UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number: 001-40249

ThredUp Inc.

(Exact name of registrant as specified in its charter)


Delaware			26-4009181
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

969 Broadway, Suite 200 Oakland, California			94607
(Address of principal executive offices)			(Zip Code)

(415) 402-5202

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value per share

TDUP

The Nasdaq Stock Market LLC

Long-Term Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~77,290,731~~80,571,704 shares of Class A common stock and ~~29,959,781~~29,684,496 shares of Class B common stock outstanding as of ~~October 31, 2023.~~April 30, 2024.

TABLE OF CONTENTS


		Page Number
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Unaudited Condensed Consolidated Balance Sheets	5
	Unaudited Condensed Consolidated Statements of Operations	6
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	7
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	8
	Unaudited Condensed Consolidated Statements of Cash Flows	109
	Notes to Unaudited Condensed Consolidated Financial Statements	1110
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2826
Item 4.	Controls and Procedures	2927

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3129
Item 1A.	Risk Factors	3129
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3130
Item 3.	Defaults Upon Senior Securities	3230
Item 4.	Mine Safety Disclosures	3230
Item 5.	Other Information	3230
Item 6.	Exhibits	3230
	Signatures	3432

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are statements that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” ~~“potential,”~~“potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our revenue, cost of revenue and operating expenses and our ability to achieve and maintain future profitability;

•the sufficiency of our cash, cash equivalents and capital resources to meet our liquidity needs;

•our ability to effectively manage or sustain our growth and to effectively expand our operations;

•our strategies, plans, objectives and goals, including our expectations regarding future infrastructure investments as well as ~~restructuring~~reorganization activities;

•our ability to effectively deploy new and evolving technologies, such as artificial intelligence and machine learning, in our offerings;

•our ability to attract and retain buyers and sellers and the continued impact of network effects as we scale our platform;

•our ability to continue to generate revenue from new Resale-as-a-Service (“RaaS”) offerings as sources of revenue;

•trends in our key financial and operating metrics;

•our estimated market opportunity;

•economic and industry trends, projected growth or trend analysis, including the effects of foreign currency exchange rate fluctuations, inflationary pressures, increased interest rates, cybersecurity risks, changing consumer habits, climate change and extreme weather events and general global economic uncertainty;

•our ability to comply with applicable laws and regulations;

•~~our ability to remediate our material weakness in our internal control over financial reporting;~~ and

•our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments.

You should not rely upon forward-looking statements as predictions of future events. ~~The outcome~~Forward-looking statements are neither historical facts nor assurances of future performance. Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include, but are not limited to: our ability to attract new users and convert users into buyers and active buyers; the ~~events described~~sufficiency of our cash, cash equivalents and capital resources to meet our liquidity needs; our ability to effectively manage or sustain our growth and to effectively expand our operations; our ability to continue to generate revenue from new RaaS offerings as sources of revenue; risks from an intensely competitive market; our ability to effectively deploy new and evolving technologies, such as artificial intelligence and machine learning, in our offerings; risks arising from economic and industry trends, including the effects of foreign currency exchange rate fluctuations, inflationary pressures, increased interest rates, changing consumer habits, climate change and general global economic uncertainty; our ability to comply with applicable laws and regulations; our ability to recognize realize expected savings or benefits from reorganization activities; and our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments. More information on these ~~forward-looking statements is subject to~~ risks ~~uncertainties~~ and other potential factors ~~described~~ that could affect the Company’s business, reputation, results of operations, financial condition, and stock price is included in the Company’s filings with the Securities and Exchange Commission (“SEC”), includingin Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, in Part II, Item 1A, Risk Factors, ~~in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023~~ and elsewhere in this Quarterly Report on Form 10-Q, as well as in our other filings with the Securities and Exchange Commission (“SEC”). Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Table of Contents

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

***

Unless otherwise indicated or unless the context requires otherwise, all references in this document to ~~“thredUP”~~“ThredUp”, “the Company”, “we”, “us”, “our”, or similar references are to ThredUp Inc. and its consolidated subsidiaries.

~~thredUP~~ThredUp is one of the world’s largest online resale platforms for apparel, shoes and accessories, based primarily on items processed, items sold and the capacity of our distribution centers.

~~Table of Contents~~

The “estimated retail price” of an item is based on the estimated original retail price of a comparable item of the same quality, construction and material offered elsewhere in new condition. Our estimated original retail prices are set by our team of merchants who periodically monitor market prices for the brands and styles that we offer on our marketplaces.

Channels for Disclosure of Information

ThredUp intends to announce material information to the public through the ThredUp Investor Relations website (ir.thredup.com), SEC filings, press releases, public conference calls, and public webcasts. ThredUp uses these channels, as well as social media, to communicate with its investors, customers, and the public about the company, its offerings, and other issues. It is possible that the information ThredUp posts on social media could be deemed to be material information. As such, ThredUp encourages investors, the media, and others to follow the channels listed above, including the social media channels listed on ThredUp’s investor relations website, and to review the information disclosed through such channels.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THREDUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


			September 30, 2023		December 31, 2022
			(in thousands, except par value amounts)
		March 31, 2024						March 31, 2024		December 31, 2023
		(in thousands, except par value amounts)							(in thousands, except par value amounts)
ASSETS	ASSETS						ASSETS
Current assets:	Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents		$	68,552	$	38,029
Marketable securities	Marketable securities		5,575		66,902
Accounts receivable, net	Accounts receivable, net		5,993		4,669
Inventory	Inventory		18,173		17,519
Other current assets	Other current assets		7,199		7,076
Total current assets	Total current assets		105,492		134,195
Operating lease right-of-use assets	Operating lease right-of-use assets		43,090		46,153
Property and equipment, net	Property and equipment, net		90,270		92,482
Goodwill	Goodwill		11,455		11,592
Intangible assets	Intangible assets		8,460		10,499
Other assets	Other assets		6,621		7,027
Total assets	Total assets		$	265,388	$	301,948
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:
Accounts payable	Accounts payable		$	12,426	$	7,800
Accounts payable
Accounts payable
Accrued and other current liabilities	Accrued and other current liabilities		40,225		50,155
Seller payable	Seller payable		21,516		16,166
Operating lease liabilities, current	Operating lease liabilities, current		6,383		6,413
Current portion of long-term debt	Current portion of long-term debt		3,834		3,879
Total current liabilities	Total current liabilities		84,384		84,413
Operating lease liabilities, non-current	Operating lease liabilities, non-current		45,257		48,727
Long-term debt, net of current portion	Long-term debt, net of current portion		22,968		25,788
Other non-current liabilities	Other non-current liabilities		3,231		3,019
Total liabilities	Total liabilities		155,840		161,947
Commitments and contingencies (Note 10)	Commitments and contingencies (Note 10)						Commitments and contingencies (Note 10)
Stockholders’ equity:	Stockholders’ equity:
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of September 30, 2023 and December 31, 2022; 106,837 and 101,532 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively			11		10
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of March 31, 2024 and December 31, 2023; 110,217 and 108,784 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of March 31, 2024 and December 31, 2023; 110,217 and 108,784 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of March 31, 2024 and December 31, 2023; 110,217 and 108,784 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital		577,740		551,852
Accumulated other comprehensive loss	Accumulated other comprehensive loss		(3,941)		(4,234)
Accumulated deficit	Accumulated deficit		(464,262)		(407,627)
Total stockholders’ equity	Total stockholders’ equity		109,548		140,001
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity		$	265,388	$	301,948

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended				Nine Months Ended
		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands, except per share amounts)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands, except per share amounts)
		(in thousands, except per share amounts)
		(in thousands, except per share amounts)
Revenue:	Revenue:
Consignment	Consignment	$	57,838	$	41,553	$	157,732	$	137,524
Consignment
Consignment
Product
Product
Product	Product	24,211		26,392		82,897		79,537
Total revenue	Total revenue	82,049		67,945		240,629		217,061
Total revenue
Total revenue
Cost of revenue:
Cost of revenue:
Cost of revenue:	Cost of revenue:
Consignment	Consignment	10,131		9,087		28,931		29,354
Consignment
Consignment
Product
Product
Product	Product	15,291		14,362		48,246		40,335
Total cost of revenue	Total cost of revenue	25,422		23,449		77,177		69,689
Total cost of revenue
Total cost of revenue
Gross profit
Gross profit
Gross profit	Gross profit	56,627		44,496		163,452		147,372
Operating expenses:	Operating expenses:
Operating expenses:
Operating expenses:
Operations, product, and technology
Operations, product, and technology
Operations, product, and technology	Operations, product, and technology	40,355		38,702		118,473		121,824
Marketing	Marketing	19,406		14,752		54,919		51,370
Marketing
Marketing
Sales, general, and administrative
Sales, general, and administrative
Sales, general, and administrative	Sales, general, and administrative	15,058		15,232		47,147		47,276
Total operating expenses	Total operating expenses	74,819		68,686		220,539		220,470
Total operating expenses
Total operating expenses
Operating loss
Operating loss
Operating loss	Operating loss	(18,192)		(24,190)		(57,087)		(73,098)
Interest expense	Interest expense	732		103		1,530		764
Interest expense
Interest expense
Other income, net
Other income, net
Other income, net	Other income, net	(845)		(624)		(2,006)		(1,108)
Loss before provision for income taxes	Loss before provision for income taxes	(18,079)		(23,669)		(56,611)		(72,754)
Loss before provision for income taxes
Loss before provision for income taxes
Provision for income taxes
Provision for income taxes
Provision for income taxes	Provision for income taxes	3		9		24		31
Net loss	Net loss	$	(18,082)	$	(23,678)	$	(56,635)	$	(72,785)
Net loss
Net loss
Loss per share, basic and diluted
Loss per share, basic and diluted
Loss per share, basic and diluted	Loss per share, basic and diluted	$	(0.17)	$	(0.24)	$	(0.54)	$	(0.73)
Weighted-average shares used in computing loss per share, basic and diluted	Weighted-average shares used in computing loss per share, basic and diluted	105,898		100,253		103,918		99,409
Weighted-average shares used in computing loss per share, basic and diluted
Weighted-average shares used in computing loss per share, basic and diluted

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


		Three Months Ended				Nine Months Ended
		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands)
		(in thousands)
		(in thousands)
Net loss	Net loss	$	(18,082)	$	(23,678)	$	(56,635)	$	(72,785)
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Foreign currency translation adjustments
Foreign currency translation adjustments	Foreign currency translation adjustments	(1,080)		(2,217)		(772)		(5,258)
Unrealized gain (loss) on available-for-sale securities	Unrealized gain (loss) on available-for-sale securities	152		(28)		1,065		(1,284)
Unrealized gain (loss) on available-for-sale securities
Unrealized gain (loss) on available-for-sale securities
Total other comprehensive income (loss)
Total other comprehensive income (loss)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(928)		(2,245)		293		(6,542)
Total comprehensive loss	Total comprehensive loss	$	(19,010)	$	(25,923)	$	(56,342)	$	(79,327)
Total comprehensive loss
Total comprehensive loss

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock
		Shares
		Shares
		Shares											Amount	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit		Total Stockholders’ Equity
	(in thousands)																(in thousands)
Balance as of December 31, 2023
Issuance of common stock from exercise of stock options and restricted stock units
Stock-based compensation
Shares withheld for net share settlement
Net loss
Other comprehensive loss
Balance as of March 31, 2024

		Common Stock
		Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
		(in thousands)
Balance as of December 31, 2022		101,532	$	10	$	551,852	$	(4,234)	$	(407,627)	$	140,001
Issuance of common stock from exercise of stock options and restricted stock units		1,484	—		275						275
Stock-based compensation					9,720						9,720
Shares withheld for net share settlement		(180)	—		(270)						(270)
Net loss									(19,793)		(19,793)
Other comprehensive income							1,154				1,154
Balance as of March 31, 2023		102,836	10		561,577		(3,080)		(427,420)		131,087
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan		2,663	1		593						594
Stock-based compensation					7,958						7,958
Shares withheld for net share settlement		(164)	—		(348)						(348)
Net loss									(18,760)		(18,760)
Other comprehensive income							67				67
Balance as of June 30, 2023		105,335	$	11	$	569,780	$	(3,013)	$	(446,180)	$	120,598
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan		1,673	$	—	$	490					490
Stock-based compensation					$	8,190					8,190
Shares withheld for net share settlement		(171)	—		$	(720)					(720)
Net loss									(18,082)		(18,082)
Other comprehensive loss							(928)				(928)
Balance as of September 30, 2023		106,837	$	11	$	577,740	$	(3,941)	$	(464,262)	$	109,548

~~Table of Contents~~

Common Stock
Shares Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity
(in thousands)
Balance as of December 31, 2021 98,435 $ 10 $ 522,161 $ (1,094) $ (315,343) $ 205,734
Issuance of common stock from exercise of stock options and restricted stock units 507 — 754 754
Stock-based compensation 3,618 3,618
Net loss (20,708) (20,708)
Other comprehensive loss (1,710) (1,710)
Balance as of March 31, 2022 98,942 10 526,533 (2,804) (336,051) 187,688
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan 1,030 — 1,031 1,031
Stock-based compensation 10,353 10,353
Shares withheld for net share settlement (19) — (157) (157)
Net loss (28,399) (28,399)
Other comprehensive loss (2,587) (2,587)
Balance as of June 30, 2022 99,953 $ 10 $ 537,760 $ (5,391) $ (364,450) $ 167,929
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan 779 $ — $ 229 $ 229
Stock-based compensation $ 7,460 $ 7,460
Net loss $ (23,678) $ (23,678)
Other comprehensive loss $ (2,245) $ (2,245)
Balance as of September 30, 2022 100,732 $ 10 $ 545,449 $ (7,636) $ (388,128) $ 149,695


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	(in thousands)
Balance as of December 31, 2022	101,532	$	10	$	551,852	$	(4,234)	$	(407,627)	$	140,001
Issuance of common stock from exercise of stock options and restricted stock units	1,484	—		275						275
Stock-based compensation				9,720						9,720
Shares withheld for net share settlement	(180)	—		(270)						(270)
Net loss								(19,793)		(19,793)
Other comprehensive income						1,154				1,154
Balance as of March 31, 2023	102,836	$	10	$	561,577	$	(3,080)	$	(427,420)	$	131,087

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


			Nine Months Ended
			September 30, 2023		September 30, 2022
			(in thousands)
		Three Months Ended						Three Months Ended
		March 31, 2024					March 31, 2024		March 31, 2023
		(in thousands)						(in thousands)
Cash flows from operating activities:	Cash flows from operating activities:
Net loss	Net loss		$	(56,635)	$	(72,785)
Adjustments to reconcile net loss to net cash used in operating activities:
Net loss
Net loss
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization		13,881		10,217
Stock-based compensation expense	Stock-based compensation expense		24,907		20,758
Reduction in carrying amount of right-of-use assets	Reduction in carrying amount of right-of-use assets		4,788		4,820
Other	Other		59		1,409
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:
Accounts receivable, net
Accounts receivable, net
Accounts receivable, net	Accounts receivable, net		(1,373)		795
Inventory	Inventory		(873)		(6,222)
Other current and non-current assets	Other current and non-current assets		1,055		(1,732)
Accounts payable	Accounts payable		4,049		(3,000)
Accrued and other current liabilities	Accrued and other current liabilities		(4,331)		6,918
Seller payable	Seller payable		5,358		(380)
Operating lease liabilities	Operating lease liabilities		(5,426)		2,396
Other non-current liabilities	Other non-current liabilities		(75)		(133)
Net cash used in operating activities			(14,616)		(36,939)
Net cash provided by (used in) operating activities
Cash flows from investing activities:	Cash flows from investing activities:
Purchases of marketable securities
Purchases of marketable securities
Purchases of marketable securities	Purchases of marketable securities		(9,851)		(3,475)
Maturities of marketable securities	Maturities of marketable securities		71,979		35,830
Purchases of property and equipment	Purchases of property and equipment		(13,775)		(39,316)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities		48,353		(6,961)
Cash flows from financing activities:	Cash flows from financing activities:
Proceeds from debt, net of discount			—		491

Repayment of debt

Repayment of debt

Repayment of debt	Repayment of debt		(3,000)		(5,333)
Proceeds from issuance of stock-based awards	Proceeds from issuance of stock-based awards		3,761		3,878
Payment of withholding taxes on stock-based awards			(3,744)		(1,958)
Payments of withholding taxes on stock-based awards
Net cash used in financing activities	Net cash used in financing activities		(2,983)		(2,922)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(230)		(918)
Net change in cash, cash equivalents, and restricted cash	Net change in cash, cash equivalents, and restricted cash		30,524		(47,740)
Cash, cash equivalents, and restricted cash, beginning of period	Cash, cash equivalents, and restricted cash, beginning of period		44,051		91,840
Cash, cash equivalents, and restricted cash, end of period	Cash, cash equivalents, and restricted cash, end of period		$	74,575	$	44,100

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

109

Table of Contents

THREDUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

ThredUp Inc. (“~~thredUP”~~ThredUp” or the “Company”) was formed as a corporation in the State of Delaware in January 2009. ~~thredUP~~ThredUp operates a large resale platform that enables consumers to buy and sell primarily secondhand apparel, shoes, and accessories.

2. Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany account balances and transactions have been eliminated upon consolidation. The unaudited condensed consolidated financial statements were prepared in accordance with the United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10‑Q and Article 10 of Regulation S-X. As permitted under those rules, certain footnotes or other financial information may be condensed or omitted.

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and the related disclosures. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to: the useful lives of property and equipment and ~~intangibles;~~intangibles, allowance for sales ~~returns;~~returns, breakage on loyalty points and rewards and gift ~~cards;~~cards, valuation of inventory, stock-based compensation, ~~right-of-use assets,~~lease liabilities, goodwill and acquired intangible assets, and income taxes.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the financial position of the Company as of ~~September 30, 2023,~~March 31, 2024, and the results of operations and cash flows for the interim periods presented.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 (the ~~“2022~~“2023 10-K”).

Recently Adopted Accounting Pronouncements

There were no accounting pronouncements adopted during the three months ended March 31, 2024.

Accounting Pronouncements Not Yet Effective

In ~~June 2016,~~October 2023, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2016-13,~~ ~~Financial Instruments — Credit Losses (Topic 326): Measurement~~2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” to amend certain disclosure and presentation requirements for a variety of ~~Credit Losses~~topics within the Accounting Standards Codification (the “ASC”). These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on ~~Financial Instruments. This ASU changes~~which the impairment model for most financial assets, requiring the use of an expected loss model that requires entities to estimate the lifetime expected credit loss on financial assets measured at amortized cost. Such credit losses will be recorded as an allowance to offset the amortized costSEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company does not expect that the application of this standard will have an impact on our consolidated financial ~~asset, resulting in a net presentation of~~statements and disclosures.

In November 2023, the ~~amount expected~~FASB issued ASU 2023-07, Improvements to ~~be collected on the financial asset. In addition, credit losses relating~~Reportable Segment Disclosures. This new guidance is designed to ~~available-for-sale debt securities will now be recorded~~improve reportable segment disclosure requirements, primarily through ~~an allowance for credit losses rather than as a direct write-down to the security. This standard~~enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, ~~2022, including~~2023, and interim periods within ~~those~~ fiscal ~~years.~~years beginning after December 15, 2024 on a retrospective basis. Early adoption is permitted. The ~~adoption~~Company is currently assessing the impact of adopting this ~~guidance during the first quarter of 2023 did not have a material impact~~new accounting standard on ~~the Company’s condensed~~its consolidated financial statements.

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In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires additional quantitative and qualitative income tax disclosures to enable financial statements users to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. For public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024, which will be the fiscal year ending December 31, 2025 for us. We expect the adoption will result in enhanced income tax disclosures.

Revenue from Loyalty Reward Redemption and Expiration

The Company has a customer loyalty program, which allows end-customers to earn and accumulate points with each qualifying purchase. Earned points can be redeemed for ~~reward coupons,~~loyalty rewards, such as ~~discounts,~~non-cashoutable shopping credit, free shipping, or waived restocking fee, which can be applied to future purchases or returns. Unredeemed points expire after one year from the date the points were earned. Reward coupons expire six months from the date the reward is claimed. Points earned on purchases are a material right, representing a separate performance obligation.

The allocated consideration for the points earned through qualifying purchase transactions is deferred based on the standalone selling price of the points, adjusted for expected breakage in proportion to the pattern of redemption, and recorded within deferred revenue under accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue is recognized for these performance obligations at a point in time when rewards are redeemed by the end customer or expired.

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As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company had a deferred revenue liability of ~~$3.4~~$1.6 million and ~~$3.3~~$3.1 million, respectively, related to its customer loyalty program, which is included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. The Company recognized revenue from loyalty reward redemption of ~~$2.1~~$3.7 million and ~~$2.2~~$2.1 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $6.7 million and $7.4 million for the nine months ended September 30, 2023 and 2022,~~ respectively. As our loyalty points expire in 12 months and coupon rewards expire in six months, the revenue for the remaining performance obligation is expected to be recognized within a 12-month period.

Gift Cards and Site Credits

The Company sells ~~thredUP~~ThredUp gift cards on its e-commerce website and may also convert seller payables and site credits to ~~thredUP~~ThredUp gift cards beginning after one year at the discretion of the Company. ~~thredUP~~ThredUp gift cards do not expire or lose value over periods of inactivity. The Company accounts for gift cards by recognizing a gift card liability at the time a gift card is delivered to the customer. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022, $8.9~~2023, $6.9 million and ~~$10.9~~$6.6 million, respectively, of gift card liability was included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue from gift cards is generally recognized when the gift cards are redeemed by the customer and amounted to ~~$0.5~~$0.3 million and ~~$0.2~~$0.5 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $1.7 million and $0.7~~respectively.

The Company recognizes breakage revenue when it determines that the redemption of gift cards is remote. Breakage revenue was $1.3 million for the ~~nine~~three months ended ~~September 30, 2023 and 2022, respectively.~~March 31, 2024. Breakage revenue was not material for the three months ended March 31, 2023.

The Company issues site credits for returns, which can be applied toward future charges but may not be converted into cash. Site credits may also be converted to ~~thredUP~~ThredUp gift cards beginning after one year at the discretion of the Company. These credits are recognized as revenue when used. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022, $4.8~~2023, $5.2 million and ~~$7.2~~$4.8 million, respectively, of such customer site credits were included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue recognized from the redemption of site credits was ~~$10.2~~$13.5 million and ~~$11.9~~$9.4 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $30.1 million and $35.9 million for the nine months ended September 30, 2023 and 2022,~~ respectively.

~~The Company recognizes breakage revenue when it determines that the redemption~~

Table of gift cards is remote. Breakage revenue was $1.9 million and $2.3 million for the three and nine months ended September 30, 2023, respectively. Breakage revenue was not material for the three and nine months ended September 30, 2022.Contents

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s condensed consolidated balance sheets that sum to the total of the same such amounts shown in the Company’s condensed consolidated statements of cash flows:


			September 30, 2023		December 31, 2022
			(in thousands)
		March 31, 2024					March 31, 2024		December 31, 2023
		(in thousands)						(in thousands)
Cash and cash equivalents	Cash and cash equivalents		$	68,552	$	38,029
Restricted cash included in Other current assets	Restricted cash included in Other current assets		644		383
Restricted cash included in Other assets	Restricted cash included in Other assets		5,379		5,639
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	Total cash, cash equivalents, and restricted cash shown in the statement of cash flows		$	74,575	$	44,051

Fair Value Measurements

The Company applies the provisions of FASB ASC Topic 820, Fair Value Measurements and Disclosures, for its financial and non-financial assets and liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

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•Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 inputs are unobservable inputs for the asset or liability.

The Company measures certain assets and liabilities at fair value as discussed throughout the notes to its condensed consolidated financial statements. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the carrying amounts of the Company’s accounts receivable, other current assets, other assets, accounts payable, seller payable and accrued and other current liabilities approximated their estimated fair values due to their relatively short maturities. Management believes the terms of its long-term variable-rate debt reflect current market conditions for an instrument with similar terms and maturity, and as such, the carrying value of the Company’s long-term debt approximated its fair value as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

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3. Financial Instruments and Fair Value Measurements

The following tables provide information about the Company’s financial instruments that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such values as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022:~~2023:


			September 30, 2023
			Level 1		Level 2		Level 3		Total
			(in thousands)
		March 31, 2024											March 31, 2024
		Level 1									Level 1	Level 2	Level 3	Total
		(in thousands)											(in thousands)
Assets:	Assets:
Cash equivalents:	Cash equivalents:
Cash equivalents:
Cash equivalents:
Money market funds
Money market funds
Money market funds	Money market funds		$	10,096	$	—	$	—	$	10,096
U.S. treasury securities	U.S. treasury securities		—		17,571		—		17,571
Commercial paper	Commercial paper		—		19,333		—		19,333
U.S. government agency discount notes			—		2,874		—		2,874

Total cash equivalents
Total cash equivalents
Total cash equivalents	Total cash equivalents		10,096		39,778		—		49,874
Marketable securities:	Marketable securities:

U.S. treasury securities

U.S. treasury securities

U.S. treasury securities	U.S. treasury securities		—		2,480		—		2,480
U.S. government agency bonds	U.S. government agency bonds		—		3,095		—		3,095
Total marketable securities	Total marketable securities		—		5,575		—		5,575
Total assets at fair value	Total assets at fair value		$	10,096	$	45,353	$	—	$	55,449

December 31, 2022
Level 1 Level 2 Level 3 Total
(in thousands)
Assets:
Cash equivalents:
Money market funds $ 1,110 $ — $ — $ 1,110
Commercial paper — 14,460 — 14,460
Total cash equivalents 1,110 14,460 — 15,570
Marketable securities:
Corporate debt securities 25,488 — — 25,488
U.S. treasury securities 19,176 — — 19,176
U.S. government agency bonds 22,238 — — 22,238
Total marketable securities 66,902 — — 66,902
Total assets at fair value $ 68,012 $ 14,460 $ — $ 82,472

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	December 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	8,028	$	—	$	—	$	8,028
Commercial paper	—		14,954		—		14,954
U.S. treasury securities	—		7,976		—		7,976
U.S. government agency bonds	—		1,108		—		1,108
Total cash equivalents	8,028		24,038		—		32,066
Marketable securities:

U.S. treasury securities	—		7,405		—		7,405
U.S. government agency bonds	—		695		—		695
Total marketable securities	—		8,100		—		8,100
Total assets at fair value	$	8,028	$	32,138	$	—	$	40,166

The following tables summarize the cost, gross unrealized gains, gross unrealized losses and fair value of the marketable securities as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022:~~2023:

March 31, 2024

Cost or Amortized Cost

Unrealized

Fair Value

Gains

(in thousands)

September 30, 2023

Cost or Amortized Cost

Unrealized

Fair Value

Gains

Losses

(in thousands)

U.S. treasury securities

2,482

—

(2)

2,480

U.S. government agency bonds

3,110

—

(15)

3,095

Total

5,592

—

(17)

5,575

December 31, 2022
Cost or Amortized Cost Unrealized Fair Value
Gains Losses
(in thousands)
Corporate debt securities $ 25,774 $ — $ (286) $ 25,488
U.S. treasury securities 19,531 — (355) 19,176
U.S. government agency bonds 22,679 — (441) 22,238
Total $ 67,984 $ — $ (1,082) $ 66,902

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	December 31, 2023
	Cost or Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(in thousands)

U.S. treasury securities	$	7,403	$	2	$	—	$	7,405
U.S. government agency bonds	695		—		—		695
Total	$	8,098	$	2	$	—	$	8,100

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company’s cash equivalents approximated their estimated fair value. As such, there ~~are~~were no unrealized gains or losses related to the Company’s cash equivalents.

For the Company’s marketable securities, which were all classified as available-for-sale, the Company utilizes third-party pricing services to obtain fair value. Third-party pricing methodologies incorporate bond terms and conditions, current performance data, proprietary pricing models, real-time quotes from contributing dealers, trade prices and other market data. The Company determined that the declines in the fair value of its marketable securities were not driven by credit-related factors. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company did not recognize any losses on its marketable securities due to credit-related factors.

As of ~~September 30, 2023,~~March 31, 2024, the Company’s money market funds were valued using Level 1 inputs because they were valued using quoted prices in active markets. The Company’s U.S. treasury securities, commercial paper ~~U.S. government agency discount notes,~~ and U.S. government agency bonds were valued using Level 2 inputs because they were valued using quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

~~As of September 30, 2023, there~~There were no transfers into or out of Level 3 during the three ~~and nine~~ months ended ~~September 30, 2023.~~March 31, 2024. As of ~~September 30, 2023,~~March 31, 2024, all of the ~~$5.6~~$12.4 million carrying amount of marketable securities ~~all~~ had a contractual maturity date of less than one year.

4. Property and Equipment, Net

Property and equipment, net consisted of the following:

September 30,
2023

December 31,
2022

(in thousands)

Property and equipment

133,980

124,412

March 31,
2024

December 31,
2023

(in thousands)

Property and equipment, at cost:

Machinery and equipment

Leasehold improvements

Internal-use software

Computers and software

Construction in progress

Furniture and fixtures

Total property and equipment, at cost

Less: accumulated depreciation and amortization

(43,710)

(31,930)

Property and equipment, net

90,270

92,482

Depreciation and amortization expense of property and equipment was ~~$4.7~~$4.3 million and ~~$2.9~~$3.0 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $11.9 million and $8.3 million for the nine months ended September 30, 2023 and 2022,~~ respectively.

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5. Goodwill and Other Intangible Assets

Goodwill is primarily attributable to the planned growth in the combined business after the acquisition of Remix Global EAD (“Remix”). Goodwill is reviewed for impairment at least annually, absent any interim indicators of impairment. Goodwill was ~~$11.5~~$11.7 million and ~~$11.6~~$12.0 million as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. The ~~decrease~~change in goodwill during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was due to foreign currency translation adjustments.

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The gross carrying amounts and accumulated amortization of the Company’s intangible assets with determinable lives as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 were as follows:


					September 30, 2023
			Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
			(in years)		(in thousands)
				March 31, 2024											March 31, 2024
		Amortization Period									Amortization Period	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
		(in years)									(in years)	(in thousands)
Customer relationships	Customer relationships		8		$	4,757	$	(1,178)	$	3,579
Developed technology	Developed technology		3		4,482		(2,959)		1,523
Trademarks	Trademarks		9		4,305		(947)		3,358
Total	Total				$	13,544	$	(5,084)	$	8,460


					December 31, 2022
			Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
			(in years)		(in thousands)
				December 31, 2023											December 31, 2023
		Amortization Period									Amortization Period	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
		(in years)									(in years)	(in thousands)
Customer relationships	Customer relationships		8		$	4,814	$	(742)	$	4,072
Developed technology	Developed technology		3		4,536		(1,864)		2,672
Trademarks	Trademarks		9		4,351		(596)		3,755
Total	Total				$	13,701	$	(3,202)	$	10,499

The changes in the gross carrying amounts were due to foreign currency translation adjustments.

Amortization expense related to developed technology, customer relationships, and trademarks is recorded within operations, product, and technology; sales, general, and administrative; and marketing expense, respectively, within the Company’s condensed consolidated statements of operations. Amortization expense of intangible assets with determinable lives was ~~$0.7~~$0.6 million and $0.6 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $2.0 million and $1.9 million for the nine months ended September 30, 2023 and 2022,~~ respectively.

6. Balance Sheet Components

Inventories consisted of the following:


			September 30, 2023		December 31, 2022
			(in thousands)
		March 31, 2024					March 31, 2024		December 31, 2023
		(in thousands)						(in thousands)
Work in process	Work in process		$	3,222	$	2,639
Finished goods	Finished goods		14,951		14,880
Total	Total		$	18,173	$	17,519

Work in process inventory relates to items that are currently undergoing preparation for sale, including itemization, cleaning, and repair.

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Accrued and other current liabilities consisted of the following:


			September 30, 2023		December 31, 2022
			(in thousands)
		March 31, 2024					March 31, 2024		December 31, 2023
		(in thousands)						(in thousands)
Gift card and site credit liabilities	Gift card and site credit liabilities		$	13,784	$	18,101
Accrued compensation
Accrued vendor liabilities
Accrued taxes
Allowance for returns
Deferred revenue	Deferred revenue		6,807		7,582
Accrued compensation			4,751		4,993
Accrued taxes			4,500		4,326
Accrued vendor liabilities			4,303		9,116
Allowance for returns			4,195		4,907
Accrued other	Accrued other		1,885		1,130
Total	Total		$	40,225	$	50,155

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7. Long-Term Debt

In February 2019, the Company entered into a loan and security agreement (“Term Loan”) with Western Alliance Bank for an aggregate amount of up to $40.0 million.

The Term Loan was subsequently amended several times, with the most recent amendment taking place in ~~July 2022.~~December 2023. As amended, the Term Loan matures on July 14, 2027 and provides for an aggregate borrowing amount of up to ~~$70.0~~$48.8 million, of which $22.5 million is designated for the purchase of certain equipment. The Term Loan bears interest at the prime rate published in the Wall Street Journal plus a margin of 1.25%, with a floor of ~~6.00%~~4.75%. ~~The Company incurred an immaterial amount of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to FASB ASC Topic 470,~~ ~~Debt~~, this transaction was accounted for as a modification of the Term Loan. The debt issuance costs were recognized in interest expense within the Company’s condensed consolidated statement of operations during the third quarter of 2022.

The Term Loan requires the Company to comply with certain financial covenants, including, among other things, liquidity requirements, minimum cash deposits with Western Alliance Bank, performance metrics, and a debt service coverage ratio. The Term Loan also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, loans and investments, additional indebtedness, liens, mergers, asset sales and transactions with affiliates. In addition, the Term Loan contains customary events of default. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company was in compliance with its debt covenants under the Term Loan.

The Term Loan is payable in consecutive monthly installments. Interest is due monthly on amounts outstanding under the Term Loan. The Company is permitted to make voluntary prepayments without penalty or premium at any time.

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the effective interest rate for borrowings under the Term Loan was 10.73% ~~and 9.70%, respectively.~~.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, the Company did not make any borrowings under the Term Loan and repaid a total of ~~$3.0~~$1.0 million ~~on amounts outstanding under~~in each of the ~~Term Loan. During the nine months ended September 30, 2022, the Company borrowed $0.7 million under the Term Loan and repaid a total of $5.3 million~~periods on amounts outstanding under the Term Loan. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the amounts outstanding under the Term Loan were ~~$27.3~~$25.3 million and ~~$30.3~~$26.3 million, respectively.

~~During the three months ended September 30, 2023 and 2022, the~~The Company incurred $0.7 million ~~and $0.6 million, respectively,~~ of interest costs relating to the Term ~~Loan.~~Loan during each of the three months ended March 31, 2024 and 2023. There was no capitalized interest during the three months ended ~~September 30, 2023~~March 31, 2024, and ~~$0.5~~$0.6 million was capitalized as part of an asset for the three ~~month ended September 30, 2022.~~

~~During the nine~~ months ended September 30, 2023 and 2022, the Company incurred $2.0 million and $1.8 million, respectively, of interest costs relating to the Term Loan, of which $0.6 million and $1.0 million, respectively, were capitalized as part of an asset.

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March 31, 2023.

As of ~~September 30, 2023,~~March 31, 2024, the future annual principal payments of the Term Loan were as follows:


			Amount
			(in thousands)
2023			$	1,000
2024			4,000
		Amount			Amount
		(in thousands)			(in thousands)
2024 (Remaining nine months)
2025	2025		4,000
2026	2026		4,000
2027	2027		14,333

Total principal payments
Total principal payments
Total principal payments	Total principal payments		27,333
Less: unamortized debt discount	Less: unamortized debt discount		(531)
Less: current portion of long-term debt	Less: current portion of long-term debt		(3,834)
Non-current portion of long-term debt	Non-current portion of long-term debt		$	22,968

8. Common Stock and Stockholders’ Equity

Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common stock.

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The table below summarizes the Class A common stock and Class B common stock authorized, issued and outstanding as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022:~~2023:

September 30, 2023

Authorized

Issued and Outstanding

(in thousands)

March 31, 2024

Authorized

Issued and Outstanding

(in thousands)

Class A common stock

1,000,000

76,866

Class B common stock

120,000

29,971

Total

1,120,000

106,837

December 31, 2022
Authorized Issued and Outstanding
(in thousands)
Class A common stock 1,000,000 70,723
Class B common stock 120,000 30,809
Total 1,120,000 101,532


	December 31, 2023
	Authorized	Issued and Outstanding
	(in thousands)
Class A common stock	1,000,000	78,830
Class B common stock	120,000	29,954
Total	1,120,000	108,784

9. Stock-Based Compensation

The Company has stock-based compensation plans, which are more fully described in Note ~~11,~~10, Stock-Based Compensation Plans, to the Consolidated Financial Statements included in the ~~2022~~2023 10-K. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, the Company granted restricted stock units subject to service conditions.

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Stock-Based Compensation Expense

The following table provides information about stock-based compensation expense by financial statement line item:


		Three Months Ended				Nine Months Ended
		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
		(in thousands)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands)
		(in thousands)
		(in thousands)
Operations, product, and technology	Operations, product, and technology	$	2,858	$	2,480	$	9,442	$	7,842
Marketing	Marketing	1,264		818		3,392		2,377
Marketing
Marketing
Sales, general, and administrative
Sales, general, and administrative
Sales, general, and administrative	Sales, general, and administrative	3,766		3,879		12,073		10,539
Total stock-based compensation expense	Total stock-based compensation expense	$	7,888	$	7,177	$	24,907	$	20,758
Total stock-based compensation expense
Total stock-based compensation expense

Stock-based compensation expense capitalized in internal use software was not material for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and was $0.5 million and $0.4 million for the nine months ended September 30, 2023 and 2022,~~ respectively.

Stock Options

The following table summarizes the activities for all stock options under the Company’s share-based compensation plans for the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:


			Number of Options Outstanding	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value (1)
			(in thousands)				(in thousands)
Outstanding as of December 31, 2022			17,872	$	1.97	5.20 years	$	1,442
		Number of Options Outstanding							Number of Options Outstanding	Weighted-Average Exercise Price Per Share	Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value (1)
		(in thousands)							(in thousands)				(in thousands)
Outstanding as of December 31, 2023
Granted	Granted		—	$	—
Exercised	Exercised		(505)	$	1.86
Exercised
Exercised
Forfeited or expired	Forfeited or expired		(347)	$	3.36
Outstanding as of September 30, 2023			17,020	$	1.95	4.50 years	$	36,049
Exercisable as of September 30, 2023			15,128	$	1.91	4.21 years	$	32,498
Forfeited or expired
Forfeited or expired
Outstanding as of March 31, 2024
Outstanding as of March 31, 2024
Outstanding as of March 31, 2024
Exercisable as of March 31, 2024

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(1)The intrinsic value is the amount by which the current market value of the underlying stock exceeds the exercise price of the stock awards.

There were no options granted during the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. The total intrinsic value of stock options exercised during the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023 was ~~$0.6 million.~~not material.

As of ~~September 30, 2023,~~March 31, 2024, the total unrecognized compensation cost related to all nonvested stock options was ~~$1.7~~$0.8 million and the related weighted-average period over which it is expected to be recognized was approximately ~~1.06~~0.83 years.

Restricted Stock Units

The following table summarizes the activities for all restricted stock units (“RSUs”) under the Company’s share-based compensation plans for the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:

Number of Shares Weighted-Average Grant Date Fair Value Per Share
(in thousands)
Outstanding and nonvested as of December 31, 2022 7,855 $ 8.01
Granted 8,917 $ 1.86
Vested (4,788) $ 5.14
Forfeited (1,075) $ 4.65
Outstanding and nonvested as of September 30, 2023 10,909 $ 4.57

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	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
	(in thousands)
Outstanding and nonvested as of December 31, 2023	8,538	$	4.39
Granted	5,058	$	1.98
Vested	(1,638)	$	4.25
Forfeited	(970)	$	5.21
Outstanding and nonvested as of March 31, 2024	10,988	$	3.23

The total vesting date fair value of RSUs that vested during the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023 was ~~$24.6 million.~~$3.5 million and $8.0 million, respectively.

During the three months ended March 31, 2023, the Company modified the vesting schedule of substantially all RSUs outstanding as of December 31, 2022 from 4 years to 3 years and recognized compensation expense of $2.4 million related to the acceleration of the vesting schedule.

As of ~~September 30, 2023,~~March 31, 2024, the total unrecognized compensation cost related to all nonvested RSUs was ~~$47.0~~$32.4 million and the related weighted-average period over which it is expected to be recognized was approximately ~~1.88~~1.94 years.

10. Commitments and Contingencies

Legal Contingencies

The Company is subject to litigation claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for limited and customary indemnification obligations. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made.

11. Income Taxes

The quarterly income tax provision reflects an estimate of the corresponding quarter’s state taxes in the ~~United States.~~U.S. The provision for income tax expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ was determined based upon estimates of the Company’s annual effective tax rate for the years ending December 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Since the Company is in a full valuation allowance position due to losses incurred since inception, the provision for taxes consists solely of certain state income taxes.

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12. Loss Per Share

The following participating securities have been excluded from the computation of diluted loss per share for the periods presented because including them would have been anti-dilutive:

September 30,
2023

September 30,
2022

(in thousands)

March 31,
2024

March 31,
2023

(in thousands)

Outstanding stock options

17,020

17,966

Restricted stock units

10,909

8,693

Delayed share issuance related to acquisition

—

131

Employee stock purchase plan

230

Total

28,026

27,020

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with other information, including our condensed consolidated financial statements and related notes included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q; Part I, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q; and our consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 (the ~~“2022~~“2023 10-K”). The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full calendar year or any other period.

Overview

~~thredUP~~ThredUp operates one of the world’s largest online resale platforms for apparel, shoes and accessories. Our mission is to inspire ~~a new generation of consumers~~the world to think secondhand first. We believe in a sustainable fashion future and we are proud that our business model creates a positive impact to the benefit of our buyers, sellers, clients, employees, investors and the environment. Our custom-built operating platform consists of distributed processing infrastructure, proprietary software and systems and data science expertise. This platform is powering the rapidly emerging resale economy, one of the fastest growing sectors in retail, according to a GlobalData market survey conducted in January 2023.

~~thredUP’s~~ThredUp’s proprietary operating platform is the foundation for our managed marketplace, where we have bridged online and offline technology to make the buying and selling of tens of millions of unique items easy and fun. The marketplaces we have built enable buyers in the U.S. and in Europe to browse and purchase resale items for primarily apparel, shoes and accessories across a wide range of price points. Buyers ~~love~~enjoy shopping value, premium and luxury brands all in one place, at up to 90% off estimated retail price. Sellers ~~love thredUP~~enjoy ThredUp because we make it easy to clean out their closets and unlock value for themselves or for the charity of their choice while doing good for the planet. ~~thredUP’s~~ThredUp’s sellers order a Clean Out Kit, fill it and return it to us using our prepaid label. We take it from there and do the work to make those items available for resale. Aside from Clean Out Kits, ~~thredUP~~ThredUp also sources inventory from a variety of supply channels, such as wholesale supply in Europe.

In addition to our core marketplace, some of the world’s leading brands and retailers are taking advantage of our RaaS offering, which allows them to conveniently offer a scalable closet clean out service and/or resale shop to their customers. We believe RaaS will accelerate the growth of this emerging category and form the backbone of the modern resale experience domestically and internationally.

~~Key Factors Affecting Our Performance~~Recent Business Developments

~~Macroeconomic Factors~~Workforce Reorganization

~~Macroeconomic factors, including inflation, increased interest rates, significant capital market volatility,~~In March 2024, we reorganized certain corporate functions to improve efficiencies and ~~global economic~~reduce overhead costs, ensuring better alignment with the operational needs of the business, resulting in an estimated annualized reduction of operating expenses of $17 million. This and ~~geopolitical developments have direct~~other reorganization activities we may undertake in the future are expected to provide future growth and ~~indirect impacts on our~~efficiency benefits; however, the actual results of operations that are difficult to isolate and quantify. These factors contributed to increases in our operating costs during 2022 and the first three quarters of 2023 primarily due to increased transportation costs and wage rates. In addition, rising fuel, utility, and food costs, rising interest rates, and recessionary fears may ~~impact customer demand and our ability to forecast consumer spending patterns. We expect some or all of these factors to continue to impact our operations at least throughout the rest of 2023.~~differ.

Overview of ~~Third~~First Quarter Results

Revenue: Total revenue was ~~$82.0~~$79.6 million, representing an increase of ~~20.8%~~4.8% year-over-year.

Gross Profit and Margin: Gross profit totaled ~~$56.6~~$55.3 million, representing an increase of ~~27.3%~~8.3% year-over-year. Gross margin was ~~69.0%~~69.5%, an increase of ~~350~~220 basis points from ~~65.5%~~67.3% in the comparable quarter last year.

Net Loss: Net loss was ~~$18.1~~$16.6 million, or a negative ~~22.0%~~20.8% of revenue, for the ~~third~~first quarter of ~~2023,~~2024, compared to a net loss of ~~$23.7~~$19.8 million, or a negative ~~34.8%~~26.1% of revenue, for the ~~third~~first quarter of ~~2022.~~2023.

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Non-GAAP Adjusted EBITDA Loss: Non-GAAP Adjusted EBITDA loss was ~~$3.6~~$0.7 million, or a negative ~~4.4%~~0.9% of revenue, for the ~~third~~first quarter of ~~2023,~~2024, compared to Non-GAAP Adjusted EBITDA loss of ~~$11.0~~$6.6 million, or a negative ~~16.2%~~8.7% of revenue, for the ~~third~~first quarter of ~~2022.~~2023. Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies. See below for a reconciliation of Non-GAAP Adjusted EBITDA loss to net loss.

Active Buyers and Orders: Active Buyers totaled ~~1.8~~1.7 million and Orders totaled ~~1.8~~1.7 million in the ~~third~~first quarter of ~~2023,~~2024, representing an increase of ~~4.1%~~3.7% and an increase of ~~11.4%~~9.3%, respectively, compared to the ~~third~~first quarter of ~~2022.~~2023.

Key Financial and Operating Metrics

We review a number of operating and financial metrics, including the following key business and non-GAAP metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. These key financial and operating metrics are set forth below for the periods presented.


		Three Months Ended								Nine Months Ended
		September 30, 2023			September 30, 2022			Change		September 30, 2023			September 30, 2022			Change
		(in thousands, except percentages)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands, except percentages)
		(in thousands, except percentages)
		(in thousands, except percentages)
Active Buyers (as of period end)	Active Buyers (as of period end)	1,763			1,694			4.1	%	1,763			1,694			4.1	%
Orders	Orders	1,803			1,618			11.4	%	5,103			4,962			2.8	%
Orders
Orders
Total revenue
Total revenue
Total revenue	Total revenue	$	82,049		$	67,945		20.8	%	$	240,629		$	217,061		10.9	%
Gross profit	Gross profit	$	56,627		$	44,496		27.3	%	$	163,452		$	147,372		10.9	%
Gross profit
Gross profit
Gross margin
Gross margin
Gross margin	Gross margin	69.0		%	65.5		%	350	bps	67.9		%	67.9		%	—	bps
Net loss	Net loss	$	(18,082)		$	(23,678)		(23.6)	%	$	(56,635)		$	(72,785)		(22.2)	%
Net loss
Net loss
Net loss margin
Net loss margin
Net loss margin	Net loss margin	(22.0)		%	(34.8)		%	1,280	bps	(23.5)		%	(33.5)		%	1,000	bps
Non-GAAP Adjusted EBITDA loss(1)	Non-GAAP Adjusted EBITDA loss(1)	$	(3,588)		$	(11,041)		(67.5)	%	$	(15,235)		$	(37,545)		(59.4)	%
Non-GAAP Adjusted EBITDA loss(1)
Non-GAAP Adjusted EBITDA loss(1)
Non-GAAP Adjusted EBITDA loss margin(1)	Non-GAAP Adjusted EBITDA loss margin(1)	(4.4)		%	(16.2)		%	1,180	bps	(6.3)		%	(17.3)		%	1,100	bps
Non-GAAP Adjusted EBITDA loss margin(1)
Non-GAAP Adjusted EBITDA loss margin(1)

(1)Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies. See below for a reconciliation of Non-GAAP Adjusted EBITDA loss to net loss.

Active Buyers

An Active Buyer is a ~~thredUP~~ThredUp buyer who has made at least one purchase in the last twelve months. A ~~thredUP~~ThredUp buyer is a customer who has created an account and purchased in our marketplaces, including through our RaaS clients, and is identified by a unique email address. A single person could have multiple ~~thredUP~~ThredUp accounts and count as multiple Active Buyers. The number of Active Buyers is a key driver of revenue for our marketplaces.

Orders

Orders means the total number of orders placed by buyers across our marketplaces, including through our RaaS clients, in a given period, net of cancellations.

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Non-GAAP Financial Metrics

Non-GAAP Adjusted EBITDA Loss and Non-GAAP Adjusted EBITDA Loss Margin

Non-GAAP Adjusted EBITDA loss means net loss adjusted to exclude, where applicable in a given period, stock-based compensation expense, depreciation and amortization, severance and other reorganization costs, interest expense, and provision for income ~~taxes, depreciation and amortization, stock-based compensation expense, acquisition-related expenses, and severance and other charges.~~taxes. Non-GAAP Adjusted EBITDA loss margin represents Non-GAAP Adjusted EBITDA loss divided by Total revenue. We use Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin, which are non-GAAP ~~metrics,~~measures, to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes. We believe that Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

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The following table provides a reconciliation of net loss to Non-GAAP Adjusted EBITDA loss:


		Three Months Ended						Nine Months Ended
		September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
		(in thousands)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands)
		(in thousands)
		(in thousands)
Net loss	Net loss	$	(18,082)		$	(23,678)		$	(56,635)		$	(72,785)
Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expense
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Severance and other
Severance and other
Severance and other
Interest expense
Interest expense
Interest expense	Interest expense	732			103			1,530			764
Provision for income taxes	Provision for income taxes	3			9			24			31
Depreciation and amortization		5,364			3,539			13,881			10,217
Stock-based compensation expense		7,888			7,177			24,907			20,758
Severance and other		507			1,809			1,058			3,470
Provision for income taxes
Provision for income taxes

Non-GAAP Adjusted EBITDA loss

Non-GAAP Adjusted EBITDA loss

Non-GAAP Adjusted EBITDA loss	Non-GAAP Adjusted EBITDA loss	$	(3,588)		$	(11,041)		$	(15,235)		$	(37,545)
Total revenue	Total revenue	$	82,049		$	67,945		$	240,629		$	217,061
Total revenue
Total revenue
Non-GAAP Adjusted EBITDA loss margin	Non-GAAP Adjusted EBITDA loss margin	(4.4)		%	(16.2)		%	(6.3)		%	(17.3)		%
Non-GAAP Adjusted EBITDA loss margin
Non-GAAP Adjusted EBITDA loss margin

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~

Revenue


		Three Months Ended						Change				Nine Months Ended						Change
		September 30, 2023			September 30, 2022			Amount		%		September 30, 2023			September 30, 2022			Amount		%
		(in thousands, except percentages)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands, except percentages)
		(in thousands, except percentages)
		(in thousands, except percentages)
Consignment revenue	Consignment revenue	$	57,838		$	41,553		$	16,285	39.2	%	$	157,732		$	137,524		$	20,208	14.7	%
Product revenue	Product revenue	24,211			26,392			(2,181)		(8.3)	%	82,897			79,537			3,360		4.2	%
Product revenue
Product revenue
Total revenue
Total revenue
Total revenue	Total revenue	$	82,049		$	67,945		$	14,104	20.8	%	$	240,629		$	217,061		$	23,568	10.9	%
Consignment revenue as a percentage of total revenue	Consignment revenue as a percentage of total revenue	70.5		%	61.2		%					65.5		%	63.4		%
Consignment revenue as a percentage of total revenue
Consignment revenue as a percentage of total revenue
Product revenue as a percentage of total revenue	Product revenue as a percentage of total revenue	29.5		%	38.8		%					34.5		%	36.6		%
Product revenue as a percentage of total revenue
Product revenue as a percentage of total revenue

Total revenue increased ~~$14.1~~$3.7 million, or ~~20.8%~~4.8%, for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in ~~2022.~~2023. The increase in revenue for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in ~~2022~~2023 was driven by $14.7 million or a 31.7% increase in consignment revenue, partially offset by $11.1 million or a 37.6% decrease in product revenue. The increase in total revenue was primarily due to ~~an 11.4%~~a 3.7% increase in Active Buyers, a 9.3% increase in Orders and a ~~4.1%~~7.6% increase in ~~Active Buyers.~~

~~Total~~the average order value. Consignment revenue increased ~~$23.6 million, or 10.9%, for the nine months ended September 30, 2023~~while product revenue decreased as ~~compared~~a percentage of revenue by 15.7% as we transitioned our RaaS partners and introduced our European operations to the ~~same period~~consignment model in ~~2022. The increase in revenue for the nine months ended September 30, 2023 as compared to the same period in 2022 was due to a 4.1% increase in Active Buyers and a 2.8% increase in Orders.~~2023.

Gross Margin


	Three Months Ended						Change
	March 31, 2024			March 31, 2023			Amount		%
	(in thousands, except percentages)
Cost of consignment revenue	$	10,502		$	9,220		$	1,282	13.9	%
Cost of product revenue	13,760			15,609			(1,849)		(11.8)	%
Total cost of revenue	$	24,262		$	24,829		$	(567)	(2.3)	%
Gross profit	$	55,326		$	51,093		$	4,233	8.3	%
Gross margin	69.5		%	67.3		%

~~Table of Contents~~

~~Cost of Revenue~~

Three Months Ended Change Nine Months Ended Change
September 30,
2023 September 30,
2022 Amount % September 30,
2023 September 30,
2022 Amount %
(in thousands, except percentages)
Cost of consignment revenue $ 10,131 $ 9,087 $ 1,044 11.5 % $ 28,931 $ 29,354 $ (423) (1.4) %
Cost of product revenue 15,291 14,362 929 6.5 % 48,246 40,335 7,911 19.6 %
Total cost of revenue $ 25,422 $ 23,449 $ 1,973 8.4 % $ 77,177 $ 69,689 $ 7,488 10.7 %
Gross profit $ 56,627 $ 44,496 $ 12,131 27.3 % $ 163,452 $ 147,372 $ 16,080 10.9 %
Gross margin 69.0 % 65.5 % 67.9 % 67.9 %

Gross margin was ~~69.0%~~69.5% and ~~65.5%~~67.3% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively, or an increase of ~~350~~220 basis points ~~and 67.9% for the nine months ended September 30, 2023 and 2022.~~.

Consignment revenue is recognized net of seller payouts. Seller payouts ~~and cost of items sold, whereas for~~related to product revenue ~~seller payouts and cost of items sold~~ are included as a component of cost of product revenue. As such, product revenue has a lower gross margin than consignment revenue.

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The increase in gross margin for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in ~~2022~~2023 was primarily due to ~~the mix shift between~~an increase in consignment gross margin by 260 basis points, primarily driven by lower shipping, labor and ~~product revenue as~~packaging costs. We transitioned our RaaS partners ~~transition~~and introduced our European operations to the consignment ~~model. Consignment revenue increased by 39.2% while product revenue decreased by 8.3%. The increase~~model in 2023, which positively impacted our gross margin. This higher consignment gross margin was ~~primarily due to~~offset by a ~~340~~2,190 basis point decrease in ~~shipping, labor and packaging costs as a percentage of revenue.~~

~~Gross~~product gross margin, ~~for the nine months ended September 30, 2023 was flat as compared to the same period in 2022, which was due to a 210 basis point increase in payouts, offset~~primarily driven by ~~a similar decrease in shipping, labor and packaging~~higher inventory costs.

~~Cost of~~ Consignment ~~Revenue~~Gross Margin


		Three Months Ended						Change				Nine Months Ended						Change
		September 30, 2023			September 30, 2022			Amount		%		September 30, 2023			September 30, 2022			Amount		%
		(in thousands, except percentages)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands, except percentages)
		(in thousands, except percentages)
		(in thousands, except percentages)
Cost of consignment revenue	Cost of consignment revenue	$	10,131		$	9,087		$	1,044	11.5	%	$	28,931		$	29,354		$	(423)	(1.4)	%
Consignment gross margin	Consignment gross margin	82.5		%	78.1		%					81.7		%	78.7		%
Consignment gross margin
Consignment gross margin

Consignment gross margin was ~~82.5%~~82.8% and ~~78.1%~~80.2% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively, or an increase of ~~440~~260 basis ~~points, and 81.7% and 78.7% for the nine months ended September 30, 2023 and 2022, respectively, or an increase of 300 basis~~ points.

The increase in consignment gross margin for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in ~~2022~~2023 was primarily due to a ~~410~~260 basis point decrease in outbound shipping, labor and packaging costs.

Product Gross Margin


	Three Months Ended						Change
	March 31, 2024			March 31, 2023			Amount		%
	(in thousands, except percentages)
Cost of product revenue	$	13,760		$	15,609		$	(1,849)	(11.8)	%
Product gross margin	25.1		%	47.0		%

Product gross margin was 25.1% and 47.0% for the three months ended March 31, 2024 and 2023, respectively, or a decrease of 2,190 basis points. The ~~increase~~decrease in ~~consignment~~product gross margin for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in ~~2022~~2023 was ~~primarily~~ due to higher inventory costs in our European operations, which unfavorably impacted product gross margin by 2,800 basis points. This decrease was partially offset by a 300 basis point decrease in inventory costs in the U.S. and a 290 basis point decrease in ~~outbound~~ shipping ~~labor~~ and packaging costs.

Operations, Product, and Technology


	Three Months Ended						Change
	March 31, 2024			March 31, 2023			Amount		%
	(in thousands, except percentages)
Operations, product, and technology	$	41,051		$	38,347		$	2,704	7.1	%
Operations, product, and technology as a percentage of total revenue	51.6		%	50.5		%

Operations, product, and technology expenses increased $2.7 million, or 7.1% for the three months ended March 31, 2024 as compared to the same period in 2023. The increase was due to a $2.4 million increase in facilities, technology, and other allocated costs, $1.2 million in severance costs related to our workforce reorganization in March 2024, and a $0.8 million increase in inbound shipping. This increase was partially offset by a $1.7 million decrease in personnel-related costs, of which $1.1 million was related to stock-based compensation.

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~~Cost of Product Revenue~~ Marketing


	Three Months Ended						Change
	March 31, 2024			March 31, 2023			Amount		%
	(in thousands, except percentages)
Marketing	$	13,413		$	16,870		$	(3,457)	(20.5)	%
Marketing as a percentage of total revenue	16.9		%	22.2		%

~~Product gross margin was 36.8% and 45.6%~~Marketing expenses decreased $3.5 million, or 20.5%, for the three months ended September 30, 2023 and 2022, respectively, or a decrease of 880 basis points, and 41.8% and 49.3% for the nine months ended September 30, 2023 and 2022, respectively, or a decrease of 750 basis points.

~~The decrease in product gross margin for the three months ended September 30, 2023~~March 31, 2024 as compared to the same period in 2022 was primarily due to the growth of our European operations as a percentage of product revenue, which has lower gross margin, partially offset by a 340 basis point decrease in labor, shipping and packaging costs.

The decrease in product gross margin for the nine months ended September 30, 2023 as compared to the same period in 2022 was due to the growth of our European operations as a percentage of product revenue, which has lower gross margin, partially offset by a 100 basis point decrease in labor, shipping and packaging costs.

~~Operations, Product, and Technology~~

Three Months Ended Change Nine Months Ended Change
September 30,
2023 September 30,
2022 Amount % September 30,
2023 September 30,
2022 Amount %
(in thousands, except percentages)
Operations, product, and technology $ 40,355 $ 38,702 $ 1,653 4.3 % $ 118,473 $ 121,824 $ (3,351) (2.8) %
Operations, product, and technology as a percentage of total revenue 49.2 % 57.0 % 49.2 % 56.1 %

Operations, product, and technology expenses increased $1.7 million, or 4.3%, for the three months ended September 30, 2023 as compared to the same period in 2022. The increase was primarily due to a $1.7 million increase in facilities, technology, and other allocated costs and a $0.4 million increase in personnel-related costs, offset by a $0.3 million decrease in inbound shipping costs and a $0.2 million decrease in professional services.

~~Operations, product, and technology expenses decreased $3.4 million, or 2.8% for the nine months ended September 30, 2023 as compared to the same period in 2022.~~2023. The decrease was due to a ~~$4.7~~$2.5 million decrease in ~~personnel-related~~advertising costs, a ~~$1.0~~$1.3 million decrease ~~in inbound shipping, and a $0.9 million decrease in professional services, offset by a $3.2 million increase in facilities, technology, and other allocated costs.~~

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~~Marketing~~

Marketing expenses increased $4.7 million, or 31.5%, for the three months ended September 30, 2023 as compared to the same period in 2022. The increase was due to a $4.6 million increase in social advertising and other lead generation costs and a $0.8 million increase in personnel-related costs, partially offset by a $0.6 million decrease in professional services and other costs.

Marketing expenses increased $3.5 million, or 6.9%, for the nine months ended September 30, 2023 as compared to the same period in 2022. The increase was due to a $2.9 million increase in social advertising and other lead generation costs and a $1.8 million increase in personnel-related costs, of which $1.0 million was related to stock-based compensation expense, and a $0.2 million decrease in facilities, technology and other costs. This decrease was partially offset by ~~a $1.1~~$0.5 million ~~decrease~~ in ~~professional services and other costs.~~severance costs related to our workforce reorganization in March 2024.

Sales, General and Administrative


		Three Months Ended						Change				Nine Months Ended						Change
		September 30, 2023			September 30, 2022			Amount		%		September 30, 2023			September 30, 2022			Amount		%
		(in thousands, except percentages)
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31, 2024
		March 31, 2024
		March 31, 2024
		(in thousands, except percentages)
		(in thousands, except percentages)
		(in thousands, except percentages)
Sales, general, and administrative	Sales, general, and administrative	$	15,058		$	15,232		$	(174)	(1.1)	%	$	47,147		$	47,276		$	(129)	(0.3)	%
Sales, general, and administrative as a percentage of total revenue	Sales, general, and administrative as a percentage of total revenue	18.4		%	22.4		%					19.6		%	21.8		%
Sales, general, and administrative as a percentage of total revenue
Sales, general, and administrative as a percentage of total revenue

Sales, general, and administrative ~~decreased $0.2~~expenses increased $1.5 million, or ~~1.1%~~9.4%, for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in ~~2022.~~2023. The ~~decrease~~increase was due to $1.3 million in severance costs related to our workforce reorganization in March 2024, a ~~$0.3~~$0.5 million ~~decrease~~increase in personnel-related costs, ~~partially offset by~~and a $0.1 million increase in facilities, technology and other costs.

~~Sales, general, and administrative expenses remained flat for the nine months ended September 30, 2023 as compared to the same period in 2022, which~~ This increase was ~~due to~~partially offset by a ~~$2.3~~$0.4 million decrease in professional ~~services, partially offset by a $1.6 million increase in personnel-related costs and a $0.6 million increase in facilities, technology, and other costs.~~services.

Interest Expense


	Three Months Ended				Change
	March 31, 2024		March 31, 2023		Amount		%
	(in thousands, except percentages)
Interest expense	$	(677)	$	(77)	$	(600)	779.2	%

Interest expense increased $0.6 million for the three months ended ~~September 30, 2023~~March 31, 2024 as compared to the same period in ~~2022. The~~2023. This increase ~~during the three months ended September 30, 2023~~ was ~~primarily~~ due to ~~$0.5~~a $0.6 million of capitalized interest expense ~~during~~recorded in the ~~three months ended September 30, 2022~~first quarter of 2023 in conjunction with the build-out of our distribution centers. ~~There was no such capitalized~~We did not capitalize any interest ~~during~~in the same period in 2024.

Other Income, Net


	Three Months Ended				Change
	March 31, 2024		March 31, 2023		Amount		%
	(in thousands, except percentages)
Other income, net	$	845	$	476	$	369	77.5	%

Other income, net increased $0.4 million for the three months ended ~~September 30, 2023.~~

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~~Interest expense increased $0.8 million for the nine months ended September 30, 2023~~March 31, 2024 as compared to the same period in 2022. This increase was primarily due to a $0.6 million increase in interest costs and a $0.3 million decrease in capitalized interest expense in conjunction with the build-out of our distribution centers, offset by a $0.1 million decrease in amortization of debt issuance costs.

~~Other Income, Net~~

~~Other income, net increased $0.2 million for the three months ended September 30, 2023 as compared to the same period in 2022.~~2023. The increase was primarily due to an increase in interest income on our marketable securities due to a higher interest rate environment.

Other income, net increased $0.9 million for the nine months ended September 30, 2023 as compared to the same period in 2022. The increase was primarily due to an increase in interest income on our marketable securities due to a higher interest rate environment.

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Liquidity and Capital Resources

~~We have~~Although we generated $1.4 million in cash flows from operating activities in the first quarter of 2024, we had historically generated negative cash flows from operations and have primarily financed our operations through private and public sales of equity securities and debt. As of ~~September 30, 2023,~~March 31, 2024, we had cash, cash equivalents and short-term marketable securities of ~~$74.1~~$62.5 million. Additionally, we have a term loan facility (“Term Loan”) under which ~~$38.0~~$22.5 million remained available to be drawn as of ~~September 30, 2023~~March 31, 2024 for the purchase of certain equipment, and we were in full compliance with our debt covenants under the Term Loan as of that date. See Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further discussion on our Term Loan.

We expect operating losses ~~and negative cash flows from operations~~ to continue in ~~2023~~2024 as we continue to invest in growing our business and our infrastructure. Our primary sources of liquidity are cash flows generated from operations, cash on hand and borrowings available under the Term Loan. Our primary use of cash includes operating costs such as distribution network spend, product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our operations and our growth. Additionally, our primary capital expenditures are related to the set-up, expansion and/or automation of our distribution network. Based upon our current operating plans, we believe that our existing cash, cash equivalents and short-term marketable securities will be sufficient for at least the next 12 months and beyond to meet our short- and long-term capital requirements, and we do not anticipate expanding our distribution network to include additional locations in the near term. Our cash flow forecast is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

Our future capital requirements will depend on many factors, including but not limited to, the timing of our increased distribution center automation and expansion plans to support planned revenue growth, the expansion of sales and marketing activities, the potential introduction of new offerings and new RaaS clients, the continuing growth of our marketplaces and overall economic conditions. However, we expect that our capital expenditures will be limited in the remainder of ~~2023~~2024 as we have completed the first phase of our new distribution center in Texas. ~~We may seek additional equity or debt financing.~~ See the section titled “Risk Factors—Risks Relating to Our Indebtedness and Liquidity—We may require additional capital to support business growth, and this capital might not be available or may be available only by diluting existing stockholders” within the ~~2022~~2023 10-K.

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Cash Flows

The following table summarizes our cash flows for the periods indicated:

Nine Months Ended

September 30,
2023

September 30,
2022

(in thousands)

Three Months Ended

March 31,
2024

March 31,
2023

(in thousands)

Net cash provided by (used in):

Operating activities

(14,616)

(36,939)

Investing activities

48,353

(6,961)

Financing activities

(2,983)

(2,922)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(230)

(918)

Net change in cash, cash equivalents and restricted cash

30,524

(47,740)

Changes in Cash Flows from Operating Activities

Net cash ~~used in~~provided by operating activities was ~~$14.6~~$1.4 million during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to net cash used of ~~$36.9~~$4.5 million during the ~~nine~~three months ended ~~September 30, 2022. Operating~~March 31, 2023. The increase in cash ~~flows during the nine months ended September 30, 2023 reflect~~inflows was primarily due to a $3.2 million decrease in our net loss, ~~of $56.6~~partially offset by a $0.5 million decrease in non-cash adjustments ~~of $43.6~~to net loss, and favorable changes totaling $3.1 million ~~primarily for depreciation, amortization, stock-based compensation, and the reduction of the carrying amount of right of use assets, and a net cash outflow of $1.6 million due to changes~~ in ~~our~~ operating assets and liabilities. The ~~$1.6 million outflow from changes~~change in operating assets and liabilities was primarily due to a ~~$12.0~~$7.0 million ~~decrease due~~reduction in inventory mainly driven by decreased upfront inventory purchases as we transitioned our RaaS partners and introduced our European operations to ~~lower operating lease~~the consignment model in 2023 and a $2.4 million increase in accrued and other current and non-current liabilities ~~and~~driven primarily by accrued ~~liabilities, and higher accounts receivable and inventory,~~severance costs related to our workforce reorganization in March 2024. This was partially offset by a ~~$10.5~~$6.5 million ~~increase~~decrease in accounts and seller payable primarily due to ~~higher~~timing of vendor payments and seller ~~payables and accounts payable and lower other current and non-current assets.~~credit cash-outs or redemptions.

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Changes in Cash Flows from Investing Activities

Net cash ~~provided by~~used in investing activities for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 increased ~~$55.3~~$24.7 million as compared to the same period in ~~2022.~~2023. The increase in cash ~~inflows~~outflows was primarily due to ~~an increase~~a $20.1 million decrease in ~~cash inflows of $29.8 million from net~~ maturities of marketable securities and an $8.7 million increase in purchases of marketable securities, offset by a ~~$25.5~~$4.1 million decrease in purchases of property and ~~equipment in the current period.~~equipment.

Changes in Cash Flows from Financing Activities

Net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 increased ~~$0.1~~$0.3 million as compared to the same period in ~~2022~~2023 which was primarily due to ~~a decrease~~$0.6 million of ~~$2.3 million in repayments of debt, offset by a net decrease of $1.9 million in cash outflows~~increased taxes paid related to stock-based award ~~activity.~~activity, offset by $0.3 million of increased proceeds from issuance of stock-based awards.

Critical Accounting Policies and Estimates

U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses. Actual results could differ from those estimates.

There have been no material changes to our critical accounting policies since the ~~2022~~2023 10-K. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our condensed consolidated financial statements, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the ~~2022~~2023 10-K.

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JOBS Act Accounting Election

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Accordingly, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

New Accounting Pronouncements

See discussion under Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for information on new accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include:

Interest Rate Risk

As of ~~September 30, 2023,~~March 31, 2024, we had cash and cash equivalents of ~~$68.6~~$50.1 million and marketable securities of ~~$5.6~~$12.4 million, consisting primarily of money market funds, commercial paper, ~~corporate debt securities,~~ U.S. treasury securities and U.S. government agency bonds, ~~and discount notes,~~ which carry a degree of interest rate risk. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short- to intermediate-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to fluctuations in interest rates.

The Term Loan bears variable interest rates tied to the prime rate, with a floor of ~~6.00%~~4.75%, and therefore carries interest rate risk. If interest rates were to increase or decrease by 1% for the year and our borrowing amounts on the Term Loan remained constant, the increase or decrease to our annual interest expense would not ~~materially increase or decrease. See the risk factor discussion captioned~~ be material.

~~"Risks Relating to Our Indebtedness and Liquidity—Recent events affecting the financial services industry could have an adverse impact on our business, results~~Table of ~~operations and financial conditions"~~Contents under Part II, Item 1A of this Quarterly Report on Form 10-Q for more discussion on adverse developments affecting the financial services industry that may have an adverse impact on our business, results of operations and financial conditions.

Inflation Risk

As of ~~September 30, 2023,~~March 31, 2024, inflation remains at elevated levels in the U.S. and overseas where we conduct our business, resulting in rising interest rates and fuel, labor and processing, freight and other costs that have affected our gross margin and operating expenses. We believe these increases have negatively impacted our business, and although difficult to quantify, inflation is potentially having an adverse effect on our customers’ ability to purchase in our marketplaces, resulting in slowing revenue and Order growth. If we are unable to increase our prices to sufficiently offset the rising costs of doing business, our profitability and financial position could be adversely impacted.

Foreign Currency Exchange Rate Risk

We transact business in Europe through Remix in multiple currencies. As a result, our operating results, cash flows and net investment in Remix are subject to fluctuations due to changes in foreign currency exchange rates. As of ~~September 30, 2023,~~March 31, 2024, our most significant currency exposure was the Bulgarian lev. We manage our foreign currency exchange rate risks through natural hedges including foreign currency revenue and costs matching, as well as foreign currency assets offsetting liabilities. We have not entered into any hedging arrangements with respect to foreign currency risk, but we may do so in the future if our exposure to foreign currency becomes more significant.

Assets and liabilities of our foreign operations are translated into dollars at period-end rates, while income and expenses are translated using the average exchange rate during the period in which the transactions occurred. The related translation adjustments were reflected as an unfavorable foreign currency translation adjustment of ~~$0.8~~$0.9 million during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, which was recognized in accumulated other comprehensive loss within our condensed consolidated balance sheet.

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A hypothetical 10% change in foreign currency exchange rates would not have had a material impact on our financial condition or results of operations during any of the periods presented.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of ~~the end of the period covered by this report.~~March 31, 2024. The term “disclosure controls and procedures,” as defined under the Exchange Act, means controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. ~~Further, no~~

Based on that evaluation, ~~of control can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.~~

~~Because of the material weakness in our internal control over financial reporting discussed below,~~ our Chief Executive Officer and Chief Financial Officer concluded that ~~as of September 30, 2023,~~ our disclosure controls and procedures were ~~not effective. In light~~effective as of this fact, our management, including our Chief Executive Officer and Chief Financial Officer, has put in place processes and controls and other post-closing procedures and has concluded that, notwithstanding the material weakness in our internal control over financial reporting, the unaudited interim condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

~~Previously Reported Material Weaknesses in Internal Control Over Financial Reporting~~

As previously described in the 2022 10-K, in connection with the audits of our consolidated financial statements in certain prior years, we and our independent registered public accounting firms identified certain control deficiencies in the design and implementation of our internal control over financial reporting that, in the aggregate, constituted a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.

~~Our material weakness related to the following control deficiency:~~

•We did not design and maintain adequate controls over the preparation and review of certain account reconciliations and journal entries. Specifically, we did not design and maintain controls and we did not maintain a sufficient complement of accounting personnel to ensure account reconciliations were prepared and reviewed at the appropriate level of precision on a consistent and timely basis.

The deficiency described above, if not remediated, could result in a misstatement of one or more account balances or disclosures in our annual or interim consolidated financial statements that would not be prevented or detected, and, accordingly, we determined that this control deficiency constitutes a material weakness.

~~Remediation Plans~~

To address our material weakness, we have added accounting and finance personnel and implemented new financial accounting processes, controls, and systems. We are continuing to take steps to remediate the material weakness described above through hiring additional qualified accounting and finance resources and further evolving our accounting close processes. We will not be able to fully remediate this control deficiency until these steps have been completed and the controls have been operating effectively for a sufficient period of time.

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March 31, 2024.

Changes in Internal Control over Financial Reporting

~~We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as described above, there was not any change~~There were no changes in our internal control over financial reporting ~~(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)~~that occurred during our most recent fiscal quarter ended March 31, 2024 that ~~has~~ materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

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Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designated and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business.

Item 1A. Risk Factors

The Company is supplementing the risk factors previously disclosed in the section titled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 filed with the SEC on March ~~7, 2023~~5, 2024 (our “Fiscal ~~2022~~2023 10-K”~~) and Part II, Item 1A,~~ ~~Risk Factors, of our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2023 (“Q1 2023 10-Q”) and the quarter ended June 30, 2023 (“Q2 2023 10-Q”~~) to include the following risk factors, which should be read in conjunction with the other risk factors presented in our Fiscal ~~2022 10-K, our Q1~~ 2023 ~~10-Q and our Q2 2023 10-Q.~~10-K.

Our ~~business is affected by seasonality~~ability to incorporate artificial intelligence and ~~we may be adversely affected by weather conditions, including any potential effects from climate change.~~

Seasonality in our core marketplace does not follow that of traditional retailers, such as typical concentration of revenue in the holiday quarter, and we see relatively stable demand from our buyers throughout the year. However,machine learning into our business ~~has in the past, and~~operations successfully may in the future be adversely affected by unseasonable weather conditions, including those resulting from climate change in both our U.S. and EU markets. For example, we have observed that periods of unseasonably warm weather in the fall and winter may lead to reduced consumer spending on winter apparel that tends to have a higher average selling price, which negatively impacts our business. The effects of unseasonably warm weather are particularly pronounced on our Remix platform, which unlike our core marketplace, tends to see an increased concentration of revenue in winter months due to increased sales of winter apparel. As the effects of climate change increase, we expect the frequency and impact of weather and climate related events and conditions to increase as well. Any and all of these risks may materially and adversely affect our ~~financial condition, results of operations~~reputation and ~~cash flows.~~

~~We rely on consumer discretionary spending and have been and may continue to be adversely affected by economic downturns and other macroeconomic conditions or trends.~~

Our business and results of operations are subject to global economic conditions and their impact on consumer discretionary spending, particularly in the retail market. Some of the factors that may negatively influence consumer spending on retail items include economic downturns, high levels of unemployment, high consumer debt levels, reductions in net worth, declines in asset values, home foreclosures and reductions in home values, fluctuating interest rates and credit availability, inflation, resumption of federal student loan payments, fluctuating fuel and other energy costs, fluctuating commodity prices and general uncertainty regarding the overall future political and economic environment. Economic conditions in particular regions may also be affected by natural disasters, such as earthquakes, hurricanes and wildfires; unforeseen public health crises, such as pandemics and epidemics, including the COVID-19 pandemic; political crises, such as a government shutdown, terrorist attacks, war and other incidents of political instability, such as Russia’s invasion of Ukraine and the Israel-Hamas war; or other catastrophic events, whether occurring in the United States or internationally.

Traditionally, consumer purchases of new retail items have declined during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. This has also resulted in increases in inventory levels which can lead to increased price competition and depressed margins. Such economic uncertainty and decrease in the rate of retail purchases in the primary market may slow the rate at which individuals choose to supply their secondhand items to us, which could result in a decrease of items available in our marketplaces, and may also slow the rate at which individuals choose to buy secondhand items and their value on our marketplaces, including through a relative increase in purchases in the primary market compared with the resale market. The presence or absence of government stimulus funding programs has had and may continue to have an impact on consumer discretionary spending and, consequently, purchases through our marketplaces. Further, we cannot guarantee that buyers will continue to buy at current rates if the economy worsens. Adverse economic changes could reduce consumer confidence, and thereby negatively affect our results of operations.

We use artificial intelligence (“AI”), and machine learning (“ML”) technologies in our business to, among other things, optimize our product presentation and personalize our website experience through advanced search and product recommendations. Our strategic plans and initiatives also include investments in information technology, data science and AI and ML. We may expand our use of AI and ML into other areas of our business including general administrative functions. However, there can be no assurance that we will realize the desired or anticipated benefits from AI and ML. Our investments in AI and ML solutions and features may negatively impact our cost of revenue and gross margins until and unless we are able to increase revenue enough to offset these investments. We may also fail to properly implement or market our AI solutions and features.

In addition, issues relating to our and our vendors’ use of new and evolving technologies such as AI and ML may cause us to experience brand or reputational harm, competitive harm, legal liability and new or enhanced governmental or regulatory scrutiny, and to incur additional costs to resolve such issues. For example, data sets used by AI and ML may be over-broad or insufficient, can include unexpected biases and may also be subject to legal risks and licensing costs. Our vendors may incorporate artificial intelligence tools into their offerings without disclosing this use to us, and the providers of artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to the use and governance of artificial intelligence tools. AI algorithms or training methodologies may have flaws and be prone to cybersecurity incidents or service interruptions. Perceived or actual technical, legal, compliance, privacy, security, ethical or other issues relating to the use of AI and ML could undermine the decisions, predictions or analysis that such applications produce and create additional risks, such as risks of cybersecurity incidents or loss of intellectual property and other confidential information, all of which could adversely affect our business and operating results. Developing, testing and deploying AI systems may also increase our operating expenses due to the nature of the computing costs involved in such systems. Further, we may be unable to quickly and successfully adapt to rapid change resulting from advancements in AI and similar technology, or our competitors may have more success implementing and utilizing such technology than we do. Any of these risks could have an adverse effect on our reputation and results of operations.

The use of AI and ML involves significant technical complexity and requires specialized expertise, and our future success depends on our ability to continue to attract, retain and motivate highly skilled employees, software engineers and other employees with the technical skills in AI, ML and advanced algorithms. Competition for highly skilled employees is intense, particularly in the fields of AI and data science. We may be unable to attract or retain such highly skilled personnel who are critical to our success, which could hinder our ability to keep pace with innovation and technological changes in our industry or result in harm to our business, results of operations and financial condition.

Our reorganization activities may not lead to expected savings or benefits and may be disruptive to our operations and harm our business.

We have in the past implemented internal reorganizations designed to reduce our cost structure to better align the operational needs of the business to current economic conditions. In March 2024, we reorganized certain functions within our business to improve efficiencies and reduce overhead costs. We may have additional workforce reorganization initiatives in the future to improve our operations, respond to changes in business conditions and markets and to streamline certain key functions to reduce costs. We may not realize expected savings or benefits from reorganization activities, incur additional charges and experience loss of key personnel, disruptions in our operations, and difficulties in the timely delivery of products. These factors could negatively impact our business, results of operations and financial condition.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)None.

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(b)On March ~~30,~~25, 2021, ~~we closed~~the SEC declared our IPO, in which we sold 13,800,000 shares of our Class A common stock at an offering price of $14.00 per share, including 1,800,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares of our Class A common stock, resulting in net proceeds to us of $175.5 million after deducting offering costs, underwriting discounts and commissions of $17.7 million. All of the shares offered, issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-253834)~~, which was declared effective by~~ for our IPO effective. We have applied the ~~SEC on March 25, 2021. There has been no material change in the planned use~~entirety of net proceeds from our IPO in accordance with the ~~IPO as disclosed~~description included in our final prospectus filed with the SEC on March 3, 2021 pursuant to Rule 424(b) ~~on March 26, 2021.~~(4).

(c)None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)None.

(b)None.

(c)Rule 10b5-1 Trading Plans

On March 15, 2024, James Reinhart, Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act for the sale of up to 692,152 shares of the Company’s Class A common stock until June 13, 2024.

On March 15, 2024, Alon Rotem, Chief Legal Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act for the sale of up to 310,135 shares of the Company’s Class A common stock until June 13, 2024.

There were no other Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements adopted, modified or terminated by our directors or officers during the three months ended March 31, 2024.

Item 6. Exhibits

(a)Exhibit Index:

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Incorporated by Reference

Exhibit Number

Description

Form

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of the Registrant

S-1

3.2

3/3/2021

3.2

Amended and Restated Bylaws of the Registrant, as adopted on February 16, 2023

8-K

3.1

2/21/2023

4.1

Form of Class A common stock certificate of the Registrant

S-1

4.1

3/3/2021

4.2

Tenth Amended and Restated Investors’ Rights Agreement, dated February 16, 2021, by and among the Registrant and certain of its stockholders

S-1

4.2

3/3/2021

31.1*

Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

* Filed herewith.

** Furnished herewith.

† Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K under the Securities Act. The Company agrees to furnish supplementally any omitted schedules to the Securities and Exchange Commission upon request.

^ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because they are both (i) not material and (ii) the type that the registrant treats as private or confidential. A copy of the omitted portions will be furnished to the Securities and Exchange Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			THREDUP INC.

			By:			/s/ SEAN SOBERS
						Sean Sobers
						Chief Financial Officer
						(Principal Financial and Accounting Officer)

Date: ~~November~~May 6, ~~2023~~2024

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