ThredUp Inc. Q2 FY2025 earnings call

Macro Environment Impact

• Closure of de minimis loophole likely to cause higher prices for ultrafast fashion goods and reduced production volumes, positively impacting ThredUp.
• Increase in new apparel prices from tariffs enhances ThredUp's value proposition for value-seeking consumers.
• Ad markets dynamic; short-term gains from Shein and Temu pulling back then resuming spending.

AI-Driven Product Experiences

• More than 18 months into AI-led product journey with positive results compounding; sign-up rates up 30% YoY, sign-up to purchase rate up 60%, 18% improvement in visitor to customer conversion.
• Debuted AI-generated images on ~100,000 product pages, positively impacting new secondhand shoppers; social commerce work continues with live feature on iOS app and plan to roll out to more platforms.

Seller Side Improvements

• Set all-time records in requests, receipts, and cleanout kits processed; premium service kits growing 44% QoQ with new sellers.
• Resell items when returning ThredUp purchases up over 4x QoQ; RaaS with open source model showing promising engagement from over 60 apparel brands.

Competitive Advantages

• Operational infrastructure and supply chain invested over $400M, unique and hard to replicate.
• Technology investments enabling leverage of AI with vast data from processed clothing items.
• Marketplace flywheels delighting buyers and sellers, expanding addressable opportunity.

No specific product segment financial performance breakdown provided in the transcript.

Q3 2025

• Revenue: $76M - $78M (25% YoY midpoint)
• Gross margin: 77% - 79%
• Adjusted EBITDA: ~4.5% of revenue

Q4 2025

• Revenue: $73M - $75M (10% YoY midpoint)
• Gross margin: 77% - 79%
• Adjusted EBITDA: ~3% of revenue

Full Year 2025

• Revenue: $298M - $302M (15% YoY midpoint)
• Gross margin: 78% - 79%
• Adjusted EBITDA: ~4.2% of revenue, incorporating Q2 beat and raised outlook.

• Macro uncertainties: Impact of tariffs, ad market dynamics, consumer environment uncertainties.
• Execution risks: Challenges in scaling RaaS partnerships, managing seasonal slowdowns, maintaining LTV to CAC ratio.

Q: James, what drove Q2 revenue outperformance and new buyers?

A: I think rank ordering is difficult. We've got this flywheel working of improved product experience, new buyer acquisition is strong driven by product, combined with strong operations processing and high-quality supply. When those things get better, we can deploy more dollars into the growth flywheel.

Q: Dylan on gross margin and cost timing?

A: Premium supply drove ASPs, but new buyer growth had some offset. Timing of costs impacted Q2 EBITDA beat as we were unable to hire fast enough in processing operations, but we're spending on marketing and inbound processing earlier in Q3.

Q: Dana on new buyer demographics and RaaS?

A: New buyers are similar to prior customers. RaaS strategy is resonating with brands, but it takes time to ink deals as some brands are in contracts with others or navigating tariff news.

Q: Bobby on marketing spend and RaaS impact?

A: We target ~15-20% of revenue on marketing. RaaS strategy is in early stages, with positive brand engagement from over 60 brands but will take time to have material impact.

Q: Bernie on new buyer growth and RaaS bottlenecks?

A: Marketing has dynamic with ad rate changes. RaaS partnerships take time, but we're optimistic for year-end momentum despite macro uncertainties.

Q: Oliver on AI challenges and new buyer growth?

A: Hardest part of AI is nailing product recommendations with large catalog. New buyer growth from large addressable market, CACs improved by conversion rate from AI-driven product experience improvements.