ThredUp Inc.

Good afternoon, ladies and gentlemen, and welcome to the ThreadUp Q3 2025 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on November 3, 2025. And I would now like to turn the conference over to Ms. Lauren Fash. Thank you. Please go ahead.

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

Good afternoon, everyone. I'm James Reinhart, CEO and co-founder of ThreadUp. Thank you for joining our third quarter 2025 earnings call. Today, we'll discuss financial results for Q3 and update our expectations for Q4 and fiscal year 2025. I will provide an update on our perspective about the consumer, discuss ongoing innovation in our AI-driven product experiences, and end with a reminder on our compounding competitive advantages in the growing resale market, specifically how we expect new product development will increase that advantage in 2026. I will then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our financials in more detail and provide some guideposts as we look ahead to 2026. We'll close out today's call with a question and answer session. First to the results. The third quarter was our strongest year-over-year growth in nearly four years, and the fourth quarter in a row of accelerating growth. Revenue growth accelerated to 34% year-over-year, gross margin was 79.4%, and adjusted EBITDA was 4.6%, all of which exceeded expectations. Once again, these results were driven by exceptional customer growth in orders in our business. I said this last quarter, and I'm pleased to say it again, We acquired more new customers in the third quarter than at any other time in our history, with new buyer acquisition up 54% year over year. Active buyers were up 26% year over year, and orders were up 37% year over year. Our approach in 2025 and into 2026 is straightforward. Maintain our gross margin efficiency, gradually expand the bottom line, but largely reinvest incremental dollars we generate back into growing our marketplace through product improvements, marketing spend, and long-term innovation. Turning to the macro, we talked about the impact of tariffs at some length on our last two calls, so I will not belabor those points here. Overall, we believe the effect of tariffs and the closure of the de minimis loophole have been a boost to acquiring new customers and could be a structural tailwind going forward as prices rise in the apparel market. Our strategy is to take some price but largely improve our competitiveness on a relative basis. At the same time, we remain cautious on the state of the broader American consumer and believe that price and value will be of utmost importance this holiday season. While this could theoretically be beneficial to the secondhand market by enhancing the value of comparative offerings, we think a reduction in overall holiday spending or a wallet share shift to new gifts is something we'll have to navigate adeptly. Turn to the product and customer experience. While many of our customer-facing features over the past 18 months specifically drove improvements in our funnel and margins, the third quarter was best characterized as a consolidation and clarification of our mission, vision, and value proposition. In late September, we launched a fully rebranded experience on ThredUP. The unifying theme is, quote, fashion meet forever, which speaks to our ambitions of building a more emotional long-term relationship with our customers. ThredUP has been a brand mostly defined by logic and quantitative rigor over the past decade. And while we will never abandon that part of our DNA, we know shopping is inherently emotional. And by tapping into our customers' hearts through storytelling and cultural relevance, we can elevate both our brand and secondhand shopping to new heights. We saw the green shoots of this in October, as it was the best month for new customer acquisition in our history, up 81% year over year. driven primarily by historically low acquisition costs. Of course, as a customer-assessed company, we did not miss the chance to launch our rebrand alongside two powerful new product features, the daily edit and the trend report. With the daily edit, every customer will receive a newly personalized feed of 100 items that are refreshed daily. This was a major technical advancement in our personalization capabilities, powered by AI models we trained in-house that can generate real-time user and item embeddings, allowing us to better understand each customer's style preferences and serve them a fresh, curated feed every day. The trend report is using AI to combine macro and social trends alongside internal search and customer trends, then generating imagery and style feeds in real time that help customers shop what's on trend. Now let me turn to selling on ThredUP. Since the founding of ThredUP more than 10 years ago, we've maniacally focused on building competitive advantage in our supply chain. Our investments in infrastructure and data have been central to the success of our marketplace, expanding ways we can process clothing at ever-increasing levels of scale and profit. Our investment in building a novel, dynamic, and robust data layer for secondhand clothing has enabled us to develop additional ways to compete in the evolving resale market. The first new supply growth vector we built on top of this core infrastructure was our resale as a service business, or RAS, which now powers resale for dozens of brands. This month, we are launching RAS programs for New York & Co., as well as Cotopaxi, a brand that is near and dear to my heart as someone who loves the outdoors. It's the first large brand to launch after our RAS strategy shift six months ago, and it's just one of many expected to come over the next few months. Our Code Epoxy launch is a showcase of the suite of services we can power for brands, including take-back programs and resale shops, as well as cash-out programs for customer acquisition and bulk consignment for inventory management. Earlier this year, we launched our second supply growth vector, the Premium Kit. With virtually no marketing investment, this product was an instant hit with sellers and has grown to be more than 20% of the supply in our marketplace. Premium Kits deliver superior monetization for sellers access to in-demand products for buyers, and accretive margins to ThredUp compared to our regular kits. Today, I'm excited to announce the third vector of growth, which is the launch of direct selling on ThredUp, often known as peer-to-peer. While currently in a closed beta, given the way direct selling is expected to impact buying and selling on ThredUp, I thought it important to detail in advance our approach to serving this large part of the resale market. We have been working on the launch of direct selling on ThredUP for more than a year, but I personally have been working on this strategy for many years. I felt strongly there was an opportunity to serve this market as resale became more mainstream, mobile technology matured, and our operations hit a level of scale and margin where we could build a superior, differentiated customer experience. That time is now, day one of direct selling. So let me explain. The problem for sellers in the peer-to-peer market is the friction that still exists in listing, pricing, fulfilling, and servicing the items available for sale. Many items don't sell. Those that do don't always fetch the right price, and post-purchase management of returns and seller reputation becomes an ongoing headache. The result is that most casual sellers participate for a while, or they mix and match across peer-to-peer platforms, but they never love the experience. While public data is hard to find, our longitudinal research suggested that the majority of items listed on current peer-to-peer platforms never actually sell. For buyers on peer-to-peer marketplaces, it's very much buyer beware. A lack of quality merchandising and curation, low trust, or buyer recourse in the event of a bad transaction keep many buyers from shopping more than periodically. For platforms, the incentives are to race to the bottom on fees to acquire sellers, and to encourage as many listings as possible. This leads to rampant product pollution, limited curation, and to flea market quality that leads to short-term success but long-term value erosion. With weak network effects and limited moats, a new peer-to-peer marketplace pops up every five to seven years, skimming buyers and sellers off the top with the renewed promise of that it'll be better this time. Join us over here. The fact is that this is a big market, and we believe it's mostly broken. Against that backdrop, here's our new approach. First, our marketplace will focus on casual sellers, the exceptionally large, long tail of sellers who consistently get crowded out. The number of items a seller can list will be based on their selling success. Flooding a site with low-quality items will not be an option. Second, sellers will be independently verified so that buyers will be able to shop with total confidence. We plan to mitigate the potential for fraud at every opportunity. Sellers will not pay fees to list items. ThredUP will provide premium listing, merchandising, and photography tools that make the seller's life easier. We believe if done right, that suite of tools will be worth paying for over time. Finally, and unique to ThredUP, sellers will have a seamless experience to choose between direct selling and the clean-out kit to meet their needs at any point in their selling journey. ThredUP is now a one-stop shop for most apparel selling needs. Turning to buyers, we are excited to solve the most important parts of buyer friction. First, returns. We believe the single biggest challenge with the peer-to-peer model is seamless returns. Leveraging our decade-long investments in our supply chain and infrastructure, we can now use this as an option to buyers, given our power to resell returned items in our marketplace. Second, trust. With every seller vetted and ThredUp's brand and customer service standing behind our sellers, Buyers can shop with confidence. Third, we will bring standards of merchandising, listing quality, and curation to the peer-to-peer buying experience. We will bring a new wave of merchandise to buyers, but in an organized and thoughtful way, backed by the generative AI products we've launched over the past year. And we will be methodical in our rollout, opting for quality and long-term defensibility over quantity. We acknowledge we're in the early days of this new vector for growth. but we are excited to bring our experience, expertise, and unique assets to solve this large customer opportunity. We believe the supply and demand we can unlock in this effort will further accelerate our flywheel for years to come, and that this launch couldn't be more timely given the economic uncertainty present for many American households. Finally, before I turn it over to Sean, let me place some of the work in Q3 into the context of our longer-term strategy. On our last call, I discussed in detail the three important competitive advantages we've been building. First, our operational infrastructure and supply chain continues to prove a defensible asset. Having invested more than $400 million in infrastructure, software, and data to invent how a managed marketplace can work at scale, we are now capable of building customer-facing experiences more rapidly on top of it. Our RAS business, our premium kit, and now the next generation of direct selling are examples of business lines built on top of this core infrastructure. Second, we believe the investments in a unique proprietary data layer have helped us build a direct listing beta product that can work better for sellers while providing endless ways for buyers to shop well-curated merchandise. Third, marketplaces are hard to build and sustain, but when you get the flywheels going, they are very hard to stop. Our marketplace has succeeded over prior years, primarily through building a quality transactional experience. By updating and elevating our brand, we have the potential to deepen customer attachment and stickiness, making ThredUp a household name for years to come. In expanding ways that customers buy and sell on ThredUp with the launch of direct listings, we believe that over time we can increase our wallet share as well as widen the moat in our marketplace. With that, I'll turn it over to Sean to talk through the financials in more detail.