ThredUp Inc. (TDUP) Q2 2025 Earnings Call Transcript
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Overview
The earnings call reveals positive growth in active buyers and revenue guidance. AI enhancements and RaaS strategy are promising, though not immediately impactful. Strong performance in key categories and efficient marketing spending further support a positive outlook. However, some uncertainty remains due to lack of specifics in management's responses. Considering the overall positive sentiment and strategic initiatives, the stock is likely to see a positive movement of 2% to 8%.
Key Financial Performance
Revenue Revenue totaled $77.7 million, an increase of 16.4% year-over-year. This growth was driven by significant investments into marketing and inbound processing to drive the marketplace flywheel.
Gross Margin Gross margin was 79.5%, a 70 basis point increase versus the same quarter last year. This improvement was due to higher average selling prices from the rapid growth in premium supply, slightly offset by higher incentives required for new buyers.
Adjusted EBITDA Adjusted EBITDA was $3 million or 3.9% of revenue, doubling from last year and representing a 170 basis point margin improvement. This was due to leveraging multiyear investments and revenue outperformance.
Active Buyers Active buyers were 1.5 million for the trailing 12 months, up 16.5% year-over-year. This growth was attributed to record new buyer acquisition, which was up 74% year-over-year.
Orders Orders were up 20.8% year-over-year to 1.5 million, driven by strong customer growth and engagement.
Cash and Securities Cash and securities increased to $56.2 million from $55.4 million at the beginning of the quarter, generating $800,000 in cash. This was achieved despite $3.3 million spent on CapEx.
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Operating Highlights
AI-driven product experiences: ThredUp has been investing in AI-led product innovations for over 18 months. Features like Visual Search, Style Chat, Image Search, and Shop Similar have improved customer engagement. Sign-up rates increased by 30% year-over-year, and sign-up to purchase rates rose by 60%. AI-generated images on 100,000 product pages showed promising results, especially for new customers.
Social commerce: ThredUp introduced a feature allowing customers to shop their style inspiration from Instagram and other social media platforms. This feature is live on the iOS app and will expand to other platforms later this year.
Resale as a Service (RaaS) strategy: ThredUp transitioned to an open-source model for its RaaS strategy, engaging with over 60 apparel brands. The company aims to create a universal recommerce layer for the resale ecosystem, similar to AWS for cloud services.
Operational infrastructure and supply chain: ThredUp has invested over $400 million in infrastructure, software, and data to scale its managed marketplace. This includes automation for item identification, measurements, and shipping.
Seller experience improvements: Premium service kits with fees up to $34.99 grew by 44% quarter-over-quarter. A new feature allows customers to resell items when returning products, with volume increasing 4x quarter-over-quarter.
AI and data-driven competitive advantage: ThredUp leverages its proprietary resale database and AI technology to improve margins and customer experience. The company believes its decade-long head start and investments make it difficult for competitors to replicate its model.
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Risk or Challenges
Tariff Impact: The closure of the de minimis loophole and potential broad-based tariffs could lead to higher prices for ultrafast fashion goods, which may indirectly benefit ThredUp but also create uncertainties in pricing and production volumes.
Advertising Market Dynamics: Ad markets remain dynamic, with fluctuations in advertising rates due to competitors like Shein and Temu. This could impact ThredUp's marketing efficiency and customer acquisition costs.
Operational Hiring Challenges: Increased demand and operational momentum led to hiring challenges in processing operations, which could strain the company's ability to meet growth demands efficiently.
Consumer Environment Uncertainty: Cautious outlook on the current consumer environment, which could impact revenue growth and customer spending behavior.
Seasonal Resale Slowdown: Expected seasonal slowdown in resale activity around the holidays, which could affect Q4 revenue performance.
New Buyer Incentives: Higher incentives required to convert new buyers, which could pressure margins despite higher average selling prices.
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Guidance & Outlook
Revenue Expectations: For Q3 2025, revenue is expected to range between $76 million and $78 million, representing 25% year-over-year growth at the midpoint. For Q4 2025, revenue is expected to range between $73 million and $75 million, reflecting 10% year-over-year growth at the midpoint. For the full year 2025, revenue is projected to range between $298 million and $302 million, reflecting 15% year-over-year growth at the midpoint.
Gross Margin Projections: Gross margin is expected to range between 77% and 79% for both Q3 and Q4 2025. For the full year 2025, gross margin is projected to be between 78% and 79%.
Adjusted EBITDA: For Q3 2025, adjusted EBITDA is expected to be approximately 4.5% of revenue. For Q4 2025, adjusted EBITDA is projected to be approximately 3% of revenue. For the full year 2025, adjusted EBITDA is expected to be approximately 4.2% of revenue.
Capital Expenditures: Maintenance CapEx levels are expected to be approximately $8 million for the full year 2025.
Market Trends and Consumer Behavior: The closure of the de minimis loophole and potential broad-based tariffs are expected to increase the price of new apparel, enhancing the value proposition for ThredUp's secondhand offerings. Dynamic ad markets are also influencing marketing efficiency.
AI and Technology Investments: ThredUp plans to continue investing in AI-driven product experiences, including AI-generated images and social commerce features, to improve customer engagement and conversion rates. These investments are expected to drive long-term growth and operational efficiency.
Resale as a Service (RaaS) Strategy: ThredUp is transitioning to an open-source model for its RaaS strategy, engaging with over 60 apparel brands. This strategy aims to create a universal recommerce layer for the resale ecosystem, with more updates expected in the coming quarters.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What drove the Q2 revenue outperformance and new buyer growth?
A:James Reinhart attributed the Q2 revenue outperformance to a combination of improved product experience, strong new buyer acquisition driven by product, efficient operations processing, and high-quality supply. He described it as a 'trifecta' of great supply, product experience, and efficient acquisition, which allowed for more investment into the growth flywheel.
Q:Is the business sequentially building every month?
A:Yes, James Reinhart confirmed that the momentum from new buyers acquired starting in Q4 of last year continued into Q1, Q2, and the first month of Q3. He noted that this acceleration, combined with strong engagement and retention rates, is compounding and reflected in Q3 and Q4 numbers.
Q:Why does the revenue guidance drop to 10% in Q4?
A:James Reinhart explained that Q4 typically experiences a seasonal downshift in resale, which has been consistent for over a decade. Additionally, marketing rates tend to increase in Q4, leading the company to pull back on investments to maintain their CAC-LTV strategy. He also cited macroeconomic uncertainties, such as weak job and housing markets, as reasons for a conservative approach.
Q:How was the company able to achieve record gross margins despite new customer growth?
A:Sean Sobers attributed the record gross margins in Q2 to the growth of premium supply, which drove ASPs. He noted that while gross margins might tick down slightly in the second half of the year due to investments in customer experience (e.g., pick, pack, and ship), the focus remains on converting new customers into repeat buyers.
Q:How is the company managing supply and processing times?
A:James Reinhart stated that the company continues to see record requests and receipts processed on the supply side. They are focused on innovating the supply chain to make ThredUp the default place to sell online, catering to both premium sellers and non-financially motivated cleanouts.
Q:What are the demographics of new buyers, and are they different from the core customer base?
A:James Reinhart noted that the demographics of new buyers are not materially different from the core customer base. He emphasized that the addressable market for female secondhand shoppers in the U.S. is large, and the company is aggressively growing its share in this market.
Q:What are the category trends from Q1 to Q2?
A:James Reinhart highlighted the continued strong performance of dresses, which saw significant growth from spring into summer. He sees further opportunities to take market share in this category.
Q:What is the cadence of marketing spend, and how does it vary by quarter?
A:James Reinhart stated that marketing spend is generally in the high teens to 20% of revenue, except for a seasonal downshift in Q4 when ad rates become more competitive. The company focuses on maintaining an LTV to CAC ratio under 1, ensuring payback within a year.
Q:What is the status of the RaaS (Resale as a Service) open-source model?
A:James Reinhart mentioned that the new RaaS strategy is resonating with over 60 apparel brands. The focus is on positioning ThredUp as a scalable partner for take-back programs and secondhand assortments. While it will take time to finalize deals, the company expects momentum by year-end, with material impact anticipated in 2026.
Q:What is driving the 3Q EBITDA guide of 4.5% and the 4Q guide of 3%?
A:Sean Sobers explained that the full-year guide accounts for Q1 and Q2 beats, leading to a 4.2% full-year EBITDA margin. James Reinhart added that the company is balancing growth with modest EBITDA expansion to demonstrate free cash flow generation and strong margin control.
Q:What are the supply dynamics and the makeup of different payout bands?
A:James Reinhart did not disclose specific data on payout bands but noted that the growth in premium supply, which tends to have higher payout amounts, is driving buyer acquisition and overall marketplace health.
Q:What are the trends in buyer and seller dynamics?
A:James Reinhart explained that the company is acquiring many new buyers and sellers, with significant crossover between the two groups. This dynamic is contributing to a healthy network effect for the marketplace.
Q:How did competition for new buyers impact growth in Q2, and what is expected for the rest of the year?
A:James Reinhart noted that competition from players like Temu and Shein fluctuated during Q2, with some pullback in April and a return in mid-May. Despite this, the company maintained strong momentum into July and expects similar trends for the rest of the year.
Q:What are the bottlenecks for RaaS brand partnerships, and when will they be material?
A:James Reinhart identified existing contracts, tariff news, and other dynamics as bottlenecks for RaaS partnerships. While some brands could have an immediate impact, he does not expect material contributions until 2026.
Q:What are the hardest parts of the AI journey, and how does it impact the financial model?
A:James Reinhart stated that the hardest part of AI implementation is optimizing product recommendations and filtering for a vast and dynamic catalog. AI has significantly improved customer acquisition costs and conversion rates, enhancing the overall shopping experience and driving financial efficiency.
Q:What are the long-term growth prospects for new buyers?
A:James Reinhart emphasized the large addressable market for secondhand shoppers in the U.S. While he does not expect the current high growth rates to persist indefinitely, he believes there is significant room for expansion given the untapped market potential.
Q:What are the key drivers of customer acquisition cost (CAC) changes?
A:James Reinhart highlighted improvements in conversion rates as the primary driver of reduced CACs. These improvements have allowed the company to spend more effectively on customer acquisition, creating a virtuous cycle of growth.
Q:Review of Unclear Management Responses
A:Management appeared to avoid providing specific details on the makeup of different payout bands within the supply dynamics. Additionally, while they discussed the potential of RaaS partnerships, they did not offer concrete timelines or metrics for when these partnerships would become material. Similarly, they did not provide a steady-state growth rate for new buyers or detailed financial impacts of AI implementation, relying instead on general optimism and qualitative descriptions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI model
AI technology
Bernard
CEO Co
Chief Financial
Co Founder
Director
Financial Officer
Investor Relations
LLC Research
Lauren
RaaS
Research Division
SKUs
Search
Telsey
advantage
automation
cleanout kit
closure minimis
deal
ecosystem
efficiency
expectation assumption
feature
fundamental
funnel
layer
mid
order
outcome
resell
seller side
set
success
time
wallet share
TDUP Transcript
ThredUp Inc. (TDUP) Q1 2026 Earnings Call Transcript
Positive5-4
The earnings call highlights a 15% revenue growth and a 2% improvement in gross margin, both of which are positive indicators. Additionally, the company reduced its net loss and improved adjusted EBITDA, suggesting better financial health. Despite the risks associated with forward-looking statements, the overall financial performance and operational improvements are likely to positively influence the stock price in the short term.
ThredUp Inc. (TDUP) Q4 2025 Earnings Call Transcript
Positive3-3
The earnings call reflects positive sentiment with revenue growth, improved margins, and increased active buyers. The RaaS platform expansion and technology investments signal strategic growth. Despite a net loss, improved financial metrics and optimistic guidance for the secondhand market suggest potential stock price gains. The absence of concerning issues in the Q&A further supports a positive outlook.
ThredUp Inc. (TDUP) Q3 2025 Earnings Call Transcript
Positive11-4
The earnings call summary and Q&A reveal positive aspects such as 25% YoY revenue growth, strong gross margins, AI investments, and a strategic RaaS transition. The Q&A highlights confidence in new partnerships and marketing efficiencies. Despite management's reluctance to provide long-term guidance, the optimistic short-term outlook and strategic initiatives suggest a positive stock price movement. The absence of a market cap suggests a moderate response, thus a 'Positive' prediction.
ThredUp Inc. (TDUP) Q2 2025 Earnings Call Transcript
Positive8-4
The earnings call reveals positive growth in active buyers and revenue guidance. AI enhancements and RaaS strategy are promising, though not immediately impactful. Strong performance in key categories and efficient marketing spending further support a positive outlook. However, some uncertainty remains due to lack of specifics in management's responses. Considering the overall positive sentiment and strategic initiatives, the stock is likely to see a positive movement of 2% to 8%.
TDUP Slides
TDUP Report
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