ThredUp Inc.

Ladies and gentlemen, thank you for your patience and holding and welcome to the ThredUP first quarter 2021 earnings call. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask an audio question. It is now my pleasure to introduce today's first presenter, Ms. Lana Adair.

Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's first quarter 2021 financial results and our first earnings call as a public company. With us are James Reinhart, ThredUp's chief executive officer and co-founder, and Sean Sobers, the company's chief financial officer. We posted a press release and supplemental financial information on our investor website at ir.thredup.com. This call is also being webcast on our investor relations website, and a replay of this call will be available on the website shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call, including but not limited to statements regarding guidance and future financial performance, market demand, growth prospects, business strategies, and plans. These forward-looking statements involve known and unknown risks and uncertainties, and actual results could differ materially. Words such as anticipate, believe, estimate, and expect, as well as similar expressions, are intended to identify forward-looking statements. You can find more information about these risks, uncertainties, and other factors that could affect operating results in our SEC filings, earnings press release, and supplemental information posted on our IR website. In addition, during the call, we will present certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our earnings release. Now, I'd like to turn the call over to James Reinhart.

Good afternoon, everyone. Thank you for joining ThredUp's first quarter 2021 earnings call. I'm James Reinhart, co-founder and CEO. With our IPO on March 26th, ThredUp entered a new chapter in our company's history, and we're excited to share our results in this first earnings call. This most recent quarter, we achieved record revenue, record gross profits, record gross margins, and record active buyers. Given the strong growth we observed in Q1 2020 prior to the onset of the pandemic, we feel like the growth metrics this quarter are an indicator of the reacceleration in our business, improving macro conditions, and the momentum in the broader resale category. Our first quarter 2021 results were better than expected, and both internal and external factors played a role. We continue to benefit from ongoing investments in our platform, our growing and dedicated base of active buyers and sellers, strong unit-level economics, and expanding competitive advantages in operations. This quarter, we also benefited from two rounds of government stimulus that helped buoy the American consumer. And while we expect the stimulus checks are over, we believe shifting consumer behavior during the pandemic will create long-term tailwinds for our business and for the resale industry at large. Because this is our first earnings announcement, and many of you might be new to ThredUp's story, I'd like to take a step back and refresh you with our mission and vision. The idea for ThredUp came to me in 2009 when I tried to sell some of my clothing at a local consignment store. Every item was rejected, and that was shocking to me because I knew my hardly worn clothes must be worth something to someone. I realized then that the selling of clothes was a ton of work, and much of what we all end up donating ends up in landfills. I just thought there had to be a better way. And so my co-founders and I set out to transform the resale industry with a mission to inspire a new generation of consumers to think secondhand first. This transformation is well underway and ThredUP is well positioned to capture the growth in this sector. As a reminder, according to independent data provider Global Data, the resale industry is expected to grow 25 times faster than traditional retail over the next few years. As it becomes easier for consumers to sell their clothing, we expect the industry's growth will be driven by a surge of new secondhand products coming online. And we believe that surge will create opportunities for more and more customers to find great secondhand product online. In Global Data's 2020 research, they found that two out of three consumers reported now being comfortable with purchasing secondhand clothing. We expect to be an ongoing beneficiary of people coming into this market for the first time. Market demand is driven by attractive demographics, including millennial and Gen Z buyers who now value sustainability more than ever, as well as all consumers continuing to prioritize value. Our team wakes up every day working hard to deliver great brands at great prices, but importantly, in a sustainable way. Not only are we inspired to build a great business, we are doing good in the world. Given we believe there is massive opportunity in this market, We have been building a differentiated and defensible operating platform to enable resale at scale. I thought I would spend a moment here detailing the key differentiation in our model and how we think about our strategy over time. If you listen to these calls long enough, you'll hear me talk again and again about our strategy and our investments to deepen our moat and widen our cam. I am a deep believer, and my team, they're deep believers, that good strategy is key to building lasting advantages over time. So here are the three elements I think you should take away. First, it's all about supply. We've never spent a single dollar directly acquiring sellers, and we expect that to continue. We are constantly working to improve the consumer experience for sellers, making our signature clean-out kits available online and offline through our own website, or those of our resale as a service partners. We are also accelerating processing capacity to reduce wait times and constantly evaluating how to pay fairly for the clothing we can resell. Since the peak of our bag backlog in Q3 2020, we've reduced processing wait times by more than 50% and we are well on our way towards our stated goal of two to three week processing time by the end of the year. Given we estimate that there are potentially a billion, that's with a B, billion clean-out kits out there in the U.S. every year, and that we processed just a million last year, we are confident in a long-term supply opportunity for ThredUP. Second, we are relentlessly investing in the technology and software that powers our managed marketplace infrastructure. Our single-skew logistics technology and distributed processing allows us to ingest and make available large amounts of secondhand clothing, each undergoing a rigorous 12-point quality inspection. We've processed over 100 million items to date, saving our customers more than $3.3 billion off of estimated retail price and displacing 1 billion pounds of CO2. But to be honest, we aren't thinking about the next 100 million items. We're thinking about the next billion items. We're building the backbone for resale on the internet. 35,000 brands across 100 categories, and our goal is to power a disproportionate part of this industry over time. Our plans for our next distribution center are well underway, and we expect it to come online in mid-2022. We'll have more to share on a future call, but keep in mind that every facility we build tends to be larger and more automated than our previous facilities. Size and automation translates into increased revenue capacity and higher operating margins. Third and final here is that our proprietary resell data makes us smarter every day. Each day we ingest millions of data points on items that we process, items that we sell, items we reject, items that are favorited, items added to cart, removed from cart, returned, et cetera. This vast trove of data combined with the algorithms and the models we've built that sit on top of that data help us improve our acceptance, merchandising, photography, pricing, and marketing capabilities so that we can consistently grow our active buyers, expand margins, and drive increased sell-through. And I think as you see from our results, this data science work is one of the reasons that has allowed us to expand margins and add active buyers in our most recent quarter at a record clip. Keep in mind that a key advantage of a managed marketplace like Dredup is that we can leverage our data across the buying and selling experience, adjusting prices and payouts, incentives and fees, to consistently drive sell-through, margins, and growth in our business. These three investments, unlocking supply, building infrastructure, and leveraging our proprietary resale data, have positioned us well to continue serving our buyers and sellers, but also to power resale for some of the world's leading fashion brands and retailers via our resale as a service platform. We're still in the early days of our RAS model and our brand partner strategy, but we see opportunity for growth and meaningful high margin revenue over time. We envision hundreds, even thousands of brands having dedicated resale strategies powered by ThredUP. And I'm looking forward to sharing more of that on a subsequent call. Hopefully that provides you with a high level reminder of the key competitive advantages in our business and the broader market in which we operate. We will continue to update you as we make investments in furtherance of this strategy. In closing, let me say that our team is cautiously optimistic about post-pandemic long-term trends. COVID-19 meaningfully impacted internal operations in the back half of 2020, so the further we get from that, the better our business continues to look. On the supply side, we believe that our convenient clean-out kit model is poised to benefit if people cycle out of pandemic clothing and refresh their looks, venture out of their homes to have fun and go to work, and have less free time on their hands. we are ready to meet this opportunity. On the demand side, as the weather continues to improve and opening restrictions ease, we still expect apparel budgets to remain constrained given the broader economic toll the pandemic has wrought. But what we do anticipate is that people will prioritize the value when shopping for seasonal apparel and heading back out into the world. We feel very well positioned for that consumer environment. And so with that, I'd like now to turn it over to Sean, our Chief Financial Officer, to walk you through the financials.