Q4 2023 ThredUp Inc Earnings Call

Operator: Good afternoon. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the 4th Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Good afternoon, My name is Jamie and I will be your conference operator today.

Speaker Change: At this time I would like to welcome everyone.

Speaker Change: Did he threat of fourth quarter 2023 earnings conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, then the number 2.

Speaker Change: After the Speakers' remarks there.

Speaker Change: There will be a question and answer session.

I'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question.

Speaker Change: Please press Star then the number two.

Operator: Thank you. I would now like to hand the conference over to Lauren Frasch, Head of Investor Relations. Please go ahead.

Speaker Change: Thank you.

Speaker Change: I would now like to hand, the conference over to Lauren <unk> head of Investor Relations. Please go ahead.

Lauren: Good afternoon, and thank you for joining us on today's conference call to discuss <unk> fourth quarter and full year 2023 financial results with me are James Reinhart, CEO and cofounder and Shanghai.

Lauren Marie Frasch: Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's fourth quarter and full year 2023 financial results. With me are James Reinhart, ThredUp's CEO and co-founder, and Sean Sobers, CFO. We posted our press release and supplemental financial information on our investor relations website at ir.thredup.com. This call is being webcast on our IR website, and a replay of this call will be available shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call, including, but not limited to, statements regarding our earnings guidance for the first fiscal quarter and full year of 2024, future financial performance, including our goal of reaching adjusted EBITDA break-even on a consolidated annual basis, our expectations for capital expenditures and other developments in our business in the U.S. and Europe, market demand, growth prospects Thank you for your time.

Speaker Change: So.

Lauren: We posted our press release and supplemental financial information on our Investor Relations website at IR Dot Dot com.

Lauren: Call is being webcast on our IR website and a replay of this call will be available shortly.

Lauren: Before we begin I'd like to remind you that we will make forward looking statements. During the course of this call, including but not limited to statements regarding our earnings guidance for the first fiscal quarter and full year of 2020 for future financial performance, including our goal of reaching adjusted EBITDA breakeven on a consolidated annual basis, our expectations for capital expenditures.

Lauren: I think development business in the U S and Europe market demand growth prospects business strategies and plans our ability to cost effectively attract new buyers.

Lauren Marie Frasch: Words such as anticipate, believe, estimate, and expect, as well as similar expressions, are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, involve known and unknown risks and uncertainties, including our ability to effectively deploy new and evolving technologies, such as artificial intelligence and machine learning in our office, and The Effects of Inflation, Increased Interest Rates, Changing Consumer Habits, Climate Change, and General Global Economic Un Our actual results could differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. You can find more information about these risks, uncertainties, and other factors that could affect our operating results and our SEC filings, ARRAIN's press release, and supplemental information posted on our IR website.

Lauren: Such as anticipate believe estimate expect as well as similar expressions are intended to identify forward looking statements.

Lauren: These forward looking statements are not guarantees of future performance involve known and unknown risks and uncertainties, including our ability to effectively deploy new and evolving technologies, such as artificial intelligence and machine learning and our offerings and the effects of inflation increased interest rates changing consumer habits climate change in general global economic.

Lauren: T.

Our actual results could differ materially from any projections of future performance or results expressed or implied by such forward looking statements.

Lauren: You can find more information about these risks uncertainties and other factors that could affect our operating results in our SEC filings earnings press release, and supplemental information posted on our IR website.

Lauren Marie Frasch: Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition, during the call, we will present certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, GAAP measures.

Lauren: Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

Lauren: In addition, during the call we will present certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from GAAP measures.

Lauren Marie Frasch: You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures, in our earnings release, and supplemental information posted on our IR website. Now, I'd like to turn the call over to James Reinhart. Good afternoon, everyone.

Lauren: You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our earnings press release and supplemental information posted on our IR website.

Now I'd like to turn the call over to James Reinhart.

Lauren: Good afternoon, everyone I'm, James Reinhart, CEO and co founder of threat up. Thank you for joining <unk> fourth quarter 2023, and fiscal year 2023 earnings call.

James G. Reinhart: I'm James Reinhart, CEO and co-founder of ThredUp. Thank you for joining ThredUp's fourth quarter 2023 and fiscal year 2023 earnings call. As we head into a new fiscal year, we're pleased to share ThredUp's financial results and key business highlights from our fourth quarter. In addition to the financial results, we will also reflect on the progress we made in 2023, as well as provide an update on key strategic initiatives that we expect will drive growth and margin expansion in 2024. I'm particularly excited to share how we're leveraging AI across our business and how we believe we are uniquely positioned to benefit from advancements in this technology. I will then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our fourth quarter 2023 and fiscal year 2023 financials in more detail. He will also provide our outlook for the first quarter 2024 and fiscal year 2024. We'll close out today's call with a question and answer session.

James G. Reinhart: As we head into a new fiscal year, we're pleased to share threat ups financial results and key business highlights from our fourth quarter. In addition to the financial results. We will also reflect on the progress we made in 2023 as well as provide an update on key strategic initiatives that we expect will drive growth and margin expansion in 2024, I'm, particularly excited to share how we are leveraging AI.

James G. Reinhart: Across our business and how we believe we are uniquely positioned to benefit from investments in this technology I will then hand, it over to Sean Sobers, Chief Financial Officer to talk through our fourth quarter 2023, and fiscal year 2020, the financials in more detail.

Sean Sobers: He will also provide our outlook for the first quarter of 2024 and fiscal year 2024, well close out today's call with a question and answer session.

James G. Reinhart: Let me start with our Q4 results. We closed out 2023 with another quarter of strong financial performance, demonstrating healthy top-line growth and bottom-line leverage. Our revenue exceeded the high end of our guidance at $81.4 million, representing a year-over-year increase of 14%. Additionally, we reached 1.8 million active buyers in Q4, up 9% compared to the same quarter last year. Orders reached a record high of 1.8 million, a 17% year-over-year increase.

Sean Sobers: Let me start with our Q4 results, we closed out 2023 with another quarter of strong financial performance, demonstrating healthy topline growth and bottom line leverage our revenue exceeded the high end of our guidance at $81 4 million, representing a year over year increase of 14%.

Sean Sobers: Reached one 8 million active buyers in Q4 up 9% compared to the same quarter last year orders reached a record high of $1 8 million or 17% year over year increase.

James G. Reinhart: In Q4, gross margins came in at 62%, the midpoint of our range. But note that this includes our decision to do a one-time write-off of $1.9 million of aged and unproductive inventory in Europe that we had acquired in early 2023. This action had a 230 basis point impact on our consolidated gross margin. Excluding this one-time impact, our consolidated gross margins exceeded our guidance at 64%, representing gross profit growth of 16%. The one-time write-off in Europe also impacted our adjusted EBITDA in Q4, which totaled negative 2.1 million, or minus 2.6%.

Sean Sobers: Q4 gross margins came in at 62% the midpoint of our range.

Sean Sobers: This includes our decision to do a one time write off of $1 9 million of aged and unproductive inventory Europe did we had acquired in early 2023.

Sean Sobers: <unk> had 230 basis point impact to our consolidated gross margins. Excluding this one time impact our consolidated gross margin exceeded our guidance at 64% representing gross profit growth of 16%.

The onetime write off in Europe also impacted our adjusted EBITDA in Q4, which totaled negative $2 1 million or minus two 6%. Excluding the one time inventory write off we are proud to deliver an adjusted EBITDA loss of just 200000.

James G. Reinhart: Excluding the one-time inventory write-off, we're proud to deliver an adjusted inventory write-off of just $200,000. This 790 basis point improvement over last year represents the significant progress we've made toward breakeven in 2023 and indicates our clear line of sight toward full year adjusted EBITDA breakeven in 2024, which Sean will talk about more in a bit. I'm particularly proud to report that despite a highly competitive Q4, the U.S. business posted expanding gross margins of 78% while generating positive adjusted EBITDA for the second consecutive quarter. Stepping back, 2023 was a very strong year for our business.

Sean Sobers: 790 basis point improvement over last year represents the significant progress we've made toward breakeven in 2023 and indicate a clear line of sight towards full year adjusted EBITDA breakeven in 2024 with Sean will talk about more in a bit.

Speaker Change: I'm, particularly proud to report that despite a highly competitive Q4, the U S business posted expanded gross margins of 78%, while generating positive adjusted EBITDA for the second consecutive quarter.

Speaker Change: Stepping back 2023 was a very strong year for our business. Despite a challenging discretionary environment caused by compounded inflation and elevated interest rates. We delivered consolidated net revenue growth of 12% active buyer growth of 9%, while expanding adjusted EBITDA margin of 960 basis points.

James G. Reinhart: Despite a challenging discretionary environment caused by compounded inflation and elevated interest rates, we deliver consolidated net revenue growth of 12%, active buyer growth of 9%, while expanding adjusted EBITDA margin by 960 basis. We're extremely pleased with how well our US business continues to scale and believe that this year has demonstrated the growth and earnings opportunities of a managed resale business model. Our European business demonstrated strong growth and an accelerated transformation to become a leading resale marketplace in Europe. Finally, we finished the last phases of our distribution network build out and expect minimal maintenance cutbacks until at least 2026.

Speaker Change: We're extremely pleased with how well our U S business continues to scale and believe that this year has demonstrated the growth in earnings opportunity of a managed resale business model.

Speaker Change: Our European business demonstrated strong growth and accelerated its transformation to becoming a leading retail marketplace in Europe.

Speaker Change: Finally, we finished the last phases of our distribution network build out and expect minimal maintenance capex until at least 2026 with limited capex needs over the next few years, we expect our cash flows from operations to move in line with our adjusted EBITDA.

James G. Reinhart: With limited CapEx needs over the next few years, we expect our cash flows from operations to move in line with our adjusted EBITDA. Now, let's turn to the year ahead. Let me start with profitability on a consolidated basis. The good news is that we are already there in the US, which makes up 80% of our overall.

Speaker Change: Now, let's turn to the year ahead.

Speaker Change: Let me start with profitability on a consolidated basis.

Speaker Change: The good news is that we are already there in the U S, which makes up 80% of our overall business. We believe we've demonstrated the strength of our unit economics, and our bottom line discipline, having delivered positive adjusted EBITDA in the U S. In both Q3 and Q4 of 2023.

James G. Reinhart: We believe we've demonstrated the strength of our unit economics and our bottom line discipline, having delivered positive adjusted EBITDA in the U.S. in both Q3 and Q4 of 2023. We expect that the U.S. business will continue to expand gross margins and generate positive adjustability this year as we grow, continue to automate, and leverage our expenses. Our next task is to do this in Europe.

Speaker Change: We expected the U S business will continue to expand gross margins and generate positive adjusted EBITDA. This year as we grow continue to automate and leverage our expenses.

Speaker Change: Our next task is to do this in Europe, we've nearly doubled revenue in Europe since our acquisition in 2021 and continue to progress towards positive adjusted EBITDA in that market.

James G. Reinhart: We've nearly doubled revenue in Europe since our acquisition in 2021 and continue to progress towards positive adjusted EBITDA in that market. To give you a sense of how we evaluate our European business, we apply the rule of 40 to the EU's gross profit growth and adjusted EBITDA rate. We believe gross profit is the best indicator of its growth when normalized for the consignment transition, and we expect that business to be well above 40 in the year ahead. I'm confident that we are on the right track addressing the large opportunity in Europe with a proven playbook from the U.S. We expect to see continued improvement in Europe each quarter, driven by three core initiatives. Some of these may sound familiar if you followed us into our IPO. First, we are accelerating the transition to consignment. This process began in mid-23, and we expect Europe to be approximately 20% of consignment revenue in 2024.

Speaker Change: To give you a sense of how we evaluate our European business, we apply the rule of 40% to the Eu's gross profit growth and adjusted EBITDA rate.

Speaker Change: We believe gross profit is the best indicator of its growth.

Speaker Change: Normalized for the consignment transition and we expect that business to be well above 40% in the year ahead.

Speaker Change: I am confident that we are on the right track tackling the large opportunity in Europe with a proven playbook from the U S.

Speaker Change: We expect to see continued improvement in Europe, each quarter, driven by three core initiatives. Some of these may sound familiar if you've followed us since our IPO.

Speaker Change: First we are accelerating the transition to consignment. This process began in mid 'twenty, three and we expect Europe to be approximately 20% consignment revenue in 2024.

James G. Reinhart: As I've shared on previous calls, this change presents a short-term headwind to revenue due to the accounting treatment, but we believe that it will yield a business with a superior margin profile and provide us with more levers to flex margins and invest in growth. Second, we are migrating our dynamic data-driven pricing system from the US to Europe to improve sell-through rates. The faster items sell, the more we maximize average selling prices and minimize our aged inventory, which yields better margins. This work is already starting to pay off, as we are seeing some of the fastest sell-throughs in history, year-to-date in 2024. And third, we're introducing inventory sculpting. Using the U.S.

Speaker Change: On previous calls this change presents a short term headwind to revenue due to the accounting treatment, but we believe that it will yield a business with a superior margin profile and provide us more levers to flex margins and growth investments.

Speaker Change: Second we are migrating our dynamic data driven pricing system from the U S to Europe to improve sell through rates.

Speaker Change: Faster item sell the more we maximize average selling prices and minimize our aged inventory, which yields better margins. This work is already starting to pay off as we are seeing some of the fastest sell throughs in history year to date in 2024.

Speaker Change: And third we're introducing inventory sculpting using the U S item acceptance model is the guide we recently implemented a similar system in the EU to determine which items are listed on our marketplace at any given time.

James G. Reinhart: Using the Item Acceptance Model as a guide, we recently implemented a similar system in the EU to determine which items are listed in our marketplace at any given time. By leveraging data science, we are segmenting inventory to better identify what types of items sell quickly and which items maximize gross profit. The goal is a marketplace with an overall assortment that's more desirable to buyers and expands Europe's gross margin profile. To summarize, the U.S. has already posted two consecutive quarters of positive adjusted EBITDA, and as we continue to apply U.S. strategies and tactics to Europe to improve our gross margins in that market, we expect to achieve positive consolidated adjusted EBITDA on an annual basis in 2024. Next, I'd like to share an overview of strategic initiatives that are designed to drive business growth in 2024.

Speaker Change: By leveraging data science, where say many inventory to better identify what types of items, so quickly and which items maximize gross profit.

Speaker Change: The goal is a marketplace with an overall assortment that is more desirable to buyers and expanse Europe's gross margin profile.

Speaker Change: To summarize the U S is already posted two consecutive quarters of positive adjusted EBITDA and as we continue to apply U S strategy and tactics to Europe to improve our gross margins in that market. We expect to achieve positive consolidated adjusted EBITDA on an annual basis in 2024.

Speaker Change: Next I'd like to share an overview of strategic initiatives that are designed to drive business growth in 2024, let.

James G. Reinhart: Let me start with the ways we're deploying artificial intelligence to improve the customer experience and reduce costs in our distribution. First, we recently debuted an AI-powered search experience that makes it easy and intuitive to find any second-hand item on ThredUp. Our vast selection of inventory is one of our biggest assets, but it also creates challenges for buyers as they shop up to 4 million unique second-hand items at any given time. This new search functionality significantly enhances the second-hand shopping experience in our marketplace by combining visual language with personal style. By enabling buyers to curate style inspirations effortless, whether it's by searching for a popular item like a satin cocktail dress, or a descriptive trend or look like Sunday brunch dress, or a phrase that evokes emotion like Academy Awards chic, ThredUp can help shoppers find exactly what they want. And it's not only fun to use. But it also has that sense of magic to it.

Speaker Change: Let me start with the ways, we are deploying artificial intelligence to improve the customer experience and reduce costs in our distribution network.

Speaker Change: First we recently debuted in AI powered search experience that makes it easy and intuitive to find any secondhand item on dry dock. Our vast selection of inventory is one of our biggest assets, but it also creates challenges for buyers as they shop up to 4 million unique secondhand items any given time.

Speaker Change: This new search functionality significantly enhances the secondhand shopping experience in our marketplace by combining visual language with personal style.

Speaker Change: By enabling buyers to curate style inspirations effortlessly, whether it's by searching for a popular item microstat cocktail dress or a descriptive trend or look like Sunday brunch dress or a phrase that evokes emotion like Academy Award chic.

Speaker Change: Set up can help shoppers find exactly what they want it's.

Speaker Change: It's not only fund the use.

Speaker Change: But it also is that sense of magic to it sometimes you just can't believe how good the technology is delivering relevant results early indicators show an increase in searches precession, our higher Ed to car conversion of items from search and higher click through for individual product pages.

James G. Reinhart: Sometimes you just can't believe how good the technology is at delivering relevant results. Early indicators show an increase in searches per session, a higher add-to-cart conversion of items from search, and higher click-through for individual product pages. Second, we have begun to leverage the power of AI technology that will soon give customers the ability to create outfits they love using just a text description. For example, a friend is looking for an outfit to wear to a fancy luau on an upcoming trip to Hawaii.

Speaker Change: Second we have begun to leverage <unk> AI technology that will soon give customers the ability to create outfit. They love using just the tax description. For example, a friend is looking for an outfit to wear to fancy low on an upcoming trip to Hawaii using natural language prompts our general tool created an alpha composed of a beautiful floral <unk>.

James G. Reinhart: Using natural language prompts or a generative AI tool, create an outfit composed of a beautiful floral crop top, a flowy white maxi skirt with a side slit, paired with highly embellished sandals. Want to create an outfit inspired by popular magazines or style influencers or runway trends? We can now easily do that while delivering shoppable secondhand products up to 70% off what a consumer might pay new. The list of outfits that can be generated through this tool is endless, restricted only by the imagination of our buyers.

Speaker Change: <unk> are fully white maxi skirt with sideslip paired with highly embellished sandals want to create an outfits from popular magazines or style influencers of runway trends. We can now easily do that while delivering shopper, both secondhand product up to 70% off when a consumer might pay new.

The list of assets that can be generated from this tool with analysts.

Speaker Change: It only by the imagination of our buyers will be leading the style inspiration touch points throughout the product experience over the year ahead and look forward to sharing more soon.

James G. Reinhart: We'll be introducing these style inspiration touchpoints throughout the product experience over the year ahead and look forward to sharing more. I want to emphasize that AI is an enormous leap forward for us in bringing emotion and storytelling to the millions of unique shopping journeys that regularly happen on ThredUp. Given the breadth of our offering and the limitation of not having on-model photography in our core product experience, we believe generative AI technology disproportionately benefits a managed marketplace like ThredUp compared to other apparel or peer-to-peer marketplaces. Now, let me turn to AI in action. We're also implementing AI across more operations in our distribution center network to enhance the customer experience and improve throughput and productivity. For example, once the garment has been photographed, we employ advanced AI technologies to extract a wide range of detailed characteristics of the item from its image.

Speaker Change: I want to emphasize that AI is an enormous leap forward for us in bringing emotion and storytelling to the millions of unique shopping journeys that regularly happen on dry dock.

Speaker Change: Given the breadth of our offering and the limitation of not having on model photography, and our core product experience. We believe generative AI technology disproportionately benefit to manage the marketplace like better compared to other apparel or peer to peer marketplaces.

Speaker Change: Now, let me turn to AI in operations. We're also implementing AI across more operations in our distribution center network to enhance the customer experience and improve throughput and productivity.

Speaker Change: Once the government has been photographed we employ advanced AI technologies to extract a wide range of detailed characteristics of the item from its image. This capability not only enriches our inventory database, but also streamlines the cat organization and processing of items.

James G. Reinhart: This capability not only enriches our inventory database but also streamlines the categorization and processing of items. This has improved operational efficiency and the accuracy of our product listings, resulting in better search and personalization in our marketplace. We see near-term opportunities for generative AI to improve visual merchandising and add more engaging content to the shopping journey without us having to use expensive on model photography. Eventually, you can imagine a world where AI not only supplements manual photography but replaces it.

Speaker Change: This is improved operational efficiency and the accuracy of our product listings, resulting in better search and personalization in our marketplace.

Speaker Change: See near term opportunities for generative AI to improve visual merchandising and add more engaging content to the shopping journey without us having to use expensive on model photography.

Speaker Change: You can imagine.

Speaker Change: Well, where AI not only supplement manual photography, but replaces it.

James G. Reinhart: These AI-driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion. So much of what we believed we could achieve over the next few years through our own software and industrial engineering development has now become readily available, and it's cheaper and faster than we imagined. Beyond AI, we're seeing continued improvements across a number of areas. For example, our Delivery Promise and Thrift Promise initiatives, which aim to deliver purchase to doorstep shipping in four days or less and do right by the customer with every order, continue to make progress. Orders delivered within this timeframe have increased more than 150% year over year in the quarter to date. Additionally, our return rate decreased by 700 basis points in Q4 compared to the same quarter last year.

Speaker Change: These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

Speaker Change: So much of what we believe we can achieve over the next few years through our own software and industrial Engineering development has now become readily available and it's cheaper and faster than we imagined.

Speaker Change: Beyond AI, we're seeing continued improvements across a number of areas. For example, our delivery promise and thrift promise initiative, which aims to deliver purchased the doorsteps shipping four days or less and do right by the customer with every order continue to make progress orders delivered within this timeframe have increased more than 100.

Speaker Change: 50% year over year in the quarter to date.

Speaker Change: Return rate decreased by 700 basis points in Q4 compared to the same quarter last year.

Speaker Change: We've also put a renewed focus on our loyalty program as a way to reduce broad based promotions and we expect to see continued benefits as we invest in customer retention efforts with more attractive rewards early signals show a double digit increase in orders with loyalty rewards and we believe creating a fun and easy rewards loop will encourage all customers to shop.

James G. Reinhart: We've also put a renewed focus on our loyalty program as a way to reduce broad-based promotions, and we expect to see continued benefits as we invest in customer retention efforts with more attractive rewards. Early signals show a double-digit increase in orders with loyalty rewards, and we believe creating a fun and easy rewards loop will encourage all customers to shop like our best customers do today. Our Resale as a Service business, or RAS, continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable resale experiences to their customers. Across our 50-plus brand customers, we now estimate that we power six of the 10 largest brand resale shops online, power more than 50% of total branded resale listings that are sold online, and you can pick up a co-branded ThredUp clean-out kit in more than 800 stores nationwide.

Like our best customers do today.

Speaker Change: Our retail as a service business or Ras continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable retail experiences to their customers.

Speaker Change: Across our 50 plus brand customers, we now estimate that we power six of the 10 largest brand resale shops online how we're more than 50% of total branded resale listings that are sold online and you can pick up a co branded threat cleanout kit and more than 800 stores nationwide.

James G. Reinhart: As a reminder, by leveraging ThredUp's marketplace infrastructure, RAS amplifies our supply advantage, increases our sell-through and return on assets, drives brand awareness, and expands our long-term profitability. As I often do on these calls, I'd like to take a moment to remind you of ThredUp's steadfast commitment to balancing purpose and profit. Our mission of inspiring the world to think secondhand first remains the cornerstone of our strategy.

Speaker Change: Reminder, by leveraging perhaps marketplace infrastructure Ras amplifies, our supply advantage increases our sell through and return on assets drives brand awareness and expands our long term profitability metrics.

Speaker Change: As I often do on these calls I'd like to take a moment to remind you of setups steadfast commitment to balancing purpose and profit are.

Our mission of inspiring the world thinks secondhand first remains the cornerstone of our strategy since our founding we've now processed more than 172 million unique pieces of clothing.

James G. Reinhart: Since our founding, we've now processed more than 172 million unique pieces of clothing, keeping clothes in circulation and out of landfills while delivering incredible value to our millions of customers. At the center of every decision we make is our business and brand-aligned environmental, social, and governance strategy, which guides us and helps fuel our success. Purpose and profits are inextricably linked. We were recently named a winner in Good Housekeeping's 2024 Sustainable Innovation Awards, which recognize products and services that have embraced a people, purpose, and planet approach to sustainability.

Speaker Change: In closing the circulation in and out of landfill, while delivering incredible value to our millions of customers.

Speaker Change: At the center of every decision, we make is our business and brand on environmental social and governance strategy, which guides us it helps fuel our success and threat up purpose and profit are inextricably linked.

Speaker Change: We were recently named a winner in good housekeeping as 2020 for sustainable Innovation Awards, which recognize products and services that have embraced our people purpose and planet approach to sustainability as we head into another year I'm excited about our path forward and the impact will make globally on our people our communities and the planet.

Sean Sobers: As we head into another year, I'm excited about our path forward and the impact we'll make globally on our people, our communities, and the planet. With that, I will now turn it over to Sean to go through our financial results and guidance in more detail. Thanks, James. I'll begin with an overview of our results and follow up with guidance for the first quarter and then, I will discuss non-GAAP results throughout my remarks. Our GAAP financials and our reconciliation between GAAP and non-GAAP are found in our earnings release supplemental financials and our 10-K file.

Speaker Change: With that I will now turn it over to Sean to go through our financial results and guidance in more detail.

Sean Sobers: Thanks, James I'll begin with an overview of our results and follow up with guidance for the first quarter and the full year.

Sean Sobers: We'll discuss non-GAAP results throughout my remarks, our GAAP financials, and a reconciliation between GAAP and non-GAAP are found in our earnings release supplemental financials in our 10-K filings.

Sean Sobers: We are very proud of our Q4 results for the fourth quarter of 2023 revenue totaled $81 4 million, an increase of 14% year over year.

Sean Sobers: We are very proud of our Q4 results. For the fourth quarter of 2023, revenue totaled $81.4 million, an increase of 14% year-over-year, consignment revenue grew 49% year over year, while product revenue shrank by 25%. We are pleased with the growth in consignment revenue driven by the transition of our RAF clients and our European business to the consignment model. We would expect to continue to see outsized growth in consignment and declines in product revenue throughout 2024. While the transition of these businesses to consignment should be a tailwind to growth margins over time, we expect it to meet revenue growth simply due to accounting. As a reminder, consignment payouts reduce net revenue. We expect consignment revenue will be an increasingly larger part of our business throughout 2020.

Sean Sobers: Consignment revenue grew 49% year over year, while product revenue shrank by 25%.

We're pleased with the growth in consignment revenue driven by the transition of our RASK clients and our European business to the consignment model.

Sean Sobers: We would expect to continue to see outsized growth in consignment and declines in product revenue throughout 2024.

Sean Sobers: While the transition of these businesses to consignment should be a tailwind to gross margins over time, we expect it to meet revenue growth simply due to the accounting treatment.

Sean Sobers: As a reminder, consignment payouts reduced net revenue.

Sean Sobers: We expect consignment revenue will be an increasingly larger part of our business throughout 2024.

Sean Sobers: Phone payouts are in cogs and reduce gross margin; expect own revenue to be a smaller part of our. As a result, we look to gross profit as the most relevant measure to evaluate the underlying growth rate of our. We're happy to report that we accelerated our active buyer growth and achieved a record number of active buyers for the second consecutive quarter, reaching 1.8 million, up 9% year-over-year. Orders growth also accelerated to 17% year over year to 1.8. For the fourth quarter of 2023, the reported gross margin was 61.9%.

Sean Sobers: Oh, and payouts are in Cogs and reduced gross margins.

Sean Sobers: We expect one revenue to be a smaller part of our business.

Sean Sobers: As a result, we look to gross profit as the most relevant measure to evaluate the underlying growth rate of our business.

Sean Sobers: We're happy to report that we accelerated our active buyer growth and achieved a record number of active buyers for the second consecutive quarter, reaching $1 8 million up 9% year over year.

Sean Sobers: Orders growth also accelerated to 17% year over year to $1 8 million.

Sean Sobers: For the fourth quarter of 2023 reported gross margin was 61, 9% as we implement our resale playbook in Europe, we made the strategic decision to take a onetime $1 9 million inventory write off in Q4 of 230 basis point impact to gross margin.

Sean Sobers: As we implement our resale playbook in Europe, we made the strategic decision to take a one-time $1.9 million inventory write-off in Q4, a 230 basis point impact on gross margin. We expect that clearing this inventory will enable an improved customer experience, allowing shoppers to more easily access fresh inventory, while supporting a better margin profile and accelerating our shift to consignment. We believe that this action is setting up our EU business for success in the coming year. Excluding its impact, our gross margin came in at 64.2%, 110 basis points ahead of last year, while our gross profit grew by 16%.

Sean Sobers: We expect that clearing this inventory will enable an improved customer experience, allowing shoppers to more easily access fresh inventory, all supporting a better margin profile and accelerating our shift to consignment.

Sean Sobers: We believe that this action is setting up our EU business for success in the coming year.

Sean Sobers: Excluding this impact our gross margin came in at 64, 2% a 110 basis points ahead of last year, our gross profit grew by 16%.

Sean Sobers: Our consolidated results exceeded our expectations driven by U S. Gross margins of 77, 5% and gross profit growth of 19%.

Sean Sobers: Our consolidated results exceeded our expectations, driven by U.S. gross margins of 77.5% and gross profit growth of 19%. This year-over-year expansion was the result of continued improvements in how we optimize our marketplace, including pricing, promotions, returns, payouts, and fees. For the fourth quarter of 2023, the net loss was $14.6 million dollars compared to a net loss of $19.5 million dollars in the same quarter last year. Adjusted EBITDA loss was $2.1 million or a negative 2.6% of revenue for the fourth quarter of 2023. Excluding inventory write-off, adjusted EBITDA loss was just $200,000.

Sean Sobers: This year over year expansion was a result of continued improvements in how we optimize our marketplace, including pricing promotions returns payouts in PS.

Sean Sobers: For the fourth quarter of 2023, net loss was $14 $6 million compared to a net loss of $19 5 million in the same quarter last year.

Sean Sobers: Adjusted EBITDA loss was $2 1 million or a negative two 6% of revenue for the fourth quarter of 2023.

Sean Sobers: Excluding the inventory write off adjusted EBITDA loss was just $200000.

Sean Sobers: We reduced our adjusted EBITDA loss in Q4 by more than half versus last year, representing an approximate 560 basis point improvement as we tightly managed expenses and leveraged our investments on higher revenue.

Sean Sobers: We reduced our adjusted EBITDA loss in Q4 by more than half versus last year, representing an approximate 560 basis point improvement as we tightly manage expenses and leverage our investment on higher revenue. To this point, we are proud to report that our hard work drove a 14% year-over-year revenue increase on just a 6% increase in operating expenses, illustrating the powerful leverage of our marketplace model. Turning to the balance sheet, we began the fourth quarter with $80.2 million in cash and marketable securities and ended the quarter with $69.6 million. We used $10.6 million in cash in Q4.

Sean Sobers: To this point, we are proud to report that our hard work drove a 14% year over year revenue increase on just a 6% increase in operating expenses illustrating the powerful leverage of our marketplace model.

Sean Sobers: Turning to the balance sheet.

Sean Sobers: We began the fourth quarter with $82 million in cash and marketable securities and ended the quarter was $69 $6 million, we used $10 6 million in cash in Q4.

Sean Sobers: While we continue to spend maintenance levels of CapEx with just $2.2 million, the step-up in our CAF's usage was largely due to seasonal timing within our accounts. As a reminder, in Q4 of last year, we used $19.6 million in cash, illustrating the enormous progress we've made over the last four quarters. In 2024, we expect cash flow uses to significantly decline versus 2022.

Sean Sobers: While we continue to spend maintenance levels of Capex with just $2 2 million step up in our cash usage was largely due to seasonal timing within our accounts payable.

As a reminder, in Q4 of last year, we used $19 6 million in cash illustrating the enormous progress we've made over the last four quarters.

In 2024, we expect cash flow usage to significantly decline versus 2023.

Sean Sobers: In 2023, we are proud to have reduced our consolidated adjusted EBITDA loss in every quarter achieved quarterly positive adjusted EBITDA in our U S business and continue to spend only maintenance levels of Capex.

Sean Sobers: In 2023, we are proud to have reduced our consolidated adjusted EBITDA loss in every quarter, achieved quarterly positive adjusted EBITDA in our U.S. business, and continue to spend only maintenance levels of capital. We believe we will reach breakeven on a consolidated annual basis in 2024 as we scale the U.S. and improve Europe's margin profile. As we look to 2024, please keep in mind the following. First, though our customers continue to feel the pressure of compounded inflation and higher interest rates, we are implementing a number of tactics to improve the customer experience, as James described. As our strategic initiatives roll out in both the U.S. and Europe, we expect our revenue to improve sequentially throughout the year, weighted towards the second half.

Sean Sobers: We believe we will reach breakeven on a consolidated annual basis in 2024, as we scale the U S and improve Europe's margin profile.

Sean Sobers: As we look to 2024, please keep in mind. The following first though our customer continues to feel the pressure of compounded inflation and higher interest rates. We are implementing a number of tactics to improve the customer experience as James described.

Sean Sobers: As our strategic initiatives rollout in both the U S and Europe, we expect our revenue to improve sequentially throughout the year weighted towards the second half.

Sean Sobers: As a reminder, also consider that we spend more marketing dollars as a percentage of revenue in the first half of the year to drive buyers whose multiple annual purchases tend to yield revenue in the second. Additionally, gross margin improvement will be primarily driven by our ongoing work in the U.S. and Europe's transition to consignment. Though the consignment transition will mute revenue growth due to the accounting treatment, consignment revenue will drive gross profit and margin improvement over time. We would expect gross margins to be better in the second half and in the first half as the transition progresses. In 2023, 66% of our consolidated revenues came from consignment.

Sean Sobers: As a reminder, also consider that we spend more marketing dollars as a percentage of revenue in the first half of the year to drive buyers, who has multiple annual purchases tend to yield revenue in the second half.

Sean Sobers: Second gross margin improvement will be primarily driven by our ongoing work in the U S and Europe transition to consignment.

Sean Sobers: The consignment transition will mute revenue growth due to the accounting treatment consignment revenue will drive gross profit and margin improvement over time.

Sean Sobers: We would expect gross margins to be better in the second half than in the first half as the transition progresses in.

Sean Sobers: In 2023, 66% of our consolidated revenues came from consignment and we expect to see that percentage increased to approximately 80% in 2024.

Sean Sobers: And we expect to see that percentage increase to approximately 80% in 2024. Third, we continue to expect maintenance levels of CapEx of approximately $2 million per quarter until 2026, which provides us a high level of confidence that we can run the business with our existing cash until we reach cash flow positive. We want to reiterate that we do not anticipate our cash and marketable securities going below $50 million before reaching free cash flow positive. Nor do we expect to turn to the capital markets or draw down our existing debt before then.

Sean Sobers: Third we continue to expect maintenance levels of Capex of approximately $2 million per quarter until 2026, which provides us a high level of confidence that we can on the business with our existing cash until we reach cash flow positive.

Sean Sobers: We want to reiterate that we do not anticipate our cash and marketable securities going below $50 million before reaching free cash flow positive.

Sean Sobers: Nor do we expect to turn to the capital markets or drawdown on our existing debt before them.

Sean Sobers: With all that in mind, for the first quarter, we expect revenue in the range of $79 to $81 million, with margin in the range of 68.5% to 70.5% of revenue. At the midpoint, this represents gross profit dollar growth of 9% year over year, an Adjusted EBITDA loss of 3% to 1% of revenue, and a basic weighted average shares outstanding of approximately 110 million shares.

Sean Sobers: With all that in mind for the first quarter, we expect revenue in the range of <unk> $79 million to $81 million.

Gross margin in the range of 65% to 75% of revenue at the midpoint. This represents gross profit dollar growth of 9% year over year.

Sean Sobers: Adjusted EBITDA loss of 3% to 1% of revenue and basic weighted average shares outstanding of approximately 110 million shares.

Sean Sobers: For the full year of 2024, we now expect revenue in the range of approximately $340 million to $350 million gross margin in the range of approximately 69, 5% to 71, 5% of revenue.

Sean Sobers: For the full year of 2024, we now expect revenue in the range of approximately $340 to $350 million, and gross margin in the range of approximately 69.5% to 71.5% of REP. At the midpoint, this represents a gross profit dollar growth of 14% year over year, positive adjusted EBITDA of half a percent to one and a half percent of revenue, and a basic weighted average shares outstanding of approximately 114 million In closing, we are extremely proud of the progress we have made towards our growth and profitability goals in 2023 and look forward to delivering steady growth and continued leverage in 2024 as we achieve positive adjusted EBITDA on a consolidated basis. James and I are now ready for your questions. Operator, please open the line.

Sean Sobers: At the midpoint. This represents a gross profit dollar growth of 14% year over year.

Sean Sobers: Positive adjusted EBITDA of half a percent to one 5% of revenue and basic weighted average shares outstanding of approximately 114 million shares.

In closing we are extremely proud of the progress we have made towards growth and profitability goals in 2023, and look forward to delivering steady growth and continued leverage in 2024 as we achieved positive adjusted EBITDA on a consolidated basis.

Speaker Change: James and I are now ready for your questions. Operator, Please open the line.

Speaker Change: Okay.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on you touched on filings.

Operator: You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. If you wish to cancel your request, please press the star followed by 2. If you are using a speakerphone, please lift the handset before pressing any key.

Speaker Change: Our three ton prompt acknowledging your request questions will be taken in order to receive should you wish to cancel your request. Please press the star followed by the tail. If you are using a speaker phone. Please lift the handset before pressing any case one moment. Please for your first question.

Irwin Bernard Boruchow: One moment please for your first question. Your first question is from Ike Boruchow from Wallace Fargo. Please ask your question. Hey guys, good afternoon. I guess two for me, maybe one for James, and one for Sean.

Speaker Change: Your first question is from Ike <unk> from Wells Fargo. Please ask your question.

Ike: Hey, guys good afternoon.

Ike: Just two for me, maybe one for James one for Sean.

Ike: On the active buyer growth and James you guys are kind of reflected that your basket growth.

James G. Reinhart: On the active buyer growth, James, you guys have kind of re-inflected value on the growth. Good to see. So maybe just give us a little bit more detail of what exactly you guys have done to kind of get you guys back in good shape there. And then, second question for Sean or James, but um, it's just on the consignment because it's having such a big impact on the margins in the model. Can you just be a little bit more specific about what you expect based on your Q1 and fiscal year guide, what you expect consignment to be as a percent of revenue? That way, we can kind of build it from Q1 kind of through Q4 as the transition is taking place. Sure.

Ike: Good to see so maybe just give us a little bit more detail on what exactly you guys have done to kind of get you guys back in good shape. There and then just second follow up for Sean or James but.

Ike: Just on the amico assignments, because it's having such a big impact on the margins and the model can you just be a little bit more specific of what you expect based on the Q1 and fiscal year Guide what you expect confinement could be as a percentage of revenue that way, we can kind of just build it from Q1 through Q4 as the transition taking place.

Sean Sobers: Hey, yeah, on the first one, I think over the last couple of quarters, we really reoriented the customer acquisition strategy to focus on, you know, a slightly more premium customer, a customer who we thought, you know, would, you know, we had the right inventory mix for, and I think you're just starting to see that strategy pay off. And that's driven the active buyer growth. And we expect that to continue into 2024, to sort of refocus on the customer, a real focus on retention and loyalty has driven the upside. And so we feel very good about that return to growth and really how that will compound as we move through 2024. I'll let Sean talk a little bit about the consignment piece. Yeah, like on consignment for Q1, think of it in the mid-70s as a total percentage of revenue, and that will grow throughout the year to be about 80% for the full year. Perfect, thank you guys.

Ike: Sure.

Speaker Change: On the first one.

Speaker Change: I think over the last couple of quarters, we really reoriented the customer acquisition strategy to focus on a slightly more premium customer a customer who we thought.

We have the right inventory mix for and I think you're just starting to see that strategy pay off.

Speaker Change: And Thats driven the active buyer growth and we expect that to continue into 2024.

Speaker Change: We focus on the customer.

Speaker Change: Our real focus on retention and <unk>.

Speaker Change: <unk> has driven the upside and so we feel very good about that return to growth and really how that compound as they move through 2020 for Shawn talk a little bit about the consignment fees.

Shawn: On assignment for do you wanted to give it about mid <unk> as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Shawn: Perfect. Thank you guys.

Operator: Thank you. Your next question is from Anna Andreeva from Needham and Company. Please ask your question. Great, thanks so much. Thanks for taking our question.

Speaker Change: Thank you.

Speaker Change: Next question is from Andrew <unk> from Needham <unk> Company. Please ask your question.

Andrew: Great. Thanks, so much thanks for taking our question two quick ones from us so on the product revenue side of things down 25% was that would you guys expect this for the quarter just given the shift to consignment and can you also secondly talk about what youre seeing with the underlying demand in Europe.

Anna A. Andreeva: So on the product revenue side of things, down 25%. Was that what you guys expected for the quarter, just given the shift to consignment? And can you also, secondly, talk about what you're seeing with the underlying demand in Europe? I remember you had talked about sluggishness as the quarter unfolded. Just curious if the trend got better, and if you're seeing anything differently quarter to date. Thanks.

Speaker Change: I remember you had talked about sluggishness as the quarter unfolded, just curious if the trend got better and if you're seeing anything differently quarter to date. Thanks Pat.

Sean Sobers: Yeah, from a product revenue perspective, that is what we forecasted and what we expected. So nothing new or surprising for us on that side. Yeah, on the demand side, Anna, I think, you know, inflation in the areas that we serve in Europe has, you know, it's been elevated relative to the US. And so that's definitely affected the demand curve. But, you know, I think we've seen better year-to-date results. Certainly, some of the work that we're doing on the product mix and consignment mix in Europe is helping. And so we think the selection that we have in Europe is better.

Pat: Yes from a product revenue perspective that is what we forecasted and expected so nothing new or surprising for us on that side.

Speaker Change: Yeah on the demand side.

Speaker Change: I mean I think.

Speaker Change: Inflation in the areas that we serve in Europe as it's been elevated relative to the U S and so that's definitely affected the demand curve, but I think we've seen better.

Year to date results certainly some of the work that we're doing on the product mix consignment mix in Europe is helping and.

Speaker Change: And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that.

James G. Reinhart: And I think customers are seeing that. So we feel pretty good about where the demand curve is in Europe and, and the guidance for the year reflects that. Awesome. Thanks so much.

Speaker Change: Awesome. Thanks, so much best of luck.

Anna A. Andreeva: Best of luck. Thank you. Your next question is from Tom Nikic from Redbush. Please ask your question. Hey, thanks for taking my question. I just wanted to ask about the write-off.

Speaker Change: Yes.

Speaker Change: Thank you. Your next question is from Tom <unk> from Wedbush. Please ask your question.

Tom: Hey, Thanks for taking my question.

Tom: Just wanted to ask about the write off of it.

Tom Nikic: Inventory in Europe. I guess, obviously, that's something that you'd like to avoid, generally speaking, I guess, kind of, have you sort of made any changes besides the mix shift that you're trying to do but any kind of changes and the way you take in, you know, product in Europe, you know, to kind of ensure that you are bringing in higher quality inventory and higher quality products. So if you don't see a situation like, Yeah, hey, Tom.

Inventory in Europe.

Tom: Yeah.

Tom: I guess, obviously, that's not something that you'd like to avoid generally speaking I guess kind of have you seen.

Tom: <unk> made any changes besides the kind of confinement.

Mix shift that you are trying to do but like any kind of changes in the way you.

Tom: Taken product in Europe.

Tom: To ensure that.

Tom: Just kind of bringing in higher quality.

Tom: Inventory and higher quality products. So that you don't see a situation like this again.

James G. Reinhart: Yeah, I mean, all through last year, we had been making, you know, improvements to, you know, what that mix looks like, laying the foundations for consignment. But a lot of the product that we wrote down was stuff where, you know, we were in negotiations to buy that product well over a year ago, right? And the market has changed; our approach to the business has changed. And so ultimately, it was about what's the best way to serve the customer, you know, on a going forward basis. And we found that that product, you know, over a year old, was crowding out, frankly, some of the best stuff in the browsing experience.

Speaker Change: Yeah, Hey, Tom.

Tom: Yes, I think all through last year, we had been making improvements to what that mix looks like laying the foundations for consignment.

Tom: But a lot of the product that we wrote down with stuff, where we were in negotiations to buy that product well over a year ago right and the market has changed our approach to the business had changed and so ultimately it was about what's the best way to serve that customer on a go forward basis, and we found that that product.

Tom: Over a year all of this was crowding out frankly, some of the best the best stuff in the browsing experience and so.

James G. Reinhart: And so for us, it was, hey, we're full speed ahead on the consignment transition, we feel very good about the strategy in place to get that done, and let's not have any of that sort of legacy product holding us back, whether that's in our facility, in the browsing and search experience, or even just kind of like having to move it around. And so it's definitely not something we anticipate doing again.

Tom: For us it was hey, we're full speed ahead on the consignment transition we feel very good about the strategy in place to get that done and let's not have any of that sort of legacy products holding us back whether thats in our facility.

Tom: In the browsing and search experience or even just kind of like having to move it around and so its definitely not something we anticipate doing again.

James G. Reinhart: But we thought it was the best thing for the customer. And as we move forward, we want to make sure that we're doing the right thing, right? And we want to make sure that we're doing the right thing for the customer as we move forward. 4. It was at its lowest level, really.

Tom: But we thought the best thing for the customer as we move forward.

Speaker Change: Understood and if I could ask one more just a basketball marketing so.

Speaker Change: Yes.

Speaker Change: Marketing, obviously was kind of down.

Speaker Change: In Q4 is at its lowest level since.

Speaker Change: Since 2020.

Speaker Change: I guess, how do we kind of think about.

James G. Reinhart: I guess, you know, how do we kind of think about... reimbursed, drive the top line. Yeah, I mean, I think marketing is always lower in Q4, and so that's typically our playbook. I think this Q4, even in particular, we expected it to be a competitive holiday season. We expected consumers to feel squeezed around how to spend those discretionary dollars.

Speaker Change: I guess that reinvestment in marketing going forward, helping to.

Speaker Change: Jagger top line drive.

Speaker Change: And you're right.

Speaker Change: Yes, I mean, I think Tom the marketing is always lower in Q4, and so that's typically our playbook I think this Q4, even in particular.

Speaker Change: We expected it to be a competitive holiday season.

Speaker Change: We expect to consumers to feel squeezed around how to spend those discretionary dollars and so I think we we thought it was even smarter to push some of that spend in Q4 into Q1, where we thought it would be more productive and I think that's that's what we're seeing.

James G. Reinhart: And so I think we thought it was even smarter to push some of that spend in Q4 into Q1, where we thought it would be more productive. And I think that's what we're seeing. And so I think it fits our seasonal pattern, but our expectation is to continue to drive top line growth through marketing spend, but at the same time, moving slowly towards our long-term targets that we set out at the IPO, and we're sort of on that glide path as we think about 2024. Thanks very much for taking my questions and best of luck this year.

Speaker Change: So I think it fits our seasonal pattern and but our expectation is to continue to drive top line through marketing spend but at the same time moving slowly towards our long term targets that we set at the IPO and we're sort of on that glide path as we think about 'twenty 'twenty four.

Speaker Change: Okay, great. Thanks, very much for taking my questions and best of luck. This here.

Tom Nikic: Thanks. Thank you. Your next question is from Edward Yruma of Piper Sandler. Please ask your question. Hey, good afternoon. Thanks for taking the questions. Two for me.

Speaker Change: Thanks, guys.

Speaker Change: Thank you.

Speaker Change: Our next question is from Edward <unk> from Piper Sandler. Please ask your question.

Hey, good afternoon. Thanks for taking my question two from me I guess first.

Edward James Yruma: I guess first, some very constructive comments around Gen-AI. Curious kind of what the cost structure for that looks like and kind of what the uptake has been thus far. And then second, you know, I know you guys have complained a little bit about the inventory situation at first price. Obviously, results got better in the fourth quarter.

Edward: Very constructive comments around Gen. AI curious kind of what the cost structure for that looks like and kind of what the uptake has been thus far and then second I know you guys have complained a little bit about the inventory situation in first price.

Edward: Have you seen results got better in the fourth quarter are you sort of see some of that industry inventory normalized and do you think is kind of allowing some of your price gaps to better show. Thank you.

Edward James Yruma: Are you sort of seeing some of that industry inventory normalize, and do you think it's kind of allowing some of your price gaps to better show? Thank you. Yeah, hey, Ed, let me just hit the second one first.

Speaker Change: Yeah, Hey, Ed Let me just hit the second one first yes, I mean, we're definitely seeing the inventory levels across sort of our competitive set normalized and so I think that that actually really sets up our value proposition.

James G. Reinhart: Yes, I mean, we're definitely seeing the inventory levels across sort of our competitive set normalized. And so I think that that actually, you know, really sets up our value proposition to perform well as we get into 2024. I would say the only counterpoint to that is, you know, as you have seen, mentioned, talked about, right, there is sort of, you know, still a squeeze on the discretionary dollar.

Speaker Change: Performed well as we get into 2020 for I would say the only counterpoint to that is.

Ed: Do you have.

Ed: <unk> seen mentioned talked about right there is.

Ed: Still a squeeze on the discretionary dollar and so I think that maybe eases throughout the year combined with leaner inventories I think threat is positioned very well for that.

James G. Reinhart: And so, you know, I think if that may be easiest throughout the year, combined with leaner inventories, I think, you know, ThredUp is positioned very well for that. But we certainly see a better competitive environment for our product. On the Gen AI stuff, you know, similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others. You know, given the long tail of products, the constantly changing nature of our product, we really rely on sort of the dynamic nature of the technology to do a lot of work that, you know, would otherwise be done by, you know, inferior algorithms. So I'm very bullish on its ability to delight the customer on the front end.

Ed: But we certainly see a better competitive environment for our product on the Gen eight Gen AI stuff.

Ed: Similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product the constantly changing nature of our product, we really rely on sort of the dynamic.

Ed: Nature of the technology to do a lot of work that that that.

What otherwise be done by inferior algorithms, so I'm very bullish on its ability to delight the customer on the front end and I think we're working on a number of things that will start to materialize. This year that I think will really change how consumers shop resale and so I'm very excited about that and then the last part would be on the operation side is we've been employing AI and AR.

James G. Reinhart: And I think we're working on a number of things that will start to materialize this year that I think will really change, you know, how consumers shop resale. And so I'm very excited about that. And then the last part on the operation side is, you know, we've been employing AI in a number of ways in our DCs for years. But I think just in the last 12 months, you've seen this step-function change in what the technology can do. And I think it has real implications for how productive our operations can be.

Ed: Number of ways in our Dcs for years, but I think just in the last 12 months, you've seen a step function change in what the technology can do.

Ed: I think it has real implications for how productive our operations can be.

Ed: Okay.

Operator: At this time, I'd like to welcome everyone to the ThredUp fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

I'd like to welcome everyone. The threat of fourth quarter 2023 earnings conference call.

The threat of fourth quarter 2023 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. Thank you.

There will be a question and answer session.

I'd like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press Star then the number two.

If you would like to withdraw your question. Please press Star then the number two.

Please press Star then the number two.

I'd now like to hand the conference over to Lauren Frasch, Head of Investor Relations. Please go ahead.

I'd now like to hand, the conference over to Lauren <unk> head of Investor Relations. Please go ahead.

Lauren Frasch: Good afternoon and thank you for joining us on today's conference call to discuss ThredUp's fourth quarter and full year 2023 financial results. With me are James Reinhart, ThredUp's CEO, and cofounder and Sean Sobers, CFO.

We posted our press release and supplemental financial information on our Investor Relations website at ir.thredup.com. This call is being webcast on our IR website and a replay of this call will be available shortly.

Call is being webcast on our IR website and a replay of this call will be available shortly.

Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call, including but not limited to statements regarding our earnings guidance for the first fiscal quarter and full year of 2024, future financial performance, including our goal of reaching adjusted EBITDA breakeven on a consolidated annual basis, our expectations for capital expenditures and other developments in our business in the US and Europe, market demand, growth prospects, business strategies and plans and our ability to cost effectively attract new buyers.

our expectations for capital expenditures and other developments in our business in the US and Europe, market demand, growth prospects, business strategies and plans and our ability to cost effectively attract new buyers.

Words such as anticipate, believe, estimate and expect as well as similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, involve known and unknown risks and uncertainties, including our ability to effectively deploy new and evolving technologies, such as artificial intelligence and machine learning and our offering and the effects of inflation, increased interest rates, changing consumer habits, climate change in general global economic uncertainty.

These forward looking statements are not guarantees of future performance involve known and unknown risks and uncertainties, including our ability to effectively deploy new and evolving technologies, such as artificial intelligence and machine learning and our offering and the effects of inflation increased interest rates changing consumer habits climate change in general global economic.

Our actual results could differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. You can find more information about these risks, uncertainties and other factors that could affect our operating results in our SEC filings, earnings press release, and supplemental information posted on our IR website.

Our actual results could differ materially from any projections of future performance or results expressed or implied by such forward looking statements. You can find more information about these risks uncertainties and other factors that could affect our operating results in our SEC filings earnings press release, and supplemental information posted on our IR website.

You can find more information about these risks uncertainties and other factors that could affect our operating results in our SEC filings earnings press release, and supplemental information posted on our IR website.

Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

In addition, during the call, we will present certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from GAAP measures.

You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our earnings press release and supplemental information posted on our IR website.

Now, I'd like to turn the call over to James Reinhart.

James Reinhart: Good afternoon everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining ThredUp's fourth quarter 2023 and fiscal year 2023 earnings call.

As we head into a new fiscal year, we're pleased to share ThredUp's financial results and key business highlights from our fourth quarter. In addition to the financial results, we will also reflect on the progress we made in 2023, as well as provide an update on key strategic initiatives that we expect will drive growth and margin expansion in 2024.

I'm particularly excited to share how we're leveraging AI across our business and how we believe we are uniquely positioned to benefit from advancements in this technology. I will then hand it over to Sean Sobers, our Chief Financial Officer to talk through our fourth quarter 2023 and fiscal year 2023 financials in more detail. He will also provide our outlook for the first quarter 2024 and fiscal year 2024. We'll close out today's call with a question-and-answer session.

He will then hand, it over to Sean Sobers, our Chief Financial Officer to talk through our fourth quarter 2023 in fiscal year 'twenty 'twenty. The financials in more detail you will also provide our outlook for the first quarter 2024 and fiscal year 'twenty 'twenty four will close out today's call with a question and answer session.

Let me start with our Q4 results. We closed out 2023 with another quarter of strong financial performance, demonstrating healthy topline growth and bottom line leverage. Our revenue exceeded the high end of our guidance at $81.4 million, representing a year over year increase of 14%. We reached 1.8 million active buyers in Q4, up 9% compared to the same quarter last year. Orders reached a record high of $1.8 million, a 17% year over year increase in. In Q4, gross margins came in at 62% the midpoint of our range, but note, this includes our decision to do a one time write off of $1.9 million of aged and unproductive inventory in Europe that we had acquired in early 2023. This action had a 230 basis point impact to our consolidated gross margins. Excluding this one time impact, our consolidated gross margins exceeded our guidance at 64%, representing gross profit growth of 16%.

compared to the same quarter last year. Orders reached a record high of $1.8 million, a 17% year over year increase in. In Q4, gross margins came in at 62% the midpoint of our range, but note, this includes our decision to do a one time write off of $1.9 million of aged and unproductive inventory in Europe that we had acquired in early 2023. This action had a 230 basis point impact to our consolidated gross margins. Excluding this one time impact, our consolidated gross margins exceeded our guidance at 64%, representing gross profit growth of 16%.

In Q4 gross margins came in at 62% the midpoint of our range, but this includes our decision to do a one time write off of $1 9 million of aged and unproductive inventory in Europe that we had acquired in early 2023. This action had a 230 basis point impact to our consolidated gross margins. Excluding this one time impact our consolidated gross margins exceeded our guidance at 64% representing gross profit growth of 16%.

Operator: This action had a 230 basis point impact to our consolidated gross margins. Excluding this one time impact our consolidated gross margins exceeded our guidance at 64% representing gross profit growth of 16%.

Operator: The one time write off in Europe also impacted our adjusted EBITDA in Q4, which totaled negative $2.1 million or minus 2.6%. Excluding the one time inventory write off, we're proud to deliver an adjusted EBITDA loss of just 200,000. This 790 basis point improvement over last year represents the significant progress we made toward breakeven in 2023 and indicates a clear line of sight towards full year adjusted EBITDA breakeven in 2024, which Sean will talk about more in a bit.

Operator: Excluding the one time inventory write off we're proud to deliver an adjusted EBITDA loss of just 200000. This 790 basis point improvement over last year represents the significant progress we made toward breakeven in 2023 and indicates a clear line of sight towards full year adjusted EBITDA breakeven in 2024, which Sean will talk about more in a bit.

Operator: This 790 basis point improvement over last year represents the significant progress we made toward breakeven in 2023 and indicates a clear line of sight towards full year adjusted EBITDA breakeven in 2024, which Sean will talk about more in a bit.

Lauren Marie Frasch: I'm particularly proud to report that despite a highly competitive Q4, the U.S business posted expanded gross margins of 78%, while generating positive adjusted EBITDA for the second consecutive quarter. Stepping back, 2023 was a very strong year for our business. Despite a challenging discretionary environment caused by compounding inflation and elevated interest rates, we delivered consolidated net revenue growth of 12%, active buyer growth of 9%, while expanding adjusted EBITDA margin of 960 basis points. We're extremely pleased with how well our U.S business continues to scale and believe that this year has demonstrated the growth in earnings opportunities of a managed resale business model. Our European business demonstrated strong growth and accelerate its transformation to becoming a leading retail marketplace in Europe.

I'm particularly proud to report that despite a highly competitive Q4, the U.S business posted expanded gross margins of 78%, while generating positive adjusted EBITDA for the second consecutive quarter.

Stepping back, 2023 was a very strong year for our business. Despite a challenging discretionary environment caused by compounding inflation and elevated interest rates, we delivered consolidated net revenue growth of 12%, active buyer growth of 9%, while expanding adjusted EBITDA margin of 960 basis points. We're extremely pleased with how well our U.S business continues to scale and believe that this year has demonstrated the growth in earnings opportunities of a managed resale business model. Our European business demonstrated strong growth and accelerate its transformation to becoming a leading retail marketplace in Europe.

Lauren Marie Frasch: Stepping back 2023 was a very strong year for our business. Despite a challenging discretionary environment caused by compounding inflation and elevated interest rates. We delivered consolidated net revenue growth of 12% active buyer growth of 9%, while expanding adjusted EBITDA margin of 960 basis points. We're extremely pleased with how well our U S business continues to scale and believe that this year has demonstrated the growth in earnings opportunities of a managed resale business model. Our European business demonstrated strong growth and accelerate its transformation to becoming a leading retail marketplace in Europe.

Lauren Marie Frasch: We're extremely pleased with how well our U S business continues to scale and believe that this year has demonstrated the growth in earnings opportunities of a managed resale business model. Our European business demonstrated strong growth and accelerate its transformation to becoming a leading retail marketplace in Europe.

Lauren Marie Frasch: Our European business demonstrated strong growth and accelerate its transformation to becoming a leading retail marketplace in Europe.

Lauren Marie Frasch: Finally, we finished the last phases of our distribution network build out and expect minimal maintenance capex until at least 2026. With limited capex needs over the next few years, we expect our cash flows from operations and move in line with our adjusted EBITDA.

Lauren Marie Frasch: Now, let's turn to the year ahead. Let me start with profitability on a consolidated basis. The good news is that we are already there in the U.S, which makes up 80% of our overall business. We believe we've demonstrated the strength of our unit economics, and our bottom line discipline, having delivered positive adjusted EBITDA in the U.S in both Q3 and Q4 of 2023. We expect that the U.S business will continue to expand gross margins and generate positive adjusted EBITDA this year as we grow, continue to automate and leverage our expenses.

Lauren Marie Frasch: Let me start with profitability on a consolidated basis. The good news is that we are already there in the U S, which makes up 80% of our overall business. We believe we've demonstrated the strength of our unit economics, and our bottom line discipline, having delivered positive adjusted EBITDA in the U S. In both Q3 and Q4 of 2023. We expected the U S business will continue to expand gross margins and generate positive adjusted EBITDA. This year as we grow continue to automate and leverage our expenses.

Speaker Change: The good news is that we are already there in the U S, which makes up 80% of our overall business. We believe we've demonstrated the strength of our unit economics, and our bottom line discipline, having delivered positive adjusted EBITDA in the U S. In both Q3 and Q4 of 2023. We expected the U S business will continue to expand gross margins and generate positive adjusted EBITDA. This year as we grow continue to automate and leverage our expenses.

Speaker Change: We expected the U S business will continue to expand gross margins and generate positive adjusted EBITDA. This year as we grow continue to automate and leverage our expenses.

Speaker Change: Our next task is to do this in Europe. We've nearly doubled revenue in Europe since our acquisition in 2021 and continue to progress towards positive adjusted EBITDA in that market. To give you a sense of how we evaluate our European business, we apply the rule of 40 to the EU's gross profit growth and adjusted EBITDA rate. We believe gross profit is the best indicator of its growth when normalized for the consignment transition and we expect that business to be well above 40 in the year ahead.

Speaker Change: To give you a sense of how we evaluate our European business, we apply the rule of 40 to the Eu's gross profit growth and adjusted EBITDA rate. We believe gross profit is the best indicator of its growth. Normalized for the consignment transition and we expect that business to be well above 40 in the year ahead.

Lauren Marie Frasch: We believe gross profit is the best indicator of its growth. Normalized for the consignment transition and we expect that business to be well above 40 in the year ahead.

Lauren Marie Frasch: Normalized for the consignment transition and we expect that business to be well above 40 in the year ahead.

Lauren Marie Frasch: I'm confident that we're on the right track tackling the large opportunity in Europe with a proven playbook from the U.S. We expect to see continued improvement in Europe each quarter, driven by three core initiatives. Some of these may sound familiar if you've followed us since our IPO.

James G. Reinhart: We expect to see continued improvement in Europe, each quarter, driven by three core initiatives. Some of these may sound familiar if you've followed us since our IPO.

James G. Reinhart: First, we are accelerating the transition to consignment. This process began in mid '23 and we expect Europe to be approximately 20% consignment revenue in 2024. As I've shared on previous calls, this change presents a short term headwind to revenue due to the accounting treatment, but we believe that it will yield a business with a superior margin profile and provide us with more levers to flex margins and growth investments.

Sean Sobers: To flex margins and growth investments.

Sean Sobers: Second, we are migrating our dynamic data driven pricing system from the U.S to Europe to improve sell through rates. The faster items sell, the more we maximize average selling prices and minimize our aged inventory, which yields better margins. This work is already starting to pay off as we are seeing some of the fastest sell throughs in history year to date in 2024. And third, we're introducing inventory sculpting. Using the U.S item acceptance model as the guide, we recently implemented a similar system in the EU to determine which items are listed on our marketplace at any given time. By leveraging data science, we're segmenting inventory to better identify what types of items sell quickly and which items maximize gross profit. The goal is a marketplace with an overall assortment that is more desirable to buyers and expands Europe's gross margin profile.

Second, we are migrating our dynamic data driven pricing system from the U.S to Europe to improve sell through rates. The faster items sell, the more we maximize average selling prices and minimize our aged inventory, which yields better margins. This work is already starting to pay off as we are seeing some of the fastest sell throughs in history year to date in 2024.

Sean Sobers: Faster items, so the more we maximize average selling prices and minimize our aged inventory, which yields better margins. This work is already starting to pay off as we are seeing some of the fastest sell throughs in history year to date in 2024. And third we're introducing inventory sculpting using a U S item acceptance model out the guide we recently implemented a similar system in the EU to determine which items are listed on our marketplace at any given time. By leveraging data science, where say many inventory to better identify what types of items, so quickly and which items maximize gross profit. The goal is a marketplace with an overall assortment that is more desirable to buyers and expands Europe's gross margin profile.

And third, we're introducing inventory sculpting. Using the U.S item acceptance model as the guide, we recently implemented a similar system in the EU to determine which items are listed on our marketplace at any given time. By leveraging data science, we're segmenting inventory to better identify what types of items sell quickly and which items maximize gross profit. The goal is a marketplace with an overall assortment that is more desirable to buyers and expands Europe's gross margin profile.

Sean Sobers: And third we're introducing inventory sculpting using a U S item acceptance model out the guide we recently implemented a similar system in the EU to determine which items are listed on our marketplace at any given time. By leveraging data science, where say many inventory to better identify what types of items, so quickly and which items maximize gross profit. The goal is a marketplace with an overall assortment that is more desirable to buyers and expands Europe's gross margin profile.

James G. Reinhart: By leveraging data science, where say many inventory to better identify what types of items, so quickly and which items maximize gross profit. The goal is a marketplace with an overall assortment that is more desirable to buyers and expands Europe's gross margin profile.

James G. Reinhart: The goal is a marketplace with an overall assortment that is more desirable to buyers and expands Europe's gross margin profile.

James G. Reinhart: To summarize, the U.S has already posted two consecutive quarters of positive adjusted EBITDA and as we continue to apply a U.S strategy and tactics to Europe to improve our gross margins in that market, we expect to achieve positive consolidated adjusted EBITDA on an annual basis in 2024.

James G. Reinhart: Next I'd like to share an overview of strategic initiatives that are designed to drive business growth in 2024. Let me start with the ways we're deploying artificial intelligence to improve the customer experience and reduce costs in our distribution network. First, we recently debuted an AI powered search experience that makes it easy and intuitive to find any secondhand item on ThredUp. Our vast selection of inventory is one of our biggest assets, but it also creates challenges for buyers as they shop up to 4 million unique secondhand items at any given time. This new search functionality significantly enhances the secondhand shopping experience in our marketplace by combining visual language with personal style.

Speaker Change: Let me start with the ways, we're deploying artificial intelligence to improve the customer experience and reduce costs in our distribution network. First we recently debuted in AI powered search experience that makes it easy and intuitive to find any secondhand item on threat up. Our vast selection of inventory is one of our biggest assets, but it also creates challenges for buyers as they shop up to 4 million unique secondhand items at any given time. This new search functionality significantly enhances the secondhand shopping experience in our marketplace by combining visual language with personal style.

First we recently debuted in AI powered search experience that makes it easy and intuitive to find any secondhand item on threat up. Our vast selection of inventory is one of our biggest assets, but it also creates challenges for buyers as they shop up to 4 million unique secondhand items at any given time. This new search functionality significantly enhances the secondhand shopping experience in our marketplace by combining visual language with personal style.

Speaker Change: Our vast selection of inventory is one of our biggest assets, but it also creates challenges for buyers as they shop up to 4 million unique secondhand items at any given time. This new search functionality significantly enhances the secondhand shopping experience in our marketplace by combining visual language with personal style.

Speaker Change: This new search functionality significantly enhances the secondhand shopping experience in our marketplace by combining visual language with personal style.

James G. Reinhart: By enabling buyers to curate style inspirations effortlessly, whether it's by searching for a popular item like a satin cocktail dress or a descriptive trend or look like Sunday brunch dress or a phrase that evokes emotion like Academy Award chic, ThredUp can help shoppers find exactly what they want. It is not only fun to use but it also has that sense of magic to it. Sometimes you just can't believe how good the technology is at delivering relevant results. Early indicators show an increase in searches per session, a higher [inaudible] conversion of items researched and higher click through for individual product pages.

James G. Reinhart: Set up can help shoppers find exactly what they want and it's. It is not only fun to use. But it also is that sense of magic to it sometimes you just can't believe how good the technology is delivering relevant results. Early indicators show an increase in searches precession, our higher Ed to car conversion of items from search and higher click through for individual product pages.

James G. Reinhart: It is not only fun to use. But it also is that sense of magic to it sometimes you just can't believe how good the technology is delivering relevant results. Early indicators show an increase in searches precession, our higher Ed to car conversion of items from search and higher click through for individual product pages.

James G. Reinhart: But it also is that sense of magic to it sometimes you just can't believe how good the technology is delivering relevant results. Early indicators show an increase in searches precession, our higher Ed to car conversion of items from search and higher click through for individual product pages.

James G. Reinhart: Early indicators show an increase in searches precession, our higher Ed to car conversion of items from search and higher click through for individual product pages.

Second, we have begun to leverage generative AI technology that will soon give customers the ability to create outfits they love using just the text description. For example, a friend is looking for an outfit to wear to fancy [inaudible] on an upcoming trip to Hawaii. Using natural language prompts, our generative AI tool created enough to compose a beautiful floral crop, a flowy white maxi skirt with a side split, paired with highly embellished sandals. Want to create outfits from popular magazines or style influencers of runway trends, we can now easily do that while delivering shoppable secondhand product up to 70% off what a consumer might pay new. The list of outfits that can be generated from tool is endless, restricted only by the imagination of our buyers. We'll be leading the style inspiration touch points throughout the product experience over the year ahead and look forward to sharing more soon.

James G. Reinhart: a flowy white maxi skirt with a side split, paired with highly embellished sandals. Want to create outfits from popular magazines or style influencers of runway trends, we can now easily do that while delivering shoppable secondhand product up to 70% off what a consumer might pay new. The list of outfits that can be generated from tool is endless, restricted only by the imagination of our buyers. We'll be leading the style inspiration touch points throughout the product experience over the year ahead and look forward to sharing more soon.

James G. Reinhart: Paired with highly embellished sandals want to create an outfits from popular magazines or style influencers of runway trends. We can now easily do that while delivering shopper, both secondhand product up to 70% of all what a consumer might pay new. The list of Alf X that can be generated from this towards endless restricted only by the imagination of our buyers will be leading the style inspiration touch points throughout the product experience over the year ahead and look forward to sharing more soon.

James G. Reinhart: The list of Alf X that can be generated from this towards endless restricted only by the imagination of our buyers will be leading the style inspiration touch points throughout the product experience over the year ahead and look forward to sharing more soon.

James G. Reinhart: I want to emphasize that AI is an enormous leap forward for us in bringing emotion and storytelling to the millions of unique shopping journeys that regularly happen on ThredUp. Given the breadth of our offering and the limitation of not having on model photography in our core product experience, we believe generative AI technology disproportionately benefit to manage the marketplace like ThredUp compared to other apparel or peer to peer marketplaces.

James G. Reinhart: Given the breadth of our offering and the limitation of not having on model photography, and our core product experience. We believe generative AI technology disproportionately benefit to manage the marketplace like better compared to other apparel or peer to peer marketplaces.

James G. Reinhart: Now, let me turn to AI and operations. We're also implementing AI across more operations in our distribution center network to enhance the customer experience and improve throughput and productivity. Once the government has been photographed, we employ advanced AI technologies to extract a wide range of detailed characteristics of the item from its image. This capability not only enriches our inventory database, but also streamlines the cat organization and processing of items. This is improved operational efficiency and the accuracy of our product listings, resulting in better search and personalization in our marketplace. We see near term opportunities for generative AI to improve visual merchandising and add more engaging content to the shopping journey without us having to use expensive on model photography. Eventually, you can imagine a world where AI not only supplements manual photography, but replaces it. These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

Now, let me turn to AI and operations. We're also implementing AI across more operations in our distribution center network to enhance the customer experience and improve throughput and productivity. Once the government has been photographed, we employ advanced AI technologies to extract a wide range of detailed characteristics of the item from its image. This capability not only enriches our inventory database, but also streamlines the cat organization and processing of items. This is improved operational efficiency and the accuracy of our product listings, resulting in better search and personalization in our marketplace. We see near term opportunities for generative AI to improve visual merchandising and add more engaging content to the shopping journey without us having to use expensive on model photography.

James G. Reinhart: Once the government has been photographed we employ advanced AI technologies to extract a wide range of detailed characteristics of the item from its image. This capability not only enriches our inventory database, but also streamlines the cat organization and processing of items. This is improved operational efficiency and the accuracy of our product listings, resulting in better search and personalization in our marketplace. See near term opportunities for <unk> to improve visual merchandising and add more engaging content to the shopping journey without us having to use expensive on model photography. So you can imagine a world, where AI not only supplement manual photography, but replaces it. These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

James G. Reinhart: This is improved operational efficiency and the accuracy of our product listings, resulting in better search and personalization in our marketplace. See near term opportunities for <unk> to improve visual merchandising and add more engaging content to the shopping journey without us having to use expensive on model photography. So you can imagine a world, where AI not only supplement manual photography, but replaces it. These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

James G. Reinhart: See near term opportunities for <unk> to improve visual merchandising and add more engaging content to the shopping journey without us having to use expensive on model photography. So you can imagine a world, where AI not only supplement manual photography, but replaces it. These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

Eventually, you can imagine a world where AI not only supplements manual photography, but replaces it. These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

James G. Reinhart: So you can imagine a world, where AI not only supplement manual photography, but replaces it. These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

James G. Reinhart: These AI driven initiatives have enabled us to set new standards for efficiency and accuracy and are paving the way for continuous innovation and potential margin expansion.

James G. Reinhart: So much of what we believe we could achieve over the next few years through our own software and industrial engineering development has now become readily available and it's cheaper and faster than we imagined. Beyond AI, we're seeing continued improvements across a number of areas. For example, our delivery promise and thrift promise initiative, which aims to deliver purchase to doorstep shipping in four days or less and do right by the customer with every order, continued to make progress. Orders delivered within this timeframe have increased more than 150% year over year in the quarter to date. Our return rate decreased by 700 basis points in Q4 compared to the same quarter last year.

James G. Reinhart: Beyond AI, we're seeing continued improvements across a number of areas. For example, our delivery promise and thrift promise initiative, which aims to deliver purchased the doorstep shipping in four days or less and do right by the customer with every order continued to make progress orders delivered within this timeframe have increased more than 100. 50% year over year in the quarter to date. Return rate decreased by 700 basis points in Q4 compared to the same quarter last year.

James G. Reinhart: 50% year over year in the quarter to date. Return rate decreased by 700 basis points in Q4 compared to the same quarter last year.

James G. Reinhart: Return rate decreased by 700 basis points in Q4 compared to the same quarter last year.

James G. Reinhart: We've also put a renewed focus on our loyalty program as a way to reduce broad based promotions and we expect to see continued benefits as we invest in customer retention efforts with more attractive rewards. Early signals show a double digit increase in orders with loyalty rewards and we believe creating a fun and easy rewards loop will encourage all customers to shop like our best customers do today. Our retail as a service business or RAS, continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable retail experiences to their customers.

We've also put a renewed focus on our loyalty program as a way to reduce broad based promotions and we expect to see continued benefits as we invest in customer retention efforts with more attractive rewards. Early signals show a double digit increase in orders with loyalty rewards and we believe creating a fun and easy rewards loop will encourage all customers to shop like our best customers do today.

James G. Reinhart: Like our best customers do today. Our retail as a service business or Ras continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable retail experiences to their customers.

James G. Reinhart: Our retail as a service business or Ras continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable retail experiences to their customers.

Our retail as a service business or RAS, continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable retail experiences to their customers. Across our 50 plus brand customers, we now estimate that we power six of the 10 largest brand retail shops online, power more than 50% of total branded resale with things that are sold online and you can pick up a cobranded ThredUp cleanout kit in more than 800 stores nationwide. As a reminder, by leveraging ThredUp's marketplace infrastructure, RAS amplifies our supply advantage, increases our sell through and return on assets, drives brand awareness and expands our long term profitability metrics. As I often do on these calls, I'd like to take a moment to remind you of ThredUp's steadfast commitment to balancing purpose and profit.

Our retail as a service business or RAS, continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable retail experiences to their customers. Across our 50 plus brand customers, we now estimate that we power six of the 10 largest brand retail shops online, power more than 50% of total branded resale with things that are sold online and you can pick up a cobranded ThredUp cleanout kit in more than 800 stores nationwide. As a reminder, by leveraging ThredUp's marketplace infrastructure, RAS amplifies our supply advantage, increases our sell through and return on assets, drives brand awareness and expands our long term profitability metrics.

James G. Reinhart: Across our 50 plus brand customers, we now estimate that we power six of the 10 largest brand retail shops online, power more than 50% of total branded resale with things that are sold online and you can pick up a cobranded ThredUp cleanout kit in more than 800 stores nationwide. As a reminder, by leveraging ThredUp's marketplace infrastructure, RAS amplifies our supply advantage, increases our sell through and return on assets, drives brand awareness and expands our long term profitability metrics. As I often do on these calls, I'd like to take a moment to remind you of ThredUp's steadfast commitment to balancing purpose and profit.

James G. Reinhart: Reminder, by leveraging threat of some marketplace infrastructure Ras amplifies our supply advantage increases our sell through and return on assets drives brand awareness and expands our long term profitability metrics. As I often do on these calls I'd like to take a moment to remind you of threat ups steadfast commitment to balancing purpose and profit our.

As I often do on these calls, I'd like to take a moment to remind you of ThredUp's steadfast commitment to balancing purpose and profit.

James G. Reinhart: As I often do on these calls I'd like to take a moment to remind you of threat ups steadfast commitment to balancing purpose and profit our.

James G. Reinhart: Our mission of inspiring the world to think secondhand first remains the cornerstone of our strategy. Since our founding, we've now processed more than 172 million unique pieces of clothing, keeping clothes in circulation and out of landfills, while delivering incredible value to our millions of customers. At the center of every decision we make is our business and brand on environmental social and governance strategy, which guides us and helps fuel our success and ThredUp's purpose and profit are inextricably linked.

James G. Reinhart: Keeping close in circulation and out of landfill, while delivering incredible value to our millions of customers. At the center of every decision, we make is our business and brand on environmental social and governance strategy, which guides us and helps fuel our success and threat up purpose and profit are inextricably linked.

James G. Reinhart: At the center of every decision, we make is our business and brand on environmental social and governance strategy, which guides us and helps fuel our success and threat up purpose and profit are inextricably linked.

James G. Reinhart: We were recently named a winner in good housekeeping's 2024 Sustainable Innovation Awards, which recognize products and services that have embraced our people, purpose, and planet approach to sustainability. As we head into another year, I'm excited about our path forward and the impact we'll make globally on our people, our communities and the planet. With that, I will now turn it over to Sean to go through our financial results and guidance in more detail.

James G. Reinhart: As we head into another year I'm excited about our path forward and the impact will make globally on our people our communities and the planet. With that I will now turn it over to Sean to go through our financial results and guidance in more detail.

James G. Reinhart: With that I will now turn it over to Sean to go through our financial results and guidance in more detail.

Sean Sobers: Thanks, James. I'll begin with an overview of our results and follow up with guidance for the first quarter and the full year. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and a reconciliation between GAAP and non-GAAP are found in our earnings release supplemental financials in our 10-K filings.

Sean Sobers: I will discuss non-GAAP results throughout my remarks, our GAAP financials, and a reconciliation between GAAP and non-GAAP are found in our earnings release supplemental financials in our 10-K filings.

Sean Sobers: We are very proud of our Q4 results. For the fourth quarter of 2023, revenue totaled $81.4 million, an increase of 14% year over year. Consignment revenue grew 49% year over year, while product revenue shrank by 25%. We are pleased with the growth in consignment revenue driven by the transition of our RAS clients and our European business to the consignment model. We would expect to continue to see outsized growth in consignment and declines in product revenue throughout 2024. While the transition of these businesses to consignment should be a tailwind to gross margins over time, we expect it to meet revenue growth simply due to the accounting treatment.

James G. Reinhart: Consignment revenue grew 49% year over year, while product revenue shrank by 25%. We are pleased with the growth in consignment revenue driven by the transition of our RASK clients and our European business to the consignment model. We would expect to continue to see outsized growth in consignment and declines in product revenue throughout 2024. While the transition of these businesses to consignment should be a tailwind to gross margins over time, we expect it to meet revenue growth simply due to the accounting treatment.

James G. Reinhart: We are pleased with the growth in consignment revenue driven by the transition of our RASK clients and our European business to the consignment model. We would expect to continue to see outsized growth in consignment and declines in product revenue throughout 2024. While the transition of these businesses to consignment should be a tailwind to gross margins over time, we expect it to meet revenue growth simply due to the accounting treatment.

James G. Reinhart: We would expect to continue to see outsized growth in consignment and declines in product revenue throughout 2024. While the transition of these businesses to consignment should be a tailwind to gross margins over time, we expect it to meet revenue growth simply due to the accounting treatment.

James G. Reinhart: While the transition of these businesses to consignment should be a tailwind to gross margins over time, we expect it to meet revenue growth simply due to the accounting treatment.

James G. Reinhart: As a reminder, consignment payouts reduced net revenue. We expect consignment revenue will be an increasingly larger part of our business throughout 2024. [inaudible] payouts are in Cogs and reduced gross margins. We expect owned revenue to be a smaller part of our business. As a result, we look to gross profit as the most relevant measure to evaluate the underlying growth rate of our business.

James G. Reinhart: We expect consignment revenue will be an increasingly larger part of our business throughout 2024. Oh, and payouts are in Cogs and reduced gross margins. We expect one revenue to be a smaller part of our business. As a result, we look to gross profit as the most relevant measure to evaluate the underlying growth rate of our business.

James G. Reinhart: Oh, and payouts are in Cogs and reduced gross margins. We expect one revenue to be a smaller part of our business. As a result, we look to gross profit as the most relevant measure to evaluate the underlying growth rate of our business.

James G. Reinhart: We expect one revenue to be a smaller part of our business. As a result, we look to gross profit as the most relevant measure to evaluate the underlying growth rate of our business.

James G. Reinhart: As a result, we look to gross profit as the most relevant measure to evaluate the underlying growth rate of our business.

James G. Reinhart: We're happy to report that we accelerated our active buyer growth and achieved a record number of active buyers for the second consecutive quarter, reaching $1.8 million, up 9% year over year. Orders growth also accelerated to 17% year over year to $1.8 million. For the fourth quarter of 2023, reported gross margin was 61.9%. As we implement our resale playbook in Europe, we made the strategic decision to take a onetime $1.9 million inventory write off in Q4, a 230 basis point impact to gross margin. We expect that clearing this inventory will enable an improved customer experience, allowing shoppers to more easily access fresh inventory while supporting a better margin profile and accelerating our ship to consignment. We believe that this action is setting up our EU business for success in the coming year. 

James G. Reinhart: Orders growth also accelerated to 17% year over year to $1 8 million. For the fourth quarter of 2023 reported gross margin was 61, 9% as we implement our resale playbook in Europe, we made the strategic decision to take a onetime $1 9 million inventory write off in Q4 of. 230 basis point impact to gross margin we. We expect that clearing this inventory will enable an improved customer experience, allowing shoppers to more easily access fresh inventory, all supporting a better margin profile and accelerating our ship to consignment.

James G. Reinhart: For the fourth quarter of 2023 reported gross margin was 61, 9% as we implement our resale playbook in Europe, we made the strategic decision to take a onetime $1 9 million inventory write off in Q4 of. 230 basis point impact to gross margin we. We expect that clearing this inventory will enable an improved customer experience, allowing shoppers to more easily access fresh inventory, all supporting a better margin profile and accelerating our ship to consignment.

James G. Reinhart: 230 basis point impact to gross margin we. We expect that clearing this inventory will enable an improved customer experience, allowing shoppers to more easily access fresh inventory, all supporting a better margin profile and accelerating our ship to consignment.

James G. Reinhart: We expect that clearing this inventory will enable an improved customer experience, allowing shoppers to more easily access fresh inventory, all supporting a better margin profile and accelerating our ship to consignment.

James G. Reinhart: Excluding this impact, our gross margin came in at 64.2%, a 110 basis points ahead of last year while our gross profit grew by 16%. Our consolidated results exceeded our expectations driven by U.S gross margin of 77.5% and gross profit growth of 19%. This year over year expansion was a result of continued improvements in how we optimize our marketplace, including pricing, promotions, returns, payouts in fees.

James G. Reinhart: Excluding this impact our gross margin came in at 64, 2% a 110 basis points ahead of last year, our gross profit grew by 16%. Our consolidated results exceeded our expectations driven by U S. Gross margin was 77, 5% and gross profit growth of 19%. This year over year expansion was a result of continued improvements in how we optimize our marketplace, including pricing promotions returns payouts in PS.

James G. Reinhart: Our consolidated results exceeded our expectations driven by U S. Gross margin was 77, 5% and gross profit growth of 19%. This year over year expansion was a result of continued improvements in how we optimize our marketplace, including pricing promotions returns payouts in PS.

James G. Reinhart: This year over year expansion was a result of continued improvements in how we optimize our marketplace, including pricing promotions returns payouts in PS.

James G. Reinhart: For the fourth quarter of 2023, net loss was $14.6 million compared to a net loss of $19.5 million in the same quarter last year. Adjusted EBITDA loss was $2.1 million or a negative 2.6% of revenue for the fourth quarter of 2023. Excluding the inventory write off, adjusted EBITDA loss was just $200,000.

For the fourth quarter of 2023, net loss was $14.6 million compared to a net loss of $19.5 million in the same quarter last year. Adjusted EBITDA loss was $2.1 million or a negative 2.6% of revenue for the fourth quarter of 2023.

James G. Reinhart: Adjusted EBITDA loss was $2 1 million or a negative two 6% of revenue for the fourth quarter of 2023. Excluding the inventory write off adjusted EBITDA loss was just $200000.

James G. Reinhart: Excluding the inventory write off adjusted EBITDA loss was just $200000.

Excluding the inventory write off, adjusted EBITDA loss was just $200,000. We reduced our adjusted EBITDA loss in Q4 by more than half versus last year, representing an approximate 560 basis point improvement as we tightly manage expenses and leveraged our investments on higher revenue. To this point, we are proud to report that our hard work drove a 14% year over year revenue increase on just a 6% increase in operating expenses, illustrating the powerful leverage of our marketplace model.

James G. Reinhart: We reduced our adjusted EBITDA loss in Q4 by more than half versus last year, representing an approximate 560 basis point improvement as we tightly manage expenses and leveraged our investments on higher revenue. To this point, we are proud to report that our hard work drove a 14% year over year revenue increase on just a 6% increase in operating expenses, illustrating the powerful leverage of our marketplace model.

James G. Reinhart: Representing an approximate 560 basis point improvement as we tightly manage expenses and leveraged our investments on higher revenue. To this point, we are proud to report that our hard work drove a 14% year over year revenue increase on just a 6% increase in operating expenses illustrating the powerful leverage of our marketplace model.

James G. Reinhart: To this point, we are proud to report that our hard work drove a 14% year over year revenue increase on just a 6% increase in operating expenses illustrating the powerful leverage of our marketplace model.

Turning to the balance sheet, we began the fourth quarter with $80.2 million in cash and marketable securities and ended the quarter was $69.6 million. We used $10.6 million in cash in Q4. While we continue to spend maintenance levels of Capex with just $2.2 million, the step up in our cash usage was largely due to seasonal timing within our accounts payable.

James G. Reinhart: We began the fourth quarter with $80 $2 million in cash and marketable securities and ended the quarter was $69 $6 million, we used $10 $6 million in cash in Q4. While we continue to spend maintenance levels of Capex with just $2 2 million step up in our cash usage was largely due to seasonal timing within our accounts payable.

James G. Reinhart: While we continue to spend maintenance levels of Capex with just $2 2 million step up in our cash usage was largely due to seasonal timing within our accounts payable.

James G. Reinhart: As a reminder, in Q4 of last year, we used $19.6 million in cash, illustrating the enormous progress we've made over the last four quarters. In 2024, we expect cash flow usage to significantly decline versus 2023. In 2023, we are proud to have reduced our consolidated adjusted EBITDA loss in every quarter. We achieved quarterly positive adjusted EBITDA in our US business and continue to spend only maintenance levels of Capex. We believe we will reach breakeven on a consolidated annual basis in 2024, as we scaled the US and improve Europe's margin profile.

James G. Reinhart: In 2024, we expect cash flow usage to significantly decline versus 2023. In 2023, we are proud to have reduced our consolidated adjusted EBITDA loss in every quarter achieved quarterly positive adjusted EBITDA in our U S business and continue to spend only maintenance levels of Capex. We believe we will reach breakeven on a consolidated annual basis in 2024, as we scaled the U S and improve Europe's margin profile.

James G. Reinhart: In 2023, we are proud to have reduced our consolidated adjusted EBITDA loss in every quarter achieved quarterly positive adjusted EBITDA in our U S business and continue to spend only maintenance levels of Capex. We believe we will reach breakeven on a consolidated annual basis in 2024, as we scaled the U S and improve Europe's margin profile.

James G. Reinhart: We believe we will reach breakeven on a consolidated annual basis in 2024, as we scaled the U S and improve Europe's margin profile.

James G. Reinhart: As we look to 2024, please keep in mind the following. First, though our customer continues to feel the pressure of compounded inflation and higher interest rates, we are implementing a number of tactics to improve the customer experience as James described. As our strategic initiatives rollout in both the US and Europe, we expect our revenue to improve sequentially throughout the year weighted towards the second half.

Sean Sobers: As our strategic initiatives rollout in both the U S and Europe, we expect our revenue to improve sequentially throughout the year weighted towards the second half.

Sean Sobers: As a reminder, also consider that we spend more marketing dollars as a percentage of revenue in the first half of the year to drive buyers, whose multiple annual purchases tend to yield revenue in the second half. Second, gross margin improvement will be primarily driven by our ongoing work in the U.S and Europe's transition to consignment. Though the consignment transition will mute revenue growth due to the accounting treatment, consignment revenue will drive gross profit and margin improvement overtime. We would expect gross margins to be better in the second half than in the first half as the transition progresses. In 2023, 66% of our consolidated revenues came from consignment and we expect to see that percentage increased to approximately 80% in 2024.

As a reminder, also consider that we spend more marketing dollars as a percentage of revenue in the first half of the year to drive buyers, whose multiple annual purchases tend to yield revenue in the second half.

Sean Sobers: Second gross margin improvement will be primarily driven by our ongoing work in the U S and Europe's transition to consignment. The consignment transition will mute revenue growth due to the accounting treatment consignment revenue will drive gross profit and margin improvement overtime, we would expect gross margins to be better in the second half than in the first stop as the transition progresses and. In 2023, 66% of our consolidated revenues came from consignment. And we expect to see that percentage increased to approximately 80% in 2024.

Second, gross margin improvement will be primarily driven by our ongoing work in the U.S and Europe's transition to consignment. Though the consignment transition will mute revenue growth due to the accounting treatment, consignment revenue will drive gross profit and margin improvement overtime. We would expect gross margins to be better in the second half than in the first half as the transition progresses. In 2023, 66% of our consolidated revenues came from consignment and we expect to see that percentage increased to approximately 80% in 2024.

Sean Sobers: The consignment transition will mute revenue growth due to the accounting treatment consignment revenue will drive gross profit and margin improvement overtime, we would expect gross margins to be better in the second half than in the first stop as the transition progresses and. In 2023, 66% of our consolidated revenues came from consignment. And we expect to see that percentage increased to approximately 80% in 2024.

Sean Sobers: In 2023, 66% of our consolidated revenues came from consignment. And we expect to see that percentage increased to approximately 80% in 2024.

Sean Sobers: And we expect to see that percentage increased to approximately 80% in 2024.

Sean Sobers: Third, we continue to expect maintenance levels of Capex of approximately $2 million per quarter until 2026, which provides us a high level of confidence that we can run the business with our existing cash until we reach cash flow positive. We want to reiterate that we do not anticipate our cash and marketable securities going below $50 million before reaching free cash flow positive. Nor do we expect to turn to the capital markets or draw down our existing debt portfolio. 

Sean Sobers: We want to reiterate that we do not anticipate our cash and marketable securities going below $50 million before reaching free cash flow positive. Nor do we expect to turn to the capital markets or draw down our existing debt before them.

Sean Sobers: Nor do we expect to turn to the capital markets or draw down our existing debt before them.

Sean Sobers: With all that in mind, for the first quarter, we expect revenue in the range of $79 million to $81 million, gross margin in the range of 68.5% to 70.5% of revenue. At the midpoint this represents gross profit dollar growth of 9% year over year, adjusted EBITDA loss of 3% to 1% of revenue and basic weighted average shares outstanding of approximately 110 million shares.

Sean Sobers: Gross margin in the range of 68, 5% to 75% of revenue at the midpoint. This represents gross profit dollar growth of 9% year over year. Adjusted EBITDA loss of 3% to 1% of revenue and basic weighted average shares outstanding of approximately 110 million shares.

Sean Sobers: Adjusted EBITDA loss of 3% to 1% of revenue and basic weighted average shares outstanding of approximately 110 million shares.

For the full year of 2024, we now expect revenue in the range of approximately $340 million to $350 million, gross margin in the range of approximately 69.5% to 71.5% of revenue. At the midpoint, this represents a gross profit dollar growth of 14% year over year, positive adjusted EBITDA of half a percent to 1.5% of revenue and basic weighted average shares outstanding of approximately 114 million shares. In closing, we are extremely proud of the progress we have made towards growth and profitability goals in 2023, and look forward to delivering steady growth and continued leverage in 2024 as we achieved positive adjusted EBITDA on a consolidated basis.

For the full year of 2024, we now expect revenue in the range of approximately $340 million to $350 million, gross margin in the range of approximately 69.5% to 71.5% of revenue. At the midpoint, this represents a gross profit dollar growth of 14% year over year, positive adjusted EBITDA of half a percent to 1.5% of revenue and basic weighted average shares outstanding of approximately 114 million shares.

Sean Sobers: Margin in the range of approximately 69, 5% to 71, 5% of revenue. At the midpoint. This represents a gross profit dollar growth of 14% year over year. Positive adjusted EBITDA of half a percent to one 5% of revenue and basic weighted average shares outstanding of approximately 114 million shares. In closing we are extremely proud of the progress we have made towards growth and profitability goals in 2023, and look forward to delivering steady growth and continued leverage in 2024 as we achieved positive adjusted EBITDA on a consolidated basis.

Sean Sobers: At the midpoint. This represents a gross profit dollar growth of 14% year over year. Positive adjusted EBITDA of half a percent to one 5% of revenue and basic weighted average shares outstanding of approximately 114 million shares. In closing we are extremely proud of the progress we have made towards growth and profitability goals in 2023, and look forward to delivering steady growth and continued leverage in 2024 as we achieved positive adjusted EBITDA on a consolidated basis.

Sean Sobers: Positive adjusted EBITDA of half a percent to one 5% of revenue and basic weighted average shares outstanding of approximately 114 million shares. In closing we are extremely proud of the progress we have made towards growth and profitability goals in 2023, and look forward to delivering steady growth and continued leverage in 2024 as we achieved positive adjusted EBITDA on a consolidated basis.

In closing, we are extremely proud of the progress we have made towards growth and profitability goals in 2023, and look forward to delivering steady growth and continued leverage in 2024 as we achieved positive adjusted EBITDA on a consolidated basis.

Sean Sobers: In closing we are extremely proud of the progress we have made towards growth and profitability goals in 2023, and look forward to delivering steady growth and continued leverage in 2024 as we achieved positive adjusted EBITDA on a consolidated basis.

Speaker Change: James and I are now ready for your questions. Operator, please open the line. 

Speaker Change: Okay.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a three tone prompt acknowledging your request. Questions will be taken in order received. If you wish to cancel your request, please press the star followed by two. If you're using a speaker phone, please lift the handset before pressing any keys. One moment please for your first question.

Speaker Change: <unk> and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on you touched on filing. There are three ton prompt acknowledging your request questions will be taken in order to receive should you wish to casually. Your request. Please press the star followed by consumer if you're using a speaker phone. Please lift the handset before pressing any case one moment. Please for your first question. Yeah.

Speaker Change: There are three ton prompt acknowledging your request questions will be taken in order to receive should you wish to casually. Your request. Please press the star followed by consumer if you're using a speaker phone. Please lift the handset before pressing any case one moment. Please for your first question. Yeah.

Speaker Change: Yeah.

Operator: Your first question is from [inaudible] from Wells Fargo. Please ask your question.

Unknown: Hey guys, good afternoon. Two from me, maybe one for James and one for Sean. On the active buyer growth, James you guys have kind of [inaudible] by your investor growth, good to see so maybe just give us a little bit more detail on what exactly you guys have done to kind of get you guys back in good shape there. And then just second follow up for Sean or James, just on the consignment, because it's having such a big impact on the margins and the model, can you just be a little bit more specific of what you expect based on the Q1 and fiscal year guide what you expect consignment could be as a percentage of revenue, that way we can kind of just build from Q1 kind of through Q4 of the transition of [inaudible].

Ike: Two for me, maybe one for James and one for Sean. On the active buyer growth and James you guys have kind of reflected by your basket growth. Good to see so maybe just give us a little bit more detail on what exactly you guys have done to kind of get you guys back in good shape. There and then just second follow up for Sean or games.

Ike: On the active buyer growth and James you guys have kind of reflected by your basket growth. Good to see so maybe just give us a little bit more detail on what exactly you guys have done to kind of get you guys back in good shape. There and then just second follow up for Sean or games.

Ike: Good to see so maybe just give us a little bit more detail on what exactly you guys have done to kind of get you guys back in good shape. There and then just second follow up for Sean or games.

Ike: just on the consignment, because it's having such a big impact on the margins and the model, can you just be a little bit more specific of what you expect based on the Q1 and fiscal year guide what you expect consignment could be as a percentage of revenue, that way we can kind of just build from Q1 kind of through Q4 of the transition of [inaudible].

James Reinhart: Sure. Yeah, on the first one, I think over the last couple of quarters, we really reoriented the customer acquisition strategy to focus on a slightly more premium customer, a customer who we thought we have the right inventory mix for and I think you're just starting to see that strategy pay off and that's driven the active buyer growth. And we expect that to continue into 2024 sort of refocus on the customer, a real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compounds as we move through 202. Sean, talk like a little bit about the consignment fees. Yes, on consignment for Q1 think about it as mid-70s as a total percentage of revenues and that will grow throughout the year to be about 80% for the full year.

James Reinhart: Sure. Yeah, on the first one, I think over the last couple of quarters, we really reoriented the customer acquisition strategy to focus on a slightly more premium customer, a customer who we thought we have the right inventory mix for and I think you're just starting to see that strategy pay off and that's driven the active buyer growth. And we expect that to continue into 2024 sort of refocus on the customer, a real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compounds as we move through 202. Sean, talk like a little bit about the consignment fees.

Speaker Change: Yeah on the first one. I think over the last couple of quarters, we really reoriented the customer acquisition strategy to focus on a slightly more premium customer a customer who we thought. You know we have the right inventory mix for and I think you're just starting to see that strategy pay off. And thats driven the active buyer growth. And we expect that to continue into 2024 sort of refocus on the customer. A real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compound as they move through 'twenty 'twenty four it sounds like a little bit about the consignment fees yes. Or do you want to give it about mid seventies as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Speaker Change: I think over the last couple of quarters, we really reoriented the customer acquisition strategy to focus on a slightly more premium customer a customer who we thought. You know we have the right inventory mix for and I think you're just starting to see that strategy pay off. And thats driven the active buyer growth. And we expect that to continue into 2024 sort of refocus on the customer. A real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compound as they move through 'twenty 'twenty four it sounds like a little bit about the consignment fees yes. Or do you want to give it about mid seventies as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Sean Sobers: You know we have the right inventory mix for and I think you're just starting to see that strategy pay off. And thats driven the active buyer growth. And we expect that to continue into 2024 sort of refocus on the customer. A real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compound as they move through 'twenty 'twenty four it sounds like a little bit about the consignment fees yes. Or do you want to give it about mid seventies as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Sean Sobers: And thats driven the active buyer growth. And we expect that to continue into 2024 sort of refocus on the customer. A real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compound as they move through 'twenty 'twenty four it sounds like a little bit about the consignment fees yes. Or do you want to give it about mid seventies as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Sean Sobers: And we expect that to continue into 2024 sort of refocus on the customer. A real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compound as they move through 'twenty 'twenty four it sounds like a little bit about the consignment fees yes. Or do you want to give it about mid seventies as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Sean Sobers: A real focus on retention and loyalty has driven the upside and so we feel very good about that return to growth and really how that compound as they move through 'twenty 'twenty four it sounds like a little bit about the consignment fees yes. Or do you want to give it about mid seventies as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Sean Sobers: Yes, on consignment for Q1 think about it as mid-70s as a total percentage of revenues and that will grow throughout the year to be about 80% for the full year.

Or do you want to give it about mid seventies as a total percentage of revenue and that will grow throughout the year to be about 80% for the full year.

Unknown: Perfect. Thanks, guys.

Operator: Thank you. Your next question is from Anna [inaudible] from Needham and Company. Please ask your question.

Unknown: Great. Thanks so much. Thanks for taking our questions. Two quick ones from us. So on the product revenue side of things down 25%, was that would you guys expect this for the quarter just given the shift to consignment? And can you also secondly talk about what you're seeing with the underlying demand in Europe? I remember you had talked about sluggishness as the quarter unfolded, just curious if the trend got better and if you're seeing anything differently quarter to date.

Anna: I remember you had talked about sluggishness as the quarter unfolded, just curious if the trend got better and if you're seeing anything differently acquired to date.

Sean Sobers: Yeah, from a product revenue perspective that is what we forecasted and expected so nothing new or surprising for us on that side. Yeah, on the demand side, I think inflation in the areas that we serve in Europe has been elevated relative to the U.S and so that's definitely affected the demand curve. But I think we've seen better year-to-date results. Certainly some of the work that we're doing on the product mix because diamond mix in Europe is helping and so we think the selection that we have in Europe is better and I think customers are seeing that. So we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that. 

Sean Sobers: Yeah, from a product revenue perspective that is what we forecasted and expected so nothing new or surprising for us on that side.

James Reinhart: Yeah, on the demand side, I think inflation in the areas that we serve in Europe has been elevated relative to the U.S and so that's definitely affected the demand curve. But I think we've seen better year-to-date results. Certainly some of the work that we're doing on the product mix because diamond mix in Europe is helping and so we think the selection that we have in Europe is better and I think customers are seeing that. So we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that.

Speaker Change: Yeah on the demand side. I think. Inflation in the areas that we serve in Europe as you know, it's been elevated relative to the U S and so that's definitely affected the demand curve, but I think we've seen better a year to date results. Certainly some of the work that we're doing on the product mix because diamond mix in Europe is helping. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that.

Speaker Change: I think. Inflation in the areas that we serve in Europe as you know, it's been elevated relative to the U S and so that's definitely affected the demand curve, but I think we've seen better a year to date results. Certainly some of the work that we're doing on the product mix because diamond mix in Europe is helping. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that.

Speaker Change: Inflation in the areas that we serve in Europe as you know, it's been elevated relative to the U S and so that's definitely affected the demand curve, but I think we've seen better a year to date results. Certainly some of the work that we're doing on the product mix because diamond mix in Europe is helping. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that.

Speaker Change: Certainly some of the work that we're doing on the product mix because diamond mix in Europe is helping. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that. And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that.

Speaker Change: And so we think the selection that we have in Europe is better and I think customers are are seeing that so we feel pretty good about where the demand curve is in Europe and the guidance for the year reflects that.

Unknown: Awesome. Thanks so much. Best of luck.

Operator: Thank you. Our next question is from Tom [inaudible] from Wedbush. Please ask your question.

Unknown: Hey, thanks for taking my question. Just wanted to ask about the write off of inventory in Europe. I guess, obviously, that's something that you would like to avoid a generally speaking. I guess kind of have you seen--you haven't made any changes besides the kind of consignment mix shift that you're trying to do but like any kind of changes in the way you take in product in Europe to kind of ensure that you are bringing in higher quality inventory and higher quality product offerings so that you don't see a situation like this again?

Speaker Change: Just wanted to ask about the write off of it. Inventory in Europe. I guess, obviously, that's not something that you would like to avoid a generally speaking I guess kind of have you seen. We haven't made any changes besides the kind of confinement and mix shift that youre trying to do but like any kind of changes in the way you are. Yeah take in product in Europe to kind of ensure that you are bringing in higher quality. Inventory and higher quality product offerings, you don't see a situation like this again.

Inventory in Europe. I guess, obviously, that's not something that you would like to avoid a generally speaking I guess kind of have you seen. We haven't made any changes besides the kind of confinement and mix shift that youre trying to do but like any kind of changes in the way you are. Yeah take in product in Europe to kind of ensure that you are bringing in higher quality. Inventory and higher quality product offerings, you don't see a situation like this again.

Speaker Change: I guess, obviously, that's not something that you would like to avoid a generally speaking I guess kind of have you seen. We haven't made any changes besides the kind of confinement and mix shift that youre trying to do but like any kind of changes in the way you are. Yeah take in product in Europe to kind of ensure that you are bringing in higher quality. Inventory and higher quality product offerings, you don't see a situation like this again.

Speaker Change: We haven't made any changes besides the kind of confinement and mix shift that youre trying to do but like any kind of changes in the way you are. Yeah take in product in Europe to kind of ensure that you are bringing in higher quality. Inventory and higher quality product offerings, you don't see a situation like this again.

Yeah take in product in Europe to kind of ensure that you are bringing in higher quality. Inventory and higher quality product offerings, you don't see a situation like this again.

Speaker Change: Inventory and higher quality product offerings, you don't see a situation like this again.

James Reinhart: Yeah, hey, Tom. Yeah, I mean, I think all through last year, we had been making improvements to what that mix looks like laying the foundations for consignment, but a lot of the product that we wrote down was stuff where we were in negotiations to buy that product well over a year ago and the market has changed, our approach to the business has changed and so ultimately it was about what's the best way to serve that customer on a go forward basis, and we found that that product over a year old was crowding out frankly, some of the best stuff in the browsing experience. And so for us it was hey, we're full speed ahead on the consignment transition, we feel very good about the strategy in place to get that done and let's not have any of that sort of legacy products holding us back, whether that's in our facility, in the browsing and search experience or even just kind of like having to move it around and so it's definitely not something we should be doing again but we thought it's the best thing for the customer to move forward.

Tom: Yeah, I mean, I think all through last year, we had been making improvements to what that mix looks like laying the foundations for consignment. But a lot of the product that we wrote down with stuff, where we were in negotiations to buy that product well over a year ago right and the market has changed our approach to the business had changed and so ultimately it was about what's the best way to serve that customer on a go forward basis, and we found that. That product over a year all of this was crowding out frankly, some of the best the best stuff in the browsing experience and so. For us it was hey, we're full speed ahead on the consignment transition we feel very good about the strategy in place to get that done and let's not have any of that sort of legacy products holding us back whether that's in our facility in. In the browsing and search experience or even just kind of like having to move it around and so its definitely not something we should be doing again. But we thought it's the best thing for the customer to move forward.

Operator: But a lot of the product that we wrote down with stuff, where we were in negotiations to buy that product well over a year ago right and the market has changed our approach to the business had changed and so ultimately it was about what's the best way to serve that customer on a go forward basis, and we found that. That product over a year all of this was crowding out frankly, some of the best the best stuff in the browsing experience and so. For us it was hey, we're full speed ahead on the consignment transition we feel very good about the strategy in place to get that done and let's not have any of that sort of legacy products holding us back whether that's in our facility in. In the browsing and search experience or even just kind of like having to move it around and so its definitely not something we should be doing again. But we thought it's the best thing for the customer to move forward.

Irwin Bernard Boruchow: That product over a year all of this was crowding out frankly, some of the best the best stuff in the browsing experience and so. For us it was hey, we're full speed ahead on the consignment transition we feel very good about the strategy in place to get that done and let's not have any of that sort of legacy products holding us back whether that's in our facility in. In the browsing and search experience or even just kind of like having to move it around and so its definitely not something we should be doing again. But we thought it's the best thing for the customer to move forward.

Speaker Change: For us it was hey, we're full speed ahead on the consignment transition we feel very good about the strategy in place to get that done and let's not have any of that sort of legacy products holding us back whether that's in our facility in. In the browsing and search experience or even just kind of like having to move it around and so its definitely not something we should be doing again. But we thought it's the best thing for the customer to move forward.

Speaker Change: In the browsing and search experience or even just kind of like having to move it around and so its definitely not something we should be doing again. But we thought it's the best thing for the customer to move forward.

Speaker Change: But we thought it's the best thing for the customer to move forward.

Unknown: Understood. And if I could ask one more just about marketing. Marketing, obviously, it's kind of down. In Q4 it was at its lowest level since 2020, I guess how do we kind of think about the reinvestment in marketing going forward, helping to drive the top line and drive better performance in Europe as well?

Speaker Change: Yeah. Marketing, obviously, but it's kind of down in. Q4 is at its lowest level since 2020. How do we kind of think about. Reinvestment in marketing going forward, helping too. The top line drive. In Europe.

Speaker Change: Marketing, obviously, but it's kind of down in. Q4 is at its lowest level since 2020. How do we kind of think about. Reinvestment in marketing going forward, helping too. The top line drive. In Europe.

Q4 is at its lowest level since 2020. How do we kind of think about. Reinvestment in marketing going forward, helping too. The top line drive. In Europe.

Speaker Change: How do we kind of think about. Reinvestment in marketing going forward, helping too. The top line drive. In Europe.

Speaker Change: Reinvestment in marketing going forward, helping too. The top line drive. In Europe.

Speaker Change: The top line drive. In Europe.

Speaker Change: In Europe.

James Reinhart: Yeah, I think Tom the marketing is always lower in Q4, and so that's typically our playbook. I think this Q4, even in particular, we expected it to be a competitive holiday season, we expected consumers to feel squeezed around how to spend those discretionary dollars and so I think we thought it was even smarter to push some of that spend in Q4 into Q1 where we thought it would be more productive and I think that's what we're seeing. And so I think it fits our seasonal pattern but our expectation is to continue to drive topline through marketing spend but at the same time, moving slowly towards our long term targets that we set out at the IPO and we're sort of on that glide path as we think about 2024.

Sean Sobers: We expected it to be a competitive holiday season. We expect to consumers to feel squeezed around how to spend those discretionary dollars and so I think we thought it was even smarter to push some of that spend in Q4 into Q1, where we thought it would be more productive and I think that's that's what we're seeing and so I think it fits our seasonal pattern and but our. <unk> is to continue to drive topline through marketing spend but. But at the same time moving slowly towards our long term targets that we set out at the IPO and you know we're sort of on that glide path as we think about 'twenty 'twenty four.

Sean Sobers: We expect to consumers to feel squeezed around how to spend those discretionary dollars and so I think we thought it was even smarter to push some of that spend in Q4 into Q1, where we thought it would be more productive and I think that's that's what we're seeing and so I think it fits our seasonal pattern and but our. <unk> is to continue to drive topline through marketing spend but. But at the same time moving slowly towards our long term targets that we set out at the IPO and you know we're sort of on that glide path as we think about 'twenty 'twenty four.

Sean Sobers: <unk> is to continue to drive topline through marketing spend but. But at the same time moving slowly towards our long term targets that we set out at the IPO and you know we're sort of on that glide path as we think about 'twenty 'twenty four.

Sean Sobers: But at the same time moving slowly towards our long term targets that we set out at the IPO and you know we're sort of on that glide path as we think about 'twenty 'twenty four.

Unknown: Okay, great. Thanks very much for taking my questions and [inaudible].

Thanks.

Operator: Thank you. Your next question is from Edward [inaudible] from Piper Sandler. Please ask your question.

Unknown: Hey, good afternoon. Thanks for taking my questions. Two from me. I guess first some very constructive comments around Gen AI, curious kind of what the cost structure for that looks like and kind of what the uptake has been thus far. And then second, I know you guys have complained a little bit about the inventory situation in first price, obviously results got better in the fourth quarter, are you sort of see some of that industry inventory normalize and do you think it's kind of allowing some of your price gaps to better show? Thank you.

Edward: I'm very constructive comments around Gen. AI curious kind of what the cost structure for that looks like and kind of what the uptake has been thus far and then second I know you guys have complained a little bit about the inventory situation in first price obviously results got better in the fourth quarter are you sort of see some of that industry inventory normalize and do you think it's kind of a lot. Some of your price gaps to better show. Thank you.

Anna A. Andreeva: Some of your price gaps to better show. Thank you.

James Reinhart: Yeah, hey Ed, let me just hit the second one first. Yes, I mean, we're definitely seeing the inventory levels across sort of our competitive set normalize and so I think that that actually really sets up our value proposition to perform well as we get into 2024. I would say the only counterpoint to that is as you have seen mentioned and talked about right there is still a squeeze on the discretionary dollar and so I think that that may be easier throughout the year combined with leaner inventories I think ThredUp is positioned very well for that but we certainly see a better competitive environment for our products. On the Gen AI stuff, similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product, the constantly changing nature of our product, we really rely on sort of the dynamic nature of the technology to do a lot of work that

James Reinhart: Yeah, hey Ed, let me just hit the second one first. Yes, I mean, we're definitely seeing the inventory levels across sort of our competitive set normalize and so I think that that actually really sets up our value proposition to perform well as we get into 2024. I would say the only counterpoint to that is as you have seen mentioned and talked about right there is still a squeeze on the discretionary dollar and so I think that that may be easier throughout the year combined with leaner inventories I think ThredUp is positioned very well for that but we certainly see a better competitive environment for our products.

Ed: To perform well as we get into 2020 for I would say the only counterpoint to that is as. You have you know. <unk> seen mentioned talked about right there is still. Still a squeeze on the discretionary dollar and so I think that that may be easier throughout the year combined with leaner inventories I think you know threat is positioned very well for that. But we certainly see a better competitive environment for our products on the Gen eight Gen AI stuff. Similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product the constantly changing nature of our product, we really rely on sort of the dynamic. Nature of the technology to do a lot of work at that.

Ed: You have you know. <unk> seen mentioned talked about right there is still. Still a squeeze on the discretionary dollar and so I think that that may be easier throughout the year combined with leaner inventories I think you know threat is positioned very well for that. But we certainly see a better competitive environment for our products on the Gen eight Gen AI stuff. Similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product the constantly changing nature of our product, we really rely on sort of the dynamic. Nature of the technology to do a lot of work at that.

Ed: <unk> seen mentioned talked about right there is still. Still a squeeze on the discretionary dollar and so I think that that may be easier throughout the year combined with leaner inventories I think you know threat is positioned very well for that. But we certainly see a better competitive environment for our products on the Gen eight Gen AI stuff. Similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product the constantly changing nature of our product, we really rely on sort of the dynamic. Nature of the technology to do a lot of work at that.

Ed: Still a squeeze on the discretionary dollar and so I think that that may be easier throughout the year combined with leaner inventories I think you know threat is positioned very well for that. But we certainly see a better competitive environment for our products on the Gen eight Gen AI stuff. Similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product the constantly changing nature of our product, we really rely on sort of the dynamic. Nature of the technology to do a lot of work at that.

James G. Reinhart: But we certainly see a better competitive environment for our products on the Gen eight Gen AI stuff. Similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product the constantly changing nature of our product, we really rely on sort of the dynamic. Nature of the technology to do a lot of work at that.

James Reinhart: On the Gen AI stuff, similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product, the constantly changing nature of our product, we really rely on sort of the dynamic nature of the technology to do a lot of work that would otherwise be done by inferior algorithms, so I'm very bullish on its ability to delight the customer on the front end and I think we're working on a number of things that will start to materialize this year that I think will really change how consumers shop retail and so I'm very excited about that. And then the last part would be on the operation side is we've been employing AI in a number of ways in our DCs for years, but I think just in the last 12 months, you've seen a step function change in what the technology can do and I think it has real implications for how productive our operations can be and what the margin profile can ultimately look like. So you can probably tell from my voice I'm quite bullish on it and and I think we're uniquely positioned to benefit from it.

James G. Reinhart: Similar to my prepared remarks, I remain very bullish on its ability to improve our business really disproportionately compared to others given the long tail of product the constantly changing nature of our product, we really rely on sort of the dynamic. Nature of the technology to do a lot of work at that.

Nature of the technology to do a lot of work at that.

Tom Nikic: would otherwise be done by inferior algorithms, so I'm very bullish on its ability to delight the customer on the front end and I think we're working on a number of things that will start to materialize this year that I think will really change how consumers shop retail and so I'm very excited about that. And then the last part would be on the operation side is we've been employing AI in a number of ways in our DCs for years, but I think just in the last 12 months, you've seen a step function change in what the technology can do and I think it has real implications for how productive our operations can be and what the margin profile can ultimately look like. So you can probably tell from my voice I'm quite bullish on it and and I think we're uniquely positioned to benefit from it.

Tom Nikic: Number of ways in our Dcs for years, but I think just in the last 12 months, you've seen a step function change in what the technology can do.

Tom Nikic: I think it has real implications for how productive our operations can be. And what the margin profile can ultimately look like so. You can probably tell from my voice I'm quite bullish on it and and I think we're uniquely positioned to benefit from it.

Speaker Change: And what the margin profile can ultimately look like so. You can probably tell from my voice I'm quite bullish on it and and I think we're uniquely positioned to benefit from it.

Speaker Change: You can probably tell from my voice I'm quite bullish on it and and I think we're uniquely positioned to benefit from it.

Unknown: Great. Thank you.

Operator: Thank you. Your next question is from Alexandra Steiger from Goldman Sachs. Please ask your question.

Alexandra Steiger: Great. Thank you so much. So we have a number of e-commerce consumer companies calling out a very weak January this year. So I'm just wondering like what are you seeing among your customer base that would give you confidence in your Q1 guidance you can comment a little bit on like the month over month dynamics you're seeing in your business. And then one follow up question just on the business initiatives that leverage AI, can you maybe talk about the contribution or the growth contribution you expect for this year versus your assumption around a potential recovery in this broader consumer spending environment? Thank you. 

Alexander Tiger: So we have a number of e-commerce consumer companies. I'm, calling out a very weak January this year. So I'm just wondering like what are you seeing among your customer base that would give you confidence in your Q1 guidance you can comment a little bit on like the month over month dynamics Youre seeing in your business and then one follow up question just on the business initiatives that leverage AI can you maybe. We talk about the contribution or the growth contribution you expect for this year versus your assumption around a potential recovery in group. Broader consumer spending environment. Thank you.

Alexander Tiger: I'm, calling out a very weak January this year. So I'm just wondering like what are you seeing among your customer base that would give you confidence in your Q1 guidance you can comment a little bit on like the month over month dynamics Youre seeing in your business and then one follow up question just on the business initiatives that leverage AI can you maybe.

James G. Reinhart: We talk about the contribution or the growth contribution you expect for this year versus your assumption around a potential recovery in group. Broader consumer spending environment. Thank you.

James G. Reinhart: Broader consumer spending environment. Thank you.

James Reinhart: Yeah, hey, Alexandra. Yeah, I don't think we are expecting AI to drive anything sort of in an outsized way in the results nor do we expect some big inflection later in the year on the consumer environment. I think our guidance reflects our best estimates of how the business is going to perform this year. I will say that AI we finally rolled out the new surge in some of the work just in the last week or two and so we're only starting to see the benefits of the entire customer experience using it

James G. Reinhart: Expecting AI to drive anything sort of in an outsized way and the results nor do we expect expect some big inflection later in the year on the consumer environment. I think our guidance reflects our best estimates of how the business is going to perform this year I will say that AI is as you know, we finally rolled out the new surge in some of the work just in the last week or two and so we're only starting to see the benefits of the entire customer experience.

James G. Reinhart: I think our guidance reflects our best estimates of how the business is going to perform this year I will say that AI is as you know, we finally rolled out the new surge in some of the work just in the last week or two and so we're only starting to see the benefits of the entire customer experience.

James G. Reinhart: and so I think as we get better information, we'll sort of update those numbers. As for Q1 and what other companies have said, I don't think Q1 is noticeably weaker than we expected. I mean, I think our business tends to receive a hangover from Q4 Christmas, New Year's holiday period, gift giving. We see some of that normally in January. And I don't think it's been an exceptional consumer environment, but I wouldn't characterize it as sort of darker draconian. But I think we expect the consumer to be challenged this year and so I think that's where we feel good about our active buyer growth and our gross profit growth in an environment like this one while we drive to positive EBITDA. 

James G. Reinhart: As for Q1 and what other companies have said you know I don't think Q1 was is noticeably weaker than. And then we expected I mean, I think our business tends to receive a hangover from Q4. Christmas New year's holiday period gift, giving as we see some of that normally in January. And I think you know I don't think it's been an exceptional consumer environment, but I I wouldn't characterize it as sort of darker draconian. So. But I think we expect the consumer to be challenged this year and so I think that's where we feel good about our active buyer growth in our gross profit growth in an environment like this one you know while we drive to positive EBITDA.

James G. Reinhart: And then we expected I mean, I think our business tends to receive a hangover from Q4. Christmas New year's holiday period gift, giving as we see some of that normally in January. And I think you know I don't think it's been an exceptional consumer environment, but I I wouldn't characterize it as sort of darker draconian. So. But I think we expect the consumer to be challenged this year and so I think that's where we feel good about our active buyer growth in our gross profit growth in an environment like this one you know while we drive to positive EBITDA.

James G. Reinhart: Christmas New year's holiday period gift, giving as we see some of that normally in January. And I think you know I don't think it's been an exceptional consumer environment, but I I wouldn't characterize it as sort of darker draconian. So. But I think we expect the consumer to be challenged this year and so I think that's where we feel good about our active buyer growth in our gross profit growth in an environment like this one you know while we drive to positive EBITDA.

James G. Reinhart: And I think you know I don't think it's been an exceptional consumer environment, but I I wouldn't characterize it as sort of darker draconian. So. But I think we expect the consumer to be challenged this year and so I think that's where we feel good about our active buyer growth in our gross profit growth in an environment like this one you know while we drive to positive EBITDA.

James G. Reinhart: But I think we expect the consumer to be challenged this year and so I think that's where we feel good about our active buyer growth in our gross profit growth in an environment like this one you know while we drive to positive EBITDA.

Speaker Change: Thank you.

Operator: Thank you. Once again, should you have a question, please press star one. Your next question is from Dana Telsey from Telsey Group. Please ask your question.

Edward James Yruma: Your next question is from Dana Telsey from Telsey Group. Please ask your question.

Edward James Yruma: Hello Dana, your line is now open.

Dana Lauren Telsey: Hi, sorry. Hi everyone. In the fourth quarter and as you're thinking about 2024, how are you thinking about spending behavior by buyer cohort or buyer demographics and what you're seeing there? And then also as you're thinking about the promotional environment, has the promotional environment or the competitive environment changed lately? Thank you.

Speaker Change: It changed lately. Thank you.

James Reinhart: Hey Dana. On the buyer spend, I mean, we continue to see very strong revenue per buyer metrics. I mean they were all time highs in '23 and we expect them to continue to be strong. So I think our ability to drive share of wallet revenue per buyer growth I think it continues to be we feel very good about. I think as far as like the sort of nuance in the consumer environment, I don't think there's any sector in the consumer world that's immune to the sort of effects of compound in inflation and interest rates, whether you're a wealthier consumer who is dealing with higher borrowing costs or a more budget consumer that's dealing with food inflation, I think it's kind of hitting everyone. And again, I think part of why we feel good about where we're heading into '24 is despite that environment still being able to grow the underlying growth rate to be in the teens, as well as 600 bps of margin expansion, it feels like a really great place for our business to live in '24 given the environment.

On the buyer spend I mean, we continue to see very strong you know revenue per buyer metrics I mean they were. They were all time highs in 'twenty, three and we expect them to continue to be strong. So I think our ability to drive share of wallet. Revenue per buy revenue per buyer growth I think it continues to be we feel very good about I think as far as like the sort of nuance in the consumer environment.

Dana Lauren Telsey: They were all time highs in 'twenty, three and we expect them to continue to be strong. So I think our ability to drive share of wallet. Revenue per buy revenue per buyer growth I think it continues to be we feel very good about I think as far as like the sort of nuance in the consumer environment.

Dana Lauren Telsey: Revenue per buy revenue per buyer growth I think it continues to be we feel very good about I think as far as like the sort of nuance in the consumer environment.

James G. Reinhart: I don't think theres any sector in the consumer world that's immune. To the sort of effects of compound in inflation and interest rates, whether you're a wealthier consumer who is dealing with higher borrowing costs. Or a more budget consumer that's dealing with food inflation I think it's kind of hitting everyone. And again I think part of why we feel good about where we're heading into 24, despite that environment still being able to grow. The underlying growth rate to be in the teens, you know as well as 600 bps of margin expansion it feels like a really.

James G. Reinhart: To the sort of effects of compound in inflation and interest rates, whether you're a wealthier consumer who is dealing with higher borrowing costs. Or a more budget consumer that's dealing with food inflation I think it's kind of hitting everyone. And again I think part of why we feel good about where we're heading into 24, despite that environment still being able to grow. The underlying growth rate to be in the teens, you know as well as 600 bps of margin expansion it feels like a really.

James G. Reinhart: Or a more budget consumer that's dealing with food inflation I think it's kind of hitting everyone. And again I think part of why we feel good about where we're heading into 24, despite that environment still being able to grow. The underlying growth rate to be in the teens, you know as well as 600 bps of margin expansion it feels like a really.

James G. Reinhart: And again I think part of why we feel good about where we're heading into 24, despite that environment still being able to grow. The underlying growth rate to be in the teens, you know as well as 600 bps of margin expansion it feels like a really.

The underlying growth rate to be in the teens, you know as well as 600 bps of margin expansion it feels like a really.

James G. Reinhart: great place for our business to live in '24 given the environment. And as on the promotional side, as I said earlier with Ed, I mean, I do think that the environment has gotten better but I still think you may have a positive tailwind from the promotional environment with a bit of a headwind in the consumer discretionary work and so I think net of it those probably cancel each other out.

great place for our business to live in '24 given the environment.

And as on the promotional side, as I said earlier with Ed, I mean, I do think that the environment has gotten better but I still think you may have a positive tailwind from the promotional environment with a bit of a headwind in the consumer discretionary work and so I think net of it those probably cancel each other out.

James G. Reinhart: There's probably cancel each other out.

Speaker Change: Got it. And then in Europe, as the shift to consignments in Europe, any differences that you're noticing or insights taking away that would make it be accelerated or be faster or slower than what you may have originally expected? I mean, I think that the consumer or the seller in the countries that we operate in Europe I think it's been looking for a scaled convenient solution like this for some time and so I think the customer reception has been positive, but it is a transformation of the business and how shoppers are browsing and the number of items that they are buying and their orders. But so far, as we said, sell through rates have been strong and I think consumers are really liking that fresh product, a differentiated product, the owned business that we had more of earlier in the year. Thank you.

Got it. And then in Europe, as the shift to consignments in Europe, any differences that you're noticing or insights taking away that would make it be accelerated or be faster or slower than what you may have originally expected? I mean, I think that the consumer or the seller in the countries that we operate in Europe I think it's been looking for a scaled convenient solution like this for some time and so I think the customer reception has been positive, but it is a transformation of the business and how shoppers are browsing and the number of items that they are buying and their orders. But so far, as we said, sell through rates have been strong and I think consumers are really liking that fresh product, a differentiated product, the owned business that we had more of earlier in the year.

Dana Lauren Telsey: Got it. And then in Europe, as the shift to consignments in Europe, any differences that you're noticing or insights taking away that would make it be accelerated or be faster or slower than what you may have originally expected?

Speaker Change: Any differences that you're noticing her insights taking away that would make it be accelerated or be faster or slower than what you may have originally expected.

Speaker Change: I mean, I think that the the consumer or the seller and the countries that we operate in Europe I think it's been looking for a scaled convenient solution like this for some time and so I think I think the customer reception has been positive. But it is a transformation. Of the business and how shoppers are browsing in a. A number of items that they are buying and their orders. But so far as we said sell through rates have been have been strong. And I think consumers are really liking that fresh product a differentiated. Differentiated product saves. The one business that we had had more of earlier in the year. Thank you.

James Reinhart: I mean, I think that the consumer or the seller in the countries that we operate in Europe I think it's been looking for a scaled convenient solution like this for some time and so I think the customer reception has been positive, but it is a transformation of the business and how shoppers are browsing and the number of items that they are buying and their orders. But so far, as we said, sell through rates have been strong and I think consumers are really liking that fresh product, a differentiated product, the owned business that we had more of earlier in the year.

Speaker Change: But it is a transformation. Of the business and how shoppers are browsing in a. A number of items that they are buying and their orders. But so far as we said sell through rates have been have been strong. And I think consumers are really liking that fresh product a differentiated. Differentiated product saves. The one business that we had had more of earlier in the year. Thank you.

Speaker Change: Of the business and how shoppers are browsing in a. A number of items that they are buying and their orders. But so far as we said sell through rates have been have been strong. And I think consumers are really liking that fresh product a differentiated. Differentiated product saves. The one business that we had had more of earlier in the year. Thank you.

Speaker Change: A number of items that they are buying and their orders. But so far as we said sell through rates have been have been strong. And I think consumers are really liking that fresh product a differentiated. Differentiated product saves. The one business that we had had more of earlier in the year. Thank you.

But so far as we said sell through rates have been have been strong. And I think consumers are really liking that fresh product a differentiated. Differentiated product saves. The one business that we had had more of earlier in the year. Thank you.

Speaker Change: And I think consumers are really liking that fresh product a differentiated. Differentiated product saves. The one business that we had had more of earlier in the year. Thank you.

Speaker Change: Differentiated product saves. The one business that we had had more of earlier in the year. Thank you.

Speaker Change: The one business that we had had more of earlier in the year. Thank you.

Speaker Change: Thank you.

Dana Lauren Telsey: Thank you.

Operator: Thank you. There are no further questions at this time. I will now hand the call back to James Reinhart for the closing remarks.

Speaker Change: No further questions at this time I will now hand, the call back to James Reinhart for closing remarks.

James Reinhart: Well, thank you everyone for joining us for our earnings call and guidance for the year, very excited about the year ahead. We're incredibly proud of the work in 2023 that we did to drive growth and expand margins and we expect more of the same as we head into 2024. So we will see you next time. Thanks.

James G. Reinhart: Expand margins and we expect more of the same as we head into 2024. So we will see you next time. Thanks.

Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining, you may all disconnect.