ThredUp Inc. Q4 FY2024 earnings call

• Growth drivers: Customer acquisition and retention strategy with new customer volume up 32% YoY in Q4 and strong Q1 outlook; sourcing/processing with fresh listings up 9% Q-to-date YoY and premium selling service live to 100% of sellers, with premium items making up over 10% of new listings; generative AI investments including AI search with 85% higher conversion rates for sessions using image search, visual category pivoting, style chat, and 360-degree photos increasing sell-through rates.
• Consumer environment: Tariffs and inflation impacting consumer spending on apparel, with 51% of consumers saying inflation affects apparel spending, 62% concerned about tariffs making apparel more expensive, and 59% likely to seek secondhand options if tariffs raise prices.
• Competitive advantages: Reverse logistics supply chain creating supply advantage, world-class infrastructure/technology to process apparel at scale, and data-driven managed marketplace leveraging data for better capabilities.

For the fourth quarter of 2024, revenue totaled $67.3 million, a 9.5% year-over-year increase. Active buyers reached 1.3 million, a 6% year-over-year decline. Orders grew 2% year over year. Gross margin was 80.4%, a 290 basis point increase from the prior year. Adjusted EBITDA was $5 million, or 7.4% of revenue, doubling from the previous year with a 330 basis point margin improvement.

• Q1 2025: Revenue expected to be in the range of $67.5 million to $69.5 million (6% YoY growth at midpoint), gross margin 77%-79% of revenue, adjusted EBITDA 2.5%-3.5% of revenue, basic weighted average shares outstanding ~117 million.
• Full year 2025: Revenue expected in the range of $270 million to $280 million (6% YoY growth at midpoint), gross margin ~77%-79% of revenue, adjusted EBITDA flat to 2024's 3.3%, aim for positive free cash flow, plan to moderate share dilution with over 40% reduction in stock-based compensation in 2025.

• Risks include inflation, increased interest rates, changing consumer habits, general global economic uncertainty, ability to effectively deploy AI technologies, and effects of tariffs on consumer demand and pricing dynamics.

Q: Ike Boruchow asked about revenue, gross margin, EBITDA pacing and if there's anything concerning in Q4 momentum.

A: Sean Sobers said revenue growth accelerates from Q1 to Q2 to Q3 and slows in Q4; gross margin rate consistent by quarter; EBITDA rate similar in Q2 to Q1, expands in Q3, then slows in Q4. James Reinhart added Q4 was strong due to post-election, momentum continues into Q1 but some consumer uncertainty.

Q: Dylan Carden asked about marketing spend, stock-based comp, and capacity utilization.

A: James Reinhart said capacity utilization is good with plenty of capacity in DCs; stock-based comp to be reduced by over 40% in 2025; marketing spend ~19% of revenue quarterly due to better LTV to CAC ratios. Sean Sobers added SBC for 2025 is ~$14.5 million.

Q: Bernie McTernan asked about image search and conversion.

A: James Reinhart said image search drives higher conversion as it provides more relevant results by using visual ways women shop, with customers increasingly using it over text search.

Q: Kunal Madukar asked about tariffs affecting CPC and pricing algorithm flexibility.

A: James Reinhart said tariffs could be a tailwind on CPC as advertising rates may change, and pricing algorithm is dynamic, adjusting prices based on market and demand curve.