ThredUp Inc.

Please press star zero for the operator. This call is being recorded on August 4, 2025. And I would now like to turn the conference over to Ms. Lauren Frash. Thank you. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's second quarter 2025 financial results. With me are James Reinhart, ThredUp CEO and co-founder, and Sean Sober, CSO. We posted our press release and supplemental financial information on our investor relations website at ir.thredUP.com. This call is being webcast on our IR website, and a replay of this call will be available on the site shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, supplemental financial information, and our Forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and the supplemental financial information, which are distributed and available to the public through our investor relations website located at ir.thredUP.com. Now, I'd like to turn the call over to James.

Good afternoon, everyone. I'm James Reinhart, CEO and co-founder of ThredUP. Thank you for joining our second quarter 2025 earnings call. Today, we'll discuss financial results for Q2 and update our expectations for Q3, Q4, and fiscal year 2025. I will provide an update on our thinking about the macro environment, discuss ongoing innovation in our AI-driven product experiences, and end with a refresher on our compounding competitive advantages in the growing resale market. I'll then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our financials in more detail. As always, we'll close out today's call with a question and answer session. First to the results. The second quarter was strong. Revenue growth accelerated to 16.4% year-over-year. Gross margin landed at 79.5%, and adjusted EBITDA was 3.9%, all of which exceeded our own internal expectations. These results were driven by the underlying fundamentals of strong customer growth and orders in our business. We acquired more new customers in the second quarter than at any other time in our history, with new buyer acquisition up 74% year over year. Active buyers were up 17% year over year, and orders were up 21% year over year. Again, our approach in 2025 is simple. maintain our gross margin and bottom line efficiency, and reinvest incremental dollars we generate back into growing new buyers and sellers in our marketplace. We are continuing to do this with success in the third quarter and believe this approach creates the greatest long-term shareholder value. Turning to the macro, we talked about the impact of tariffs at some length on our last call. Let me reiterate a few points that remain relevant. First, and by far the most impactful to ThredUP, is the closure of the de minimis loophole. Though the full impact is still uncertain, we believe the closure of the de minimis exemption is likely to cost higher prices for ultra-fast fashion goods and to reduce production volumes, both of which could continue to be positives for ThredUp. Second, the increase in the price of new apparel that may result from broad-based tariffs could enhance the comparative value proposition for consumers who are shopping for value on ThredUp. Third, ad markets remain dynamic. As we predicted, the short-term gains we experienced from companies like Shein and Timu aggressively pulling back lasted from mid-April to mid-May before they began spending again. Regardless of how advertising rates trend, we're continuing to see efficiency throughout our funnel, driven by improvements in the startup experience. Let's turn to that. We are now more than 18 months into our AI-led product journey, and positive results continue to compound. It's not as though any one feature is driving the outcome. but rather the whole set of ways that shoppers can now engage on ThredUP is improving. While we've shared some of the individual feature results previously, including visual search, style chat, image search, shop similar, I thought it might be useful to review how the aggregate nature of these improvements is rolling up to create better business fundamentals. Visitor to sign-up rates on ThredUP are up 30% year over year, and sign-up to purchase rate is up 60%. Combined, this is an 18% improvement in how visitors turn into ThredUp customers. Typically, when you accelerate marketing spend, as we have, and drive more traffic, you get degradation in the funnel. But the work we've done has created the opposite outcome. This is the flywheel we will continue to lean into. And we continue to invest in new ways to leverage AI technology in the prompt experiences. This quarter, we debuted our first AI-generated images on roughly 100,000 individual product pages that showed how an item might look on a model. What fashion brands who make products can do easily, but we can't given our massive assortment of secondhand SKUs. The results were fascinating. For existing heavy-thread-up buyers, AI model images had modest conversion impact. But for those new to shopping secondhand, it was a big deal. Customer satisfaction of AI model photos has been on par with our very best features. We think this is because this is the way the new customers are used to shopping elsewhere. We have taken this feedback and are retooling how the images are created and displayed at further scale and expect to be back in market in the coming quarters. Again, this is in service of our goal to make the experience of shopping secondhand virtually indistinguishable from shopping new products. Our social commerce work continues to delight customers with easy ways to shop their inspiration from Instagram and other social media. Our new feature is live on the ThredUP iOS app, and we expect to roll out to more platforms later this year. We believe that enabling customers to seamlessly shop their style inspiration from influencers and creators is a meaningful opportunity for us to drive social proof and capture wallet share. We plan to continue to invest in engineering, design, and data science resources over multiple cycles to nail this experience all the way through the product funnel. Turning to the seller side of our marketplace, we continue to make substantial improvements across the seller experience with our ambition to make ThredUP the default place to sell secondhand clothing online. Given the top line growth in Q2 and the expectations for Q3, It will come as no surprise that we set all-time records in requests, receipts, and clean-out kits processed. Our strategy involves expanding the number of ways customers can sell and the frequency with which they sell on ThredUP. Premium service kits with service fees up to $34.99 continue to grow as a mix of kits received, growing 44% quarter-over-quarter. We are particularly excited by the mix of new sellers joining ThredUP as premium service customers. Roughly a quarter of premium kits are coming from sellers who have never previously sold on ThredUp. Earlier this year, we launched the ability to resell items when you were returning a product you bought on ThredUp, and that volume has increased more than 4x quarter over quarter, despite no measurable increase in our overall buyer return rates. We are leveraging our return supply chain to lower selling costs, but more importantly, making it easier for buyers to become sellers on ThredUp. Let me provide a brief update on Resell as a Service, or RAS. Our change to an open source model in our RAS strategy is in the earliest stages, and we are seeing promising engagement from brands. We have renewed conversations with more than 60 apparel brands after the announcement of our new strategy. Again, we believe value for this ecosystem is created in the operations and technology layer to ingest secondhand items at scale and make them available for resale as efficiently as possible. Over the long term, as brand resale becomes more prevalent in the industry, we believe this ecosystem will benefit from a powerful, affordable, quote, universal e-commerce layer, akin to what Amazon Web Services has done for cloud or Shopify has done for small business. This can then enable any brand to do everything they need across the resale ecosystem. We will have more to share in the coming quarters as we launch new brands under this model. Before I turn it over to Sean, I want to reiterate three important competitive advantages in our model that are working together to drive the positive momentum you're seeing today. First, the operational infrastructure and supply chain we have invested in over many years is working as well as ever. We've invested over $400 million in infrastructure, software, and data to invent how a managed marketplace can work at scale. From the humble clean-out kit to advanced photography technology, from inbound automation of item identification and measurements to the outbound carousel automation for shipping out unique apparel SKUs tens of thousands of times a day. Our tailored, purpose-built supply chain is unique, and we believe that replicating our success would take many years, significant capital investment, and the creation of a great deal of new intellectual property. Second, The technology investments we've made over many years to build a proprietary resale database and data expertise have enabled us to take advantage of the leaps in AI technology you're seeing today. It is precisely the hundreds of millions of pieces of clothing that we've processed and the vast stores of data about those items that has helped us leverage AI so quickly and expertly to sell more items to better margins. Third, as we all know, marketplaces are hard to build and sustain. But when you get the flywheels going, they are very hard to stop. Our innovations on the buyer and seller sides are helping us delight both sets of customers, expanding the addressable opportunity while deepening engagement and capturing wallet share. I have said multiple times that ThredUP's marketplace should uniquely benefit from advances in AI, and I believe we are seeing that come to fruition so far this year. As a parting thought, if you zoom out and ask how to compete with ThredUP over time, we think you will run into a lot more questions than answers. What will it cost to acquire millions of secondhand buyers and sellers? How will you acquire, process, and fulfill the broadest selection of quality secondhand apparel anywhere? Can you price the apparel attractively while maintaining healthy and sustainable unit economics, a feed-only possible through advanced automation infrastructure? Will you be able to compete with a well-known and trusted brand backed by superior technology infrastructure and a decade-plus head start? These are hard questions to answer, especially while threat up is accelerating. In sum, we believe the conditions for our future success are very bright, and we are going to be relentless in executing our playbook. With that, I'll turn it over to Sean to talk the financials in more detail.