ThredUp Q1 2025 Earnings Report

ThredUp EPS Results

• Actual EPS: -$0.04
• Consensus EPS: -$0.07
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

ThredUp Revenue Results

• Actual Revenue: $71.29 million
• Expected Revenue: $67.54 million
• Beat/Miss: Beat by +$3.75 million
• YoY Revenue Growth: N/A

ThredUp Announcement Details

• Quarter: Q1 2025
• Date: 5/5/2025
• Time: After Market Closes
• Conference Call Date: Monday, May 5, 2025
• Conference Call Time: 4:30PM ET

ThredUp (NASDAQ:TDUP), together with its subsidiaries, operates an online resale platform in the United States and internationally. Its platform enables consumers to buy and sell primarily secondhand apparel, shoes, and accessories. ThredUp Inc. was incorporated in 2009 and is headquartered in Oakland, California.

ThredUp Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1, revenue grew 10.5% year-over-year to $71.3 million, adjusted EBITDA reached 5.3%, cash generation was $2.6 million, active buyers increased 5.7% TTM, and new buyers surged 95%, with April marking the strongest new customer acquisition month ever.
• For Q2, ThreadUp now expects revenue of $72.5 to $74.5 million and for fiscal 2025 revenue of $281 to 291 million (≈10% growth), while maintaining an adjusted EBITDA margin of around 4%.
• The company believes recent tariff announcements, closure of the de minimis loophole and reduced advertising spend by major fast-fashion players could act as tailwinds by driving up new apparel prices and lowering customer acquisition costs.
• New AI-driven search and discovery features—such as “shop similar” (with 64% higher conversion), personalized sort, advanced brand discovery and beta “shop social”—are enhancing customer engagement across a 4 million+ item catalog.
• ThreadUp is evolving its Resell as a Service offering by open-sourcing its front-end technology and logistics to launch free branded resale shops, lower usage-based fees with optional cleaning/repair, and integrated marketing support, targeting a “universal ecommerce layer” for circular retail.

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the ThredUP First Quarter twenty twenty five Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Monday, May fifth of twenty twenty five. I would now like to turn the conference over to Lauren Fresh.

[Operator]

Please go ahead.

[Lauren Frasch, Senior Director, IR & Strategic Finance at ThredUp]

Good afternoon, everyone, and thank you for joining us on today's conference call to discuss ThreadUp's first quarter twenty twenty five financial results. With me are James Reinhart, ThreadUP's CEO and Co Founder and Sean Silberts, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.threadup.com. This call is being webcast on our IR website and 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.

[Lauren Frasch, Senior Director, IR & Strategic Finance at ThredUp]

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 ks and 10 Q for more information on these expectations, assumptions and related risk factors. We undertake no obligation to update any forward looking statements. During this call, we will present both GAAP and non GAAP financial measures.

[Lauren Frasch, Senior Director, IR & Strategic Finance at ThredUp]

A reconciliation of non GAAP to GAAP measures is included in today's earnings press release and the supplemental financial information, which are distributed and available to the public through our Investor Relations website located at ir.swedip.com. Now I'd like to turn the call over to James. James?

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Good afternoon, everyone. I'm James Reinhart, CEO and Co Founder of ThreadUP. Thank you for joining our first quarter twenty twenty five earnings call. We are pleased to share ThreadUP's financial results for Q1 and update our expectations for Q2 and fiscal year twenty twenty five. I will provide a high level summary of our improving financial profile, but spend the majority of my time commenting on the macro environment and our approach to navigating this unique time for drug.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

I will discuss key ongoing innovation in our AI driven product experience and update you on our evolving RAS strategy. I will then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our first quarter twenty twenty five financials in more detail and provide our outlook for the second quarter and full year 2025. As always, we'll close out today's call with a question and answer session. First to the results. We've continued to make meaningful progress reaccelerating growth in our U.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

S. Marketplace after our exit from Europe. Top line growth accelerated to double digits at 10.5% at the same time that we achieved adjusted EBITDA of 5.3% and generated cash of $2,600,000 Active buyer growth turned positive on a trailing twelve month basis and was up 5.7% year over year. But most importantly, new buyers acquired in the quarter were up 95% from Q1 twenty twenty five over Q1 twenty twenty four. This positive acquisition trend has continued early in Q2 with April being the strongest new customer acquisition month in our history.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Our approach in 2025 is simple, maintain our gross margin and bottom line efficiency and reinvest incremental dollars we generate back into growing new buyers and sellers in our marketplace. We believe this creates the greatest long term shareholder value. Turning to the macro, our financial results in Q1 exceeded our expectations and we believe this had very little to do with the macro environment. Given the announcements of successive rounds of tariffs and the closure of the de minimis loophole only were made public on April 2 and were to go into effect on May 2 or later, it is hard to observe any directly correlated impact. If our customer base remains resilient, while tariffs drive increases in new apparel prices, these changes could add incremental benefit to our current business trajectory for the following three reasons.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

First, by far the most impactful to ThreadUP is the closure of the de minimis loophole. This is a policy change we have been advocating for over the course of the past few years. While we expect tariff induced disruptions to global trade to normalize over time, we do not anticipate a broad rollback of the de minimis loophole closure. Duty free ultrafast fashion that has flooded The U. S.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Market over the past few years undoubtedly put some pressure on our price competitiveness. We believe the closure of the de minimis exemption is likely to cause higher prices for these goods and to reduce production volumes, both of which could be a positive for ThredUP. Second, the increase in the price of apparel that could result from broad based tariffs in key overseas manufacturing hubs could be a tailwind. If the price of new clothing goes up because of these tariffs, we believe this enhances the comparative value proposition for consumers who shop for used clothing on thredUP.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Third, large ad buyers on Meta and Google, like Shein and Tmall, have announced a reduction

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

in their advertising spend, and this should reduce the escalation we have seen in advertising costs. In some cases, we might see customer acquisition advertising costs come down. This is what we've seen in April, though we anticipate markets to efficiently reprice over time. Finally, on the macro piece, I would reiterate that our business was accelerating before the trade disruptions were introduced in early April. And while we can't predict the future, we want to underscore our fundamentally improving growth and profit profile, tariff and de minimis closure aside.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Now turning to the product experience. Across the product experience with our inventory of 4,000,000 plus items to change every day, we have continued to augment the customer experience with an AI first mentality. Improving our core search and discovery infrastructure is key to building out the next set of customer facing product features that makes thrifting more joyful. Let me give you a few examples of enhancements we've launched in just the past sixty days. First, customers can now effortlessly pivot from items they love to similar styles, shop from any inspiration source, and put together outfits on any conceivable theme.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Our expanded discovery tools mean customers rarely, quote, miss their chance to purchase a coveted style. When items are sold or held in someone else's cart, a new powerful visual search is just one touch away for items that are just like that item or even better. Sessions where a customer uses our updated shop similar feature have a 64% higher conversion rate as it helps customers discover even more of what they already love. Next, we're developing fully personalized pathways for product discovery. ThreatApp has benefited from having a personalized item sort for many years, but our recently upgraded personalized sort is created by incorporating data from every user interaction into unique information rich customer profiles that we then match against our deep catalog to find the most relevant styles.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Each day, we're serving up many hundreds of thousands of personalized product listing pages powered by our in house recommendation engine. In addition, updated tooling that launched last month is making discovering brands far, far better. It leverages our massive database of customer interactions to define relationships between the more than 60,000 brands that exist on ThredUP. This technology gives customers easy ways to shop groups of brands that have the same style as the ones they already love. Across all the AI powered discovery initiatives that we've developed over the last year and a half, including visual search, style chat, image search, shop similar and more, we see encouraging signs that we are reshaping browse behaviors.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Instead of doubling down on well established and utilitarian ecommerce shopping patterns, we're creating new product discovery paths and augmenting existing ones to help make thrifting our vast catalog feel like shopping at your own personal boutique. And finally, beyond optimizing the core product experience, we're launching new ways for customers to shop their favorite styles and trends. In early April, we launched an AI powered shopping experience for customers to link their social media inspiration from Instagram and elsewhere and receive curated aesthetics, styles, and brands to shop on ThredUP. The shop social feature is currently in beta in the ThredUP iOS app,

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

and

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

we're seeing strong early signals, including nearly four times higher conversion than non AI searches. Now turning to the seller side of our marketplace. We are making substantial investments across the seller experience with our ambition to make Thread up the default place to sell secondhand clothing online, expanding our TAM and at the same time our sustainability impact. Our strategy involves expanding the number of ways customers can sell and the frequency with which they want to sell on ThredUp. For premium sellers, we are continuing to refine their dashboards and seller tools to make it easy for those with premium items to feel confident selling on Drive Up.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Premium continues to grow as a mix of items processed, and contribution margins from premium items sold are 60% higher than regular items sold. Our previous selling experience was designed for episodic clean out kit selling alongside regular buying patterns. We are now innovating to let buying and selling follow a more rhythmic in out pattern that we think fits with how the modern consumer thinks about circularity, buy a few items, sell a few items, repeat. Last quarter, we launched the ability for customers to sell items alongside any returns that we're making on product, leveraging not just the shipping, but importantly, the psychology of getting rid of things to make room for new things. Already 8% of returns now include items for resale, and on average, customers are including nine items in those returns.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

And finally, let me turn to resell as a service or RAS. I wanted to share a more detailed update on our RAS strategy. Over the past year, we've seen the market evolve in ways we think are counterproductive to building scalable circularity business models. A lot of what's being counted as resale is overstock and customer returns masquerading as secondhand product. This is largely because brands have been unable to scale their take back and circularity programs and are left with no choice but to fill their shops with other branded product.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

In reality, they are paying software, management and consulting fees for programs that are doing very little to build native circularity into their strategies. In short, we think branded resale is being held back by the lack of sophisticated technology and operations. So we've decided to begin open sourcing our front end technology and back end logistics chain to encourage brands to make a bigger impact. We believe value for this ecosystem is created in the operations and technology layer to ingest secondhand items at scale and make them available for resale as efficiently as possible. This has never been more relevant than it is today as brands navigate global supply chain disruptions.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

We're excited to pioneer the next generation of branded resale, pairing free branded resale shops with clean out programs that significantly reduce barriers to entry for brands and retailers. We expect that these shops will not just help brands expand inventory listings, they will also be more reflective of the brand's aesthetics with catalog data and imagery, enhanced customization, optional cleaning and repair, and our built in ever improving AI search and discovery technology. Alongside these free resale shops, we are also lowering our usage based fees on our cleanup programs to support brand loyalty and allow brands to grow their second hand inventory, ensuring a consistent supply of quality items for sale. We also plan to provide broader marketing support, including new modules on thredUP.com to promote branded customer acquisition and retention. We believe branded resale scales better when it's designed with a simplified performance based model that aligns revenue sharing and usage based fees with brand success.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Over the long term, as branded resale becomes more prevalent in the industry, we believe the ecosystem will benefit from a powerful, affordable, quote, universal ecommerce layer, akin to what Amazon Web Services has done for cloud services or Shopify has done for small businesses. This can enable any brand to do everything they need across the resell ecosystem. We remain more ambitious than ever as we begin the next chapter of RAF. With that, I'll turn it over to Sean to talk through the financials in more detail.

[Sean Sobers, CFO at ThredUp]

Thanks, James. I'll begin with an overview of our results and follow-up with guidance for the second quarter and full year of 2025. All reported results are from continuing operations unless otherwise noted. I will discuss non GAAP results throughout my remarks. Our GAAP financials and a reconciliation between our GAAP and non GAAP measures are found in our earnings release, supplemental financials and our 10 Q filing.

[Sean Sobers, CFO at ThredUp]

We are extremely proud of our Q1 results. For the first quarter of twenty twenty five, revenue totaled $71,300,000 an increase of 10.5% year over year. Our outperformance was driven by the significant investment into marketing and inbound processing we made in order to drive our marketplace flywheel. These investments resulted in our strongest quarter for new buyer acquisition in the company's history, with new buyers up 95% year over year. This performance inflected our total active buyers to growth for the first time in over a year.

[Sean Sobers, CFO at ThredUp]

We finished the quarter with 1,400,000 active buyers for the trailing twelve months, up 5.7% over last year, while orders were up 16.1% over last year to 1,400,000. For the first quarter of twenty twenty five, gross margin was 79.1%, a 100 basis point decrease versus the same quarter last year as a result of the strength of our new buyer growth as new buyers require higher incentives to convert on their first purchase. We called out this dynamic on our last earnings call and continue to expect acquisitions to impact gross margins throughout the year as we plan for robust new customer growth. Adjusted EBITDA was $3,800,000 or 5.3% of revenue for the first quarter of twenty twenty five. We doubled our adjusted EBITDA dollars versus last year, representing a two forty basis point margin improvement as we leveraged our multiyear investments and benefited from our revenue outperformance.

[Sean Sobers, CFO at ThredUp]

As our momentum accelerated through March, we were unable to spend marketing and processing fast enough, driving our EBITDA beat. The strength of the beat illustrates how our marketplace model generates powerful margin flow through on incremental revenue. Turning to the balance sheet. We began the first quarter with $52,800,000 in cash and securities and ended the quarter with $55,400,000 generating $2,600,000 in cash. Free cash flow for the quarter was $3,900,000 a record level of quarterly free cash flow, driven by $5,700,000 in cash flow from operations.

[Sean Sobers, CFO at ThredUp]

We spent 1,800,000 on CapEx in Q1 and continue to expect maintenance CapEx levels of approximately $8,000,000 in 2025. Now I'd like to provide a bit of context for our updated guidance. We delivered a significant revenue beat in the first quarter and we are flowing that through the full year revenue outlook. Though we remain cautious given the current volatile and uncertain consumer environment, we are pleased to be raising our top line expectations for the balance of the year to align with the positive trends we are currently seeing in the business. We also delivered a strong beat on Q1 adjusted EBITDA, which we are flowing through to our raised full year guide.

[Sean Sobers, CFO at ThredUp]

However, we are maintaining our profitability expectations for the remainder of the year as we continue to focus on driving growth. As we discussed on our last call and demonstrated in Q1, our priority this year is to accelerate our top line. To do this, we will continue to lean into the key drivers of our marketplace flywheel, growing active buyers through marketing and fresh listings through inbound processing. With contribution margins in the low 40% range and the current ad market becoming less competitive, we see even more opportunity to continue to invest ad dollars that uphold our long held twelve month payback period. As we spend more on marketing and drive new buyers to the site, we are simultaneously investing in inbound processing to bring in a broad selection of fresh, high value items to delight and convert our buyers.

[Sean Sobers, CFO at ThredUp]

With all this in mind, in the second quarter, we expect revenue in the range of 72,500,000.0 to $74,500,000 representing 10% growth at the midpoint gross margin in the range of 77% to 79% adjusted EBITDA of approximately 3.3% of revenue, in line with current expectations and basic weighted average shares outstanding of approximately 119,000,000 shares. For the full year of 2025, we now expect revenue in the range of $281,000,000 to $291,000,000 reflecting 10% growth at the midpoint. This updated view is $11,000,000 above our previous guidance, incorporating our Q1 beat and a raised outlook for the remainder of the year. Gross margin in the range of 77% to 79%, adjusted EBITDA of approximately 4% of revenue, which reflects our Q1 beat while we are holding our assumptions for the remainder of the year to be broadly similar to our previous outlook, and basic weighted average shares outstanding of approximately 122,000,000 shares. In closing, we are extremely proud of our Q1 performance.

[Sean Sobers, CFO at ThredUp]

The momentum we're seeing in the business provides us with increased confidence in our ability to deliver accelerated revenue growth and reach positive annual free cash flow this year. This progress is being fueled by our near term investments in marketing and processing and our multiyear investments in our infrastructure, technology and software, all of which will move us closer to our long term targets. James and I are now ready for your questions. Operator, please open the line.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press 2.

[Operator]

If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Ike Boruchow of Wells Fargo. Your line is already open.

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

Hey. Good afternoon. Congrats, guys. Great performance and a tough tape. So I think I have two questions.

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

Maybe, James, just bigger picture for you to start. I guess just to ask what's really driving in your opinion, what do think is driving the buyer and revenue outperformance in a way that maybe you think is sustainable for the rest of the year? And I just really want to understand what you the confidence. I mean, raising revenue is not something we're seeing anywhere in the space right now. So, just kinda what gives you the confidence to to underpin that, in this in this highly uncertain, environment?

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah. Hey, Ike. Yeah. I mean, I think if you go back to our, you know, our our q four earnings, we were really seeing, you know, a new trajectory in the business in q four. And I think on that call, we, were a little cautious around, hey.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Is this momentum gonna continue into q one? And we've just continued to see that momentum in the business, specifically around new buyer acquisition and then the progress we're making on the supply side, you know, continuing the process and operations. And that's really, you know, the two ingredients. And so there's nothing that we look at across the KPIs in the business that suggests that the business isn't continuing, to execute at a very high level. And so, you know, I think that gives us a lot of confidence across our cohorts, across our operations, across the unit economics.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Everything is really fundamentally sound, and I think, you know, we're feeling feeling pretty good about the rest of the year.

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

Got it. And then a quick follow-up for Sean. I think you had given us some puts and takes on the remainder of the year and the flow of the year. I guess I just want to double check that do certain things still apply? Most specifically, are you still expecting Q3 to accelerate from 2Q in revenue?

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

And are you still expecting 3Q to be the high point of the year on EBITDA margin and conversely expecting Q4 to kind of fall back down a bit? Thanks.

[Sean Sobers, CFO at ThredUp]

So I would say yes on the first one, accelerate revenue from Q2 to Q3. I think with the outperformance in EBITDA in Q1, I would expect Q3 to be more in the 4.5 ish kind of range as far as EBITDA, so slightly down from Q1 and then come back down and dip down to match our full year guide of around 4% EBITDA.

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

Got it. Cool. Thanks, guys.

[Sean Sobers, CFO at ThredUp]

Thanks.

[Operator]

Your next question comes from Dana Telsey of Telsey Group. Your line is already open.

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

Hi.

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

Congratulations on that new customer acquisition. Any demographics surrounding who you're getting in terms of new of new customers? What you're where they're from? Any more color around it? And then in terms of the marketing spend, how do you plan to keep this momentum going?

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

And, James, do you feel given the fact that what's happening with the potential for tariffs, the opportunity for marketing and capturing with this the resale opportunity and what you're saying is is how you see the rest of the year progressing and what it could mean for 2026? Thank you.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Sure. Hey, Dana. Yeah. On on the customer side, you know, I think it's it's what what's been really exciting is to see how efficiently we've been able to drive customers into the funnel. You know, CACs have been as good as they've been in in some time, and that's really being driven from just a better product experience.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

And so, you know, we're able to drive sessions efficiently, you know, get people to the site, and then it's really the product, the conversion rate that's really driving a lot of the momentum. And so from a demographics perspective, these are a lot of this, you know, very similar to customers we've had previously. I would say, consistent with over the past few years, we've definitely moved incrementally, you know, upmarket. Dana, where these are slightly more middle to upper income customers, which was a shift we made coming out of the pandemic. So that continues to be true.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

As for marketing spend momentum, you know, I think q one was very strong. We talked about April being the best acquisition month in our history. And so we will continue to spend if the paybacks are attractive. And right now, they are attractive. I think Xi'an and Timu pulling out some of their spend in The US has certainly been a tailwind in the April.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

And we'll see if tariffs kind of flow through the rest of retail. But if the consumer holds up, I could see it being a tailwind for us on the acquisition side. But we'll sort of have to see how those, dynamics unfold. But I think we're feeling good about the growth and efficiency, momentum in the business.

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

Got it. And then category wise, what performed? What did you see that was most in demand? And is anything changing on the pricing side? Thank you.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah. Nothing changing specifically on the pricing side, although the mix of goods, you know, I think as we mentioned with our consignment premium business, the mix of goods is a little bit higher price, but no structural change really on on the pricing side. And then, you know, dresses continue to be our number one, category, you know, large share of the business. And I think as we got through, end of q one and into April, you know, I think we had an incredible assortment. You know, the right the right mix of goods at the right price, combined with all of the search and AI infrastructure, and I think that's a recipe, for success.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

So and I think throughout the the activities that the business is executing, I think that's what's making it work.

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

Thank you.

[Operator]

Your next question comes from Dylan Carden of William Blair. Your line is already open.

[Dylan Carden, Research Analyst at William Blair]

Thank

[Dylan Carden, Research Analyst at William Blair]

you. James, you've spoken before about kind of the philosophy around marketing spend. I guess to check-in, is the idea here, particularly given what you're seeing in this quarter and the outlook to kind of keep it at this high teens level and drive leverage, I guess, across the other parts of SG and A? And to that point, Keith, through some of the leverage that you are seeing now beyond marketing?

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah, Dylan. I mean, that that is the approach. I mean, I think we we you know, as we said in the prepared remarks, we really wanna take the incremental flow through and invest that back, you know, into top line growth given the efficiency. We're seeing tax Tax are good. Paybacks are strong.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

And so, you know, we can put more and more dollars to work, and I think that, you know, high teens, you know, 20% of revenue mix is is probably where we're headed. And, you know, as our contribution margins have improved over the over the past past few quarters, you're just seeing that the more revenue we generate, you know, the the better the business can get at the bottom line. And so we're trying to get that flywheel spinning even faster and then continue to leverage SG and A and everything else below the line. And I think that was the recipe in q one, and we'll we'll do more of that as we move throughout 2025.

[Dylan Carden, Research Analyst at William Blair]

And on the AI initiatives, is there anything underway? Or could you get sharper on pricing and selection through some of these maneuvers?

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah. I mean, I think it's something we you know, we have an incredibly talented, you know, marketplace optimization team, that's looking at pricing and treatment groups every day. So on any given day, we're running, you know, half a dozen different, you know, large scale pricing experiments. And so we're really always trying to optimize, you know, margins to thread up while also delivering incredible value to the buyer and then, you know, value to the seller. So I would say, Dylan, there's a constant optimization there to make the parts of our marketplace work.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

And I think similar to q four, we're having success, you know, processing the volume of goods that we need, acquiring buyers, delighting those buyers, and getting that flywheel turning. And I think that's the plan in Q2.

[Dylan Carden, Research Analyst at William Blair]

Awesome. And then just quickly, just I get why your model is sort of competitively positioned here. But remind me kind of coming out of COVID, the inflation overhang on consumer was kind of an issue, right? There was the kind of back to work or sorry, the work hit initially in COVID and then kind of even coming out of it that inflation overhang. This is an environment where you are seeing inflation spike, how do you kind of work through the puts and takes of that as it relates to your end customer?

[Dylan Carden, Research Analyst at William Blair]

I guess maybe it's higher income or that inflation would be disparate or not evenly spread across? Any thoughts there would be helpful.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah, Dylan. I think it's great pattern match back to what happened in '22 with inflation. I think what's fundamentally different now is back then, remember, we had very large backlogs. We couldn't process the volume of goods that we needed to maintain the growth rate. And I also think our margins and contribution didn't flow through at the same rate, and so we were really struggling to put the growth know, the growth ingredients together.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Whereas I think now we're in a position where, incredible supply coming online, you know, processing power. We don't obviously have any of the health, risk concerns of having people in our distribution centers. And so in a world where you're able to process lots of goods online and the customer's looking for value, I think ThredUP, you know, has that value, in space. And so I think we can really, delight the customer. And then on top of that, if you add that in other areas, you know, big retailers pulling back on marketing spend, you can combine great inventory selection, great value with very efficient customer acquisition dynamics.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

And so I think even in a time when consumers are feeling a little bit more pinched, I think relative to everyone else, I think we'll be very well positioned.

[Dylan Carden, Research Analyst at William Blair]

Excellent. Thank you very much.

[Operator]

Your next question comes from Bernie McTernan of Needham and Company. Your line is already open.

[Bernie Mcternan, Senior Research Analyst at Needham & Company]

Great. Thanks for taking the question. Just wanted to start on revenue and the guidance. James, in the prepared remarks, mentioned really no impact on the consumer, from the macro environment, but certainly hinted at how the current you know, tariff environment could be supportive for for the company and demand trends. Just wanted to double click in terms of, you know, what the what the macro expectations are that are embedded in the guidance for for q two in the in the year.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah. No. I'll talk tariffs, and then I'll let Sean talk about about the guide in particular, Bernie. Yeah. I mean, I I think, you know, the announcement came in early April.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Right? Many of these things were not set to take effect until just a few days ago. I think there's still a lot of volatility around what's, you know, what what's what's gonna be passed through to the customer, which is versus what's gonna be, you know, eaten by by other companies in our in the apparel space. The short answer is I'm not entirely sure how it will all play out, but one thing I can be sure of is that Thrive does doesn't is not specifically directly exposed to tariffs. Right?

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

So our value proposition, which I think is already resonating with customers, At at worst, it's the same as it's been. Right? At best, our value proposition relative to others improves. And so I think that's that's sort of our take for for q two and and for the rest of the year. And then I think the other piece that gets bundled in there, Bernie, is, the de minimis exemption, which, you know, I think functions a little bit differently than than tariffs, but we think, something we've been advocating for some time and I think makes us more competitive when when when the when the playing field is level.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

But I'll turn it over to Sean and talk about what's embedded in the guide.

[Sean Sobers, CFO at ThredUp]

Yeah. Bernie, on the guide, we have no tailwinds related to tariffs, and then we also have no assumption there's a recession or anything like that too. It's kind of based on everything we're seeing in the business all the way through yesterday.

[Bernie Mcternan, Senior Research Analyst at Needham & Company]

Understood.

[Bernie Mcternan, Senior Research Analyst at Needham & Company]

And then just as a follow-up, the press release mentioned that you launched the the soft, Shop Social in April. So it's beta right now. Just when should that go more live and and, you know, how you know, what's the early, you know, for how consumers are engaging with that and expectations for, you know, the kind of demand and and engagement it can drive?

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah, Bernie. I mean, I'm personally super excited by it. I think, you know, there's there's always been a big gap between where customers get their inspiration, you know, on social platforms versus how it really, feels to shop. And I think this is one of the first products out there, you know, that I've seen that really natively pulls them together. And so it's in beta only as we work through, some of the user journeys, making sure that everything is is buttoned up, in the display.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

And so I, you know, I expect it to be out widely to everyone, you know, shortly, and and then really like to do more of a marketing push to to tell customers that we have it. Right? We've been a little bit subdued, in our in our product marketing around it. But the the at least the customers that we're talking to and, the customers we've been sort of on this journey as we built it, I think are very complimentary of the experience. And, so I think it's gonna be great for ThreadUp and great for our customers and should drive, you know, strong conversion and order value.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

So, yeah, I'm I'm quite bullish on it conceptually.

[Bernie Mcternan, Senior Research Analyst at Needham & Company]

Great. Thank you both.

[Operator]

Your next question comes from Kunal Madhukar of Water Tower Research. Your line is already open.

[Kunal Madhukar, Managing Director at Water Tower Research LLC]

Hi. Thank you for taking the questions. I've been hearing great things about the buyer stat. Wanted to explore the seller side of the business and, you know, any any trends that you're seeing on the selling side, especially post the tariffs, given consumer confidence has been, you know, has been eroding. So if you could talk about the seller trends.

[Kunal Madhukar, Managing Director at Water Tower Research LLC]

And then how we go

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah. On the seller side, yeah, we we continue to see good momentum across the selling part of our business. I mean, we we couldn't drive buyer growth, right, without having access, you know, to high quality and growing amounts of supply. And so I think at the core, the engine's working very well. And then I think where we're spending time is optimizing, you know, the various experiences across the seller experience such that it's great opportunity for sellers in this environment.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

So you're seeing growth in our consignment premium offering, which is coming in with much better contribution margins. We talked about being able to sell in your returns, and that was a product that, you know, was launched, you know, just recently and and has gotten really fast adoption. Almost nine percent now of orders, I think, are coming back with some items selling. So I think we're continuing to push new and novel ways for sellers to engage because to to meet our buyer growth targets, you know, when you really need to make sure that sellers are on the platform and so so significant investments there.

[Kunal Madhukar, Managing Director at Water Tower Research LLC]

Great. And then a a quick follow-up on the average revenue per order. We declined about 5%. Now some of that would definitely be because of, discounts that you offer for first time customers. Is there any pricing pressure or are the are the prices in general kind of going up?

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Yeah. That that there's no pricing pressure there. That's just the mix of new buyers versus existing buyers. So new buyers tend to have slightly lower, net revenue per order because of the promotion that they get as new customers. So when you have an explosive growth in new buyers like we experienced in q one, you know, that would drag down the average.

[Kunal Madhukar, Managing Director at Water Tower Research LLC]

Great. Thank you so much.

[Operator]

There are no further questions at this time. I would hand over the call to James Reinhart for closing remarks. Please go ahead.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

Well, thank you all for joining our call today. Thank you for the good questions. Incredibly exciting time for ThredUP right now, and I look forward to sharing some more progress with you in the future. And I wanna end by thanking the ThredUP team. They've working tremendously hard and for living our values every day, especially the ones we have on the secret menu, and for your ambition and commitment to inventing the future of retail.

[James Reinhart, Co-Founder, CEO & Director at ThredUp]

So thanks, everyone. We'll see you next time.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.

Participants

Executives

• Lauren Frasch, Senior Director, IR & Strategic Finance
• James Reinhart, Co-Founder, CEO & Director
• Sean Sobers, CFO

Analysts

• Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo
• Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group
• Dylan Carden, Research Analyst at William Blair
• Bernie Mcternan, Senior Research Analyst at Needham & Company
• Kunal Madhukar, Managing Director at Water Tower Research LLC