ThredUp(TDUP) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2024, total revenue was $79.8 million, a decrease of 3.5% year-over-year [22] - Active buyers were 1.7 million, representing a 2.6% decline, while orders were also down 6% [22] - GAAP net loss was $14 million compared to a loss of $18.8 million in the same quarter last year [25] - Adjusted EBITDA loss was $1.5 million, or negative 1.9% of revenue [25] - Consolidated gross margin was 70.4%, a 300 basis point increase year-over-year [24] Business Line Data and Key Metrics Changes - U.S. net revenue was $66.7 million, flat year-over-year, with active buyers at 1.3 million, a 5.6% decline [23] - European business posted net revenue of $13 million, an 18% decline year-over-year [23] - U.S. achieved gross margin of 78.8%, 240 basis points higher than last year [24] - EU gross margin was 27.3%, a 250 basis point decline year-over-year [24] Market Data and Key Metrics Changes - The U.S. business is experiencing challenges due to a more selective consumer environment influenced by inflation [7] - The European market continues to struggle, leading to a decision to divest the European business [8][21] Company Strategy and Development Direction - The company plans to exit the European market and focus on U.S. operations to improve gross margins and achieve positive adjusted EBITDA [21][27] - A new AI product launch is expected to enhance customer experience and drive growth [15] - The company aims to improve unit economics and drive process improvements in distribution centers [17] Management's Comments on Operating Environment and Future Outlook - Management expects the consumer environment to remain challenging until inflation decreases and job stability improves [16] - The company acknowledges mistakes in its buyer acquisition strategy and is focused on correcting these issues [20] - Future growth is anticipated to be slower due to the impact of strategic changes and macroeconomic conditions [28] Other Important Information - The company invested over $20 million in the European business over the past six quarters, which did not yield expected results [7] - The company is maintaining a cautious approach to investments in marketing and operations while focusing on improving product experience [17] Q&A Session Summary Question: What specifically changed in the second quarter regarding the European business? - Management noted that the transition to consignment in Europe took longer than expected, leading to the decision to divest the European business [34] Question: How much was the impact of the self-inflicted issues on U.S. EBITDA? - The estimated impact was around $2 million in EBITDA for the full year due to the buyer strategy change [40] Question: Can you explain the changes made in customer acquisition and their impact? - The company shifted from percentage discounts to flat dollar-based credits, which did not perform as well, leading to a loss of approximately 90,000 customers [43] Question: What is the outlook for consumer behavior on the platform? - Management observed that budget shoppers are becoming more discerning, requiring higher discounts to convert [45] Question: What is the expected revenue for the third and fourth quarters? - For Q3, revenue is expected to be in the range of $59 million to $61 million, and for Q4, it is expected to be between $57 million and $59 million [30][31]