• Consolidated Revenue: $73 million, a decrease of 11% year-over-year.
• US Net Revenue: $61.5 million, down 9.6% over last year.
• US Active Buyers: 1.2 million, a 7.3% decline.
• US Orders: 1.2 million, a 10.5% decline.
• Consolidated Gross Margin: 71.2%, a 220-basis point increase over last year.
• US Gross Margin: 79.3%, a 70-basis point improvement over last year.
• Consolidated GAAP Net Loss: $25 million.
• Adjusted EBITDA Loss: $2.5 million.
• US Adjusted EBITDA: $700,000, or 1.1% of revenue.
• Cash and Securities: $60.6 million at the end of the quarter.
• US Cash Flow from Operations: $3.9 million generated in Q3.
• Q4 US Revenue Guidance: $58 million to $60 million, a 4% decline at the midpoint.
• Q4 US Gross Margin Guidance: 78.5% to 79.5%.
• Full Year 2024 US Revenue Guidance: $250.8 million to $252.8 million.
• Full Year 2024 US Gross Margin Guidance: 79.2% to 79.4%.
• Full Year 2024 Positive Adjusted EBITDA: 1.6% to 2.1% of revenue.

• Warning! GuruFocus has detected 3 Warning Signs with TDUP.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ThredUp Inc (NASDAQ:TDUP) exceeded its own expectations for Q3 and raised estimates for Q4 and the year.
• The company reported its strongest new buyer acquisition quarter in over two years, with improved customer retention metrics.
• Gross margins in the US improved by 70 basis points year-over-year to 79.3%, and the company achieved positive adjusted EBITDA for the fifth consecutive quarter.
• ThredUp Inc (NASDAQ:TDUP) is making significant advancements in AI technologies, enhancing the second-hand shopping experience with features like AI search functionality and image search.
• The company is transitioning its US marketplace to a consignment model, which now makes up more than 90% of US revenue, expected to improve cash flow and working capital cycle.

Negative Points

• Consolidated revenue for Q3 2024 decreased by 11% year-over-year, with US revenue down 9.6%.
• US active buyers and orders declined by 7.3% and 10.5%, respectively, compared to the previous year.
• The company reported a consolidated GAAP net loss of $25 million for the third quarter.
• ThredUp Inc (NASDAQ:TDUP) had to be more promotional to drive sales, indicating challenges in maintaining pricing power.
• The company is exiting the European market, which has been a distraction and required a final cash investment of approximately $2 million for the divestiture.

Q & A Highlights

Q: What KPIs are giving you confidence to raise expectations for Q4, and how should we think about EBITDA margins into 2025? A: James Reinhart, CEO, explained that Q3 was the best acquisition quarter in years, with improved retention and product enhancements. Despite macroeconomic challenges, the fundamentals are stronger. For 2025, they expect better growth and EBITDA driven by improved gross and contribution margins. Sean Sobers, CFO, added that contribution margins have improved significantly since the IPO, and they plan to reinvest these gains into business growth.

Q: How will ThredUp allocate resources as a US-only business, and what impact do AI and product initiatives have? A: James Reinhart stated that the focus will be on enhancing the US marketplace model, data advantage, and infrastructure. AI and product initiatives like Style Chat and Image Search are improving customer acquisition and retention by enhancing the shopping experience and targeting capabilities. These efforts are expected to drive growth and efficiency in the US market.

Q: Can you discuss the efficiency in marketing spend and its impact on buyer acquisition and retention? A: James Reinhart noted that Q3 saw strong acquisition with similar or reduced marketing spend, indicating improved efficiency. Lessons from Q2 led to fresh strategies in acquisition and retention, resulting in better customer metrics. The focus is on combining marketing investments with strong merchandising and operational improvements to enhance overall performance.

Q: Is the revenue guidance for Q4 inclusive of the European business, and what is the rationale for staying invested in Europe? A: Sean Sobers confirmed that the guidance includes both US and consolidated figures. The European revenue decline is by design as they transition to consignment, which is expected to improve margins. James Reinhart emphasized the focus on the US business, with Europe being managed to optimize its future potential.

Q: What are the expectations for the European business post-divestiture, and how does it affect the US focus? A: James Reinhart mentioned that the European business is being right-sized under Florin Filote's leadership, with a focus on transitioning to a more profitable model. This allows ThredUp to concentrate resources and efforts on the US market, which is expected to drive growth and profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.