Strong earnings print for TDUP beating consensus on Revenue and EBITDA with revenue growth accelerating 820bps. 4Q was also guided ahead on Revs to $69mm-71mm with EBITDA margins in-line at -15% to -17%. The Remix acquisition closed roughly a month ago, and had $34mm in revenue in 2020. That means it will probably contribute about $9-$10mm in revenue in 4Q which would imply another organic revenue growth acceleration into the high 30s. A multi-quarter revenue acceleration was exactly the catalyst we were looking for on our TDUP long. In addition to easier compares, we expected TDUP to have some demand tailwinds and advantages. There’s the return of apparel demand as the reopening progresses, but then there is also the inventory availability and pricing opportunity that TDUP has with totally domestic sourced resale goods and prices that deliver great value, while the rest of retail has tight supply, rising costs, and no promotions. Bargain shoppers should be drawn to the resale market. The CEO commented on this share opportunity on the call. He also commented on the company’s supply trends, where TDUP is processing more cleanout bags than ever, with a huge backlog. The company is investing in more distribution and supply processing capacity to help reduce the backlog, which should also ultimately drive incremental demand via product availability. A new processing center is expect to open 1Q22. Lastly is the Resale As A Service (RAAS) offering. It is now up to over 2 dozen clients, adding some big name partners recently, including Adidas, Crocs, and Michael Stars. TDUP looks to be the default partner for launching a resale offering, and we expect to see many more partners in the future.
The company is investing heavily for growth both in the US and to optimize its new acquisition (Remix) into the European market. At the same time it is seeing some incremental headwinds from domestic freight and labor inflation, guiding to $4mm in added costs in 4Q (which will likely persist into 2022). For this reason we’re taking down our 2022 margins, but taking up 2022 revenue and longer term growth. This company is the leader in apparel resale as secondhand clothing is likely to be one of the best growth consumer categories of the next decade. TDUP is establishing a moat with its brand, partnerships, and logistics. We think it will scale into profitability over 2 years while having a great cash conversion model to fuel growth. We see upside to the low 30s, or 40% upside over 6-12 months and double over a Tail duration.
For our original Long thesis on TDUP CLICK HERE
