Summary of ThredUp Inc. Conference Call Company Overview - **Company**: ThredUp Inc. - **Industry**: Online resale and secondhand retail Key Points and Arguments Business Transformation - ThredUp underwent a significant transformation in the U.S. business, moving away from a struggling European segment, which was dragging down consolidated results. The decision to focus solely on the U.S. market was made in August of the previous year, leading to improved performance in subsequent quarters [2][3]. Revenue Growth - The company reported a revenue growth of 10% in Q4 of the previous year and projected a 25% growth for Q3 of the current year [4][5]. - New customer growth was remarkable, with a 95% increase year-over-year in Q1 and a 75% increase in Q2 [43]. AI and Product Investments - ThredUp has made significant investments in AI, which has improved product cataloging and customer experience. The company transitioned from tagging 6-7 attributes per item to over 100 attributes using AI, resulting in an 18% year-over-year increase in new customer conversion rates [25][26]. - AI-driven features include improved search capabilities, similar search options, and social commerce initiatives that integrate with platforms like Pinterest and Instagram [28][29]. Seller Experience Enhancements - The introduction of a premium selling kit priced at $34.99 has been successful, accounting for over 10% of seller expenses. This kit offers enhanced services such as longer consignment windows and better price control [10][11]. - The psychology of pricing has been leveraged to encourage sellers to submit higher-quality items, as they are more likely to include valuable items when paying a premium fee [16]. Customer Acquisition Costs (CAC) and Payback Period - Customer acquisition costs have decreased, leading to a payback period of well under a year. This allows for increased marketing spend to further accelerate growth [55]. - The marketing budget has remained stable at 18-20% of sales, with expectations to maintain this level while focusing on organic growth opportunities in the long term [56]. Supply Chain and Processing Efficiency - The processing backlog for regular bags is currently 4-5 weeks, with premium kits processed within a week. This efficiency has improved customer satisfaction regarding processing times [62]. - The existing distribution network can support approximately $500 million in revenue, with plans for future expansions based on growth [65]. Financial Discipline and Margin Management - ThredUp aims to balance growth with margin expansion, committing to EBITDA guidance while reinvesting incremental revenue into growth initiatives [83][84]. - The company anticipates steady industry growth in the low double digits, which aligns with its growth strategy and free cash flow generation [87]. Market Trends and Customer Behavior - The current customer base is increasingly composed of resale natives who are familiar with secondhand shopping, leading to better lifetime values and retention rates [43][44]. - The normalization of secondhand shopping is seen as a potential tailwind for the industry, with a shift in consumer perception similar to the acceptance of electric vehicles [46]. Additional Important Insights - The company is focused on leveraging technology and innovation to enhance operational efficiency and customer experience, with ongoing discussions about future capital expenditures to support growth [81]. - ThredUp's strategy includes a commitment to maintaining a positive free cash flow while investing in new technologies and infrastructure to stay ahead in the competitive landscape [76][84].

Core Insights - Optimist Fund reported its strongest investment performance in Q2 2025, achieving a return of 39.2%, significantly outperforming its benchmark which returned 11.3% [1] Company Overview: ThredUp Inc. (NASDAQ:TDUP) - ThredUp Inc. is an online resale platform focused on secondhand apparel, shoes, and accessories, with a market capitalization of $1.33 billion as of September 15, 2025 [2] - The stock experienced a remarkable one-year return of 1,062.54% and a one-month return of 1.98% [2] Financial Performance - ThredUp Inc. reported a revenue growth of 16.4% year-over-year, reaching $77.7 million in Q2 2025 [4] - The company exceeded expectations in Q1 2025 and raised its guidance for Q2 and the full year, indicating a positive outlook for future performance [3] Investment Sentiment - ThredUp Inc. was held by 25 hedge fund portfolios at the end of Q2 2025, an increase from 13 in the previous quarter, reflecting growing interest among institutional investors [4] - Despite its strong performance, some analysts suggest that certain AI stocks may offer greater upside potential with less downside risk compared to ThredUp Inc. [4]

Group 1 - The excitement of finding valuable items at garage sales parallels the potential in small-cap stocks, highlighting the investment opportunities in this sector [1] - Gary Alexander, with extensive experience in technology and startups, contributes insights on industry trends and has been active on Seeking Alpha since 2017 [1] Group 2 - No current stock or derivative positions are held by the analyst, but there is potential for initiating a long position in ThredUp (TDUP) within the next 72 hours [2] - The article reflects the author's personal opinions and is not influenced by compensation from any company mentioned [2]

Group 1 - The excitement of finding valuable items at garage sales parallels the potential in small-cap stocks, highlighting the investment opportunities in this sector [1] - Gary Alexander, with extensive experience in technology and startups, contributes insights on industry trends and has been active on Seeking Alpha since 2017 [1] Group 2 - No current stock or derivative positions are held by the analyst, but there is potential for initiating a long position in ThredUp (TDUP) within the next 72 hours [2]

Company Overview - ThredUp Inc. is one of the largest online resale platforms for apparel, shoes, and accessories, transforming resale with technology and a mission to inspire the world to think secondhand first [2] - The company has processed over 200 million unique secondhand items from 60,000 brands across 100 categories, promoting a more sustainable future for the fashion industry [2] Upcoming Events - CEO James Reinhart and CFO Sean Sobers will participate in the 8th Annual Wells Fargo Consumer Conference on September 17, 2025, from 9:30 AM to 10:05 AM PT [1] - The event will be webcast live on ThredUp's investor website, with a replay available for 30 days following the event [1] Business Model - ThredUp's proprietary operating platform includes distributed processing infrastructure, proprietary software, systems, and data science expertise, supporting its managed marketplace [2] - The company offers a Resale-as-a-Service model, allowing leading brands and retailers to leverage its platform for customizable and scalable resale experiences [2] Consumer Benefits - Sellers benefit from an easy process to clean out their closets and unlock value, either for themselves or for charity, while contributing to environmental sustainability [2] - Buyers can shop for premium and luxury brands at discounts of up to 90% off estimated retail prices [2]

Group 1 - The global trade war is intensifying, with significant developments occurring this week, particularly the United States ending the de minimis rule for small shipments [1] - Observing megatrends can provide insights into societal advancements and potential investment opportunities, despite the challenges in identifying them [1] - The importance of fundamentals, quality of leadership, and product pipeline is emphasized for uncovering investment opportunities [1] Group 2 - The focus has shifted towards marketing and business strategy for medium-sized companies and startups, highlighting the relevance of these aspects in the current market [1] - The analyst has experience in international development and evaluating startups and emerging technologies, indicating a broad understanding of various industries [1]

Group 1 - The article focuses on value investing opportunities in Asia, particularly in Hong Kong, targeting stocks with significant discrepancies between market price and intrinsic value [1] - The investment strategy emphasizes deep value balance sheet bargains, such as net cash stocks and low price-to-book (P/B) ratio stocks, as well as wide moat stocks that represent high-quality businesses [1] - The author provides a range of watch lists with monthly updates to assist investors in identifying potential investment opportunities [1]

Core Insights - ThredUp reported Q2 2025 GAAP revenue of $77.7 million, exceeding analyst expectations by over $3.9 million, while still posting a net loss [1][5] - The company achieved a record increase in active buyers, with a year-over-year growth of 74%, marking the best performance in its history [6] Financial Performance - Q2 2025 GAAP revenue was $77.7 million, a 16.4% increase from $66.7 million in Q2 2024 [2] - GAAP EPS improved to $(0.04) from $(0.09) in Q2 2024 [2] - Gross margin increased to 79.5%, up from 78.8% year-over-year [2] - Adjusted EBITDA from continuing operations doubled to $3.0 million, compared to $1.5 million in Q2 2024 [2][5] - The net loss from continuing operations narrowed to $5.2 million from $9.4 million in Q2 2024 [5] Operational Highlights - Active buyers reached 1.47 million, with orders processed rising to 1.54 million, a 21% increase [6] - The company invested in AI-powered product improvements, leading to a 64% higher conversion rate for sessions using the "shop similar" feature [7] - ThredUp's scalable infrastructure processes over 100,000 unique items daily, supporting efficient operations [10] Strategic Focus - The company is focused on scaling operations and enhancing its technology-enabled marketplace through its Resale-as-a-Service (RaaS) offering [4][8] - Management emphasized the importance of data-driven personalization and automation for long-term growth and profitability [4] Financial Position - ThredUp maintained positive non-GAAP free cash flow and ended the quarter with $56.2 million in cash, securities, and equivalents [9] - Total assets were $173.6 million as of June 30, 2025, with liabilities remaining steady [9] Future Guidance - Management raised revenue expectations for the full year to between $298.0 million and $302.0 million, up from previous estimates [11] - Q3 2025 revenue is projected to be in the range of $76.0 million to $78.0 million [11] - Full-year gross margin is expected to be in the 78% to 79% range, with an adjusted EBITDA margin forecast around 4.2% [11]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 totaled $77.7 million, representing a 16.4% year-over-year increase [23] - Gross margin was 79.5%, a 70 basis point increase compared to the same quarter last year [23] - Adjusted EBITDA was $3 million, or 3.9% of revenue, doubling from the previous year [24] Business Line Data and Key Metrics Changes - New buyer acquisition increased by 74% year-over-year, marking the highest number of new customers in the company's history [7][23] - Active buyers rose to 1.5 million, up 16.5% year-over-year, while orders increased by 20.8% to 1.5 million [23] Market Data and Key Metrics Changes - The company noted that the closure of the de minimis loophole could lead to higher prices for fast fashion goods, potentially benefiting ThredUP [10] - Advertising markets remain dynamic, with fluctuations in spending from competitors impacting customer acquisition [11][82] Company Strategy and Development Direction - The company aims to maintain gross margin and bottom-line efficiency while reinvesting in acquiring new buyers and sellers [8] - ThredUP is focusing on AI-driven product experiences to enhance customer engagement and conversion rates [12][20] - The strategy includes expanding the seller experience to make ThredUP the default platform for selling secondhand clothing online [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory despite potential macroeconomic uncertainties [42] - The company is optimistic about the long-term potential of the resale market, expecting significant growth in the coming years [99] Other Important Information - The company has invested over $400 million in infrastructure and technology to support its marketplace operations [19] - The introduction of AI-generated images on product pages has shown positive results, particularly for new customers [13][14] Q&A Session Summary Question: What drove the Q2 revenue outperformance and new buyer growth? - Management highlighted a combination of improved product experience, strong operations, and high-quality supply as key drivers [36] Question: Why is the Q4 revenue guidance conservative? - Management noted seasonal trends and uncertainties in the macro environment as reasons for a cautious outlook [41] Question: What factors contributed to the gross margin outperformance? - The growth in premium supply and a focus on customer experience were cited as contributing factors [47] Question: What are the demographics of new buyers? - Management indicated that new buyers resemble previous customers, with a large addressable market for secondhand shoppers [57] Question: What are the dynamics of customer acquisition costs? - Management noted that improved conversion rates have significantly impacted customer acquisition costs, allowing for more effective spending [100]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 totaled $77.7 million, representing a 16.4% year-over-year increase [23] - Gross margin was 79.5%, a 70 basis point increase compared to the same quarter last year [23] - Adjusted EBITDA was $3 million, or 3.9% of revenue, doubling from the previous year [24] Business Line Data and Key Metrics Changes - New buyer acquisition increased by 74% year-over-year, marking the highest number of new customers in the company's history [6][23] - Active buyers rose to 1.5 million, up 16.5% year-over-year, while orders increased by 20.8% to 1.5 million [23] Market Data and Key Metrics Changes - The closure of the de minimis loophole is expected to increase prices for ultrafast fashion goods, potentially benefiting the company [8] - The company noted a dynamic advertising market, with fluctuations in spending from competitors impacting customer acquisition [9] Company Strategy and Development Direction - The company aims to maintain gross margin and bottom line efficiency while reinvesting in acquiring new buyers and sellers [7] - Ongoing innovation in AI-driven product experiences is a key focus, with improvements in customer engagement and conversion rates [10][11] - The company is expanding its seller experience to make it the default platform for selling secondhand clothing online [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive momentum and growth potential, despite caution regarding the current consumer environment [25][27] - The company is optimistic about the long-term success of its resale as a service (RAS) strategy, with renewed conversations with over 60 apparel brands [17][59] Other Important Information - The company generated $800,000 in cash during Q2, ending the quarter with $56.2 million in cash and securities [25] - The company plans to maintain profitability expectations while focusing on growth and cash generation [27] Q&A Session Summary Question: What drove the Q2 revenue outperformance and new buyer growth? - Management highlighted a combination of improved product experience, strong operations, and high-quality supply as key drivers [34][35] Question: Why is the Q4 guidance conservative? - Management noted seasonal downshifts in resale and increased marketing rates as factors influencing the conservative guidance [41] Question: What are the dynamics behind gross margin performance? - The growth in premium supply drove average selling prices, while new customer acquisition typically requires higher incentives [47] Question: What are the demographics of new buyers? - New buyers resemble previous customers, with a significant addressable market for female secondhand shoppers in the US [54] Question: What are the challenges in the AI journey? - The complexity of managing a large catalog and ensuring effective product recommendations were noted as challenges [87] Question: What is the long-term outlook for new buyer growth rates? - Management expects continued growth in the addressable market, with significant potential for acquiring new customers [89]