TDUP - Earnings call transcript Q3 2024

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Operator

Good day, everyone, and welcome to the ThredUp Third Quarter 2024 Earnings Call. [Operator Instructions] Please note today's call will be recorded [Operator Instructions]. It is now my pleasure to turn today's conference over to Lauren Frasch. Please go ahead.

Lauren Frasch

Good afternoon and thank you for joining us on today's conference call to discuss ThredUp's Third Quarter 2024 Financial Results. Reinhart, and James Sobers, and are CFO. me ThredUp's Co-Founder; CEO Sean With press financial and Investor posted release We our supplemental at Relations ir.thredup.com. information website our on replay our This the on website, webcast is shortly. call on call and be being site a of available this will IR

full such performance, market forward-looking including, as for estimate believe, statements. evolving similar technologies are investments earnings rates, our uncertainties, and market and a of general alternative company's exit begin, we artificial demand, offerings, and attract and but including the growth financial fiscal strategies performance, as forward-looking alternatives and to, buyers. Words regarding in intended effectively learning to as our deploy identify the European future make European risks its not for of future for prospects, and to involve to statements guarantees new the as and the and ability such intention expect anticipate, European to global in course quarter plans, changing not that interest unknown execute consumer company's business and we known remind uncertainty. forward-looking expressions ability limited of and business Before habits inflation, strategic the strategic economic to ability increased intelligence effects and our machine during you of effectively identify our These the our well AI guidance seek business to fourth technologies, like will I'd cost to XXXX, statements year this call, statements new are and

performance or by materially differ such results forward-looking future actual could any expressed from implied projections statements. results Our or of

earnings more and affect IR release other about our website. press information that filings, and in results uncertainties You could and our information supplemental on risks SEC find posted update can these we information events. and statements of our operating result factors undertake statements call to new make are today, as of or on we on no assumptions forward-looking as obligation a this that future Any these based

during These non-GAAP financial substitution will measures. as the certain in to, In considered non-GAAP not call, present a addition, we GAAP from measures isolation be addition in for should financial or measures.

disclosures You GAAP reconciliations our supplemental regarding information including to press additional on website. non-GAAP comparable release find earnings measures those measures, posted in our IR can and

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

James Reinhart

Good and Co-Founder everyone. of Thank Reinhart, afternoon, call. quarter third earnings James CEO joining for you XXXX ThredUp. I'm our

for our We for are pleased results to QX financial ThredUp's expectations QX and into XXXX. share and

expectations it adjusted on Financial our I the will will in detail Sean Chief over performance free our our to developments update cash will hand for will we've third full products. Sobers, My and progress talk made the year provide outlook then marketplace, U.S. Officer, on our divestiture. I significant XXXX. flow on focus and next the XXXX expansion, year new fourth through margin an We in financials more for provide quarter provide our EU with to quarter on over EBITDA update remarks further growth, our AI an and and

out close call question-and-answer with session. today's we'll always, a As

Before Remix. We've team. and Florin for Remix business, a I agreed our of the Filote, made our divestiture me in GM substantial the Remix's U.S. in clarity having detail my management business, of some current performance terms material balance let with on what's get provide on by happening management EU on the progress into EU remarks, buyout

targeting Discussions of and final are cash year-end. the this While Remix are investment proceeding with we strategic we Remix continue approximately to to under alternatives, and ThredUp to terms, in transaction evaluate to well, retain a the minority million $X expected is a all close by interest fund proposed business.

U.S. the quarter. real made U.S. back Now by correcting start the progress marketplace; saying we've me in that last to since in let turning course

confidence While belabor operating history. challenges view threefold. were they gives in will our anomalies me that August, I this I What in view our we won't in the mentioned confirm is

First, year. we raising exceeded our own the QX estimates and QX and expectations for are for

shopping consumers be gifts as shift slower secondhand share QX for to holiday. new to wallet tends typically, their goods the in and Second, new

Over the on decline. past seasonally down a our years, to QX marketplace has three trended just we X% QX. are seasonal X% This year, average, from expecting

facing shopping still Third, they a despite are our environment, with us. customers more regularly challenging

macro is value, be we've don't promotional $XXX at million $XXX confident noted to year-over-year more in that from to that thought trajectory. return back to we opportunities at midpoint. both see what to to squarely we merchandise But we've in the willingness it gross to previous calls, know I'm XXXX are report turn more GMV targets, doing as the generate to work pay on drive add environment sale. We XXXX. that on order flow-through in do incrementally had ThredUp, but more million as We we higher XXXX profit also page typically to useful growing to growth While in there's and our X% but in we ambitious and we're our to our

highlight As blocks that building are of form areas such, five confidence. here I'd that like to the

years, customer on new ad targeting as had a well full combination more we've and the QX conversion. in First, acquisition than acquisition strongest retention; as of buyer was quarter funnel two better

period. believe improve the invest reengagement revised while our our with our XX% buyers to and strong. Year-to-date, customer are XX% LTV-to-CAC back position in the over in targets. last retention new months and rates and ratios are flow are now last our a were up onboarding Repeat product in customers free aggressively are growing cash strategies. paybacks achieving our they new new more as predicted payback better still e-mail for dial trending push we experience addition, we few In strengthening same than metrics over notification year We

positive growth As next buyers metric, of be active full early turn quarters, a reminder, expect lagging improvements a to won't several active seen the we impact these so is year. for but buyer

line and allowed us algorithms; our basis on in in sourcing strategy our adjusted generated operations to out contribution Second, strategy by algorithms top with our have margins customers cash lower delight and sell-through QX. EBITDA strong nearly pricing deals, expanded of and we points. from XXX driving contraction sourcing despite the and our year-over-year incredible flow pricing continued exit QX, refinements Despite expanding rate more

Our remain as gross as unit basis XX points strong economics ever XX.X%. with to year-over-year margins up

free was expect XXXX, in I'll on attention as U.S. the our breakeven year. be We positive from flow per to a milestone U.S. the net this in full basis and positive cash will fifth cash speaking as such, and Adjusted will be full positive the flow driving operations EBITDA earnings in a quarter. roughly in as for year And income QX turn stop our future. share for the to consecutive we the

our Third, consignment transition.

our to to the consignment in of makes revenue U.S. it's trend stages up final mid-XXs the in is and now in more XXXX. than XX% toward Consignment revenue, marketplace expected transition the of Our U.S.

treatment to in impact accounting muted will operations consignment revenue XXXX. flow consignment rates goods in capital cycle the business QX, will With grows. our cash the as While extension should our and continue have mid-XXs, previous of improve negative our has minimal quarters in into growth it working and by again from

serve infrastructure opportunities Fourth, peril With a continued source processing, sustainable dollar really more Resale-as-a-Service RaaS. shine business double-down advantage, future contribution partner to and to with highs, ecosystem. record not at incremental a With and prove of ] our leverage in now see competitive and profits. that operating only source strong [ just not our can the are our clients, meaning built leverage these potentially or of in from continues extends level. model broader of brand but the an improvements marketplace to revenue RaaS, ultimately the line use operating advantages this to but mix with durable at we automation infrastructure; platform we've and variable Our bottom our returns. This to power consignment competitive flow-through generates to our our resale also on margins

more ever maintenance are ambitious expenditures infrastructure our the only modest with or goal otherwise time. than of over the for are of on to majority primed resale, Internet. With additional underlying front us, and providing ThredUp vast centers our in distribution being branded continue of the CapEx leverage We

our fund As to a should from XXXX be through generated cash we expect need network capacity at we capacity don't any in additional additional able business. until when any the reminder, least to

to that AI believe AI and technology to Finally, we and generative experience to that significantly investments; shopping relative benefits retailers other marketplace product customer the experience. in continue continued our improve can Generative have enhance our disproportionately secondhand and we ways, and the AI marketplaces significant

was build making secondhand a to that in experience Advancements from a shopping are dream quickly Generative shopping years, AI reality. new. indistinguishable For that our was

double-click into and quarter we that me a last few provide update. product a areas introduced Let

merchandising, This journey. marketing our search more for platform, our the to all is ad much AI every becoming technology experience functionality our across robust tech bringing e-mail, is and deployed of on-site First, foundation shopping a quickly now campaigns.

week technology new prestigious XXXX our fact, Best In list. AI just last TIME recognized search in Magazine Inventions its

Style and shop by foundation our helps will build to power influencers new experience. of creators, affiliates launching the and the million-plus empowering back inspiration X in celebrate and to XXXX, Thrift. compelling secondhand occasion, commerce Chat items engagement This showcase social bringing destinations fun Second, intuitively customers secondhand and expression shopping curate to endless features and

and We remains seeing tools of made behavior has that consumer to We Search bump looks into tools customers tech, Image the adoption to afterwards. lets costumes shifting been in it for experience and photo our items. adoption of ThredUp new. Third, powerful trifecta pay available unlocking Search Search your know it premium shift is match assortment for but Image experience Halloween concluded saw Search infrastructure of you what find launch for combining and us. of as style. The they just to their a on takes of a data would mobile one they find these what any XX% secondhand have go-to new fraction time, usage Image import ThredUp's Image sticky of This want a vast for we're rapid

thematically not we out high-definition items XXXX. flaw in item. for photos detection this about to long-tail giving measurements coming able AI-based every month, now information and be demand ago. emerging niche have would moments, that next, just in holiday Fourth, solutions rolling XX XXX-degree will capture months scalable are our possible sweaters. customers This will processed We year-end by DCs, been trends with ugly Up with newly cultural automated or launch coupled beginning digital new richer

next photo returns are are All should While quality, ThredUp lower getting routine, the upgrade and they into shopping secondhand conversion, these over retention. customer improved see big critical increased on detection and We a measurement translate in flaw friction points seem quarters. online. this few three accuracy,

our to sellers. premium introduced of we XXX% selling service Finally,

demonstrating demand launch, a is payouts with floor targeted quality send consignment this in service doubled per nation, premium or tools desirability While discount ThredUp. still the need priced of on cleanout as their service standard items kit items. Upon premium at windows, The the is for for you our options get and on more confidence deductions sellers, a can from power higher for for with the for customers longer in high $XX.XX dedicated more service customer support. overnight, bag such and

innovate same our want apparel we the the remain do pursuit this TAM We are online. We our in impact. relentless sellers, it our continuing making sell more to do you somewhere to of on of us work, the to to sustainability at secondhand of between, you yourself leading all and choice or expand want will ThredUp believe time, behalf whether in

and on over to doubt with But to work I it it. to wait been teammates can't track past our all momentum ThredUp few want our with front see Before I the Sean, months, tough what opportunities turn of their and hard no strong close of customers. we're us. next the marketplace celebration quarter. over It's behalf of on a we about in in invent I back exciting my

Now you, over Sean. to

Sean Sobers

quarter I'll for James. an non-GAAP I up our begin XXXX. of my remarks. follow of results guidance fourth results and full with with throughout and will year discuss Thanks, overview the

filing. our financials and GAAP a Our in our supplemental our and between financials release, XX-Q and non-GAAP found GAAP reconciliation earnings measures are

by to planning mentioned EU significant progress James made the our transaction the As year-end. of business and we've in close are earlier, divestiture

U.S. quarter. this For focused this be reason, on will results our I primarily

the go-forward would supplemental the I financials. plus will providing representative of are focus but investors results in We I U.S. last to X they on are briefly P&L our discuss our quarters our business. encourage our results, as U.S. consolidated

million, third decrease active year-over-year. were quarter the QX, U.S. down achieved XXXX, a In were the $XX.X over million, $X.X revenue XX.X% $XX consolidated last totaled million, net respectively. the revenue For of of U.S. million, buyers decline, XX% of while X.X X.X% a a year. and orders X.X%

revenue performance by million. the impacted year, earlier were guidance the midpoint buyers our $X.X exceeded our our active by our in While missteps of

gross over year. point year consolidated above XXX final basis XX.X%, the The increase phase and shift outlook. both For same the and last a third competitive quarter of a points environment, pleased basis XX sequential U.S. Despite the economics. improvement, XX.X%, year-over-year our improvement last XX achieved point we quarter basis was and XXXX, midpoint by margin highly over the are a gross to consumer of unit of improving driven consignment the margin deliver

QX quarter adjusted year XXXX, the consecutive GAAP million, versus loss and loss of million. of consolidated This For of U.S. net X.X% $XXX,XXX the $XX adjusted our In generated EBITDA or in is revenue. adjusted was the $X.X of EBITDA we third was last EBITDA in U.S., while positive result quarter $XXX,XXX higher fifth

in the million U.S. million in $XX.X operations. $XXX,XXX with quarter ended Turning from cash to in sheet; flow QX. $X.X quarter in securities balance cash with the third and using the and cash million The generated began we $XX.X

very our to year. flow. are are we've consolidated we making EU to compared million the consumed the $XX is free of path basis, on to which Year-to-date, We strides a proud entirely $X.X attributable last on million, cash

U.S. same is the the period, in Importantly, breakeven.

Now to turn to I'd like guidance.

U.S. economy favorable the to uncertain on our and We we highly consumer are trends post-election an for a revenue business. account outlook raising anticipate U.S. seeing our in are in We promotional the outlook remain QX. of the cautious

with improvements underlying to trends a gross throughout the and margin to However, to made positive us expectation. raise return revenue we our year. customer of impact confidence and are are our outlook Current the beginning see seeing provide the QX our fundamentals narrow experience we've

We our and we momentum processing outlook margin fuel XXXX. are as EBITDA reiterating QX to invest in marketing into

our planning revenue year, XXXX As we up EBITDA XXXX. as of margins similar flat to U.S. next net contemplates into early on process look in slightly growth

positive in we planning expect mind, of of U.S. in U.S., million, to CapEx positive now the to are revenue XX.X% cash and higher our the in we an to our $X million the the decline range EBITDA reiterating last a and adjusted of of X% higher million we range million gross in approximately the million of to outlook, outstanding margin of year annual points the to at addition, X% weighted on as the XXX remain midpoint, previous average With narrowing at midpoint over all at In needs XX.X%, free flow representing be $XX shares. basis revenue basic $X than XXX basis a quarter, X% fourth shares this approximately expect $XX

shares. approximately now there behind higher range the the QX full are year-over-year the quarters we XXX year to to outstanding points we million range the in $X.X $XXX.X pleased XX.X% challenging us, at average approximately midpoint, work QX XXX to to revenue For of margin have revenue, year EBITDA million, weighted approximately beat Positive the in in midpoint our and higher XX.X%, outlook. our million basic at the X.X% incorporating basis a shares but of U.S., improvement and midpoint. higher of million XXXX over to two million a closing, last know expect is of $XXX.X In $XX still of do. at adjusted X.X% of we the Gross

XXXX. We processing to our into power raise QX outlook that investing momentum are fuel still excited should revenue revenue-driving in while for

open year to as EBITDA We a dynamics. James adjusted please gross flow and free looking for questions. approaching are improving divestment with XX%, positive line. margins are ready and your now EU business the on the I forward making cash exiting progress are our U.S.-only Operator, and

Operator

We'll Instructions] Wells Ike Boruchow take our from question with [Operator first Fargo.

Irwin Boruchow

me. for So questions two

expectations. taking Just down U.S. some issues. the we were I obviously, were months There James, three think, ago,

XQ. you're expectations Now raising for

margin are you the that what you exactly obviously, margin next give that, U.S. with X%. underlying just that KPIs And of curious What got kind at? looking to EBITDA confidence? margins just X.X% the the noise into then So year, we've and around reported

there? puts how about Just of and rate think should takes we and margin the 'XX into run the EBITDA

James Reinhart

retention Yeah, learn think doing a QX. we Ike. Hey and some acknowledged we'd did around the turnaround Sure. work and QX think significant some call, difficult. as we acquisition I we of We were mistakes made and was those we the mistakes but had in last said mean, on on from we I I pretty

that said, years. And working QX. just think best continued was think had underlying quarter product throughout I retention improve we then in couple of on As it into improvements quarter the I the seeing experience, that a been on a we've of to has acquisition that top across materialized the think that I I -- with lot and of and do have had

and we've at and I more think they're so, look of over in like unclear of than not elections days business underlying that months great corner we XX us turned tomorrow the when feel ] still fundamentals top think the the I will is sound on rebounded. guess couple have just it what I macro the of fundamentals [ the ago. And business and And the the were we feeling think like they like really the I look underlying but despite next

that's into think just than specifically. number XXXX. sort some XXXX XXXX then and giving kind to Sean of I confidence and expect qualitatively be So that I'll better talk We just about of let us

I grow think to we faster. expect

expect by driven better better, be contribution think margin. really better I margins, gross to we EBITDA

I to think, focus I U.S. difficult think So the months really we've piece. couple a and of last the the business, the in on corner really is but quarter, turned other ability

And really attention turned a start U.S., results think EU has to we've can the the our we all been materialize. you think distraction those I I acknowledged. see to once So as of

I'll about Sean talk financials. let those So of some

Sean Sobers

a side went when IPO the public on we like of just go back I margin, financial think color about was it would contribution you if the we Yeah. talked it is add piece And to I improved we've we're I think, growth the to improvement, over then, we 'XX of you business. revenue go basically 'XX into to reinvest as bps. X,XXX it Since XX%. taking the And as from on about that increase

why you're versus seeing that's 'XX 'XX. to I think into as EBITDA slightly get rates So similar you better

Operator

& take from Needham our Bernie And we'll question Company. next McTernan from

Bernard McTernan

Maybe Great. talking about just business. to to moving start a U.S.-only

resources, love provide Is in color driving on where sense Chat, platform? some will to where to color and a it a be time investments of -- would how through trying just should of financials. the their any terms incremental incremental the Image follow-up, you of additional Search. to management I guys a any trying Style would buyers retention? spending allocating the get new get the Is sense of we new terms Just product that like or as initiatives AI be just can in then going. And increasing in Just how be these seeing flow basically terms

James Reinhart

back about Hi we the back our infrastructure, fundamentals had operating on think Bernie. so being and advantage advantage model, the competitive the improvements we're only, if and mean, I marketplace U.S. really we think go it's our business, think infrastructure. And the the the now being in features. doubling really product business, Yeah, sure. U.S. lot whether to across a European three I things in are those or our in spent you DCs before time I down data talking of we I AI as innovation our Yeah,

team. that see QX our I focused team, really the product the the the think U.S. team, you really And across on the I been attention of in of started think to all fruits finance back has ops

business cash the of had time. was to a over do as generate the of to I how the the without can perspective, we from U.S. think a consumption progress there's of in faster, I that of a because optimism past without But now lot allocation we okay, in didn't of, the over make we resource I challenges invest think challenging more to deeply few think and still EU to overhead, grow the feel business. And freedom margin And one drag contribution the faster. get we I was feeling EU well, think freeing the distraction now some business U.S. manage business, things of there's that the the that quarters so

the through that's what growth resources think into -- we're reflects the as see that from declaring us dollars. we EBITDA is over next the should really get I incremental driving you think quarters is victory why So U.S. driving in not EBITDA and -- few XXXX I

we're business, in I the on and which think fundamentals is operations. focused growth really underlying marketing the of

about look, and question its up your think impact, for and I down As it's the AI funnel.

to tagging, provide So from I Meta. image an provide I think that or on better AI ad and photography, to we're tech targeting, think using whether we're better Google using

think power once to our more helping the on customers of they the new get want product search is customers find I platform, quickly. items

use them just image are it's I giving really them. And our then and to that's something confidence search results able attractive remarketing that retargeting the think piece, the being technology. to

search. that's If that out ability just you here's say, using find to an item an hey, one item that's like visual sold the our

So think, I a at customer little customer have and few drive conversion. all things, to adoption bps time those added up a

So think I better. And think you'll as into be we and I of XXXX. is going product to see the more get fundamentally, that more

Operator

We'll Carden with question from next take Dylan Blair. William our

Dylan Carden

Just quarter you of Difficulty] that efficiency? into next there, big invest of A and acquisition marketing year, you of speaking including you've you're sort I marketing? the some you kind this on Can nice item guess little buyer [Technical improvement speak third decline of had and expect retention. touched in sort piece but bit item, Difficulty]. just to the in dollar more would maybe on line a that to on to And it [Technical kind year, of

James Reinhart

I I have to improved. And yeah, strong I have the CACs right, that I thanks I LTVs and our mean, why been and year-over-year. think marketing -- our a look, ratios had why -- that less bit little think with mean, we think a or quarter same the that great roughly acquisition speaks LTV-to-CAC you're for in Dylan, was pointing QX, Hey out.

unlock the the way approach I some to team going acquisition, it think in lessons really fresh think we QX. So again, way were to we QX the going were think delivered thinking retention. And the I were that did approach I in painful, around but

us we a into improve not playbook, rocky to have And QX, gives that as it think despite I of in the to acquire into types of spend want Presidential to so to confidence customers. we Dylan, done in year, take has I we think get dollars continue into QX marketing those sort I on it, same efficiency to a XXXX just upon And and continue but side to think if team macro challenges. we've and can a job the had election great despite QX the

And so combine as you get you with some opportunity. And to into 'XX marketing investments should the merchandising. without see that, strong we need

We ThredUp, Merchandising product I the have the kind Head is team operations to of the And work will think we're a new at the of experience improve continuing who really side. improve on operations doing.

things confidence what's things all us year. Dylan the marketing that that's you things XXX-degree line And think and can little work measurements, harder. good all out are the some And the I like photos happen. giving automated think up these we when as together, I help dollars So really close this

Dylan Carden

to the fourth XX%, be And that's quarter, the for still XX% Europe it, [indiscernible] just clear, correct? in revenue guide

Sean Sobers

given U.S. well -- consolidated guidance as guidance, We've the standalone Yeah, the the as too. both yeah. Europe total you as

well So press the in release supplemental as that the financials. you see as can

Dylan Carden

thinking I at there? invested little you And that deceleration explain can Europe, through -- looking kind your reasons numbers, somewhat And for bit? in staying those you guess, the kind of the a I of walk guess can

James Reinhart

in some much is to this that mean, which had They're as supply the degree, their I some margins, lower of by near-term to think going I to consignment. design. transition they No, is, reduce Yeah. reducing revenue

what I this So is of we expected. think kind

on business should getting be I through the So seen it I you've But shrink, you've think the in little seen But well to they're designing very way still point successful. that the out, and going months near-term, designed while. XX-plus It's transition. be way dollars a revenue just to in they'll they're taken EBITDA their run. the shrink. assume

Sean Sobers

are deploy the I we're estimates want Yeah. But anything Sean's to U.S. to the U.S. I in the And really think consolidators a investors to business, dollars. And team we underway. Florin great be because just of get down per turnaround really the just and kind But the guidance and we've guys really that coming and for QX on by Dylan, the really rightsizing comments I in has to I and didn't where those raising just job And I'd focus I Europe down the right? add, want of really, here. design. community mean, done We're be and successful. clear, the translation, is will think business, been focused U.S. think lost think what on doing I

Operator

I'll questions further no any are there program speakers the on And our line. the return remarks. to for closing

James Reinhart

you to We their for forward in next teammates Well, to it's and our QX but out thank page been turn March. great see and next everyone, look momentum, I posted all earnings for work exciting moments, coming past we the we the difficult to of all know at thank share the hard progress call and quarter to ThredUp at call. news the what's over Really joining you, kind want the keeping and on quarter. of our it's really as the this to positive able feel be sort of confidence the we

thanks. So

Operator

may today's Thank program. conclude does and you your for This now participation you disconnect.

ThredUp (TDUP) 4 Nov 242024 Q3 Earnings call transcript