Financial Data and Key Metrics Changes - Revenue for Q1 2022 reached $73 million, a 31% increase year-over-year, while gross profits grew 26% to a record $50 million [10] - Gross margins were reported at 69.1%, reflecting a 300 basis point improvement over Q4 2021 [10] - Adjusted EBITDA loss was $13 million, with a margin of 17.8% of revenue, compared to a loss of $9.1 million or 16.4% of revenue in Q1 2021 [41][42] Business Line Data and Key Metrics Changes - Consignment revenue increased by 6% year-over-year, while product revenue surged by 130% [38] - Active buyers rose by 33% to 1.7 million, and orders increased by 45% to 1.6 million [39] Market Data and Key Metrics Changes - The U.S. gross margins expanded to 74.1%, a 280 basis point increase from the same quarter last year [39] - The European business contributed to a consolidated gross margin of 69.1%, which was a 220 basis point decline year-over-year due to lower-margin operations [40] Company Strategy and Development Direction - The company is focused on long-term growth, investing in infrastructure and technology to support future revenue growth and widen its competitive moat [15][47] - ThredUp is expanding its Resale-As-A-Service (RaaS) platform, expecting to onboard approximately 40 brands by year-end [20] - The company is also building a new processing facility in Bulgaria to enhance its European operations and capture market share [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of rising consumer prices and inflation on consumer spending, noting a general softening across the market [11][12] - Despite near-term uncertainties, management remains confident in the long-term retail opportunity and the company's path to profitability [16][47] Other Important Information - The company is investing in four new facilities in 2022, which will significantly increase processing capacity [26][27] - The company is also focusing on improving its pricing and payout systems to expand margins and enhance customer acquisition [30] Q&A Session Summary Question: Revenue outlook and customer cohort pressures - Management noted no significant warning signs from customers but acknowledged a general softening in consumer behavior [56] Question: Freight component of guidance - Freight impact increased from an expected $6 million to $9 million year-over-year [57] Question: RaaS business potential - RaaS is currently small but has the potential to grow significantly with many enterprise clients expected [61] Question: Impact of macroeconomic conditions on consumer spending - Management indicated that while inflation is affecting consumer spending, resale may perform well as consumers trade down [62] Question: Marketing growth expectations - Marketing spend was moderated in Q1 due to processing constraints but is expected to increase in the back half of the year [75] Question: Inventory levels and concerns - Elevated inventory levels are primarily related to European operations, with no concerns about carryover in the U.S. [76] Question: Gross margin guidance increase - Gross margin guidance was raised due to improved shipment consolidation and automation [96]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for ThredUp Inc., including the balance sheets, statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity, and cash flows, prepared in accordance with GAAP for interim financial information [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $68.6 | $84.6 | | Marketable securities | $115.2 | $121.3 | | Inventory, net | $12.0 | $9.8 | | Total current assets | $208.4 | $228.4 | | Total assets | $361.0 | $360.8 | | Total current liabilities | $103.4 | $89.4 | | Total liabilities | $173.3 | $155.1 | | Total stockholders' equity | $187.7 | $205.7 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | YoY Change (%) | | :--------------- | :--------------------------------------------- | :--------------------------------------------- | :------------- | | Total revenue | $72.7 | $55.7 | 30.5% | | Gross profit | $50.2 | $39.7 | 26.5% | | Operating loss | $(20.6) | $(14.7) | -40.2% | | Net loss | $(20.7) | $(16.2) | -28.1% | | Net loss per share | $(0.21) | $(0.86) | 75.6% | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :---------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net loss | $(20.7) | $(16.2) | | Foreign currency translation adjustments | $(0.7) | — | | Unrealized loss on available-for-sale debt securities | $(1.0) | — | | Total comprehensive loss | $(22.4) | $(16.2) | [Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity) Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity | Metric | As of March 31, 2022 (in millions) | As of December 31, 2021 (in millions) | | :----------------------------------- | :---------------------------------- | :----------------------------------- | | Total Stockholders' Equity | $187.7 | $205.7 | | Net loss (Q1 2022) | $(20.7) | N/A | | Stock-based compensation (Q1 2022) | $3.6 | N/A | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash (used in) provided by operating activities | $(6.7) | $1.1 | | Net cash used in investing activities | $(7.9) | $(4.1) | | Net cash (used in) provided by financing activities | $(1.2) | $185.1 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(16.0) | $182.0 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the unaudited condensed consolidated financial statements, covering accounting policies, financial instruments, asset components, debt, equity, and commitments [1. Organization and Description of Business](index=11&type=section&id=1.%20Organization%20and%20Description%20of%20Business) - ThredUp Inc. is a large online resale platform for secondhand women's and kid's apparel, shoes, and accessories, with corporate offices and distribution/processing centers in the US and Bulgaria[31](index=31&type=chunk) [2. Significant Accounting Policies](index=11&type=section&id=2.%20Significant%20Accounting%20Policies) - Financial statements are prepared in accordance with GAAP, requiring management estimates for items like asset useful lives, allowances, inventory valuation, and stock-based compensation[32](index=32&type=chunk)[33](index=33&type=chunk) - The Company's loyalty program liability was **$3.4 million** as of March 31, 2022, down from **$4.0 million** as of December 31, 2021[37](index=37&type=chunk) - Revenue from loyalty reward redemption or expiration was **$2.7 million** for Q1 2022, a decrease from **$3.3 million** in Q1 2021[39](index=39&type=chunk) Significant Accounting Policies | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------------- | :---------------------------- | :------------------------------- | | Cash and cash equivalents | $68.6 | $84.6 | | Restricted cash, current | $0.6 | $0.6 | | Restricted cash, non-current | $6.7 | $6.7 | | Total cash, cash equivalents and restricted cash | $75.9 | $91.8 | - The Company is evaluating the impact of ASU 2016-13 (Credit Losses), effective for fiscal years beginning after December 15, 2022[47](index=47&type=chunk) [3. Financial Instruments and Fair Value Measurements](index=13&type=section&id=3.%20Financial%20Instruments%20and%20Fair%20Value%20Measurements) Financial Instruments and Fair Value Measurements | Asset Category | Fair Value as of March 31, 2022 (in millions) | | :---------------------- | :--------------------------------------------- | | Money market fund | $8.9 (Level 1) | | U.S. treasury securities | $4.8 (Level 1) | | Commercial paper | $18.5 (Level 2) | | U.S. government agency bonds | $2.5 (Level 1) | | **Total cash equivalents** | **$34.6** | | Corporate debt securities | $50.6 (Level 1) | | U.S. treasury securities | $36.9 (Level 1) | | U.S. government agency bonds | $27.7 (Level 1) | | **Total marketable securities** | **$115.2** | | **Grand Total** | **$149.8** | - As of March 31, 2022, marketable securities had total unrealized losses of **$1,367 thousand**[50](index=50&type=chunk) - Of the **$115.2 million** marketable securities as of March 31, 2022, **$71.6 million** had a contractual maturity of less than one year, and **$43.6 million** had a maturity between one to two years[55](index=55&type=chunk) [4. Property and Equipment, Net](index=15&type=section&id=4.%20Property%20and%20Equipment,%20Net) Property and Equipment, Net | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Property and equipment, net | $73.1 | $55.5 | | Depreciation and amortization expense (Q1) | $2.6 | $2.0 | [5. Goodwill and Other Intangible Assets](index=15&type=section&id=5.%20Goodwill%20and%20Other%20Intangible%20Assets) - Goodwill decreased from **$12.2 million** as of December 31, 2021, to **$12.0 million** as of March 31, 2022, primarily due to foreign currency translation adjustments[57](index=57&type=chunk) Goodwill and Other Intangible Assets | Intangible Asset | Carrying amount, net as of March 31, 2022 (in millions) | | :--------------------- | :----------------------------------------------------- | | Customer relationships | $4.7 | | Developed technology | $4.0 | | Trademarks | $4.3 | | **Total** | **$12.9** | - Amortization expense of intangible assets with determinable lives was **$0.7 million** for Q1 2022, compared to zero for Q1 2021[61](index=61&type=chunk) [6. Balance Sheet Components](index=16&type=section&id=6.%20Balance%20Sheet%20Components) Balance Sheet Components | Inventory Component | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :------------------ | :---------------------------- | :------------------------------- | | Finished goods | $9.9 | $8.2 | | Raw materials | $1.5 | $0.9 | | Work in progress | $0.7 | $0.7 | | **Total Inventories** | **$12.0** | **$9.8** | Balance Sheet Components | Accrued and Other Current Liabilities Component | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :---------------------------------------------- | :---------------------------- | :------------------------------- | | Gift card and site credit liabilities | $13.8 | $13.2 | | Accrued vendor liabilities | $9.4 | $6.0 | | Allowance for returns | $7.4 | $6.2 | | Accrued compensation | $6.8 | $6.4 | | Deferred revenue | $6.2 | $5.9 | | Accrued taxes | $5.4 | $5.7 | | Accrued other | $2.0 | $1.7 | | **Total** | **$51.0** | **$45.3** | [7. Lease Agreements](index=17&type=section&id=7.%20Lease%20Agreements) - Operating lease expense increased to **$2.4 million** for Q1 2022 from **$2.1 million** for Q1 2021[64](index=64&type=chunk) - The Company entered into new lease agreements in Sofia, Bulgaria, for a distribution center (approx. **€6.1 million** or **$6.8 million** over 10 years) and office space (approx. **€4.3 million** or **$4.7 million** over 10 years)[64](index=64&type=chunk)[65](index=65&type=chunk) Lease Agreements | Maturity Period (as of March 31, 2022) | Amount (in millions) | | :------------------------------------- | :-------------------- | | Remainder of 2022 | $6.8 | | 2023 | $8.5 | | 2024 | $7.5 | | 2025 | $6.7 | | 2026 | $6.4 | | Thereafter | $29.9 | | **Total lease payments** | **$65.9** | | Less: imputed interest | $(14.9) | | Less: tenant improvement allowance yet to be received | $(4.5) | | **Total lease liabilities** | **$46.5** | | Less: current lease liabilities | $(4.4) | | **Total non-current lease liabilities** | **$42.0** | [8. Long-term Debt](index=17&type=section&id=8.%20Long-term%20Debt) - The Company has a Term Loan with Western Alliance Bank for up to **$40.0 million**, with **$34.0 million** principal outstanding as of March 31, 2022[66](index=66&type=chunk)[67](index=67&type=chunk) - The interest rate on the Term Loan is prime rate plus **1.5%** with a floor of **5.50%** per annum, and the effective interest rate was **6.65%** as of March 31, 2022[66](index=66&type=chunk)[67](index=67&type=chunk) Long-term Debt | Remaining Maturities (as of March 31, 2022) | Amount (in millions) | | :------------------------------------------ | :-------------------- | | Remainder of 2022 | $6.0 | | 2023 | $8.0 | | 2024 | $20.0 | | Thereafter | — | | **Total future principal** | **$34.0** | | Less: unamortized debt discount | $(0.6) | | Less: current portion of long-term debt | $(7.8) | | **Non-current portion of long-term debt** | **$25.6** | [9. Common Stock](index=18&type=section&id=9.%20Common%20Stock) Common Stock | Common Stock Class | Authorized (in thousands) | Issued and Outstanding (in thousands) as of March 31, 2022 | | :----------------- | :------------------------ | :--------------------------------------------------------- | | Class A | 1,000,000 | 58,558 | | Class B | 120,000 | 40,384 | | **Total** | **1,120,000** | **98,942** | - Class A common stock is entitled to one vote per share, while Class B common stock is entitled to ten votes per share and is convertible into Class A common stock[70](index=70&type=chunk) [10. Stock-Based Compensation Plans](index=18&type=section&id=10.%20Stock-Based%20Compensation%20Plans) - The 2021 Stock Option and Incentive Plan and the 2021 Employee Stock Purchase Plan (ESPP) became effective on March 24, 2021[73](index=73&type=chunk)[74](index=74&type=chunk) - The Company granted **749,842 shares** of RSUs with a weighted average grant date fair value of **$8.81** during Q1 2022[77](index=77&type=chunk) Stock-Based Compensation Plans | Department | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Operations, product and technology | $1.4 | $1.4 | | Marketing | $0.3 | $0.4 | | Sales, general and administrative | $1.8 | $1.7 | | **Total stock-based compensation expense** | **$3.5** | **$3.5** | [11. Commitments and Contingencies](index=19&type=section&id=11.%20Commitments%20and%20Contingencies) - The Company is subject to litigation claims in the ordinary course of business, but management does not believe they will have a material adverse effect[79](index=79&type=chunk) - The Company enters into contracts with indemnification provisions, with unknown exposure for future claims[80](index=80&type=chunk) [12. Income Taxes](index=19&type=section&id=12.%20Income%20Taxes) - The provision for income tax expense was **$13 thousand** for Q1 2022, compared to **$27 thousand** for Q1 2021[81](index=81&type=chunk) - The Company is in a full valuation allowance position due to accumulated losses, so the tax provision consists solely of certain state income taxes[81](index=81&type=chunk) [13. Net Loss Per Share Attributable to Common Stockholders](index=20&type=section&id=13.%20Net%20Loss%20Per%20Share%20Attributable%20to%20Common%20Stockholders) Net Loss Per Share Attributable to Common Stockholders | Participating Securities Excluded from Diluted EPS (as of March 31, 2022, in thousands) | | :-------------------------------------------------------------------- | | Outstanding stock options | 18,825 | | Restricted stock units | 1,830 | | Delayed share issuance related to acquisition | 130 | | Employee stock purchase plan | 105 | | **Total** | **20,890** | - These securities were excluded from the diluted net loss per share computation because their effect would have been anti-dilutive[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on ThredUp's financial condition and results of operations for the three months ended March 31, 2022, discussing key financial and operating metrics, recent business developments, and future outlook [Overview](index=22&type=section&id=Overview) - ThredUp is one of the world's largest online resale platforms for women's and kids' apparel, shoes, and accessories, aiming to inspire consumers to think secondhand first for a sustainable fashion future[86](index=86&type=chunk) - The Company's proprietary operating platform supports a managed marketplace and extends to brands and retailers through its Resale-as-a-Service (RaaS) offering[87](index=87&type=chunk)[88](index=88&type=chunk) - The acquisition of Remix Global EAD in October 2021 expanded the Company's reach to European customers and diversified its product assortment to include men's items and wholesale supply[89](index=89&type=chunk) [Recent Business Developments](index=22&type=section&id=Recent%20Business%20Developments) This section highlights the acquisition of Remix Global EAD and the ongoing impact of the COVID-19 pandemic on the company's operations and financial performance [Acquisition of Remix Global EAD](index=22&type=section&id=Acquisition%20of%20Remix%20Global%20EAD) - The acquisition of Remix Global EAD, a fashion resale company headquartered in Sofia, Bulgaria, was completed on October 7, 2021, expanding the Company's European presence[89](index=89&type=chunk)[90](index=90&type=chunk) [COVID-19 Update](index=22&type=section&id=COVID-19%20Update) - In Q1 2022, the Company experienced increased demand partly due to COVID-19 recovery, but gross margin and operating expenses were negatively impacted by rising labor, processing, and other costs[92](index=92&type=chunk)[93](index=93&type=chunk) - The tightened labor supply and inflationary labor market led to challenges in hiring and retention, resulting in higher Cost of Revenue and Operations, Product and Technology expenses[93](index=93&type=chunk) - The COVID-19 pandemic is expected to continue to adversely impact the business, results of operations, and financial condition in the short term[94](index=94&type=chunk) [Overview of First Quarter Results](index=24&type=section&id=Overview%20of%20First%20Quarter%20Results) Overview of First Quarter Results | Metric | Q1 2022 (in millions) | Q1 2021 (in millions) | YoY Change (%) | | :----------------- | :-------------------- | :-------------------- | :------------- | | Total Revenue | $72.7 | $55.7 | 31% | | Gross Profit | $50.2 | $39.7 | 26% | | Gross Margin | 69% | 71% | -224 bps | | GAAP Net Loss | $(20.7) | $(16.2) | -28% | | Adjusted EBITDA Loss | $(13.0) | $(9.1) | -42% | | Active Buyers | 1.72 | 1.29 | 33% | | Orders | 1.64 | 1.13 | 45% | [Key Financial and Operating Metrics](index=24&type=section&id=Key%20Financial%20and%20Operating%20Metrics) This section defines and presents key financial and operating metrics used by management to evaluate business performance, including Active Buyers, Orders, and Adjusted EBITDA, along with their reconciliation to GAAP net loss [Active Buyers](index=24&type=section&id=Active%20Buyers) - Active Buyers, defined as customers making at least one purchase in the last twelve months, increased by **33%** to **1.715 million** as of March 31, 2022, from **1.290 million** as of March 31, 2021[99](index=99&type=chunk)[100](index=100&type=chunk) [Orders](index=24&type=section&id=Orders) - Total Orders, net of cancellations, increased by **45%** to **1.640 million** for Q1 2022, from **1.128 million** for Q1 2021[99](index=99&type=chunk)[101](index=101&type=chunk) [Adjusted EBITDA](index=25&type=section&id=Adjusted%20EBITDA) - Adjusted EBITDA loss increased by **42%** to **$(12.963) million** for Q1 2022, from **$(9.119) million** for Q1 2021[99](index=99&type=chunk)[103](index=103&type=chunk) - Adjusted EBITDA margin was **(18)%** for Q1 2022, compared to **(16)%** for Q1 2021[99](index=99&type=chunk) - Adjusted EBITDA is a Non-GAAP metric used to evaluate operating performance, excluding items like depreciation, stock-based compensation, and acquisition-related expenses[102](index=102&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's revenue, cost of revenue, gross profit, and operating expenses for the three months ended March 31, 2022, and 2021, highlighting key drivers and changes [Revenue](index=26&type=section&id=Revenue) Revenue | Revenue Type | Q1 2022 (in millions) | Q1 2021 (in millions) | Change Amount (in millions) | % Change | | :----------------- | :--------------------- | :--------------------- | :--------------------------- | :------- | | Consignment revenue | $47.4 | $44.7 | $2.7 | 6% | | Product revenue | $25.3 | $11.0 | $14.3 | 130% | | **Total revenue** | **$72.7** | **$55.7** | **$17.0** | **31%** | | Consignment revenue as % of total revenue | 65% | 80% | N/A | N/A | | Product revenue as % of total revenue | 35% | 20% | N/A | N/A | - The **31% increase** in total revenue was primarily driven by a **45% increase** in Orders and **33% growth** in Active Buyers, largely due to the addition of European operations, offset by a **10% decrease** in revenue per Order[105](index=105&type=chunk)[106](index=106&type=chunk) - Product revenue increased by **130%**, primarily due to the introduction of European operations, which are largely product revenue, and a smaller increase in domestic product revenue[107](index=107&type=chunk) [Cost of Revenue](index=27&type=section&id=Cost%20of%20Revenue) Cost of Revenue | Cost of Revenue Type | Q1 2022 (in millions) | Q1 2021 (in millions) | Change Amount (in millions) | % Change | | :------------------- | :--------------------- | :--------------------- | :--------------------------- | :------- | | Cost of consignment revenue | $10.0 | $10.8 | $(0.8) | (7)% | | Cost of product revenue | $12.4 | $5.1 | $7.3 | 142% | | **Total cost of revenue** | **$22.5** | **$16.0** | **$6.5** | **41%** | | Gross profit | $50.2 | $39.7 | $10.5 | 26% | | Gross profit margin | 69% | 71% | N/A | N/A | - Total cost of revenue as a percentage of total revenue increased by **200 basis points** to **31%** for Q1 2022, primarily due to the addition of European operations, which have lower gross margins from product sales[108](index=108&type=chunk) - Consignment gross margin increased by **300 basis points** to **79%** for Q1 2022, driven by a decrease in outbound shipping and packaging costs due to process consolidation[110](index=110&type=chunk)[111](index=111&type=chunk) - Product gross margin decreased by **200 basis points** to **51%** for Q1 2022, as the **142% increase** in cost of product revenue outpaced product revenue growth, mainly due to higher inventory costs in European operations[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses) Operating Expenses | Operating Expense Category | Q1 2022 (in millions) | Q1 2021 (in millions) | Change Amount (in millions) | % Change | | :------------------------- | :--------------------- | :--------------------- | :--------------------------- | :------- | | Operations, product and technology | $39.2 | $28.3 | $10.8 | 38% | | Marketing | $17.0 | $15.4 | $1.5 | 10% | | Sales, general and administrative | $14.7 | $10.6 | $4.0 | 38% | | **Total operating expenses** | **$70.8** | **$54.4** | **$16.4** | **30%** | - Total operating expenses increased by **30%** (**$16.4 million**) for Q1 2022, driven by investments in distribution center processing capacity, marketing, public company infrastructure, and European expansion[117](index=117&type=chunk)[118](index=118&type=chunk) - Operations, product and technology expenses increased by **38%**, primarily due to a **36% rise** in personnel-related costs from increased U.S. headcount and the Remix acquisition, and a **38% increase** in facilities and other allocated costs[119](index=119&type=chunk)[120](index=120&type=chunk) - Sales, general and administrative expenses increased by **38%**, mainly due to a **33% increase** in personnel-related costs and a **37% increase** in professional services for scaling the business and public company processes[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - Marketing expenses increased by **10%**, with marketing and advertising costs up **5%** due to organic and acquisition marketing, partially offset by the discontinuance of the Goody Box program[122](index=122&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2022, the Company had **$183.8 million** in cash, cash equivalents, and short-term marketable securities, and an accumulated deficit of **$336.1 million**[129](index=129&type=chunk) - Operations have been primarily financed through private and public equity sales (IPO net proceeds of **$175.5 million** in March 2021; follow-on offering net proceeds of **$45.5 million** in August 2021) and debt[129](index=129&type=chunk) - The Company expects continued operating losses and negative cash flows as it invests in business growth and infrastructure, but believes existing financial resources are sufficient for short-term and long-term capital requirements[130](index=130&type=chunk) - Future capital requirements depend on expansion plans, marketing, new offerings, and economic conditions, and the Company may seek additional equity or debt financing[131](index=131&type=chunk) [Cash Flows](index=32&type=section&id=Cash%20Flows) This section provides a summary of cash flow activities for the three months ended March 31, 2022, and 2021, detailing changes in operating, investing, and financing cash flows [Changes in Cash Flow from Operating Activities](index=32&type=section&id=Changes%20in%20Cash%20Flow%20from%20Operating%20Activities) - Net cash used in operating activities was **$6.7 million** for Q1 2022, a shift from **$1.1 million** provided in Q1 2021[133](index=133&type=chunk)[134](index=134&type=chunk) - The Q1 2022 usage was driven by a net loss of **$20.7 million**, partially offset by **$8.7 million** in non-cash charges and **$5.4 million** from changes in operating assets and liabilities[134](index=134&type=chunk) [Changes in Cash Flow from Investing Activities](index=33&type=section&id=Changes%20in%20Cash%20Flow%20from%20Investing%20Activities) - Net cash used in investing activities was **$7.9 million** for Q1 2022, an increase from **$4.1 million** used in Q1 2021[133](index=133&type=chunk)[137](index=137&type=chunk) - Q1 2022 usage was primarily due to **$12.6 million** in capital expenditures for new distribution centers, partially offset by **$4.7 million** from marketable securities maturities[137](index=137&type=chunk) [Changes in Cash Flow from Financing Activities](index=33&type=section&id=Changes%20in%20Cash%20Flow%20from%20Financing%20Activities) - Net cash used in financing activities was **$1.2 million** for Q1 2022, a significant change from **$185.1 million** provided in Q1 2021[133](index=133&type=chunk)[139](index=139&type=chunk) - Q1 2022 usage was mainly from **$2.0 million** in debt repayment, partially offset by **$0.8 million** from common stock option exercises[139](index=139&type=chunk) - Q1 2021 cash provided was primarily from **$180.3 million** in IPO proceeds, **$4.6 million** in debt financing, and **$1.9 million** from stock option exercises[140](index=140&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no significant changes to the Company's critical accounting policies since December 31, 2021[142](index=142&type=chunk) - The preparation of consolidated financial statements requires management to make judgments and estimates that affect reported amounts[141](index=141&type=chunk) [Recent Accounting Pronouncements](index=33&type=section&id=Recent%20Accounting%20Pronouncements) - Information on recently issued accounting pronouncements is provided in Note 2 to the unaudited condensed consolidated financial statements[143](index=143&type=chunk) [JOBS Act Accounting Election](index=34&type=section&id=JOBS%20Act%20Accounting%20Election) - As an 'emerging growth company' under the JOBS Act, ThredUp has elected to use the extended transition period for new or revised accounting standards[144](index=144&type=chunk) - This election means the Company's financial statements may not be comparable to those of companies complying with public company effective dates[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, including interest rate risk, inflation risk, and foreign currency exchange rate risk, and how these risks are managed [Interest Rate Risk](index=35&type=section&id=Interest%20Rate%20Risk) - The Company is exposed to interest rate risk from its **$68.6 million** in cash and cash equivalents and **$115.2 million** in marketable securities, as well as its **$34.0 million** outstanding term loan at a **5.50%** interest rate[145](index=145&type=chunk)[146](index=146&type=chunk) - A hypothetical **100 basis point** change in interest rates would not have a material impact on the Company's financial condition or results of operations[147](index=147&type=chunk) [Inflation Risk](index=35&type=section&id=Inflation%20Risk) - Inflation has significantly increased in the U.S. and overseas, leading to rising interest rates, fuel, wages, and freight costs, but has not had a material effect on the Company's business to date[148](index=148&type=chunk) - Rising costs could negatively impact operating and borrowing costs, and inflation's effect on consumer budgets could decrease spending, potentially harming profitability if price increases cannot offset costs[148](index=148&type=chunk) [Foreign Currency Exchange Rate Risk](index=35&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) - The Company transacts business in Europe through Remix in multiple currencies, primarily Bulgarian lev (BGN), exposing it to foreign currency exchange rate fluctuations[149](index=149&type=chunk) - Foreign currency risk is managed through natural hedges, and a **$0.7 million** foreign currency translation adjustment was reflected in accumulated other comprehensive loss for Q1 2022[149](index=149&type=chunk)[150](index=150&type=chunk) - A hypothetical **10%** change in foreign currency exchange rates would not have a material impact on the Company's financial condition or results of operations[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures, identifies previously reported material weaknesses in internal control over financial reporting, and outlines remediation plans [Evaluation of Disclosure Controls and Procedures](index=36&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of March 31, 2022, the Company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[154](index=154&type=chunk) - Despite the material weakness, management concluded that the unaudited interim condensed consolidated financial statements for the periods covered fairly present the Company's financial position, results of operations, and cash flows in conformity with GAAP after performing additional reconciliations and post-closing procedures[154](index=154&type=chunk) [Previously Reported Material Weaknesses in Internal Control Over Financial Reporting](index=36&type=section&id=Previously%20Reported%20Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) - A material weakness in internal control over financial reporting was previously disclosed for fiscal years ended December 31, 2021, 2020, 2019, and 2018[155](index=155&type=chunk) - Control deficiencies included ineffective controls over accounting and proprietary data systems (user access, program change management, data validation) and inadequate controls over the preparation and review of account reconciliations and journal entries (segregation of duties, precision, timeliness)[156](index=156&type=chunk)[157](index=157&type=chunk) [Remediation Plans](index=37&type=section&id=Remediation%20Plans) - Remediation efforts include adding accounting, finance, and information technology personnel, implementing new financial accounting processes, enhancing controls within systems, and evolving accounting and quarterly close processes[160](index=160&type=chunk) - Full remediation will require completion of these steps and effective operation of controls for a sufficient period[160](index=160&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - The Company is actively remediating the material weaknesses, and no other material changes in internal control over financial reporting occurred during the most recent fiscal quarter[161](index=161&type=chunk) - The Company is continually monitoring and assessing the COVID-19 situation's impact on internal controls[161](index=161&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is not currently a party to any material pending legal proceedings, though it may be subject to claims in the ordinary course of business - The Company is not a party to any material pending legal proceedings but may be subject to claims in the ordinary course of business[164](index=164&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive discussion of risks affecting the business as previously disclosed in the company's Annual Report on Form 10-K for fiscal year 2021, noting no material changes - Risks affecting the business are discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, with no material changes reported[166](index=166&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales of equity securities and details the use of proceeds from the company's initial public offering (IPO) and subsequent registered public offering, stating no material change in planned use - There were no unregistered sales of equity securities[169](index=169&type=chunk) - The IPO in March 2021 generated net proceeds of **$175.5 million** from the sale of **13,800,000 Class A common shares**[170](index=170&type=chunk) - A follow-on public offering in August 2021 generated net proceeds of **$45.5 million** from the sale of **2,000,000 Class A common shares**[171](index=171&type=chunk) - There has been no material change in the planned use of proceeds from either public offering[170](index=170&type=chunk)[171](index=171&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL interactive data files - The exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Form of Class A common stock certificate, Investors' Rights Agreement, and certifications from principal executive and financial officers[172](index=172&type=chunk) - XBRL Instance Document and related taxonomy extension documents are also filed as exhibits[172](index=172&type=chunk)[173](index=173&type=chunk) [Signatures](index=43&type=section&id=Signatures) This section contains the required signatures of the registrant's Chief Executive Officer and Chief Financial Officer, certifying the report - The report is signed by James Reinhart, Chief Executive Officer, and Sean Sobers, Chief Financial Officer, on May 9, 2022[178](index=178&type=chunk)

Part I [Business](index=5&type=section&id=Item%201.%20Business) ThredUp operates one of the world's largest online resale platforms for apparel, shoes, and accessories, promoting sustainable fashion through its proprietary "single SKU" logistics platform and Resale-as-a-Service offering - ThredUp's core business is an online resale platform for women's and kids' apparel, shoes, and accessories, built on a custom operating platform for unique, single-SKU items[18](index=18&type=chunk)[19](index=19&type=chunk) - The company offers a Resale-as-a-Service (RaaS) platform for brands and retailers, serving **28 RaaS clients** as of December 31, 2021, including major brands like Adidas, GAP, and Walmart[20](index=20&type=chunk)[27](index=27&type=chunk) - In October 2021, ThredUp acquired Remix Global AD, a European fashion resale company, to facilitate its expansion into the European market[21](index=21&type=chunk) Key Operating Metrics (as of Dec 31, 2021) | Metric | Value | YoY Growth | | :--- | :--- | :--- | | Active Buyers | 1.69 million | 36% | | Orders (FY 2021) | 5.3 million | 34% | - The company faces intense competition from other secondhand marketplaces (e.g., Poshmark, The RealReal), large online retailers (e.g., Amazon, Walmart), and off-price retailers (e.g., TJX Companies, Ross Stores)[32](index=32&type=chunk)[33](index=33&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces a wide range of risks, including dependence on attracting buyers and sellers, complex logistics, a history of net losses, IT and data security vulnerabilities, and concentrated voting power from its dual-class stock structure [Risks Relating to Our Business and Industry](index=11&type=section&id=Risks%20Relating%20to%20Our%20Business%20and%20Industry) The company's growth is highly dependent on attracting and retaining both buyers and sellers, challenged by intense competition, economic downturns, operational complexities, and uncertainties from the COVID-19 pandemic and Remix acquisition - The company's continued growth is contingent on its ability to attract new buyers and sellers and retain existing ones, with failure in this area potentially harming business operations and financial condition[50](index=50&type=chunk)[51](index=51&type=chunk) History of Net Losses | Year | Net Loss (in millions) | | :--- | :--- | | 2021 | $63.2 | | 2020 | $47.9 | | 2019 | $38.2 | - The COVID-19 pandemic has adversely impacted business operations, causing delays in processing Clean Out Kits and increasing costs, with the full extent of its future impact remaining uncertain[84](index=84&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) - The integration of the newly acquired Remix business presents significant risks, including potential difficulties, higher-than-expected costs, and the possibility of not realizing the anticipated benefits of European expansion[91](index=91&type=chunk)[92](index=92&type=chunk) [Risks Relating to Information Technology, Intellectual Property, Data Security and Privacy](index=26&type=section&id=Risks%20Relating%20to%20Information%20Technology%2C%20Intellectual%20Property%2C%20Data%20Security%20and%20Privacy) The company faces significant risks related to data security breaches, compliance with evolving privacy laws like CCPA and GDPR, reliance on third-party services, and protecting its intellectual property - The company is vulnerable to data security compromises, which could result in unexpected expenses, litigation, regulatory fines, and significant harm to its reputation and operations[120](index=120&type=chunk)[121](index=121&type=chunk) - Compliance with numerous and evolving data privacy laws, such as the California Consumer Privacy Act (CCPA) and the EU's General Data Protection Regulation (GDPR), is complex and costly, with failure to comply potentially leading to substantial penalties[124](index=124&type=chunk)[126](index=126&type=chunk) - The business heavily relies on third-party services, including Amazon Web Services (AWS) for hosting and various payment processors, making any service interruptions from these providers potentially disruptive to operations[131](index=131&type=chunk)[132](index=132&type=chunk) [Risks Relating to Legal, Regulatory, Accounting and Tax Matters](index=33&type=section&id=Risks%20Relating%20to%20Legal%2C%20Regulatory%2C%20Accounting%20and%20Tax%20Matters) The company has identified a material weakness in its internal control over financial reporting and is subject to a complex web of regulations governing e-commerce, resale, and data privacy, with non-compliance posing financial and operational risks - A material weakness has been identified in the company's internal control over financial reporting, related to ineffective controls over IT systems and inadequate controls over the preparation and review of account reconciliations and journal entries[146](index=146&type=chunk)[149](index=149&type=chunk) - The business is subject to numerous laws and regulations pertaining to the internet, e-commerce, and the resale of secondhand items, with non-compliance potentially resulting in fines or penalties[151](index=151&type=chunk)[153](index=153&type=chunk) - Following the Supreme Court's Wayfair decision, the company is required to collect and remit sales taxes in numerous jurisdictions, creating administrative burdens and potential tax liabilities[173](index=173&type=chunk) - As an "emerging growth company," ThredUp is subject to reduced public company reporting requirements, which may make its stock less attractive to certain investors[178](index=178&type=chunk) [Risks Relating to Our Indebtedness and Liquidity](index=40&type=section&id=Risks%20Relating%20to%20Our%20Indebtedness%20and%20Liquidity) The company may require additional capital for growth, which might not be available on favorable terms or could dilute existing stockholders, and its loan agreement contains restrictive covenants that limit operational flexibility - The company may require additional capital to support its growth, and such financing might not be available on favorable terms, if at all, potentially leading to dilution for existing stockholders[182](index=182&type=chunk) - The company's loan and security agreement contains financial covenants and other restrictions that may limit operational flexibility, with a breach potentially resulting in an event of default and acceleration of the debt[185](index=185&type=chunk)[186](index=186&type=chunk) [Risks Relating to Ownership of Our Class A Common Stock](index=41&type=section&id=Risks%20Relating%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) The company's stock price may be volatile, and its dual-class stock structure concentrates voting power with pre-IPO stockholders, potentially limiting Class A stockholder influence and affecting stock index eligibility - The company's dual-class common stock structure concentrates significant voting power with holders of Class B stock, who have ten votes per share compared to one vote for Class A stock, with Class B holders controlling approximately **87.6% of the voting power** as of December 31, 2021[192](index=192&type=chunk)[193](index=193&type=chunk) - The dual-class structure may make the company's stock ineligible for inclusion in certain stock market indices (e.g., S&P 500, Russell 2000), which could negatively affect its market price and liquidity[196](index=196&type=chunk) - The company has never paid cash dividends and does not intend to do so in the foreseeable future, meaning returns for investors will depend solely on stock price appreciation[204](index=204&type=chunk) [Properties](index=49&type=section&id=Item%202.%20Properties) ThredUp maintains its corporate headquarters in Oakland, California, with additional offices in Arizona and Bulgaria, and operates a network of four main distribution centers across the US and Bulgaria, alongside new processing centers for logistics expansion - The company's corporate headquarters is located in Oakland, California, with additional offices in Scottsdale, Arizona, and Sofia, Bulgaria[226](index=226&type=chunk) - ThredUp operates four main distribution centers in Arizona, Georgia, Pennsylvania, and Bulgaria, and is expanding its capacity with a new distribution center under construction in Texas and two new processing centers in Texas and Tennessee[227](index=227&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=50&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ThredUp's Class A common stock began trading on Nasdaq on March 26, 2021, with no public market for its Class B common stock, and the company has not paid cash dividends, intending to retain earnings for business expansion - The company's Class A common stock is listed on the Nasdaq Global Select Market under the symbol "TDUP," with trading having commenced on **March 26, 2021**[233](index=233&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, retaining funds for business development[235](index=235&type=chunk) - Net proceeds from the March 2021 IPO were **$175.5 million**, with a subsequent registered public offering in August 2021 generating additional net proceeds of **$45.5 million**[241](index=241&type=chunk)[242](index=242&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2021, ThredUp achieved record revenue of $251.8 million, a 35% increase, driven by growth in active buyers and orders, while gross margin improved to 71%, despite a widened net loss of $63.2 million due to significant investments in growth and public company operations [Overview of 2021 Results](index=56&type=section&id=Overview%20of%202021%20Results) For the full year 2021, ThredUp achieved record revenue of $251.8 million, a 35% year-over-year increase, with gross margin expanding to 71%, though the GAAP net loss increased to $63.2 million, reflecting strong operational growth in active buyers and orders 2021 Financial Highlights vs. 2020 | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $251.8M | $186.0M | +35% | | Gross Profit | $178.1M | $128.1M | +39% | | Gross Margin | 71% | 69% | +185 bps | | Net Loss | ($63.2M) | ($47.9M) | +32% | | Adjusted EBITDA Loss | ($36.5M) | ($33.4M) | +9% | 2021 Key Operating Metrics vs. 2020 | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Active Buyers | 1.69 million | 1.24 million | +36% | | Orders | 5.3 million | 4.0 million | +34% | [Results of Operations](index=59&type=section&id=Results%20of%20Operations) For the year ended December 31, 2021, total revenue increased 35% to $251.8 million, driven by a 34% increase in orders, and gross margin improved to 71%, but operating expenses grew 38% to $240.5 million, leading to an increased net loss of $63.2 million Consolidated Statements of Operations (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | **Total revenue** | **$251,792** | **$186,015** | | Gross profit | $178,132 | $128,148 | | Total operating expenses | $240,518 | $174,737 | | Operating loss | $(62,386) | $(46,589) | | **Net loss** | **$(63,176)** | **$(47,877)** | - Revenue growth of **35%** was primarily driven by a **36% increase in Active Buyers** and a **34% increase in Orders**[281](index=281&type=chunk) - Operating expenses increased by **38%**, with significant growth in Marketing (**+42%**) and Sales, General & Administrative (**+71%**) costs, reflecting investments in growth and public company infrastructure[289](index=289&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, the company maintained a strong liquidity position with $205.8 million in cash and marketable securities, bolstered by IPO and follow-on offering proceeds, despite historically negative cash flows from operations - As of December 31, 2021, the company had cash, cash equivalents, and short-term marketable securities totaling **$205.8 million**[305](index=305&type=chunk) Summary of Cash Flows (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(35,019) | $(19,105) | | Net cash used in investing activities | $(169,576) | $(19,424) | | Net cash provided by financing activities | $228,960 | $18,215 | - Financing activities in 2021 were primarily driven by **$175.5 million** in net proceeds from the IPO and **$45.5 million** from a follow-on offering[305](index=305&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate risk from its cash, marketable securities, and variable-rate debt, and foreign currency exchange rate risk from European operations, neither of which is expected to have a material impact from hypothetical changes - The company is exposed to interest rate risk through its cash equivalents, marketable securities, and its loan agreement tied to the prime rate, with a hypothetical **100 basis point change** in interest rates not expected to have a material impact[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) - Foreign currency exchange rate risk exists due to European operations transacting in multiple currencies, with a hypothetical **10% change** in foreign currency exchange rates estimated to have an impact of under **$1.0 million**[335](index=335&type=chunk)[337](index=337&type=chunk) [Financial Statements and Supplementary Data](index=71&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements for the year ended December 31, 2021, report total assets of $360.8 million, total liabilities of $155.1 million, and total stockholders' equity of $205.7 million, with a net loss of $63.2 million on revenues of $251.8 million, and accompanying notes detailing accounting policies and financial components Consolidated Balance Sheet Highlights (as of Dec 31, 2021) | (in thousands) | Amount | | :--- | :--- | | Cash and cash equivalents | $84,550 | | Marketable securities | $121,277 | | Total Assets | $360,826 | | Total Liabilities | $155,092 | | Total Stockholders' Equity | $205,734 | Consolidated Statement of Operations Highlights (FY 2021) | (in thousands) | Amount | | :--- | :--- | | Total Revenue | $251,792 | | Gross Profit | $178,132 | | Operating Loss | $(62,386) | | Net Loss | $(63,176) | [Notes to Consolidated Financial Statements](index=91&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies and financial components, including the Remix acquisition which added $12.5 million in goodwill and $14.8 million in intangible assets, $36.0 million in outstanding debt, $40.9 million in lease liabilities, and a $75.3 million valuation allowance against deferred tax assets - The acquisition of Remix resulted in the recognition of **$12.5 million** in goodwill and **$14.8 million** in identifiable intangible assets, including customer relationships, developed technology, and trademarks[479](index=479&type=chunk)[481](index=481&type=chunk) - As of December 31, 2021, the company had total operating lease liabilities of **$40.9 million** with a weighted-average remaining lease term of **8.1 years**[489](index=489&type=chunk)[492](index=492&type=chunk) - As of December 31, 2021, the company had **$36.0 million** in principal outstanding under its term loan agreement with Western Alliance Bank[496](index=496&type=chunk)[499](index=499&type=chunk) - Due to a history of operating losses, the company has established a full valuation allowance of **$75.3 million** against its deferred tax assets, as it is more likely than not that these assets will not be realized[536](index=536&type=chunk) [Controls and Procedures](index=73&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2021, due to a material weakness in internal control over financial reporting related to IT systems and accounting processes, for which remediation plans are underway - Management concluded that the company's disclosure controls and procedures were **not effective** as of December 31, 2021[344](index=344&type=chunk) - The ineffectiveness is due to a material weakness related to: (1) ineffective controls over accounting and proprietary data systems, and (2) inadequate controls over the preparation and review of certain account reconciliations and journal entries[346](index=346&type=chunk)[347](index=347&type=chunk) - The company is taking steps to remediate the material weakness, including hiring additional personnel and implementing enhancements and controls within its accounting and IT systems[349](index=349&type=chunk)

ThredUp Inc. (NASDAQ:TDUP) Q4 2021 Earnings Conference Call March 7, 2022 4:30 PM ET Company Participants James Reinhart - Co-Founder, CEO Sean Sobers - CFO Conference Call Participants Ike Boruchow - Wells Fargo Ross Sandler - Barclays Dylan Carden - William Blair Anna Andreeva - Needham & Company Nathan Feather - Morgan Stanley Michael Ng - Goldman Sachs Tom Nikic - Wedbush Securities Dana Telsey - Telsey Advisory Group Matthew Egger - Piper Sandler Brian McNamara - Berenberg Unidentified Company Rep ...

Washington, D.C. 20549 ______________________ FORM 10-Q ______________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to UNITED STATES SECURITIES AND EXCHANGE COMMISSION Commission file number 001-40249 ThredUp Inc. (Exact name of registrant as specified in its charter) Dela ...

THREDUP The following contains confidential information. Do not distribute without permission. INVESTOR PRESENTATION Second Quarter 2021 Safe Harbor This presentation contains forward-looking statements within the meaning of the federal securities laws, which are statements that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they cont ...

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents ThredUp Inc.'s unaudited condensed consolidated financial statements and related management discussion [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents ThredUp Inc.'s unaudited condensed consolidated financial statements and comprehensive notes on accounting policies and corporate events [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show a significant increase in assets and a shift to positive stockholders' equity following the IPO Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :------------------ | | **Assets** | | | | Cash and cash equivalents | $173,058 | $64,485 | | Marketable securities | $57,382 | — | | Total current assets | $242,772 | $75,159 | | Total assets | $312,371 | $142,911 | | **Liabilities & Equity** | | | | Total current liabilities | $78,174 | $62,564 | | Total liabilities | $131,533 | $118,047 | | Convertible preferred stock | — | $247,041 | | Total stockholders' equity (deficit) | $180,838 | $(222,177) | - Total assets increased significantly from **$142.9 million** at December 31, 2020, to **$312.4 million** at June 30, 2021, primarily driven by a substantial increase in cash and cash equivalents and the addition of marketable securities[17](index=17&type=chunk) - Stockholders' equity shifted from a deficit of **$(222.2) million** at December 31, 2020, to a positive **$180.8 million** at June 30, 2021, largely due to the initial public offering and conversion of preferred stock[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations detail revenue growth and increased net losses for the three and six months ended June 30, 2021 Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $59,959 | $47,335 | $115,639 | $95,650 | | Total cost of revenue | $15,827 | $14,324 | $31,789 | $30,013 | | Gross profit | $44,132 | $33,011 | $83,850 | $65,637 | | Total operating expenses | $58,018 | $39,485 | $112,414 | $85,394 | | Operating loss | $(13,886) | $(6,474) | $(28,564) | $(19,757) | | Net loss | $(14,379) | $(6,657) | $(30,550) | $(19,872) | | Net loss per share (basic and diluted) | $(0.15) | $(0.61) | $(0.54) | $(1.84) | - Total revenue increased by **27%** for the three months ended June 30, 2021, and **21%** for the six months ended June 30, 2021, compared to the same periods in 2020[19](index=19&type=chunk) - Net loss increased significantly to **$(14.4) million** for Q2 2021 from **$(6.7) million** in Q2 2020, and to **$(30.6) million** for the six months ended June 30, 2021, from **$(19.9) million** in the prior year, primarily due to increased operating expenses[19](index=19&type=chunk) [Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity) This section outlines changes in equity, reflecting the IPO, preferred stock conversion, and accumulated deficit Changes in Stockholders' Equity (in thousands) | Metric | December 31, 2020 | March 31, 2021 | June 30, 2021 | | :------------------------------------ | :---------------- | :------------- | :------------ | | Total Stockholders' Equity (Deficit) | $(222,177) | $191,427 | $180,838 | | Convertible Preferred Stock (Shares) | 65,970,938 | — | — | | Common Stock (Shares) | 12,889,760 | 94,143,694 | 94,780,166 | | Additional Paid-in Capital | $29,989 | $459,756 | $463,582 | | Accumulated Deficit | $(252,167) | $(268,338) | $(282,717) | - The Company completed its IPO in March 2021, resulting in the conversion of all outstanding convertible preferred stock into Class B common stock and a significant increase in common stock shares and additional paid-in capital[20](index=20&type=chunk)[31](index=31&type=chunk) - Net loss for Q1 2021 was **$(16.17) million** and for Q2 2021 was **$(14.38) million**, contributing to an increased accumulated deficit[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statements show significant cash generation from financing activities, primarily due to the IPO Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(9,090) | $(1,467) | | Net cash used in investing activities | $(66,417) | $(10,695) | | Net cash provided by financing activities | $184,081 | $7,398 | | Net increase (decrease) in cash | $108,574 | $(4,764) | | Cash, cash equivalents and restricted cash, end of period | $176,113 | $83,089 | - Net cash provided by financing activities significantly increased in H1 2021 to **$184.1 million**, primarily due to **$180.3 million** in net proceeds from the IPO[26](index=26&type=chunk)[152](index=152&type=chunk) - Investing activities saw a substantial increase in cash usage to **$66.4 million** in H1 2021, driven by **$57.4 million** in marketable securities purchases and **$9.0 million** in capital expenditures[26](index=26&type=chunk)[151](index=151&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain significant accounting policies, recent corporate events like the IPO, and the proposed acquisition of Remix Global AD - ThredUp Inc. completed its Initial Public Offering (IPO) on March 25, 2021, selling **13,800,000 shares** of Class A common stock at **$14.00 per share**, generating **$175.5 million** in net proceeds[29](index=29&type=chunk)[91](index=91&type=chunk) - Immediately prior to the IPO, **65,970,938 shares** of convertible preferred stock and **164,973** convertible preferred stock warrants were converted into Class B common stock and Class B common stock warrants, respectively[31](index=31&type=chunk)[93](index=93&type=chunk) - Subsequent to the reporting period, on August 2, 2021, the Company completed a follow-on public offering, issuing **2,000,000 shares** of Class A common stock at **$24.25 per share**, yielding approximately **$45.3 million** in net proceeds[85](index=85&type=chunk)[94](index=94&type=chunk) - On July 24, 2021, ThredUp entered into an agreement to acquire Remix Global AD, a fashion resale company in Bulgaria, for approximately **$28.5 million**, including debt repayment, with a portion payable in Class A common stock and restricted stock units for management[86](index=86&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) Stock-Based Compensation Expense by Department (in thousands) | Department | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operations, product and technology | $984 | $871 | $2,334 | $1,585 | | Marketing | $289 | $282 | $726 | $456 | | Sales, general and administrative | $1,623 | $813 | $3,334 | $1,367 | | **Total** | **$2,896** | **$1,966** | **$6,394** | **$3,408** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses ThredUp's business, recent developments, COVID-19 impact, financial performance, liquidity, and critical accounting policies [Overview](index=23&type=section&id=Overview) ThredUp operates a large online resale platform for apparel, processing millions of items and offering Resale-as-a-Service - ThredUp operates one of the world's largest online resale platforms for women's and kids' apparel, shoes, and accessories, leveraging a custom-built operating platform[89](index=89&type=chunk) - Since its founding in 2009, the company has processed over **125 million** unique secondhand items from **35,000 brands**, saving buyers an estimated **$3.3 billion** and positively impacting the environment by saving **1.0 billion pounds** of CO2 emissions[89](index=89&type=chunk) - ThredUp offers a managed marketplace for buyers and a 'Clean Out Kit' service for sellers, and has expanded into Resale-as-a-Service (RaaS) offerings for brands and retailers since 2018[90](index=90&type=chunk) [Recent Business Developments](index=23&type=section&id=Recent%20Business%20Developments) Recent developments include the IPO, a follow-on offering, and the proposed acquisition of European fashion resale company Remix Global AD - ThredUp completed its Initial Public Offering (IPO) on March 25, 2021, selling **13,800,000 shares** of Class A common stock at **$14.00 per share**, generating **$175.5 million** in net proceeds[91](index=91&type=chunk) - A follow-on public offering on August 2, 2021, raised approximately **$45.3 million** in net proceeds from the sale of **2,000,000** Class A common stock shares at **$24.25 per share**[94](index=94&type=chunk) - The Company entered into an agreement on July 24, 2021, to acquire Remix Global AD, a European fashion resale company, for an estimated **$28.5 million**, expected to close in Q4 2021[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) [COVID-19 Impact](index=24&type=section&id=COVID-19%20Impact) The pandemic increased demand but also raised operating expenses and retention challenges, with continued adverse impacts expected - The COVID-19 pandemic led to increased demand in H1 2021, partly due to recovery efforts and federal stimulus, but also resulted in higher operating expenses to support demand and retention programs[100](index=100&type=chunk) - Unprocessed Clean Out Kits increased in Q2 2021 after lifting restrictions on seller orders, and the company faces challenges in employee retention, leading to higher costs in operations[101](index=101&type=chunk)[102](index=102&type=chunk) - The company expects the pandemic to continue adversely impacting its business, including revenue and cash flows, for the remainder of 2021, with potential shifts in buyer/seller behavior due to economic uncertainties and stimulus changes[103](index=103&type=chunk) [Overview of Second Quarter Results](index=25&type=section&id=Overview%20of%20Second%20Quarter%20Results) Second quarter results show revenue growth, improved gross margin, but also increased net loss and Adjusted EBITDA loss Second Quarter 2021 Key Financial Highlights (in millions) | Metric | Q2 2021 | Q2 2020 | YoY Change | | :---------------- | :------ | :------ | :--------- | | Total Revenue | $60.0 | $47.3 | +27% | | Gross Profit | $44.1 | $33.0 | +34% | | Gross Margin | 74% | 70% | +400 bps | | GAAP Net Loss | $(14.4) | $(6.7) | +115% | | Adjusted EBITDA Loss | $(9.0) | $(3.3) | +173% | Second Quarter 2021 Key Operating Metrics (in millions) | Metric | Q2 2021 | Q2 2020 | YoY Change | | :----------- | :------ | :------ | :--------- | | Active Buyers | 1.34 | 1.24 | +8% | | Orders | 1.22 | 0.998 | +22% | [Key Financial and Operating Metrics](index=25&type=section&id=Key%20Financial%20and%20Operating%20Metrics) This section details active buyers, orders, and provides an Adjusted EBITDA reconciliation for the periods presented - Active Buyers (buyers with at least one purchase in the last 12 months) increased by **8%** year-over-year to **1.34 million** as of June 30, 2021[107](index=107&type=chunk)[108](index=108&type=chunk) - Orders (total orders placed, net of cancellations) grew by **22%** year-over-year to **1.22 million** for the three months ended June 30, 2021[107](index=107&type=chunk)[109](index=109&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(14,379) | $(6,657) | $(30,550) | $(19,872) | | Depreciation and amortization | $1,861 | $1,198 | $3,899 | $2,443 | | Stock-based compensation expense | $2,896 | $1,966 | $6,394 | $3,408 | | Interest expense | $573 | $224 | $1,132 | $497 | | Change in fair value of convertible preferred stock warrant liability | — | $(1) | $930 | $(173) | | Provision for income taxes | $13 | — | $40 | — | | **Adjusted EBITDA** | **$(9,036)** | **$(3,270)** | **$(18,155)** | **$(13,697)** | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section analyzes revenue breakdown, cost of revenue, gross profit, and operating expenses, highlighting growth and strategic shifts Revenue Breakdown (in thousands, except percentages) | Revenue Type | Q2 2021 | Q2 2020 | Change (Amount) | Change (%) | H1 2021 | H1 2020 | Change (Amount) | Change (%) | | :------------------- | :------ | :------ | :-------------- | :--------- | :------ | :------ | :-------------- | :--------- | | Consignment revenue | $48,597 | $34,914 | $13,683 | 39% | $93,285 | $70,228 | $23,057 | 33% | | Product revenue | $11,362 | $12,421 | $(1,059) | (9)% | $22,354 | $25,422 | $(3,068) | (12)% | | **Total revenue** | **$59,959** | **$47,335** | **$12,624** | **27%** | **$115,639** | **$95,650** | **$19,989** | **21%** | | Consignment % of total | 81% | 74% | 7% | | 81% | 73% | 8% | | | Product % of total | 19% | 26% | (7)% | | 19% | 27% | (8)% | | - Consignment revenue grew significantly (**39%** in Q2, **33%** in H1) and increased its share of total revenue, while product revenue decreased (**9%** in Q2, **12%** in H1) due to a strategic mix shift[113](index=113&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) Cost of Revenue and Gross Profit (in thousands, except percentages) | Metric | Q2 2021 | Q2 2020 | Change (Amount) | Change (%) | H1 2021 | H1 2020 | Change (Amount) | Change (%) | | :---------------------- | :------ | :------ | :-------------- | :--------- | :------ | :------ | :-------------- | :--------- | | Total cost of revenue | $15,827 | $14,324 | $1,503 | 10% | $31,789 | $30,013 | $1,776 | 6% | | Gross profit | $44,132 | $33,011 | $11,121 | 34% | $83,850 | $65,637 | $18,213 | 28% | | Gross profit margin | 74% | 70% | 4% | | 73% | 69% | 4% | | - Gross profit margin expanded by **400 basis points** in both the three and six months ended June 30, 2021, primarily due to the revenue mix shift towards higher-margin consignment sales[120](index=120&type=chunk)[121](index=121&type=chunk) Operating Expenses (in thousands, except percentages) | Expense Category | Q2 2021 | Q2 2020 | Change (Amount) | Change (%) | H1 2021 | H1 2020 | Change (Amount) | Change (%) | | :-------------------------------- | :------ | :------ | :-------------- | :--------- | :------ | :------ | :-------------- | :--------- | | Operations, product and technology | $31,062 | $22,149 | $8,913 | 40% | $59,374 | $47,624 | $11,750 | 25% | | Marketing | $15,957 | $10,898 | $5,059 | 46% | $31,403 | $23,899 | $7,504 | 31% | | Sales, general and administrative | $10,999 | $6,438 | $4,561 | 71% | $21,637 | $13,871 | $7,766 | 56% | | **Total operating expenses** | **$58,018** | **$39,485** | **$18,533** | **47%** | **$112,414** | **$85,394** | **$27,020** | **32%** | - Operating expenses grew faster than gross profit in both periods, reflecting investments in distribution center capacity, marketing, and public company infrastructure[133](index=133&type=chunk)[134](index=134&type=chunk) - Personnel-related costs in Operations, Product and Technology increased by **58%** in Q2 2021 and **41%** in H1 2021, driven by a **46%** and **27%** increase in average headcount, respectively, and higher compensation to attract and retain staff[134](index=134&type=chunk)[135](index=135&type=chunk) - Marketing and advertising costs increased by **44%** in Q2 2021 and **29%** in H1 2021, due to increased efforts to attract new buyers[139](index=139&type=chunk) - Sales, General and Administrative expenses surged by **71%** in Q2 2021 and **56%** in H1 2021, mainly due to increased personnel and professional services costs associated with scaling the business and becoming a public company[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by IPO proceeds, but it anticipates continued operating losses and negative cash flows, requiring future capital - As of June 30, 2021, the Company had **$173.1 million** in cash and cash equivalents and an accumulated deficit of **$282.7 million**[144](index=144&type=chunk) - Operations have historically generated negative cash flows, financed primarily through equity sales and debt, including **$175.5 million** net proceeds from the March 2021 IPO and **$45.3 million** from an August 2021 follow-on offering[144](index=144&type=chunk) - The Company expects continued operating losses and negative cash flows, with primary cash uses for distribution center operations, marketing, personnel, and capital expenditures for automation and expansion[145](index=145&type=chunk) - Existing cash and equivalents are projected to fund operations for at least the next twelve months, but future capital requirements depend on growth plans and market conditions, potentially necessitating additional financing[145](index=145&type=chunk)[146](index=146&type=chunk) [Cash Flows](index=36&type=section&id=Cash%20Flows) Cash flow analysis shows increased usage in operating and investing activities, offset by significant financing proceeds from the IPO Summary of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Operating activities | $(9,090) | $(1,467) | | Investing activities | $(66,417) | $(10,695) | | Financing activities | $184,081 | $7,398 | | Net increase (decrease) in cash | $108,574 | $(4,764) | - Net cash used in operating activities increased to **$9.1 million** in H1 2021 (from **$1.5 million** in H1 2020), driven by a net loss of **$30.6 million**, partially offset by non-cash charges and changes in operating assets and liabilities[149](index=149&type=chunk) - Net cash used in investing activities significantly increased to **$66.4 million** in H1 2021 (from **$10.7 million** in H1 2020), primarily due to **$57.4 million** in marketable securities purchases and **$9.0 million** in capital expenditures[151](index=151&type=chunk) - Net cash provided by financing activities surged to **$184.1 million** in H1 2021 (from **$7.4 million** in H1 2020), mainly from **$180.3 million** in IPO proceeds[152](index=152&type=chunk) [Contractual Obligations and Commitments](index=36&type=section&id=Contractual%20Obligations%20and%20Commitments) Contractual obligations remain largely unchanged, with an additional term loan borrowed in February 2021 - There have been no material changes to contractual obligations as of June 30, 2021, compared to December 31, 2020, except for an additional **$5.0 million** term loan borrowed from Western Alliance Bank in February 2021[155](index=155&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) The company reports no off-balance sheet financing arrangements or relationships with unconsolidated entities - The Company did not have any off-balance sheet financing arrangements or relationships with unconsolidated entities during the periods presented[156](index=156&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No significant changes to critical accounting policies have occurred since December 31, 2020 - No significant changes to critical accounting policies have occurred since December 31, 2020[158](index=158&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted new accounting standards ASU 2018-15 and ASU 2020-06, with no material financial impact - The Company adopted ASU 2018-15 (Intangibles—Goodwill and Other—Internal-use Software) and ASU 2020-06 (Debt with Conversion and Other Options) as of January 1, 2021, with no material impact on financial statements[46](index=46&type=chunk)[47](index=47&type=chunk) - The Company is currently evaluating the impact of ASU 2016-13 (Financial Instruments - Credit Losses), effective for fiscal years beginning after December 15, 2022[48](index=48&type=chunk)[50](index=50&type=chunk) [JOBS Act Accounting Election](index=37&type=section&id=JOBS%20Act%20Accounting%20Election) As an emerging growth company, ThredUp uses an extended transition period for new accounting standards, potentially affecting comparability - As an 'emerging growth company' under the JOBS Act, ThredUp has elected to use the extended transition period for complying with new or revised accounting standards, which may result in financial statements not being comparable to other public companies[160](index=160&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details ThredUp's exposure to market risks, including interest rate and inflation risks, which are not expected to materially impact financial condition - As of June 30, 2021, the Company held **$173.1 million** in cash and cash equivalents and **$57.4 million** in marketable securities, primarily short to intermediate-term fixed income securities[162](index=162&type=chunk) - The Company's loan and security agreement with Western Alliance Bank has an interest rate tied to the prime rate, with a **5.50%** nominal interest rate and **$40.0 million** principal outstanding as of June 30, 2021[163](index=163&type=chunk) - A hypothetical **100 basis point** change in interest rates is not expected to have a material impact on the Company's financial condition or results of operations[164](index=164&type=chunk) - Inflation has not had a material effect on the Company's business, results of operations, or financial condition to date[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of disclosure controls and internal control over financial reporting, noting material weaknesses and ongoing remediation efforts - As of June 30, 2021, the Company's disclosure controls and procedures were deemed **not effective** due to a material weakness in internal control over financial reporting[168](index=168&type=chunk) - Despite the material weakness, management concluded that the unaudited interim condensed consolidated financial statements fairly present the financial position, results of operations, and cash flows[168](index=168&type=chunk) - Previously reported material weaknesses include ineffective controls over accounting and proprietary data systems (user access, program change management, data validation) and inadequate controls over the preparation and review of account reconciliations and journal entries (segregation of duties, precision, timeliness)[170](index=170&type=chunk)[171](index=171&type=chunk)[269](index=269&type=chunk) - Remediation plans involve hiring additional accounting, finance, and IT personnel, implementing enhancements to accounting and proprietary systems, and evolving accounting and quarterly close processes[174](index=174&type=chunk)[270](index=270&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides other information, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, though ordinary course claims may arise - The Company is not a party to any material pending legal proceedings[178](index=178&type=chunk) - From time to time, the Company may be subject to legal proceedings and claims arising in the ordinary course of business, which management does not believe will have a material adverse effect[80](index=80&type=chunk)[178](index=178&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks and uncertainties across business, technology, legal, financial, and stock ownership, including the proposed Remix acquisition [Risk Factor Summary](index=42&type=section&id=Risk%20Factor%20Summary) Key risks include dependence on buyers/sellers, managing growth, history of losses, and material weaknesses in internal controls - Key risks include dependence on attracting and retaining buyers and sellers, managing rapid growth, a history of losses, potential fluctuations in quarterly results, and challenges in expanding distribution center operations[182](index=182&type=chunk) - Other significant risks involve material weaknesses in internal control over financial reporting, the adverse impact of the COVID-19 pandemic, data security compromises, the need for additional capital, and the volatility of Class A common stock due to its dual-class structure[184](index=184&type=chunk) [Risks Relating to Our Business and Industry](index=43&type=section&id=Risks%20Relating%20to%20Our%20Business%20and%20Industry) Business risks include attracting users, managing operations, rapid growth, competition, COVID-19 impacts, and reliance on third-party vendors - Continued growth relies on attracting and retaining buyers and sellers, which requires effective marketing, a broad selection of desirable items, reliable shipping, and high-quality customer experiences[183](index=183&type=chunk)[185](index=185&type=chunk) - The business is exposed to risks in sourcing, itemizing, warehousing, and shipping, including fluctuations in item quality, potential damage or contamination of items, and challenges in managing distribution center operations and personnel[186](index=186&type=chunk)[187](index=187&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) - Rapid growth places significant demands on management and resources, and failure to manage this growth effectively, including scaling operations and improving automation, could harm the business[190](index=190&type=chunk)[191](index=191&type=chunk)[194](index=194&type=chunk) - The Company has a history of net losses and anticipates increasing operating expenses, making future profitability uncertain, especially with aggressive investments in growth and public company costs[195](index=195&type=chunk) - The market is competitive and rapidly changing, with competition from new and secondhand item vendors, large online retailers, and other marketplaces, requiring continuous innovation and strategic relationships[206](index=206&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk) - The global COVID-19 pandemic has adversely impacted operations, including processing delays, increased costs, and shifts in consumer spending, and is expected to continue affecting the business[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[220](index=220&type=chunk) - Reliance on third-party shipping vendors and digital advertising platforms (search engines, social media) poses risks if terms change, performance declines, or algorithms are altered, potentially increasing costs or reducing buyer/seller acquisition[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[232](index=232&type=chunk) [Risks Relating to Information Technology, Intellectual Property, Data Security and Privacy](index=58&type=section&id=Risks%20Relating%20to%20Information%20Technology,%20Intellectual%20Property,%20Data%20Security%20and%20Privacy) IT risks involve data security breaches, evolving privacy laws, service interruptions, intellectual property infringement, and open-source software reliance - Compromises of data security, including hacking or data breaches, could lead to unexpected expenses, harm reputation, disrupt operations, and result in litigation, regulatory fines, or increased transaction fees[244](index=244&type=chunk) - The Company's use of personal information is subject to evolving privacy and data protection laws (e.g., CCPA, CPRA, GDPR), and non-compliance or changes in interpretation could result in investigations, fines, and significant costs[247](index=247&type=chunk)[248](index=248&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Interruptions or delays in services from third-party data centers (like AWS), internet service providers, or payment processors could prevent access to the marketplace and harm business operations[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk) - The Company faces risks of intellectual property infringement claims from third parties and challenges in protecting its own intellectual property (patents, trademarks, trade secrets), which could lead to costly litigation or loss of competitive advantage[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk) - Reliance on open-source software and third-party commercial software/services introduces risks of license non-compliance, defects, or loss of access, potentially increasing costs or limiting product features[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk) [Risks Relating to Legal, Regulatory, Accounting and Tax Matters](index=64&type=section&id=Risks%20Relating%20to%20Legal,%20Regulatory,%20Accounting%20and%20Tax%20Matters) Legal and regulatory risks include internal control weaknesses, compliance with evolving laws, payment fraud, anti-corruption, tax changes, and JOBS Act election - Material weaknesses in internal control over financial reporting, if not remediated, could lead to inaccurate financial reporting, failure to meet legal deadlines, and potential sanctions[268](index=268&type=chunk)[269](index=269&type=chunk)[271](index=271&type=chunk) - Failure to comply with evolving laws and regulations (e.g., e-commerce, consumer protection, product safety, secondhand dealer licensing) or changes in their interpretation could result in fines, penalties, and adverse effects on business practices and reputation[272](index=272&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) - Risks associated with payment methods, credit card fraud, and other consumer fraud could damage reputation, lead to financial losses, and subject the Company to fines or litigation[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) - The Company is subject to anti-corruption and anti-bribery laws (e.g., FCPA), and non-compliance, especially with international expansion, could result in severe criminal or civil sanctions and reputational harm[285](index=285&type=chunk)[287](index=287&type=chunk) - Changes in tax laws or adverse application of existing tax laws could substantially increase costs, reduce liquidity, and harm results of operations, including limitations on net operating loss (NOL) carryforwards[296](index=296&type=chunk)[297](index=297&type=chunk)[299](index=299&type=chunk) - As an emerging growth company, electing reduced reporting requirements under the JOBS Act may make Class A common stock less attractive to some investors and affect market volatility[300](index=300&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) [Risks Relating to Our Indebtedness and Liquidity](index=72&type=section&id=Risks%20Relating%20to%20Our%20Indebtedness%20and%20Liquidity) Indebtedness and liquidity risks involve the need for additional capital and restrictive covenants in loan agreements - The Company may require additional capital for business growth, and if not available on favorable terms, it could lead to significant dilution for stockholders or restrictive debt financing terms[304](index=304&type=chunk)[306](index=306&type=chunk) - The loan and security agreement with Western Alliance Bank imposes financial covenants and restrictions (e.g., on indebtedness, business changes, dividends), which could limit operational flexibility and adversely affect results if not complied with[305](index=305&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) [Risks Relating to Ownership of Our Class A Common Stock](index=73&type=section&id=Risks%20Relating%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) Stock ownership risks include price volatility, concentrated voting control, potential dilution from future sales, and anti-takeover provisions - The market price of Class A common stock may be volatile and decline due to various factors, including market performance, operating results, analyst expectations, and broader economic conditions[309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) - The dual-class common stock structure concentrates voting control with pre-IPO stockholders (directors, executive officers, affiliates), limiting other stockholders' influence on corporate matters and potentially depressing the stock's trading price[314](index=314&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk) - Sales of substantial amounts of Class A common stock in the public markets, especially after lock-up restrictions are released, or the perception of such sales, could cause the market price to decline[319](index=319&type=chunk)[320](index=320&type=chunk)[323](index=323&type=chunk)[325](index=325&type=chunk) - Future issuance of additional capital stock for financings, acquisitions, investments, or stock incentive plans will dilute existing stockholders' ownership interests[326](index=326&type=chunk) - The Company does not intend to pay dividends in the foreseeable future, meaning returns on investment will depend solely on stock price appreciation[327](index=327&type=chunk) - Provisions in charter documents and Delaware law could make company acquisition more difficult, limit stockholder influence, and potentially depress the Class A common stock price[328](index=328&type=chunk)[329](index=329&type=chunk)[331](index=331&type=chunk) [Risks Relating to our Proposed Acquisition](index=79&type=section&id=Risks%20Relating%20to%20our%20Proposed%20Acquisition) Risks for the proposed Remix acquisition include non-completion, integration challenges, and unknown liabilities - The proposed acquisition of Remix Global AD may not be completed on the anticipated timeline or at all, due to closing conditions, potentially leading to incurred costs without benefits and negative reactions from stakeholders[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk) - Integrating Remix with ThredUp's business could be more difficult, costly, or time-consuming than expected, potentially hindering the realization of anticipated benefits and disrupting ongoing operations[338](index=338&type=chunk)[339](index=339&type=chunk) - Remix may have unknown or contingent liabilities that were not discovered during due diligence, which could adversely affect ThredUp's business and financial condition post-acquisition[340](index=340&type=chunk) [General Risks](index=80&type=section&id=General%20Risks) General risks include dependence on key personnel, social media marketing risks, and management's limited public company experience - The Company's success depends on its executive officers and key employees; loss of these individuals or inability to attract and retain skilled talent could harm the business[341](index=341&type=chunk)[342](index=342&type=chunk) - Use of social media, emails, and text messages for marketing carries risks of reputational damage, fines, or penalties due to non-compliance with evolving laws or inadvertent disclosure of sensitive information[345](index=345&type=chunk) - The management team has limited experience managing a public company, and the requirements of being public may strain resources, divert attention, and affect the ability to attract and retain executive management and board members[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on unregistered sales of equity securities, specifically a warrant exercise for Class B common stock, exempt from registration - On May 28, 2021, a warrant to purchase **138,209 shares** was net exercised for **103,806 shares** of Class B common stock[353](index=353&type=chunk) - This issuance was exempt from registration under Section 4(a)(2) of the Securities Act, as it was a transaction by an issuer not involving a public offering[354](index=354&type=chunk) [Item 6. Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents and certifications - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, Investors' Rights Agreement, First Amendment to Loan and Security Agreement, and certifications from the Principal Executive and Financial Officers[355](index=355&type=chunk) - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Presentation Linkbase, and Cover Page Interactive Data File are also included[355](index=355&type=chunk)[356](index=356&type=chunk) [Signatures](index=86&type=section&id=Signatures) This section contains the official signatures of ThredUp Inc.'s CEO and CFO, certifying the Quarterly Report on Form 10-Q - The report is signed by James Reinhart, Chief Executive Officer (Principal Executive Officer), and Sean Sobers, Chief Financial Officer (Principal Financial and Accounting Officer), on August 10, 2021[361](index=361&type=chunk)

ThredUp, Inc. (NASDAQ:TDUP) Q1 2021 Earnings Conference Call May 12, 2021 4:30 PM ET Company Participants Lana Adair - IR James Reinhart - Co-Founder, CEO & Director Sean Sobers - CFO Conference Call Participants Ross Sandler - Barclays Bank Ralph Schackart - William Blair & Company Erinn Murphy - Piper Sandler & Co. Irwin Boruchow - Wells Fargo Securities Edward Yruma - KeyBanc Capital Markets Dana Telsey - Telsey Advisory Group Operator Ladies and gentlemen, thank you for your patience in holding, and wel ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents ThredUp Inc's unaudited condensed consolidated financial statements for the quarter ended March 31, 2021, detailing the company's financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Financials | March 31, 2021 | December 31, 2020 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $246,514 | $64,485 | +$182,029 | | Total assets | $323,770 | $142,911 | +$180,859 | | **Liabilities & Equity** | | | | | Total liabilities | $132,343 | $118,047 | +$14,296 | | Convertible preferred stock | $— | $247,041 | -$247,041 | | Total stockholders' equity (deficit) | $191,427 | $(222,177) | +$413,604 | | Total liabilities, convertible preferred stock and stockholders' equity | $323,770 | $142,911 | +$180,859 | - Total Assets increased significantly from **$142.9 million** at December 31, 2020, to **$323.8 million** at March 31, 2021, primarily driven by a substantial increase in cash and cash equivalents[16](index=16&type=chunk) - Stockholders' Equity (Deficit) shifted from a deficit of **$(222.2) million** to a positive equity of **$191.4 million**, largely due to the IPO proceeds and conversion of preferred stock[16](index=16&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenue Performance (Three months ended March 31) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) | | :---------------- | :------------------- | :------------------- | :------------ | | Consignment Revenue | $44,688 | $35,314 | +26.5% | | Product Revenue | $10,992 | $13,001 | -15.5% | | **Total Revenue** | **$55,680** | **$48,315** | **+15.2%** | - Gross Profit increased from **$32.6 million** in Q1 2020 to **$39.7 million** in Q1 2021, a **21.7% increase**[17](index=17&type=chunk) - Net Loss increased from **$(13.2) million** in Q1 2020 to **$(16.2) million** in Q1 2021[17](index=17&type=chunk) - Net Loss Per Share (Basic and Diluted) decreased from **$(1.23)** in Q1 2020 to **$(0.86)** in Q1 2021, despite a higher net loss, due to an increase in weighted-average shares outstanding[17](index=17&type=chunk) [Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity) - All **65,970,938 shares of convertible preferred stock** were converted to Class B common stock immediately prior to the IPO, eliminating the preferred stock balance[18](index=18&type=chunk)[29](index=29&type=chunk) - The initial public offering resulted in the sale of **13,800,000 Class A common stock shares**, adding **$175.5 million** to additional paid-in capital[18](index=18&type=chunk)[27](index=27&type=chunk) - Additional Paid-in Capital increased significantly from **$29.9 million** at December 31, 2020, to **$459.8 million** at March 31, 2021, primarily due to the IPO and preferred stock conversion[18](index=18&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Cash Flow Summary (Three months ended March 31) | Activity | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) | | :------------------------------------------------ | :------------------- | :------------------- | :------------ | | Net cash provided by (used in) operating activities | $1,077 | $(9,102) | +$10,179 | | Net cash used in investing activities | $(4,099) | $(4,673) | +$574 | | Net cash provided by (used in) financing activities | $185,051 | $(785) | +$185,836 | | **Net increase (decrease) in cash, cash equivalents and restricted cash** | **$182,029** | **$(14,560)** | **+$196,589** | - Operating Activities shifted from **$(9.1) million** used in Q1 2020 to **$1.1 million** provided in Q1 2021, primarily due to a **$9.3 million** net change in operating assets and liabilities, partially offset by a net loss of **$16.2 million**[123](index=123&type=chunk) - Financing Activities provided **$185.1 million** in Q1 2021, mainly from **$180.3 million** in IPO proceeds (net of underwriting discounts) and **$4.6 million** in debt financing[129](index=129&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) - ThredUp's IPO was declared effective on March 25, 2021, with Class A common stock trading on Nasdaq from March 26, 2021; the company sold **13.8 million shares** at **$14.00 per share**, generating **$175.5 million** in net proceeds[27](index=27&type=chunk)[75](index=75&type=chunk) - Immediately prior to the IPO, **65,970,938 shares of convertible preferred stock** and **164,973 convertible preferred stock warrants** were converted into Class B common stock and Class B common stock warrants, respectively[29](index=29&type=chunk)[55](index=55&type=chunk)[57](index=57&type=chunk) - Total stock-based compensation expense was **$3.5 million** for Q1 2021, up from **$1.4 million** in Q1 2020, with **$20.1 million** of unrecognized expense remaining[66](index=66&type=chunk) - The company previously identified **material weaknesses in internal control** over financial reporting related to accounting and proprietary data systems and the preparation/review of account reconciliations and journal entries; remediation efforts are ongoing[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[148](index=148&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes ThredUp's business, recent developments including its IPO and COVID-19 impact, and financial results for the three months ended March 31, 2021 [Overview](index=19&type=section&id=Overview) - ThredUp is one of the world's largest online resale platforms for women's and kids' apparel, shoes, and accessories, leveraging a custom-built operating platform[73](index=73&type=chunk) - Since 2009, the company has processed over **100 million unique secondhand items** from **35,000 brands**, saving buyers an estimated **$3.3 billion**[73](index=73&type=chunk) - The platform offers a managed marketplace for buyers and provides a convenient "Clean Out Kit" service for sellers[74](index=74&type=chunk) - ThredUp also offers a "Resale-as-a-Service" (RaaS) offering, enabling brands and retailers to participate in the resale economy[74](index=74&type=chunk) [Recent Business Developments](index=19&type=section&id=Recent%20Business%20Developments) - ThredUp completed its IPO on March 25, 2021, selling **13.8 million Class A common stock shares** at **$14.00 per share**, generating **$175.5 million** in net proceeds[75](index=75&type=chunk) - The COVID-19 pandemic led to operational modifications, temporary reductions in marketing spend, and cost-saving measures like retail store closures[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - In Q1 2021, the company experienced increased demand partly due to COVID-19 recovery efforts but also faced increased operating expenses to support demand[83](index=83&type=chunk)[85](index=85&type=chunk) - The number of unprocessed Clean Out Kits declined in Q1 2021 compared to Q4 2020 due to increased processing, leading to a higher volume of new listings[86](index=86&type=chunk) [Current Period Highlights](index=21&type=section&id=Current%20Period%20Highlights) - Total revenue reached a record **$55.7 million**, an increase of **15% year-over-year**[88](index=88&type=chunk) - Gross profit totaled **$39.7 million**, representing growth of **22% year-over-year**, with gross margin expanding from **68% to 71%**[88](index=88&type=chunk) - GAAP net loss was **$16.2 million** for Q1 2021, compared to a GAAP net loss of **$13.2 million** for Q1 2020[88](index=88&type=chunk) - Active Buyers grew **14% to 1.29 million**, and Orders grew **18% to 1.13 million** year-over-year[89](index=89&type=chunk)[91](index=91&type=chunk) [Key Financial and Operating Metrics](index=21&type=section&id=Key%20Financial%20and%20Operating%20Metrics) Key Metrics (Three months ended March 31) | Metric | 2021 (in thousands) | 2020 (in thousands) | YoY Change | | :---------------- | :------------------- | :------------------- | :------------ | | Active Buyers | 1,290 | 1,135 | +13.7% | | Orders | 1,128 | 956 | +18.0% | | Net loss | $(16,171) | $(13,215) | -22.4% | | Adjusted EBITDA | $(9,119) | $(10,427) | +12.6% | - **Active Buyers** are defined as a ThredUp buyer who has made at least one purchase in the last twelve months, serving as a key driver of revenue[92](index=92&type=chunk) - **Adjusted EBITDA** is a non-GAAP measure used to evaluate operating performance, excluding items like depreciation, stock-based compensation, and interest expense[94](index=94&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Revenue (Q1 2021 vs. Q1 2020) | Revenue Type | 2021 (in thousands) | 2020 (in thousands) | Change Amount | Change % | | :------------------- | :------------------- | :------------------- | :-------------- | :------- | | Consignment revenue | $44,688 | $35,314 | $9,374 | 27% | | Product revenue | $10,992 | $13,001 | $(2,009) | (15)% | | **Total revenue** | **$55,680** | **$48,315** | **$7,365** | **15%** | - Total revenue increase was primarily due to an **18% increase in Orders** and **14% growth in Active Buyers**, partially offset by a 2% decrease in revenue per Order[97](index=97&type=chunk) Cost of Revenue & Gross Profit (Q1 2021 vs. Q1 2020) | Cost/Profit Metric | 2021 (in thousands) | 2020 (in thousands) | Change Amount | Change % | | :-------------------------------- | :------------------- | :------------------- | :-------------- | :------- | | Cost of consignment revenue | $10,832 | $8,816 | $2,016 | 23% | | Cost of product revenue | $5,130 | $6,873 | $(1,743) | (25)% | | **Total cost of revenue** | **$15,962** | **$15,689** | **$273** | **2%** | | **Gross profit** | **$39,718** | **$32,626** | **$7,092** | **22%** | | Gross profit margin | 71% | 68% | 3% | | - Total cost of revenue as a percentage of total revenue **decreased by 300 basis points** (from 32% to 29%) due to the mix shift towards higher-margin consignment sales[101](index=101&type=chunk) Operating Expenses (Q1 2021 vs. Q1 2020) | Operating Expense | 2021 (in thousands) | 2020 (in thousands) | Change Amount | Change % | | :-------------------------------- | :------------------- | :------------------- | :-------------- | :------- | | Operations, product and technology | $28,312 | $25,475 | $2,837 | 11% | | Marketing | $15,446 | $13,001 | $2,445 | 19% | | Sales, general and administrative | $10,638 | $7,433 | $3,205 | 43% | | **Total operating expenses** | **$54,396** | **$45,909** | **$8,487** | **18%** | - Sales, general and administrative expenses **increased 43%**, primarily due to investments in scaling the business and public company readiness[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2021, the company had **$246.5 million in cash and cash equivalents** and an accumulated deficit of **$268.3 million**[117](index=117&type=chunk) - Historically, operations were financed through private equity sales and debt; the recent IPO generated **$175.5 million in net proceeds**[117](index=117&type=chunk) - The company expects **continued operating losses** and negative cash flows from operations due to investments in growth and infrastructure[118](index=118&type=chunk) - Existing cash and cash equivalents are believed to be sufficient to fund operations for at least the next twelve months[118](index=118&type=chunk) - Future capital requirements depend on distribution center expansion, marketing, new offerings, and economic conditions, potentially requiring additional financing[120](index=120&type=chunk) [Contractual Obligations and Commitments](index=30&type=section&id=Contractual%20Obligations%20and%20Commitments) - There have been no material changes to contractual obligations since December 31, 2020, other than an additional **$5.0 million term loan** borrowed in February 2021[131](index=131&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company did not have any off-balance sheet financing arrangements or relationships with unconsolidated entities for the periods presented[132](index=132&type=chunk) [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no significant changes to critical accounting policies since December 31, 2020[134](index=134&type=chunk) - The preparation of financial statements requires management to make judgments and estimates that affect reported amounts[133](index=133&type=chunk) [Recent Accounting Pronouncements](index=31&type=section&id=Recent%20Accounting%20Pronouncements) - For information on recently issued accounting pronouncements, refer to Note 2 titled "Significant Accounting Policies" in Part 1, Item 1 of this report[135](index=135&type=chunk) [JOBS Act Accounting Election](index=31&type=section&id=JOBS%20Act%20Accounting%20Election) - As an "emerging growth company," ThredUp has elected to use the extended transition period for complying with new accounting standards[136](index=136&type=chunk)[276](index=276&type=chunk) - This election allows the company to delay adopting new accounting standards, which may affect comparability with other public companies[136](index=136&type=chunk)[275](index=275&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses ThredUp's exposure to market risks, primarily focusing on interest rate risk and inflation risk [Interest Rate Risk](index=32&type=section&id=Interest%20Rate%20Risk) - As of March 31, 2021, the company held **$246.5 million in cash and cash equivalents**, primarily in money market funds, with no material risk from interest rate fluctuations to date[137](index=137&type=chunk) - The company's **$40.0 million term loan** has an interest rate tied to the prime rate with a **5.75% floor**; a hypothetical 100 basis point change would not materially impact financials[138](index=138&type=chunk)[139](index=139&type=chunk) [Inflation Risk](index=32&type=section&id=Inflation%20Risk) - Management does not believe inflation has had a material effect on the business, but an inability to offset future inflationary pressures could be harmful[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of disclosure controls, acknowledging a material weakness in internal control but affirming the fair presentation of financial statements [Evaluation of Disclosure Controls and Procedures](index=33&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of March 31, 2021, the CEO and CFO concluded that disclosure controls and procedures were **not effective** due to a previously reported material weakness in internal control[142](index=142&type=chunk) - Despite the material weakness, management concluded that the financial statements fairly present the company's financial position in conformity with GAAP[142](index=142&type=chunk) [Previously Reported Material Weaknesses in Internal Control Over Financial Reporting](index=33&type=section&id=Previously%20Reported%20Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) - Identified control deficiencies in the design and implementation of internal control for fiscal years 2018-2020, specifically related to accounting and proprietary data systems[143](index=143&type=chunk)[144](index=144&type=chunk) - Also identified inadequate controls over the preparation and review of account reconciliations and journal entries, including insufficient segregation of duties[145](index=145&type=chunk) [Remediation Plans](index=34&type=section&id=Remediation%20Plans) - The company is actively addressing the material weaknesses by hiring additional personnel, implementing new financial processes, and enhancing system controls[148](index=148&type=chunk) [Changes in Internal Control over Financial Reporting](index=34&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No material impact to internal controls over financial reporting despite employees working remotely due to the COVID-19 pandemic[149](index=149&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) ThredUp Inc is not currently a party to any material pending legal proceedings, though it may face litigation in the ordinary course of business - The company is not a party to any material pending legal proceedings[152](index=152&type=chunk) - From time to time, the company may be subject to legal proceedings and claims arising in the ordinary course of business[152](index=152&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section outlines the significant risks and uncertainties that could adversely affect ThredUp's business, operations, financial condition, and stock price [Risk Factor Summary](index=36&type=section&id=Risk%20Factor%20Summary) - **Business & Industry Risks** include dependence on attracting buyers/sellers, managing growth, history of losses, distribution center operations, and the impact of COVID-19[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - **IT, IP, Data Security & Privacy Risks** cover compromises of data security, compliance with privacy laws (e.g, CCPA), and reliance on third-party data centers[158](index=158&type=chunk)[217](index=217&type=chunk)[221](index=221&type=chunk)[226](index=226&type=chunk)[230](index=230&type=chunk)[232](index=232&type=chunk)[237](index=237&type=chunk) - **Legal, Regulatory, Accounting & Tax Risks** involve material weaknesses in internal control, non-compliance with laws, payment fraud, and limitations on NOLs[158](index=158&type=chunk)[242](index=242&type=chunk)[246](index=246&type=chunk)[252](index=252&type=chunk)[255](index=255&type=chunk)[259](index=259&type=chunk)[262](index=262&type=chunk)[266](index=266&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[272](index=272&type=chunk) - **Risks Relating to Ownership of Class A Common Stock** include volatile market price, dual-class structure concentrating voting control, and potential stock price decline[158](index=158&type=chunk)[281](index=281&type=chunk)[285](index=285&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk)[292](index=292&type=chunk) [Risks Relating to Our Business and Industry](index=37&type=section&id=Risks%20Relating%20to%20Our%20Business%20and%20Industry) - Continued growth relies on attracting and retaining buyers and sellers and generating a sufficient supply of high-quality secondhand items[157](index=157&type=chunk)[159](index=159&type=chunk) - The business is subject to risks in sourcing, itemizing, warehousing, and shipping, including fluctuations in item quality and potential damage or contamination[160](index=160&type=chunk)[161](index=161&type=chunk) - Rapid growth places significant demands on management and resources; failure to manage growth effectively could harm the business[164](index=164&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk) - The **COVID-19 pandemic** continues to have an adverse impact, including operational limitations, increased costs, and shifts in consumer demand[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[195](index=195&type=chunk) [Risks Relating to Information Technology, Intellectual Property, Data Security and Privacy](index=51&type=section&id=Risks%20Relating%20to%20Information%20Technology,%20Intellectual%20Property,%20Data%20Security%20and%20Privacy) - Risk of hacking or other attacks leading to **data breaches** of personal information, which could disrupt operations and harm reputation[217](index=217&type=chunk)[218](index=218&type=chunk) - Subject to evolving state, federal, and international **privacy laws** (e,g, CCPA, CPRA); non-compliance could result in fines and enforcement actions[221](index=221&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - Reliance on **third-party data centers (AWS)**, internet providers, and payment processors; service interruptions could disrupt operations[226](index=226&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - Inability to successfully protect its own **intellectual property** (patents, trademarks) could harm its competitive position and brand recognition[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) [Risks Relating to Legal, Regulatory, Accounting and Tax Matters](index=57&type=section&id=Risks%20Relating%20to%20Legal,%20Regulatory,%20Accounting%20and%20Tax%20Matters) - Previously identified **material weaknesses in internal control** over financial reporting could lead to inaccurate reporting or sanctions if not remediated[242](index=242&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk) - Failure to comply with evolving laws and regulations (e,g, e-commerce, consumer protection) could result in fines or penalties[246](index=246&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - Risks from **fraudulent transactions** could lead to losses, lawsuits, and damage to reputation[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - Ability to use **net operating loss (NOL) carryforwards** to offset future taxable income may be limited by Section 382 of the Internal Revenue Code[272](index=272&type=chunk) [Risks Relating to Our Indebtedness and Liquidity](index=65&type=section&id=Risks%20Relating%20to%20Our%20Indebtedness%20and%20Liquidity) - The company may require additional financing for business growth, which may not be available on favorable terms or could dilute stockholders[277](index=277&type=chunk) - The loan agreement with Western Alliance Bank imposes **restrictive covenants** that limit the company's ability to incur debt, dispose of property, or pay dividends[278](index=278&type=chunk)[279](index=279&type=chunk) - Past non-compliance with debt covenants required waivers; future failure to comply could lead to an event of default and acceleration of debt[280](index=280&type=chunk) [Risks Relating to Ownership of Our Class A Common Stock](index=66&type=section&id=Risks%20Relating%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) - The market price of Class A common stock may be **highly volatile** and decline regardless of operating performance[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk) - The **dual-class structure** concentrates **98.3% of voting power** with pre-IPO stockholders, limiting other stockholders' influence on corporate matters[285](index=285&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) - The dual-class structure may make the company **ineligible for inclusion in certain stock indices** (e,g, S&P 500), potentially affecting the stock price[289](index=289&type=chunk) - Sales of large amounts of Class A common stock, especially after **lock-up restrictions expire**, could cause the market price to decline[292](index=292&type=chunk)[293](index=293&type=chunk) [General Risks](index=72&type=section&id=General%20Risks) - Success relies heavily on executive officers and key employees; loss of these individuals could harm the business[307](index=307&type=chunk)[308](index=308&type=chunk) - Past and future cost-cutting measures may disrupt business and affect employee retention[309](index=309&type=chunk) - Use of social media for marketing carries risks of adverse impact on reputation or fines if laws are not complied with[310](index=310&type=chunk) - The management team has **limited experience managing a public company**, which may strain resources and divert attention[311](index=311&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered sales of equity securities and confirms the use of IPO proceeds aligns with previously disclosed plans - On March 30, 2021, a warrant was net exercised for **24,837 shares of Class B common stock**[316](index=316&type=chunk) - From January 1 to March 26, 2021, **923,291 Class B common stock options** were granted to directors, employees, and consultants[316](index=316&type=chunk) - During the same period, **1,458,159 Class B common stock shares** were issued through option exercises[317](index=317&type=chunk) - The IPO closed on March 30, 2021, generating net proceeds of **$175.5 million** from the sale of **13.8 million Class A common stock shares**[319](index=319&type=chunk) - There has been no material change in the planned use of proceeds from the IPO[320](index=320&type=chunk) [Item 6. Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, agreements, and certifications - Includes Amended and Restated Certificate of Incorporation and Bylaws as organizational documents[322](index=322&type=chunk) - Features the Tenth Amended and Restated Investors' Rights Agreement and the Amended and Restated Loan and Security Agreement[322](index=322&type=chunk) - Details the 2021 Stock Option and Incentive Plan, 2021 Employee Stock Purchase Plan, and various executive compensation plans[322](index=322&type=chunk) - Contains certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906[322](index=322&type=chunk)[325](index=325&type=chunk) [Signatures](index=77&type=section&id=Signatures) This section contains the official signatures of ThredUp Inc's CEO and CFO, certifying the filing of the Quarterly Report on Form 10-Q - The report is signed by James Reinhart, Chief Executive Officer, and Sean Sobers, Chief Financial Officer[329](index=329&type=chunk) - The signing date for both officers is May 12, 2021[329](index=329&type=chunk)