tdup-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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 June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number: 001-40249

ThredUp Inc.

(Exact name of registrant as specified in its charter)


Delaware			26-4009181
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

969 Broadway, Suite 200 Oakland, California			94607
(Address of principal executive offices)			(Zip Code)

(415) 402-5202

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value per share

TDUP

The Nasdaq Stock Market LLC

Long-Term Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 75,238,351 shares of Class A common stock and 30,230,675 shares of Class B common stock outstanding as of August 1, 2023.

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		Page Number
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Unaudited Condensed Consolidated Balance Sheets	5
	Unaudited Condensed Consolidated Statements of Operations	6
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	7
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	8
	Unaudited Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
	Signatures	33

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, 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 contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our revenue, cost of revenue and operating expenses and our ability to achieve and maintain future profitability;

•the sufficiency of our cash, cash equivalents and capital resources to meet our liquidity needs;

•our ability to effectively manage or sustain our growth and to effectively expand our operations;

•our strategies, plans, objectives and goals, including our expectations regarding future infrastructure investments as well as restructuring activities;

•our ability to attract and retain buyers and sellers and the continued impact of network effects as we scale our platform;

•our ability to continue to generate revenue from new Resale-as-a-Service (“RaaS”) offerings as sources of revenue;

•trends in our key financial and operating metrics;

•our estimated market opportunity;

•economic and industry trends, projected growth or trend analysis, including the effects of foreign currency exchange rate fluctuations, inflationary pressures, increased interest rates, changing consumer habits and general global economic uncertainty;

•our ability to comply with applicable laws and regulations;

•our ability to remediate our material weakness in our internal control over financial reporting;

•our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; and

•the increased expenses associated with being a public company.

You should not rely upon forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2022, in Part II, Item 1A, Risk Factors, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and elsewhere in this Quarterly Report on Form 10-Q, as well as in our other filings with the Securities and Exchange Commission (“SEC”). Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

***

Unless otherwise indicated or unless the context requires otherwise, all references in this document to “thredUP”, “the Company”, “we”, “us”, “our”, or similar references are to ThredUp Inc. and its consolidated subsidiaries.

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thredUP is one of the world’s largest online resale platforms for apparel, shoes and accessories, based primarily on items processed, items sold and the capacity of our distribution centers.

The “estimated retail price” of an item is based on the estimated original retail price of a comparable item of the same quality, construction and material offered elsewhere in new condition. Our estimated original retail prices are set by our team of merchants who periodically monitor market prices for the brands and styles that we offer on our marketplaces.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THREDUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2023		December 31, 2022
	(in thousands, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	51,073	$	38,029
Marketable securities	25,856		66,902
Accounts receivable, net	3,782		4,669
Inventory	20,362		17,519
Other current assets	8,238		7,076
Total current assets	109,311		134,195
Operating lease right-of-use assets	45,265		46,153
Property and equipment, net	93,786		92,482
Goodwill	11,756		11,592
Intangible assets	9,346		10,499
Other assets	6,867		7,027
Total assets	$	276,331	$	301,948
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,780	$	7,800
Accrued and other current liabilities	43,334		50,155
Seller payable	19,471		16,166
Operating lease liabilities, current	5,834		6,413
Current portion of long-term debt	3,830		3,879
Total current liabilities	81,249		84,413
Operating lease liabilities, non-current	47,356		48,727
Long-term debt, net of current portion	23,928		25,788
Other non-current liabilities	3,200		3,019
Total liabilities	155,733		161,947
Commitments and contingencies (Note 10)
Stockholders’ equity:
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of June 30, 2023 and December 31, 2022; 105,335 and 101,532 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	11		10
Additional paid-in capital	569,780		551,852
Accumulated other comprehensive loss	(3,013)		(4,234)
Accumulated deficit	(446,180)		(407,627)
Total stockholders’ equity	120,598		140,001
Total liabilities and stockholders’ equity	$	276,331	$	301,948

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(in thousands, except per share amounts)
Revenue:
Consignment	$	53,415	$	48,536	$	99,894	$	95,971
Product	29,243		27,885		58,686		53,145
Total revenue	82,658		76,421		158,580		149,116
Cost of revenue:
Consignment	9,580		10,218		18,800		20,267
Product	17,346		13,555		32,955		25,973
Total cost of revenue	26,926		23,773		51,755		46,240
Gross profit	55,732		52,648		106,825		102,876
Operating expenses:
Operations, product, and technology	39,771		43,961		78,118		83,122
Marketing	18,643		19,640		35,513		36,618
Sales, general, and administrative	16,030		17,380		32,089		32,044
Total operating expenses	74,444		80,981		145,720		151,784
Operating loss	(18,712)		(28,333)		(38,895)		(48,908)
Interest expense	721		238		798		661
Other income, net	(685)		(181)		(1,161)		(484)
Loss before provision for income taxes	(18,748)		(28,390)		(38,532)		(49,085)
Provision for income taxes	12		9		21		22
Net loss	$	(18,760)	$	(28,399)	$	(38,553)	$	(49,107)
Loss per share, basic and diluted	$	(0.18)	$	(0.29)	$	(0.37)	$	(0.50)
Weighted-average shares used in computing loss per share, basic and diluted	103,905		99,331		102,911		98,979

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	(in thousands)
Net loss	$	(18,760)	$	(28,399)	$	(38,553)	$	(49,107)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(236)		(2,333)		308		(3,041)
Unrealized gain (loss) on available-for-sale securities	303		(254)		913		(1,256)
Total other comprehensive income (loss)	67		(2,587)		1,221		(4,297)
Total comprehensive loss	$	(18,693)	$	(30,986)	$	(37,332)	$	(53,404)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	(in thousands)
Balance as of December 31, 2022	101,532	$	10	$	551,852	$	(4,234)	$	(407,627)	$	140,001
Issuance of common stock from exercise of stock options and restricted stock units	1,484	—		275						275
Stock-based compensation				9,720						9,720
Shares withheld related to net share settlement	(180)	—		(270)						(270)
Net income								(19,793)		(19,793)
Other comprehensive income						1,154				1,154
Balance as of March 31, 2023	102,836	10		561,577		(3,080)		(427,420)		131,087
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan	2,663	1		593						594
Stock-based compensation				7,958						7,958
Shares withheld related to net share settlement	(164)	—		(348)						(348)

Net income								(18,760)		(18,760)
Other comprehensive income						67				67
Balance as of June 30, 2023	105,335	$	11	$	569,780	$	(3,013)	$	(446,180)	$	120,598


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	(in thousands)
Balance as of December 31, 2021	98,435	$	10	$	522,161	$	(1,094)	$	(315,343)	$	205,734
Issuance of common stock from exercise of stock options and restricted stock units	507	—		754						754
Stock-based compensation				3,618						3,618
Net income								(20,708)		(20,708)
Other comprehensive loss						(1,710)				(1,710)
Balance as of March 31, 2022	98,942	10		526,533		(2,804)		(336,051)		187,688
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan	1,030	—		1,031						1,031
Stock-based compensation				10,353						10,353
Shares withheld related to net share settlement	(19)	—		(157)						(157)
Net income								(28,399)		(28,399)
Other comprehensive loss						(2,587)				(2,587)
Balance as of June 30, 2022	99,953	$	10	$	537,760	$	(5,391)	$	(364,450)	$	167,929

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	June 30, 2023		June 30, 2022
	(in thousands)
Cash flows from operating activities:
Net loss	$	(38,553)	$	(49,107)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	8,517		6,678
Stock-based compensation expense	17,019		13,581
Reduction in carrying amount of right-of-use assets	3,177		2,905
Other	291		1,138
Changes in operating assets and liabilities:
Accounts receivable, net	916		682
Inventory	(2,670)		(4,703)
Other current and non-current assets	(699)		(4,799)
Accounts payable	177		1,954
Accrued and other current liabilities	(1,750)		749
Seller payable	3,301		3,465
Operating lease liabilities	(4,240)		2,602
Other non-current liabilities	(325)		20
Net cash used in operating activities	(14,839)		(24,835)
Cash flows from investing activities:
Purchases of marketable securities	(7,878)		(3,475)
Maturities of marketable securities	49,479		26,294
Purchases of property and equipment	(12,292)		(27,583)
Net cash provided by (used in) investing activities	29,309		(4,764)
Cash flows from financing activities:
Repayment of debt	(2,000)		(4,000)
Proceeds from issuance of stock-based awards	2,136		3,147
Payment of withholding taxes on stock-based awards	(1,885)		(1,479)
Net cash used in financing activities	(1,749)		(2,332)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	324		(521)
Net change in cash, cash equivalents, and restricted cash	13,045		(32,452)
Cash, cash equivalents, and restricted cash, beginning of period	44,051		91,840
Cash, cash equivalents, and restricted cash, end of period	$	57,096	$	59,388

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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THREDUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

ThredUp Inc. (“thredUP” or the “Company”) was formed as a corporation in the State of Delaware in January 2009. thredUP operates a large resale platform that enables consumers to buy and sell primarily secondhand apparel, shoes, and accessories.

2. Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany account balances and transactions have been eliminated upon consolidation. The unaudited condensed consolidated financial statements were prepared in accordance with the United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10‑Q and Article 10 of Regulation S-X. As permitted under those rules, certain footnotes or other financial information may be condensed or omitted.

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and the related disclosures. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to: the useful lives of property and equipment and intangibles; allowance for sales returns; breakage on loyalty points and rewards, and gift cards; valuation of inventory stock-based compensation, right-of-use assets, goodwill and acquired intangible assets, and income taxes.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 2023, and the results of operations and cash flows for the interim periods presented.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”).

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated statement of cash flows to conform to the current period presentation.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU changes the impairment model for most financial assets, requiring the use of an expected loss model that requires entities to estimate the lifetime expected credit loss on financial assets measured at amortized cost. Such credit losses will be recorded as an allowance to offset the amortized cost of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In addition, credit losses relating to available-for-sale debt securities will now be recorded through an allowance for credit losses rather than as a direct write-down to the security. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this guidance during the first quarter of 2023 did not have a material impact on the Company’s condensed consolidated financial statements.

Revenue from Loyalty Reward Redemption and Expiration

The Company has a customer loyalty program, which allows end-customers to earn and accumulate points with each qualifying purchase. Earned points can be redeemed for reward coupons, such as discounts, free shipping, or waived restocking fee, which can be applied to future purchases or returns. Unredeemed points expire after one year from the date the points were earned. Reward coupons expire six months from the date the reward is claimed. Points earned on purchases are a material right, representing a separate performance obligation.

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The allocated consideration for the points earned through qualifying purchase transactions is deferred based on the standalone selling price of the points and recorded within deferred revenue under accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue is recognized for these performance obligations at a point in time when rewards are redeemed by the end customer or expired.

As of June 30, 2023 and December 31, 2022, the Company had a deferred revenue liability of $3.1 million and $3.3 million, respectively, related to its customer loyalty program, which is included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. The Company recognized revenue from loyalty reward redemption of $2.4 million and $2.5 million for the three months ended June 30, 2023 and 2022, respectively, and $4.6 million and $5.2 million for the six months ended June 30, 2023 and 2022, respectively. As our loyalty points expire in 12 months and coupon rewards expire in six months, the revenue for the remaining performance obligation is expected to be recognized within a 12-month period.

Gift Cards and Site Credits

The Company sells thredUP gift cards on its e-commerce website and may also convert site credits to thredUP gift cards after one year at the discretion of the Company. thredUP gift cards do not expire or lose value over periods of inactivity. The Company accounts for gift cards by recognizing a gift card liability at the time a gift card is delivered to the customer. As of June 30, 2023 and December 31, 2022, $10.6 million and $10.9 million, respectively, of gift card liability was included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue from gift cards is generally recognized when the gift cards are redeemed by the customer and amounted to $0.7 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $1.2 million and $0.5 million for the six months ended June 30, 2023 and 2022, respectively.

The Company issues site credits for returns, which can be applied toward future charges but may not be converted into cash. Site credits may also be converted to thredUP gift cards after one year at the discretion of the Company. These credits are recognized as revenue when used. As of June 30, 2023 and December 31, 2022, $5.7 million and $7.2 million, respectively, of such customer site credits were included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue recognized from the redemption of site credits was $10.7 million and $13.2 million for the three months ended June 30, 2023 and 2022, respectively, and $20.0 million and $24.0 million for the six months ended June 30, 2023 and 2022, respectively.

The Company recognizes breakage revenue when it determines that the redemption of gift cards is remote. Breakage revenue was not material for the three and six months ended June 30, 2023 and 2022.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s condensed consolidated balance sheets that sum to the total of the same such amounts shown in the Company’s condensed consolidated statements of cash flows:


	June 30, 2023		December 31, 2022
	(in thousands)
Cash and cash equivalents	$	51,073	$	38,029
Restricted cash included in Other current assets	476		383
Restricted cash included in Other assets	5,547		5,639
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	57,096	$	44,051

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Fair Value Measurements

The Company applies the provisions of FASB ASC Topic 820, Fair Value Measurements and Disclosures, for its financial and non-financial assets and liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

•Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 inputs are unobservable inputs for the asset or liability.

The Company measures certain assets and liabilities at fair value as discussed throughout the notes to its condensed consolidated financial statements. As of June 30, 2023 and December 31, 2022, the carrying amounts of the Company’s accounts receivable, other current assets, other assets, accounts payable, seller payable and accrued and other current liabilities approximated their estimated fair values due to their relatively short maturities. Management believes the terms of its long-term variable-rate debt reflect current market conditions for an instrument with similar terms and maturity, and as such, the carrying value of the Company’s long-term debt approximated its fair value as of June 30, 2023 and December 31, 2022.

3. Financial Instruments and Fair Value Measurements

The following tables provide information about the Company’s financial instruments that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such values as of June 30, 2023 and December 31, 2022:


	June 30, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	10,005	$	—	$	—	$	10,005
U.S. treasury securities	—		2,581		—		2,581
Commercial paper	—		18,769		—		18,769
U.S. government agency discount notes	—		4,481		—		4,481
Total cash equivalents	10,005

SEC Form 10-Q filed by ThredUp Inc.