any additional or closing remarks.
Speaker Change: Well, Thanks that concludes our first quarter of 2024 earnings call.
In conclusion I want to thank all of our current and former employees for.
Speaker Change: For the contribution that they've made over the years and building threat up into.
Speaker Change: Into the highly defensible marketplace leader in resale pioneer that it is today I cannot be prouder of the work that we've done to date and I've never actually been more bullish on our future.
Speaker Change: Okay. So I want to thank our shareholders for sticking with us through this.
Speaker Change: Last couple of years and I assure you that we truly believe our.
Speaker Change: They are ahead of us. So thanks, everyone. We'll see you next time.
Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at anytime.
Speaker Change: Everyone else has left to come.
Okay.
Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at any time.