Etsy, Inc. (ETSY) Earnings Call Transcript & Summary

Hi, everyone. I'm Deb Wasser, Etsy's Vice President of Investor Relations and ESG Engagement. And joining me today are Josh Silverman, CEO; Rachel Glaser, CFO; and Gabe Ratcliff, our Director of IR. We're excited to welcome you to this call to discuss the signing of an agreement to acquire Depop. For your convenience, the accompanying slide deck has been posted to our website. Once we are finished with Josh and Rachel's presentations, we will take your questions. [Operator Instructions] I'll be reading your questions, and Gabe will help me try to get to as many as we can. Please keep in mind that our remarks today include forward-looking statements related to our potential addressable market, the potential impact of the acquisition of Depop on our future performance and consolidated financial results, the anticipated timing of the closing of the acquisition of Depop and the potential of Depop's business. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties, some of which are described in today's press release and in our most recent 10-Q filed with the SEC on May 6, 2021, and which may be updated in future periodic reports we file with the SEC. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also during the call, we'll discuss certain non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in the Investor Relations -- excuse me, included in the investor presentation related to this call, which you can find on our IR website, along with the replay of this call. And with that, I'll turn it over to Rachel.

Thanks, Deb, and hello, everyone. As Deb said, we are excited to host this call to tell you more about our planned acquisition of global fashion e-commerce marketplace, Depop. The terms of the transaction were announced a few hours ago, and I'll highlight a few key items now, which you can also see on Slide 3. The purchase price is $1.625 billion, primarily in cash, subject to certain adjustments with respect to Depop's net debt and working capital. The valuation for this transaction is in line with publicly traded industry peers on a gross adjusted multiple of gross profit. We have sufficient liquidity to fund the transaction. If you recall, as of March 31, 2021, we had $2 billion in total liquidity, made up of $1.8 billion in cash, cash equivalents and short- and long-term investments and an undrawn $200 million revolving credit facility in addition to cash, which we are generating this quarter. The transaction is currently expected to close during the third quarter of 2021. And importantly, as we have done with Reverb, Depop will remain a separately operated and branded marketplace run by its current CEO, Maria Raga, and her fantastic leadership team in London. Maria was promoted to CEO from VP of Operations in 2016 and has overseen its significant growth to approximately 400 employees in 5 global offices. We've been incredibly impressed with Maria and her team since we reached out proactively to get to know them nearly 2 years ago, and we respect their deep knowledge, spanning international commerce, fashion and apparel, technology and consumer brands. This deal was made because of the tremendous regard and shared values between our 2 companies. Our press release also provided some insights into Depop's financial profile. Seen on Slide 4, 2020 GMS and revenue were approximately $650 million and $70 million, respectively, implying a take rate of about 10%. Similar to Etsy, Depop delivered impressive GMS and revenue growth of over 100% in 2020. They've had a strong start to 2021, and we are currently -- and we currently expect the business to be accretive to our top line growth rate and modestly dilutive to Etsy's adjusted EBITDA margin. We'll plan to share more information in conjunction with our second quarter 2021 financial results. I'll now pass it over to Josh to tell you more about Depop.

Thanks, Rachel. Moving to Slide 5. In 2019, we laid out M&A criteria as part of our overall capital allocation strategy, hinged on being patient and picky, to opportunistically find the right businesses fitting very clearly defined criteria. When looking at marketplace businesses, this includes identifying values in mission-aligned companies with similar levers for growth. Those that expand our TAM in interesting horizontal or vertical categories or geographies are well positioned market leaders with organic authentic brands and a strong track record of growth and share our capital-light peer-to-peer operating model. And of course, we always want to purchase that business for the right price with strong conviction that we have the management bandwidth and expertise to help it grow and succeed utilizing our value creation road map. These criteria applied to Reverb. And now we think Depop also fits the bill, and we couldn't be more thrilled to add this business to our family. We've long admired Depop and believe that they are a particularly excellent fit for us, which is why we began our courtship of them in 2019. Depop is a vibrant, two-sided, mobile-first marketplace with a passionate community, a highly differentiated offering of unique items and we believe significant potential to further scale. As Rachel said, their world-class truly global management team and employees have done a fantastic job nurturing this community in a way that is well aligned with Etsy's DNA and mission of keeping commerce human. We are values-aligned businesses that believe in supporting creative entrepreneurs, fostering human connection and making a sustainable impact in the communities we serve. And the strategies and levers for growth are so similar to Etsy's. Depop is already a well-known Gen Z-focused brand in one of the most exciting spaces in e-commerce, resale. And it's an incredible business within that space. As we'll talk you through today, Depop is an organic authentic consumer brand. While smaller in scale than some of its peers, we believe Depop punches above their weight in growth rate, the strength of its brand, user engagement, organic traffic and unit economics. As I've said many times, two-sided marketplaces are lightning in a bottle, and Depop appears to have captured that very rare spark. We believe that Depop has the most engaged community of any resale platform, which, in our book, makes it the most special. Since its founding in 2011, Depop employees have been active participants in all manner of independent creative entrepreneurship, making the marketplace home to millions of buyers and sellers, including stylists, designers, artists, collectors, vintage sellers and, of course, sneakerheads. Sharing Etsy and Reverb's peer-to-peer business model, Depop is an early-stage business that has already begun to scale globally, yet where we believe we will be able to leverage our value creation road map to drive further growth and profitability. We think that this is ideal timing for us to acquire this business. The last year has shown us all a lot, and one thing is crystal clear for me, we have a long runway of growth at Etsy as well as at Reverb, given how small we are as a percentage of overall retail. Now we're adding another highly differentiated early-stage marketplace to our portfolio, our house of brands, featured on Slide 6. We plan to run each marketplace individually with strong leadership at the helm, enabling each to retain the value of its brand and community, yet these marketplaces are deeply connected at their core, allowing passionate users to be sellers and buyers, build businesses and form human connections that extend beyond transactions. Each of our two-sided marketplaces is a leader in its respective category, offering non-commoditized special merchandise, but they share a common set of needs, such as a payments platform, performance and brand marketing, martech capabilities, a trust and safety program and sophisticated search, to name just a few. We believe we can add value across each of these areas and are well positioned to do so. Our investment thesis, borne out by our experience with Reverb is that we know how to scale differentiated special marketplaces really well and that by sharing our know-how in product development, marketing and technology, we can, over time, drive accelerated GMS revenue and profitability, making the whole of Etsy greater than the sum of its parts. Moving to Slide 7. A couple of years ago, we outlined our total available market opportunity for Etsy, and 2020 proved to us that we are sitting on an enormous TAM, where Etsy is competing for consumer wallet share with some of the biggest household names in retail. Within that opportunity sits the largest sector, apparel, where etsy.com did about $1 billion in GMS last year. While $1 billion was a great milestone for Etsy, Depop is expected to significantly increase our footprint in apparel, a category which Euromonitor forecasts to reach $543 billion by 2025. So clearly, we have lots of room to build our position in what is widely regarded to be a high-frequency category, where we believe consumers often start their purchasing habits. There has been no shortage of attention to the rapidly growing resale sector, projected to reach $64 billion in the U.S. by 2024, growing at a projected nearly 40% CAGR over the next 5 years as seen on Slide 8. This is truly astounding growth compared with traditional fast fashion, which generally grows in the single digits. Among the trends often highlighted in driving this phenomenon are younger consumers who favor the concept of sharing over owning, consumers' desire to access used goods at a discounted value price, the rise of the digital consumer and environmental consciousness. Let me highlight why we think Depop is a gem within the resale space. Why do we love Depop? Seeing is believing. I encourage you to spend some time on the website and download the app. Actually, you may want to solicit the help of a teenager, as you'll probably find many teens in your community are already passionate about Depop and see it as very distinct from other resale brands. Depop is primarily known for its vintage, streetwear, one-of-a-kind and Y2K fashion. But beyond the merchandise, you'll see a company that has captured the essence of the creative, hustling, connected next-generation consumer in their commitment to people and planet. You'll see partnerships and praise from all corners of youth culture, celebrity and influencers alike. To quote Depop's CEO, Maria, "the Depop community is made up of people who are creating a new fashion system by establishing new trends and making new from old. They come for the clothes, but they stay for the culture." Young consumers are adopting secondhand fashion faster than any other audience. And as we've seen on Slide 10, approximately 90% of Depop's active users are under the age of 26. This transaction deepens our connection with the younger consumer known to be trendsetters, reaching the next generation in a very meaningful way. According to third-party research, Depop is the tenth most popular shopping site among all teens in the U.S. And in 2020, buyers on the platform made approximately 6 purchases a year. According to survey data, nearly half of Gen Z consumers value self-expression, 90% believe firms should address societal and environmental issues, and 50% want to start their own company. Depop addresses these trends head-on by supporting and celebrating the richness and diversity of its community with a commitment to carbon neutrality by the end of this year and by laying out a detailed sustainability plan. Depop is also striving to create a trusted, safe and secure experience for its community of young entrepreneurs to thrive and grow. As a result, according to its monthly brand surveys, Depop has high prompted awareness from the Gen Z demographic. As with Etsy, every seller on Depop has a story and a story worth sharing. Many begin by selling clothes from their own wardrobes. They're mobile natives. For casual Depop users, small-scale sales are often enough. It's today's version of the paper route. For others, selling on Depop can become more. They understand the power and value in sharing their particular tastes with the world. They create inventory and generate a following. Sometimes, it becomes a full-time gig. For example, there's @internetgirl, who took a break from school in Canada using the app to become a serial fashion entrepreneur at the age of 24. And there's @ladskazeem, who credits his Depop shop for helping him move from homelessness to being a top U.K. vintage fashion trader. These seller stories are all about special. They inspire all of us, just as our Etsy and Reverb seller stories do, and we're excited to share our learnings to help them grow and succeed. To give you a bit of background on Depop's roots, Depop was founded by Simon Beckerman, Co-Founder of an independent Milan-based culture magazine, and it was originally a social network where readers could buy items featured in the magazine. After realizing that Depop needed a selling function, Simon reenvisioned the app as a global marketplace, a mobile space where you can see what your friends and the people you're inspired by are liking, buying and selling. The app hit a milestone of 1 million users in 2014, and then refocused the business on fashion and the influential Gen Z consumer. After starting first in the U.K. and moving into the U.S. and Australia, Depop now has a loyal community of approximately 30 million registered users across nearly 150 countries. And Depop has been growing significantly faster than its resale peers and even faster than Etsy's own substantial growth, without yet the benefit of meaningful marketing investments. Moving to Slide 13. How has Depop grown so fast in such a short period of time? Similar to how Etsy tapped into the needs and values of its community in its early risk days and continues to do so today, Depop has as well. They've created a generationally aligned, highly curated, engaging and visual-first selling and buying experience, featuring one app for both buyers and sellers; a visual-first user experience with video-enabled listings,; multiple jumping-off points for discovery, featuring both human and machine-driven journeys; human connections through comments, messages, favorites and follows; ease of use for sellers with the ability to offer free shipping and bundled discounts as an example, all resulting in an engaging, intuitive innately social and connected experience. Depop is still in the early days of its product development journey. We're excited about their road map for continued innovation, and we can't wait to dive in and learn from Depop's experience to benefit both Etsy and the Reverb marketplaces. Depop's product experience has led to strong engagement among its user base, shown on Slide 14. And frankly, this is one of the parts of their story we are most excited about. As of the end of 2020, Depop's active buyer installer base has grown to 4 million and 2 million, respectively, with 49% being repeat buyers and 75% in GMS coming from existing cohorts. These metrics are encouraging for a company of Depop's size and scale, but we believe their engagement flywheel is best highlighted by the percentage of sellers that are also buyers. This metric is 74% for Depop, which leads the resale industry. To reiterate, what's most compelling for us is that the strong foundation created by these KPIs was built organically, with relatively little marketing investment. Rachel will now tell you a little bit about how we see the go-forward business opportunity for Depop.

Thanks, Josh. Moving to Slide 15. Depop is a true two-sided marketplace similar to Etsy and Reverb. We love these businesses. We'll now have another marketplace to love, and I'll take a minute to share why. Two-sided marketplaces are, as Josh said earlier, like lightning in a bottle. As we all saw last year for both Etsy and Reverb, we benefit from not having certain risks associated with traditional retail, such as managing physical inventory, warehouses and logistics or forecasting styles and trends. Consequently, we have a highly variable cost structure, which provides ample opportunity to drive growth, profitability or both. These types of businesses are generally high gross margin, capital-light and at scale, they are free cash flow generative and don't need to tap the balance sheet to organically fund the business. And we anticipate Depop to be similar, featured on Slide 16. The marketplace has a natural flywheel that accelerates as the community expands, and one that will get extra amplification from its strong content machine. With more sellers, new and engaging content and a larger user base, this virtuous cycle can manifest into incremental GMS. With under 10% of Depop's GMS coming from paid marketing, we are extremely excited to share Etsy's learnings on performance marketing, compare notes on our martech stack and consider how brand marketing might also be incorporated at the right time to further accelerate brand awareness and the marketplace flywheel. As we dive deeper into the business, we see a tremendous opportunity to invest and drive growth, which I'll touch on more in a moment. We believe Depop's core user demographic is a huge untapped opportunity and see plenty of room to expand the seller and buyer community. When looking at the Gen Z and millennial demographic in its largest 2 markets, the U.S. and the U.K., there are a significant number of consumers aged 15 to 34 open to buying or selling secondhand items online. Depop estimates this to be approximately 20x their current buyer base, a large base to draw upon as we elevate the brand in both regions and beyond. We believe we have a proven playbook for creating value for acquired businesses. Our approach is fairly simple. We explore the right value-added services to drive monetization, combined with focused improvements to the on-site project experience that can expand the conversion rate. We believe that, together, these efforts can drive lifetime value higher and enable us to invest more in marketing to drive traffic and brand awareness at similar or better returns. With more efficient marketing, the marketplace gets bigger. And as we've always said, two-sided marketplaces get better as they get bigger. With Reverb as a case in point, as shown on Slide 18, operationally, it is now set up for success with a more efficient approach to marketing, a disciplined product development culture and a more stable infrastructure to leverage. And as 2 proof points of Reverb's success, gross margins have expanded to 53% in the first quarter of 2021, and GMS per marketing dollar has also grown significantly, as you can see from the chart. Over the past year, Etsy has converted nearly 100% of operating cash flow to free cash flow, while investing heavily in the business to drive growth. We believe this demonstrates the strength of our disciplined and rigorous approach to evaluating growth investments as we drive for positive ROI. We believe, with scale, each of our marketplaces can deliver similar trends in profitability over time. Similar to Etsy and Reverb, we see so many opportunities with Depop to expand the brand globally, invest in product experiences, expand marketing strategies and investment, and grow value-added seller services. To give you just a few examples of how we see working with the Depop team, we'll be sharing our attribution marketing know-how to help them build a profitable performance marketing program, reviewing some of our most successful product wins, such as how we have improved etsy.com's search experience and other approaches we have used to drive increased conversion rate, evaluating opportunities to provide more value-added seller services like advertising on and off the marketplace, and we'll be developing disciplined investment strategies to build the brand globally, where we see ample room to expand from here. We plan to leverage Depop's strong organic base and work to capitalize on macro trends shaping the future of e-commerce, the shift from offline to online, the growing importance of resale and the influence of social. We believe Depop is well positioned to take advantage of a massive opportunity in the retail market and we'll bolster their ability to do so. With that, I'll turn it back to Josh for closing comments.

Thanks, Rachel. Etsy's mission is keeping commerce human, and I think that matters now more than ever. In a time when buyers are thinking a lot about what they're buying and how it aligns with their values, Etsy stands for something that has meaning. We'll now have a house of brands where each individual business stands for something different and meaningful, built on a foundation of marketplace expertise with tremendous potential to unlock further growth, and I've never been more excited about what lies ahead. I hope that by now you know that we take a very disciplined approach to all of our investments, organic and inorganic, while continuing to focus on executing our long-term strategy and keeping our eye on the prize. We have tremendous conviction about this deal and the value we can deliver to our various stakeholders by bringing Depop into the Etsy family. And with that, I'll turn it over to Deb, so we can take your questions.

Thanks, Josh and Rachel. First question comes in from Ed Yruma from KeyBanc. Depop has very targeted psychographics. How willing are you to expand it over time to tap into the growing resale opportunity? And that's for you Josh.

Ed, thanks for the question. First, that's really a question that we'll cover with Maria over time and the leadership team at Depop. They're going to continue to be the ones in charge of running this business. As you know, I love focus. And why do I think that Depop has been so enormously successful in the space where there are many competitors, I think it's because of their focus. And in this case, they're focused on Gen Z. They have really been exclusively focused on serving that demographic. They know it incredibly well. They speak to that demographic. And if you go and you talk to any of the Gen Z folks in your community, I think you're going to find a high percentage of them know Depop, are very passionate about Depop and would not put Depop in the same category as other resale players. And I think that's because of the focus and dedication. And when we look at the Gen Z demographic, a couple of things I'd point out, it's 1/4 of the global workforce already. It's projected to be 1.3 billion members of the workforce by 2030 are part of Gen Z. So this is an enormous demographic and it's the trendsetter demographic. It's the aspirational demographic. I can remember a time when Venmo was niche because it was very young people, and those people grew up and Venmo is a very big business now as it has followed that one generation, that one demographic as they've entered the workforce and their spending power has grown. I see similar potential here with Depop. I do think that there might be an opportunity for category expansion. The focus right now is almost exclusively clothing. And I can imagine that Gen Z people, as they grow up, will have other needs as well. But we think that the market that they're focused on right now is enormous and they're relatively lightly penetrated as it is.

Great. Thanks, Josh. Okay. Next one is from Maria Ripps at Canaccord. Rachel, I think we'll start with you on this one. With Depop's take rate already at approximately 10%, are there any services that are available on Etsy that are not yet on Depop but can be extended to Depop to offer sellers even more functionality?

Maria, great question. So the primary seller services that they have, in addition to their transaction, is shipping and payments, and they're, right now, outsourced to a third-party provider, which is Stripe. So we will -- as Josh has said a number of times now, they're going to run their business independently, but we're going to be very excited to share best practices and learnings from our own seller service and take rate growth. And over time, we'll see -- we're sticking to our credo of fair exchange of value, see there might be additional services that are value add to sellers and we'll go from there.

Great. The next one is from Laura Champine at Loop. Josh, I'll kick this one to you. Why is the timing ideal now, given that Depop's growth was accelerated by the pandemic last year?

So we've been getting to know them for almost 2 years now. And also, we get a ton of inbounds from companies that are in a process, that are running an auction, that are kind of looking to get bought. We are patient and picky, and we have a very clear set of criteria that we're looking for. We proactively reached out to Depop. And we've been tracking and following Depop because we've been so impressed with the organic growth and the authenticity of that brand and frankly, the culture and values fit with Etsy. And over a period of time getting to know each other, we had the management team confident that we can really help them grow their community and that Etsy can help enable even better growth and success for all of their stakeholders. And so the time was right for us to conclude this transaction. In my experience, there's -- companies can be in a mode where they kind of feel like they need to go and buy something and I'll buy whatever I can in the next 3 to 4 months to fill some kind of need, in my experience, that usually doesn't end well. A better place to be is to have a clear set of criteria for what you're looking for and be patient and picky and then opportunistic. When the right deal comes around, you buy it. If it's at the right price, if you've got the bandwidth to do it and if it's a great fit, relative to what you've been thinking about, I think that's a better strategy, and that's the strategy that we've executed in this particular deal.

Okay. Next one is from Marvin Fong at BTIG. I'd like to dig deeper into your house-of-brand terminology and what this might mean for how Etsy will evolve. Depop clearly pushes Etsy into new areas of e-commerce. I was curious about what your philosophical guardrails are regarding future acquisitions. And I'm interested if you might acquire businesses that aren't marketplaces. Would you consider taking on net debt if the right acquisition came along? Maybe, Josh, you want to start and Rachel could maybe add on to that a little bit.

Yes. We have some very clear criteria. So first, it's got to meet with -- it's got to be well aligned with our mission of keeping commerce human, which means a peer-to-peer marketplace where we're selling non-commoditized goods, special inventory first. Second, it's got to be aligned with our business model. It's a capital-light business model. We like our business model. We know how to execute our business model. To the point of nonmarketplaces or other things like that, that's not currently something that's in scope. That's not what we envisioned when we mean house of brands. We mean peer-to-peer marketplaces that serve a very particular community and where their brand stands for something unique and special. So with Reverb, we have that in the musical instrument category. With Etsy, we have that in handmade and vintage. And now with Depop, we have that with Gen Z in fashion. And so that's what we mean. The next criteria is that we believe we can add a lot of value, that we believe that when we look at the capabilities they're building and what it takes to unlock growth in the next phase, Etsy's expertise can be a real value add. And what we saw with Reverb is that our know-how and expertise alone could unlock a lot of value. We were able to help them to significantly increased gross profit and then take that gross profit and reinvest in marketing more efficiently in order to further accelerate growth. We may, over time, be able to create shared platforms. There's a lot of platforms that these different businesses need, which could potentially be shared in time. But we really need to do the work to make sure that the effort is worth the payoff and that the independent brands would be able to have a sufficient independence to be able to continue to operate independently and chase their own missions and visions. So that's work to be done. Where we are confident is expertise alone, through our value creation playbook, can unlock a lot of value. And then the next criteria is that we can buy the business at a fair price and that we have the bandwidth to execute it and to give it the attention that it deserves. And so those are the criteria we look at when we evaluate opportunities. And again, we're patient and picky. We think Reverb worked out pretty great. And we're really excited about Depop. We think it's a perfect fit.

Let me just add.

Yes, Rachel.

Yes, let me just jump in a little bit. One thing I want to add a little bit responding to the question that Laura had just before this one. We -- the point Josh has made about paying a fair price, when you look at the comps in this specific industry on a -- and you look at the gross profit on a gross adjusted basis, we feel like we paid a very good price for this company. So we always look at things with expectation that we're going to get a good return on the investment that we've made. So that is one thing we feel pretty strongly about on all of the potential future partnerships that we might want to enter into. On our balance sheet, we've always talked about 3 uses of capital. We talk a lot about, we love our marketplace model because we're highly cash generative. So we're generating cash all the time and we're able to find a lot of -- primarily our organic investments don't come off the balance sheet there, things that we can invest in on our -- with our own capital that we generate such as our marketing investments and the investment in our infrastructure, like migrating to the cloud. We also like to use our balance sheet to return capital to shareholders, and we've been good stewards of that and have been -- done some share repurchasing to offset the dilution created by the equity we give to our employees as part of their compensation, and we'll continue to do that. So we really feel that we have a strong balance sheet that will continue to look to balancing operating cash flow with uses of capital on one of these forms of investment that we've demonstrated in the past.

Okay. Next one is from Naved Khan with Truist. How much of Depop's revenue is coming from advertising?

Right now, they don't have advertising revenue on their platform. So that's an example of the kind of value-added service that we could consider. Etsy Ads, Onsite and Offsite Ads program off of Etsy have both been very powerful levers for Etsy. They are very aligned with the seller community. They allow sellers to pay for prominence. So it's not third-party ads on the site, it's first-party ads on the site, and it's made the product experience better and the seller experience better. Reverb has had great experience with its bumped product, which is similar to Etsy's Onsite ads. And Etsy has been advising Reverb on how we can think about continuing to evolve that product. So that's a good example of the kind of value-added service that Depop might consider going forward and where Etsy would have a lot of experience to help guide them.

Great. The next one is from Ygal Arounian from Wedbush. The first part is regarding valuation, which we already covered. The second part was really focused on the growth. So do you expect to see continued material growth this year off of the COVID comps for this business?

Well, we haven't issued our guidance beyond the second quarter for Etsy, and we're not issuing guidance at this time for Depop. We feel great about the Depop business. We think their track record is super impressive. We think they're chasing a very large opportunity, and we think we're well positioned to help them. I don't think we have more to say at this time in terms of future guidance on Depop.

That's correct. And we did talk about the growth that they saw in 2020. And of course, we've talked about Etsy's growth significantly. We'll -- we don't expect to close the deal until the third quarter. So we'll talk a bit more -- we'll give a bit more color on our Q2 call, but probably won't be talking about forward guidance for them until we're closed.

We also did give the 3-year CAGR at 80% as well. So next one is from Shweta Khajuria from Evercore ISI. Could you talk about buyer retention and purchase frequency trends on Depop's platform beyond the first year? Rachel, you want to start with that one maybe?

Yes. So one of the things we love about Depop is their very, very engaged audience and the significant amount of buyer retention that they have, which is actually as strong or stronger than Etsy's. And they also -- one of the things that we see is a very high frequency, which is stronger than Etsy. So their cohorts are amazingly strong, providing all of that organic growth that Josh talked about with very little investment in marketing to drive that frequency. Once they're in, they're highly engaged and they stick around for a while.