ThredUp Inc (TDUP) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for your patience in holding, and welcome to the thredUp First Quarter 2021 Earnings Call. (Operator Instructions) It is now my pleasure to introduce today's first presenter, Mr. Lana Adair.

Good afternoon, and thank you for joining us on today's conference call to discuss thredUp's first quarter 2021 financial results and our first earnings call as a public company.

With us are James Reinhart, thredUp's Chief Executive Officer and Co-Founder; and Sean Sobers, the company's Chief Financial Officer.

We posted a press release and supplemental financial information on our investor website at ir.thredup.com. This call is also being webcast in our Investor Relations website, and a replay of this call will be available on the website shortly.

Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call, including, but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects, business strategies and plans. These forward-looking statements involve known and unknown risks and uncertainties, and actual results could differ materially. Words such as anticipate, believe, estimate and expect as well as similar expressions are intended to identify forward-looking statements. You can find more information about these risks, uncertainties and other factors that could affect operating results in our SEC filings, earnings press release and supplemental information posted on our IR website.

In addition, during the call, we will present certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our earnings release.

Now I'd like to turn the call over to James Reinhart.

Good afternoon, everyone. Thank you for joining thredUp's First Quarter 2021 Earnings Call. I'm James Reinhart, Co-Founder and CEO.

With our IPO on March 26, thredUp entered a new chapter in our company's history. And we're excited to share our results in this first earnings call. This most recent quarter, we achieved record revenue, record gross profits, record gross margins and record active buyers. Given the strong growth we observed in Q1 2020, prior to the onset of the pandemic, we feel like the growth metrics this quarter are an indicator of the re-acceleration in our business, improving macro conditions and the momentum in the broader resale category.

Our first quarter 2021 results were better than expected, and both internal and external factors played a role. We continue to benefit from ongoing investments in our platform, our growing and dedicated base of active buyers and sellers, strong unit level economics and expanding competitive advantages in operations.

This quarter, we also benefited from 2 rounds of government stimulus that helped buoy the American consumer. And while we expect the stimulus checks are over, we believe shifting consumer behavior during the pandemic will create long-term tailwinds for our business and for the resale industry at large.

Because this is our first earnings announcement, many of you might be new to thredUp story. I'd like to take a step back and refresh you with our mission and vision. The idea for thredUp came to me in 2009 when I tried to sell some of my clothing at a local consignment store. Every item was rejected. And that was shocking to me, because I knew my hardly worn clothes must be worth something to someone.

I realized then that the selling of clothes was a ton of work, and much of what we all end up donating ends up in landfills. I just thought there had to be a better way. And so my co-founders and I set out to transform the resale industry with the mission to inspire a new generation of consumers to think secondhand first.

This transformation is well underway, and thredUp is well positioned to capture the growth in this sector. As a reminder, according to independent data provider, GlobalData, the resale industry is expected to grow 25x faster than traditional retail over the next few years. As it becomes easier for consumers to sell their clothing, we expect the industry's growth will be driven by a surge of new secondhand products coming online. And we believe that surge will create opportunities for more and more customers to find great secondhand products online.

In GlobalData's 2020 research, they found that 2 out of 3 consumers reported now being comfortable with purchasing secondhand clothing. We expect to be an ongoing beneficiary of people coming into this market for the first time. Market demand is driven by attractive demographics, including millennial and Gen Z buyers, who now value sustainability more than ever, as well as all consumers continuing to prioritize value.

Our team wakes up every day working hard to deliver great brands at great prices, but importantly, in a sustainable way. And not only are we inspired to build a great business, we are doing good in the world.

Given we believe there is massive opportunity in this market, we've been building a differentiated and defensible operating platform to enable resale at scale. I thought I would spend a moment here in detailing the key differentiation in our model and how we think about our strategy over time.

If you listen to these calls long enough, you'll hear me talk again and again about our strategy and our investments to deepen our moat and widen our TAM. I am a deep believer, and my team, they're deep believers that good strategy is key to building lasting advantages over time. So here are the 3 elements, I think, you should take away.

First, it's all about supply. We've never spent a single dollar directly acquiring sellers, and we expect that to continue. We are constantly working to improve the consumer experience for sellers, making our signature Clean Out Kits available online and offline through our own website or those of our Resale-As-A-Service partners.

We are also accelerating processing capacity to reduce wait times and constantly evaluating how to pay fairly for the clothing we can resell. Since the peak of our bag backlog in Q3 2020, we've reduced processing wait times by more than 50%. And we are well on our way towards our stated goal of 2- to 3-week processing time by the end of the year.

Given we estimate that there are potentially a billion, that's with a B, billion cleanout kits out there in the U.S. every year and that we processed just a million last year, we are confident in the long-term supply opportunity for thredUp.

Second, we are relentlessly investing in the technology and software that powers our managed marketplace infrastructure. Our single SKU logistics technology and distributed processing allows us to ingest and make available large amounts of secondhand clothing, each undergoing a rigorous 12-point quality inspection.

We've processed over 100 million items to date, saving our customers more than $3.3 billion off of estimated retail price and displacing 1 billion pounds of CO2. But to be honest, we aren't thinking about the next 100 million items. We're thinking about the next billion items. We're building the backbone for resale on the Internet, 35,000 brands across 100 categories. And our goal is to power a disproportionate part of this industry over time.

Our plans for our next distribution center are well underway, and we expect it to come online in mid-2022. We'll have more to share on a future call, but keep in mind that every facility we build tends to be larger and more automated than our previous facilities. Size and automation translates into increased revenue capacity and higher operating margins.

Third and final here is that our proprietary resale data makes us smarter every day. Each day, we ingest millions of data points on items that we process, items that we sell, items that we reject, items that are favorited, items added to cart or removed from cart, returned, et cetera. This vast trove of data, combined with the algorithms and the models we've built that sit on top of that data, help us improve our acceptance, merchandising, photography, pricing and marketing capabilities so that we can consistently grow our active buyers, expand margins and drive increased sell-through.

And I think as you see from our results, this data science work is one of the reasons that has allowed us to expand margins and add active buyers in our most recent quarter at a record clip. Keep in mind that a key advantage of a managed marketplace like thredUp is that we can leverage our data across the buying and selling experience, adjusting prices and payouts, incentives and fees to consistently drive sell-through margins and growth in our business.

These 3 investments, unlocking supply, building infrastructure and leveraging our proprietary resale data, have positioned us well to continue serving our buyers and sellers, but also to power resale for some of the world's leading fashion brands and retailers via our Resale-As-A-Service platform. We're still in the early days of our RaaS model and our brand partner strategy, but we see opportunity for growth and meaningful high-margin revenue over time. We envision hundreds, even thousands of brands having dedicated resale strategies powered by thredUp. And I'm looking forward to sharing more of that on a subsequent call.

Hopefully, that provides you with a high level of a reminder of the key competitive advantages in our business and the broader market in which we operate. We will continue to update you as we make investments in furtherance of this strategy. In closing, let me say that our team is cautiously optimistic about post-pandemic long-term trends. COVID-19 meaningfully impacted internal operations in the back half of 2020. So the further we get from that the better our business continues to look.

On the supply side, we believe that our convenient Clean Out Kit model is poised to benefit as people cycle out of pandemic clothing and refresh their looks, they venture out of their homes to have fun and go to work and have less free time on their hands. We are ready to meet this opportunity.

On the demand side, as the weather continues to improve and opening restrictions ease, we still expect apparel budgets to remain constrained, given the broader economic toll the pandemic has brought. But what we do anticipate is 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 to turn it over to Sean, our Chief Financial Officer, to walk you through the financials.

Thanks, James, and again, thanks, everyone, for joining us for our first earnings call as a public company. I'll begin with an overview of our first quarter 2021 results and follow with guidance for the second quarter and the full year 2021. I will discuss non-GAAP results throughout my remarks. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP, are in our earnings release.

First, let me remind you, we shifted to a primarily consignment-based revenue model in 2019, meaning a greater portion of our revenue is recognized net of seller payouts rather than on a consignment basis. Because of this, we focus on gross profits to help normalize for this mix shift, and we track gross profit growth as a key indicator of the health and growth of our marketplace. We expect to be through this transition to a mostly consignment-based business by the end of the year.

As James mentioned, we had a strong first quarter in 2021, comping against a very strong quarter in Q1 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 in the last month of the quarter with an increase in both active buyers and orders coinciding with the third round of stimulus checks.

Each quarter, we plan to provide data for active buyers and orders, which are our key operating metrics. Active buyers highlight our success in attracting new buyers who return and make repeat purchases. Orders are another important operating metric and give insight into the sales activity of our marketplace.

As mentioned, we started to see more strength in our business as the quarter progressed. We had a record 1.29 million active buyers at the end of the first quarter, which is a 14% increase over the same quarter last year. Repeat buyers represented approximately 80% of our orders. First quarter orders were another record and totaled 1.13 million, which was 18% above the 956,000 orders in the first quarter of 2020.

Let me talk about gross profit. Again, we think this is the best measure of underlying growth in our business until we are through the consignment transition. First quarter 2021 gross profit totaled $39.7 million, representing growth of 21.7% year-over-year. Gross margin expanded to 71.3%, up from 67.5% in the same quarter last year, an improvement of 380 basis points. The main drivers of gross margin improvement reflects what James mentioned earlier, operating scale in our DCs and using our data to drive superior unit economics.

On the supply side, our volumes have remained strong. As James already stated, we have significantly reduced Clean Out Kit processing wait times by over 50% from last year's peak. We expect processing times to continue to come down throughout the year, even while we significantly scale the total number of bags processed. There are currently no restrictions on customers sending in Clean Out Kits. We are fully open for business, which feels great, given how much we had to deliberately scale back processing last year during the height of the pandemic.

In our distribution centers, we are well positioned to process and manage many millions of unique items per year at improving unit economics. Our newest distribution center in Georgia is less than a year old and continues to exceed expectations. This distribution center is our largest facility and has the highest processing capacity and is the most automated. We expect that our distribution center capacity will grow from 5.5 million to 6.5 million items by the end of 2021. We are getting bigger, but we are 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 in our distribution centers as we continue to ramp inbound processing, increase corporate headcount to support being a public company plus increased marketing activities. Note that as we aggressively scale inbound processing from time to time, our inbound processing costs may exceed our forecast. Keep in mind that we expect increased inbound processing to ultimately lead to increased sales.

Our first quarter EBITDA loss of $9.1 million was 16.4% of revenue, an improvement in both dollars and percentage of revenue from last year's loss of $10.4 million and 21.6% 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 with $67.5 million in cash, cash equivalents and short-term investments and ended the quarter at $250 million, which includes $175 million in net proceeds from our March 26 initial public offering.

We generated $1 million in cash flow from operations, primarily due to the timing of payments to vendors. We do not expect to be cash flow from operations positive in the near term as we continue to invest in the growth and infrastructure of our business.

Now I'd like to share our financial outlook for the second quarter and full year of 2021. For the second quarter of 2021, we expect revenue in 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%, resulting in a gross profit dollar growth of 12% to 20% over the same period last year; an adjusted EBITDA loss of 28% to 23% of revenue; and basic weighted average shares outstanding of approximately 95 million.

For the full year 2021, we expect fiscal year revenue of $223 million to $229 million, representing top line growth in the range of 20% to 23%; gross margins of 70% to 72%, resulting in gross profit dollar growth of 22% to 29% over the prior year; an 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 in our business as we emerge from the pandemic. In 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. thredUp is prime for the digital consumer who seeks an efficient, fresh and frictionless shopping experience.

With that, James and I are now ready to take your questions. Operator, please open the line.

(Operator Instructions) Our first question comes from Ross Sandler with Barclays.

Congrats on getting out there. Just 2 quick ones from me. Sean, can you talk about retention and frequency that you're seeing right now in the second quarter compared to what you were seeing maybe last year during COVID and maybe versus pre-COVID? And then I think you mentioned the gross margins up 380 from automation and use of data. Can you just elaborate a little bit more on what drove the unit economics up and that gross margin in particular?

Yes. Thanks, Ross. I'll start with gross margin, and then I'm going to let James talk about frequency. On the gross margin side, we did improve fairly well sequentially, and it was really driven from the transition from the mix shift in direct and consignment to more consignment, so that's a big push, as well as the overall order economics that we are driving using -- really driven from our data.

So if you think about the data usage, we're able to improve ASPs, improve sell-through, get pricing more correct and be able to improve what payouts are going to be. So using the data overall is really driven and better overall order economics. In addition to that is the automation and really kind of the build-out and move into these specifics, improving overall order economics as well to drive gross margin.

Yes. And just on the retention side, Ross, I mean, I think when you look at the active buyer numbers, which were very strong and orders, I mean, I think we had a very strong Q1 last year, as you recall, January, February. And then as the pandemic started, things slowed down. And so we're lapping a very strong quarter this quarter and are still seeing very strong retention. And we're also seeing new buyers come onto the platform at record rates. So I feel very good about where our retention is. It's at our historical norms and things should continue as we move further away from the pandemic.

Our next question comes from Ralph Schackart with William Blair.

Great start as a public company. First 1 or 2 is for Sean, and then I have 1 for James. Sean, you talked about stimulus helping out on the top line, I believe, in the prepared remarks and then buyers are also very strong as well in the quarter. Just curious, were there any other factors contributing to the strong performance in the quarter?

And then on the outlook, it's also better than expected. I think previously, you had anticipated around September or so kind of reopening for the U.S. consumer and as states are reopening again. Is that still in contemplation for the full year? Or has that been pulled forward? And then I have a follow-up with James.

Yes. I think the drivers are right. We talked about stimulus, but also supply really drives our overall results. So that supply increase and listings increase that was driving it and as well as we were able to market more efficiently. We've talked consistently about doing marketing to -- or basically spending into marketing as long as we get a 12-month payback. And those are the really big drivers as far as Q1's results.

And then Sean, just on the outlook as well?

Can you ask that again?

Sure. I think previously you anticipated sort of a September or so time frame for reopening and then the outlook being stronger than expected. Just curious if that's still in contemplation or if you're seeing signals that the reopening or the closet, I guess, refilling is maybe happening?

No, no -- that. Yes, thanks for reiterating. Yes. So I think like James said, we're cautiously optimistic that it's going to happen sooner. We're starting to see things that are positive. It's hard to really dissect out what stimulus was and wasn't as far as the impact to the business. We're still planning internally that it's going to be that Q3 recovery, but we're starting to see some things that are a little more positive and being able to pull that in a little bit.

Yes. And Ralph, I wouldn't say -- I don't think we currently have in our forecast any sort of pull forward. I think we just have that the consumer is just feeling a little confident and had some stimulus money in their pockets. And so we saw this acceleration earlier than we thought. And I think as we think about Q2, I think the question is how much of those stimulus dollars are still in play. And I think what we're seeing even the CDC coming out with their expectation for a surge of COVID in May. I think we're just trying to be thoughtful about what the quarter is going to look like as we think about the guidance in Q2 and the rest of the year.

Okay. That makes sense. And then, James, maybe a follow-up with you if that's all right? We get a lot of investor interest around your RaaS opportunity. And on the call, you talked about hundreds, if not thousands, of brands as sort of your opportunity. Any way you could help us or investors think about sort of sizing this market opportunity and perhaps when do you think grass might start scaling within the financial results?

Yes, Ralph, I don't think we have put together kind of a size of the market, in particular on the RaaS opportunity. But I think the way that we think about it and I think the way that retailers and brands are thinking about it as, this is a new emerging channel. And so if you think about the current channels that exist out there, whether it's stores or e-commerce or off-price or outlet, even as a channel, we think resale is another meaningful channel for these brands and retailers. And I think that's the way we're working to support them is what does it look like to build a new channel. And that's everything from point-of-sale to the supply chain, right?

I think it's an end-to-end experience that we're trying to provide. And I think we're being very deliberate around how do we put the pieces in play for our partners such that they can really build the channel at scale, right? Because I don't think anybody cares about a few pairs of jeans here or a few pairs of the yoga pants here, right? The idea is how do these become meaningful parts of a company's business, and that's the work that we're doing today. So hopefully, that provides a little bit of context.

Our next question comes from Ike Boruchow with Wells Fargo.

Guys, let me add my congrats on a great quarter. I guess, James, high level, could you just talk more about supply? How you're thinking about the supply dynamics coming back the rest of this year and then beyond? Where is that opportunity kind of coming from bigger picture? And then as a follow-up to that, for Sean, Sean, is there any way to kind of talk about how much you're still limited with the Clean Out Kit issue that you have? Like what could you have grown revenue had that been completely cleaned up? I'm just kind of trying to understand the power of the business versus you kind of working through some of those headwinds from COVID still?

Yes. Thanks, Ike. I mean I think that, as we noted we're -- processing times have come down more than 50%. I mean we're running right now about 8 weeks to process a bag, where in Q3 '20, we were up around 20 weeks. So we made a lot of progress. I think what gives us a lot of optimism is we've made a lot of progress in the process side, but we've also opened up the Clean Out Kit experience so that anybody can get one. And so we've really scaled processing nicely in Q1. And I think if you think about how our business works, as we ramp processing and bring more supply online, that ultimately creates long-term revenue opportunities.

And we still haven't spent any direct dollars acquiring suppliers, and we're having a lot of success there. And we still believe there are a billion, that's with a B, Clean Out Kits out there every year. And we've only scratched the surface.

And so I think our model, right our business model is set up to be very successful acquiring supply over time. 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 in Q1, what that would have looked like. But I think we feel good that probably by the end of the year, at least that's the target, we'll be down a 2- to 3-week processing times and I think get back -- get to there on a steady state basis.

Yes. And the only thing I'd add to it is like as DC06 or our new facility in Georgia comes online, think of the processing power per week to be just that much more. So we're able to process that much more in our overall system of DCs. So it's not the same that we were processing a year ago or 24 months ago. So that 2 to 4 weeks is kind of a much higher number that we're able to process than it was maybe a year or 2 ago.

Got it. And then just one quick follow-up on the RaaS business. I mean we saw another big brand, lululemon come out and talk about their own resale business. Just kind of curious how you balance the resale of service on a newer business as other brands are potentially attempting to do it on their own?

Yes. I think it's really nice to see brands like starting to experiment here. And I think lululemon was the most recent one. But look, I mean, none of these brands are really at the point where they're taking the channel seriously from a scale perspective. And so on the one hand, I'm glad that brands are dabbling. On the other hand -- at the end of the day like we have to build like a scalable opportunity.

And so I think the way we're approaching it is we love what lululemon is doing. But if they really want to do it big, they're going to need a partner with like real meaningful scale for them to achieve their business objectives. And so a lot of the conversations that we are having with brands are how can this become a real meaningful channel for them, given where the customer is moving.

So I actually think it's really good that these brands are dabbling into it. And we feel really confident that they will come to the conclusion that working with a company like thredUp, who are experts in all of this, is the right move to scale all of this. And I use the analogy sometimes like when brands try to open stores, what they don't do is go and buy all the real estate, right? They lease the storefronts, right? They use 3 P&Ls. And so we think about ourselves as an enabler and a software provider and these brands and retailers as customers. And I think that's the way we approach the opportunity. We think that's where the biggest prize is.

Our next question comes from Erinn Murphy with Piper Sandler.

A couple from me as well, James, for you. On the category performance in the first quarter, could you just share a little bit more about what are the categories that are really contributing to the growth the most? And is there any changes you moved into the second quarter just as you stack up some of those reopening categories?

Yes. Thanks, Erinn. Yes -- I mean we definitely saw -- we're definitely seeing sales of things like loungewear and sweats and leggings and what you would categorize as stay-at-home categories decline. They're down in our business about 10% as a percent of sales since March, whereas we're seeing strong performance in dresses. Mini dresses are up more than 20%. You have formal dresses. As wedding season comes into focus, they're up 15%.

So we're definitely seeing this rotation back to going-out clothing. And I think what's good for us is those are the categories in which resale really wins and those categories also tend to have higher price points. So we feel like there's 2 factors that should provide some good tailwinds.

Great. That's good to hear. And then, I guess, another question, James, for you, and then I've got one for Sean quick. Is the primary market, if we think about the apparel market, it's the cleanest it's been for years from an inventory perspective. You're seeing really strong AUR gains across the board. Is this a positive for the business, just given how you price from an algo perspective? So maybe that's kind of a sneaky positive as we look forward into the next 12 months?

And then Sean, for you, quick on the take rate. One question we've gotten from investors is if you look at your take rate, it is like the highest in the industry. I mean do you see variability or risk that, that changes over time?

Yes. Erinn, I think on the -- what we're seeing across the retail ecosystem, we're seeing the same thing you're seeing around inventory levels being clean and prices going up. And I think it provides us some ability to raise prices on items that are turning well. But I'll tell you that it all for us comes back to the data. And we let the machines, frankly, tell us how to price these things so that we're really delivering for the buyer and the seller.

And so I think what we'll see algorithmically is as turns go up in our business, you can see prices float up as well. But I think, in general, I think it's great. Especially from an environmental perspective, it's great to see inventory is clean and brand is not discounting as much. I think that's good for everybody. It's good for the planet. So cheers for that. I'll let Sean talk a little bit about your other question.

Yes. On the take rate, we don't really see a lot of pressure on that side. I mean I think the only times when take rates are really fluctuating inside our business is when our ASPs go up. Obviously, they go in the mirror image with what's happening on the ASP side. And this is all really relative to the fact that we believe we make the market on where we stand today. We're not talking about the luxury side. We're talking about mass market. And so we think we're able to pay fairly from a take rate perspective, but we haven't seen pressure on that side.

Our next question comes from Edward Yruma with KeyBanc Capital Markets.

Congrats on becoming a public company. Two quick ones from me. I guess, first, now that you're opening up distribution of the clean out bags, I know that historically, you've used AI to help determine whether you would send someone a bag. I guess any surprises in terms of kind of the good customers you're seeing come through that program?

And then second, I know you were a little light on lower price point items. Just kind of catch us up maybe on whether you think you've hit a more optimum assortment?

Yes. Thanks, Ed. Look, I feel like the clean out part of our business is very strong. So we continue to use our data to educate our customers and make sure that we're getting the right supply in the door. But we've seen nice uptake once we were able to open up the seller part of our business.

If you remember, I mean, in the back half of last year, we were turning away hundreds of thousands of potential customers. We were able to reengage many of those customers, because they put themselves on a wait list. So we have a nice steady stream of supply coming in from people that have been waiting for us. And so we feel good about where it's headed and so don't see any pressure in the near term.

Ed, on the lower price point items, we think that kind of the overall supply is really balanced out now. We've been able to get through and process and bringing our processing power back up to speed. So we've been able to really kind of broaden that out. So we don't see that as a headwind any longer.

Our next question comes from Dana Telsey with Telsey Advisory Group.

Certainly, congratulations on this first conference call and the results. As you think about the operating expenses, whether it's operations, marketing, SG&A, can you unpack them for us? How do you think of it going forward, what the growth rates will look like? And as we head into the back half of the year and your ability to process more Clean Out Kits, how do you think about the back half of the year with the gatherings recurring? Should that drive potentially higher-than-expected sales or -- and RaaS businesses that you're looking at?

Yes. Thanks, Dana. I'll start, and then I'll kick it over to Sean for anything I miss. I mean we definitely saw the operating expenses grow year-over-year. I mean they grew about $2.5 million year-over-year. But at the same time, Dana, gross profits were up $7 million over that period. And so I think actually what you're seeing is the business able to drive real leverage as we grow operating products and technology expenses, that really turns into gross profit expansion.

And so I think you should see more of that leverage over time. And I think as we look to the future around our RaaS partners and the high gross margin revenue that we're seeing there, I think it points to a good profile in line with the guidance that we've given for the back half of the year.

And the only thing I would add on specifics maybe to those lines is on the G&A side, it's our first year as being public. So we're going to swallow that pill of things like D&O insurance and other public company costs that will happen in '21 and then will be not really rising in '22. So you'll see the leveraging start to happen in '22 on the G&A side.

On the marketing side, again, that's kind of the fuel to our growth. So we'll continue to do marketing and invest in marketing as long as the payback is in line with our 12-month payback, because we really feel like that's a driver of the business, and then, James, I think on the other side.

(Operator Instructions) At this time, we have no further questioners in the queue. So I'll turn it back to Mr. Reinhart for closing comments.

Well, thanks, everyone, for joining our first earnings call as a public company. I appreciate the questions and your keen attention to the business. And I just want to thank the thredUp team, the management team, the folks in our DCs across the world, who work hard every day to deliver a great experience to our buyers, our sellers and our partners. So thanks, everyone, and we'll see you next time.

Thank you. Ladies and gentlemen, that concludes the thredUp First Quarter 2021 Earnings Call. We thank you for your participation. You may now disconnect.