Q2 2026 ThredUp Inc Earnings Call

August 5, 2026

Speaker #1: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the ThredUp Q2 2026 earnings conference call.

Operator: Hello, and thank you for standing by. My name is Regina. I will be your conference operator today. At this time, I would like to welcome everyone to the ThredUp Q2 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. 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 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Lauren Frasch, investor relations. Please go ahead.

Operator: Hello, and thank you for standing by. My name is Regina. I will be your conference operator today. At this time, I would like to welcome everyone to the ThredUp Q2 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. 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 one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Lauren Frasch, Investor Relations. Please go ahead.

Speaker #1: All lines have been placed on mute to prevent any background noise. 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.

Speaker #1: To withdraw your question, press star 1 again. I would now like to turn the conference over to Lauren Frasch, Investor Relations. Please go ahead.

Speaker #2: Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's Q4 2025 financial results. With me are James Reinhart, ThredUp CEO and co-founder, and Sean Sobers, CFO.

Lauren Frasch: Good afternoon. Thank you for joining us on today's conference call to discuss ThredUp's Q4 2025 financial results. With me are James Reinhart, CEO and co-founder of ThredUp, 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. A replay of this call will be available on the site shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, the supplemental financial information, and our Forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors.

Speaker #2: 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 on the site shortly.

Speaker #2: Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties.

Lauren Frasch: Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, the supplemental financial information, and our Forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors.

Speaker #2: Actual results can differ materially. Please refer to our earnings release, the supplemental financial information, and our forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors.

Speaker #2: We undertake no obligation to update any forward-looking statements. During this call, we will present both gap and non-gap financial measures. A reconciliation of non-gap to gap measures is included in today's earnings press release and supplemental financial information.

Lauren Frasch: We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and supplemental financial information, which are distributed and available to the public through our investor relations website located at ir.thredup.com. I'd like to turn the call over to James. James?

Lauren Frasch: We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and supplemental financial information, which are distributed and available to the public through our Investor Relations website located at ir.thredup.com. I'd like to turn the call over to James. James?

Speaker #2: Which are distributed and available to the public through our investor relations website located at ir.threadup.com. Now, I'd like to turn the call over to James.

Speaker #2: James?

Speaker #3: Good afternoon, everyone. I'm James Reinhart, CEO and co-founder of ThreadUp. Thank you for joining our Q2 2026 earnings call. Today, I'll walk through our Q2 results, the key drivers behind them, and how we're thinking about the back half of the year.

James Reinhart: Good afternoon, everyone. I'm James Reinhart, CEO and co-founder of ThredUp. Thank you for joining our Q2 2026 earnings call. I'll walk through our Q2 results, the key drivers behind them, and how we're thinking about the back half of the year. I'll then hand it over to Sean Sobers, our Chief Financial Officer, to walk through the financials in more detail and provide our outlook for Q3, Q4, and the full year. We'll close with a question and answer session. Let me start with the results. In Q2, revenue was $90.8 million, up 16.9% year over year. Gross margin was 79.9%, up 40 basis points. Net loss was $5.9 million. Adjusted EBITDA was $4.8 million, or 5.3% of revenue.

James Reinhart: Good afternoon, everyone. I'm James Reinhart, CEO and co-founder of ThredUp. Thank you for joining our Q2 2026 earnings call. I'll walk through our Q2 results, the key drivers behind them, and how we're thinking about the back half of the year. I'll then hand it over to Sean Sobers, our Chief Financial Officer, to walk through the financials in more detail and provide our outlook for Q3, Q4, and the full year. We'll close with a question-and-answer session. Let me start with the results. In Q2, revenue was $90.8 million, up 16.9% year over year. Gross margin was 79.9%, up 40 basis points. Net loss was $5.9 million. Adjusted EBITDA was $4.8 million, or 5.3% of revenue.

Speaker #3: I'll then hand it over to Sean Sobers, our Chief Financial Officer, to walk through the financials in more detail and provide our outlook for Q3, Q4, and the full year.

Speaker #3: We'll close with a question-and-answer session. First, let me start with the results. In the Q2, revenue was 90.8 million, up 16.9% year over year.

Speaker #3: Gross margin was 79.9%, up 40 basis points to $5.9 million, and adjusted EBITDA was $4.8 million, or 5.3% of revenue. Active buyers on a trailing 12-month basis also grew 21% year over year, while orders were up 22%.

James Reinhart: Active buyers on a trailing 12-month basis also grew 21% year over year, while orders were up 22%. All of these metrics exceeded our expectations. We're pleased with our Q2 results, but this was a tougher consumer environment than we would have expected at the beginning of the year. Despite a record quarter for new buyers acquired and record active buyers, we had to be incrementally promotional to drive conversion among our most price-sensitive shoppers. This approach in Q2 led to lower ASPs and average revenue per buyer, ultimately, we estimate a $3 million headwind to our top-line results in Q2. Turning to the back half of the year. As we continue to move throughout 2026, our focus remains on the three strategic priorities that I outlined last quarter.

Speaker #3: All of these metrics exceeded our expectations. We're pleased with our Q2 results. But this was a tougher consumer environment than we would have expected at the beginning of the year.

Speaker #3: Despite a record quarter for new buyers acquired and a record active buyers, we had to be incrementally promotional to drive conversion among our most price-sensitive shoppers.

Speaker #3: This approach in Q2 led to lower ASPs and average revenue per buyer, and ultimately, headwind to our top-line results in Q2. Turning to the back half of the year, as we continue to move through our 2026, our focus remains on the three strategic priorities that I outlined last quarter.

Speaker #3: Continuing to grow and retain high-value buyers, scaling high-quality, premium supply from a diverse group of sellers, and developing AI technology that helps customers discover and shop across our vast marketplace.

James Reinhart: Continuing to grow and retain high-value buyers, scaling high-quality premium supply from a diverse group of sellers, and developing AI technology that helps customers discover and shop across our vast marketplace. New buyer growth was again strong, up 13% in the quarter, lapping the 72% growth from the prior year quarter. Q2 was our strongest quarter on record for new buyers acquired. This is especially promising due to the higher expected LTVs of these new buyers and is consistent with our ongoing shift to a more premium buyer. We are continuing to reduce spend on Google PMax in favor of Meta and Pinterest, where LTVs are higher, customer acquisition costs are coming down, and volume is scaling quickly. As such, new customer volume on Meta and Pinterest grew 130% and 145% year over year, respectively. Brand is a big part of why that shift is working.

Speaker #3: New buyer growth was again strong, up 13% in the quarter, lapping the 72% growth from the prior year quarter. Q2 was our strongest quarter on record for new buyers acquired.

Speaker #3: This is especially promising due to the higher expected LTVs of these new buyers, and it’s consistent with our ongoing shift to a more premium buyer.

Speaker #3: We are continuing to reduce spend on Google Pmax in favor of Meta and Pinterest, where LTVs are higher, customer acquisition costs are coming down, and volume is scaling quickly.

Speaker #3: As such, new customer volume on Meta and Pinterest grew 130% and 145% year over year, respectively. Brand is a big part of why that shift is working.

Speaker #3: We believe that those who discover secondhand through creators and culture, rather than through search or promotions, tend to be stickier over time. Our most recent campaign, "Dress the Party," generated hundreds of millions of earned impressions this June.

James Reinhart: We believe that those who discover second-hand through creators and culture rather than through search or promotions tend to be stickier over time. Our most recent campaign, Dress The Party, generated hundreds of millions of earned impressions this June, proof that we can create an owned cultural moment, not just buy media around one. On the supply side, active sellers grew to record levels, with quality keeping pace. The volume of premium bag items was up 32% year over year, representing 12% of the overall mix. We're targeting an even stronger mix by year-end through seller incentives, new acquisition channels for premium sellers, and continuing investment in the seller experience. In June, we opened Direct Listings, our peer-to-peer offering, to everyone in our marketplace. Since then, items listed are up 89% month over month, and there are now more than 100,000 items listed, with an average listing price of $80.

Speaker #3: Proof that we can create an owned cultural moment not just by media around one. On the supply side, active sellers grew to record levels, with quality keeping pace.

Speaker #3: The volume of premium bag items was up 32% year over year, representing 12% of the overall mix. We're targeting an even stronger mix by year-end through seller incentives, new acquisition channels for premium sellers, and continued investment in the seller experience.

Speaker #3: In June, we opened direct listings, our peer-to-peer offering, to everyone in our marketplace. Since then, items listed are up 89% month over month, and there are now more than 100,000 items listed, with an average listing price of $80.

Speaker #3: While just a small fraction of total available items were pleased with the steady organic growth and premium mix of these items. Let me turn to reseller to service.

James Reinhart: While just a small fraction of total available items, we're pleased with the steady organic growth and premium mix of these items. Let me turn to Resale-as-a-Service. This quarter, we launched three new brand storefronts, Steve Madden, Dolce Vita, and Betsey Johnson. As a reminder, each new brand gives us access to an entirely new set of sellers, customers with real affinity for that brand who send us their clean-out kits because they trust the storefront carrying a name they already shop. That's a distribution advantage we don't get from any other channel, and it compounds every time we add a new brand to the roster. Now let me talk about the product experience. We're now more than two years into our AI transformation work.

Speaker #3: This quarter, we launched three new brand storefronts: Steve Madden, Dolce Vita, and Betsy Johnson. As a reminder, each new brand gives us access to an entirely new set of sellers.

Speaker #3: Customers with real affinity for that brand who send us their cleanout kits because they trust the storefront carrying a name they already shop. That's a distribution advantage we don't get from any other channel, and it compounds every time we add a new brand to the roster.

Speaker #3: Now, let me talk about the product experience. We're now more than two years into our AI transformation work. No longer do we merely quote, "Work on AI products." Rather, they are, quote, "the foundation of everything we build across the enterprise." I'm often asked, "What's the biggest impact short and long term?" Well, in the short term, it's efficiency and cost leverage.

James Reinhart: No longer do we merely work on AI products. Rather, they are the foundation of everything we build across the enterprise. I am often asked what is the biggest impact short and long term. Well, in the short term, it is efficiency and cost leverage. I am confident that advancements in AI technology will provide significant cost savings for the business by reducing the need to grow headcount as fast and by helping our teams to be more productive. The phase we are entering now is closer to what I think the long-term impact will be, speed. The speed at which we can test, learn, adapt is accelerating. The rate at which we can develop next-generation product experiences, test pricing algorithms, design new backend operations processes is unlike anything I have seen in my years running the business.

Speaker #3: I'm confident that advancements in AI technology will provide significant cost savings for the business by reducing the need to grow headcount as fast and by helping our teams to be more productive.

Speaker #3: But the phase we're entering now is closer to what I think the long-term impact will be. Speed. The speed at which we can test, learn, adapt is accelerating.

Speaker #3: The rate at which we can develop next-generation product experiences—test pricing algorithms, design new back-end operations processes—is unlike anything I've seen in my years running the business.

Speaker #3: Of course, many companies will speed up, and the rate of change we will see across consumer experiences will likely accelerate. But we think that we'll only make our unique, defensible, competitive advantages more pronounced.

James Reinhart: Of course, many companies will speed up. The rate of change we will see across consumer experiences will likely accelerate. We think that will only make our unique, defensible, competitive advantages more pronounced. Generative AI will commoditize a lot of the technology stack, but it will not replace the fact that we still put real clothes on every day. Our continued investments in our supply chain and processing infrastructure, our compounding data advantage, and our trusted marketplace enable us to build world-class buyer and seller experiences. With that context, let me turn to recent product advancements. Over the past several calls, I have walked you through individual features that use AI to make a 5 million single SKU catalog feel more easily shoppable. I believe the most powerful example for where our technology is going now is with our real-time personalization engine.

Speaker #3: Generative AI will commoditize a lot of the technology stack, but it will not replace the fact that we still put real clothes on every day.

Speaker #3: Our continued investments in our supply chain and processing infrastructure are compounding data advantage, and our trusted marketplace enable us to build world-class buyer and seller experiences.

Speaker #3: With that context, let me turn to recent product advancements. Over the past several calls, I've walked you through individual features that use AI to make a $5 million single-SKU catalog feel more easily shoppable.

Speaker #3: I believe the most powerful example for where our technology is going now is with our real-time personalization engine. We see more than 250,000 anonymous sessions a day.

James Reinhart: We see more than 250,000 anonymous sessions a day. Historically, the experience stayed largely static until our systems adapted for the shopper's next visit. Our new real-time engine reads intent within seconds and retailers the feed on the very next batch of inventory. In our first A/B test, that drove a 5% lift in item engagement and a 7% lift in profit per buyer for new customers. It is early, but it is a real signal on what this system can unlock. We have also now widely deployed several AI-driven product experience to cut down the overwhelm of shopping second-hand. Clustering, Exact Match, and Notify Me all get at reducing cognitive shopping friction and are especially effective for newer customers. Clustering brings visually similar items together into a single browsing experience, keying off buyer intent and preference.

Speaker #3: Historically, the experience stayed largely static until our systems adapted for the shopper's next visit. Our new real-time engine reads intent within seconds and retailers to feed on the very next fetch of inventory.

Speaker #3: In our first A/B test, that drove a 5% lift in item engagement and a 7% lift in profit per buyer for new customers. It's early, but it's a real signal on what this system can unlock.

Speaker #3: We've also now widely deployed several AI-driven product experiences to cut down the overwhelm of shopping secondhand. Clustering, exact match, and notify-me all get at reducing cognitive shopping friction, and are especially effective for newer customers.

Speaker #3: Clustering brings visually similar items together into a single browsing experience, keying off buyer intent and preference. Exact match goes further and aggregates listings of the exact same item into a single product page, where one item means one page, where a user chooses their size, color, or condition, rather than seeing the same item show up as 10 near-identical listings.

James Reinhart: Exact Match goes further, aggregates listings of the exact same item into a single product page where one item means one page, where a user chooses their size, color, or condition, rather than seeing the same item show up as 10 near identical listings. Both features remove visual redundancy and bring second-hand shopping closer to a traditional e-commerce experience, critical technology for scaling our marketplace. This advancement also unlocks a Notify Me feature. Notify Me turns a sold-out single SKU item from a dead end into a reason to come back once it is restocked. Opt-ins for Notify Me have grown more than 50% week over week since its launch. For someone new to resale, this makes our marketplace feel as easy to shop as buying new. Taken together, this is why we believe that advancements in AI create a structural advantage for us.

Speaker #3: Both features remove visual redundancy and bring secondhand shopping closer to a traditional e-commerce experience—critical technology for scaling our marketplace. This advancement also unlocks a notify-me feature.

Speaker #3: Notify-me turns a sold-out single SKU item from a dead end into a reason to come back once it's restocked. An opt-in for notify-me have grown more than 50% week over week since its launch.

Speaker #3: For someone new to resale, this makes our marketplace feel it's easy to shop as buying new. Taken together, this is why we believe that advancements in AI create a structural advantage for us.

Speaker #3: It makes our marketplace more fun to shop and more efficient for us to run. Now, let's look ahead. While Sean will discuss our second-half guidance in more detail, I want to be clear that we likely could have maintained our original second-half outlook.

James Reinhart: It makes our marketplace more fun to shop and more efficient for us to run. Let's look ahead. While Sean will discuss our H2 guidance in more detail, I want to be clear that we likely could have maintained our original H2 outlook. However, doing so would have required just about every variable to fall in our favor, gas prices to come back down and uncertainty to abate. Seasonal acceleration that has proved to be unpredictable the last few years, and flawless execution of price, promotion, and customer targeting. This seemed a high bar and one that could risk investor confidence if even one of these things moved against us. Our view is that the business is executing at a high level with growing active buyers, strong new buyer and seller growth fundamentals, and an exceptional product pipeline.

Speaker #3: However, doing so would have required just about every variable to fall in our favor. Gas prices to come back down, and uncertainty to abate.

Speaker #3: Seasonal acceleration has proved to be unpredictable over the past few years, and flawless execution of price, promotion, and customer targeting is required. This seems like a high bar, and one that could risk investor confidence if even one of these factors moves against us.

Speaker #3: Our view is that the business is executing at a high level, with growing active buyers, strong new buyer and seller growth fundamentals, and an exceptional product pipeline.

Speaker #3: Even with our updated guidance, our two-year average revenue growth rate in the second half of the year is projected to be 16.6%. Our current approach now allows us to stay committed to building durable, compounding performance over time, without compromising our long-term vision for short-term gains.

James Reinhart: Even with our updated guidance, our two-year average revenue growth rate in the H2 of the year is projected to be 16.6%. Our current approach now allows us to stay committed to building durable compounding performance over time without compromising our long-term vision for short-term gains. With that, I'll turn it over to Sean.

Speaker #3: With that, I'll turn it over to Sean.

Speaker #2: Thanks, James. I'll begin with an overview of our results and follow up with guidance for the third and fourth quarters and full year of 2026.

Sean Sobers: Thanks, James. I'll begin with an overview of our results and follow up with guidance for the Q3 and Q4 and full year 2026. I will discuss non-GAAP results throughout my remarks. We're pleased with our Q2 results. Despite a more challenging consumer and macroeconomic environment than we had anticipated, we delivered strong revenue growth, gross margin, and adjusted EBITDA, all of which exceeded our internal expectations. For the Q2 of 2026, revenue totaled $90.8 million, an increase of 16.9% year over year. Our performance was primarily driven by strong buyer trends and higher repurchase rates, supported by elevated promotional activity. These drivers resulted in another record quarter for new buyers acquired, with new buyer acquisition up 13.1% year over year.

Speaker #2: I will discuss non-GAAP results throughout my remarks. We are pleased with our second quarter results. Despite a more challenging consumer and macroeconomic environment than we had anticipated, we delivered strong revenue growth, gross margin, and adjusted EBITDA, all of which exceeded our internal expectations.

Speaker #2: For the second quarter of 2026, revenue totaled $90.8 million, an increase of 16.9% year over year. Our performance was primarily driven by strong buyer trends and higher repurchase rates supported by elevated promotional activity.

Speaker #2: These drivers resulted in another record quarter for new buyers acquired, with new buyer acquisition up 13.1% year over year. We finished the quarter with 1.8 million active buyers for the trailing 12 months, up 21% over last year, while we had 1.9 million orders in the second quarter, up 22% year over year.

Sean Sobers: We finished the quarter with 1.8 million active buyers for the trailing 12 months, up 21% over last year, while we had 1.9 million orders in the Q2, up 22% year over year. For the Q2 of 2026, gross margin was 79.9%, a 40 basis point increase versus the same quarter last year as a result of improved efficiency and logistics. For the Q2 of 2026, GAAP net loss was $5.9 million compared to GAAP net loss of $5.2 million in the same quarter last year. Adjusted EBITDA was $4.8 million or 5.3% of revenue for the Q2 of 2026, outperforming our internal expectations. Our Q2 result represented 140 basis point increase over last year. Turning to the balance sheet, we began the quarter with $54.4 million in cash and securities and ended the quarter with $57.4 million.

Speaker #2: For the second quarter of 2026, gross margin was 79.9%, a 40 basis point increase versus the same quarter last year, as a result of improved efficiency in logistics.

Speaker #2: The second quarter of 2026, GAAP net loss was 5.9 million, compared to GAAP net loss of 5.2 million, in the same quarter last year.

Speaker #2: Adjusted EBITDA was 4.8 million, or 5.3% of revenue for the second quarter of 2026, outperforming our internal expectations. Our Q2 result represented 140 basis point increase over last year.

Speaker #2: Turning to the balance sheet, we began the quarter with $54.4 million in cash and securities, and ended the quarter with $57.4 million. We invested $2.7 million on CapEx and generated $3 million in cash in Q2.

Sean Sobers: We invested $2.7 million on CapEx and generated $3 million in cash in Q2. We continue to expect similar levels of CapEx investment in 2026 as of last year or 2025. I'd like to turn to guidance. As James noted, our underlying fundamentals remain strong. In this environment, we are choosing to prioritize buyer engagement. That means investing more in promotions in H2. We believe protecting buyer engagement is essential to long-term value creation. Because we expect these elevated promotions to create a revenue headwind of approximately $7 million in H2, we are updating our revenue and EBITDA margin expectations for the balance of the year. In Q3, we now expect revenue in the range of $87 to $89 million, representing 7% year-over-year growth at the midpoint, and a 20.3% two-year average growth rate.

Speaker #2: We continued to expect similar levels of CapEx investment in 2026 as of last year, or 2025. Now, I'd like to turn to guidance. As James noted, our underlying fundamentals remain strong.

Speaker #2: In this environment, we are choosing to prioritize buyer engagement, and that means investing more in promotions in the second half. We believe protecting buyer engagement is essential to long-term value creation.

Speaker #2: Because we expect these elevated promotions to create a revenue headwind of approximately $7 million in the second half, we are updating our revenue and EBITDA margin expectations for the balance of the year.

Speaker #2: In the third quarter, we now expect revenue in the range of $87 to $89 million, representing 7% year-over-year growth at the midpoint and a 20.3% two-year average growth rate.

Speaker #2: Gross margin in the range of 78 to 79 percent, adjusted EBITDA of approximately 4% of revenue, and basic weighted average shares outstanding of approximately $132 million shares.

Sean Sobers: Gross margin in the range of 78% to 79%, adjusted EBITDA of approximately 4% of revenue, and basic weighted average shares outstanding of approximately 132 million shares. In Q4, we now expect revenue in the range of $85 to $87 million, representing 8% year-over-year growth at the midpoint, and a 13.2 two-year average growth rate. Gross margins in the range of 77.5% to 78.5%, adjusted EBITDA of approximately 6% of revenue, and basic weighted average shares outstanding of approximately 133 million shares. For the full year of 2026, we now expect revenue in the range of $344.4 to $348.4 million, reflecting 11% year-over-year growth at the midpoint, and a 15.5% two-year average growth rate.

Speaker #2: In the fourth quarter, we now expect revenue in the range of $85 to $87 million, representing 8% year-over-year growth at the midpoint and a 13.2% two-year average growth rate.

Speaker #2: Gross margins in the range of 77.5 to 78.5%, adjusted EBITDA of approximately 6% of revenue, and basic weighted average shares outstanding of approximately $133 million shares.

Speaker #2: For the full year of 2026, we now expect revenue in the range of $344.4 to $348.4 million, reflecting 11% year-over-year growth at the midpoint and a 15.5% two-year average growth rate.

Speaker #2: Gross margin in the range of 78.7% to 79.1%, adjusted EBITDA of approximately 4.7% of revenue, representing approximately 30 basis points of expansion versus last year, and basic weighted average shares outstanding of approximately 131 million shares.

Sean Sobers: Gross margin in the range of 78.7% to 79.1%, adjusted EBITDA approximately 4.7% of revenue, representing approximately 30 basis points expansion versus last year, and basic weighted average shares outstanding of approximately 131 million shares. Lastly, we expect to continue to be capital positive for the full year. As we progress through the back half of 2026 and throughout 2027, we will balance growth investments while planning to drive EBITDA expansion. Despite the temporary macroeconomic friction outside of our control, we remain confident in the core fundamentals of our marketplace, our proven ability to engage buyers, and our path forward towards long-term growth and profitability. James and I are now ready for your questions. Operator, please open the line.

Speaker #2: Lastly, we expect to continue to be capital positive for the full year. As we progress through the back half of 2026 and throughout 2027, we will balance growth investments while planning to drive EBITDA expansion.

Speaker #2: Despite the temporary macroeconomic friction outside of our control, we remain confident in the core fundamentals of our marketplace, our proven ability to engage buyers, and our path forward towards long-term growth and profitability.

Speaker #2: James and I are now ready for your questions. Operator, please open the line.

Speaker #3: We will now begin the question and answer session. In order to ask a question, simply press star, followed by the number 1 on your telephone keypad.

Operator: We will now begin the question and answer session. In order to ask a question, simply press star followed by the number 1 on your telephone keypad. Our first question will come from the line of Dylan Carden with William Blair. Please go ahead.

Operator: We will now begin the question-and-answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Dylan Carden with William Blair. Please go ahead.

Speaker #3: Our first question will come from the line of Dylan Carden with William Blair. Please go ahead.

Speaker #4: Yes, thank you. I'm curious just sort of coming off the quarter that you had and with the idea that you're sort of engaging a stickier buyer.

Dylan Carden: Yeah, thank you. I'm curious, just sort of coming off the quarter that you had, and with the idea that you're sort of engaging a stickier buyer and presumably incentivizing or stimulating demand through higher promo, why sort of the level of caution that you're embedding in the guide? Maybe if you can speak to what you're kind of currently seeing in the business or That'd be very helpful. Thanks.

Speaker #4: And presumably, incentivizing or stimulating demand through higher promo, why sort of the level of caution that you're embedding in the guide? Maybe if you can speak to what you're kind of currently seeing in the business or that would be very helpful.

Speaker #4: Thanks.

Speaker #5: Yeah. Hey, Dylan. Yeah. I mean, Q2, I mean, we beat all of our internal expectations. As I indicated, it was grindy out there. In June, it was just more challenging to get customers to convert.

James Reinhart: Yeah. Hey, Dylan. Yeah, Q2, we beat all of our internal expectations. As I indicated, it was grindy out there in June. It was just more challenging to get customers to convert. We saw lots of visitors, lots of traffic, but you could tell that people needed incentives and promotions to convert. We noticed that through June, and I think as we came into July, we saw some of that same behavior, coming out of Fourth of July, certainly through the first couple of weeks. I think that we probably could have sort of powered through it, but I think it's going to be challenging, Dylan, in this, with some of the segments of customers that have been a little bit more price sensitive.

Speaker #5: We saw lots of visitors, lots of traffic, but you could tell that people needed incentives and promotions to convert. And so we noticed that through June.

Speaker #5: And I think, as we came into July, we saw some of that same behavior coming out of Fourth of July, certainly through the first couple of weeks.

Speaker #5: And so I think that we probably could have sort of powered through it, but I think it's going to be challenging, Dylan, in this with some of the segments of customers that have been a little bit more price sensitive.

Speaker #5: And so I think we just decided to be a little bit more cautious with how we thought about the back half of the year, knowing that we will have to be incrementally promotional to maintain buyer engagement.

James Reinhart: I think we just decided to be a little bit more cautious with how we thought about the back half of the year, knowing that we will have to be incrementally promotional to maintain buyer engagement. Again, I think the most important thing, when you sort of hit these types of points, is to maintain strong cohorts and strong buyers. I think we made the conscious decision to be a little bit more promotional, especially to this segment of more budget shoppers. Which again, I just want to emphasize, it's really that segment of our customer base, which is probably less than 20% at this point, customers making under $60,000 a year. That's really where this is landing. We think that that's going to be temporary, and we're continuing to shift our mix of customers out of that.

Speaker #5: But again, I think the most important thing when you sort of hit these types of points is to maintain strong cohorts and strong buyers.

Speaker #5: And so I think we made the conscious decision to be a little bit more promotional. Especially to this segment of more budget shoppers which, again, I just want to emphasize, it's really that segment of our customer base, which is probably less than 20% at this point, customers making under $60,000 a year.

Speaker #5: That's really where this is landing. And we think that that's going to be temporary, and we're continuing to shift our mix of customers out of that.

Speaker #5: But I think it's going to be a little bit of a headwind in the back half of the year and so that's why we made the change.

James Reinhart: I think it's going to be a little bit of a headwind in the back half of the year. That's why we made the change we did.

Speaker #5: We did.

Speaker #4: Yep. And just two follow-ups from that. When you say more promotional, do you mean adjusting price, or actually kind of going out with real, more traditional types of discounts or offers?

Dylan Carden: Yep. Just two follow-ups from that. When you say more promotional, do you mean adjusting price or actually kind of going out with real, more traditional type of discounts or offers? Then just to confirm the hit on the EBITDA margin line, what's sort of driving that as far as your sort of prior outlook for the year? Thanks.

Speaker #4: And then just to confirm the hit on the EBITDA margin line, what's sort of driving that as far as your sort of prior outlook for the year?

Speaker #4: Thanks.

Speaker #5: Sure, I'll let Sean cover the EBITDA one, but on price promotion, I appreciate you asking. We're really emphasizing discounts on aging inventory.

James Reinhart: Sure. I'll let Sean cover the EBITDA one. On price promotion, I appreciate you asking. We're really emphasizing discounts on aging inventory. We used to be able to sell items that, say, were 60 days old or 90 days old at higher prices. What we're finding is that we want to really protect the marketplace willingness to pay of buyers fresh inventory, new listings. We're not discounting that product. We're discounting older inventory, I think that's what's causing us for these elevated pricing promotions.

Speaker #5: And so we used to be able to sell items that, say, were 60 days old or 90 days old at higher prices, but what we're finding is that we want to really protect the marketplace willingness to pay of buyers fresh inventory, new listings.

Speaker #5: And so we're not discounting that product. We're discounting older inventory. And I think that's what's causing us for these elevated price and promotions. And to be really direct, the reason why I think that we could have we could have maybe squeezed through the back half of the year, but we would have had to do things to discount kind of our best fresh inventory that's coming online in ways that I think are unnatural and in ways that I think actually really hurt us in 2027 with customer expectations, willingness to pay.

James Reinhart: To be really direct, the reason why I think that we could have maybe squeezed through the H2 of the year, we would have had to do things to discount kind of our best fresh inventory that's coming online in ways that I think are unnatural and in ways that I think actually like really hurt us in 2027 with customer expectations, willingness to pay. I think this is totally the right strategy. It's just something that we're going to have to navigate for these couple of quarters.

Speaker #5: And so I think this is totally the right strategy. It's just something that we're going to have to navigate for these couple of quarters.

Speaker #2: And Dylan, on the EBITDA side, obviously, the biggest hit is revenue and the flow from there. So if you can kind of just take the revenue that we reduced it to down to the gross margin rate of about 79, 80 percent.

Sean Sobers: Dylan Carden, on the EBITDA side, obviously the biggest hit is revenue and the flow-through from there. If you can kind of just take the revenue that we reduce it to down to the gross margin rate of about 79% to 80%. I think the piece that makes it a little more impactful is that we are staying on the investment mode in marketing and in processing because we believe in the business, we're very confident this is temporary. Those two together really have an impact on the EBITDA in the short term, in Q3 and in Q4.

Speaker #2: But I think the piece that makes it a little more impactful is that we are staying on the investment mode in marketing and in processing because we believe in the business and we're very confident this is temporary.

Speaker #2: So those two together really have an impact on the EBITDA in the short term in Q3 and in Q4.

Speaker #4: Appreciate it. Thank you.

James Reinhart: Appreciate it. Thank you.

Speaker #3: Our next question comes from the line of Oliver Chen with TD Callan. Please go ahead.

Operator: Our next question comes from the line of Oliver Chen with TD Cowen. Please go ahead.

Speaker #6: Hi, James and Sean. On your comments what's driving your thoughts that this could be temporary in terms of what you're seeing lately on that price-sensitive consumer?

Oliver Chen: Hi, James and Sean. On your comments, what is driving your thoughts that this could be temporary in terms of what you are seeing lately on that price-sensitive consumer? Also, as we think about ASP, what is happening with how we should model ASP in light of what you are seeing as well? Thank you.

Speaker #6: And also, as we think about ASP, what's happening with how we should model ASP in light of what you're seeing as well? Thank you.

Speaker #5: Yeah. Hey, Oliver. I think we think that the higher gas prices that have come from the conflict in the Middle East, I think, are weighing on—again, Oliver—this sort of budget customer.

James Reinhart: Well, hey, Oliver. We think that the higher gas prices that have come from sort of conflict in the Middle East, I think, are weighing on, again, Oliver, this sort of budget customer. The reason why I think it is a little bit more temporary is that we are shifting our mix of customers away from that budget customer. On a percentage basis, that budget customer is as low as a percent of our overall mix as it has been in a very long time. What we are seeing among customers who are making $100,000, $150,000 a year, is their growth rate is significantly higher than that budget customer. So we are shifting the business into that premium segment. Not luxury by any means, but more premium. So I think our strategy is to sort of move away from having that exposure.

Speaker #5: And the reason why I think it's a little bit more temporary is that we are shifting our mix of customers away from that budget customer on a percentage basis.

Speaker #5: That budget customer is as low as a percent of our overall mix as it has been in a very, very long time. And what we're seeing among customers who are making $100,000, $150,000 a year is their growth rate is significantly higher than that budget customer.

Speaker #5: And so we are shifting the business into that premium segment, not luxury by any means, but more premium. And so I think our strategy is to sort of move away from having that exposure.

Speaker #5: But I do think it's still part of our mix today, which is why we think the combination of gas prices and the current mix is a temporary thing.

James Reinhart: I do think it's still part of our mix today, which is why we think the combination of gas prices and the combination of the current mix is a temporary thing. As far as average selling prices, I wouldn't move them for 2027. I think we will be a little bit more promotional with some of our older inventory in the back half of 2026. I think in general, the mix of goods is actually improving and prices are going up. Again, we're just discounting this segment of our aging and older inventory.

Speaker #5: As far as average selling prices, we're probably not going to—I wouldn't move them for 2027. I think we will be a little bit more promotional with some of our older inventory in the back half of '26.

Speaker #5: But I think, in general, the mix of goods is actually improving and prices are going up. But again, we're just discounting this segment of our aging and older inventory.

Speaker #6: Okay. And on the mix, strategy, is that what's limiting that to be even better? Is it supply or demand? It sounds like you're getting good acquisition, but supply also matters too.

Oliver Chen: Okay. On the mix strategy, what's limiting that to be even better? Is it supply or demand? It sounds like you're getting good acquisition, but supply also matters too. We talk regularly about AI, but what's changed the most since we last talked on AI? It sounds like reinforcement learning is coming into play, but can AI offset some of the weaknesses you're seeing in terms of the model?

Speaker #6: And we talk regularly about AI, but what's changed the most since we last talked on AI? It sounds like reinforcement learning is coming into play, but can AI offset some of the weaknesses you're seeing in terms of the model?

Speaker #5: Well, yeah. I mean, on the mix, you're exactly right. I mean, we're shifting the buyer mix up. So I think part of the channel shift into Meta and Pinterest has really proven to be valuable, right?

James Reinhart: Well, yeah, on the mix, you're exactly right. We're shifting the buyer mix up. I think part of the channel shift into Meta and Pinterest is really proving to be valuable, right? Those customers have significantly higher LTVs than the Google PMax customer. I think as you saw in the prepared remarks, premium as a percent of our mix is also growing, and that is having success. I would say we're slowly moving the entire marketplace up in that direction. It doesn't happen overnight. I think the general trend is right. On the AI front, I think where the most impactful work we're doing is what I commented on, which is just the ability to real-time personalize browsers. We're seeing lift in that for window shoppers, for our new buyers.

Speaker #5: Those customers are have significantly higher LTVs than the Google Pmax customer. And I think as you saw in the prepared remarks, premium as a percent of our mix is also growing, and that is having success.

Speaker #5: So, I would say we're slowly moving the entire marketplace up in that direction. Obviously, it doesn't happen overnight, but I think the general trend is right.

Speaker #5: And then, on the AI front, I think where the most impactful work we're doing is what I commented on, which is just the ability to real-time personalize browsers. We're seeing lift in that for window shoppers and for our new buyers.

Speaker #5: And I think part of why the acquisition engine is continuing to work as well as it is, is conversion rates of new visitors, and that new visitor conversion rate is being amplified by the work in AI.

James Reinhart: I think part of why the acquisition engine is continuing to work as well as it is conversion rates of new visitors. That new visitor conversion rate is being amplified by the work in AI. I think it is helping, and we'll just kind of keep executing against that.

Speaker #5: So I do think it is I think it is helping. And we'll just kind of keep executing against that.

Speaker #6: Thank you. Best regards.

Oliver Chen: Thank you. Best regards.

Speaker #5: Thanks.

James Reinhart: Thanks.

Speaker #3: Our next question will come from the line of Ike Boricka with Wells Fargo. Please go ahead.

Operator: Our next question will come from the line of Ike Boruchow with Wells Fargo. Please go ahead.

Speaker #7: Hey. This is Robert on Friday. I just want to clarify. So it sounds like you guys are maintaining the investment into the Grand Creation.

[Analyst] (Wells Fargo): Hey, this is Robert on for Ike. I just want to clarify. It sounds like you guys are maintaining the investment into demand creation. As we look towards the back half of the year, should it be more average order value being impacted from promotions and while orders or active buyers continue to maintain at the same level? Is that how we should be thinking about it?

Ike Boruchow: Hey, this is Robert on for Ike. I just want to clarify. It sounds like you guys are maintaining the investment into demand creation. As we look towards the back half of the year, should it be more average order value being impacted from promotions and while orders or active buyers continue to maintain at the same level? Is that how we should be thinking about it?

Speaker #7: So as we look towards the back half of the year, should it be more average order value being impacted from promotions and well orders or active buyers continue to maintain at the same level?

Speaker #7: Is that how we should be thinking about it?

Speaker #5: Yeah, Robert, that's right. I mean, you should see average order values come down a little bit, but you should see orders continue to be strong and buyers continue to be strong.

James Reinhart: Yeah, Robert, that's right. You should see average order values come down a little bit. You should see orders continue to be strong, buyers continue to be strong. Again, we're working every day to sort of refine that and improve that. I think to the extent that the environment gets a little bit better, some of the seasonal acceleration takes place. I think we're going to have room to take those average order values up. I think that's probably the right way to model it right now.

Speaker #5: And then again, we're working every day to sort of refine that and improve that. And I think to the extent that the environment gets a little bit better, some of the seasonal acceleration takes place, I think we're going to have room to take those average order values up.

Speaker #5: But I think that's probably the right way to model it right now.

Speaker #7: Yeah. I see. And just as a follow-up, are you usually you pull back in marketing in 4Q. Is that going to be the case here or are you just going to ramp up through the back half?

[Analyst] (Wells Fargo): Got you. Just as a follow-up. Usually you pull back in marketing in Q4. Is that going to be the case here, or are you going to ramp up through the back half?

Ike Boruchow: Got you. Just as a follow-up. Usually you pull back in marketing in Q4. Is that going to be the case here, or are you going to ramp up through the back half?

Speaker #5: I think right now we're not planning to do anything different than we did last year on the marketing side. So, I would not characterize it as a ramp-up or a big ramp-down.

James Reinhart: I think right now we're not planning to do anything different than we did last year on the marketing side. I would not characterize it as a ramp-up or a big ramp-down. I think Q4 last year was stronger than our expectations. I think we feel like we're well-positioned for Q4 in the guide that we provided.

Speaker #5: I think Q4 last year was stronger than our expectations. And I think we feel like we're well positioned for Q4 in this in the guide that we provided.

Speaker #7: Gotcha. Thank you.

[Analyst] (Wells Fargo): Got you. Thank you.

Ike Boruchow: Got you. Thank you.

Speaker #3: Our next question will come from the line of Matt Kuranda with Ross Capital. Please go ahead.

Operator: Our next question will come from the line of Matt Korando with ROTH Capital. Please go ahead.

Operator: Our next question will come from the line of Matt Koranda with Roth Capital. Please go ahead.

Speaker #6: Hey, guys. Can you just clarify, I guess, how much of the guidance cut is attributed? It sounds like mostly you're attributing it to weakness with your lower-end customer but it also sounds like there's a bit of an assortment reset going on where you're trying to get rid of some older inventory and maybe reprioritize some new elements in the assortment that may be higher AOV over time to cater to a higher-end customer.

Matt Koranda: Hey, guys. Can you just clarify, I guess, how much of the guidance cut is attributed? It sounds like mostly you're attributing it to weakness with your lower-end customer. It also sounds like there's a bit of an assortment reset going on, where you're trying to get rid of some older inventory and maybe reprioritize some new elements in the assortment that may be higher AOV over time to cater to a higher-end customer.

Speaker #6: Maybe just can you parse that out for us? I just want to make sure I understand what's going on there.

James Reinhart: Yeah.

Matt Koranda: Maybe just can you parse that out for us? I just want to make sure I understand what's going on there.

Speaker #5: Yeah, Matt. I mean, I would say both things are true. So the weakness that we're seeing is by and large from this segment of buyers making under $60,000 a year.

James Reinhart: Yeah, Matt, I would say both things are true. The weakness that we're seeing is by and large from this segment of buyers making under $60,000 a year. We can see it so clearly in the data, which is why it's actually very easy for us to tell you what we think the quantum of the miss is, because you can just see it in their purchasing behavior and frequency and what they're buying and what types of promotions and credits are required to get them to move. It's actually quite easy. We were testing this all in June, trying to understand the credit elasticity, the discount elasticity to drive purchases of that lower income cohort, and that's how we were able to really see what we think will happen in H2.

Speaker #5: I mean, we can see it so clearly in the data, which is why it's actually very easy for us to tell you what we think the quantum of the miss is, because you can just see it in their purchasing behavior and frequency, and what they're buying, and what types of promotions and credits are required to get them to move.

Speaker #5: So it's actually quite easy. We were testing this all in June trying to understand the credit elasticity the discount elasticity to drive purchases of that lower-income cohort.

Speaker #5: And that's how we were able to really see what we think will happen in the back half of the year. At the same time, we are definitely shifting the mix and improving kind of the fresh products that are coming online.

James Reinhart: At the same time, we are definitely shifting the mix and improving kind of the fresh products that are coming online, and as that mix becomes a larger part of what we do in H2, I think there is potentially some upside there. At the same time, we know we need to move some of that older stuff, and we can do it effectively with this more budget shopper. Again, we're really making the decision to not discount our best stuff, Matt, right? It would be easy to start to say, Hey, let's discount the brand-new products that are coming online. They're very attractive to customers.

Speaker #5: And it's that mix becomes a larger part of what we do in the back half of the year. I think there is potentially some upside there.

Speaker #5: But at the same time, we know we need to move some of that older stuff and we can do it effectively with this more budget shopper.

Speaker #5: But again, we're really making the decision to not discount our best stuff, Matt, right? It would be easy to start to say, "Hey, let's discount the brand-new products that are coming online."

Speaker #5: They're very attractive to customers. We can drive incrementality. But I think that's a very slippery slope when you're building a brand and you're building credibility.

James Reinhart: We can drive incrementality. I think that's a very slippery slope when you're building a brand and you're building credibility, and I don't want to do that, because I think it ultimately degrades brand equity and willingness to pay over time. We're going to maintain standards and expectations there for new product coming online and really push on the older stuff. Matt, to add to that.

Speaker #5: And we just I don't want to do that. Because I think it ultimately degrades brand equity and willingness to pay over time. And so we're going to maintain standards and expectations there for new products coming online and really push on the older stuff.

Speaker #2: And Matt, to add to that, the weakness in the customer and the mix shift that we're doing, again, are both back to driving forces of the macro.

Matt Koranda: Okay

James Reinhart: The weakness in the customer and the mix shift that we're doing, again, are both back to driving forces of the macroeconomic environment, right?

Speaker #2: Economic environment, right?

Speaker #5: Yeah.

Matt Koranda: Yeah. Okay. Fair enough. Just maybe, how long do you think the assortment reset takes? Can it be completed by Q3 so that theoretically you could see growth in AOVs and even maybe better top-line growth by Q4 if you've embedded enough conservatism here, or how should we think about, I guess, the timing of the reset of the assortment and how long that takes?

Speaker #6: Yeah. Okay. Fair enough. And then just maybe how long do you think the assortment reset takes? Going to be completed by the third quarter so that theoretically you could see growth in AOVs and even maybe better top-line growth by the fourth quarter if you've invested enough conservatism here?

Speaker #6: Or how should we think about, I guess, the timing of the reset of the assortment and how long that takes?

Speaker #5: I think the assortment I mean, I wouldn't characterize it as a reset of the assortment. I mean, we're continuing to push put more product online than ever.

James Reinhart: I wouldn't characterize it as a reset of the assortment. We're continuing to put more product online than ever. The ops engine and processing is very strong. I would say that the challenge that we saw as June concluded and into July, is that you just need to be more promotional on some of this older stuff to move customers off the couch to purchase. The environment just being incrementally weaker, I think, is what we're trying to do, versus trying to discount your freshest product, which we think doesn't make sense. We're trying to weaponize older inventory to drive engagement and conversion of that more budget consumer.

Speaker #5: I mean, the ops engine and processing is very strong. I would say that the challenge that we saw as June concluded and into July is that you just need to be more promotional on some of this older stuff to move customers off the couch to purchase.

Speaker #5: And so the environment just being incrementally weaker, I think, is what we're trying to do. So versus trying to discount your freshest product. Which we think doesn't make sense.

Speaker #5: And so we're trying to weaponize older inventory to drive engagement and conversion of that more budget consumer.

Speaker #6: Okay. I'll leave it there, guys. Thank you.

Matt Koranda: Okay. I'll leave it there, guys. Thank you.

Speaker #3: Our next question will come from the line of Bobby Brooks with Northland Capital Markets. Please go ahead.

Operator: Our next question will come from the line of Bobby Brooks with Northland Capital Markets. Please go ahead.

Speaker #4: Hey, good afternoon, team. Thank you for taking my questions. I thought it was really interesting to hear the average listing price coming through the peer-to-peer model was 60 or $80, I think you said.

Bobby Brooks: Hey, good afternoon, team. Thank you for taking my questions. I thought it was really interesting to hear the average listing price coming through the peer-to-peer model was $60 or $80, I think you said. Is it fair then to think that this supply funnel is skewing more to the more premium than what is coming through the clean-out bags? I just wanted to hear your thoughts there.

Speaker #4: Is it fair then to think that this supply funnel is skewing more to that the more premium? And then what is coming through the cleanout bags?

Speaker #4: I just want to hear your thoughts there.

Speaker #5: Yeah, Bobby. Yes, the stuff coming through direct listings is definitely more premium. We're still making a lot of progress on premium core marketplace. Bags, as I noted, premium items are up 32%.

James Reinhart: Yeah, Bobby. Yes. The stuff coming through Direct Listings is definitely more premium. We're still making a lot of progress on premium core marketplace bags. As I noted, premium items is up 32% year over year. We're making a lot of progress in premium kind of across the spectrum. Yes, Direct Listings items are certainly higher priced. And that's by design, right from an average listing price, because we don't accept certain low-price, low-quality brands. We don't allow you to price items below $20. We've put some guardrails in there, Bobby, again, to create conditions for an improving assortment as we continue to grow that part of the business.

Speaker #5: Year over year. So we're making a lot of progress in premium kind of across the spectrum. But yes, direct listings items are certainly higher priced and that's by design, right, from an average listing price because we don't accept certain low-priced low-quality brands.

Speaker #5: We don't allow you to price items below $20, so we've put some guardrails in there, Bobby—again, to create conditions for an improving assortment as we continue to grow that part of the business.

Speaker #6: Awesome. And then just

Bobby Brooks: Awesome. Just curious to hear on the peer-to-peer piece, have you seen the sell-through rates? Is it comparable to what the managed marketplace is seeing? Just any differences there? I would think that maybe the peer-to-peer, they're going to be asking for higher-

Speaker #4: curious to hear as the on the peer-to-peer piece, have you seen the sell-through rates? Is it comparable to what the managed marketplace is seeing?

Speaker #4: Is there any difference there? I would think that maybe in the peer-to-peer space, they're going to be asking for higher prices, kind of maybe asking for more than what it's worth.

James Reinhart: Yeah

Bobby Brooks: kind of maybe asking for more than what it's worth, it's slowing. Hear more there?

Speaker #4: And so it's slowing. Hear more there.

Speaker #5: Yeah. Sell-through is definitely slower in direct listings for but it's sort of consistent across I think other peer-to-peer sites. And yes, sellers tend to overprice items relative to what the market clearing price data should be.

James Reinhart: Yeah. Sell-through is definitely slower in Direct Listings, but it's sort of consistent across, I think, other peer-to-peer sites. Yes, sellers tend to overprice items relative to what the market clearing price data should be. Yes, the sell-through is slower, but I think we're-

Speaker #5: So yes, the sell-through is slower, but I think we're continuing to educate sellers.

Bobby Brooks: Got it.

James Reinhart: continuing to educate sellers. Yeah.

Speaker #6: Got it. And then maybe just wanted to hear, obviously, definitely a dichotomy between kind of the more stressed consumers versus the higher the more affluent consumers that have kind of been gravitating to the site more recently.

Bobby Brooks: Got it. Then maybe just wanted to hear, obviously, definitely a dichotomy between kind of the more stressed consumers versus the more affluent consumers that have kind of been gravitating to the site more recently. Just maybe wanted to hear, is there a different, and obviously you made the point of that older inventory, discounting that to engage those more stressed consumers. Just like on the broader marketing plan, are there any other key distinctions between how you're targeting those two groups, or is it kind of the same strategy throughout both?

Speaker #6: Just maybe wanted to hear, is there a different and obviously you made the point of that older inventory discounting that to engage those more stressed consumers.

Speaker #6: But just on the broader marketing plan, are there any other key distinctions between how you're targeting those two groups? Or is it kind of the same strategy throughout both?

Speaker #5: Yeah, the shift that's been consistent, I think, all year has been away from the Google PMax customer who tends to have a lower acquisition cost.

James Reinhart: Yeah, the shift that's been consistent, I think, all year has been away from the Google PMax customer who tends to have a lower acquisition cost, but definitely a lower LTV. I think the shift has been moving to more Meta, more Pinterest, what's really working there is that those customers have significantly higher LTVs, but we're almost driving the CAC much lower than we would've thought six months ago. So the paybacks are strong in those channels. Customer acquisition continues to be robust. So that's part of what makes us feel really good about this shift to this more premium customer. Again, we need more premium supply to sort of feed that engine. Again, that more premium customer is growing at a much faster rate than our budget shoppers.

Speaker #5: But definitely a lower LTV. And I think the shift has been moving to more meta, more Pinterest. And what's really working there is that those customers have significantly higher LTVs but we're almost driving the caps much lower than we would have thought six months ago.

Speaker #5: And so the paybacks are strong in those channels. Customer acquisition continues to be robust. And so that's part of what makes us feel really good about this shift, to this more premium customer.

Speaker #5: And again, we need more premium supply to sort of feed that engine. And again, that more premium customer is growing at a much faster rate than our budget choppers.

Speaker #5: And so what we're really seeing in June and through this portion of a weaker environment is really just this budget chopper, and so we just have to sort of navigate and transition through that.

James Reinhart: What we're really seeing in June and through this portion of a weaker environment is really just this budget shopper. We just have to sort of navigate and transition through that.

Speaker #4: Thank you.

Bobby Brooks: Thank you.

Speaker #3: Our next question comes from the line of Dana Tulsey with Tulsey Advisory Group. Please go ahead.

Operator: Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead.

Speaker #7: Hi, good afternoon, everyone. In this environment where it seems like the focus is more on a wardrobe update than core replenishment, would the products that you're talking and obviously that lower-income consumer is there a difference between what you're seeing the lower-income consumer spend on and category-wise versus what you're seeing your $100,000-plus income spend on?

Dana Telsey: Hi, good afternoon, everyone. In this environment where it seems like the focus is more on a wardrobe update than core replenishment with the products that you're talking, and obviously that lower income consumer, is there a difference between what you're seeing the lower income consumer spend on and category-wise versus what you're seeing your $100,000-plus income spend on? What does this mean for the RaaS business, getting Steve Madden, Dolce Vita? Those are all-

Dana Telsey: Hi, good afternoon, everyone. In this environment where it seems like the focus is more on a wardrobe update than core replenishment with the products that you're talking, and obviously that lower income consumer, is there a difference between what you're seeing the lower income consumer spend on and category-wise versus what you're seeing your $100,000+ income spend on? What does this mean for the RaaS business, getting Steve Madden, Dolce Vita? Those are all-

Speaker #7: And what does this mean for the RASP business, getting Steve Madden, Dolce Vita, those are all very growthy brands. Is there more there and anything you're seeing by category?

James Reinhart: Yeah

Dana Telsey: very growthy brands. Is there more there and anything you're seeing by category? Thank you.

Speaker #7: Thank you.

Speaker #5: Yeah. Dana, I don't have specific nuanced category data, but I think your instincts are right. It's definitely the customer who's doing better, right, in this K-shaped economy is definitely buying for fun and delight and travel, right?

James Reinhart: Yeah. Dana, I don't have specific nuanced category data, but I think your instincts are right. It's definitely the customer who's doing better, right, in this K-shaped economy, is definitely buying for fun and delight and travel, right? We've seen a lot of that over the summer for holiday vacations and things like that. Whereas your budget shopper, I think part of the discounting approach is to move some of the staples and sort of basics, right, to that budget shopper. But you have to do that at a lower price than you did 12 months ago. It's very clear in the data, Dana, around the behaviors of the group that's doing well and the group that's not. I think we just need to keep inching the assortment and inching the buyer base up.

Speaker #5: We've seen a lot of that over the summer for holiday vacations and things like that. Whereas your budget shopper—and again, I think part of the discounting approach is to move some of the staples and basics, right, to that budget shopper.

Speaker #5: But you have to do that at a lower price than you did 12 months ago. But it's very clear in the data, Dana, around the behaviors of the group that's doing well and the group that's not.

Speaker #5: And so I think we just need to keep inching the assortment and inching the buyer base up. And we've been doing that over the last couple of years, but it's not all the way there.

James Reinhart: We've been doing that over the last couple of years, but it's not all the way there.

Speaker #7: Got it. And on the RASP part, are there other new brands that are coming in? Yeah.

Dana Telsey: Got it. On the RaaS part, are there other new brands that are coming in?

Speaker #5: Oh, sorry. Yeah. On the RASP side, sorry. Yes. We're definitely focused on more elevated brands. I mean, we did something in the spring a big push with Reformation.

James Reinhart: Oh, sorry. Yeah.

Dana Telsey: Yeah.

James Reinhart: Yeah. On the RaaS side, sorry. Yes. We're definitely focused on more elevated brands. We did something in the spring, a big push with Reformation. We're planning to do this with a number of brands in the fall. Yes, our RaaS strategy is really focused on those brands that serve the customer who is doing well, and I think we're definitely having some success there. We're gonna keep doing more of that. RaaS is in a nice rhythm now of adding clients to the roster and getting those clients to be active. I'm feeling quite good about that momentum.

Speaker #5: We're planning to do this with a number of brands in the fall. And yes, our RASP strategy is really focused on those brands that serve the customer who is doing well.

Speaker #5: And I think we're definitely having some success there. So we're going to keep doing more of that. But RASP is in a nice rhythm now of adding clients to the roster and getting those clients to be active.

Speaker #5: So I'm feeling quite good about that momentum.

Speaker #7: Thank you.

Dana Telsey: Thank you.

Speaker #3: And this concludes the question and answer session. I'll hand the call back over to James Reinhart for any closing comments.

Operator: This concludes the question and answer session. I'll hand the call back over to James Reinhart for any closing comments.

Operator: This concludes the question-and-answer session. I'll hand the call back over to James Reinhart for any closing comments.

Speaker #5: Well, thank you all for joining us today. Thank you especially to ThreadUp team for your continued hard work in this operating environment. And look forward to seeing you all on our next call.

James Reinhart: Well, thank you all for joining us today. Thank you especially to the ThredUp team for your continued hard work in this operating environment, look forward to seeing you all on our next call. Thank you.

Speaker #5: Thank you.

Operator: That will conclude today's call. Thank you all for joining. You may now disconnect.

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