ThredUp Inc - Ordinary Shares - Class A Aktie

Thank you. Hi, my name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the thread up second quarter 2026 earnings conference call all lines have been placed on mute to prevent any backgrounds noise. After the speaker's remarks, there will be a question and answer session. to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Lauren Frasch, Investor Relations. Please go ahead.

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 CEO and co-founder, and Sean Sobers, CFO. We posted our press release and supplemental financial information on our investor relations website at ir.stredup.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 report. the supplemental financial information and our forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors. take 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.threadup.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 RedUp. Thank you for joining our second quarter 2026 earnings call. Today I'll walk through our Q2 results, the key drivers behind them, and how we're thinking about the back half 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 Q3, Q4, and the full year. We'll close with a question and answer session. First, let me start with the results.

In the second quarter, revenue was 90.8 million, up 16.9% year over year. First margin was 79.9%, up 40 basis points. Net loss was 5.9 million and adjusted EBITDA was 4.8 million, or 5.3% of revenue. Active buyer on a trailing 12-month basis also grew 21% year over year, but orders were up 22%. All of these metrics exceeded our expectations. We're pleased with our Q2 results, but this was a tougher consumer environment than we would have expected at the beginning of the year. Despite a record quarter for new buyers acquired and record active buyers, we had to be incrementally promotional to drive conversion among our most price sensitive shoppers.

This approaching Q2 led to lower ASPs an average revenue per buyer, and ultimately we estimate a $3 million headwind to our top line results in Q2. Turning to the back half of the year, as we continue to move throughout 2026, our focus remains on the three strategic priorities that I outlined last quarter. to grow and retain high-value buyers, scaling high-quality premium supply from a diverse group of sellers, and developing AI technology that helps customers discover and shop across our vast marketplace. New buyer growth was again strong, up 13% in the quarter, lapping the 72% growth from the prior year quarter. Q2 was our strongest quarter on record for new buyers acquired. especially promising due to the higher expected LTVs of these new buyers, and is consistent with our ongoing shift to a more premium buyer. We are continuing to reduce spend on Google PMAX in favor of Meta and Pinterest, where LTVs are higher, customer acquisition costs are coming down, and volume is scaling quickly. As such, the summer volume on Meta and Pinterest grew 130% and 145% year over year respectively. Brand is a big part of why that shift is working.

We believe that those who discover secondhand through creators and culture rather than through search or promotions tend to be stickier over time. Their most recent campaign, Dress the Party, generated hundreds of millions of earned impressions this June, proof that we can create an owned cultural moment, not just by media around one. On the supply side, active sellers grew to record levels with quality keeping pace. The volume of premium bag items was up 32% year over year, representing 12% of the overall mix. We're targeting an even stronger mix by year end through seller incentives, new acquisition channels for premium sellers, and continuing investment in the seller experience. In June, we opened direct listings, our peer-to-peer offering, to everyone in our marketplace. Since then, items listed are up 89% month over month, and there are now more than 100,000 items listed, with an average listing price of $80.

While just a small fraction of total available items, we're pleased with the steady organics growth and premium mix of these items. Let me turn to resell as a service. This quarter we launched three new brand storefronts, Steve Madden, Dolce Vita, and Betsy Johnson. As a reminder, each new brand gives us access to an entirely new set of sellers, customers with real affinity for that brand who send us their clean out kits because they trust the storefront sharing a name they already shop. That's a distribution advantage we don't get from any other channel, and it compounds every time we add a new brand to the roster. Now let me talk about the product experience. We're now more than two years into our AI transformation work.

No longer do we merely quote work on AI products, rather they are quote the foundation of everything we build across the enterprise. I'm often asked what's the biggest impact short and long term. On the short term, it's efficiency and cost leverage. I'm confident that advancements in AI technology will provide significant cost savings for the business by reducing the need to grow headcount as fast and by helping our teams to be more productive. But the phase we're entering now is closer to what I think the long term impact will be, speed. The speed at which we can tap. Test, learn, adapt is accelerating. The rate at which we can develop next-generation product experiences, test pricing algorithms, design new back-end operations processes is unlike anything I've seen in my years running the business.

Of course, many companies will speed up, and the rate of change we will see across consumer experiences will likely accelerate. But we think that we'll only make our unique, defensible competitive advantages more pronounced. Generative AI will commoditize a lot of the technology stack, but it will not replace the fact that we still put real clothes on every day. Our continued investments in our supply chain and processing infrastructure, our compounding data advantage, and our trusted marketplace enable us to build world-class buyer and seller experiences. With that context, let me turn to recent Promise advancements. Over the past several calls, I've walked you through individual features that use AI to make a 5 million single SKU catalog feel more easily shoppable. I believe the most powerful example for where our technology is going now is with our real-time personalization engine.

We see more than 250,000 anonymous sessions a day. Historically, the experience stayed largely static until our systems adapted for the shopper's next visit. I knew real-time engine reads intent within seconds and retailers to feed on the very next fetch of inventory. In our first A-B test, I drove a 5% lift in item engagement and a 7% lift in profit per buyer for new customers. It's early, but it's a real signal on what this system can unlock. We've also now widely deployed several AI-driven product experience to cut down the overwhelm of shopping secondhand. Clustering, Exact Match, and Notify Me all get at reducing cognitive shopping friction and are especially effective for newer customers.

Clustering brings visually similar items together into a single browsing experience being off buyer intent and preference. Exact match goes further and aggregates listings of the exact same item into a single product page, where one item means one page where a user chooses their size, color, or condition, rather than seeing the same item show up as 10 near identical listings. Both features remove visual redundancy and bring secondhand shopping closer to a traditional e-commerce experience. Critical technology for scaling our marketplace. This advancement also unlocks a notify me feature. Notify me turns a sold out single SKU item from a dead end into a reason to come back once it's restocked. And opt-ins for notify me have grown more than 50% week over week since its launch.

For someone new to resale, this makes our marketplace feel as easy to shop as it has buying new. Taken together, this is why we believe that advancements in AI create a structural advantage for us. It makes our marketplace more fun to shop and more efficient for us to run. Now let's look ahead. While Sean will discuss our second half guidance in more detail, I want to be clear that we likely could have maintained our original second half outlook. However, doing so would have required just about every variable to fall in our favor. Gas prices to come back down and uncertainty to abate. Decentralized acceleration that has proved to be unpredictable the last few years.

And flawless execution of price, promotion, and customer targeting. This seemed a high bar and one that could risk investor confidence if even one of these things moved against us. Our view is that the business is executing at a high level with growing active buyers, strong new buyer and seller growth fundamentals and an exceptional product pipeline. Even with our updated guidance, our two year average revenue growth rate in the second half of the year is projected to be 16.6%. Our current approach now allows us to take committed to building durable compounding performance over time without compromising our long-term vision for short-term gains. With that, I'll turn it over to Sean.

Thanks, James. I'll begin with an overview of our results and follow up with guidance for the third and fourth quarters and full year of 2026. I will discuss non-GAAP results throughout my remarks. We're pleased with our second quarter results. Despite a more challenging consumer and macroeconomic environment than we had anticipated, we delivered strong revenue growth, gross margin, and adjusted EBITDA, all of which exceeded our internal expectations. For the second quarter of 2026, revenue totaled $90.8 million, an increase of 16.9% year over year. Our performance was primarily driven by strong buyer trends and higher repurchase rates supported by elevated promotional activity. These drivers resulted in another record quarter for new buyers acquired, with new buyer acquisitions up 13.1% year over year.

I finished the quarter with 1.8 million active buyers for the trailing 12 months of 21% over last year, while we had 1.9 million orders in the second quarter of 22% year over year. For the second quarter of 2026, gross margin was 79.9%. A 40 basis point increase versus the same quarter last year as a result of improved efficiency and logistics. The second quarter of 2026, gap net loss was $5.9 million compared to gap net loss of $5.2 million in the same quarter last year. Adjusted EBITDA was $4.8 million or 5.3% of revenue for the second quarter of 2026, outperforming our internal expectations. Our Q2 result represented 140 basis point increase over last year. Turning to the balance sheet, we began the quarter with $54.4 million in cash and securities and ended the quarter with $57.4 million.

We invested $2.7 million on CapEx and generated $3 million in cash in Q2. We continue to expect similar levels of CapEx investment in 2026 as of last year, or 2025. Now I'd like to turn to guidance. As James noted, our underlying fundamentals remain strong. In this environment, we are choosing to prioritize buyer engagement, and that means investing more in promotions in the second half. We believe protecting buyer engagement is essential to long-term value creation. Because we expect these elevated promotions to create a revenue headwind of approximately $7 million in the second half, we are updating our revenue and EBITDA margin expectations for the balance of the year.

In the third quarter, we now expect revenue in the range of $87 to $89 million, representing 7% year-over-year growth at the midpoint and a 20.3% two-year average growth rate. Gross margin in the range of 78 to 79 percent, adjusted EBITDA of approximately 4 percent of revenue, and basic weighted average shares outstanding of approximately 132 million shares. In the fourth quarter, we now expect revenue in the range of $85 to $87 million, representing 8% year-over-year growth at the midpoint and a 13.2 two-year average growth rate. COST MARGINS IN THE RANGE OF 77.5 TO 78.5%, ADJUSTED EVA DOLLAR OF APPROXIMATELY 6% OF REVENUE, AND BASIC WEIGHTED AVERAGE SHARES OUTSTANDING OF APPROXIMATELY 133 MILLION SHARES. FOR THE FULL YEAR OF 2026 WE NOW EXPECT REVENUE IN THE RANGE OF 344.4 TO 348.4 MILLION DOLLARS REFLECTING 11% YEAR-OF-YEAR GROWTH AT THE MIDPOINT AND A 15.5% TWO-YEAR AVERAGE GROWTH RATE. Margin in the range of 78.7 to 79.1%. Adjusted EBITDA approximately 4.7% of revenue, representing approximately 30 basis points expansion versus last year.

And basic weighted average shares outstanding of approximately 131 million shares. Lastly, we expect to continue to be cash flow positive for the full year. As we progress through the back half of 2026 and throughout 2027, we will balance growth investments while planning to drive EBITDA expansion. Despite the temporary macroeconomic friction outside of our control, we remain confident in the core fundamentals of our marketplace, our proven ability to engage buyers, and our path forward towards long-term growth and profitability.

James and I are now ready for your questions. Operator, please open the line. We will now begin the question and answer session. In order to ask a question, simply press star, followed by the number one on your telephone keypad. Our first question will come from the line of Dylan Cardin with William Blair. Please go ahead.

Thank you. I'm curious, just sort of coming off the quarter that you had, and And with the idea that you're sort of engaging a stickier buyer and presumably incentivizing or stimulating demand through a higher promo, why sort of the level of caution that you're embedding in the guide? You know, maybe if you can speak to what you're kind of currently seeing in the business or, you know, that would be very helpful. Thanks.

Yes, hey Dylan. Yes, I mean Q2, we beat all of our internal expectations. But as I indicated, it was grindy out there in June. It was just more challenging to get customers to convert. We saw lots of visitors, lots of traffic, but you could tell that people needed incentives. and promotions to convert. And so, you know, we noticed that through June. And I think as we came into July, we saw some of that same behavior, you know, coming out of 4th of July, you know, certainly through the first couple of weeks. And so, you know, I think that we probably could have sort of powered through it, but I think it's going to be challenging, Dylan, and this, you know, of the segments of customers that have been a little bit more price sensitive.

And so I think, you know, we just decided to be a little bit more cautious with how we thought about the back half of the year, knowing that we will have to be incrementally promotional to maintain buyer engagement. But again, I think the most important thing, you know, when you sort of hit these types of points is to maintain you know strong cohorts and strong buyers and so i think we made the conscious decision to be a little bit more promotional uh Especially to this segment of more budget shoppers, which again, I just want to emphasize, it's really that segment of our customer base, which is probably less than 20% at this point, customers making under $60,000 a year. That's really where this is landing. And we think that that's going to be temporary. and we're continuing to shift our mix of customers out of that, but I think it's going to be a little bit of a headwind, you know, in the back half of the year.

And so that's why we made the change we did. Yep, and just two follow ups from that. When you say more promotional, do you mean adjusting price or actually kind of going out with real more traditional type of discounts? for offers and then just to confirm the the hit on the ebitda margin line um.

you know, what's sort of driving that as far as your prior outlook for the year? Thanks. Sure. I'll let Sean cover the EBITDA one, but on price and erosion, I think it's, I appreciate you asking, like it's, we're really emphasizing discounts on, on aging inventory. And so we used to be able to sell items that say were 60 days old or 90 days old. at higher prices. But what we're finding is that we want to really protect the marketplace willingness to pay of buyers fresh, you know, inventory, you know, new listings. And so we're not discounting that, that way. product, we're discounting older inventory. And I think that's what's causing us for for these elevated pricing promotions. And to be really direct, the reason why I think that we could have maybe squeezed through the back half of the year, but we would have had to do things to discount our best fresh inventory that's coming online in ways that I think are unnatural and in ways that I think actually really hurt us with customer expectations, willingness to pay.

And so I think this is totally the right strategy. It's just something that we're going to have to navigate for these couple of quarters.

And Dylan on the EBITDA side, obviously the biggest hit is revenue and the flow through from there. So if you can kind of just take the revenue that we reduced it to down to like the gross margin rate of about 79, 80%. But I think the piece that makes it a little more impactful is that we are staying on the investment mode in marketing and in processing because we believe in the business and we're very confident this is temporary. So those two together really have an impact on the EBITDA in the short term in Q3 and in Q4.

Appreciate it. Thank you. Our next question comes from the line of Oliver Chen with TD Cowan. Please go ahead.

Hi, James and Sean. On your comments, what's driving your thoughts that this could be temporary in terms of what you're seeing lately on that price-sensitive consumer? And also, as we think about ASP, what's happening with how we should model ASP in light of what you're seeing as well? Thank you.

Yes. Hey, Oliver. You know, I think we think that the higher gas prices that have come from, you know, conflict in the Middle East, I think, you know, are weighing on, again, over this sort of budget customer. And the reason why I think it's a little bit more temporary is that we are shifting our mix of customers away from, you know, that budget customer. You know, on a percentage basis, that budget customer is as low as a percent of our overall mix as it has been in a very, very long time. And what we're seeing among customers who are making, you know, $100,000, $150,000 a year, is that their growth rate is significantly higher than that budget customer. And so we are shifting the business into that premium segment. not luxury by any means, but more premium. And so I think our strategy is to sort of move away from having that exposure. But I do think it's still part of our mix today, which is why we think the combination of gas prices and the combination of the current mix. know, is a temporary thing.

As far as average selling prices, you know, we're not probably going to, I wouldn't move them for 2027. You know, I think we will be a little bit more promotional with some of our older inventory in the back half of 26. Um, But I think in general, the mix of goods is actually improving and prices are going up. But again, we're just discounting this segment of our aging and older inventory.

Okay, and on the mix strategy, what's limiting that to be even better? Is it supply or demand? It sounds like you're getting good acquisition, but supply also matters too. We talk regularly about AI, but what's changed the most since we last talked in AI? It sounds like reinforcement learning is coming into play, but can AI offset some of the weaknesses you're seeing in terms of the model? Sure.

Well, yes, I mean, on the mix, you're exactly right. I mean, we're shifting the buyer mix up. So I think part of the channel shift into Meta and Pinterest has really proving to be valuable. Those customers have significantly higher LTVs than the Google PMAX customer and I think as you prepared remarks you know premium as a percent of our mix is also. We're slowly moving the entire marketplace up in that direction. But it obviously doesn't happen overnight. But I think the general trend is right.

And then on the AI front, I think where the most impactful work we're doing is what I commented on, which is just the ability to real-time personalize. We're seeing lift in that for window shoppers, for our new buyers. And I think part of why the acquisition engine is continuing to work as well as it is, is conversion rates of new buyers. visitors and that new visitor conversion rate is being amplified by the work in AI. So I do think it is helping and we'll just kind of keep executing against that.

Thank you. Best regards. Our next question will come from the line of Ike Borrico with Wells Fargo. Please go ahead.

Hey, this is Robert on Friday. I just want to clarify. So it sounds like you guys are maintaining the investment into the brand creation. So as we look towards the back half of the year, should it be more like average order value being impacted from promotions? And you know, well, well, you know, orders or active buyers continue to maintain the.

Is that how we should be thinking about it? Yes, Robert, that's right. I mean, you should see average order values come down a little bit and then but you should see orders, you know continue to be strong buyers continue to be strong and And then again, we're working every day to sort of refine that and improve that. And I think to the extent that the environment gets a little bit better, of the seasonal acceleration takes place, I think we're going to have room to take those average order values up. But I think that's probably the right way to model it right now.

Yes, and just as a follow up, are you, usually you pull back in marketing in 4Q, is that going to be the case here or are you going to ramp up to 4Q?.

half. I think right now we're not planning to do anything different than we did last year you know on the marketing side so I would not characterize it as a as a ramp up or a big ramp down I think you know Q4 last year was was was strong stronger than our expectations and I think we feel like we're well positioned for Q4 in this in the guide that we provided. Yes, thank you.

Our next question will come from the line of Matt Carando with Roth Capital. Please go ahead.

Hey guys, can you just clarify, I guess, how much of the guidance cut is attributed? It sounds like mostly you're attributing it to weakness with your lower end customer, but it also sounds like there's a bit of an assortment reset going on where you're trying to get rid of some older inventory and maybe reprioritize. some new elements in the assortment that may be higher AOV over time to cater to a higher end customer?.

to parse that out for us. I just want to make sure I understand what's going on there. Yes, Matt, I mean, I would say both things are true. So... The weakness that we're seeing is by and large from this segment of buyers making under $60,000 a year. I mean, we can see it so clearly in the data, which is why it's actually very easy for us to tell you what we think the quantum of the myth is, because you can just see it in their purchasing behavior and frequency what they're buying and what types of promotions and credits are required to get them to move. So it's actually quite easy. We were testing this all in June, trying to understand the credit elasticity, the discount elasticity to drive, purchases of that lower income cohort. And that's how we were able to really see what we think will happen in the back half of the year.

At the same time, we are definitely like shifting the mix and improving kind of the fresh products that are coming online. And if that mix becomes a larger part of what we do in the back half of the year, I think there is potentially some upside there. But at the same time, we know we need to move some of that older stuff and we can do it effectively you know with this more budget shopper But again, we're really making the decision to not discount our best stuff, Matt. It would be easy to start to say, hey, let's discount the brand new products that are coming online. They're very attractive to customers. We can drive incrementality. But I think that's a very slippery slope when you you're building a brand and you're building credibility. And we just, I don't want to do that.

Cause I think it ultimately degrades, brand equity and willingness to pay over time. And so we're going to maintain standards and expectations there for new product coming online and really push on the older stuff.

And Matt, to add to that, the weakness in the customer and the mix shift that we're doing, again, are both back to driving forces of the macro economic environment, right? Yes.

Yes, okay, fair enough. And then just maybe how long do you think the assortment reset takes? Like, can it be completed by the third quarter so that theoretically you could see growth in AOVs and even maybe... better top line growth by the fourth quarter, if you've been met enough conservatism here, or how should we think about, I guess, the timing of the reset of the assortment and how long that takes?.

I think the assortment, I mean, I wouldn't characterize it as a reset of the assortment. I mean, we're continuing to push, you know, put more product, you know, online than ever. I mean, the ops engine and processing is very strong. I would say that the challenge that we saw, you know, as June concluded and into July was, is that you just need to be more promotional on some of this um uh older stuff to move customers off the couch you know to purchase and so the environment just being you know incrementally weaker i think is what we're trying to do so uh versus trying to discount your freshest product, which we think doesn't make sense. And so we're just, we're trying to weaponize older inventory to drive engagement and conversion of, um, that.

more budget consumer. Okay, I'll leave it there guys, thank you.

Our next question will come from the line of Bobby Brooks with Northland Capital Markets. Please go ahead.

Hey, good afternoon team. Thank you for taking my questions. I thought it was really interesting to hear the average listing price coming through the peer to peer model was 60 or $80. I think you said, is it fair then to think that this supply funnel is skewed viewing more to that the premium, the more premium, and then what is coming through the clean out bags. I just want to hear your thoughts there.

Yes, Bobby. Yes. The stuff coming through direct listings is definitely more premium. know we're still making a lot of progress on premium you know core marketplace back As I noted, premium items is up 32% year over year. So we're making a lot of progress in premium kind of across the board. across the spectrum. But yes, direct listings items are certainly higher priced. by design right from an average listing price because we don't accept certain low price, low quality brands. We don't allow you to price items below $20. So we've put some guardrails in there, Bobby, again, to create conditions for an improving assortment as we continue to grow that part of the business.

Awesome. And then just curious to hear as the on the peer-to-peer piece, have you seen like the sell-through rates? Is it comparable to what the managed marketplace is seeing? Just any difference, any differences there? I would think that maybe the peer-to-peer, they're going to be asking for higher, you know, kind of maybe asking for more than what it's worth. And so it's slowing.

hear more there. Yes, sell-through is definitely slower in direct listings, you know, for, you know, but it's sort of consistent across I think other peer to peer sites. And yes, sellers tend to overprice items relative to what the market clearing price data should be. So, yes, the sell through is slower, but I think we're going to educate sellers.

Got it. And then maybe just wanted to hear, obviously, definitely a dichotomy between kind of the more stressed consumers versus the higher, you know, the more affluent consumers that have kind of been gravitating to the site more recently. Just maybe wanted to hear, is there a different, and obviously you made the point of like that older inventory distribution. discount on that to engage those more stressed consumers. But just like on the broader marketing plan, are there any other key distinctions between how you're targeting those two groups, or is it kind of the same strategy throughout both?.

Yes, the shift that's been consistent, I think, all year has been away from the Google PMAX customer who tends to have a lower acquisition cost, but definitely a lower LTV. And I think the shift has been moving to more meta, more Pinterest, and LTV. What's really working there is that those customers have significantly higher LTVs but we're almost driving to caps. much lower than we would have thought six months ago. And so the paybacks are strong in those channels, customer acquisition, continues to be robust. And so that's part of like what makes us feel really good about this shift to this more premium customer. And again, we need more, premium supply to sort of feed that engine. And again, like that more premium customer is growing at a much faster rate than our budget choppers.

And so like what we're really seeing in June and through this portion of a weaker environment is really just this budget chopper. And so we just have to get sort of navigate and transition.

through that. Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead.

Hi, good afternoon, everyone. In this environment where it seems like the focus is more on a wardrobe update than core replenishment, with the products that you're talking and obviously that lower income consumer, it's Is there a difference between what you're seeing the lower income consumers spend on and category wise versus what you're seeing your $100,000 plus income spend on? And what does this mean for the RASP business? Getting Steve Madden, Dolce Vita, those are all very growthy brands, is there more there.

you're seeing by category thank you yes dana i don't have specific uh nuanced like category data but i think your instincts are right like it's definitely the customer who's doing doing better right in this k-shaped economy is definitely buying for you know fun and delight and travel right you see we've seen a lot of that over the summer for holiday vacations and stuff and things like that. Whereas your budget shopper, and again, I think part of the discounting approach is to move some of the staples and sort of basics, right? To that budget shopper, but you have to do that at a lower price than you did 12 months ago. But it's very clear in the data around the behaviors of the group that's doing well and the group that's not. And so I think we just need to keep inching the assortment and inching the buyer base And we've been doing that over the last couple of years, but it's not all the way there.

Got it. And on the RAS part, are there other new brands that are coming in? Yes.

Yes, on the RAS side, sorry. Yes, you know, we're definitely focused on more elevated brands. I mean, we did, we did something in the spring, a big push with Reformation, you know, we're planning to do this with a number of brands in the fall. And yes, our RAS strategy is really focused on those brands that, you know, serve, you know, the customer who is doing well. And I think we're, we're definitely having some success there. So we're going to keep doing more of that. But RAS is in a nice rhythm now of adding clients to the roster and getting those clients to be active.

I'm feeling quite good about that momentum. Thank you.

And this concludes the question and answer session. I'll hand the call back over to James Reinhardt for any closing comments.

Well, thank you all for joining us today. Thank you especially to the ThredUP team for your continued hard work in this operating environment.

I look forward to seeing you all on our next call. Thank you. That will conclude today's call. Thank you all for joining. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

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.