• Revenue: $67.3 million for Q4 2024, a 9.5% increase year over year.
• Gross Margin: 80.4% for Q4 2024, a 290 basis points increase from the previous year.
• Adjusted EBITDA: $5 million or 7.4% of revenue for Q4 2024, representing a 330 basis points margin improvement.
• Active Buyers: 1.3 million, a decline of 6% year over year.
• Order Growth: 1.2 million orders, a 2% increase year over year.
• Cash and Investments: Ended Q4 2024 with $52.8 million, down from $57.1 million at the beginning of the quarter.
• CapEx: $2.5 million in Q4 2024, totaling $6.6 million for the year.
• 2025 Revenue Guidance: $270 million to $280 million, representing 6% growth at the midpoint.
• 2025 Gross Margin Guidance: Expected to be in the range of 77% to 79% of revenue.
• 2025 Adjusted EBITDA Guidance: Approximately flat to 2024's 3.3%.

• Warning! GuruFocus has detected 5 Warning Signs with TDUP.

Release Date: March 03, 2025

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

Positive Points

• ThredUp Inc (NASDAQ:TDUP) reported a 9.5% year-over-year increase in revenue for Q4 2024, driven by marketing investments, AI upgrades, and a focus on core business.
• Customer acquisition remained strong, with new customer volume up 32% year-over-year in Q4, and Q1 shaping up to be one of the strongest acquisition quarters in the company's history.
• The company achieved its first full year of adjusted profitability in 2024, with a significant improvement in adjusted EBITDA margins.
• ThredUp Inc (NASDAQ:TDUP) is leveraging generative AI to enhance the shopping experience, with AI search functionality driving higher conversion rates and new shopping methods being introduced.
• The company is confident in reaching positive free cash flow on an annual basis in 2025, supported by multi-year investments in infrastructure, technology, and software.

Negative Points

• Active buyers declined by 6% year-over-year, despite the increase in new customer volume.
• Gross margins are expected to decline slightly in 2025 due to higher incentives required for converting first-time buyers.
• The company faces uncertainty in the consumer environment, with potential impacts from tariffs and inflation on consumer spending.
• ThredUp Inc (NASDAQ:TDUP) plans to maintain similar adjusted EBITDA margins in 2025, indicating limited margin expansion despite revenue growth.
• The company is still in the early stages of aggressively investing in marketing and operations, which may pose risks if trends do not play out as expected.

Q & A Highlights

Q: Can you provide guidance on the pacing of revenue, gross margin, and EBITDA throughout the year? A: Sean Sobers, CFO: Revenue growth is expected to accelerate from Q1 to Q2 and Q2 to Q3, with Q4 still showing growth. Gross margin will remain consistent throughout the year. EBITDA will be similar in Q2 to Q1, expand in Q3, and decrease in Q4 as we prepare for 2026, focusing on processing and inbound goods.

Q: How are you planning to manage marketing spend and stock-based compensation in 2025? A: James Reinhart, CEO: We have ample capacity in our distribution centers and do not anticipate significant CapEx until at least 2027. We are reducing stock-based compensation by over 40% in 2025, opting for more cash usage to minimize equity dilution. Sean Sobers, CFO: Marketing spend will be about 19% of revenue quarterly, driven by better returns on investment.

Q: Can you elaborate on the impact of image search on conversion rates and its utilization? A: James Reinhart, CEO: Image search allows customers to find items visually, which is more intuitive than text search. This feature has led to higher conversion rates as customers can easily find looks they desire, such as those seen in magazines or on Pinterest. It has become a default way for many to shop online.

Q: How might new tariffs affect your marketing strategy and pricing? A: James Reinhart, CEO: Tariffs could lower cost-per-click rates, allowing us to spend more on marketing if customer quality remains high. Additionally, tariffs on new apparel could make second-hand goods more attractive, benefiting our business. Our dynamic pricing algorithm can adjust to market changes, ensuring we remain competitive.

Q: What are your expectations for the impact of AI and technology investments on your business? A: James Reinhart, CEO: AI investments enhance the shopping experience, with features like AI search driving higher conversion rates. We are integrating AI across our infrastructure, improving product imagery and measurements, which should lead to better conversion, lower returns, and increased customer retention.

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