ThredUp Inc. Q3 FY2025 earnings call

Consumer Perspective: Cautious on broader American consumer, believes price and value crucial this holiday season, but sees potential benefit to secondhand market from enhanced value of comparative offerings.

AI-Driven Product Experiences: Launched fully rebranded experience 'Fashion, Meet Forever'; introduced Daily Edit (personalized feed of 100 items refreshed daily powered by in-house AI models) and Trend Report (uses AI to combine trends for real-time style feeds); these innovations aim to tap into customers' emotional side and improve shopping experience.

Supply Chain and New Business: Invested in supply chain infrastructure and data; RaaS business now powers resale for dozens of brands, with launches for New York & Co. and Cotopaxi; Premium Kit launched earlier this year and now over 20% of supply; launching direct selling on ThredUp with focus on casual sellers, independent verification, no listing fees, and seamless choice between direct selling and Clean Out Kit for sellers; for buyers, addressing returns, trust, and merchandising/curation issues using supply chain investments and AI.

For the third quarter of 2025, revenue totaled $82.2 million, an increase of 33.6% year-over-year. Gross margin was 79.4%, a 10 basis point increase versus the same quarter last year. Adjusted EBITDA was $3.8 million or 4.6% of revenue for the third quarter of 2025. The business saw new buyer acquisition up 54% year-over-year, active buyers up 26% year-over-year, and orders up 37% year-over-year. The premium supply offering contributed to higher average selling prices, driving gross margin outperformance. The business generated $2.4 million of free cash flow for the quarter and $3.4 million year-to-date, with CapEx in Q3 at $3.7 million and expected to be around $10 million for the year.

Q4 Guidance: Now expects revenue in the range of $76 million to $78 million, representing 14% year-over-year growth at the midpoint; gross margin in the range of 78% to 79%; adjusted EBITDA of approximately 3% of revenue. ### Full Year 2025: Now expects revenue in the range of $307 million to $309 million, reflecting 18% year-over-year growth at the midpoint; gross margin range raised to 79% to 79.2%; adjusted EBITDA of approximately 4.2% of revenue. ### 2026: Planning for low double-digit revenue growth in line with U.S. online resale industry growth expectations; EBITDA margins expected to expand slightly better than in 2025; direct selling to be rolled out methodically throughout 2026 but not included in current forecast.

Consumer Spending: Concern over potential reduction in overall holiday spending or wallet share shift to new gifts which could impact the secondhand market. ### Market Competition: Intense competition in the resale market which could affect market share and growth. ### Tariffs: Impact of tariffs and closure of de minimis loophole, although initially seen as a boost to acquiring new customers, there could be ongoing uncertainties.

Q: Bobby Brooks from Northland Capital Markets asked about buyer growth mix and marketing approach.

A: James Reinhart said about 1/3 of new buyers are resurrected lapsed customers; marketing focus is on driving new buyer growth and capturing lapsed buyers with rebrand.

Q: Dylan Carden from William Blair asked about peer-to-peer product listing and synergies.

A: James Reinhart said consumers can browse peer-to-peer and consignment together or separately; synergies include consolidating sellers' needs, greater buyer selection, and leveraging supply chain and logistics network.

Q: Dana Telsey from Telsey Group asked about premium selling kits, AI investments, new buyer growth, and marketing spend.

A: James Reinhart said premium selling kits have grown to over 20% and have room to run; AI investments have positively impacted conversion; new buyer growth demos consistent; marketing spend in 2026 will be higher in dollars but percentage basis similar to 2025.

Q: Matt Koranda from ROTH asked about Q3 sales acceleration drivers and Q4 growth.

A: Sean Sobers said Q4 guidance is based on what's seen to date; James Reinhart said October strong but November/December softer due to wallet share shift; Q3 drivers include tools, buyers, and macro factors of consumers seeking value.

Q: Oliver Chen from TD Cowen asked about revenue beat drivers, peer-to-peer comparison, GenAI role, and CapEx.

A: James Reinhart said existing buyers still drive most revenue; peer-to-peer has opportunity to build superior experience; GenAI plays role in direct selling tooling; Sean Sobers said CapEx expected to be $10 million in 2026 and more in 2027 with Dallas DC filling.