TheRealReal, Inc. (REAL) Q2 2021 Earnings Call Transcript

Good day and thank you for joining us for The RealReal's Second Quarter 2021 Financial Results Conference Call. Currently, all participants are in listen-only mode. Following the presentation, we will have a question-and-answer session. I will now turn the call over to Mr. Paul Bieber, Head of Investor Relations. Please proceed.

Thank you. Good afternoon and welcome to The RealReal's earnings call for the quarter ended June 30, 2021. I'm Paul Bieber, Head of Investor Relations at The RealReal. Joining me today to discuss our results are Founder and CEO, Julie Wainwright and Chief Financial Officer, Matt Gustke. Hopefully you had a chance to read our press release and stockholder letter that we distributed earlier today, both of which are available on our Investor Relations website. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. These forward-looking statements involve known and unknown risks and uncertainties, and our actual results could differ materially. You can find more information about these risks, uncertainties and other factors that could affect our operating results in our most recent periodic report on Form 10-K, subsequent quarterly reports on Form 10-Q and in our earnings release from earlier today. In addition, our presentation will include certain non-GAAP financial measures for which we have provided reconciliations to the most comparable GAAP measures in our earnings press release. With that, I'll hand the call over to Julie for introductory remarks, and then we'll go straight to Q&A. Julie?

Thanks, Paul. And thank you all for joining us to discuss our second quarter results. We are pleased to report another quarter of strong growth, driven by at-home consignments and our continued retail momentum. We achieved our highest numbers of both new and repeat consignors this quarter. As a supply-driven marketplace, this has resulted in Q2 GMV increasing 91% year-on-year and 53% compared to the same period in 2019. Q2 year-over-year GMV growth also accelerated to quarter-on-quarter when compared to both 2020 and 2019. We achieved these strong growth rates, while also driving a significant improvement in gross profit per order, a key driver in our path to profitability. Q2 gross profit per order was approximately $94, a $9 quarter-on-quarter improvement. Q2 wasn't a very busy quarter for us, and we made significant progress with our top priorities; specifically, getting back at-home. Our at-home consignments are increasing as a percentage of total consignments and contributed 38% of total units in Q2. Our Arizona facility, we accelerated the move to our large authentication center in Phoenix to accommodate future growth and I'm happy to say that's going very well. Our neighborhood store expansion; we added Austin, Dallas and Atlanta during Q2. Our retail stores generated 30% of new consignments in the quarter. We plan to open about two more stores this year. And lastly, our technology innovation; our investments in technology continue to differentiate our business, drive efficiencies in our operations, and enable significant feature scale. In Q2, we released the next generation of our authentication and pricing engines. The current trends in our business are strong. We believe they will continue this year and next. Beyond their GMV growth, we make progress with gross profit per order and efficiencies in operations and marketing. All of these elements are key to our path to profitability. The investments we have made in neighborhood stores and our Arizona facility not only support our growth, but also create the potential for meaningful leverage going forward. We are focused on achieving profitability and expect to make significant progress over the coming quarter. As always, I'd like to thank the entire TRR team for their hard work in delivering these strong Q2 results. It is their dedication and commitment that drives our business every day. And with that, operator, we're ready for questions.

Your first question is from Oliver Chen of Cowen. Your line is now open.

Thank you very much. On profitability and the opportunity ahead, what do you see as the key drivers in managing that gross profit per order? And also just love your thoughts on the evolution of LA and New York in these markets, in terms of supply growth and capabilities. Thank you.

I'm going to start with the last part and then I'll hand it over to Matt to talk about the main factors contributing to our path to profitability. Interestingly, both our Los Angeles and New York locations, being our oldest stores, continue to attract new consigners and buyers, performing exceptionally well. We are in the process of expanding the New York store. Additionally, we will be reconfiguring the lower section of the New York store to enable us to take in even more consignment, particularly since these stores are more established and performing on or above targets. We remain dedicated to these flagship stores. Furthermore, we are not only expanding the flagship stores but also our neighborhood stores, which are performing at or above our expectations as well.

Okay. And I'll go to the first question. So I think your focus was really on gross profit per order drivers and within the context of overall profitability. So, first of all, we're very focused on it. And as you saw, gross profit per order increased $9 quarter-over-quarter, getting into the mid-90s. From here forward, further improvements can be expected from a full quarter benefit from lower buyer incentives which exited Q2 at pre-COVID levels. And then beyond that, we do expect over time to see incremental shipping improvements and continuing benefits from higher AOV. So those are really the key pieces that get you from where we are now to that $100 neighborhood and going forwards just small incremental benefits from there. In the broader context of profitability, that's just one element. So, first and foremost is top-line growth. GMV is growing well. In July, I think you saw we put a release out that we are still growing 53% versus 2019, in which the comps actually were getting more difficult in Q3. We're comfortable saying that we can sustain 30 plus percent top-line growth for the foreseeable future. That combined with gross profit per order increasing to the $100 neighborhood, and getting variable expenses issues, which we have been doing consistently over time and expect to continue to do so, get us to the point where we're seeing contribution margin per order in the $35 to $40 range. And then what remains is the controlling of fixed costs. Our fixed costs from this point forward are really not going to increase very much at all until we get to profitability. Arizona was the last big step up. We've got two small stores to come in. After that, you're able to see very minimal fixed costs increases going forward. So the leverage in the top-line, compounded by the gross profit piece, and variable marketing efficiencies and other variable expense efficiencies will carry us to the finish line.

Thank you so much. That was very helpful. Last question, on the 30% annual GMV growth that you called out in the letter. What are some underlying drivers that give you confidence there? Any further details would be helpful. Thank you and best regards.

Yeah, thanks. Thanks, Oliver. So I'll start and Julie might want to chime in on this. But overall, we're feeling very optimistic about where we are, not only coming out of COVID but just overall. Keep in mind that where we are now is just a rounding error in terms of penetration to the overall TAM with significant tailwinds in the resale market overall. We're very well-positioned to continue growing well and taking our unfair share of market growth going forward. On top of that, I think we've de-risked some of those assumptions over the course of COVID and still now, with more diversified supply coming from more places; that gives us incremental confidence that committing to something like that is reasonable.

Of course, we are always looking at our cohort and seeing if there's any change in the cohorts. In fact, we are in very good shape with our assumptions for repeat versus new and also on the consigners and buyers side. Consequently, we do feel confident about next year. And we do recognize the Delta variant is the wild card, but assuming there are no complete shutdowns again, which we don't foresee, we feel good about our future here.

Thank you very much. Best regards.

Thanks, Oliver.

Your next question is from Erinn Murphy of Piper Sandler. Your line is open.

Great, thanks. Good afternoon. I've got two for Julie and just a quick clarification for Matt. Julie, on the next generation of authentication and pricing capabilities that you're adding, can you share a little bit more about what that should permit you to do over time and how are you measuring returns there? And then if you could share on the second quarter, what you saw in apparel and footwear trends? And then I've got just one clarification for Matt.

Sure. First, I want to highlight that apparel sales are up again, and we are very excited about that. In fact, they are exceeding our overall growth, which is a positive sign. Footwear is not quite at the same level, but it is still performing well and is no longer dragging down the business, which is encouraging. We are seeing similar positive trends in July, so this is all great news. Specifically, apparel sales in ready-to-wear increased by 70% year-over-year, and footwear also saw a similar increase of about 70% compared to the same period last year. This is very promising for the remainder of the year. Regarding technology, we've been leveraging it extensively, particularly for pricing optimization. Our aim is to achieve the highest possible price without affecting the velocity of sales. Generally, we’ve experienced an overall price increase of $10 per unit by utilizing machine learning and computer vision along with human oversight. This strategy is showing improvements, benefiting consigners with higher prices while ensuring we receive our fair share. We are pleased with this progress and how we are measuring success. For authentication, there are two key aspects. Firstly, it allows us to enhance our team's workflow, and we evaluate it based on our ability to maintain sales at market levels and the efficiency of our processing. While we still heavily rely on human input, our technology solutions are making us more effective and efficient. Additionally, we plan to organize an office tour at our new Phoenix facility this year, depending on the status of the Delta variant. Visitors will have the opportunity to see firsthand the changes we are implementing, which we believe will have a significant impact.

Got it. Thanks. And then Matt, my clarification for you, just on the gross profit per order, you talk in a shareholder letter about, obviously, getting to that 100 plus level. Should we take the language around that to be over the next 18 months as the exit rate for next year or is that still potentially in the cards for this year? Just trying to understand the way it was laid out in the shareholder letter is kind of as an 18 months guide. Thanks.

Sure. Yeah, we're trying to put very specific timeframes and evidence, but by no means are we walking back the main thing we said previously. And I do see the potential to approach the $100 kind of milestone at the end of this year. And certainly would come for kind of getting down on a full-year basis next year.

Thanks so much.

Your next question is from Michael Binetti of Credit Suisse. Your line is now open.

Hey, guys. Thanks for taking our questions here. Matt, can you connect a few comments on the variable expenses here? I think you noted the variable expenses at the end of the shareholder letter were $79 per order in 2020. And we can see it move around in 2018 and 2019. But maybe you could walk us to where you see the apples to apples equivalent of that number this year? And what are the inputs that get you there and then maybe rank order the inputs from next year, as you push towards the - I think the apples to apples number will be $60 to $65 per order to get to EBITDA profitability from the 79 in 2020? I'm just trying to understand the gap there since we've been over the gross profit for quite a bit.

Sure, sure. I think I tracked all parts of your question. So, let's start with the definition first, what our variable expenses are. So, they include the three big ones, which are the cost of our marketing, the cost of our variable operations, that is for inbound, pick, pack and ship, and the cost of the sales team. And then sort of second tier is our retail, our variable retail operating expenses. To get from here to there, I think 2019 is kind of the most recent good kind of benchmark to work from. So, we just see all those costs, in aggregate, improve by about 10% to 15% on a per unit or per order basis to get to the profitability milestone. The biggest drivers are going to be the first ones I mentioned. That's marketing and our operations variable expenses. Marketing efficiency, there's a long-standing track record of driving marketing efficiency that starts with really strong cohorts and really strong buyer engagement or retention; see no reason to think that that won't continue. And then on top of that, we compound that with improving buyer acquisition costs over time. On the variable operation side, that’s really the product of strength of really leveraged investments that we've made in automation that we continue to make. So, we are seeing those benefits now. We expect to continue seeing them going forward. And then as you know, we're kind of - we're just about pressing to open retail stores for the time being, so that too will start to generate leverage going forward. So that all adds up to 10% to 15%.

I guess to just follow that, where do you see the customer acquisition costs going by '22, if we should think about in those terms? And then one other follow-up on that, I think you said the direct gross margin was down about 570 basis points, driven by the sale of aged inventory with lower margins. Can you just help us think about what's embedded, as we think about Q3 or second half please?

Yep. Sure, let me start with that one remembering your first question. So, the direct margin you are arriving at was down 4 or 5 percentage points on a year-over-year basis. And that's really a function of us de-emphasizing the purposeful purchase of inventory, as our supply channels across the board have rebounded strongly. So, we just don't utilize that as much. So the higher mix of the direct business is coming from the traditional accounts, late returns with the lowest margin piece. But it's important to dimensionalize this thing. So the direct piece of the business is less than 10% of overall GMV. So, small changes on a small base have a pretty significant impact on the surface. Overall, gross profit per order is the metric to look at. That increased $9 quarter-over-quarter and we continue to see the opportunity for that to go up. What was the other question?

Marketing impact.

Marketing impact, yeah, I'm not going to provide any long-term guidance on where we see that heading, other than to say that we have historically been very nimble and have been very effective at driving back improvements, just about every year, except for 2020. And I'm confident we can continue being efficient.

Alright. Thanks a lot, guys.

Your next question is from Mark Altschwager of Baird. Your line is now open.

Thanks. Good afternoon. Appreciate you taking my question. So, another follow-up just on the path to profitability, that maybe from a little bit of a different angle here. So, appreciate that the backdrop makes the forecasting difficult, but it's kind of putting the pieces together that you are guiding to GMV to break this year expectations for at least 30%. Next year, it would seem that you're going to be knocking on the door of about a $2 billion GMV run rate by kind of later part of next year. Gross profit per order has bounced back nicely, as you outlined and there's some room for that to improve. It sounds like you're pleased with some of the efficiency initiatives, especially to Arizona. So I guess - as I put that together, I guess, which components on the path kind of bear the most risk here, because it seems like you've given us all the components that are kind of moving in the direction, but you kind of call out not wanting to put a timeline on some of these things at this point. So, just any further clarity, there would be great.

I guess, so we would love - obviously, I think you're hearing loud and clear our commitment is to simultaneously continue to drive top-line growth and drive to profitability. We'd love to be definitive about the timeframe that we're going to get there. But the current environment we are in, it doesn't seem like the prudent thing to do but we are putting out monthly disclosures, which are a pretty good proxy for providing short-term guidance, and the incremental benefit in the short term is sort of negligible. So, that's how we're going to approach it and provide as much transparency, not less on our path.

Fair enough. And just a quick follow-up, Matt, on just the inventory line, it looks like the direct gross margin was weighed down a bit by some working through of aged inventory, just any more context there, and I think you're guiding to some kind of further inventory build through the remainder of the year. So, just any thoughts on how you're kind of managing the opportunities with the direct side with some potential margin risks? Thank you.

Let me start with the inventory situation. At the end of Q2, our inventory stands at approximately $60 million. This level should represent our inventory balance for the remainder of the year. We are not focusing on it as intensively as we did a couple of quarters ago. Additionally, when we mention aged inventory, we are referring to older stock from late returns that we continue to hold for some time, which we eventually reduce in price to facilitate sales. This pattern is not new; it has always been our approach. The inventory from late returns typically carries the lowest margins in our direct line and overall business. So, there are no significant changes to note besides the fact that our inventory isn't increasing, including this quarter, and we do not anticipate that changing.

Okay. Thanks for the clarification there. Best of luck.

Take care.

Your next question is from Edward Yruma of KeyBanc. Your line is now open.

Hey, guys, thanks for taking the questions. I guess first, any more metrics you can give? I know it is early days on customer acquisition costs through neighborhood stores. And I know you guys indicated you're going to kind of pause expansion once you've completed this last, but any particular hurdles you're hoping to meet? And then as a follow-up, we noticed that you guys seem to be testing other categories like electronics and sporting goods and kind of any sense as to how we should think about those tests thus far, and kind of how are you obtaining the initial set of inventory? Thanks.

Alright, so it's Julie. So hi, Ed, how are you?

How are you?

I think we are good. We are good. So, the interesting thing, I'm going to just start with a category expansion, we are pretty excited about it. It's early, early days, so we're not going to make any predictions, but we are going into collectibles, in particular, they're a very large category in the outdoor. And we think of ourselves as a luxury lifestyle business. Our consigners were asking us to get into these categories. We researched it for a while; it sounds like it would actually be a net add to us, so we just started that, almost the third week of July. So it's very, very new for us. But I would expect it to be it expands our TAM, and actually expands our service level. So, we feel really great about that. And then do you want to talk about the first part, Matt?

Yeah, sure. So to add on to that as well, so you also asked there like how does that change, how it gets applied. Not really at all. It leverages our existing sales infrastructure and our existing authentication infrastructure, and our retail footprint. So it's just putting, making better utilization out of those things.

And then the retail store retail stores.

Retail stores, yeah, so there's kind of a lot in there. So, we're not disclosing specific numbers in terms of store acquisition costs. We have set and remain the case that the acquisition of new consigners through retail is more efficient than through our marketing efforts alone. That remains the case. It's a very surgical, effective way to acquire new consigners. It's, frankly, the tool that we didn't really have previously. And you're right, we're about to pause, we're doing exactly what we said we were going to do. Get to around 10 stores and then give them some time to mature. We're going to learn some things, we're going to optimize them, and we'll come back and reassess what we do going forward. Keep in mind that the majority of the stores have been open, not even at all yet, just a couple more to go in less than three months. So it's going to take a little bit of time to gather data and come back. But we've talked in the past that early signs from the stores are quite good. So of course, we're looking at our row value supply quantity and value of supply coming in, the number of new consigners, of course the demand it's generated in the stores, and then most importantly, the impact of the stores on the market in which they operate. And that can be a small or large halo depending on the size of the store and location. But we've seen consistently a halo effect where the growth rate in that market accelerates with the opening of a store and then stays at that higher level and continues to grow for a longer period of time. So, want to see that play out across our portfolio before committing to how many we're going forward.

Got it. Thanks, guys.

Your next question is from Michael McGovern of Bank of America. Your line is now open.

Hey, thanks for taking my question. I just wanted to ask about the metrics around the retail stores driving 30% of new consignors and at-home concierge appointments generating 38% of total units in June. Are you seeing that trend continue to improve in July as we've seen COVID cases pick up a little bit nationwide? And then also secondly, I just wanted to ask about any other specific cost trends to call out for Q3? I think he gave some high-level framework. Is there anything specific to call out for Q3 that might cause some quarter-on-quarter, anything to point out?

So in terms of what are we seeing in July, actually, we're seeing an increase in the number of units coming from our in-home experience that has increased. We in fact, have not felt, at this point, any impact at all from the Delta variant, and I think it's also because we do tend to - most of our business is urban-centric and most of the urban areas also have a higher vaccination rate, I think, nationally. So we are an urban-driven business and getting back at home, people are excited to have us come back in and we're seeing increasing units. And that continues in August. And the second part?

Yeah, the second part was around OpEx. So we expect to see some OpEx increases on a quarter-over-quarter basis, and that's going to come from - the general theme is investing ahead of anticipated Q4 volumes and growth. So where you're going to see growth is in our sales team, in our operations to support higher volumes of product coming in, and higher volumes of the product going out, to some extent with our marketing as we kind of invest into the strong seasonal period. And then for Q3 specifically, we still have redundant or duplicative expenses for our California facility, which is basically shut down at this point and the cost will be rolling off, as we exit the quarter, so that'll be clean coming into Q4. So you didn't ask but I'll give you, so Q4 OpEx, given all the different dynamics, should be pretty close to flat sequentially versus Q3.

Alright, that's great. Thank you so much.

Your next question is from Lauren Schenk of Morgan Stanley. Your line is now open.

Great. I just wanted to ask about the third quarter and the fact that you didn't give a GMV guide that you typically did. So just curious at that 30% plus comment in the shareholder letter should sort of be extrapolated as the general guide for the third quarter or if there's something else that you're seeing there. Thanks so much.

Okay. No, I wouldn't - that's not the interpretation that I'm making. Here's it but, we replaced giving short-term guidance with providing even more frequent disclosures of actual results on a monthly basis. So the July results are out, you're going to continue seeing those disclosures every month, throughout the year. So the incremental benefit in the short term of providing guidance is considered de minimis. In terms of what we're seeing, as you saw from July, the year-to-year comp did not decelerate but it is the beginning of more difficult comps in 2019. Q3 of 2019 was one of our strongest quarters ever coming off of our IPO. August was the most difficult comp in that quarter and September was pretty much up there as well. But we're expecting to see continuing strong growth for the balance of this year, no doubt in excess of that 30% of the balance of this quarter.

Okay. Great.

Yes. And in case you missed the press release for July, we did grow 53% versus the same period in 2019, so that's 53%, not 30.

Right. But there's - I guess the reason for not giving the guidance is just sort of, you're just going to give short, you're going to get monthly updates rather than quarterly guidance going forward. Is that the conclusion?

At least for the balance of the year, that's what we committed. Just because our business was so impacted last year by COVID, we just thought it would be easier for us - easier for you to follow the business and its recovery if we give actual every single month on the top line.

Your next question is from Ike Boruchow of Wells Fargo. Your line is now open.

Hey, good afternoon, everyone. I guess, Matt, I did want to dig into the direct business a little bit more. The consignment gross margin looks great. But I guess I'm trying to understand what - maybe what exactly happened this quarter on direct margin. I bring it up because three months ago - excuse me, three months ago, you would say that you assumed that the margin would sequentially improve and there would be more purposeful direct revenue, buying inventory up front, which gives you better margin. But now it sounds like you're saying you have less of that and the gross margin decelerated from Q1. So I guess I'm just trying to understand if something strategically is happening in the second quarter and then is there is there a way we should think about the margins in that revenue base, just because they used to be in the 20s and now they're closer to 10? And I think we're just having a little bit of trouble understanding how we should think about it.

Something has changed since last quarter. Our in-home business and our traditional consignment sourcing are growing significantly, which reduces the need for us to purchase inventory to support our recovery and growth. We decided to ease off on buying inventory for now, as that's not our preferred way to utilize our capital. Overall, our consignment business and gross profit are performing well, but the margins in the direct business are currently too small to have a substantial impact. Over time, those margins should improve since there are elements in both segments that are not entirely variable, allowing for some leverage as we grow. We'll be transparent about any impact this part of the business might have on our gross profit trajectory per quarter, but there hasn't been any significant effect.

Got it. Thanks, Matt.

And part of that, sorry, part of the follow-up is what we're seeing sell through there on the inventory side from the vendor perspective is very high-value things. There are lots of high-value watches and handbags; those carry inherently structurally lower take rates. So that you're seeing watches are a very strongly growing category recently. So part of that is just systemic in terms of our take rate structure. So that's going to bounce around on a small base of GMV going forward.

Thanks again.

Your next question comes from the line of Susan Anderson. Your line is open.

Hi, it's Alec Legg on for Susan. Thanks for taking your question. Just the bigger overall picture question on the path to profitability and assuming that 30% annual GMV growth. When would you likely need to make additional investments such as opening a new facility or moving into a bigger one? And then what other types of investments do you think you would need to make to maintain that growth?

It's a great question and with a pretty simple answer. We will be well past the profitability milestone at a time we need a new authentication center. With Arizona we have about five years of total growth capacity in front of us. And that, obviously, our warehousing network is a big part of our fixed cost base. But more abstractly, fixed costs overall, going forward, should not grow very fast from the levels that they're currently at or will exit this year at, I should say. So those fixed costs include our overhead functions, all of our real estate, and including our store portfolio. So that should be a very modest growth rate going forward.

Well operator?

Yes, sir. Your next question comes from the line of Anna Andreeva. Your line is open.

Great, thanks. Thanks for taking our questions and congrats, guys. One question for Julie, I guess, and a follow-up from that. So to Julie, the number of new buyers increased nicely again, this quarter. Can you maybe talk about the behavior of some of these buyers compared to the previous cohorts, just anything to call out that's different demographically or regionally? And Matt, I'm not sure if I missed this. I think you talked about 10 million in the transient costs from the Arizona DC for this year. What should we expect for the third quarter and just remind us when should we expect these costs to roll off?

Okay. Just I will start off.

Yeah.

Okay. Yes, you're right, about $10 million for the full year in non-recurring costs, that's made up of COVID expenses and Arizona inefficiency. So, both overlapping rent as well as duplicative labor costs. The overlapping rent will be done by exiting this quarter. The duplicative labor also will be done as we exit this quarter. So, what's left is COVID. And I wish I could say when those costs are going to roll off, but that typical costs are a million dollars and change per quarter going forward until they're knocked.

And in terms of the buyers, we're actually seeing it's getting - our base is getting younger and a little bit more male, but not significantly. So, we just are Gen Xs that are a little bit more engaged with. If you go millennial plus Gen X, it is the majority of our buyer base now; and our - and we are getting more males. But having said that, their lifestyle value is approaching, as far as we can tell with the earliest ones, is approaching pre-COVID level. So on some level, it hasn't changed at all and on another level, it's getting younger, which we like getting, younger and more male is also good for us.

Operator, we will go to the next question.

Your next question comes from the line of Marvin Fong. Your line is open.

Great, thanks. Good evening. Thanks for taking all these questions. Two for me. Most have been asked but just wanted to follow up on what Andreeva was bringing up that the new buyer growth was very strong. If I look back in history, I think you guys were doing even better numbers like 140,000 or better new customers a quarter and I noticed, Matt, that you said buyer incentives are about the pre-COVID level. So just wanted your thoughts on, for our models, should we think about your active buyer growth staying up around this level where you did in a second quarter, or could we actually kind of reach that kind of 140, 150 levels? And then second question, and just apologies if you addressed this elsewhere, but the AOV for July was down a little bit. Just interested in your comments on what drove that; is that some mix of apparel going up and just the total AOV trend there, that'd be great. Thank you.

I'll address the latter and then kick it over to Matt. So the AOV, that itself was to record highs in the month of July for us, but it did trend down versus June and May just because they had more apparel and shoes to some extent. But it's still was a record high AOV for July, which tends to be - before COVID, it tends to be one of our lowest AOV months just because people are buying more apparel and the apparel is less expensive. It's more contemporary in that month, so we did see it mixed down a little bit. It's still at a record high level. And then Matt?

Yeah, I think your question broadly was around buyer growth generally. I think it's a basic function of the metric of active buyers in the trailing 12 months. So you're going to see - you saw that it is a lagging indicator both in the deceleration during COVID and the reacceleration now that we're kind of pulling out of COVID. I think the most useful use of that metric is to look at GMV per active buyer on a trailing 12-month basis. You can see on this period, we're up to about $1,700, just shy of $1,700, which is approaching where we were pre-COVID. So, overall, the buyer ecosystem, the folks that we have are very engaged. It's very, very healthy. Over time, I don't think our new buyer growth - active buyer growth should basically attract the business; new buyer growth doesn't necessarily need to because we do tend to see a slightly increasing contribution from our base of buyers every year.

Gotcha. Thanks, Julie and thanks, Matt. Appreciate it.

Sure.

Operator, we will take the last question.

Your last question will be coming from Simeon Siegel. Your line is open.

Thanks. Good afternoon, everyone. Did you - anyway to quantify how much of the ASP increase was due to mix versus, I think in the shareholder letter you mentioned you're already seeing benefits on ASP from the next-gen pricing engine. So, I'd love to hear about that. And then how you're thinking about that, as the latter, moving forward. Thanks, guys.

So, yes, we've actually got $10 more, so we're excited about that, overall, in the business with our pricing optimization. And here's how we would literally - and this is a key area of investment for us because, obviously, you can raise prices; we did it almost, it's all great. Now having said that, the last thing you want to see is velocity of sales dropping. So it is an iterative process that's ongoing and we do expect it to continue to see benefits; sometimes it's only $5, but like I said, overall, it's $10 this year. And hopefully it'll continue to yield some benefits. But every dollar is important to us because it does drop a portion of it just right to the bottom line, and it also enhances consigners satisfaction. So both things, both benefits are really positive for it. And Matt?

Yeah, and I think you've basically covered it. So I think we covered in the second stockholder letter. So ASP was up 17% year-on-year and in Q2. Julie mentioned earlier in the call that in July, women's ready to wear home and shoes were up 70% year-over-year, so starting to mix up in the business. So, that implies that the like-for-like prices are up as Julie was mentioning. Also, our units per transaction are very high. So we're seeing a continuance of high-value purchases; the strength there is sustaining, but the items per order have come up to pre-COVID levels as well. So that's - the outcome of that are the record high and obviously, we've been saying for a while.

Great, thank you. And then Matt, can you comment at all in terms of the return cancellations, maybe what you're expecting there the impact, if there's an impact from mix and as apparel grows?

No, we didn't comment on it. But typically, what - it should be pretty stable. I think the abnormally low return during COVID has largely normalized at this point but it is still a bit lower and that's just a function of category mix. So we don't frankly know exactly what category mix is going to trend over a multi-quarter basis. So, they're going to travel together return rates and AOV, frankly. And then Q4 typically is a slightly higher return rate within the context of the year but this quarter, it should be pretty consistent with what we saw in Q2.

Okay. Thanks a lot guys. Best luck for the year.

Thank you.

Thanks.

There are no questions at this time, so I will now transfer it back to Ms. Julie Wainwright.

So thank you for joining our call today. We appreciate your time. We appreciate your questions and with that, we've got some work to do and I'm sure you do too. So have a great week and we'll talk to you on Q3 results. Thanks. Bye.

That concludes today's conference call. You may now all disconnect. Have a great day.