Q4 2024 ThredUp Inc Earnings Call
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Unknown Executive: Good afternoon, ladies and gentlemen, and welcome to the ThredUp fourth quarter 2024 earnings conference call. At this time, all lines are in listen only mode.
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the trade up fourth quarter 'twenty 'twenty four earnings conference call.
This time all lines are in listen only mode.
Unknown Executive: Following the presentation, we will conduct a question and answer session.
Speaker Change: Following the presentation, we will conduct a question and answer session.
Unknown Executive: Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's fourth quarter and full year 2024 financial results. With me are James Reinhart, ThredUp 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.
Speaker Change: Good afternoon, and thank you for joining us on today's conference call to discuss fourth quarter and full year 2024 financial results.
Speaker Change: With me are James Reinhart, CEO, and co founder and Shanghai CFO.
Speaker Change: They posted our press release and supplemental financial information on our Investor Relations website at IR Dot setup dotcom.
Unknown Executive: This call is being webcast on our IR website, and a replay of this call will be available on the site shortly.
Speaker Change: This call is being webcast on our IR website and a replay of this call will be available on the site shortly.
Unknown Executive: 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 2025, future financial performance, market demand, growth prospects, business strategies and plans, investments in AI technologies, our ability to cost-effectively attract new buyers, and the effects of potential tariffs, inflation, and general economic uncertainty on consumer demand. 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 certainties, including our ability to effectively deploy new and evolving technologies, such as artificial intelligence and machine learning, in our offerings, and the effects of inflation, increased interest rates, changing consumer habits, and general global economic uncertainty.
Speaker Change: 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 2025 future financial performance market demand growth prospects business strategies and planned investments in AI technologies, our ability to cross.
Speaker Change: Effectively attract new buyers and the effects of potential tariffs inflation and general economic uncertainty on consumer demand.
Speaker Change: Words, such as anticipate believe estimate expect evolved from our expressions are intended to identify forward looking statements.
Speaker Change: These forward looking statements are not guarantees of future performance from both 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 offerings and the extra inflation increased interest rates changing consumer habits, and general global economic uncertainty.
Unknown Executive: Our actual results could differ materially from any projections of future performance, or result 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.
Speaker Change: Our actual results could differ materially from any projections of future performance or results expressed or implied by such forward looking statements.
Speaker Change: You can find more information about these risks uncertainties and other factors that could affect our operating results in our SEC filings our earnings press release and supplemental information posted on our IR website.
Unknown Executive: 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.
Speaker Change: 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.
Unknown Executive: 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.
Speaker Change: 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.
Unknown Executive: 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.
Speaker Change: 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.
James Reinhart: Now I'd like to turn the call over to Good afternoon, everyone. I'm James Reinhart, CEO and co founder of ThredUp. Thank you for joining our fourth quarter of 2024 earnings call.
James Reinhart: Now I'd like to turn the call over to James.
James Reinhart: Good afternoon, everyone I'm, James Reinhart, CEO and co founder of threat up. Thank you for joining our fourth quarter of 2024 earnings call.
James Reinhart: Given the completed divestiture remix in November of 2024, my remarks will focus exclusively on our continuing operations in our US business, unless otherwise noted. We are pleased to share ThredUp's financial results for Q4 and our expectations for Q1 and fiscal year 2025. We'll provide an update on growth, gross margins, adjusted EBITDA margin expansion, and detail further customer-facing improvements across our marketplace.
James Reinhart: Given the completed divestiture of remix in November of 2020 for my remarks will focus exclusively on our continuing operations and our U S business unless otherwise noted.
James Reinhart: We are pleased to share with you that ups financial results for Q4, and our expectations for Q1 and fiscal year 2025.
Speaker Change: Provide an update on gross gross margins adjusted EBITDA margin expansion in detail further customer facing improvements across our marketplace. I will then hand, it over to Sean Sobers, Chief Financial Officer to talk through our fourth quarter 2020 for financials in more detail and provide our outlook for the first quarter and full year 2025.
James Reinhart: I will then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our fourth quarter 2024 financials in more detail and provide our outlook for the first quarter and full year 2025.
James Reinhart: As always, we'll close out today's call with a question and answer session. Let me start by saying that we've made substantial progress in re-accelerating growth in the U.S. while maintaining our free cash flow and adjusted EBITDA targets. As we announced in January, our fourth quarter performance was well above our expectations, and that progress has continued into 2025. This is driven by three factors. First, our customer acquisition and retention status. Customer acquisition remained very strong in Q4, with new customer volume up 32% year-over-year. Q1 is also shaping up to be one of the strongest acquisition quarters in our history.
Speaker Change: We will close out today's call with a question and answer session.
Speaker Change: Let me start by saying that we have made substantial progress and reaccelerate growth in the U S. While maintaining our free cash flow and adjusted EBITDA targets as we announced in January our fourth quarter performance was well above our expectations.
Speaker Change: <unk> has continued into 2025 this.
Speaker Change: This was driven by three factors.
Speaker Change: First our customer acquisition and retention strategy custom.
Speaker Change: Customer acquisition remains very strong in Q4, with new customer volume up 32% year over year.
Speaker Change: One is also shaping up to be one of the strongest acquisition quarters in our history, we expected active buyer growth to inflect positive in Q1.
James Reinhart: We expected active buyer growth to inflect positive in Q1 and are pleased to be ahead of our plan at this point in the quarter. Customer retention metrics remain strong quarter to date, with conversion rates from visit to purchase at all-time high. Despite scaling spend significantly in Q4 and further again in Q1, strong conversion retention means our paybacks remain in line with our sub-one-year goal. We are increasingly confident we can invest more aggressively in growing new buyers while still achieving our free cash flow target. This is likely to be our approach for the foreseeable. Second, our sourcing strategy and processing capabilities.
Speaker Change: He used to be ahead of our plan at this point in the quarter.
Speaker Change: Customer retention metrics remained strong quarter to date with conversion rates from visit to purchase all time highs. Despite scaling spend significantly in Q4 as further again in Q1 strong conversion and retention means our paybacks remain in line with our sub one year ago.
Speaker Change: We are increasingly confident we can invest more aggressively in growing new buyers, while still achieving our free cash flow targets. This is likely to be our approach for the foreseeable future.
Speaker Change: Second our sourcing strategy and processing capabilities with buyer growth accelerating we are now sourcing processing enlisting more high quality apparel than ever.
James Reinhart: With buyer growth accelerating, we are now sourcing, processing, and listing more high-quality apparel than ever. We are no longer stemming the flow of sellers onto our marketplace. Instead, we are scaling up processing capacity across our network to meet the needs of more and more buyers. Fresh listings on ThredUp, which we identify as items under 14 days old, are up 9% quarter-to-date on a year-over-year basis and continuing to accelerate. Fresh listings remain a key input to buyer growth and retention. We are confident we're meeting the mark so far in 2025. Just as important, this uptick in supply isn't just, quote unquote, more stuff to chase revenue growth.
Speaker Change: We are no longer stemming the sellers onto our marketplace. Instead, we are scaling up processing capacity across our network to meet the needs of more and more buyers fresh listings on product, which we identify as items under 14 days old are up 9% quarter to date on a year over year basis and continuing to accelerate.
Speaker Change: Listings remain a key input to buyer growth and retention, we're confident we're meeting the mark so far in 2025.
Speaker Change: Just as important this uptick in supply isn't just quote unquote more stuff to chase revenue growth. Rather this is increasingly more desirable and premium apparel targeted at delighting, our core resale market.
James Reinhart: Rather, this is increasingly more desirable and premium apparel targeted at delighting our core resale market. As we noted on our last call, our premium selling service is now live to 100% of sellers. Top brands from the service include brands like Kate Spade, Veronica Beard, Pinko, and Love Shack Fancy. Average listing prices for items from premium bags are 50% higher than traditional bags. Items coming from premium kits now make up more than 10% of newly listed items, and this has been growing sequentially for three quarters. As a reminder, this service is priced higher at $34.99 per kit, with more tools for sellers, longer consignment windows, a salon discount, and more dedicated customer support.
Speaker Change: As we noted on our last call our premium selling of services now live to 100% of sellers top brands. During this service include brands like Kate Spade, Veronica Beard, Pimco and loves Shaq fancy average listing prices for items from premium bags are 50% higher than traditional bags items coming from premium kits now make up more than <unk>.
Speaker Change: 10% of newly listed items and this has been growing sequentially for three quarters.
Speaker Change: As a reminder, this service is priced higher at $34 99 per kit with more tools for sellers longer consignment windows or flan discounts and more dedicated customer support.
James Reinhart: We are continuing to innovate on behalf of sellers. Whether you want us to do all the work, you want to do more of it yourself or somewhere in between. We remain relentless in our pursuit of making ThredUp the leading choice to sell secondhand apparel online, expanding our TAM, and at the same time, our sustainability.
Speaker Change: We are continuing to innovate on behalf of sellers, whether you want us to do all the work you want to do more of it yourself or somewhere in between we remain relentless in our pursuit of making <unk>, the leading choice to sell secondhand apparel online expanding our Tam and at the same time, our sustainability impact.
James Reinhart: Third, our generative AI product and technology investment. We continue to believe that AI disproportionately benefits ThredUp relative to other marketplaces and retailers, and that generative AI can significantly enhance the second-hand shopping For years, our dream was to build a secondhand shopping experience that was indistinguishable from shopping new. Advancements in generative AI are inching us closer to that reality in multiple ways. First, our AI search functionality continues to delight customers and drive the conversion rates I mentioned earlier. Since inception, 1.3 million image searches have been performed, and sessions with an image search have an 85% higher conversion.
Third our generative AI product and technology investments, we continue to believe that AI disproportionately benefits threat up relative to other marketplaces and retailers and degenerative AI can significantly enhance the secondhand shopping experience for years, our dream was to build a secondhand shopping experience that was indistinguishable from shopping deal.
Speaker Change: Advancements in generative AI are inching closer to that reality in multiple ways.
Speaker Change: First our AI search functionality continues to delight customers and drive their conversion rates I mentioned earlier since inception, and one 3 million image searches have been performed in sessions with an image search had an 85% higher conversion rate.
James Reinhart: Second, we are using this search technology to generate visual category pivoting, allowing customers to find the exact style of dress or coat or denim that meets their needs, but in a way that feels much more intuitive to how customers shop online. High-performing AI-generated pivots can draw click-through rates north of 15%, well above merchandising engagement rates without involvement. This is particularly important for new customers who have never shopped secondhand online. Third, iterations of our style chat and image search are powering new ways to shop this year. Soon, any social feed, board, or archive of style you have will be able to be ingested into ThredUp to help you shop these looks for less secondhand.
Speaker Change: Second we are using the search technology to generate visual category pivoting, allowing customers to find the exact style of dress or coke or denim that meets their needs, but in a way that feels much more intuitive to how customers shop online Piper.
Speaker Change: High performing AI generated pivots and drive click through rates north of 15% well above merchandising engagement rates without imagery.
Speaker Change: This is particularly important for new customers, who have never shopped secondhand online.
Speaker Change: Third iterations of our style chat and image search are powering new ways to shop this year.
Speaker Change: Any social feed board or archival style, you have will be able to be ingested into it right up to help you shop lease looks for less second hand.
James Reinhart: We will be starting with a deeper Pinterest integration in the weeks ahead, and we'll follow up with other social platforms throughout 2025. Linking where you get inspiration in fashion with how you can best find those looks is a linchpin to our strategy. We expect this technology will also empower creators, influencers, and affiliates to curate and showcase our millions of high-quality secondhand items to their audience.
Speaker Change: We will be starting with a deeper interest integration in the weeks ahead, and we will follow up with other social platforms throughout 2025 link.
Speaker Change: Lincoln, where you get inspiration fashion with how you can best find those books is the linchpin to our strategy. We expect this technology will also empower creators influencers and affiliates to curate and showcase our millions of high quality secondhand items to their audiences.
James Reinhart: Finally, fourth, we are leveraging AI across our infrastructure. Last quarter, we launched 360-degree high-definition photos, paving the way for AI-generated lifestyle imagery on individual product pages. 360-degree photos have increased 30-day sell-through rates up to 12% depending on the category. This quarter, we launched automated digital measurements, increasing the accuracy and shoppability of everything on ThredUp. We should see better measurements, translating to improved conversion, lower returns, and increased customer retention.
Finally, fourth we are leveraging AI across our infrastructure last quarter, we launched 360 degree high definition photos paving the way for AI generated lifestyle imagery on individual product pages.
Speaker Change: 360 degree photos have increased 30 day sell through rates up to 12% depending on the category. This quarter, we launched automated digital measurement is increasing the accuracy and shop ability of everything on dry dock.
Speaker Change: You should see better measurements translate into improve conversion lower returns and increased customer retention.
James Reinhart: Now turning to the consumer environment.
Speaker Change: Now turning to the consumer environment last week, we released early data from our upcoming resale report about the impact that tariffs are having on consumer psychology.
James Reinhart: Last week, we released early data from our upcoming resale report about the impact that tariffs are having on consumer psychology. Our take is that with tariffs and inflation dominating the national conversation, consumers are concerned about price hikes across retail. In this environment, secondhand could become more attractive for shoppers seeking out affordable, high-quality clothing. According to the data, 51% of consumers say higher prices due to inflation impact how much they spend on apparel. 62% of consumers say they're concerned that new government policies around tariffs and trade will make apparel more expensive. And 59% of consumers say if new government policies around tariff and trade make apparel more expensive, they will seek more affordable options like secondhand.
Speaker Change: <unk> that with tariffs and inflation and dominating the national conversation consumers are concerned about price hikes across retail in this environment secondhand could become more attractive for shoppers sneaking out affordable high quality clothing.
Speaker Change: According to the data, 51% of consumers say higher prices due to inflation impact how much they spend on apparel.
Speaker Change: 62% of consumers say they are concerned that new government policies around tariffs and trade will make apparel more expenses and 59% of consumers say of new government policies around tariffs and trade make apparel more expenses, they will seek more affordable options like secondhand.
James Reinhart: Before I turn it over to Sean, I want to do a quick review of the competitive advantages in our business, especially now that we are exclusively focused on the U.S. Our competitive advantage comes from the compounding effects of three hard problems we've solved. First, we built a name brand reverse logistics supply chain that has created a massive supply advantage in the resale market. Winning the battle for high quality supply continues to be an important part of our defensibility. Second, we have built world-class infrastructure, technology, and software to process single-skew apparel at scale. With ongoing innovations in processing technology and AI, we are extending our advantage even further while we grow capacity and reduce costs.
Speaker Change: Before I turn it over to Sean I wanted to a quick review of the competitive advantages in our business, especially now that we are exclusively focused on the U S.
Sean Sobers: Our competitive advantage comes from the compounding effects of three hard problems we've solved.
Sean Sobers: We've built a name brand reverse logistics supply chain that has created a massive supply advantage in the resale market winning the battle for high quality supply continues to be an important part of our defensibility.
Sean Sobers: Second we have built world class infrastructure technology and software to process single SKU apparel at scale with ongoing innovation and process technology and AI, we are extending our advantage even further while we grow capacity and reduce cost.
James Reinhart: Third, we have built a data-driven, managed marketplace that connects buyers and sellers on our platform. We ingest millions of data points that, combined with the algorithms and models that sit on top of that data, help us improve our acceptance, merchandising, photography, pricing, and marketing capability.
Sean Sobers: Third we have built a data driven managed marketplace that connects buyers and sellers on our platform. We ingest millions of data points that combined with the algorithms and models that sit on top of that data help us improve our acceptance merchandising of photography pricing and marketing capabilities. The rapid deployment of AI technology to serve customers better comes directly.
James Reinhart: The rapid deployment of AI technology to serve customers better comes directly from this long standing data As I've said from our very first public filing, our strategy has been developed with a deeply calculated approach about what it takes to build and sustain competitive advantage over time. We believe that every day our supply advantage increases, our infrastructure and data moat widens, and the network effects of our marketplace grow.
Sean Sobers: This long standing data advantage.
Sean Sobers: As I've said from our very first public filings our strategy has been developed with a deeply calculated approach about what it takes to build and sustain competitive advantage over time, we believe that every day, our supply advantage increases our infrastructure and data moat widened and the network effects of our marketplace growth.
Sean Sobers: Now over to you, Sean. Thanks, James. I'll begin with an overview of our results and follow up with guidance for the first quarter and the full All reported results are from continuing operations unless otherwise noted. Our GAAP financials and a reconciliation between GAAP and non-GAAP are found in our earnings release supplemental financials and our 10-K file. We are very proud of our Q4 and 2024 results. We delivered our first full year of adjusted EBITDA profitability and exited the year with a healthy return to growth in Q4. For the fourth quarter revenue totaled $67.3 million, an increase of 9.5% year Our outperformance was driven by investments in marketing and amount processing, AI upgrades to the customer experience, renewed focus on our core business following the European divestment.
Shaun: Now over to you Shaun.
Shaun: Thanks, James I'll begin with an overview of our results and follow up with guidance for the first quarter and the full year.
Shaun: All reported results from continuing operations unless otherwise noted.
Shaun: Our GAAP financials, and a reconciliation between GAAP and non-GAAP are found in our earnings release supplemental financials in our 10-K filing.
We are very proud of our Q4 and 2024 results. We delivered our first full year of adjusted EBITDA profitability and exited the year with a healthy return to growth in Q4.
Shaun: For the fourth quarter revenue totaled $67 3 million, an increase of nine 5% year over year.
Shaun: Our outperformance was driven by investments in marketing and inbound processing.
Shaun: AI upgrades to the customer experience renewed focus on our core business following the European divestiture.
Sean Sobers: and post-election pent-up demand. Active buyers reached 1.3 million, a decline of 6% year over year. order growth reaccelerated to 1.2 billion, an increase of 2% As a reminder, active buyers are the trailing 12 months. And though this number declined, we were very pleased with the new buyer progress we made including our best Q4 For the fourth quarter 2024 gross margin was 80.4% a 290 basis point increase over the same quarter last year, as a result of higher percentage of our sales coming from But just the EBITDA was $5 million or 7.4% of revenue for the fourth quarter of 2024.
Shaun: And post election pent up demand.
Shaun: Active buyers reached $1 3 million a decline of 6% year over year.
Shaun: Order growth re accelerated to $1 2 million, an increase of 2% year over year.
Shaun: As a reminder, active buyers or the trailing 12 months and this number declined we were very pleased with the new buyer progress we've made including our best Q4, yet.
Shaun: For the fourth quarter of 2024 gross margin was 84% a 290 basis point increase over the same quarter last year as a result of higher percentage of our sales coming from consignment.
Shaun: Adjusted EBITDA was $5 million or seven 4% of revenue for the fourth quarter of 2024.
Sean Sobers: We doubled our adjusted EBITDA dollars versus last year, representing an approximate 330 basis point margin improvement as we leveraged our multi-year investment on higher revenue. Our Q4 EBITDA outperformance illustrates how our marketplace model generates powerful margin flow through on incremental revenue. Turning to the balance sheet, we began the fourth quarter with $57.1 million in cash and investments in our continuing operations of the business, and ended the quarter with $52.8 million, using $4.2 million in cash. The CAF's usage included $4 million of working capital adjustments, $2.5 million of CAPEX, $1 million of debt repayment, and the final $2 million of cash funding.
Shaun: We doubled our adjusted EBITDA dollars versus last year, representing an approximate 330 basis point margin improvement as we leveraged our multi year investment on higher revenue.
Shaun: Our Q4, EBITDA outperformance illustrates how our marketplace model generates powerful margin flow through on incremental revenue.
Shaun: Turning to the balance sheet, we began the fourth quarter at $57 $1 million in cash and investments in our continuing operations of the business and ended the quarter with $52 $8 million using $4 $2 million in cash.
Shaun: The cash usage included $4 million of working capital adjustments to $5 million of Capex $1 million of debt repayment and the final $2 million of cash funding for <unk>.
Sean Sobers: We spent $2.5 million in CapEx and QPOR for a total of $6.6 million.
Shaun: We spent $2 $5 million in Capex in Q4 for a total of $6 6 million for the year.
Sean Sobers: In 2025, we continue to expect maintenance capex levels of approximately $8 million.
Shaun: In 2025, we continue to expect maintenance capex levels of approximately $8 million.
Sean Sobers: Next, I'd like to look ahead. We finished 2024 in a position of strength and believe we entered 2025 with stability and confidence.
Shaun: Next I would like to look ahead, we finished 2024 and a position of strength and believe we entered 2025 with stability and confidence before we get into guidance I want to provide a little more context for our outlook.
Sean Sobers: Before we get into guidance, I want to provide a little more context for OWL. First, our priority this year is to accelerate growth while maintaining broadly similar adjusted EBITDA margins versus last year. To do this, we plan to lean into the key drivers of our marketplace flywheel, growing active buyers through marketing and fresh listings through inbound process. With contribution margins in the low 40% range, we are now able to invest more ad dollars and uphold our long-held 12-month payback. As we spend more on marketing and drive new buyers to the site, we plan to simultaneously invest in inbound processing to bring in a broad selection of fresh, high-value items to delight and convert our buyers.
Shaun: First our priority this year is to accelerate growth, while maintaining broadly similar adjusted EBITDA margins versus last year to do this we plan to lean into the key drivers of our marketplace flywheel growing active buyers through marketing and fresh listings through inbound processing.
Shaun: The contribution margins in the low 40% range, we are now able to invest more AD dollars and uphold our long held 12 month payback period, as we spend more on marketing and drive new buyers to the site, we plan to simultaneously invest in inbound processing to bring in a broad selection of fresh high value items to delight and convert our buyers.
Sean Sobers: Second, we are planning for gross margins to decline slightly in 2025 versus last year and track towards the high end of our long-term target range of 78%. This dynamic is largely the result of the acceleration in new buyer growth that we have planned. Since first-time buyers require higher incentives to convert, the more new buyers in the customer mix pressures gross margins. However, once a new buyer transitions to a repeat buyer, average discount rates are over 1,000 basis points lower. Third and finally, in 2025, we are planning to reach positive free cash flow on an annual basis, which provides us with a high level of confidence that we can fund the business with our existing cash.
Shaun: Second we are planning for gross margins to decline slightly in 2025 versus last year and track towards the high end of our long term target range of 78%.
Shaun: This dynamic is largely the result of the acceleration in new buyer growth that we had planned.
Shaun: First time buyers require higher incentives to convert more new buyers in the customer mix pressures gross margins. However, once a new buyer transitions to a repeat buyer average discount rates are over 1000 basis points lower.
Shaun: Third and finally in 2025, we are planning to reach positive free cash flow on an annual basis, which provides us with a high level of confidence that we can fund the business with our existing cash.
Sean Sobers: Without additional context for guidance, for the first quarter, we expect revenue in the range of $67.5 to $69.5 million, representing year-over-year growth of 6% at the mid-period. gross margin in the range of 77 to 79% of revenue. Adjusted EBITDA of 2.5 to 3.5% of revenue, and basic weighted average shares outstanding of approximately 117 million shares. For the full year of 2025, we expect revenue in the range of $270 to $280 million, representing year over year growth of 6% at the midpoint. Gross margin in the range of approximately 77 to 79% of revenue, adjusted EBITDA of approximately flat to 2024 is 3.3%, and basic weighted average share is outstanding of approximately 122 million shares.
Shaun: With that additional context for guidance for the first quarter, we expect revenue in the range of 67, 5% to $69 5 million representing year over year growth of 6% at the midpoint.
Shaun: Gross margin in the range of 77% to 79% of revenue.
Shaun: Adjusted EBITDA of two five to three 5% of revenue and basic weighted average shares outstanding of approximately 117 million shares.
Shaun: For the full year of 2025, we expect revenue in the range of $270 million to $280 million representing year over year growth of 6% at the midpoint.
Shaun: Gross margin in the range of approximately 77% to 79% of revenue.
Shaun: Adjusted EBITDA of approximately flat to 2024 is three 3% and basic weighted average shares outstanding of approximately 122 million shares.
Sean Sobers: I would like to note that going forward, we plan to moderate share dilution as we reduce stock-based compensation while making our way towards earnings per share. To this point, we expect to reduce stock-based compensation by over 40% in 2020.
Shaun: I would like to note that going forward, we plan to moderate share dilution as we reduced stock based compensation, while making our way towards earnings per share to this point, we expect to reduce stock based compensation by over 40% in 2025.
Sean Sobers: In closing, we are extremely proud of the milestones we achieved in 2024. In 2025, we are confident in our ability to reaccelerate revenue growth, maintain positive adjusted EBITDA, and take the next step in our trajectory and reach positive free cash. This progress will be fueled by our multi-year investment in our infrastructure, technology and software, and move us closer to our long-term target.
Shaun: In closing we are extremely proud of the milestones we achieved in 2024 and 2025, we are confident in our ability to reaccelerate revenue growth maintain positive adjusted EBITDA and take the next step in our trajectory and reach a positive free cash flow.
Shaun: This progress will be fueled by our multi year investment in our infrastructure technology and software and move us closer to our long term targets.
Unknown Executive: James and I are now ready to take your questions.
Shaun: James and I are now ready to take your questions. Operator, Please open the lines.
Unknown Executive: Operator, please open the line. Thank you.
Shaun: Okay.
Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the number one on your touchtone phone. You will hear a prompt that has been raised. Should you wish to decline from the polling process, please press star followed by the number.
Speaker Change: 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 number one on your Touchtone phone you would hear a prompt that youre has been raised.
Speaker Change: Should you wish to decline from the boarding process. Please press star followed by the number too.
Unknown Executive: If you're using a speakerphone, please lift the headset before pressing any One moment, please, for your first question.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Speaker Change: Okay.
Ike Boruchow: Your first question comes from the line of Ike Boruchow from Wells Fargo. Your line is now open. Hey, everyone. Congrats on the momentum.
Speaker Change: Your first question comes from the line of Ike <unk> from Wells Fargo. Your line is now open.
Speaker Change: Hey, everyone congrats on the momentum.
Sean Sobers: I guess two questions for me, either for James or Sean. Basically, just trying to think about the pacing of, I guess, revenue, gross margin and EBITDA through the year. Any other, you know, besides Q1, any other guide points you can kind of, your guardrails you can kind of give us as we think about the remainder of the year. And then just a second follow-up to that would be just, it sounds like you got a lot of momentum and Q4 sounded, you know, was, you know, very strong. Any reason why the business should de-sell? Anything quarter to date to share?
Speaker Change: I guess two questions for me the ear for James or songs.
Speaker Change: Basically just trying to think about the pacing of that.
Speaker Change: Revenue gross margin and EBITDA through the year or any other besides Q1, either guide points you can kind of guardrails, you can kind of give us as we think about it.
Speaker Change: The remainder of the year and then just a second follow up to that would be just sounds like you got a lot of momentum in Q4 sounded was very strong.
Speaker Change: Any reason why the business should be sell anything quarter to date the shares.
James Reinhart: Just trying to understand like, how you're planning it versus if there's anything you're actually seeing that could Hey, this is Sean. I'll start off with the pacing. Think about revenue, it's gonna, the growth is going to accelerate from Q1 to Q2, then Q2 to Q3. Q4 will come back down, but still be a grower. And the growth margin rate will be pretty consistent throughout the year by quarter. EBITDA rate for Q2, similar to Q1, expands into Q3 at its highest for the year, then comes back down to its lowest rate for Q4 in preparation for basically growing into 2026, but really about processing and bringing inbound goods online.
Speaker Change: I understand.
Speaker Change: How youre planning it versus if theres anything youre actually seeing that concerns you.
John: Hey, this is John I'll start off with the pacing, we think about revenue.
John: Growth is being accelerated from Q1 Q2. Thank you Judy Q3, Q4 will come back down, but it's Silvia grower.
John: On the gross margin rate will be pretty consistent throughout the years by quarter.
John: EBITDA range for Q2, similar to Q1 expands into Q3.
Speaker Change: Highest for the year, then comes back down to its lowest rates for Q4 in preparation for basically growing into 2026, but really about processing and bringing the inbound goods online I'll hand, it over James I will outpace, yes, Hey, Eric.
James Reinhart: I'll hand it over to James on the last piece. Yeah, hey, Ike. Look, I think Q4 was strong. I think it benefited a little bit from the post-election sort of consumer, consumers feeling good sort of post-election. So, you know, we had a strong holiday, you know, unlike prior holiday periods. And so, you know, I think nice momentum, and we have continued to see that momentum into Q1. I just think there's a little bit of uncertainty around, you know, a little bit on the consumer side. And then also, you know, this is early in the cycle for us for aggressively investing in marketing, aggressively investing in operations.
Speaker Change: Look I think Q4 was strong I think it benefited a little bit from the post election and sort of consumer.
Eric: Consumer is feeling good sort of post election, so we had a strong holiday. Unlike prior holiday periods and so I think nice momentum and we have continued to see that momentum into Q1, I just think there's a little bit of uncertainty around.
Eric: A little bit on the consumer side and then also this is early in the cycle for us for aggressively investing in marketing aggressively investing in operations and I think just we want to see some of these trends play out.
James Reinhart: And I think just we want to see some of these trends play out. But I think consistent with what Sean just said, you know, we expect, you know, Q2 to be, you know, better than Q1 and Q3 to be better than Q2. So, you know, I think we're pacing the year at such.
Sean Sobers: But I think consistent with what Sean just said we expect.
Eric: Q2 to be.
Eric: Better than Q1, and Q3 to be better than Q2, So I think we're pacing the.
Eric: The year as such.
Unknown Executive: Great, thanks guys.
Speaker Change: Great. Thanks, guys.
Dylan Carden: Your next question comes from the line of Dylan Carden from William Blair. Your line is now open. Thank you. And thanks for all the color on the guys.
Speaker Change: Your next question comes from the line of Dylan Carden from William Blair. Your line is now open.
Dylan Carden: Thank you and thanks for all the color on the guide.
Sean Sobers: I'm curious, you kind of mentioned it there at the end, if you mentioned how much you're going to spend on marketing this year, even in relative terms, as it relates to the outlook, and then that that giant decrease in stock based comp, you know, what's kind of the outlook here for the gap income side of the business as we kind of roll this forward? And maybe related to that, you know, we haven't talked about kind of capacity utilization in a while, kind of where you are on that journey. And sort of need for capex or how you kind of flex in and out of the capacity you have this year.
Dylan Carden: I'm curious.
Speaker Change: You've kind of mentioned it there at the end if you mentioned how much youre going to spend on marketing this year, even in relative terms as it relates to the outlook and then the giant and a decrease in stock based comp whats kind of the outlook here for the GAAP income side of the business as we kind of roll this forward it.
Dylan Carden: And maybe related to that.
Speaker Change: Haven't talked about kind of capacity utilization.
Dylan Carden: In awhile.
Dylan Carden: Kind of where you are on that journey and sort of need for capex or how you're kind of flex in and out of the capacity that you have this year. Thanks.
Sean Sobers: Thanks.
James Reinhart: Yeah, hey Dylan, maybe I'll start on the capacity piece. You know, we have plenty of capacity at this point in the distribution centers. And I think our terms have been increasing, you know, our ability to pick in, you know, the right items to sell at the right price. So I think Dylan, we're in great shape with that. I think we've said historically, we would need any CapEx at least 2027, you know, in any sort of scaled way. And I think that remains to be true, although, you know, potentially even further than that. So I think feeling good about the utilization piece.
Don: Yes, Hey, Don maybe I'll start on the capacity piece.
Speaker Change: We have plenty of capacity at this point in the distribution centers.
Don: I think our turns have been increasing.
Don: Ability to pick the right items to sell at the right price. So I think Delaware in great shape with that I think we've said historically, we wouldn't need any capex at least 2027 and any sort of scaled way.
Don: And I think that remains to be true.
Don: <unk>, even further than that so I think feeling good about the utilization piece.
Sean Sobers: And then on the stock based comp piece, you know, I think we have seen, you know, inflated uses of stock based comp over the past prior years. I think we very deliberately have chosen to use more cash this year and less, less shares to really reduce dilution, you know, for equity holders. And so that was a conscious decision in the business. And I think you'll see that play out as we as we prep, as we get into the to 2026. And we think about earnings growth and EPS, you know, that's that's the direction the business is headed.
Don: And then on the stock based comp.
Don: Piece I think we have seen inflated uses of stock based comp over the past prior years I think we very deliberately have chosen.
Don: If you use more cash this year and less less.
Don: <unk> shares to really reduce dilution for equity holders and so that was a conscious decision in the business and I think youll see that play out as we as we prep as we get into the 2026, when we think about earnings growth.
Don: That's the direction the business is headed and so we wanted to call out that change in share usage and Joe as you put a number on it to the SBC for 2025 is about $14 $5 million.
Sean Sobers: And so we wanted to call out that change in share usage. And Dylan, just to put a number on it to the FEC for 2025 is about 14 and a half million dollars.
Sean Sobers: And then I think on your last piece, the piece I can give you on marketing is think about it as about 19% of revenue on a quarterly basis throughout the year. And is that just because you're seeing better returns on that spend? Is that why that kind of ticks off a bit? Yeah, Dylan, we are. We're seeing our LTV to CAC ratios really trend towards all-time highs. Q4 was among the best acquisition quarter in Q4 we've had. Q1 continues to trend really positively. And so I think it's a combination of just a much better product experience.
Don: And then I think on your last piece of feedback.
Don: Can give you on marketing is think about it as about 19% of revenue on a quarterly basis throughout the year.
Don: And is that just because youre seeing better returns on that spend is that why that kind of ticked up a bit.
Don: Yes, we are we're seeing.
Don: Our LTV to CAC ratios really trend towards all time highs in Q4 was among the best acquisition quarter. In Q4. We've had Q1 continues to try and really positively and so I think it's a combination of just a much better product experience.
Sean Sobers: All of our new AI search technology is really helping customers find what they want. That's driving positive contribution margins. We're really flowing that back into the business. And I think that's why you'll start to see the progress throughout the year on the growth side.
Don: All of our new AI AI search technology is really helping customers find what they want that's driving positive contribution margins were really slowing that back into the business.
Don: And I think Thats why youll start to see the progress throughout the year on the growth side.
Unknown Executive: Excellent. Thanks a lot, guys. Yeah, thanks.
Don: Excellent. Thanks, a lot guys.
Don: Yes. Thanks.
Don: Yes.
Bernie Mcternan: Your next question comes from the line of Bernie McTernan from Needham and Company. Your line is now open. Great, thanks for taking the question was just hoping you could dive into image search a little bit more, maybe what's driving that higher conversion? We'd love to know kind of what data you're what kind of data you're collecting? And ultimately, why is it better than just traditional word based search?
Speaker Change: Your next question comes from the line of Bernie Mcternan from Needham and company. Your line is now open.
Great. Thanks for taking my question was just hoping you could dive into image search a little bit more on maybe what's driving that higher conversion, let us know kind of what data or what kind of data you're collecting and ultimately why is it better than just traditional word based search and if youre seeing increased utilization of the product over time.
James Reinhart: And if you're seeing increased utilization of the product over Yeah, hey, Bernie. Yeah, I mean, I think, you know, we talked about image search and the conversion rates that that drives, you know, I think it's just a distinction between people really being able to see items, you know, out on the street or items in magazines, or, you know, using their Pinterest boards, right, all of these visual ways that women shop, I think now being able to find exactly those looks, combined with the technology on the back end to take, you know, whatever it is that they're snapping or clipping or saving, it just delivers, you know, more relevant results.
Yeah, Hey, Bernie.
We talked about image search and the conversion rates that drive I think its just that the distinction between people really being able to see.
Speaker Change: Items out on the street or items in magazines or.
Speaker Change: Using their pinterest boards right all of these visual ways that women shop, I think now being able to find exactly those looks.
Speaker Change: Combined with the technology on the back end to take whatever it is that they're snapping or quite being are saving.
Speaker Change: It delivers more relevant results and so.
Unknown Executive: And so you're seeing people then use it more. We hear from customers all the time, you know, I've stopped using the text search, I just upload my images, and you guys find exactly what I'm looking for. Whether that is, you know, you saw a big surge of people using it, you know, with the Academy Awards, right? Like, you're just seeing people start to use this as a default way to shop online. And I think our technology is helping give them the product that they want, you know, in an efficient fashion. Makes sense. Thanks, James. As a reminder, if you have a question, please press star 1 on your telephone keypad.
Speaker Change: Youre seeing people that use it more.
Speaker Change: We hear from customers all the time I've stopped using the text search I just upload my images you guys find exactly what I'm looking for whether that is.
We saw a big surge of people using it with the Academy Awards right, you're just seeing people start to use this as a default way to shop online.
Speaker Change: And I think our technology is helping.
Speaker Change: Give them the products that they want Fisher.
Speaker Change: Fisher to fashion.
James Reinhart: Makes sense thanks James.
Speaker Change: Okay.
Speaker Change: As a reminder, if you have a question. Please press star one on your telephone keypad.
Kunal Madhukar: Your next question comes from the line of Kunal Madhukar from Water Tower Research. Your line is now open. Hi, thanks for taking my question, question, and maybe, maybe this is something that hasn't truly played out yet. But as we think of the new tariffs that could come into play, one of the things that could potentially happen is that the CPC rate, the cost per click rate should decline because there's less competitive intensity on the advertising side.
Speaker Change: Your next question comes from the line of Vanilla Microcar from moderate power Research. Your line is now open.
Speaker Change: Hi, Thanks for taking my question.
Speaker Change: <unk>.
Speaker Change: Maybe maybe this is something that hasn't really played out yet, but as we think of the new products that could come into play one of the things that could potentially happen is that the debt.
Speaker Change: CPC cost per click rate should should decline because there's less competitive intensity on the advertising side as that happens how are you thinking in terms of maybe continuing to spent as much on marketing budget and delivering higher group, where it says maybe potentially delivering higher EBITDA margins.
James Reinhart: As that happens, how are you thinking in terms of maybe, you know, continuing to spend as much on marketing budget, and delivering higher growth versus maybe potentially delivering higher EBITDA markets? Yeah, it's a great question on tariffs. I mean, I think you've sort of hit on one piece, which is, you know, advertising rates and how that might change around cost per click. You know, I think we saw the opposite, you know, over the last couple of years, you know, whether it was Sheehan or Timu sort of driving up cost per click rates. I do think that could potentially be a tailwind.
Speaker Change: Yes, it's a great question on tariffs I mean, I think you've sort of hit on one piece, which is yes adverts.
Speaker Change: Advertising rates and how that might change around cost per click I think we saw the opposite over the last couple of years, whether it was she and her team who sort of driving up.
Speaker Change: Cost per click rates I do you think that could potentially be a tailwind in the way. Our systems are designed as a cost per effect comes down and we still feel like the customer quality is there we will actually spend more money and could drive incremental new buyers I think the other part of the tariff equation is.
James Reinhart: And the way our systems are designed is if, you know, cost per click comes down, and we still feel like the customer quality is there, we will actually spend more money and could drive incremental new buyers. I think the other part of the tariff equation is, you know, if new apparel, companies that sell new apparel have increased costs, you know, from products that they're making in China or things that they're bringing in from Mexico, anything that increased the cost of new apparel is likely also to provide some modest tailwind to secondhand goods, because we don't have exposure to bringing in products from overseas.
Speaker Change: If new apparel companies, it's our new apparel have increased cost.
Speaker Change: From a product that theyre, making in China or things that they are bringing in from Mexico anything that increase the cost of new apparel.
Speaker Change: Likely also to provide some modest tailwind.
Speaker Change: Can hand goods, because we don't have exposure.
James Reinhart: And so, you know, everything that we process and sell on ThredUP is all here in the US. So I think in both areas, tariffs can be a net positive for our business.
Speaker Change: To bringing in products from overseas and so everything will be profit and sell dried up. This is all here in the U S.
Speaker Change: I think in both areas.
Speaker Change: Tariffs can be a net positive for our business.
James Reinhart: That's great. Maybe a follow up to that, especially to the second point. One of the things that RealReal kind of talks about is their pricing algo, which is, which in real time kind of adjusts to the demand and supply. How flexible is your pricing algo? Just in case prices start increasing on the new product? Yeah, all the prices on ThredUp are dynamic, you know, so we will adjust those prices based on what we're seeing in the market, as well as the as the demand curve. So we're, you know, we've got over 50,000 brands on the platform, you know, 10s of 1000s of new listings every day, and those prices are all being dynamically adjusted.
Speaker Change: That's great maybe a follow up to that I speak to the second 0.1 of the things that create real kind of talks about is the pricing algorithm, which is rich in realtime kind of adjust to the demand and supply.
Speaker Change: How flexible and.
Is your pricing out equal.
Speaker Change: Just in case prices start increasing on the new product side.
Speaker Change: Yeah, all the prices on drive up our dynamic so we will adjust those prices based on what we're seeing in the market.
Speaker Change: As long as it has been.
Demand curve so we're.
Speaker Change: We've got over 50000 brands on the platform.
Speaker Change: Tens of thousands of new listings everyday and those prices are all being dynamically adjust itself, we've actually very well positioned to take advantage of discontinuities in pricing.
James Reinhart: So we've actually very well positioned to take advantage of discontinuities and pricing, you know, if tariffs make that make that a reality.
Speaker Change: Tariffs make that make that a reality.
James Reinhart: Great. Thank you so much. Thank you.
Speaker Change: Great. Thank you so much thank.
Speaker Change: Thank you.
Unknown Executive: There are no further questions at this time.
Speaker Change: There are no further questions at this time I will now turn the call back to Mr. James Reinhart. Please continue.
James Reinhart: I will now turn the call back to Mr. James Reinhart. Please continue.
James Reinhart: Well, thank you all for joining us on this call. I want to particularly thank the ThredUp team for all their hard work over the past couple quarters. Feels great to be back on track with some strong momentum in the business and exciting opportunities in front of us. And looking forward to all the work that we have ahead of us and what we can invent on behalf of our customers. So thank you, everyone.
Speaker Change: Well. Thank you all for joining us on this call I want to particularly thank the threat up team for all their hard work over the past couple of quarters.
Speaker Change: It was great to be back on track with strong momentum in the business and exciting opportunities in front of us and looking forward to all the work that we have ahead of us.
Speaker Change: What we can invent on behalf of our customers. So thank you everyone and we'll see you next time.
Unknown Executive: We'll see you next time.
Unknown Executive: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone else has left.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Everyone else has.
Speaker Change: [noise].