Earnings Call Transcript - TDUP Q3 2022

Operator, Operator

Good day, everyone, and welcome to the thredUp Third Quarter 2022 Earnings Conference Call. Today's call is being recorded. And now at this time, I'd like to turn the call over to Lauren Frasch. Please go ahead.

Lauren Frasch, Investor Relations

Good afternoon, everyone, and thank you for joining us on today's conference call to discuss thredUp's Third Quarter 2022 Financial Results. With us are James Reinhart, thredUp CEO and Founder; and Sean Sobers, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.thredup.com. This call is also being webcast on our IR website, and a replay of this call will be available shortly. Before we begin, I'd like to remind you that forward-looking statements during the quarter, including, but not limited to, statements regarding our earnings guidance for the fourth fiscal quarter of 2022, future financial performance, market demand, growth opportunities, business strategies and plans, our ability to attract new buyers, and the effects of inflation on changing consumer habits and general global economic uncertainty. These forward-looking statements are not guarantees of future performance, involve known and unknown risks, and uncertain actual results could differ materially from any projections of future performance or the rest or implied by said statements. Words such as anticipate, believe, estimate, and expect, as well as similar expressions, are intended to identify forward-looking statements. You can find more information about these risks, uncertainties, and other factors that affect our operating results in our SEC filings, earnings press release, and supplemental information on our IR website. Any forward-looking statements that we make on this call are based on assumptions as of today, and we will update these statements as a result of new information or future events. In addition, during the call, we will present certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. You can find additional disclosures, including reconciliations to comparable GAAP measures, in our earnings press release and supplemental information posted on our IR website. Now I'd like to turn the call over to James Reinhart. James?

James Reinhart, CEO

Thanks, Lauren. Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of thredUp. Thank you for joining thredUp's Third Quarter Earnings Call. As we head into the final months of 2022, we have shared thredUp's financial results and key business highlights from our third quarter. In addition to our financial results, we will offer our perspective on our environment, how resale is faring, and our path to sustainable profits and long-term growth. I'll then hand over to Sean, our Chief Financial Officer, to talk through our third quarter 2022 financials in more detail and provide our outlook for the fourth quarter and fiscal year 2022. Let me start with our Q3. We achieved another quarter of strong financial performance, beating both the top and bottom lines of our guidance. Despite a challenging macro environment and comparisons to last year, we saw continued growth in revenue, active buyers, and orders compared to the same quarter last year. Our revenue of $67.9 million was up 7% year-over-year, demonstrating our ability to achieve growth even in a promotional retail environment. Q3 active buyers and orders increased 18% and 24% year-over-year, respectively, and our gross profit and gross margin both declined last quarter, shrinking by 3%. The decrease in margins was due to the outsized growth of Remix and RaaS as both become larger parts of the overall business. As a reminder, we recognize the majority of our RaaS and supply as owned inventory, which negatively affects our gross margin profile. Finally, our adjusted EBITDA loss of $11 million is primarily due to planned investments across our operating infrastructure and technology stack. Now let's turn to the current environment. I'd like to acknowledge that we are still navigating through a challenging consumer environment. As we shared in our last earnings call, it's been difficult to predict exactly what consumers will behave like in the back half of the year. As we said last quarter, we observed initial deterioration in consumer health towards the end of Q2, which continued into Q3. In Q4, we're seeing the added impact of a highly promotional environment as retailers move through elevated inventory levels. This creates more pressure than we had anticipated for value. While we remain confident that this competitive dynamic is temporary, we believe it will subside as retail inventory positions improve, and we expect revenue to be challenged in the near term. A common question I receive is around how resale should fare in a recession. The answer is yes; we believe resale should do quite well in a typical recessionary environment as consumers seek out value. However, it's not that simple this time around. Over the past 12 months, there has been a massive buildup of apparel. We're seeing a reduction in demand at a time when retail inventories are overflowing, resulting in significant price compression in the apparel market. Although we don't have the same inventory risks that other retailers have, we are not immune to the pressure on prices. It's important to consider how this might play out in the future. A few things to keep in mind are: One, what's getting overlooked in this environment is that consumers are becoming accustomed to buying apparel at extremely low prices. When retailers sell through their excess inventory and prices normalize, we believe there is a significant opportunity for resale to take share. Two, when consumer health slowly improves post-economic downturn, we are confident that thredUp's value proposition will enable us to capture a larger share of spend from shoppers across the economic spectrum, as we have done in the past. It's easy to get lost in the noise of the financial markets, so I want to reiterate five key points for those considering the long term: One, we have 1.7 million active buyers, each spending nearly $170 annually. Before the recent pullback, our business experienced five quarters of accelerating growth, with Q4 last year growing by 68% year-over-year. This is a business that knows how to grow. Two, we have a structural supply advantage, as we have never had to spend direct marketing dollars for suppliers. Three, we have spent many years building infrastructure, expertise, proprietary data, and a winning brand, allowing us to increasingly compete in a total addressable market in the U.S. and Europe for secondhand apparel that is expected to exceed $150 billion by 2026. Four, while we face many market innovations, most of them start small until they grow. The growth in this market is driven by young consumers who are just beginning to flex their purchasing power. Five, our business is founder-led by a management team with an average tenure of over eight years. We have navigated through much more challenging environments than this and remain driven by our mission for profits and purpose. Now that I've shared that background, let me focus on two areas: driving profits and investing in the future. Our priority continues to be reaching adjusted EBITDA breakeven and making prudent investments to create long-term shareholder value in 2023 and beyond. We are operating in an environment where we need to skillfully play both offense and defense. To put it plainly, we are playing to win, not just to survive. Let me first emphasize that we have many tools to manage expenses and drive the business to adjusted EBITDA breakeven. First, we are adjusting our processing cadence, inventory sourcing, and cleanout bag strategy, while evolving the mix of goods we put online to meet a more reasonable demand environment. We're maintaining our RaaS partner cleanout program and charging brands a fee for each RaaS bag processed. Our RaaS business accelerated in Q3, marking our best quarter yet in terms of high-margin fees generated. Second, we are leveraging the advantages of our marketplace model. We believe we have structural advantages and built-in resilience compared to traditional retailers. Our responsive supply chain allows us to navigate this dynamic environment through pricing, payout, recommendations, and mix adjustments. Third, we are optimizing our U.S. distribution network to support growth. We have delayed the opening of our Dallas distribution center to better align current demand with expenses. Once Phase 1 of the facility is completed, we expect to slow our capital expenditures considerably. We recently closed our remaining dedicated processing center in Tennessee and strategically shifted resources to Dallas, which will become our largest flagship facility. Upon full build-out, the Dallas facility will provide our network with a storage capacity of 16.5 million items. We expect to methodically expand our consumer reach and increase the number of cleanup bags available. Fourth, we remain focused on maintaining strong unit economics, key to expanding profits over time. Despite rising labor and logistics costs and higher returns, we expect to continue delivering an expanding contribution margin as we improve automation and efficiencies. Finally, we have reduced operating expenses amidst an uncertain demand environment by rigorously managing variable expenses and capex to achieve profitability targets. Again, as a marketplace, many of our expenses are variable, not just in supply processing, but across the P&L. This past quarter, we reduced expenses in headcount, R&D, capex, and discretionary spending unrelated to the current growth of the business. Now I want to discuss investments we are making to drive sustainable growth in the future. We believe consumers will emerge from this pullback with higher wages, improved sentiment regarding inflation, and an increasing commitment to sustainability. While the path may not be entirely clear, we want to be prepared to capture that moment and win market share. We did this coming out of COVID, and we grew over 50% in the second half of 2021, and we plan to do it again. Let me highlight a few investments we are making to position our business for recovery in the apparel market. First, we are enhancing the buying experience with improved curation efforts, building tools like visual filters, style matching algorithms, occasion-based recommendations, and mobile swiping features, allowing customers to find the right items easily. We're proud that our “Shop The Look,” an AI tool enabling outfit shopping through image-based search technology, was recently named one of Time's Best Inventions of 2022. Second, we’re continuing to focus on Remix, the European fashion resale company we acquired last year. Earlier this year, we invested $11 million in a new 320,000-square-foot high-tech processing and distribution center in Bulgaria, and we are on track with our expansion plans. When fully operational, this facility will triple Remix’s output. We are also enhancing our consignment inventory and data science capabilities to improve market efficiencies and margin profiles. Despite the impact of inflation, rising energy costs, and foreign exchange fluctuations, we remain impressed with Remix’s resilient business model and growth trajectory and believe it is well-positioned to capture market share in Europe. Third, we are actively growing our resale as a service (RaaS) business by leveraging our marketplace infrastructure. RaaS amplifies our supply advantage, increases our sell-through rates, and expands our long-term profitability metrics through sources of recurring high-margin revenue. We recently launched new resale programs with Tommy Hilfiger, Athleta, Vera Bradley, Francesca's, and Hot Topic. Both Athleta and Vera Bradley have expanded their resale programs from cleanout to full-scale resale shops. We remain on track to serve 40 brand clients through RaaS by year-end. I also want to take a moment to celebrate that thredUp released our inaugural impact report last month. This report outlines our business and brand-aligned environmental, social, and governance (ESG) metrics, detailing progress made across ESG initiatives in 2021. We frequently discuss the ecological impact of choosing used clothing. For example, choosing secondhand over new apparel can reduce carbon emissions by 25% on average. As thredUp grows, so does our positive impact. We also focus on ensuring our operations are sustainable, fostering a high-integrity workplace culture, and supporting an ethical corporate governance framework. For more details on our ESG strategy and disclosures, please visit our revamped impact website at thredup.com/impact. Lastly, I want to share recent efforts to educate consumers on the impact of their fashion habits and combat fashion waste. Last quarter, we launched a fast-fashion hotline to help Gen Z resist fast fashion and embrace more sustainable shopping habits. We partnered with Heinz to launch a vintage DRIP collection featuring catch-up stained apparel, highlighting the one-of-a-kind nature of used clothes. Just last week, we launched our first-ever upcycled holiday collection with designer Zerowaste Daniel, made entirely of secondhand clothing that was not fit for resale, which includes fun items like bean coasters, showcasing our commitment to closing the loop by improving our aftermarket business. Through these efforts, we inspire consumers to think sustainably and foster a brighter future for fashion. Before I turn it over to Sean, I want to reiterate our confidence in our ability to navigate this challenging consumer environment. When the consumer environment recovers and the apparel oversupply of 2022 subsides, we believe thredUp's mission to provide great brands at great prices in a sustainable way will shine brighter than ever. With that, I'll now turn it over to Sean to discuss our financial results.

Sean Sobers, CFO

Thanks, James. And again, thanks everyone for joining us on our third quarter 2022 earnings call. I will begin with an overview of our results and follow up with guidance for the fourth quarter and full year. I will discuss non-GAAP results throughout my remarks; our GAAP financials and a reconciliation between GAAP and non-GAAP are included in our earnings release, supplemental financials, and our upcoming 10-Q filing. We are very proud of our Q3 results; for the third quarter of 2022, revenue totaled $67.9 million, an increase of 7% year-over-year. Consignment revenue was down year-over-year, while product revenue grew by 74%. The decline in consignment revenue and outsized growth in product revenue is attributable to a mix shift driven by our European acquisition and the relative growth of our RaaS supply. The majority of our revenue from both RaaS and our European business falls under product revenue, so we plan to transition these businesses toward consignment over time. We are focusing our inbound resources on supporting our RaaS clients, which fuels product revenue at the expense of consignment during this period of meticulous expense management. In addition, we saw return rates move higher as consumers became more selective, negatively impacting our revenue by an incremental $3 million compared to the same period last year, and this trend is expected to persist in Q4. For the trailing 12 months, active buyers rose 18% to 1.7 million. Third quarter orders reached 1.6 million, increasing 24% compared to the same period last year. For the third quarter of 2022, U.S. gross margins declined slightly to 72.4%, a 40 basis point decrease year-over-year. Despite our continued improvements in shipping, logistics, and automation, we're facing a gross margin headwind due to Remix and the revenue mix shift into product revenue, which carries a lower margin. This shift is fueled by the strength of our RaaS channel, as I previously described. Consolidated gross margin was 65.5%, a 740 basis point decline over the same quarter last year due to the consolidation of our lower-margin European business. We're transitioning this European business toward higher-margin consignment supply in an effort to enhance its gross margin profile over time. In the near term, product margins in Europe are significantly lower than in the U.S., but we see opportunities to improve these margins through investments in automation and data science to be more in line with the 50% margins in the U.S. For Q3 of 2022, GAAP net loss was $23.7 million compared to a GAAP net loss of $14.7 million in the same period last year. The adjusted EBITDA loss was approximately 16.2% of revenue for Q3 of 2022, a decline of approximately 380 basis points compared to the same quarter last year. The deleverage was mainly due to the consolidation of our European business; however, our Q3 adjusted EBITDA loss improved over Q2 by $2.5 million, or 150 basis points, reflecting the efforts we've undertaken to rationalize expenses. Our balance sheet started the third quarter with $155.7 million in cash and marketable securities and ended the quarter with $130.6 million. Our cash burn was $12.1 million, while we spent $11.7 million on capital expenditures, primarily for our infrastructure build-out. We remain confident in our plans to achieve adjusted EBITDA breakeven in the second half of 2023, assuming we reach quarterly revenues of $80 million to $85 million. We expect growth in the first half of the year to be broadly flat, but we believe that apparel markets and the consumer environment will be in slightly better shape in the back half of the year. We continue to make strides in reducing expenses and preserving cash during this period of uncertainty. As discussed on our last conference call, our focus on expense rationalization and cost efficiency remains critical. We're aiming for $70 million in savings in 2023 based on our current forecast. We have also reduced our capex plan for 2023 to below $15 million, down from the previously mentioned $20 million, and we do not anticipate this impacting growth in 2023 or 2024. For Q4, we expect to spend $5 million to $6 million on capex. Most of our capex plan revolves around our distribution center, with annual maintenance capex, excluding new distribution center builds, totaling approximately $3 million. We spent $25 million in cash in Q3 and expect that spend level to steadily decrease in upcoming quarters. Our initiative to reduce cash burn will be driven by decreased needs in our DC network and our cost-saving innovations. Based on our ability to manage our expense structure, we believe we can fund the business through our existing cash balance and $70 million debt facility until we reach free cash flow positive. As a result, we want to reiterate that we do not foresee our cash or marketable securities balance dropping below $50 million without further debt drawn until we reach free cash flow positive. Turning to Q4—despite the highly competitive environment we are currently navigating, we see a clear path ahead. Our top line remains influenced by weaknesses in our core lower consumer segment. Additionally, the ongoing promotional environment in the retail industry is impacting us more severely than originally expected. From mid-October onwards, we experienced an unprecedented degree of early holiday promotion pressure on our business, leading us to update our outlook to account for this trend persisting through the end of the year. Given these challenges, we now expect Q4 revenue in the range of $62 million to $64 million. Our gross margin is expected to be between 62% and 64%, reflecting the larger proportion of RaaS revenue, which carries a lower margin. We anticipate a net loss between 16.5% and 14.5% of revenue, with the basic weighted average shares outstanding around 100 million. For the full year of 2022, we now expect revenue between approximately $279 million to $281 million, with gross margins estimated at 66% to 67%. In closing, we are pleased with our third quarter performance; however, Q4 presents more competitive challenges than we had expected. We remain confident in our capacity to navigate this difficult environment. We anticipate that the hyper-promotional landscape will eventually level off as retailers normalize their inventory positions, enabling us to compete once again with resales’ compelling value proposition. As the apparel market recovers, we are optimistic that the ongoing improvements we’re making to our business will enable us to meet our breakeven goal. James and I are now ready to take your questions. Operator, please open the line.

Operator, Operator

And we'll first hear from Ike Boruchow of Wells Fargo.

Ike Boruchow, Analyst

You mentioned expecting flat growth in the first half of 2023 and expressed confidence in reaching $5 million in the second half of the year to achieve breakeven this quarter. What macroeconomic expectations support that outlook?

Sean Sobers, CFO

Yes, this is Sean. Yes, I think the only thing we are assuming in our plan for 2022 is that the extreme promotional environment and the inventory surplus will have subsided. That's how I would think about this as we go through 2023.

James Reinhart, CEO

Yes. And the other thing I'd add is that it's a very competitive Q4 environment. We continue to pull back on some of our growth investments. We'll revisit those as we enter the first half of next year and see those investments compound as we progress through the year.

Trevor Young, Analyst

Great. James, I think last quarter, you had flagged that the budget value consumer was impacted from apparel broadly. Can you talk about how they trended quarter and now into 4Q in light of the updated 4Q guide? Also, what's trending on the upscale shopper? Is that holding up better than expected?

James Reinhart, CEO

Trevor, yes, both segments continued consistent trends through Q3 and into the first part of Q4. The only difference is that starting around the second Prime Day, with promotions from Walmart and Target, there was a noticeable shift in consumer spending. Currently, we need to continue monitoring until the end of the year. The trends among budget and premium shoppers remain steady, but it appears the budget shopper is retreating somewhat from what we can tell.

Trevor Young, Analyst

That's really helpful. If I could just follow up on that. You had flagged before expecting to flex on price promotions and seller payouts as well to remain competitive. Is there any one of those that's performing particularly well or better in this environment?

James Reinhart, CEO

Yes. We are focusing on ensuring that we maintain promotions on items tied to seasonal holiday themes. We're striving to flexibly price and promote products that consumers want right now. Our priority is sourcing high-quality stock for the holiday season. Q4 historically has been our slowest quarter, as customers often don't consider thrift during the holidays, a trend that's even more pronounced as wallets tighten and they consider gifts.

Alexandra Steiger, Analyst

Can you share what you're seeing across the thredUp customer base in the U.S. versus Europe regarding purchasing and engagement on the platform? Did you notice any changes in order frequency or value? Regarding user growth, you saw negative quarter-over-quarter growth versus solid growth in prior quarters. Can you walk us through the underlying drivers behind that decline?

James Reinhart, CEO

Alexandra, on the user growth side, it has slowed given the competitive environment, which is hitting the growth rate. Regarding U.S. versus Europe, in the U.S., we observe extreme promotional activity starting in mid-October, changing the dynamics for apparel purchasing and our expectations for Q4. Europe is encountering a different situation. Inflation numbers have affected wallets more acutely, and unseasonably warm weather has delayed the typical transition to winter clothing. However, the cold weather has returned recently, and we expect purchasing dynamics to shift as we move further into the quarter.

Tom Nikic, Analyst

James, Sean, considering the second half of 2023, your Q4 guidance suggests a run rate of $80 million to $85 million, indicating healthy year-over-year revenue growth by late 2023. Are you assuming customers will return when they can't find deals in the primary market to achieve the expected growth?

James Reinhart, CEO

Tom, it's important to note that we've pulled back significantly on processing and marketing investments over the last couple of quarters. Maintaining processing efforts in a competitive environment doesn't make sense at this point with retail inventory levels high. We anticipate a shift in our strategy later in the year, leading to improved demand and allowing us to invest strongly in growth as conditions stabilize.

Rakesh Patel, Analyst

Can you provide insight on the outlook for return rates in Q4 and any initial thoughts for 2023? What initiatives are underway to improve this, such as leveraging data for customer satisfaction or more selective product acceptance?

Sean Sobers, CFO

Rick, this is Sean. Our assumptions for Q4 would be consistent with what we saw in Q3, which reflected around a $3 million drag on revenue due to return rates, which have risen as consumers become more selective. We are currently implementing various strategies internally to address this issue.

James Reinhart, CEO

Yes, Rick, we are seeing similar dynamics across many retailers as they reassess how returns function in this new market landscape. We're exploring multiple strategies, such as enhancing product presentation to reduce returns and modifying the return eligibility of specific items. There are several initiatives ongoing that we anticipate will begin to show results in 2023, acknowledging this is a tangible challenge in the current environment.

Rakesh Patel, Analyst

You're on track to reach your goal of serving 40 clients through RaaS by year-end, which is impressive. What are your thoughts on 2023? Do you see potential partners advancing their circular economy strategies, or are they hesitant due to the uncertain economy?

James Reinhart, CEO

Yes, I believe 2023 will be a significant year for RaaS. I'm excited that we are on target for client signings. Achieving 40 clients this year, given the current apparel landscape underscores the strength of our RaaS value proposition. I expect more retailers will begin leveraging RaaS as their inventory positions stabilize in the upcoming year. As such, 2023 has the potential for considerable growth in this area.

Edward Yruma, Analyst

Two questions for me: First, regarding product and technology expenditures, they fell sequentially. Can you clarify whether this is the level we should expect moving forward or if we anticipate an increase? Secondly, you mentioned delaying some capital expenditures. When will this incremental capex appear in cash flow? While you're saying you won’t need to raise capital, do you expect to draw on that bank line?

Sean Sobers, CFO

Yes, this is Sean. We do believe our current cash is sufficient; we do not plan to draw from the bank line. Regarding capex, we've recently lowered our spending outlook, projecting about $5 million to $6 million for Q4 and under $15 million for 2023. In terms of operational expenditures, we expect the current level of spending seen in Q3 will remain consistent going forward, influenced by revenue improvements.

James Reinhart, CEO

Yes, I would add that as we progress past Q1 of 2023, our infrastructure will largely be established for several years, minimizing capex needs. After Q1, we’ll be in a favorable position to invest in growth for subsequent years, easing our cash burn and enabling us to aim for adjusted EBITDA breakeven and ultimately free cash flow positivity a few quarters later.

Dana Telsey, Analyst

As you consider your marketing budget for 2023, what adjustments are you planning on both marketing and your expense levers?

James Reinhart, CEO

Dana, I think that we continue to see very attractive acquisition costs. We typically ramp marketing in Q4 but will reassess in Q1. The acquisition landscape for next year appears promising, especially with apparel pricing normalizing, which is likely a positive sentiment for the back half of next year. The infrastructure is mostly variable, and we expect only minor fixed expenses after we finish with Q1 of 2023. This is an excellent position for us going into the future, responding to demand for value. Yes. I believe we have ample capacity in 2023 and beyond. We'll continue to ramp up processing as the consumer environment improves in 2023. We’re currently in an evaluation stage, determining when to lean back into growth investments as conditions stabilize.

Operator, Operator

And our next question comes from Noah Zatzkin at KeyBanc Capital Markets.

Noah Zatzkin, Analyst

Just to drill down a bit on RaaS, could you provide any insights on the P&L impact over time? As partnerships ramp up, what should we expect regarding upfront costs in relation to revenue generation?

James Reinhart, CEO

Yes, on the RaaS side, this model amplifies our supply advantage, as we charge fees for every processed bag on behalf of a brand. This generates high-margin revenue that positively impacts our bottom line as we scale RaaS supply. Additionally, through the resale shop model, we gain multiple distribution points to sell the same product across various platforms, enhancing inventory turns and returns on our fixed assets in our distribution centers. Overall, RaaS significantly amplifies our business dynamics, and I expect solid growth in this segment as we expand our client base in 2023.

Anna Andreeva, Analyst

Two questions for Sean: What was the trend in the business for the third quarter? And what have you observed so far in Q4? You mentioned elevated promotions in October, but I'm curious about any noticeable changes you anticipate while proceeding through the holiday season. Secondly, to James: What’s the outlook in the resale space regarding new entrants? It seems to be growing more competitive, but I seek your thoughts on it.

Sean Sobers, CFO

Yes, Anna, Q3's monthly cadence was consistent with historical patterns; no significant outliers were present. Back-to-school promotions looked solid. In October, we began witnessing promotional pressure, particularly with early events like Walmart's Black Friday. We've currently leveled off but are navigating a promotional landscape.

James Reinhart, CEO

Yes, to echo that sentiment, Q4 appears stable overall, but we expect continued promotional challenges. Regarding the competitive landscape, there are always new entrants in a robust market, but we have not seen competitors significantly encroaching on our market share. Market expansions will bring competition, but we're confident in the strengths of our model to secure our position over time.

Lauren Schenk, Analyst

One question for Sean: regarding the fourth quarter guidance compared to the previous estimate, revenue seems down by $8 million while EBITDA losses increase by an incremental $4 million. The change in top line outlook is clear. Where exactly is that incremental $4 million coming from?

Sean Sobers, CFO

Yes, you're observing the impact of promotional pressures affecting our overall business, which alters revenue contributions. The promotional environment is undoubtedly influencing margins, and even though we're reducing revenue projections, lower margins are impacting earnings, leading to an updated EBITDA outlook.

James Reinhart, CEO

Lauren, as you mentioned, the contribution margins decline as the promotional environment intensifies. So while we decrease revenue expectations, this revenue may not be as productive as in previous periods, leading us to calibrate our forecast conservatively to account for anticipated competitive disruption.

Operator, Operator

And it appears there are no further questions. At this time, I'll turn the call back over to our presenters for any additional or closing comments.

James Reinhart, CEO

Thank you, everyone, for joining us today. A special thanks to all the employees for their incredible efforts in this challenging environment. We'll navigate through these tough times in Q4 and emerge stronger on the other side. Thank you, and we look forward to speaking with you next time.

Operator, Operator

That does conclude today's conference. Thank you all for your participation. You may now disconnect.