The RealReal, Inc. (REAL) Earnings Call Transcript & Summary

Great. Thank you everyone for attending today. I'm very pleased to have Matt Gustke from The RealReal joining us. Also, I think, Paul Bieber will be on as well. And Matt, first-off, again, thanks for joining us so much.

I guess we'll start off with a big picture question. As you look back at last year, what The RealReal learned as a company and, I guess, did supply [indiscernible] really impact sales over the last 12 months?

Sure. Thanks for having me. It's great to be here. It's been a great conference. So yes, looking back on 2020, what a year. I guess the first thing that is evident to us is that our business was built for a lot of things, but it wasn't built to thrive in a pandemic. That much is abundantly clear. But the circumstances forced us to do a number of things to innovate and react with a sense of urgency. We had to pivot pretty quickly from a supply acquisition perspective because about 70% of our supply was immediately disrupted as the economy went into lockdown. So we had to pivot out of in-home appointments into virtual. We had to find ways to get our stores back open. We had to ramp other alternative supply channels, including our vendor channel. So we did all of those things. The result was now a path to a more diversified set of supply levers and channels, which effectively will derisk our supply acquisition and the overall business going forward because, as you know, we're very much a supply-led business. So as supply goes, soon is the GMV tend to go. It also forced us to push harder and faster on automation, and we've been focused on a few key areas to automate our processes. We made a really good progress. And actually, where we are now is above and beyond where we thought the end state would be. And moves like that help us and embolden us to accelerate our expansion outside of the Bay Area in New Jersey, where we have our facilities currently and into Arizona. And that's going to help us drive cost leverage in a number of dimensions as we scale. So I guess the one thing that really didn't change during 2020 was our demand, at least, on a relative basis to supply and that remained very healthy. So the products that we were able to bring in and put up on the marketplace sold very quickly, and they sold at very good prices. So our primary task is obviously back to scaling supply. And I guess the final thought is that the tailwind that a lot of e-commerce companies enjoyed during COVID is if for some of them is about to come to an end. And in contrast, our easy comps start next week and the tailwind that comes along with that is about to be renewed.

Great. And definitely, I know there's some interest in how the reopening could impact you. So how does increasing mobility, how do you think about what that means for your business as we go through a reopening?

Yes. It's a big deal. So we -- coming out of the fourth quarter, we were seeing positive trends in supply and demand. So we finally got back to positive year-over-year growth in GMV and even more positive on the supply side. And as we detailed in earnings last week, that continued into the first quarter, where we're seeing accelerating some [Audio Gap] and GMV growth. [Technical Difficulty]

Matt, can you hear me okay?

Sure I can.

Sorry about that. My bandwidth is too slow. Yes, good to be back online. So we're talking about your reopening and how you're thinking that's going to impact?

Yes. Okay. So I'm going to drill down a couple of supply channels. I think that's really where the story is. So first is our in-home supply acquisition. So as you know, prior to COVID, that was half of our supply and that channel was completely disrupted and it largely still is. So until now, we were able to offset a large portion of that virtual, which does have a role going forward and it's also pretty efficient. What it's not great for in really only in-home consumers are large consignments where virtual is really just still too much friction. We did start reintroducing in-home last week in a couple of markets, and our sales team is super excited about this. One week, a couple of markets, it's a small sample. But last week, in-home apparels averaged more than 30 units per pickup. So clearly, there is some pick-up supply out there for people that we couldn't service in the way they wanted to and literally no one else could either. So that's encouraging. And then second is stores, which were 10% of our supply in 2019, and more recently we're driving about 30% of our new consignor growth. So clearly, people are responding to the ability to be able to drop off and then maybe do some shopping while they're at it. So we're very excited about neighborhood stores, and we'll have about 10% of them open by the end of the second quarter. And all of our stores are still subject to pretty significant capacity constraints. So it's going to be interesting to see what happens as those restrictions are revised. And if the stores continue to perform well, then we're very likely to keep everything more. To some extent, the sky is the limit with respect to efficient supply growth that's coming out of the stores. So overall, between those 2, in-home and stores, which were about 70% of our supply in COVID are the big beneficiaries of Real. But the other supply strategies like virtual and vendor and buy upfront are also scaling. They should be able to continue doing so in most of the openings there is.

Great. If you think about people inviting someone from The RealReal into their home to go -- help them go through their closets, I imagine that was just a really tough environment. But are you already starting to see people reengaged with that at all at this point?

Yes, for sure. Again, just a very limited basis. I mean a couple of markets and effectively where we have kind of repeat like engaged consignors, who have a salesperson reach out to directly and they want that. So it's there, and we just know that, that's going to be a pretty big unlock. So we'll be able to do that more -- in a more broad-based way. But we're all seeing it, say, the progressive thing where we started with like literally having no one come closer to your house and like the UPS guy was dropping off the box like outside the front gate. And now we have service people coming into our homes, we're getting more comfortable with that. And we've learned how to do that safely. So, so long as the trajectory of vaccinations recovery happens, in-homes going to be pretty big.

Got it. One more thing, the ordering we've seen in the stores and you talked about increasing investments on the last earnings call and then also the company just raised some trends. So I guess the big picture is kind of like have you inched your investment faster a bit? And how do you think the money you just raised?

Okay. A couple of things there. So let me guess, take the capital raise first, and we'll kind of get into what that means for still [Audio Gap] investments more broadly. And these things are really kind of independent. So we have a strong balance sheet. We have one -- we're on the doorstep of a strong recovery, and we're very much focused on getting our business to profitability. We are focused on that with show to capital raise. Second, the elements of our breakeven model will be intact. Now once we get past COVID, gross profit per order [Audio Gap] breakeven milestone of around $100 and we talked about it a lot. And the progress that we made last year on automation is going to support efficiency gains and then the supply channel stores, virtual, vendor, all of that not only help diversify and derisk supply, but they possibly can produce some incremental efficiency and expanding in Arizona is going to get effected of it. So the plan is working. We just need to scale to realize all the efficiencies. There's obviously, at this point too much uncertainty, the plan to flag about when we think that moment is. But in terms of why we chose to raise money now, it's pretty simple. In terms of the convert market, we're just good to overlook, frankly. And we're not prognosticators. And we don't know where that market is going to be in 6 months from now or a year from now. [Audio Gap] we've gone back to the capital markets to raise money in advance with international expansion. What we saw that the TAM was probably right. We're seeing volume yields start to increase. So I felt like now was the right time to fortify the balance sheet at very low cost of capital. So at a minimum, it's going to give us flexibility on our long-term strategy, which certainly includes international and potentially a larger neighborhood store rollout. Yes. So that's the fund raise. And then with respect to the investment in stores, I think this is perhaps [Audio Gap] a little bit. Stores have always been hard to run now. Prior to us talking about neighborhood stores, we were focused on opening larger format stores, which we now call our flagship stores. We're going to open about 2 to 3 of those per year. For the same cost as opening those 2 to 3 flagships to open at least 10 neighborhood stores. And there's not a linear relationship between size of store and supply generating. So smaller format stores, 1/3 to 1/4 of the size of the bigger stores are generating more than 1/2 -- nearly all of the supply that the larger format stores do to make the arguments actually more efficient from a cost perspective. And certainly, on a per-store basis, it's more efficient and we see the potential to get these things to breakeven into profitability in about a year's time. So it's more of a replacement rather than an additive component to the cost structure. And to the extent that they continue to scale well, it's going to actually take some pressure off of our marketing and marketing efficiency to generate new consignors. The stores are very efficient at that. They're more efficient, we think, than marketing investments alone. So we're very happy with them.

Great. Can you help us at all think about the contribution from a regional store in dollars? I know there's 10 of them, so they could add up. But is it -- if you can give us a number, maybe help, be material, if you think all combined?

Yes. You broke up a little bit, but I think I got the gist of it, I think. Just what does the store look like? So in general, our stores, they have roughly equal value contributions from what's selling in the store versus supply that's generated in the [Audio Gap]. And on a per-store basis are the total -- let's just think about the value of one of these neighborhood stores. We don't have any really that our material [Audio Gap] really project this out. But you could think of them is generating upwards $5 million of kind of aggregate GM value split between those 2 per quarter. So you start adding these things up that they can become quite significant quite quickly. But what they do -- on the demand side, it's arguable, how much of that is incremental because everything that we have sells anyway. On the supply side, it's very pretty clearly incremental. Not only incremental, but it's faster and more cost-effective way for us to unlock supply. And by the way, it's just another supply channel for consignors and sellers. We want to have as many options for them to be the lowest friction or close to the friction way for them to sell their goods. And it's clear that they're responding to stores. People want to do that, particularly during COVID times where we're kind of in and around our neighborhoods, but we want to be out. So people are lining up to get into the store to shop and to consign. So it's something that we can offer, given our model that a lot of the other marketplaces just don't.

Got it. Supply was a challenge last year. And I think in Q4, you gave some supply incentives, which impacted, I think, growth rates. Could you talk a little bit about program? And do you expect those to -- again to repeat, is that a great way to get people kind of using RealReal?

Yes. So maybe I'll just step back a little bit and go over that kind of some of the types of promotions that we tend to run and how they get reflected in our financials. We, of course, have your garden variety, new member promotions. And we typically run an incentive of about once a month where you can earn a credit for a future use. And the more you spend, the more you earn. We call it our bounce back campaign. As supply was recovering, we did this promotion a bit more frequently to help sell-through the supply that was aging on the site, and this was actually the primary driver of buyer incentives increasing in the fourth quarter. We have such a high -- it's like sort of a little of -- we have such a high engagement from our members, and so many of them are engaged with the site or with the app multiple times for month, sometimes multiple times per day. Without a new - a lot of new supply, we use incentives as a short-term tactic to move through the supply that they had been seeing multiple times. So we continued that into January, but we've been back to a normalized level of that promotional activity since and the credits are actually booked as a reduction to revenue when they're used. So that usage of those previously earned credits will kind of continue through the balance of this quarter essentially. And then there's the $100 site credit for consignors that you referenced, that was used and still is to promote the opening or the reopening of stores and encourage people to come and experience the store and drop off goods. Store supply, as you know, is doing very well. So we're likely to continue this strategy as we open new stores, but the credit can only be used for buying goods. So it's actually helping us convert consignors into buyers and reinforce the flywheel effect that you know well, right? So with more than half of our consignors becoming buyers and when they do, they become essentially supercharge buyers. So that's, we think, a healthy thing for us to do overall. So if I boil all down, as supply continues to recover, I think as long as it continues to do so, the use of buyer incentives overall should trend back down to the historical norm of about 1.5% in GMV.

Got it. On the call also, your guidance, which I think you gave us some good data points and some monthly data points last year that really helped. But we know -- I think you've guided to 17% to 20% GMV growth for the quarter, kind of that was the rough outlook. And you were up 14%, we know March has a very easy comp. So we're all doing the math on it, but it looked -- kind of for sure, it's for March. So I don't know if you feel like giving us a bit on how the business is, but how do you think about guidance for the quarter and how do you feel its reopening trends?

So no, I'm not going to provide an update on how March is going. But I will clarify what I said on the earnings call, which is a couple of weeks ago. You're right. GMV growth through the 19th of February was up 14% year-over-year. And if it stayed in that range kind of an average daily GMV basis until we started lapping COVID, and then you adjust for having an extra day [Audio Gap] of last year, essentially implied that March was going to grow in the low 30% to low 40% year-over-year range. So even that is understandably pretty conservative. I think the most important thing from our perspective, after a year like 2020 when all bets were off and we couldn't even see into tomorrow, have like visibility is improving, and this is sort of the first step for us to start reestablishing some form of an outlook in some point of guidance. So we're happy to be in a position where we're comfortable to do that. And you're right, easier comps are ahead of us very significantly. And as the world progressively reopens, we look forward to a very nice tailwind for the rest of this year.

Great. I think investors ask a lot of questions about your margins. So maybe we can move on to comps and markings. But before we get there, maybe the first question is who are your biggest competitor? What you think about who you compete against? Who are those competitors?

Yes. That's sort of a tough one. So on the full-service part of the market for resold luxury goods across multiple categories, we really don't have much in the way of direct competition. We never really have. And to the extent that there is competition for same goods, it tends to be from more essential category specialists. And from a take rate perspective, we're already competitive versus all of those. We've used our take rates being multiple category allows us to have a differentiated commission structure or a take rate structure. So we can offer high commissions on the high price point goods and sort of tighten that and supplement that with higher take rates on the lower end of the platform. So I'm not really seeing any increasing pressure there. And then furthermore, we're getting more aggressive with making cash offers for some of the same products that maybe would have otherwise gone to some of these single category marketplaces. So you're going to see us getting more competitive there, and it's a margin additive thing for the deal.

Got it. And I've covered eBay for years, and we think about them as roughly a 30% margin company. Can you talk -- just so people can think about -- your take rates are different, but you do have verification costs. Any way to think about how your things might compare to theirs long term or just the differences in the business model?

Yes, I have some pretty decent familiarity with eBay and myself.

Yes, I know about that.

But in terms of, I guess, the question like so who our margin comps are, at a high level, I don't really feel it's my place to say. But I guess the way that I think about it is that we have essentially a hybrid model with about 90% of our GMV at consignment marketplace margins in the 70-plus percent range and a small portion of our GMV that's recognized on a gross basis with lower gross margins in 15% to 20-something percent range. But even a stuff that's sold on a gross base is really still marketplace. It's still unique products with different accounting. So from a longer-term EBITDA margin perspective, to some extent, it's really going to depend on the mix of the different accounting standards in our statements. But on the cost side, the cost of things like authentication, shipping and the sales cost, those are necessary requirements to get the top of funnel metrics that we have, like a $450 average revenue and a 36% take rate like they come in the bundle when it's necessary to get the other. So I think the way to think about this capital model can translate to cash flow or EBITDA over time. And if you look at it from that perspective, I think that we're going to stack up very well just about anyone. I'd expect a very large proportion of our orders are going to come from repeat buyers. So I don't know, perhaps the comp set is more about marketplace, category leaders, category definers and market drivers, who have high buyer loyalty and strong order economics. So whoever fits into that comp set will be kind of [indiscernible].

Got it. Let's just move over to the Arizona Authentication Center. It's new. I know you opened one in the East Coast and you have one here in California. But why open that? And what does that mean when we're thinking 2 to 3 years after?

Yes. Yes. So we're really excited about Arizona. It's going to be our largest authentication center to date, about 600,000 square feet versus our previous one in Perth Amboy, it's about 500,000 square feet. And we are on track to open that this summer. Each time that we've opened a new center, we've been able to apply the learnings from the previous ones in terms of things like workflows and the way we lay it out, our processes, the technology we're using, et cetera. So our Perth Amboy facility, like I mentioned, is our most recent and is also the most efficient, especially on the fulfillment side. So we've just recently gone through what we call a decoupling of our New Jersey facilities. So our older facility in Secaucus, also a smaller one, is now exclusively focused on inbound processing and Perth is essentially warehousing and fulfillment only. So this is going to help us drive more efficiencies for labor and a lot of efficiency in shipping because we're going to have to split fewer orders and have fewer parcels shipping out. So back to Arizona. So I look to build on what we've learned all across the rest of the portfolio, the cost of the facility itself is about half of our others on a per square foot basis. So it will support meaningful fixed cost leverage as we scale. And with some adjustments to how we're building out the warehouses, Arizona, together with New Jersey, is going to give us at least 5 years of capacity before we need to add another facility. And in the discussions that we're having with other companies in the area, they're really actually very happy with the availability and the quality and the productivity of the employee base there. So all signs point to Arizona being a very good thing. Because the final piece is that being in Arizona happens to places strategically near the University of Arizona, who might know graduates more gemologists than any other university in the world. And to the extent like that's the hardest to get expert population out there are gemologists. We have an existing partnership with the University of Arizona, that was based on creating technology to help us authenticate and automate measurement of gemstones and sort of scale our processes, and that's going very well. But we're also going to build on the partnership to create a pipeline of experts coming through the university, working with us as part of their training and development. So all signs point to Arizona being a very exciting place for us to be.

Very good. Let's move over to some of your brand relationships. I know people had some questions around the IPO about counterfeiting, but obviously, your authentication is that. Now it looks like holdings really interesting relationships with some brand. So talk about what that could mean for our business longer term in -- or HD stream in the pipeline?

Yes. So over the history of the company, we've had dozens of brand relationships, only a handful of which we've really talked about publicly because the brands were more comfortable, kind of keeping some of them off to the sideline. But the ones that you would know most would be Stella McCartney, Burberry and most recently, Gucci. The typical form of our brand partnerships starts with the brand introducing their customers to us, encouraging them to consign or just to sell the goods when they've done with them. And then we create an incentive in one form or another for them to go back to that same brand and purchase new. That's been the formula that's worked for a lot of our partnerships over time and will continue to be the kind of the cornerstone for how they operate. What I didn't mention is supply coming directly from the brands. That historically has not been part of our partnerships. So certainly as we get deeper into these relationships, we would welcome the opportunity to be a marketplace and a distribution channel for them, where we can be helpful to them. So we'd expect to see more partnerships like that and some that will have some interesting twist, one that we're hopeful that we'll be able to talk about around the time of Earth Day coming up pretty soon.

On supply, I guess, before I start, are you still more supply-constrained than demand? Talk about some of the methods there and then I have a follow-up.

Yes. We are still supply constrained. The thing that's been constant is demand, what we bring in shelves. So not to overly simply it, it's a complex business. But as supply goes, the business goes. So we look at a whole variety of metrics that, of course, it starts at the top of the funnel with the total number of, we call, opportunities or people who are expressing some interest in consignment and then we want to make sure that we're maximizing the conversion of those opportunities into consignments and also the quality and the quantity of those consignments is measured and monitored. We want to keep the average unit per consignment, the average dollar value per item. So we use various levers, both with our sales incentive model as well as promotions that we run for consignors to kind of optimize our supply. So most recently, the newest thing we're doing is offering consignors an 80% commission on any jewelry over $1,000. So jewelry is on fire right now. So we can't get enough of it. So that's a good play for us and that's versus what have generally been about a 70% commission prior to that. So we've got levers. We're going to focus on continuing to drive supply. We've got more channels in more different ways. And the ones that we developed during 2020 will stay with us. The ones that were kind of hard to execute on in 2020 will come back as reopening happens and that's going to disproportionately benefit markets like New York and L.A., who are depending on the combination of in-home and retail to drive supply growth. So retail is kind of coming back pretty fast. In-home is the next sort of shoot or drop, and we're hopeful to get back into those markets pretty quickly.

Okay. And I think you did provide some metrics on New York and L.A. on the earnings calls. But just how important are those markets to your overall supply? I think they're quite [indiscernible] to help us gauge the RealReal.

Yes. Yes. There are between the 2. Naturally, they're the #1 in 2 largest markets that we have. And they were about 1/3 of our total supply value. And not quite as much on the demand side, but pretty on close. So they're obviously very important markets, who were the most impacted by COVID restrictions. And as most people from this call are probably in one of those markets, so they can relate to like to live through that. Longer term, there's no reason that these markets shouldn't be able to grow at least in line with the company average. And frankly, given the high concentration of luxury supply in these markets, some average should probably be considered the floor. And you add to that the fact that our initial rollout of neighborhood has a pretty high concentration in these markets. We've already opened in Palo Alto, in Brooklyn, in Newport Beach, in Greenwich, Connecticut was just last week, last Friday that we opened. And our San Francisco flagship store barely got a chance to reopen before COVID block. So that should be very successful over time. So the arguing to be made that the combination of those 3 markets is really that they could be set up for a very nice display.

Got it. And then talk about a little bit about the breath sourcing of merchant. The pros and cons around that with manufacturers, the margin impact and how do you think about how big that can be?

Yes. So what direct purchasing -- we've been doing this for a while for years, frankly. It is something that a tool that we were using when people -- individual consignors came to us in one of our brick-and-mortar locations, typically in one of our consignment officers and had jewelry, watches and bags that they are getting value. And we present a price that we would sell the good at with the expected commission on consignment or we'd offer an upfront payments at, obviously, a lower price and a better margin to us. That was typically just used to convert those consignors to work with us in any way, they tended to choose consignment. We've been -- we've seen an increasing interest in people taking the cash upfront offer. So we really hadn't done much in the way of marketing of it. Then comes along COVID and the vendor opportunity just sort of surges. This is vendor just -- or the sellers are businesses. And buying upfront was particularly an important thing for them because oftentimes, they had already committed their capital. They bought their goods. So most of the vendors that we're working with are resellers in one form or another, so they wanted to get paid pretty quickly. So we're finding that was, in turn, unlocking more incremental supply at good margins for us. So we're going to start promoting that and really leaning into it because one is competitive with some of the single category marketplaces; and two, but more importantly, it really helps us unlock a very significant abundance of supply coming from the vendor channel. That said, still, actually, the majority of the supply is coming on consignment terms because they can make more money. So I think there'll be a healthy blend of that going forward. And so the direct purchasing of inventory, you can think of that as a tool used across all of the different supply channels to increase supply and enhance the margins.

Got it. We'll move from the supply side over to the demand side. And just on the consumer, what are your biggest initiatives to build brand awareness right now or just to get back to purchase on the site? What are your initiatives for this year?

You thought you're moving up from supply, but you're not. So I think to increase buyer growth and increase repeat buyer engagement is to drive supply. That's not to be too simplistic about it, but that's just the reality. We've seen that numerous cycles over time that abundant supply growth is our best tool to do all those things. But beyond that, stores are very important. We've seen everywhere we've opened a store that we have kind of an immediate acceleration in the halo effect that's created around that market, and that's just sustains for quite some time. That takes some pressure off of marketing to drive brand awareness and to drive buyer and consignor acquisition. And then beyond that, we will do our traditional marketing investments. But we're going to do so in a much more efficient level. We're focused on driving marketing efficiency this year that's not only better, obviously, than 2020, but better than 2019, which is our last fall kind of the COVID period. It was a pretty darn good year for us. So we can't do better than that.

Got it. When you don't have supply in a category and you study people come in to your side and what they do, do you find that supply really helps conversion? Is that the one thing prevents conversion rates?

Yes. It's pretty much as simple as that. We think about -- we've got 20 million members, I thought 6 million of them are active with us regularly every month, many of whom multiple times a day. The people who use our app are on in an average of 35 minutes per session. So it's like it's social media like type of engagement so those people are doing that. They know if the products on the site are new or not, right? So if they're seeing stuff that they've seen, they saw yesterday and the day before, the day before that, they're not going to convert as well. When the new supply starts showing up, and it could be things that they were looking for or things that they hadn't even thought about. When that starts to happen, that's when the magic in the marketplace really starts to take shape. And you see all of the old cohorts really start to serve. Their order sizes go up, their purchase frequency goes up. And then those members convert into new buyers at a better rate. That particularly happens when a subset of supply is growing, particularly the lower priced products, i.e., apparel, accessories, shoes. New customer orders tend to be lower AOV, and that's just how it has always been. So having a healthy abundance of those categories is sort of key to really driving new customer growth. And I think that's setting up nicely because that's been coming in pretty well throughout COVID. Demand for those types of products hasn't been as great because people haven't needed new fashion. We think that as we kind of start looking forward to the second half of the year that there could be quite a significant rebound in our business and kind of industry-wide in apparel sales as people envision a future in which they're reentering the world and going to restaurants, going back into the workplace. And they look at their closets and they were like saying, "I literally haven't put that on in more than a year. And some of that even longer and I don't know that I like it seems so old to me now. I don't really want it anymore. So I think there might be more than the average kind of rate and magnitude of refresh in the apparel side."

Got it. Maybe one more that we get a lot about is margins. And so what are you seeing in the business that gives you confidence in future margin target? And from here to breakeven, what are the key drivers to get there?

In one minute?

One minute.

All right. Well, I'll keep the short answer. Three kind of buckets of path to breakeven and breakeven to long term, gross profit per order, variable expense leverage and fixed leverage. Gross profit per order, nothing magic needs to happen. We just need to get pass COVID, order values go back to where they were, take rates normalize, all the other underpinning shipping expenses, et cetera, are there. $100 is gross profit per order, all things go well. We consider approach that by the exiting this year. Variable expense leverage. You need to shave out about $10 per order on variable costs in conjunction with that $100 gross profit per order. Most of that's going to come from marketing efficiency. We already kind of talked about that. And most of the rest is going to be on the back of the automation-driven productivity improvements we're going to see in operations. The automation is done. Well, enough of the automation is done to support that level of efficiency gain. More automation will happen. So just now just a matter of driving the scale to realize those efficiencies and realize leverage across our fixed structure. And then from breakeven going forward, gross profit per order maybe goes up a little bit, variable efficiencies will continue pretty consistently and then fixed leverage should accelerate.

I know we're a little bit over, but would like to talk -- one more question on the cohorts. Are you feeling good about cohorts of heat rates and what you're seeing about the profitability as customer change?

Yes. I feel like a broken record. Yes, I feel good about our cohorts. They all suffered in 2020, and it's not like the 2020 cohort is like this have normally low group that's going to be that forever. They are just like everybody else. They were transacting fewer [Audio Gap] lower order sizes than in pre-COVID times. As supply comes back, I think they're going to come back to doing just what they did, which is having net negative churn on an annual basis.

Great. Thank you so much, Matt. I apologize for my video issues earlier, but I think we got it fixed. It's obviously to call it...

Well, I appreciate it.

Bye-bye. Take care.