ThredUp Inc - Ordinary Shares - Class A Aktie

Hello, and thank you for standing by. My name is Tiffany, and I'll be your conference operator today. At this time, I would like to welcome everyone to the ThredUp First Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Lauren Frasch, Investor Relations. Lauren, please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's financial results. With me are James Reinhart, ThredUp's CEO and Co-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 being webcast on our IR website, and a replay of this call will be available on the site shortly.

Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, supplemental financial information and our Forms 10-K and 10-Q for more information on these expectations, assumptions and related risk factors. We undertake no obligation to update any forward-looking statements.

During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and the supplemental financial information, which are distributed and available to the public through our Investor Relations website located at ir.ThredUp.com. Now I'd like to turn the call over to James. James?

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining our first quarter 2026 earnings call. Today, I'll review our Q1 results, discuss what drove performance in the quarter and share how we're focused for the balance of the year. I'll then hand it over to Sean Sobers, our Chief Financial Officer, to walk through the financials in more detail and provide our outlook for Q2 and the full year. As always, we'll close with a question-and-answer session. First, to the results.

In the first quarter, revenue grew 14.6% year-over-year to $81.7 million, while gross margin was 79.2% and adjusted EBITDA was 3.4% of revenue. We grew our cash balance by $1.3 million. Active buyers on a trailing 12-month basis grew 25% year-over-year and new buyer acquisition remained strong. March was the best month in our history. All of these metrics exceeded our expectations. However, as we move through Q2, we think it's worth acknowledging that the macro environment remains uncertain.

Relative to prior quarters, we do see an incrementally discerning consumer as gas prices remain high and inflation proves to be sticky. We've observed this mainly through average selling prices and conversion rates being slightly lower since early March. Prices are off roughly 3% and conversion rates for existing customers lower by about 5%. Nevertheless, overall demand has remained resilient year-to-date with continued growth in new buyers and strong sell-through driven by existing buyers. That demand, combined with improved marketing efficiency has supported strong unit economics and has given us confidence in our growth plan for 2026 and how our business leverages and expands margins over time.

As we move through 2026, our priorities are focused in 3 areas: continuing to grow and retain high-value buyers, developing AI technology that helps customers discover and shop across our vast marketplace and scaling high-quality supply from a diverse group of sellers. In Q1, we continue to improve how customers discover, shop and sell across ThredUp with millions of unique items, helping customers find the right item quickly is critical to conversion and retention.

On that note, I'm excited to share that we now have our first agentic product experience live for a segment of customers. We start by assigning an agent or a team of agents to each customer. The agents consume event feeds across all platforms, web, mobile web, native and channels, e-mail, push, SMS and use reinforcement learning to enable personalized browsing at the individual customer level. No 2 customer journeys are the same. Ultimately, we're working towards a customer experience that will dynamically change everything you see on ThredUp based on your Quick Stream data in real time. This is the true promise of Agentic commerce.

Second, we are now aggregating exact match items into an improved customer experience, starting with our highest volume category, dresses. Let me explain. This means a customer who is shopping for a dress might now see options on that product page to buy this dress in a different color or a different size or a different quality standard, all without having to navigate to another product page. While this is standard in e-commerce, no scaled retail company has been able to replicate this experience across thousands of brands and category SKUs. We think this is a foundational improvement in the resale shopping journey, and ThredUp is uniquely able to do this given our data and vast catalog of photography. This experience is particularly relevant for newer customers and amplifies our broader acquisition strategy as we bring more and more first-time secondhand shoppers to our site. We plan to slowly roll this out to more customers and more categories in the coming quarters.

Third, with the ongoing success of our AI product development cycles and elevated conversion rates, we are unlocking scale in new channels. Our spend on Meta is up 100% year-over-year in Q1, delivering some of the highest LTV to CAC ratios we've seen. Pinterest is similarly up 94%. This has reduced spend on Google, where we tend to see acquisition costs be lower and churn higher. This evolution is consistent with our goal of increasing early customer retention and expanding LTVs over time and exemplifies how ThredUp benefits from advanced in generative AI technology.

Turning to supply. Each year, our annual resale report has become the industry's go-to resource for understanding where the secondhand market is headed. And this year's addition, which we published last month, identified supply as the defining constraint for the next phase of growth. With U.S. online resale already growing more than 3x faster than the broader retail environment, we believe the key to unlocking the next phase of market value isn't demand, it's aggregating more high-quality supply online. Let me anchor that on what we're actually seeing on the supply side of our own marketplace. Our 7-day sell-through rate, which we view as the best proxy for overall demand, is up more than 15% year-over-year alongside continued strong growth in listings. Listings are up 17% year-over-year in Q1. The net of these performance indicators is that we need more sellers and more supply to satisfy the growing awareness and demand from buyers on our marketplace. We are moving swiftly to do so.

In Q1, we made a deliberate investment in new seller acquisition. Of our total kit requests in the quarter, 48% came from sellers who were new to ThredUp. New seller kit requests grew 90% year-over-year. Overall, this was one of the largest surges in new sellers in ThredUp's history, driven by TikTok shop activation, on-site promotion and targeted seller campaigns. With so many new supplier initiatives in motion, we've renewed our focus on onboarding, seller education and segmentation with particular attention to TikTok Shop, where we just recently launched premium bags. In addition, we're increasing inbound processing faster than planned to capitalize on this influx of new sellers and build on the momentum we saw in Q1. The long-term picture is clear. a larger seller base, improved supply quality and more aggressive processing should create a faster-growing, more liquid, more profitable marketplace.

Now let me turn to other areas of opportunity in our business. Our direct listings data remains promising as we maintained our goal of growing 10% week-over-week while continuing to launch new features that deliver the highest quality buyer and seller experience. First, using our vast data set, we're launching a suite of improved seller pricing tools to help items sell more quickly. Second, leveraging the customer data we have accumulated over the years, we are finalizing the rollout of a relisting tool that allows our core marketplace buyer to resell their previously purchased items with one click or make their entire purchase closet shoppable.

This relisting feature is a powerful and unique asset given we've sold over 100 million items that are ostensibly to be made available to others with one click. We think about this as "lean back selling and is more consistent with our approach to serving casual sellers versus professionals looking to run a small business. Finally, we are improving seller verification and training that we reduce potential for fraud, eliminate subpar listings and build more trust in our marketplace over time.

On the Resale as a Service or RaaS front, we landed several new apparel brand partners that will be launching resale experiences with us in the coming quarters. We've also deepened engagement with existing clients. A standout example was Reformation's in-store trading event in New York City, which went viral on TikTok, a playbook we're now replicating across the entire partner base. Earth Month was a particularly strong activation period with Lands' End, Madewell and Abercrombie all running RaaS campaigns that drove meaningful engagement. As we look ahead, we remain focused on executing our growth plan amidst an ever-changing consumer environment.

Our priority is building a marketplace that delivers clear value to buyers and compelling monetization and convenience for sellers. We are confident our focus on conversion, retention and supply quality on top of our strong unit economics will position us to deliver durable compounding performance over time. With that, I'll turn it over to Sean to walk through the financials in more detail and provide our outlook for Q2 and the full year.

Thanks, James. I'll begin with an overview of our results and follow up with guidance for the second quarter and full year of 2026. I will discuss non-GAAP results throughout my remarks. We are extremely proud of our Q1 results in which we exceeded our internal expectations for revenue, gross margins and adjusted EBITDA. For the first quarter of 2026, revenue totaled $81.7 million, an increase of 14.6% year-over-year. Our performance was driven by investments into new buyer acquisition, continued LTV to CAC efficiencies and inbound processing that drove our marketplace flywheel. These drivers resulted in another strong quarter for new buyer acquisition, including a record month in March.

We finished the quarter with a record 1.7 million active buyers for the trailing 12 months, up 25% over last year, while we had 1.6 million orders in the first quarter, up 19.3%. For the first quarter of 2026, gross margin was 79.2%, a 10 basis point increase versus the same quarter last year as a result of higher ASPs. For the first quarter of 2026, GAAP net loss was $6.5 million compared to GAAP net loss of $5.2 million in the same quarter last year. Adjusted EBITDA was $2.7 million or 0.4% of revenue for the first quarter of 2026, outperforming our internal expectations.

Our Q1 result represented a 190 basis point decline over last year. This year, with more confidence in our growth trajectory, we invested in our drivers earlier in the quarter, resulting in better top line results and more moderate EBITDA this year. From here, we expect to methodically expand EBITDA year-over-year in 2026.

Turning to the balance sheet. We began the quarter with $53.1 million in cash and securities and ended the quarter with $54.4 million. We invested $4.1 million in CapEx and generated $1.3 million in cash in Q1. We continue to expect similar levels of CapEx in 2026 as last year.

Now I'd like to turn to guidance. As James mentioned earlier, we are seeing indications of a more selective consumer. As a result, we are maintaining our revenue and EBITDA margin expectations for the balance of the year while flowing through our Q1 outperformance. Nevertheless, we remain confident in driving strong performance in the things within our control. In the second quarter, we expect revenue in the range of $89 million to $91 million, representing 16% year-over-year growth at the midpoint.

Gross margin in the range of 78.5% to 79.5%. -- adjusted EBITDA of approximately 5.2% of revenue and basic weighted average shares outstanding of approximately 130 million shares. For the full year of '26, we expect revenue in the range of $351.2 million to $356.2 million, reflecting 14% year-over-year growth at the midpoint, raising our gross margin expectation in the range of 78.5% to 79.5%. -- adjusted EBITDA of approximately 6.1% of revenue, representing approximately 170 basis point expansion versus last year and basic weighted average shares outstanding of approximately 131 million shares.

As we emphasized on our last call, we continue to plan to flow any incremental dollars above our guide back into growth driving opportunities in processing and marketing. This year, we remain confident in the fundamentals of our marketplace flywheel and operational consistency and our strategy as we pursue predictable growth, expanding profits and accelerating cash flow. James and I are now ready for your questions. Operator, please open the line.

[Operator Instructions] Your first question comes from the line of Ike Boruchow with Wells Fargo.

Two from me. The first one is, I mean, for the Q1, very strong, understand maintaining expectations Q2 to Q4. But James, can maybe you or Sean elaborate. You mentioned the consumer being more selective, but demand resilient. I mean there's been a lot of things that have occurred, gas, the macro. Can you kind of square those 2 dynamics, how you're thinking about the rest of the year? Maybe when did you start to see the consumer behavior start to change? Did it coincide with the CNN effect or gas prices going up? Just to elaborate more on that would probably be helpful.

Yes, sure. Ike, it's James. Yes, I mean, look, the business has remained strong. I mean I think Q1 was a good quarter, exceeded expectations, top, bottom line, gross margins expanded. So I think we're feeling very good about the business. April has been good quarter-to-date. So I think everything generally is going in the right direction. I think we wanted to give folks the building blocks of what we saw on ASPs and what we saw on conversion rates because it does track, I think, the war in Iran and elevated oil prices and gas prices, which we just think on the margin is making the consumer a little bit more picky, a little bit more discerning, and we're seeing it in ASPs and conversion rates.

Now having said that, we flowed those dynamics through the P&L through the rest of the year. And I think the business remains strong even with those dynamics at play in April. But I think there's just enough out there, Ike, that we want to be thoughtful about what the rest of the year guide looks like. But yes, I mean, we're feeling great about where we sit. Sean, anything to add?

No, I think it is key to understand that we did flow through that ASP and conversion items that we saw in April through the full guidance outlook.

And then I guess just a follow-up on the ASP. I think you said quarter it was like down low singles. Is that kind of the expectation for the rest of the year that your ASP or AOV, however you would define it, should remain under pressure? Are you expecting a bounce back in the back half?

Yes. Right now, I think it's off about 3%, consistent with beginning of March, sort of when we started to see this. Yes, that's in the guide for the rest of the year. But I think depending on how things materialize with oil prices, with inflation, I could see a scenario where it bounces back. Timing of that, a little unclear. But I still think the unit margins, the contribution margins, top line EBITDA are all strong even with ASPs being off a little bit.

Yes. And our assumption is that there isn't a recovery in the guidance numbers.

Your next question comes from the line of Matt Koranda with ROTH Capital.

I guess maybe just following up on that line of questioning. I just wanted to hear you unpack sort of the trend that you're seeing in the business in April and how you kind of built the guide for the second quarter. I guess you said reduced conversion, ASP pressure in April, but the guide for second quarter sales is an acceleration relative to the first quarter. So just maybe square those for us, if you could help out there.

Yes, Matt, it's James. Yes, I mean, April has been strong. And I think the guide reflects 16% growth in Q2, and we flowed through the Q1 beat into the full year at 14%. So again, I think business remains strong and resilient, but we have to acknowledge that ASPs are a little less than we anticipated. I think had ASPs not come down a little bit and conversion rate not come down a little bit. And again, we attribute this to the macro, my guess the numbers would be coming up for both the quarter and the year. But I think at this point, it's better to be a little bit more cautious and see how the quarter unfolds. But again, I think both those dynamics are at play, slightly more discerning consumer, at the same time, us really operating and executing the business at a high level. Both those things can be true, Matt, I guess, is the answer.

Okay. All right. That's helpful. And then I guess maybe on the supply front, just wanted to hear a bit more. It sounds like the signal is the macro disruption we're seeing might even be driving more supply to your marketplace. Just wanted to hear a little bit about the incremental supply that you're seeing turn on and maybe in the context also if you have any of the third-party initiative that you have run on.

Yes. I mean we saw a huge surge in new sellers coming on of the platform in Q1. It was almost 1,000 basis points improvement year-over-year, Matt, around new sellers. So it was a conscious effort to really invest in getting the supply engine going, and I think we're seeing the success of that. I think any time you're onboarding that many new people, there definitely add more work to the team around how do we improve the messaging, how do we improve the education, onboarding of all these new sellers. So we're spending a little bit more time on that than we were 90 days ago. But to me, I think it speaks to the strength of the marketplace model in any economic climate. And I think we feel very good about how these suppliers from a cohort basis become repeat suppliers over time and really fuel the business back half of '26 and into '27.

Your next question comes from the line of Dylan Carden with William Blair.

Is this the first time that you spent to acquire sellers? Just let me start there.

Yes, Dylan, we are spending some dollars testing kind of the methods and the way that we acquire sellers. The work we did on TikTok as an example, we are working with some creators and some influencers on an affiliate basis. And so yes, we're sort of kicking off a real methodical approach there. And I think what we've learned actually is that there is room to really grow sellers through some basic paid marketing, and we were sort of embarking on that journey now.

The effects of that, Dylan, are that not only are you able to really expand the seller base, but those sellers that you acquire actually convert at pretty good rates into buyers. And also the quality of the sellers that you bring on the platform, their goods actually help drive improvements in buyer conversion rates and buyer LTVs. And so there's actually a nice recipe in there to spend some money acquiring sellers that makes both sides of the marketplace spin faster. So sorry, a long answer to your question, but I think there's real opportunity here for us to do this in a methodical way.

No, that's perfect. And that was kind of the root of the question. I mean, because you levered marketing, albeit still. I mean, is part of the idea you sort of walked through some of the efficiencies that you're seeing, which you've spoken to before, is part of this sort of reallocation because you're seeing some of these greater efficiencies in acquiring either buyers or sellers? Is that one way to think about it?

Yes, yes. And for the last couple of years, I've said when we do want to start turning on or turning some of our attention to acquiring sellers, we have very effective ways to do that, right, evolving some of the messaging across these platforms, changing the incentive mix. And so everything that I've said over the last few years around how we would do this is exactly what we're doing today. And I think it's playing out very similar to how we thought, which is there are very compelling ways to acquire sellers beyond just the organic reach that we have today. And those methods can be very accretive to the business, both by expanding the overall seller base and also converting those sellers into buyers, right? We do really see it as an acceleration of the flywheel.

Your next question comes from the line of Dana Telsey with Telsey Advisory Group.

As you think about the prices being off and conversion were a little bit lower, was it consistent throughout the quarter? Or is that just the end of the quarter in the month of March? And then with the uptick in new customers, what are their demographics? Is there any regional age, income level? What are you seeing there?

Yes. Dana, yes, interestingly, the pricing piece, we really did start to see some of the conversion headwinds and some of the price decrease start to happen beginning of March, which is very consistent with the war in Iran. And so it's hard to say it's perfectly correlated, but we did start to see it then. But what I would say is it really did normalize. So we're now operating in that environment for the past 60 days. And so we've been able to correct where necessary around the types of goods that we're putting on promotion, right, how we're thinking about sell-through and marketing and curation. And so I would just sort of emphasize, we've sort of digested these things, both the pricing and the conversion rate and have changed the way that we're operating the business to meet the customer where they are. But yes, it does point to some correlation with elevated oil prices and consumer sentiment.

And then your second question around customers. Yes, the buyer mix, I think I mentioned it in the prepared remarks, Dana, but the buyer -- we're trying to spend more dollars on Meta, more dollars on Pinterest fewer dollars on Google, primarily because of the mix of customers that we're able to acquire. The Meta and Pinterest customer, they have better LTVs. Their CACs are slightly elevated, but the LTVs more than offset them. And so as we start to have more and more of our customer -- new customer flow come from those channels, we actually see the predictive LTVs be higher. And I think that speaks to the ability for us to compound these cohorts over time. So I actually think we're feeling pretty good about the customer acquisition mix and strategy and feeling good about the ability to digest the pricing and conversion piece we've seen since the beginning of March.

Got it. And just one last thing. You talked about the inbound processing being faster than planned. How much faster was it? And where do you go from here?

Yes. I mean I think with all of the growth in buyers, active buyers being up, new buyer acquisition, what we're seeing in the dynamics is that all of our data suggests that the buyers that we have could buy more and eat up more supply. And so I think our approach now is to turn on all the afterburner jets to process as much as possible, given the cohort sizes, the purchase behavior. So I actually think it's a wonderful moment in time, Dana, where we can point to if we process more goods, the business flywheel should go faster given the pent-up demand from this large buyer cohort. So I think it's a nice place to be in where we're able to acquire customers efficiently. The LTVs are good and really, we just need more supply online, and that's what we're doing.

Your next question comes from the line of Bobby Brooks with Northland Capital Markets.

So I just wanted to start on -- you started to see those headwinds in the pricing conversion in March. But at the same time, you had the best month in your history of buyer acquisition, which seems really impressive. So -- but also like if I was hearing something was having pricing conversion headwinds in the month, I wouldn't think they would have the best month acquiring customers in the history. So I just wanted to hear a little bit more on that dynamic and what you -- what do you think you guys did to drive that great performance?

Yes. Bobby, it's James. Yes, I mean, again, I think both these things can be true. I think it shows actually like the underlying strength of the business, which is even in a world where conversion rates might be a little bit softer, the fundamental conversion rate in the business remains strong. If you kind of go back to last year, remember, we spent multiple quarters driving conversion rates way up. And so right now, we're seeing a little bit of a pullback, we think, because of the macro environment in there, but they're still very strong. And that conversion rate probably is translating into the new buyer growth. Like just to give you like an example, I think new buyers in Q1 were up 27% year-over-year and CACs were down more than double-digit percentage. And so again, like we're executing at a high level. And I think have we not had this ASP headwind, had we not had this conversion rate headwind, I'm guessing numbers would be going up. And so we just want to acknowledge that those headwinds are real, but we're navigating through them.

Absolutely. I appreciate that color. And then I just wanted to hear a little bit more of an update on how that supply channel through the TikTok shop ended up looking because I know it was like 100,000 bags in 1 month and then you kind of had to go through that. So I was just curious like any insights of like was that high-quality supply, and it seems like that's a channel you're looking to tap a little bit more going forward, just more there.

Yes. On TikTok, I would say that the TikTok shop bags that have come in that we've been able to process so far, they're very similar to other new suppliers, basic suppliers that are coming in, which is to say that new suppliers, Bobby, they're always a little worse than existing suppliers, right, because you need to sort of get up the learning curve on ThredUp. And so I think it's a huge opportunity for us to lean into TikTok to scale.

Again, I think we need to improve onboarding and some of the education to get all of these sellers to perform the way our large cohort of existing buyers. have performed. But I actually feel great about the channel. In fact, we just launched on TikTok in the last couple of weeks, our premium kits for sale, which is, again, a new opportunity for us to scale premium bags further. So again, I feel great about the channel, and we just need to keep educating new sellers as they come on the platform. And -- but this cohort looks to be promising.

That's really helpful. And then just last one for me. It was great to see again, like on the buyer acquisition. Just maybe a little bit more on what incentives you guys you feel you're doing that's driving that really good acquisition? Is it just the better marketing channels going leaning more into Meta and Pinterest and kind of leading away from Google? Or is it kind of a lot of tailwinds from the rebrand last year? Just wanted to dive a little bit more of what levers you think are really working in touching those new buyers.

Yes. I think the channel mix is a big piece of it. We really kicked off work to improve how we advertise on Meta and how we advertise on Pinterest in a real material way about a year ago. And we've just been methodically growing those channels. And now we're seeing historically low CAC for us on Meta. So we're able to put more dollars to work there.

And so the combination of just a better product experience on the site as well as better targeting and efficiency, I think has put together a pretty good recipe. And so we're trying to lean more into those channels, Pinterest and Meta in particular, going forward. But I think -- and if we can continue to do that, continue to scale spend, move dollars away from Google PMax, I think you'll start to really see those cohorts come even better than they are today.

Your next question comes from the line of Oliver Chen with TD Cowen.

As we look ahead, order frequency relative to all the momentum in active buyer, what should we know there in terms of what you're seeing? And second, as you articulated regarding ASP and conversion rates, do you expect that to be pretty noisy and/or get worse? Or what's incorporated in your guidance, which is usually conservative? And thirdly, on reinforcement learning, which you featured early, a lot of those models are based on the action reward models in terms of how you're defining that. What's happening in the reinforcement learning in terms of the agent versus the reward? And how does that optimize in terms of being adaptive? And what should we pay attention to in the models as you continue to invest in that experience, which sounds like you're scaling personalization in a new way.

Yes. Oliver, why don't I handle the reinforcement learning piece, and then I'll kick it back to Sean on kind of the guidance piece. Yes, I mean, I think this is pretty exciting times for us to have this first product experience in market with an Agentic engine. And yes, every time the agent is going out and an agent or a team of agents, right, because I think you think about this as multiple clients going out there, we're getting better data around how the customer is browsing, what they're adding to cart, what they're removing to cart, what they're clicking on, time on these individual items. And the model is then taking that data and flowing through what is most likely to predict an actual conversion rate at the end of all of this flow.

And so it is actually working in real time to pull this information -- and if you look at sort of the underlying fundamentals of this, it's pretty exciting stuff because typically, those models have a real lag in them. You're going back and you're doing this more in e-mail marketing or push marketing. In this experience, it's actually changing what the customer is seeing as they're navigating the site. And for a traditional retailer, this is actually not as hard to do because you have a limited catalog, right? You have SKU depth. For a secondhand, when you've got hundreds of thousands of new items coming online every week, you actually need a much more robust dynamic engine to be able to do this. And I think that's where the team has built something, I think, that's really pretty special. And so we're seeing conversion rates from that be strong, and we're looking forward to rolling out to more customers and more categories over time. We started with dresses. That's our biggest category, but lots of wood to chop.

Yes, Oliver. And on the ASPs and conversion from a plan perspective or a guidance perspective, we looked at what we were seeing at the end of March and all the way through April that James talked about on the prepared remarks and really bake that into the guidance as we go forward. So you see that in the 2026 full Q2 and full year outlook.

And then that last piece on frequency, we are seeing actually incremental frequency, Oliver. So one of the things we talked about on the last call was making some product decisions around the free shipping threshold and how customers engage and really focusing on frequency over just having average order value be the anchor. And I will tell you that we are seeing frequency go up. If you look at the data on a trailing 12-month basis, you can see revenue per order being slightly lower, but you can actually see orders per buyer actually going up. I think you're going to continue to see that trend through the rest of 2026. And I think if you roll that trend forward into '27, that order frequency number is a much bigger driver of revenue growth than revenue per order given how much customers are shopping on product. So we think those dynamics are really positive. I think the team has done a great job calibrating revenue per order and frequency.

Okay. And as you've done this for decades, supply has always been very important, but it feels like your machinery has heightened that importance given your success with buyers. But what's different now because supply has always been critical, but has there been a step change? And lastly, on the mix, your customer experience has gotten better through AI, too, and premiumization has been a factor. Like how is that interplaying with perhaps reinforcement learning or what we should understand about the CX?

Yes. I mean I think on supply, I think we've always adopted the point of view that the supply that we're getting could satisfy sort of buyers and demand on the marketplace. I think what we've seen over the last probably 15 months through the launch of our premium service and then just recently the launch of direct selling, we're seeing that incremental innovation in the supply channels really can drive outsized growth among both sellers and buyers that there are fundamentally pockets of sellers and pockets of the market that we were not addressing.

And I would say premium and even just above premium were areas that I don't think ThredUp was really known for, but I think we're slowly becoming much more relevant to customers that have that premium mix of goods. And I think similarly with direct selling, customers -- ThredUp really didn't have an option for that customer who wanted to sell their own item and recover as much as possible. That is changing. And so I think our point of view is stellar innovation can drive expansion of the addressable market and make the business grow faster. And I think that's why we're innovating. As for reinforcement learning with respect to supply, like it's sort of a TBD. We're not using agents yet to do much on the supply side. So there's no sort of RL to comment on.

On the virtual circle, lastly, James, as you really see these TAMs kind of innovate or get bigger, does that -- do you anticipate needing different capabilities or supply chain or kind of you'll test as it goes because you're broadening and relevance. I'm not sure if that means something different for how you handle or authenticate over a longer term.

Yes. I don't see any like material, no pun intended kind of change in how we do supply handling. But I think what we've done, Oliver, so far is we've built real defensibility, unique assets to price and scale items that are $25, $26, $27, and we're leveraging that entire supply chain and innovation to do more. And again, our thesis all along was that we could build competitive advantage in supply chain in data with our marketplace. And then from there, continue to incrementally expand how we serve buyers and sellers. And I think we're just showing that we can do that. We can still really drive growth among our core basic everyday sellers, but also attract different segments, whether that's through premium or direct selling. And I think it just speaks to the power of the business model to really compound year after year.

Your next question comes from the line of Bernie McTernan with Needham & Company.

I wanted to touch on supply or keep that thread going. James, what metrics do you track internally to make sure you have enough supply on the platform? And just where are those metrics now versus where you want them to be? And I have a follow-up.

Yes, Bernie, we track actually two things. One is items per buyer. So from a broad selection perspective, how many items are listed and what's the availability as we look at the distribution of buyers and distribution of items. I think that metric flipped in Q1, where it said, oh, you've got so much incremental buyer demand. You actually don't have quite as many items per buyer as you would need. And so I think that speaks to the improvements in the platform and the amount of buyer growth. All of a sudden, the warning light went on of like, hey, you actually could benefit from more and more supply to meet the demand of these buyers. That's one, it's items per buyer.

The second part is we actually look at like the quality of the item. We think about it internally as a hanger score, but it's actually like the quality and score of items per buyer. And what we saw was you could still drive more and more high-quality hanger score items primarily through the mix of premium to delight that segment of buyers, that led to us launching premium banks on TikTok, like as an example. And so both of those indicators would suggest that the relationship between supply and buyers is healthy, but that the marketplace today is currently slightly underserved relative to where it was 6 months ago. And I think to Dana's question, that's why we're more aggressively investing in ramping supply.

Yes. That makes a lot of sense. And then I wanted to ask on the ASP headwind. Is this just consumers trading down? Or is it any specific action that you guys are taking on pricing to cause this headwind?

Yes, Bernie, I think that is the question, right? I mean I think from the face of it, it looks like the consumer is being a little bit more discerning. And so I think what we're trying to figure out over the next 60 days, 90 days, is there something we can be doing to have that flip back more quickly, right? Is there something we can do about how we promote or curate or merchandise. But what we think today it's mostly the consumer being a little bit more discerning, and that's why we slowed it through the rest of the year. I think if ASPs were back up, as I said earlier, back up 3%, 3.5%, my guess is that the numbers would be higher for Q2 and for the year. And so I think we just have to digest this and keep operating at a high level, and I think we'll be in great shape.

That concludes our question-and-answer session. I will now turn the call back over to James Reinhart for closing remarks.

Well, thank you all for joining us today, especially grateful to the ThredUp team for your continued hard work and just the relentless pursuit of solutions to make the lives of all of our buyers and all of our sellers happy. So thank you all. Look forward to seeing you on our next call. Cheers.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the TDUP Fourth Quarter 2025 Earnings Conference Call.

[Operator Instructions]

This call is being recorded on Monday, March 2, 2026.

I would now like to turn the conference over to Lauren Frasch, Head of IR. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's Fourth Quarter and 2025 financial results. With me are James Reinhart, ThredUp's CEO and Co-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 being webcast on our IR website, and a replay of this call will be available on the site shortly. .

Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, the supplemental financial information in our Forms 10-K and 10-Q for more information on these expectations, assumptions and related risk factors. We undertake no obligation to update any forward-looking statements.

During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and supplemental financial information. which are distributed and available to the public through our Investor Relations website located at ir.thredup.com.

Now I'd like to turn the call over to James. James?

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining our fourth quarter earnings call. Today, we'll discuss our financial results for the fourth quarter, along with a review of our performance for the full fiscal year 2025. I'll start by reviewing highlights of our first full year back as a streamlined U.S.-focused business and how this focus has allowed us to drive record gross margins and more predictable growth. I'll then discuss our product innovation wins in 2025 and how these investments in our marketplace can translate into compounding advantages in 2026.

I will also provide our perspective on the current macro environment, and how we believe our strategy uniquely positions our marketplace model to drive as consumers continue to look for both value and delight they allocate their discretionary spending budgets. Finally, I'll turn it over to Sean Sobers, our Chief Financial Officer; to walk through our financial results in detail and provide our initial guidance for Q1 and the full year 2026. We'll conclude the call with a question-and-answer session.

First to the results. We're pleased to report that Q4 revenue grew 18.5% year-over-year, while gross margin was 79.6%, and adjusted EBITDA was 3.7% of revenue. In particular, our top line outperformance was driven by our deliberate investments in customer acquisition and new listings. This drove a noticeable surge in both new buyers and customer engagement. To that end, we're pleased to report that new buyer acquisition increased 57% year-over-year, while active buyers for the trailing 12 months were up 30% year-over-year.

For the full year 2025, our performance was a testament to the durability and scalability of the infrastructure we've built over the last decade and the fundamental strength of our marketplace model. We delivered record revenue of $310.8 million, representing 20% year-over-year growth, while maintaining our premium gross margin profile at 79.4%. These results were driven by a record 1.7 million active buyers a 30% increase over the prior year and a record $21.1 million items processed, representing volume growth of more than 17%. Importantly, this operational scale, combined with expense discipline, allowed us to generate $14 million in adjusted EBITDA or 4.4% of revenue.

I'm especially proud of the underlying consistency we maintained to achieve this, delivering adjusted EBITDA every single quarter over the past 2 years. and delivering positive free cash flow for the full year in 2025.

As I look back on the past 12 months, I'd characterize 2025 as a year where we successfully returned to the core fundamentals of our marketplace and then rapidly built on top of this foundation. This was our first full year operating as a dedicated U.S.-focused enterprise without the complexities of our former European operations. It also marked the completion of our multiyear accounting transition to a fully consignment-based model with more than 90% of our business now on consignment. By removing these historical headwinds and accounting transitions, we've clear path for the higher-margin scalable growth you see today.

I believe this establishes the financial baseline for our business moving forward. predictable growth and exceptional gross margin profile and the operating leverage required to generate consistent free cash flow. In addition, 2025 demonstrated the unique defensible advantages of our marketplace model. During the large tariff disruptions of 2025, we experienced little impact given our supplies holding on confinement and U.S. sourced. We were able to launch new ways to grow supply, first with premium listings at the beginning of the year, and following up the direct listings at the end of the year. These innovations expand the types of customers we can attract to our business over time. Given our legacy of investments in infrastructure, automation and technology, we rapidly took advantage of emerging AI models to improve product search, discovery, ad buying, recommendations, photography, measurement and flow detection. I honestly can't remember another time when the business took its giant leaps forward on behalf of the customer.

With the surge of innovation across our business, we then executed a well-received rebrand in the fall that better positions ThredUp for years to come as a marketplace for fashion forever.

Before we dive deeper into our strategy for 2026, I want to address the broader consumer landscape. I've said for a number of quarters that I think the American consumer may be weaker than headline data would appear to indicate and that recent data validates some of this intent. In 2025, job growth was uneven with the DLS revising numbers down by the largest factor in 20 years. At the same time, the New York Fed confirmed that nearly 90% of the 2025 tariff burden fell directly on firms and consumers. This is on top of an affordability crisis where nondiscretionary costs like rents and insurance have structurally reset at higher levels, effectively shrinking the wallet share left over for apparel and other discretionary goods.

All this taken together, I think it's fair to say that the macroeconomic environment for discretionary spending remains uncertain, and the American consumers understandably approaching the year with a degree of caution. However, we believe these circumstances allow us to offer a differentiated approach. While traditional apparel retailers may face headwinds in a value-driven environment. Our managed marketplace is uniquely built to capture upside demand as consumers prioritize both the stretch of their dollar and the liquidity in their closets.

As we enter 2026, our focus of ThredUp is to build on our path towards sustained profitable growth by enhancing the structural drivers of our marketplace flywheel full-funnel buyer growth, high-quality supply and AI-driven innovation that meaningfully reduces friction in shopping secondhand, all while maintaining our expense discipline. This strategy is threefold. First, we are focused on this full-funnel growth in early life cycle engagement. Our success in 2025 was fueled by record-breaking customer acquisition capped off by a 57% year-over-year surge in new customers during Q4. This momentum proves that our brand and value proposition are resonating at increased scale.

As we move into 2026, our priority is evolving from pure acquisition to deepening our relationship with these new cohorts. Our LTV to CAC ratio reached all-time highs in 2025, but we think there is more to do to build multiyear LTV expansion. We recognize that early life cycle engagement is our highest leverage growth driver. By prioritizing retention alongside acquisition, we're building a more predictive, high LTV buyer base that fuels our long-term growth engine.

Second, in 2025, we proved that we could scale supply volume meaningfully with kit requests up 36% year-over-year. This wasn't just about quantity. It was about obtaining the right supply, driven by a few key initiatives. A primary driver of this increase can be attributed to our premium kit offering. We launched this product in early 2025 and has scaled into a material contributor to our supply, representing 17% of supply for the year. We will continue to invest in expanding our premium kit offering through new channels as well as evolving the sets of incentives we offer customers. Specifically, we developed a supply approach for capitalizing on the momentum of TikTok shop while selling unique secondhand SKUs on TikTok shop is challenging, our cleanup kits, premium, regular or otherwise, can be skewed and sold effectively.

In January, we sold over 100,000 cleanout bags through TikTok shop with 97% of these orders being brand-new suppliers on our platform. In light of this early success, we are now actively experimenting and TikTok live and created affiliates to capitalize and convert these new sellers into long-term customers. Our Resell-as-a-Service footprint has expanded to include a handful of beloved brands since our last call, including Lands' End, Steve Madden and Betsy Johnson. We continue to see RaaS as a broad ever extendable platform for adding high-quality supply channels.

We are now several months into our direct listing data. I mentioned on our last call that we would be very deliberate in how we rolled out this initiative to meet a market need. Thus, we are focused on growing the business by approximately 10% per week as we observe and learned. There are now thousands of buyers and sellers involved in our beta, providing rich data to test and learn from. Some of the early data has confirmed our hypotheses, while other behaviors have surprised us. Sellers who choose to take advantage of direct listings are listing 10x more items than we expected. This suggests there is enormous closet share left for us to take as we provide more ways for our customers to monetize the full depth of their wardrobes.

Sell-through has been as expected. While the average selling price is much, much higher, more than $70, we believe that scaling these higher ASP listings will allow us to further capture a more premium shopper consistent with the launch of our premium kits last year. Customers have also reacted very positively to the seamless nature of using our infrastructure to handle returns, giving them confidence to shop direct listings when they might not have previously done so. We are continuing to roll out new updates to the experience weekly.

Most recently, we enabled the bulk import of listings. This way, customers can move their closets over more easily from competitor sites. Already 50% of new listings are now coming from bulk import, which we think is 1 indicator that we're building the right tools for sellers to consolidate their selling on ThredUp. We launched direct messaging that sellers can communicate and just this week and offer function, so buyers and sellers can more easily find the market clean price without ThredUp's direct involvement.

Finally, we are leveraging AI to build a structural advantage across our entire business. Our goal is to use technology to remove the friction inherent in resale, both for our customers but also for our bottom line. Following the launch of our AI-powered shopping suite last year, we doubled down with features like the daily edit in the trend report. These tools use proprietary embeddings to move us toward a segment of one, or the marketplace feels custom built for every individual. Looking ahead, we are going to use Agentic AI to transform the threat of experience into a much more personalized end-to-end discovery and shopping journey. We are also redefining the post-purchase experience with Doty, our AI customer service agent.

In a relatively short amount of time Doty has evolved from a simple question-and-answer tool into an agentic engine capable of facilitating the resolution of customer issues that previously required representatives. By reducing the human escalation rate of customer service inquiries, Doty allows our team to focus on higher-value interactions and more nuanced to customer requests. More importantly, as shift to instant resolution has driven a meaningful increase in our customer satisfaction scores directly supporting our overall customer growth goals.

By embedding AI into everything from discovery to service, we are building a marketplace that is not only more enjoyable for the consumer, but structurally more profitable to operate.

In closing, as we look ahead, we believe ThredUp is transitioning from a period of recovery to 1 of compounding progress. The data-driven infrastructure we've built, supported by our commitment to operational excellence and our foundational AI architecture is transforming our marketplace into a more efficient, scalable and personalized ecosystem than ever before. We've often said that marketplaces are hard to build. But when you get the flywheel spinning, they are very hard to stop. By continuing to redefine the buyer experience with emerging AI tools, while expanding our addressable market through supply innovation, we're demonstrating that our model could scale more widely and effectively over time.

I'm confident in our team's execution as we work toward our goal of making secondhand, the preferred choice for consumers everywhere and building a generation-defining company that endures.

With that, I'll turn it over to Sean to talk through the financials in more detail.

Thanks, James. I'll begin with an overview of our results and follow up with guidance for the first quarter and full year of 2026. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and a reconciliation between our GAAP and non-GAAP measures are found in our earnings release, supplemental financials and our 10-K filing. We are extremely proud of our Q4 and 2025 results in which we exceeded our internal expectations for revenue, gross margins and adjusted EBITDA.

For the year, we delivered 20% revenue growth, adjusted EBITDA profitability and our first year of positive total cash flow and set company records for revenue, new buyer acquisition and total active buyers. For the fourth quarter of 2025, revenue totaled $79.7 million, an increase of 18.5% year-over-year. Our performance was driven by investments into new buyer acquisition, continued LTV to CAC efficiencies and inbound processing that drove our marketplace flywheel. These drivers resulted in another strong quarter for new buyer acquisition with new buyers up 57% year-over-year.

We also benefited from repeat purchases by new buyers acquired earlier in the year as well as reduced churn. We finished the quarter with a record 1.7 million active buyers for the trailing 12 months, up 29.5% over last year, while we had 1.6 million orders in the fourth quarter, up 27.3%. For the fourth quarter of 2025, gross margin was 79.6%, an 80 basis point decrease versus the same quarter last year. Our outperformance versus our expectations was driven by higher average selling prices due to the growth in our premium supply offering. Adjusted EBITDA was $2.9 million or 3.7% revenue for the fourth quarter of 2025, outperforming our internal expectations.

Our Q4 results represented a 370 basis point decline over last year when our revenue outperformance occurred later in the quarter, and we were unable to accelerate our spend efficiently to keep pace with our top line performance. This year, as we gained confidence in our ability to drive future growth, we were pleased to be able to appropriately invest to better set us up for 2026.

Turning to the balance sheet. We began the year with $52.8 million in cash and securities and ended the year with $53.1 million. We are proud to have reached a major milestone for the company in 2025, generating our first year of annual free cash flow, having invested $10.5 million on CapEx in 2025. We continue to expect similar levels of CapEx in 2026 with expanding free cash flow.

Now I'd like to provide a bit of context for our guidance. Our 2025 strategy represented a return to our marketplace fundamentals disciplined investment in active buyer growth, supply processing and product innovation while maintaining rigorous expense control and leveraging our legacy investments. This approach generated success beyond our expectations.

In 2026, our plan is to extend our commitment to this core strategy, prioritizing scalable, sustainable growth and methodical EBITDA expansion. As discussed earlier, the leverage to our marketplace flywheel are marketing dollars to drive buyer growth, inbound processing of high-quality supply to fuel revenue and customer experience investments to improve conversions. As our volume scales, margin profile benefits from strong flow-through inherent in our marketplace model, but simply the more we grow, the more EBITDA dollars we generate.

I look to our approach in 2025, we plan to flow through any incremental dollars above our guide back into these growth-driving opportunities. With all that said, as James discussed earlier, we remain cautious on the current consumer environment and are taking a measured approach to our outlook. In addition, it is important to consider our typical seasonality. We expect the year to follow a similar quarterly cadence of 2025, to be explicit, we expect Q1 to be the smallest quarter in terms of both revenue and EBITDA dollars. This is because we normally experienced some hangover from the Q4 holiday while at the same time we ramp supply processing and marketing to accelerate revenue growth from Q1 onwards. That growth acceleration then drives EBITDA expansion through the year.

We expect revenue dollars to be the largest in Q2 than Q3, followed by a seasonal step down in Q4. With all this in mind, in the first quarter, we expect revenue in the range of $79.5 million to $80.5 million, representing 12% year-over-year growth at the midpoint; gross margin in the range of 78% to 79% and adjusted EBITDA of approximately 3% of revenue and basic weighted average shares outstanding of approximately 128 million shares. For the full year of 2026, we expect revenue in the range of $349 million to $355 million reflecting 13% year-over-year growth at the midpoint. Gross margin in the range of 78% to 79%. Adjusted EBITDA of approximately 6% of revenue, representing over 150 basis points of expansion versus last year and basic weighted average shares outstanding of approximately 130 million shares.

In closing, we are extremely proud of the milestones we achieved in 2025. This year, we are more confident than ever in the fundamentals of our marketplace flywheel our operational consistency and our strategy as we pursue predictable growth, expanding profits and accelerating cash flow. Jim and I are now ready for your questions. Operator, please open the line.

[Operator Instructions]

Your first question comes from the line of Irwin Boruchow from Wells Fargo.

Congrats on the good end of the year. I guess maybe for James or Sean, not sure, but just talk about the guide. You've got a lot of momentum coming out of the year guide in the low double-digit range for Q1. Anything you're seeing in the business or anything notable to call out? Or is this just you guys taking a conservative approach to start? And then maybe, Sean, can you help us more with the revenue and EBITDA expansion pacing through the year? Anything we should kind of keep in mind for the models?

I'll start. No, I don't think that we're seeing anything materially different in the business. I think there's just enough uncertainty out there in the world that we continue to invest in Q1, and we want to print the quarters, not guide the quarters. And so I just -- I think we're being appropriately it's thoughtful around what the next year could look like given the puts and takes. I think if you go back to where we were a year ago, we ran a very similar playbook investing in Q1 and watching those returns coming Q2, Q3 and Q4.

And I think if we could have a repeat of last year this year. I think that would be a great result. And so we feel good about the momentum in the business coming out of Q4. And I'll turn it over to Sean to talk a little bit about the cadence and the sequencing in the quarter because I think that's more helping folks understand what ThredUp looks like in a more normalized operating environment. So I'll let Sean handle that.

Yes, I'll go through a little more detail there. So we expect Q1 to be our smallest quarter in both revenue and EBITDA dollars as well as EBITDA margin. Then we'd expect Q2 revenue growth rate to reaccelerate to the highest of the year and then kind of step back a little bit moderating for Q3 and Q4. And then on the EBITDA side, we would expect sequential EBITDA expansion into Q2 and then second half EBITDA overall will be greater than first half EBITDA.

And I think that's the pattern that you're going to see Ike for the business, not just this year, but I would expect in '27 and '28. That's, I think, the stand-alone U.S. business is that sequencing.

Sorry, just a follow-up, Sean. When you say 2H greater than 1H on the EBITDA, are you talking just dollars or rate expansion year-over-year...

Your next question comes from the line of Matt Koranda from ROTH Capital.

I guess I just wanted to hear a little bit more about the line items you expect to leverage in 2016, just given the EBITDA margin expansion guidance. crossed up with, I guess, the gross margin, slight decline year-over-year. Are we getting more leverage on the operations line, OPT. It sounded like you're willing to invest in marketing anything over and above the target range of 6% for the year. Just wanted to hear you confirm that as well.

Yes, Matt, this is Sean. Yes. I think of marketing will be a similar percentage of revenue for the year. meaning we're going to leverage SG&A and OT&T to gain that 150 bps on the EBITDA line. But I think on the gross margin side, to touch on that a little bit is like way back when, when we did the IPO, we said our kind of our long-term target 75% to 78%. We've been outpacing that for the last couple of years. and feel pretty good about the range of 78% to 79%. And the reason that gives it a little lower than some of the stuff we've done recently is give us a little bit of leverage to improve customer satisfaction or do things that we haven't done historically and James pointed out on the call, like on the TikTok shop. That's something that we can do that's a little of a bit of a headwind to GM, but it's really good for the overall business.

Okay. That makes sense. And then maybe just speak to the level of confidence that you have in the acceleration in top line in the second quarter. I guess, is there something in recent customer acquisition in terms of the new customers you've acquired it gives you better visibility to see that acceleration in the second quarter. Just wondering where that comes from, just given the commentary around some of the softness that you see in the macro as well.

Matt, it's James. Yes. I mean I think, again, I just want to emphasize how much sort of the sequencing and pace of the business. I think we're operating in this new normal. And I think that you should always see this sequential increase from Q1 to Q2. But that's really driven by just how the business attracts customers and delights customers over time. We always have this small hangover effect in Q1 as people digest their holiday spending. So they digest their holiday spending, then they make new resolutions, shopping more sustainable, being more thoughtful, cleaning out their closets.

All that kind of New Year's resolution stuff, that then creates opportunities for us to capture some of their attention and mind share and then that produces some momentum into Q2. Matt, if you go back and look at 2025, the same thing, right? If you see Q1 growth rates in '25 going from Q1 to Q2, it's the same pattern you're seeing in '26. In fact, if you look at Q1 this year over Q1 last year, it's actually accelerating growth. We grew 10% in Q1 of last year, and we're guiding to 12%. So anyway, I think that's just the normal cadence of the business.

Your next question is from the line of Dylan Carden from William Blair.

I kind of have a related question. So if you think about the 50-plus percent new buyer growth, the strong active customer growth that you printed, can you kind of remind us the lag effect or speak to any churn as far as sort of the guiding the go-forward revenue growth where you've put it...

Yes, Dylan, I mean -- it's James. I mean, we always have churn in the business, but I think it's more, again, helping investors and others understand the patterns in the business because last year, Dylan, was the first sort of I would characterize that as a clean year for us being U.S. only. And you typically see acceleration Q1 to Q2 to Q3 and then the seasonal step back in Q4 that was exactly the pattern in '25. And even prior to going public, that was a very common pattern for the business. So I think we're just getting back to that normal cadence.

And so it's less about new buyer growth or churn, it's more of as customers come back in the market, how the business performs. So hopefully, that helps set some context.

Yes. And then any commentary on sort of customer acquisition costs. I know that sort of tends to be or has emerged as a hot button topic for you guys, efficiencies, players in the market.

Yes. I mean customer acquisition, we have customer acquisition costs going up a little bit this year just as we continue to invest in marketing and scale spend. But we're still expecting to acquire at least as many customers this year as we acquired last year, especially with spend incrementally up. So I expect another very strong year on the customer acquisition side for new buyers. Obviously, we're lapping, Dylan, a different set of comps around total new buyers. But I expect strong momentum. And then I think the real secondary emphasis is expanding those 3- and 5-year LTVs.

And I think a lot of the product work that we're doing in '26 is really focused there, which is a little bit different than in '25, which was much more focused on reaccelerating kind of first in new buyer growth. But I think that will create some of the momentum as we move throughout the year.

Your next question comes from the line of Dana Telsey from Telsey Group.

As you talk about the product and the premium assortment that you've been having lately, what did you see in ASPs? Did the premium portion of the business differentiate from the earlier quarters in the year? Anything that you're seeing there? And also how you think about the health of your customers?

Dana, it's James. Yes, I think we're very pleased with the trajectory of premium in the business. It's a product for sellers that we launched over a year ago at this point, but it grew to be high teens, 17%, 18% of the business by Q4. I think you even saw more of it from a mix perspective, ASP start to flow up because of holiday handbags, more expensive dresses, shoes, those types of things. And I think it really speaks to us continuing to move, I think, where the sweet spot is for customers and making sure that we don't have too much exposure to the lowest income demographic, which I think can be challenged in this economy.

And so I think to answer the second part of your question, I think we have been on this multiyear journey to stepping up the mix of goods, the ASPs, the price points. And I think 2025 was a big step forward. I think '26 will continue some of that.

And then the last piece on this is we launched the direct listings piece at the end of the year in '25. And as I mentioned in the prepared remarks, I've been quite surprised by the price points in the direct selling business being more than double what we were seeing in the core. And I think, again, that will allow us to touch a slightly more affluent customer and I think drive appropriate margins. So I think we feel very good about where the assortment is headed and the types of customers that we can attract and delight.

And James, any color on category performance that you saw?

Dana, no. I hate to be a broken record. It's more of the same. We're still selling tons of dresses I do think though that Q4, again, we had another very successful year with our holiday shop, the business growing 18% year-over-year on top of Q4 last year was actually like the first quarter reacceleration. So what I would say is that the customer is starting to -- or secondhand is starting to resonate more with customers around the holidays. And I think that's a place we want to continue to push in the years ahead.

Your next question comes from the line of Bobby Brooks from Northland Capital Markets.

James, I think you mentioned in a couple of questions ago that 2026, there's a lot on the slate for product enhancements focused on expanding the 3- and 5-year LTVs of customers, and that's exciting news just thinking about how successful you guys integrated AI into the search piece, so just was curious if we could here get a little bit more granular detail on those plans of trying to drive the long-term LTV is higher.

Yes. Bobby, Yes. I mean I don't want to get too far ahead of ourselves. I think you'll definitely hear us put some things in market over the next couple of quarters. But what I would sort of say at a high level is we're really emphasizing customers choosing to go to ThredUp first for all of their needs. I think historically, people would -- ThredUp would be 1 of, say, a handful of places in their consideration set around where they might shop. They might shop discount retail, they might shop off-price. I think what we're really trying to do is emphasize that we can really serve all of your closet needs by building this robust personalization experience.

And that started with the daily edit, which we talked about last quarter. But I will tell you that the daily edit momentum is growing, you're seeing customers come back every day and sort of checking what's new, and that's allowing us to refine the mix of goods that we can put in front of you. And so I think the focus really is how do we move you from -- the average customer might buy 12 items a year, right? But we know that, that is still only 25% of her closet. I think what we're really trying to attack, Bobby, is the other 75%. And so a lot of the investments are to make sure that ThredUp is top of mind for all of our needs. And so I'm very excited about what I'm seeing from the team around these types of investments.

And I do think if we get this right, you can see real expansion in LTV. And I think if you do that, you can really then change the acquisition mix over time.

Absolutely. Looking forward to hearing more on that. Then it was great to hear the -- I think you called out you sold 100,000 cleanout bags through the TikTok, which was really impressive. And maybe even more impressive was the 97% were folks new to the new to thread up -- just curious like how are those -- how was it being -- how did those folks get to the TikTok shop to buy the cleanup bag? Was there specifically like advertising campaigns? I was just kind of curious to hear that. And -- when I think of the 100,000 bags, like were those were the majority of those all already sent in and now going to the supply chain? Just curious to hear more there.

Sure. I mean, it was -- it started as a campaign with some influencers or some affiliates. But the thing about TikTok is it can take on a life of its own. And so we truly went viral there for a little bit with influencers and affiliates talking about the cleanout kit value. And so that was great. We -- it was a ton of new sellers. We're now in the process of processing those bags to really understand the mix of goods, right, because, obviously, it's not just quantity, we want high-quality product coming through. And we've been tweaking exactly how we're trying to work with influencers and affiliates to get the right stuff.

But I think it's super exciting because it really shows how the brand that we've built, specifically the rebrand and the service offering can resonate at that type of viral scale. And so I think it's more now of us getting it all the way dialed in, Bobby, but I think it's really -- it could be a real unlock for our supply goals over the next -- not just over the next year, but over the next several years if we can really get this right. And then we also want to learn for how we can translate it into some of the work we can do on buyer development, some of the work we can do on direct selling. So it's an exciting opportunity, and I'm thrilled it was really driven by just a handful of great product and engineers and marketing folks coming in to drive that.

Got it. And then 1 more for me is on the bulk import with the peer-to-peer selling. That was really interesting. And I just wanted to hear more. Is it as simple as them turning over their seller page from a different platform and then it's just like a click of a button and everything gets integrated into the ThredUp platform. I was just curious to kind of hear that cycle a little bit more.

Yes. I think the engineers would berate me if I said it was just that easy. But yes, the idea is that the customers can with just a handful of clicks kind of export and import their listings. And we always believe this would be a really important tool to reduce switching costs, right? With any marketplace where seller reputation matters, switching costs are a really important thing. But I think our thesis on direct selling was that the barriers out there in peer-to-peer and the switching costs are getting lower and lower with the improvement in AI technology. And so I think the combination of technology improvements independent of ThredUp as well as our strategy to make it as easy as possible for you to list and kind of the convergence of those 2 has been successful.

And -- so you're really seeing established sellers on these other platforms say oh, well, I'll give ThredUp a try because it's so easy. And so I think that's an exciting development. And -- we're going to keep doing things like that to make ThredUp really the easiest way to consolidate all of your selling.

Your last question comes from the line of Oliver Chen from TD Cowen.

This is Julia Shelanski on for Oliver Chen. I was curious if you could provide a snapshot of the percentage of fixed versus variable costs within OPT and SG&A today and how you expect that mix to evolve as you gain operating leverage?

And second, I'm curious how rising ASP influences your payback mass across cohorts and particularly within newer customer acquisition channels such as TikTok.

Yes. I think I'll take the second one and then I can let Sean provide a little bit of color on the mix. I think as you have ASPs go up on premium listings, you do have more potential contribution margin that flows through as those items sell and therefore, that contribution margin can flow into the LTV math that would allow you to pay higher tax. But I think that's generally how the engine has worked over the past few years. And so I do think premium helps us acquire some more customers. And I think our strategy is to provide more premium product in '26 relative to '25. So I think that engine can kind of work together, but we also recognize that the ad markets are dynamic.

And so -- we got to be thoughtful around making sure that we're honest with the LTV to CAC payback math. But as for the other stuff, OPT and SG&A, I'll let Sean kind of comment.

The SG&A is pretty easy because it's mostly almost like 97%, what you would kind of consider fixed. The only piece that goes through SG&A is like the payment processor fees which are like 3%. And on OP&T, it's more like 60-40 fixed variable. The other way around variable fixed -- sorry, 40-60...

There are no further questions at this time. I would now like to turn the call back to James Reinhart for closing comments. Sir, please go ahead.

Well, thank you all for joining our 2025 full year results call. Looking forward to a great year. I want to thank all the ThredUp teammates for all their hard work in '25, and I'm excited about the opportunities in the business in '26. And -- look forward to talking to all of you in just a couple of short months. So thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the ThredUp's Q3 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on November 3, 2025.

And I would now like to turn the conference over to Ms. Lauren Frasch. Thank you. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's Third Quarter 2025 Financial Results. With me are James Reinhart, ThredUp's CEO and Co-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 being webcast on our IR website, and a replay of this call will be available on the site shortly.

Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, supplemental financial information, and our Forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors. We undertake no obligation to update any forward-looking statements.

During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and the supplemental financial information, which are distributed and available to the public through our Investor Relations website at ir.thredup.com.

Now I'd like to turn the call over to James. James?

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining our third quarter 2025 earnings call. Today we'll discuss financial results for Q3 and update our expectations for Q4 and fiscal year 2025. I will provide an update on our perspective about the consumer, discuss ongoing innovation in our AI-driven product experiences, and end with a reminder on our compounding competitive advantages in the growing resale market, specifically how we expect new product development will increase that advantage in 2026. I will then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our financials in more detail and provide some guideposts as we look ahead to 2026. We'll close out today's call with a question-and-answer session.

First to the results. The third quarter was our strongest year-over-year growth in nearly 4 years and the fourth quarter in a row of accelerating growth. Revenue growth accelerated to 34% year-over-year. Gross margin was 79.4% and adjusted EBITDA was 4.6%, all of which exceeded expectations. Once again, these results were driven by exceptional customer growth and orders in our business. I said this last quarter, and I'm pleased to say it again, we acquired more new customers in the third quarter than at any other time in our history with new buyer acquisition up 54% year-over-year. Active buyers were up 26% year-over-year and orders were up 37% year-over-year. Our approach in 2025 and into 2026 is straightforward: Maintain our gross margin efficiency, gradually expand the bottom line, but largely reinvest incremental dollars we generate back into growing our marketplace through product improvements, marketing spend, and long-term innovation.

Turning to the macro. We talked about the impact of tariffs at some length on our last 2 calls, so I will not belabor those points here. Overall, we believe the effect of tariffs and the closure of the de minimis loophole have been a boost to acquiring new customers and could be a structural tailwind going forward as prices rise in the apparel market. Our strategy is to take some price, but largely improve our competitiveness on a relative basis. At the same time, we remain cautious on the state of the broader American consumer and believe that price and value will be of utmost importance this holiday season. While this could theoretically be beneficial to the secondhand market by enhancing the value of comparative offerings, we think a reduction in overall holiday spending or a wallet share shift to new gifts is something we'll have to navigate adeptly.

Turning to the product and customer experience. While many of our customer-facing features over the past 18 months specifically drove improvements in our funnel and margins, the third quarter was best characterized as a consolidation and clarification of our mission, vision, and value proposition. In late September, we launched a fully rebranded experience on ThredUp. The unifying theme is "Fashion, Meet Forever, which speaks to our ambitions of building a more emotional long-term relationship with our customers.

ThredUp has been a brand mostly defined by logic and quantitative rigor over the past decade. And while we will never abandon that part of our DNA, we know shopping is inherently emotional. And by tapping into our customers' hearts through storytelling and cultural relevance, we can elevate both our brand and secondhand shopping to new heights. We saw the green shoots of this in October as it was the best month for new customer acquisition in our history, up 81% year-over-year, driven primarily by historically low acquisition costs.

Of course, as a customer-assessed company, we did not miss the chance to launch our rebrand alongside 2 powerful new product features, the Daily Edit and the Trend Report. With the Daily Edit, every customer will receive a newly personalized feed of 100 items that are refreshed daily. This was a major technical advancement in our personalization capabilities, powered by AI models we've trained in-house that can generate real-time user and item embeddings, allowing us to better understand each customer's style preferences and serve them a fresh curated feed every day. The Trend Report is using AI to combine macro and social trends alongside internal search and customer trends, then generating imagery and style feeds in real time that help customers shop what's on trend.

Now let me turn to selling on ThredUp. Since the founding of ThredUp more than 10 years ago, we've maniacally focused on building competitive advantage in our supply chain. Our investments in infrastructure and data have been central to the success of our marketplace, expanding ways we can process clothing at ever-increasing levels of scale and profit. Our investment in building a novel, dynamic, and robust data layer for secondhand clothing has enabled us to develop additional ways to compete in the evolving resale market. The first new supply growth vector we built on top of this core infrastructure was our Resale-as-a-Service business or RaaS, which now powers resale for dozens of brands.

This month, we are launching RaaS programs for New York & Co. as well as Cotopaxi, a brand that is near and dear to my heart as someone who loves the outdoors. It's the first large brand to launch after our RaaS strategy shift 6 months ago, and it's just one of many expected to come over the next few months. Our Cotopaxi launch is a showcase of the suite of services we can power for brands, including take-back programs and resale shops as well as cash out programs for customer acquisition and bulk consignment for inventory management. Earlier this year, we launched our second supply growth vector, The Premium Kit. With virtually no marketing investment, this product was an instant hit with sellers and has grown to be more than 20% of the supply in our marketplace. Premium kits deliver superior monetization for sellers, access to in-demand products for buyers, and accretive margins to ThredUp compared to our regular kits.

Today, I'm excited to announce the third vector of growth, which is the launch of direct selling on ThredUp, often known as peer-to-peer. While currently in a closed beta, given the way direct selling is expected to impact buying and selling on ThredUp, I thought it important to detail in advance our approach to serving this large part of the resale market. We have been working on the launch of direct selling of ThredUp for more than a year, but I personally have been working on this strategy for many years. I felt strongly there was an opportunity to serve this market as resale became more mainstream, mobile technology matured, and our operations hit a level of scale and margin where we could build a superior, differentiated customer experience.

That time is now, day 1 of direct selling. But let me explain. The problem for sellers in the peer-to-peer market is the friction that still exists in listing, pricing, fulfilling, and servicing the items available for sale. Many items don't sell. Those that do don't always touch the right price and post-purchase management of returns and seller reputation becomes an ongoing headache. The result is that most casual sellers participate for a while or they mix and match across peer-to-peer platforms, but they never love the experience. While public data is hard to find, our longitudinal research has suggested that the majority of items listed on current peer-to-peer platforms never actually sell.

For buyers on peer-to-peer marketplaces, it's very much buyer beware, a lack of quality merchandising and curation, low trust or buyer recourse in the event of a bad transaction keep many buyers from shopping more than periodically. For platforms, the incentives are to race to the bottom on fees to acquire sellers and to encourage as many listings as possible. This leads to rampant product pollution, limited curation, and the flea market quality that leads to short-term success, but long-term value erosion with weak network effects and limited moats, a new peer-to-peer marketplace pops up every 5 to 7 years, skinning buyers and sellers off the top with the renewed promise of that it will be better this time, join us over here. The fact is that this is a big market, and we believe it's mostly broken.

Against that backdrop, here's our new approach. First, our marketplace will focus on casual sellers, the exceptionally large long tail of sellers who consistently get crowded out. The number of items the seller can list will be based on their selling success. Flooding the site with low-quality items will not be an option. Second, sellers will be independently verified so that buyers will be able to shop with total confidence. We plan to mitigate the potential for fraud at every opportunity. Third, sellers will not pay fees to list items. ThredUp will provide premium listing, merchandising, and photography tools that make the sellers' life easier. We believe if done right, that suite of tools will be worth paying for over time. Finally, and unique to ThredUp, sellers will have a seamless experience to choose between direct selling and the Clean Out Kit to meet their needs at any point in their selling journey. ThredUp is now a one-stop shop for most apparel selling needs.

Turning to buyers. We are excited to solve the most important parts of buyer friction. First, returns. We believe the single biggest challenge with the peer-to-peer model is seamless returns. Leveraging our decade-long investments in our supply chain and infrastructure, we can now see this as an option to buyers given our power to resell return items in our marketplace. Second, trust. With every seller vetted and ThredUp's brand and customer service standing behind our sellers, buyers can shop with confidence. Third, we will bring standards of merchandising, listing quality, and curation to the peer-to-peer buying experience. We will bring a new wave of merchandise to buyers, but in an organized and thoughtful way backed by the Generative AI products we launched over the past year. And we will be methodical in our rollout, opting for quality and long-term defensibility over quantity.

We acknowledge we're in the early days of this new vector for growth, but we are excited to bring our experience, expertise, and unique assets to solve this large customer opportunity. We believe the supply and demand we can unlock in this effort will further accelerate our flywheel for years to come and that this launch couldn't be more timely given the economic uncertainty present for many American households.

Finally, before I turn it over to Sean, let me place some of the work in Q3 into the context of our longer-term strategy. On our last call, I discussed in detail the three important competitive advantages we've been building. First, our operational infrastructure and supply chain continues to prove a defensible asset. Having invested more than $400 million in infrastructure, software, and data to invent how a managed marketplace can work at scale, we are now capable of building customer-facing experiences more rapidly on top of it. Our RaaS business, our premium kit, and now the next generation of direct selling are examples of business lines built on top of this core infrastructure.

Second, we believe the investments in a unique proprietary data layer have helped us build a direct listing beta product that can work better for sellers while providing endless ways for buyers to shop well-curated merchandise. Third, marketplaces are hard to build and sustain. But when you get the flywheels going, they are very hard to stop. Our marketplace has exceeded over prior years, primarily through building a quality transactional experience. By updating and elevating our brand, we have the potential to deepen customer attachment and stickiness, making ThredUp a household name for years to come. In expanding ways that customers buy and sell on ThredUp with the launch of direct listings, we believe that over time, we can increase our wallet share as well as widen the moat in our marketplace.

With that, I'll turn it over to Sean to talk through the financials in more detail.

Thanks, James. I'll begin with an overview of our results and follow-up with guidance for the fourth quarter and full year 2025. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and a reconciliation between our GAAP and non-GAAP measures are found in our earnings release, supplemental financials, and our 10-Q filing.

We are extremely proud of our Q3 results in which we accelerated revenue growth and exceeded our adjusted EBITDA expectations. For the third quarter of 2025, revenue totaled $82.2 million, an increase of 33.6% year-over-year. Our performance was driven by investments into marketing and inbound processing that drove our marketplace flywheel. As we discussed on our last call, we started spending on marketing and processing earlier in the quarter, which allowed us to generate our significant top line beat. These investments, coupled with improved buyer metrics resulting from a series of new customer-facing products we've rolled out over the past 18 months, generated our fourth consecutive quarter of accelerating growth.

These drivers resulted in another record quarter for new buyer acquisition with new buyers up 54% year-over-year. We also benefited from repeat purchases by new buyers acquired earlier in the year as well as improved conversion for both new and existing buyers. We finished the quarter with 1.6 million active buyers for the trailing 12 months, up 25.6% over last year, while we had 1.6 million orders in the third quarter, up 37.2% over the same time period. For the third quarter of 2025, gross margin was 79.4%, a 10 basis point increase versus the same quarter last year. Our outperformance versus our expectations was largely a result of higher average selling prices due to the rapid growth in our premium supply offering.

Adjusted EBITDA was $3.8 million or 4.6% of revenue for the third quarter of 2025. We improved adjusted EBITDA margin by 410 basis points over last year as we leveraged our multiyear investments and benefited from our revenue outperformance while still making investments into marketing and inbound processing in order to drive our top line.

Turning to the balance sheet. We began the third quarter with $56.2 million in cash and securities and ended the quarter at $56.1 million, reflecting just $100,000 in cash use. We are proud to have generated $2.4 million of free cash flow for the quarter and $3.4 million year-to-date. We continue to expect to be free cash flow positive for the year. We spent $3.7 million in CapEx in Q3 as we made several opportunistic investments in order to support automation. We now expect CapEx for the year to be closer to $10 million, similar to what we expect in 2026.

Now I'd like to provide a bit of context for our updated guidance. Though we remain cautious on the current consumer environment heading into a highly competitive holiday season, we are pleased to be raising our top line expectations for Q4 to align with the positive trends we are currently seeing in the business while maintaining our Q4 EBITDA margin outlook. As has been our strategy throughout this year, we see continued opportunity to invest in marketing and inbound processing to drive growth. With contribution margins in the low 40% range and healthy LTV to CACs driven by scale and recent improvements to our product experience, we plan to flow any incremental dollars above our guide back into our growth-driving opportunities.

With all of this in mind, the fourth quarter, we now expect revenue in the range of $76 million to $78 million, representing 14% year-over-year growth at the midpoint and $3 million higher than our previous outlook. The sequential step down reflects the expected seasonal slowdown in resale around the holidays, combined with our planned pullback in marketing dollars as CAC spike during the highly competitive period.

Gross margin in the range of 78% to 79%, adjusted EBITDA of approximately 3% of revenue in line with our previous expectations and basic weighted average shares outstanding of approximately 126 million shares. For the full year of 2025, we now expect revenue in the range of $307 million to $309 million, reflecting 18% year-over-year growth at the midpoint. This updated view is $8 million above our previous guidance, incorporating our Q3 beat and the raised outlook for the remainder of the year. We are raising our gross margin range to 79% to 79.2%. Adjusted EBITDA of approximately 4.2% of revenue, this incorporates our Q3 beat while maintaining our Q4 outlook. And basic weighted average shares outstanding of approximately 122 million shares.

As we look into next year, our planning process contemplates 2026 revenue growth in the low double digits, in line with U.S. online resale industry growth expectations. On EBITDA margins, we are planning for slightly better expansion than we currently expect in 2025. Since we are planning to iterate on and roll out direct selling methodically throughout 2026, our current forecast does not include this new growth vector. We will provide a more detailed outlook on our Q4 earnings call in March.

James and I are now ready for your questions. Operator, please open the line.

[Operator Instructions] And your first question comes from the line of Ike Boruchow from Wells Fargo.

Congrats. A quick clarification and then a question. Sean, on the comment you just made on next year, just to make sure I heard you right. So initially for next fiscal year, you're assuming revenue can grow low double digits with similar EBITDA margin expansion that you're putting up this year, which I assume is 4.2% relative to the U.S.' 3.3% last year. So basically 100 bps margin.

Yes. So we said a 90 bps expansion we expect for '25, and we'll do slightly better than that in '26.

And then, James, maybe just to talk about the revenue. And again, I'm not nitpicking it all. I'm actually trying to understand how you think about revenue growth because it's been a roller coaster the last 12 months and a good way for you. But just how are you thinking about the compounding effects of customer acquisition, the experience improvements, all intertwined with what is a much lower growth rate next year that you're starting to plan? And then really just longer term, I mean, this business IPO-ed doing, I think, 25% plus and then it went negative last year and now you're in the 30s. So I guess just what's a sustainable growth rate for this model as you kind of see it over a multiyear period?

Yes, I mean, I think we've been pretty consistent saying we want to be a Rule of 40 company, which our long-term EBITDA model is 20% to 25%, which implies growth in the high teens to 20%. And I think that's the path that we're on. I think the guide for this year is 18% coming off a flat '24. I think given it's the first week of November, as we look to '26, I think starting with kind of low double-digit industry growth rate is probably a good place to start. And look, I think the plan for '26 and then into '27 and beyond is very similar to '25, which is let's methodically expand EBITDA. As Sean mentioned, we're going to continue to expand rates similar to last year, if not more, and then flow those dollars back into the growth rate.

And I think if you look at the sort of anatomy of 2025, that's exactly what we did, which is we took dollars and we flowed them back through, and that produced 4 quarters of accelerating growth. So I think that's the same playbook for '26. I just think given all the uncertainty in the economy, let's turn over some more cards, right, before we guide the full year in '26. But I think we feel very good about '25, and I think we feel very good about the multiyear path to being a Rule of 40 company.

And your next question comes from the line of Bernie McTernan from Needham & Company.

Maybe just a couple on peer-to-peer to start. How will these products look on your website relative to goods coming in from the Clean Out kits? I guess, would be question one. And then maybe second on that, if you just talk to the unit economics of $1 of the expectation for what the unit economics of the peer-to-peer sales will look like versus the traditional Clean Out kits?

Yes. Hello, Bernie, yes, I mean, the product displays will actually look pretty sharp. I think we've done a lot of work using AI to produce high-quality imagery. So I think you're going to see best-in-class imagery for how they look on site. And in early beta, we're already seeing that come true. I think you really do see a rich set of products. So my guess is that consumers are actually going to really appreciate the diversity of the imagery and the quality product experience that we've put forward. So I actually feel very good about that. On the unit economics, I think we have built a variable unit economic model that supports peer-to-peer being a strong long-term EBITDA driver, right?

And so typically speaking, you have lower top line, like revenue from peer-to-peer, but it generates superior margins because of the way that it flows through on a variable basis. You don't touch all the items in the same way. Sellers make more money, right? Buyers are happy. So I think, Bernie, if you kind of look across similar models that have been around a long time, they generally generate superior long-term profit pools. And I think we can build a superior customer offering and benefit from great economics. So I feel good about both areas, but I would caveat all that to say that we're early in the journey. And normally, we wouldn't talk about this for some time. But given how much it will impact the customer experience, it will become obvious to anybody browsing the site, the difference. And so wanted to be more detail oriented and explain it in advance.

And your next question comes from the line of Bobby Brooks from Northland Capital Markets.

I was hoping to get a little bit more granular on the buyer growth. So overall, up a very healthy 26% year-over-year, but with new buyers up 54% year-over-year. So I was just wondering if we could hear of that 320,000 or so buyers you added year-over-year, maybe what the mix of that was towards new buyers? And then secondly, could you discuss how your marketing approach may differ between getting prior buyers back on the platform versus new ones?

Yes, sure. Hello, Bobby. Yes, I mean, as you know, the active buyers is a trailing metric, right, versus new buyers is a quarterly metric. Generally speaking, about 1/3 of the total new buyers -- the total buyers that we're adding at any point, 1/3 of them are customers that we had previously who had churned that we resurrect as customers. So think about it as 1/3, 2/3 is customers we've seen before. And I think as we go forward, I think we'll continue to focus on driving new buyer growth. And with the rebrand, I think we are expecting that as we move up the marketing funnel a little bit, we'll actually capture more lapsed buyers in there. And so I think we're optimistic we'll actually recover resurrect customers who've churned maybe who don't get our e-mails or push notifications the way they do today. So that's kind of the approach to the marketing mix. Hopefully, that's helpful.

Yes, that's definitely helpful. And then I was just -- I was surprised that in your opening remarks, you mentioned how you won your first new large RaaS partner since the shift in that go-to-market strategy for RaaS. Could you help me understand why there was kind of a large lag between the change in the go-to-market and the new partner that joined this quarter? And also point it seemed like your commentary, you had some pretty good visibility or confidence on new partners joining that channel over the next year or so. Could you just discuss what's driving that visibility and confidence?

Yes. I mean it's -- we announced the new strategy 6 months ago. Most of the contracts that you have with these brands are multiyear contracts. So it's really just a lag effect, Bobby, of how contracts come up for renewal. Think about it more like enterprise. And so I think now we're getting into renewal season for retail brands end of this year and into next year. And so the pipeline feels very good for some of these brands to either sign for the first time or switch over. But that's the way I think you should think about it. It's the lag around the contract renewal process.

And 6 months isn't a long period for an enterprise transaction.

Yes. Yes, exactly. I'm actually delighted about the speed upon which a lot of customers are reaching out to become part of the RaaS portfolio.

Yes, I agree with that. I had a -- I thought it was a little bit long, but yes, 6 months to turn around on an enterprise channel is quite quick. Just any more on -- so it just seems like general contract timing is giving you that confidence in landing some more new ones?

Yes. Yes. No, definitely. I think we feel like the pipeline is good, and we'll see how Q4 kind of concludes, but I think you'll continue to see momentum with us launching new brands.

Fair enough. Congrats on a great quarter I'll turn in the queue.

Thanks.

And your next question comes from the line of Dylan Carden from William Blair.

James, sorry if you said this. So will the direct -- the peer-to-peer product be listed alongside the consignment? Is this sort of a separate site? And I'm just kind of curious a broader discussion of sort of the synergies that you see between these 2 businesses, I guess, beyond just simply sort of the captive audience.

Yes, Dylan, you'll be able to browse them together or separate, right? And so very much if you think about Amazon, right, the ability to shop 1P or 3P consistently. I mean I think this is a very well-established convention in commerce these days. So consumers will be able to flex in and out of it however they like. And what was your second question, sorry, Dylan?

Kind of the synergies between the 2 platforms and well…

Yes. I mean the primary driver is the feedback from sellers. So we've heard consistently for some time how many sellers are sending some stuff to ThredUp but then selling high-quality stuff on other platforms, specifically peer-to-peer platforms. And so in the research that we did, we found there was really a compelling opportunity to centralize all of the sellers' needs and give them that flexibility to do both. So I see the opportunity to really consolidate selling of secondhand online through the ThredUp platform. And then I think there's huge benefits on the buyer side, buyers get greater selection. I think that can help drive customer acquisition efficiency. And then in our DCs being able to leverage our supply chain and logistics network. So I see synergies on both sides, but primarily, it's all about sellers and supply over time. And I think this just gives us another tailwind in that market.

Awesome. And then for either of you, the deleverage -- or sorry, rather the leverage in the marketing line item is kind of impressive. I'm just curious if you could speak to sort of efficiencies you're seeing in marketing. And then maybe just sort of the lag effect in your customer acquisition given kind of the active customer growth versus the revenue growth.

Yes, Dylan, we continue to see sort of historically low CAC. I mean I think it's a combination of the product experience being better. We talked about the conversion rate last quarter. That has continued to improve. I think the ad market, we've continued to find opportunities buying ads, whether it's on Google or Meta and just really taking advantage of some soft spots as buyers now -- sorry, as other brands sort of navigate tariffs. And then from a lag effect, yes, I mean, the new buyer growth continues to be exceptionally strong, and you'll see active buyers sort of trail that. But we feel very, very good about our ability to be aggressive in market acquiring customers. And I think you should see that this year. And there's no reason, frankly, we can't continue to acquire customers next year at a similar or better rate, given that we're going to be spending more dollars in marketing next year over '25. And this year, we spent more than '24. So I think the trajectory on the acquisition side is as good as it's ever been.

And your next question comes from the line of Dana Telsey from Telsey Group.

Nice to see the progress. Can you expand, James, on the premium selling kits, what you're seeing there and what percent of the mix do you think it could become? And also on the AI investments that you've made, how that's leading to conversion? Is that a step-up from last quarter? What are you seeing there? And then I just have a follow-up.

Yes. Sure, Dana. Premium has really grown nicely this year from really 0 to north of 20%. I think there's more room to run on it, Dana. I mean, certainly, the buyers that we have are really drawn to the premium mix. And so I think we're continuing to invest in scaling that. I think it'd be premature to know what to predict like what the steady state rate is of premium, but I would say it's probably higher than it is today. And what we're seeing is the premium brands out there that customers are loving are the ones that we're seeing the fastest growth. FARM Rio, Mac Duggal, Vuori, like those are all brands that I think are hitting the sweet spot of premium, and we just want to get more of them.

And then on the AI side, I would say the product conversion rates continue to trend positively. I think the rebrand launched September 22. Alongside of that, we launched a new personalization strategy that was very powerful. And then we launched this Daily Trend Report that also, I think, is capturing what's in demand and using our AI tooling to deliver that in real time for customers. So you have better personalization plus better curation and trend forecasting on top of that having superior products flowing in. I think that's a recipe for the success that we saw in Q3. And I expect that to continue not just in Q4, but into '26.

And then the new buyer growth, which is very impressive, demos of the new buyers and what you're seeing? And then just after that, just marketing spend, how do you see marketing spend in '26 compared to '25?

Yes. I mean I think on the marketing spend side, we're going to continue to spend marketing at higher rates than we -- on a percentage basis, the same, but more dollars overall. I think Sean said a number of times, we think it's the last thing we'll probably try and leverage in the business as we pursue the growth strategy.

And the demos of the new buyers?

Demos remain the same, remain the same. Yes, it's been a very similar story. I think it's probably the third quarter in a row that we've been talking about record buyer growth and the demo of the buyers is consistent with what we've seen previously.

And your next question comes from the line of Matt Koranda from ROTH.

Nice job. I guess I just wanted to hear a little bit more unpacking of what you think is enabling the large acceleration in sales in the third quarter. Would you say it's the new tools that are available? Is it sort of the new buyer growth that you've alluded to? Are you getting more repeat from existing core customers? Maybe just unpack the trends that are driving the acceleration in the third quarter? And then also just curious on the fourth quarter growth that you guided for 14%. I guess, is that what you have observed actually quarter-to-date? And what causes sort of the deceleration there relative to the 30-plus percent growth you've been on?

Yes. Let me tackle the fourth quarter piece. We've baked in everything we've seen to date in the guidance. So you can do the math how you want on that. But the midpoint of the guidance is 14.5% on Q4.

And typically, Matt, like October remains very strong, but then the minute you switch to holiday, you start to see wallet share shift to new gifts. So I would say that October year-over-year was stronger than the 14%, but we tend to see November, December be a little softer.

I would add in the difference between like Q3 and Q4 is the comps that we're comping off of last year because last year's Q3 was a minus 10% growth and the Q4 last year was plus 10%. So if you think about it on a 2-year stack, actually, Q4 is growing really nicely.

Yes. Now I think I understood it.

And then as far as like your first question on what's driving Q3, you sort of hit the tools, the buyers and the macro. I would say that the -- generally speaking, you're seeing consumers looking for value. So at the macro level, I definitely feel like we are being sharp on price and the value proposition. And I think probably on average, drawing more customers in with that approach. And then I think the tooling that we've built is improving conversion. And so I think we're having success in the story that we're telling in the market around ThredUp has great brands at great value. And then when customers are getting to the site, they're converting at higher rates. And I think that's been driving the flywheel for a few quarters now, and I think really worked exceptionally well in Q3, and we're optimistic that will continue.

Makes a lot of sense. Maybe just one on the direct listings. Exciting to see that development, and I see the betas on the site right now. I guess how will the process work for sellers to begin to be vetted? And then I noticed it looks like no fees right now for sellers. So how do you envision, I guess, layering in seller fees over time as you get the volume ramped up in that channel?

Yes. I think on the vetting side, we're going to do a couple of things. So one is we have more than 0.5 million sellers on ThredUp today that we have already vetted, right? So the people who are already sending us Clean Out kits are vetted for peer-to-peer in advance. So I think we have a huge head start. And then on top of that, we're going to do -- we're either going to work with some third-party vendors to do vetting ourselves or just take an extra step for customers, whether that's making us scan a picture of their driver's license, right, or scan a QR code that we send to their house. But we're going to take seriously this idea of ensuring that these are high-quality sellers. I think it's become such a problem in the broader market of fraud and low quality.

So we're going to take that seriously and probably invest on average more than other peer-to-peer markets might. And as for fees, don't get me wrong, we are going to monetize the transaction, but we'll generally be charging buyers some percentage of the fees. And then for returns, which we've talked about, we're effectively launching an insurance product, which is for buyers who want to be able to return items they're going to be buying an insurance like ability to return, and we can price that based on what we're seeing in the market. And I think for sellers over time, while I don't anticipate us charging fees to sellers, I do actually think we're going to build a lot of tooling that will help make their lives easier in selling items.

And I think if those tools are high quality, you can imagine sellers subscribing to a suite of tools to improve their listing, their merchandising, all the things that make the seller process robust. So I see many, many ways that we can monetize this stream of buying and selling on ThredUp. And the market is so large, I think there'll be lots of ways to do it.

And your next question comes from the line of Oliver Chen from TD Cowen.

Nice job. Congrats. So on the revenue beat in Q3, what was driven by repeat versus new customer acquisition? And as we look ahead to 2026, how are you thinking about how those drivers interplay into your guidance? Also on the peer-to-peer model, which is really interesting and obviously very important. How would you compare and contrast on Poshmark or Mercari? I know it's been a difficult market in terms of profitability and fees. And it sounds like you're balancing control and scalability versus curation and fraud. And third question, Generative AI is something you've been very, very good at. On the peer-to-peer model, what role will that play there? And then we're doing a lot of work around OpenAI. Your thoughts on Agentic and the evolution in terms of brands and long tail, just different characteristics of Agentic and conversational commerce continues to be an important growing traffic consideration.

Thanks, Oliver. You got a lot in there. So if I miss anything, you let me know. I mean, I think on the Q -- on the revenue beat, consistently, existing buyers are still the driving force. Historically, it's 80% of our revenue is coming from existing buyers, and it hasn't varied that much to date. It's still -- while we're acquiring lots of new customers, the bulk of buyers on ThredUp are existing customers. And so you're even seeing the new customers we acquired over the past couple of quarters becoming repeat customers at higher rates in Q3. On the peer-to-peer piece, you asked on the competitive set.

Look, I mean, frankly, there's been very little innovation and product work done by a bunch of these other peer-to-peer platforms. I think they've lost the plot a little. And so I actually think we can build something that's far superior to what's out there today. And so I see huge opportunity to build something that sellers and buyers love. I think it's clear there's a market out there. And the question is how to serve that market really effectively, and I'm confident we can do that.

On the GenAI piece for peer-to-peer, yes, a lot of the tooling that we've built over the past year is being used to deliver a superior direct selling experience. That's everything from listing photography, curation, merchandising to how we price, to how we display to buyers. So I don't think we could have done this over a year ago, right? So a lot of this has been in development based on technology shifts in the market that I think have been pretty profound. Just a nice segue to your last question, which is on OpenAI and Agentic commerce. I think it's a big part of what's coming. I'm convinced that agents is going to be a part of how people shop in the future, but I can't tell you when.

So I'm quite confident that we're in the middle of the change, but I'm not sure of the timing. And because I think shopping is a little different -- shopping for fashion is a little different than buying peanut butter. And so I think the peanut butter use case is a little bit more well defined. I think in fashion, it's going to take a little bit more time. But we're staying close to all of the large players in the space. Anybody who's building sort of customer-facing chat clients, we are in conversations with. Today, if you go to OpenAI and talk and ask ChatGPT about selling used clothes, we're at the top of that list. And so we're going to keep investing to make sure that, that stays true.

And what -- on the peer-to-peer angle, James, what will be your competitive advantages? It sounds like customer engagement in the existing sellers. But what would you say? Because it's been a race to price in that marketplace, but it does sound like there's new technology now and you've investigated P2P for a long time. And then, Sean, as we think about CapEx in the forward years, is there anything we should know about like in terms of how that interplays with some of these new endeavors?

Yes. On the selling piece, I think if you look at the market for sellers, really, it sort of has lended itself to this professional seller network, which has crowded out your casual seller. And I actually think the most interesting part of the market is the long-tail casual seller. And so right now, the incentives for some of these platforms because the product experience isn't great, is to just get flooded with stuff. And so I think our approach is a much more measured, curated experience in direct selling that I think will benefit sellers by driving liquidity and sell-through for them and also delighting buyers with a better experience. I think for buyers, in particular, returns is a huge piece of friction in this market.

Trust is a big piece of friction in this market. And I think we are delivering something that, I think, a far better experience, both on the trust and safety side as well as the ability to do returns and remove that big piece of question -- that big question mark among buyers of like, can I trust what I'm going to get, who stands behind it. So I think there's actually big advantages we're bringing to the market, and I'm excited to kind of keep going.

And Oliver, on the CapEx, like I said on the call, we'll do $10 million about this year, and that will be consistent for 2026. And then once we get to 2027, we're probably at the point where we're filling in the Dallas DC. So we'll give you guys more of a view there, but I'd expect it to be more than the $10 million, but we'll give you information as we go along there.

And finally, James, we've talked about AI together a lot. As you think about like first-party data as well as LLMs and partnerships with different LLMs, like how do you see that evolving in terms of your competitive mode in AI and how AI has a lot of open source. However, the proprietary tools that you develop are quite necessary since a lot of this is also not very generalizable.

Yes. I mean I think that we are benefiting from being a technology company and an infrastructure company at heart. I think all the tooling we built I think, has allowed us to move faster and stay ahead. And at the end of the day, I think Amazon has proved this out time and again that having the right products and being able to deliver them to customers is of utmost importance. And so in secondhand, I think we've got an incredible product selection across our DCs that's improving every day. And I think then when you add in direct selling, you just are compounding that supply advantage. And in resale, supply is the name of the game. And I think we're continuing to distance ourselves from others and having the best supply out there.

And there are no further questions at this time. I will now hand the call back to James Reinhart for any closing remarks.

Well, thank you all for joining our call today. We set out on a mission to inspire the next generation to think secondhand first. And I think this year's results so far are just beginning to show what's possible in the years ahead. It's such an incredible time for ThredUp right now. I want to thank all the teammates for being a part of this journey and look forward to sharing further progress next quarter. Thanks.

And this concludes today's call. Thank you for participating. You may all disconnect.

Good afternoon, ladies and gentlemen, and welcome to the ThredUp Q2 2025 Earnings Call.

[Operator Instructions]

This call is being recorded on August 4, 2025. And I would now like to turn the conference over to Lauren Frasch. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's second quarter 2025 financial results. With me are James Reinhart, ThredUp's CEO and Co-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 being webcast on our IR website, and a replay of this call will be available on the site shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties.

Actual results could differ materially. Please refer to our earnings release, supplemental financial information and our Forms 10-K and 10-Q for more information on these expectations, assumptions and related risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures.

A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and the supplemental financial information, which are distributed and available to the public through our Investor Relations website located at ir.thredop.com. Now I'd like to turn the call over to James.

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining our second quarter 2025 earnings call. Today, we'll discuss financial results for Q2 and update our expectations for Q3, Q4 and fiscal year 2025. I will provide an update on our thinking about the macro environment, discuss ongoing innovation in our AI-driven product experiences and end with a refresher on our compounding competitive advantages in the growing resale market. I'll then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our financials in more detail. As always, we'll close out today's call with a question-and-answer session.

First to the results. The second quarter was strong. Revenue growth accelerated to 16.4% year-over-year. Gross margin landed at 79.5% and adjusted EBITDA was 3.9%, all of which exceeded our own internal expectations. These results were driven by the underlying fundamentals of strong customer growth and orders in our business. We acquired more new customers in the second quarter than at any other time in our history, with new buyer acquisition up 74% year-over-year.

Active buyers were up 17% year-over-year and orders were up 21% year-over-year. Again, our approach in 2025 is simple: maintain our gross margin and bottom line efficiency and reinvest incremental dollars we generate back into growing new buyers and sellers in our marketplace. We are continuing to do this with success in the third quarter and believe this approach creates the greatest long-term shareholder value.

Turning to the macro. We talked about the impact of tariffs at some length on our last call. Let me reiterate a few points that remain relevant. First and by far the most impactful to ThredUp is the closure of the de minimis loophole. Though the full impact is still uncertain, we believe the closure of the de minimis exemption is likely to cause higher prices for ultrafast fashion goods and to reduce production volumes, both of which could continue to be positives for ThredUp.

Second, the increase in the price of new apparel that may result from broad-based tariffs could enhance the comparative value proposition for consumers who are shopping for value on ThredUp.

Third, ad markets remain dynamic. As we predicted the short-term gains we experienced from companies like Shein and Temu aggressively pulling back lasted from mid-April to mid-May before they began spending again. Regardless of how advertising rates trend, we're continuing to see efficiency throughout our funnel, driven by improvements in the ThredUp experience. So let's turn to that.

We are now more than 18 months into our AI-led product journey and positive results continue to compound. It's not as though any one feature is driving the outcome, but rather the whole set of ways that shoppers can now engage on ThredUp is improving. While we've shared some of the individual feature results previously, including Visual Search, Style Chat, Image Search, Shop Similar, I thought it might be useful to review how the aggregate nature of these improvements is rolling up to create better business fundamentals. [indiscernible] to sign-up rates on ThredUp are up 30% year-over-year and sign-up to purchase rate is up 60%.

Combined, this is an 18% improvement in how visitors turn into ThredUp customers. Typically, when you accelerate marketing spend as we have and drive more traffic, you get degradation in the funnel. But the work we've done has created the opposite outcome. This is the flywheel we will continue to lean into.

And we continue to invest in new ways to leverage AI technology in the prompt experience. This quarter, we debuted our first AI-generated images on roughly 100,000 individual product pages that showed how an item might look on a model, what fashion brands who make products can do easily, but we can't given our massive assortment of secondhand SKUs. The results were fascinating.

For existing heavy ThredUp buyers, AI model images had modest conversion impact. But for those new to shopping secondhand, it was a big deal. Customer satisfaction of AI model photos have been on par with our very best features. We think this is because this is the way the new customers are used to shopping elsewhere.

We have taken this feedback and are retooling how the images are created and displayed at further scale and expect to be back in market in the coming quarters. Again, this is in service of our goal to make the experience of shopping secondhand virtually indistinguishable from shopping new products. Our social commerce work continues to delight customers with easy ways to shop their inspiration from Instagram and other social media. Our new feature is live on the ThredUp iOS app, and we expect to roll out to more platforms later this year.

We believe that enabling customers to seamlessly shop their style inspiration from influencers and creators is a meaningful opportunity for us to drive social proof and capture wallet share. We plan to continue to invest in engineering, design and data science resources over multiple cycles to nail this experience all the way through the product funnel.

Turning to the seller side of our marketplace. We continue to make substantial improvements across the seller experience with our ambition to make ThredUp the default place to sell secondhand clothing online. Given the top line growth in Q2 and the expectations for Q3, it will come as no surprise that we set all-time records in requests, receipts and cleanout kits processed.

Our strategy involves expanding the number of ways customers can sell and the frequency with which they sell on ThredUp. Premium service kits with service fees up to $34.99 continue to grow as a mix of kits received, growing 44% quarter-over-quarter. We are particularly excited by the mix of new sellers joining ThredUp as premium service customers.

Roughly 1/4 of premium kits are coming from sellers who have never previously sold on ThredUp. Earlier this year, we launched the ability to resell items when you're returning a product you bought on ThredUp, and that volume has increased more than 4x quarter-over-quarter despite no measurable increase in our overall buyer return rates. We are leveraging our return supply chain to lower selling costs, but more importantly, making it easier for buyers to become sellers on ThredUp.

Let me provide a brief update on Resale as a Service or RaaS. Our change to an open source model in our RaaS strategy is in the earliest stages, and we are seeing promising engagement from brands. We have renewed conversations with more than 60 apparel brands after the announcement of our new strategy.

Again, we believe value for this ecosystem is created in the operations and technology layer to ingest secondhand items at scale and make them available for resale as efficiently as possible. Over the long term, as brand resale becomes more prevalent in the industry, we believe this ecosystem will benefit from a powerful affordable "universal recommerce layer" akin to what Amazon Web Services has done for cloud or Shopify has done for small business.

This can then enable any brand to do everything they need across the resell ecosystem. We will have more to share in the coming quarters as we launch new brands under this model. Before I turn it over to Sean, I want to reiterate 3 important competitive advantages in our model that are working together to drive the positive momentum you're seeing today.

First, the operational infrastructure and supply chain that we have invested in over many years is working as well as ever. We've invested over $400 million in infrastructure, software and data to invent how a managed marketplace can work at scale from the humble cleanout kit to advanced photography technology from inbound automation of item identification and measurements to the outbound carousel automation for shipping out unique apparel SKUs tens of thousands of times a day.

Our tailored purpose-built supply chain is unique, and we believe that replicating our success would take many years, significant capital investment and the creation of a great deal of new intellectual property. Second, the technology investments we've made over many years to build a proprietary resell database and data expertise have enabled us to take advantage of the leaps in AI technology you're seeing today.

It is precisely the hundreds of millions of pieces of clothing that we've processed and the vast stores of data about those items that has helped us leverage AI so quickly and expertly to sell more items at better margins.

Third, as we all know, marketplaces are hard to build and sustain. But when you get the flywheels going, they are very hard to stop. Our innovations on the buyer and seller side are helping us delight both sets of customers, expanding the addressable opportunity while deepening engagement and capturing wallet share.

I have said multiple times that ThredUp's marketplace should uniquely benefit from advances in AI, and I believe we are seeing that come to fruition so far this year. As a parting thought, if you zoom out and ask how to compete with ThredUp over time, we think you will run into a lot more questions than answers. What will it cost to acquire millions of secondhand buyers and sellers? How will you acquire, process and fulfill the broadest selection of quality secondhand apparel anywhere? Can you price the apparel attractively while maintaining healthy and sustainable unit economics, a feat only possible through advanced automation infrastructure?

Will you be able to compete with a well-known and trusted brand backed by superior technology infrastructure and the decade-plus head start. These are hard questions to answer, especially while ThredUp is accelerating. In sum, we believe the conditions for our future success are very bright, and we are going to be relentless in executing our playbook. With that, I'll turn it over to Sean to talk to the financials in more detail.

Thanks, James. I'll begin with an overview of our results and follow up with guidance for the third quarter, fourth quarter and full year 2025. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and a reconciliation between our GAAP and non-GAAP measures are found in our earnings release, supplemental financials and our 10-Q filing.

We are extremely proud of our Q2 results in which we accelerated revenue growth, exceeded our adjusted EBITDA expectations and generated cash. For the second quarter of 2025, revenue totaled $77.7 million, an increase of 16.4% year-over-year.

Our outperformance was driven by significant investments into marketing and inbound processing in order to drive our marketplace flywheel. These investments resulted in our second consecutive record quarter of new buyer acquisition with new buyers up 74% year-over-year. We finished the quarter with 1.5 million active buyers for the trailing 12 months, up 16.5% over last year, while orders were up 20.8% to $1.5 million.

For the second quarter of 2025, gross margin was 79.5%, a 70 basis point increase versus the same quarter last year as a result of higher average selling prices due to the rapid growth in our premium supply. This dynamic was slightly offset by new buyer growth as new buyers require higher incentives to convert on their first purchase. Adjusted EBITDA was $3 million or 3.9% of revenue for the second quarter of 2025. We doubled our adjusted EBITDA dollars versus last year, representing a 170 basis point margin improvement as we leveraged our multiyear investments and benefited from our revenue outperformance.

As our momentum accelerated through May, we were unable to hire fast enough in our processing operations, driving our EBITDA beat. As we've entered Q3 with encouraging momentum, we are spending on marketing and inbound processing earlier in the quarter, which I will further discuss later.

Turning to the balance sheet. We began the second quarter with $55.4 million in cash and securities and ended the quarter with $56.2 million, generating $800,000 in cash. We spent $3.3 million on CapEx in Q2 and continue to expect maintenance CapEx levels of approximately $8 million in 2025.

Now I'd like to provide a bit of context for our updated guidance, which should sound similar to last quarter. We delivered a significant revenue beat in the second quarter, and we are flowing that through to the full year revenue outlook. Though we remain cautious on the current consumer environment, we are pleased to be raising our top line expectations for the balance of the year to align with the positive trends we are currently seeing in the business.

We also delivered a strong beat on Q2 adjusted EBITDA, which we are flowing through to our raised year guide. With contribution margins in the low 40% range and healthy CACs driven by AI improvements in our customer experience and marketing tactics, we see continued opportunity to invest in marketing and inbound processing. As we have increasing confidence in our quarter-to-date momentum, we are making these investments earlier in the quarter. We expect this timing to drive demand throughout the quarter and beyond and more effectively enable us to flow our incremental EBITDA dollars back into our growth drivers.

Therefore, we are maintaining our profitability expectations for the remainder of the year as we continue to focus on driving growth and generating cash. With all this in mind, in the third quarter, we now expect revenue in the range of $76 million to $78 million, representing 25% year-over-year growth at the midpoint; gross margin in the range of 77% to 79%, adjusted EBITDA of approximately 4.5% of revenue, in line with our previous expectation and basic weighted average shares outstanding of approximately 125 million shares.

In the fourth quarter, we expect revenue in the range of $73 million to $75 million, representing 10% year-over-year growth at the midpoint. The sequential step down reflects the seasonal slowdown in resale around the holidays.

Gross margin in the range of 77% to 79%, adjusted EBITDA of approximately 3% of revenue, in line with our previous expectations and basic weighted average shares outstanding of approximately 129 million shares. For the full year of 2025, we now expect revenue in the range of $298 million to $302 million, reflecting 15% year-over-year growth at the midpoint.

This updated view is $14 million above our previous guidance, incorporating our Q2 beat and our raised outlook for the remainder of the year. We are narrowing our gross margin range to 78% to 79%, adjusted EBITDA of approximately 4.2% of revenue. This reflects our Q2 beat, while we are holding our assumptions for the remainder of the year to be broadly similar to our previous outlook and basic weighted average shares outstanding of approximately 123 million shares.

In closing, we are extremely proud of our Q2 performance. We accelerated revenue growth, generated cash, and we remain focused on doing the same in Q3. The momentum we're seeing in the business provides us with increased confidence in our ability to deliver on our goals. James and I are now ready for your questions. Operator, please open the line.

[Operator Instructions] And your first question comes from the line of Irwin Boruchow from Wells Fargo.

Let me add my congrats. I guess a couple of quick ones. I guess, first for James, and then I have a follow-up for Sean. But just, James, maybe just at a high level, just more detail on what drove this kind of Q2 revenue outperformance and the new buyers. It's just the business has inflected so strongly, and it seems like it's happened pretty fast.

So I'm just kind of curious underlying what you think was the biggest driver there because there are so many different things you guys are doing right now to improve the business. I'm curious if you could kind of like level set that or rank order those for us.

Yes, sure, Yes. I mean I think rank ordering is difficult. What I would say, though, is that we've really got this flywheel working of improved product experience, sort of put some numbers in the prepared remarks around this, around conversion rate across the product experience. And then our new buyer acquisition continues to be strong, really driven by product.

And so when you combine that with strong operations processing and high-quality supply, what you get is this trifecta of great supply, great product experience and efficient acquisition. And what we're seeing is that as those things continue to get better and better, we're able to then deploy more dollars into the growth flywheel. And I think that's what's driving sort of momentum in the business. And yes, it feels great to be able to see the model really working and to feel like the marketplace is really humming on all cylinders.

I assume you don't want to get into like the monthly cadence or anything, but I mean, just to see the 16% growth in 2Q and you're guiding to 25% in the third quarter, like is the business just sequentially building every month? Has that been going on for a while? Just kind of curious if you could kind of help us understand what's going on under the covers.

Yes. I mean we're definitely seeing -- the new buyers that we were acquiring starting back in Q4 of last year, right, that momentum continued into Q1 and I think into Q2, and we're seeing it in the first month of Q3. So certainly, you're getting that acceleration.

But then if you get a normal seasonal slowdown in Q4. And yes, I think as you all know, right, that when you're driving that many new buyers into the business, as long as you're maintaining strong engagement rates and retention rates, that really does start to compound, and we're seeing that in the numbers for Q3 and Q4.

Great. And just the last one, maybe for Sean. I'm not sure if it's for Sean or for you, James. But to drop to 10 in the fourth quarter seems very conservative. Can you maybe just talk about the guardrails you're putting on that just because -- I mean, like how many active buyers are you assuming drop off because I assume there's a good amount to get the rev to go from 25 to 10. So I'm just kind of curious the guardrails you're kind of putting around the fourth quarter.

Yes, I can jump in because we've been talking about the quarterly cadence. Really for Q4, remember that it is a seasonal downshift in resale, right? That has been true for more than a decade. You see sequential step down from Q3 to Q4. And so I think one is the seasonal piece. I think the second is that we do tend to see marketing rates go up in Q4.

And so we tend to pull back a little bit on our own investments just to maintain our paybacks in CAC -- LTV to CAC strategy. So we do a little bit of that ourselves. And then the third is, to be honest, I think Sean and I are a little uncertain on the macro. Jobs numbers are weak, housing market is weak.

And so I think it's probably smart to be a little conservative around exactly how Q4 is going to play out at this point. But obviously, when we get to properly reporting Q3 and guiding Q4 in November, we'll have more to share. But we think that's a more prudent course.

And your next question comes from the line of Dylan Carden from William Blair.

On the gross margin side of things, typically, I think there's sort of an inverse relationship between new customers and gross margin, and yet you were able to sort of set records in both this quarter. Just curious the dynamics there and you're kind of keeping the wide range go forward, kind of the puts and takes on that.

And maybe it's a related question, but you had sort of mentioned some timing on costs as it relates to sort of some of the upside in earnings in the second quarter. Can you just provide maybe some more details as to what those were and how that rolls through third and fourth quarter?

Yes. Dylan, this is Sean. I think on the gross margin outperformance in Q2, we saw the premium supply piece continue to grow and really drive ASPs. And then as you look towards kind of the back half of the year, you see gross margin kind of tick down a little bit. I mean we still expect premium supply to be there, but we really want to focus on the customer experience as we've added all these new customers in the first half of the year.

And by that, I mean, we're going to focus on things like pick, pack and ship, which is stuff that kind of rolls into COGS and impacts gross margins to give a better overall customer experience just to drive it home and really allow those new customers to become second-time purchasers or third-time purchase and fourth-time purchasers.

And then we don't spend a lot of time typically talking about supply, and we're kind of talking about here on this call. And I'm just curious sort of as you see the business accelerate, it sounds like you're kind of keeping pace from a supply standpoint and then sort of the processing times, keeping those in check.

Yes, Dylan, it's James. Yes, we continue to see record requests, receipts processed on the supply side. And we're really focused on innovating in the supply chain. We really want to make ThredUp the default place to sell online and make it as easy as possible for anyone to get engaged.

And so I think premium has done a very good job of capturing that more premium seller. We obviously have our sort of donation program for our customers who are really just doing a non-financially, motivated cleanout and really trying to capture that whole market, Dylan, and it's worked so well so far year-to-date, and I think we're going to continue to innovate there as we get in the back half of the year.

And your next question comes from the line of Dana Telsey from Telsey Group.

Congratulations, everyone. As you think about this inflow of new buyers, what are the demographics of those new buyers? How are you seeing them different or the same from your core? And is part of this due to the closure of the de minimis? And then what are the category trends? Did they differ at all from first quarter to second quarter? And then I have a follow-up.

Hey, Dana, it's James. No, on the new demographic side, there's nothing materially different about this customer compared to prior customers. I think our point of view is that the addressable market for female secondhand shoppers in the U.S. is pretty large. And I think we're now just getting back into -- once we divested Europe, and really aggressively growing our share in that market.

So the customers really do look like previous best case ThredUp customers. So we feel good about that. I think from a trend perspective, Q1 into Q2, we really did see continued explosion in the number of dresses that we were selling into springtime and into summer. That continues to be a winning category for us, and we think opportunity to take even further share as we move through the year.

Got it. And then on the marketing spend, can you talk a little bit about the cadence of marketing spend? How much difference there is quarter-by-quarter now? And then just on the RaaS with the change to the open source model, any further expansion of RaaS and its implications?

Yes. I think on the marketing side, we -- other than the seasonal shift in -- downshift in Q4 when ad rates get really competitive around the holidays. Otherwise, we're really targeting somewhere in the high teens to 20% of revenue on marketing. We're really in growth and acceleration of growth mode. And that has been pretty consistent.

As a reminder, Dana, we're really focused on this LTV to CAC ratio being under 1 such that we're paying back under a year, and we've been really relentless on that. And so if we can acquire more customers under that construct, we'll try and lean in. And that's what we've been trying to do year-to-date. And I think that's what you're starting to see some of that momentum build on the marketing spend. And then sorry, your second part was around?

RaaS, the open source model.

Yes. I think -- look, I think we're just a few months into the new strategy, but I think it is really starting to resonate with the apparel brands that we're talking to. So more than 60 brands, we're now back engaged in conversations. And the idea really is that ThredUp is the real scalable partner in town that can help them meet their goals either on take-back programs and building sustainability and circularity into their brand as well as helping them position an assortment of secondhand goods that's expansive and quality and meets the bids for their customers. So we feel great about the strategy. I think it's summer, as you know. And so it will take a little while for us to ink some of these deals, but I think we're feeling good about the strategy shift.

And your next question comes from the line of Bobby Brooks from Northland Capital Markets.

Congrats on the great quarter. So on the 1Q call, you guys had discussed that each incremental dollar above your 4% guide would be reinvested in marketing, and it kind of dovetail -- that also dovetails with what was said earlier in this call. So I'm just trying to understand what's underpinning the 3Q guide of 4.5%. I know the 4Q guide is for 3%. So maybe it's just as simple as on a full year basis, you'll be at that 4% threshold, but I was just hoping for a little bit more color there.

Yes. It's just due to the kind of the seasonality of Q4's revenue versus Q3. And I think the full year guide takes into account the beat for Q1 and Q2, getting you to the 4.2%.

Okay. And so it's just so that's really just kind of baking in the first half beat, but anything more on like the 3Q? Because it seems like you guys are investing more heavily upfront. So I just kind of surprised that you'd be above that 4% threshold.

Yes, Bobby, I think we are continuing to invest in marketing, but we also have sort of committed to modest EBITDA expansion over the course of the year. We certainly want to be able to deliver to investors clarity around the business generating free cash flow, the business having a strong margin profile that we can control.

And so I think what you're seeing in Q3 and the rest of the year is the growth is strong, and we wanted to make sure that it was clear we were dropping some of those dollars to the bottom line, consistent with what we said earlier in the year. But to emphasize, we're really sort of growth oriented at the moment.

And I think we've been trying to focus on, let's not consume any capital, let's generate cash, let's maintain our gross margin efficiency, our EBITDA efficiency and then really grow as fast as we can, and that's how the numbers shake out.

That's very helpful color. And then the next one was, I was just curious to hear a bit more about the supply dynamics and kind of the makeup of what you guys are seeing. So obviously, you guys have 3 or 5 different bandwidth on payouts between 5 and 20, 20 and 50, 50 and 100 and so on with your take rate moving lower as the pricing -- the sale price moves up each band. So could you just give us some sense of like how much of your business falls under each category?

Yes. We don't disclose necessarily the -- what comes into each band, but I will say that as we talked about the growth in premium, right, which has been growing strong. Those products tend to be at those higher payout amounts, right, as you mentioned. And the thing to understand is while the rates might be different, the dollars flowing through are strong, right?

And so we can take those dollars and invest them back in the business. But I think what we feel like is that the consignment premium piece, not only is it great for sellers, we think it's a very out of the gate strong product market fit, but it really does help drive buyer acquisition.

Buyers are there to find great products, great value and that premium supply is a part of that. And so we really focus the rates based on maximizing the opportunity for the buyer and the seller and ThredUp all at the same time.

Got it. And then just one last one for me is just, obviously, your business has clear benefits from the network effect and those are really starting to take hold. But could you just -- and taking into account that you just posted your best quarter in customer acquisitions.

Could you just maybe discuss the balance between what you're seeing in new people coming to the platform as new suppliers versus people coming to the platform as first-time customers and just kind of the mix of that or maybe long-time customers becoming suppliers or long-term customers becoming -- or long-term suppliers becoming customer and vice versa? Just kind of curious to hear about those trends.

Yes. I think what you're seeing is -- look, I mean, we've been saying for some time that I think you have to really think about ThredUp as a marketplace where you're really trying to add the right number of buyers and the right number of sellers in to get the market clearing dynamics to work. You obviously wanted to be highly liquid.

And I think what you're seeing now is such strong buyer growth in the business and our operational infrastructure has never been stronger. We're able to feed that buyer mix with high-quality supply. And so the guardrails as far as buyer growth and seller growth are off. I think we're acquiring lots of new sellers. The sellers are becoming buyers.

As I mentioned, lots of buyers that are coming in. They're now getting complementary cleanout kits in their orders, and so they're becoming sellers. And so I think you're really starting to see that crossover happen between buyers and sellers. And again, I think that's what built a really healthy network effect for the marketplace.

And your next question comes from the line of Bernie McTernan from Needham & Company.

Just wanted to start on new buyers. Obviously, really strong results during the quarter. But just wanted to get a sense in terms of like it seems like there was less competition for new buyers in the first half of the quarter and then so there was more competition in the second half. So how did that play into the new buyer growth? And what's contemplated for the guide in 3Q and 4Q?

Hey, Bernie, it's James. Yes, I mean, as we mentioned on the last call, April was strong. And you did see Temu and Shein and a few others sort of pull back a little bit, but they kind of came back into the market in mid-May. And so a lot of the performance throughout the quarter, in the last couple of months of the quarter was really driven by the team doing a wonderful job on the growth side, the product experience continuing to get better.

And we've continued to see strong momentum into July. So I think a lot of the back half of the year, we expect to see more of the same. And so it will remain to be seen how some of these guys play. I know Amazon has made some changes into how they're spending on Google Shopping.

The Trump administration just rolled out de minimis exemption is now not just for Chinese goods, but for all goods coming into the U.S. So that will have some dynamics around who's buying ads and the ad rate. So I think it's a pretty dynamic environment, but I'm pretty confident that regardless of the macro trends there, like we're going to be able to spend and acquire our customers at real predictable and strong rates.

Okay. No, that's great. And then I also want to touch on RaaS. Obviously, you mentioned conversations with over 60 brands. What are some -- acknowledging that some are, but other than that, what are some of the bottlenecks for getting those brands over the finish line? And like how many new brand partnerships we have to see for it to be a material impact on your supply?

Yes. I mean I think it depends on the brand, Bernie. I think for some large brands, they can be impactful right away. But I think from a timing perspective, some of these brands are currently in contracts with others. Some of them are trying to navigate the tariff news and how that's impacting what they're doing.

And so the launch of Resale as a Service brands has never been something that just happens overnight. It does take a little bit of time. But I do think you're going to see some momentum by year-end. Whether that's material, I think, remains to be seen. I don't expect it to be material in '25, but I'm optimistic that it will have a real impact in 2026.

And your next question comes from the line of Oliver Chen from TD Cowen.

The AI acceleration has been really, really nice. What do you think the hardest parts of that AI journey have been? And second, as you rank order the financial impact, it sounds like customer acquisition is the highest impact, but how would you rank order the model impact as you see it?

Second question is on the new buyer growth rates. What are your thoughts on how that number -- like what kind of long-term growth rates might we expect there? It's been extraordinary, but the related question is like one and done or the nature of the new customers relative to existing.

Oliver, good to hear you. The -- I think on the first one on the hardest part of AI for us is given the breadth of the catalog, right, 4.5 million-plus SKUs changing every day is really nailing product recommendations and filtering using the technology. So even just in the last few weeks, we've been rolling out improvements into how customers are getting the right sorts of product, the items that they should shop with these other items.

So I think the hardest thing is really getting the models to work as well as we know they theoretically can, which I think is really exciting because I think similar to whether it's ChatGPT or any of the other services out there, they're getting better every month. And you can see that where we feel like the opportunity to make our experience of shopping on ThredUp better every month through AI. So I think that part is exciting and the team is working super hard and -- but these are hard, big problems to solve.

I think on the question around like new buyer growth rate, the -- look, I don't expect it to be 95% every quarter or 75% every quarter. There's a real acceleration there that has happened. But I think we feel good about the addressable market. I mean this is a big market in the U.S., expected to double by 2030.

And so there's a lot of women out there that either are casual shop versus secondhand or never shop secondhand. And we think we can go out and acquire those customers at very predictable and large numbers. And so I don't have a steady-state rate for you, but I would say that we have 1.5 million customers.

And there's an order of magnitude more customers out there that are not ThredUp customers than are. And so that's sort of how we feel about the opportunity. And then you had a second -- your other question was in there was on the model -- was on which one? On the...

Yes, linking AI to financial modeling, like how [indiscernible] some of that?

Yes. I think you sort of suggested that on the customer acquisition piece was the top of the list. I would agree with that. I think it has helped us really drive conversion throughout the funnel, make our ad spend more effective. I would say, though, that the other piece is, if you shop ThredUp today, you just -- the experience feels more elevated, and I think we're working further to even elevate the shopping experience.

And so I think the work that we've done improving the crispness of the images, some of the work we've done with on model photography, the merchandising has improved. A lot of that stuff has really elevated, the shopping journey, and we hear that from customers that ThredUp just feels like a more elevated experience than it was a couple of years ago. And I think that's drawing more customers into the fold and increasing kind of people's feeling of how the site is and what it means to shop there.

Okay. And James, you've been a visionary within the sector. What are your thoughts about consolidation going forward or how you see the next leg of innovation over the longer term? And how might that juxtapose with how you think about CapEx and what investment needs or options you may have in the future?

I mean I don't have a crystal ball on how the market is going to play out. But I -- look, I think the market is big. I think it's growing. I don't think that this is something that is a fad that people are going to wake up someday a couple of years from now and say, I'm never going to shop secondhand again.

And so I think this is a structural shift. I think similar to how off-price spent 20, 30 years really shifting how consumers shop and behave. I think secondhand is on a similar journey. So I do think there'll be big companies created. ThredUp, I hope, will be one of them, and we'll sort of see what happens. But I think that generally speaking, the fact that the market is big and the structural shift would suggest that there'll be some big companies.

Okay. Last one on customer acquisition costs. There are a lot of puts and takes and different forces here. What's changed the most in your perspective there framework? Or maybe not much has changed, but just the tactics around you have? I love any thoughts on shifts or -- and how -- what that may imply for the future on the customer acquisition costs.

Yes. I mean we've seen some change on CPMs, I think, on Meta and on Google, which I think are consistent with some of the changes with how big ad buyers like Temu or Shein are moving in and out of the market. But by far, the biggest driver has been the conversion rate.

And so conversion rates, right, when they go up, significantly, like it changes all the math in a pretty dramatic way. And so our CACs have come down commensurate with our improvements in the product experience. That has allowed us to spend more money. And by spending more money, we're actually able to optimize the funnel even more. And so you really do have this virtuous cycle driven by the product experience.

And there are no further questions at this time. I will now hand the call back to Mr. James Reinhard for any closing remarks.

Well, thank you all for joining us on this call. We're really excited about the momentum in the business. And I want to send a big thank you to the ThredUp team that I think has done an incredible job continuing to do the really hard work to serve customers. So thank you all, and thank you to the team, and we'll see you next time.

Thank you. And this concludes today's call. Thank you for participating. You may now disconnect.