SEC Filing | ThredUp Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

tdup-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to __________

Commission file number: 001-40249

ThredUp Inc.

(Exact name of registrant as specified in its charter)


Delaware			26-4009181
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

969 Broadway, Suite 200
Oakland, CA			94607
(Address of principal executive offices)			(Zip Code)

(415) 402-5202

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.0001 par value per share	TDUP	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 65,594,295 shares of Class A common stock, $0.0001 par value per share, and 34,487,761 shares of Class B common stock, $0.0001 par value per share, outstanding as of August 8, 2022.

TABLE OF CONTENTS


		Page No.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Unaudited Condensed Consolidated Balance Sheets	5
	Unaudited Condensed Consolidated Statements of Operations	6
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	7
	Unaudited Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity	8
	Unaudited Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures

	PART II. FINANCIAL INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
	Signatures	37

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are statements that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our revenue, cost of revenue and operating expenses and our ability to achieve and maintain future profitability;

•the sufficiency of our cash, cash equivalents and capital resources to meet our liquidity needs;

•our ability to effectively manage or sustain our growth and to effectively expand our operations;

•our strategies, plans, objectives and goals, including our expectations regarding future infrastructure investments as well as restructuring activities;

•our ability to attract and retain buyers and sellers and the continued impact of network effects as we scale our platform;

•our ability to continue to generate revenue from new Resale-as-a-Service (“RaaS”) offerings that are our future sources of revenue;

•trends in our key financial and operating metrics;

•our estimated market opportunity;

•economic and industry trends, projected growth or trend analysis, including the effects of foreign currency exchange rate fluctuations, increased inflation and changing consumer habits and general global economic uncertainty;

•our ability to comply with laws and regulations;

•the effect of uncertainties related to the ongoing global COVID-19 pandemic, including as a result of any new strains or variants of the virus and recovery therefrom on United States and global economies, our business, results of operations, financial condition, demand for secondhand and resale items, sales cycles and buyer and seller retention;

•our ability to remediate our material weakness in our internal control over financial reporting;

•our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; and

•the increased expenses associated with being a public company.

You should not rely upon forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 22, 2022 and elsewhere in this Quarterly Report on Form 10-Q, as well as in our other filings with the Securities and Exchange Commission (“SEC”). Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

***

Table of Contents

Unless otherwise indicated or unless the context requires otherwise, all references in this document to “thredUP”, “the Company”, “we”, “us”, “our”, or similar references are to ThredUp Inc. and its consolidated subsidiaries.

thredUP is one of the world’s largest online resale platforms for women’s and kids’ apparel, shoes and accessories, based primarily on items processed, items sold and the capacity of our distribution centers.

The “estimated retail price” of an item is based on the estimated original retail price of a comparable item of the same quality, construction and material offered elsewhere in new condition. Our estimated original retail prices are set by our team of merchants who periodically monitor market prices for the brands and styles that we offer on our marketplace.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THREDUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30,		December 31,
	2022		2021
	(in thousands, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	52,197	$	84,550
Marketable securities	96,326		121,277
Accounts receivable, net	3,368		4,136
Inventory, net	13,941		9,825
Other current assets	11,862		8,625
Total current assets	177,694		228,413
Operating lease right-of-use assets	49,420		39,340
Property and equipment, net	84,045		55,466
Goodwill	11,312		12,238
Intangible assets	11,522		13,854
Other assets	11,905		11,515
Total assets	$	345,898	$	360,826
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,183	$	13,336
Accrued and other current liabilities	48,590		45,253
Seller payable	22,564		19,125
Operating lease liabilities, current	5,014		3,931
Current portion of long-term debt	7,791		7,768
Total current liabilities	100,142		89,413
Operating lease liabilities, non-current	51,497		36,997
Long-term debt, net of current portion	23,705		27,559
Other non-current liabilities	2,625		1,123
Total liabilities	177,969		155,092
Commitments and contingencies (Note 11)
Stockholders’ equity:
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of June 30, 2022 and December 31, 2021; 99,953 and 98,435 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	10		10
Additional paid-in capital	537,760		522,161
Accumulated other comprehensive loss	(5,391)		(1,094)
Accumulated deficit	(364,450)		(315,343)
Total stockholders’ equity	167,929		205,734
Total liabilities and stockholders’ equity	$	345,898	$	360,826

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(in thousands, except per share amounts)
Revenue:
Consignment	$	48,536	$	48,597	$	95,971	$	93,285
Product	27,885		11,362		53,145		22,354
Total revenue	76,421		59,959		149,116		115,639
Cost of revenue:
Consignment	10,218		10,687		20,267		21,519
Product	13,555		5,140		25,973		10,270
Total cost of revenue	23,773		15,827		46,240		31,789
Gross profit	52,648		44,132		102,876		83,850
Operating expenses:
Operations, product and technology	43,961		31,062		83,122		59,374
Marketing	19,640		15,957		36,618		31,403
Sales, general and administrative	17,380		10,999		32,044		21,637
Total operating expenses	80,981		58,018		151,784		112,414
Operating loss	(28,333)		(13,886)		(48,908)		(28,564)
Interest expense	(238)		(573)		(661)		(1,132)
Other income (expense), net	181		93		484		(814)
Loss before provision for income taxes	(28,390)		(14,366)		(49,085)		(30,510)
Provision for income taxes	9		13		22		40
Net loss	$	(28,399)	$	(14,379)	$	(49,107)	$	(30,550)
Net loss per share, basic and diluted	$	(0.29)	$	(0.15)	$	(0.50)	$	(0.54)
Weighted-average shares used in computing net loss per share, basic and diluted	99,331		94,435		98,979		56,777

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(in thousands)
Net loss	$	(28,399)	$	(14,379)	$	(49,107)	$	(30,550)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(2,333)		—		(3,041)		—
Unrealized loss on available-for-sale debt securities	(254)		(36)		(1,256)		(36)
Total comprehensive loss	$	(30,986)	$	(14,415)	$	(53,404)	$	(30,586)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(Unaudited)


	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
	(in thousands)
Balance as of December 31, 2021	—	$	—	98,435	$	10	$	522,161	$	(1,094)	$	(315,343)	$	205,734
Exercise of stock options				334	—		754						754
Stock-based compensation							3,618						3,618
Issuance of common stock to settle restricted stock units				173	—		—						—
Other comprehensive loss									(1,710)				(1,710)
Net loss											(20,708)		(20,708)
Balance as of March 31, 2022	—	—		98,942	10		526,533		(2,804)		(336,051)		187,688
Exercise of stock options				160	—		874						874
Stock-based compensation							10,353						10,353
Issuance of common stock to settle restricted stock units				685	—		—						—
Issuance of common stock from employee stock purchase plan				166	—		—						—
Other comprehensive loss									(2,587)				(2,587)
Net loss											(28,399)		(28,399)
Balance as of June 30, 2022	—	$	—	99,953	$	10	$	537,760	$	(5,391)	$	(364,450)	$	167,929


	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
	(in thousands)
Balance as of December 31, 2020	65,971	$	247,041	12,890	$	1	$	29,989	$	—	$	(252,167)	$	(222,177)
Exercise of stock options				1,458	—		1,875						1,875
Stock-based compensation							3,498						3,498
Conversion of preferred stock warrants to Class B common stock warrants							1,827						1,827
Preferred stock conversion to Class B common stock	(65,971)	(247,041)		65,971	7		247,034						247,041
Sale of Class A common stock upon initial public offering, net of issuance costs				13,800	1		175,533						175,534
Cashless exercise of common stock warrant				25	—		—				—		—
Net loss											(16,171)		(16,171)
Balance as of March 31, 2021	—	—		94,144	9		459,756		—		(268,338)		191,427
Exercise of stock options				525	—		959						959
Stock-based compensation							2,896						2,896
Cashless exercise of common stock warrant				104	—								—
Issuance of common stock to settle restricted stock units				8	—		—						—
Withholding taxes for the net share settlement of restricted stock units				(1)	—		(29)						(29)
Other comprehensive loss									(36)				(36)
Net loss											(14,379)		(14,379)
Balance as of June 30, 2021	—	$	—	94,780	$	9	$	463,582	$	(36)	$	(282,717)	$	180,838

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	June 30,
	2022		2021
	(in thousands)
Cash flows from operating activities:
Net loss	$	(49,107)	$	(30,550)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	6,678		3,899
Stock-based compensation expense	13,581		6,394
Reduction in the carrying amount of right-of-use assets	2,905		2,384
Changes in fair value of convertible preferred stock warrants and others	1,138		1,179
Changes in operating assets and liabilities:
Accounts receivable, net	682		278
Inventory, net	(4,703)		(843)
Other current and non-current assets	(4,799)		(3,364)
Accounts payable	1,954		2,716
Accrued and other current liabilities	749		8,171
Seller payable	3,465		2,985
Operating lease liabilities	2,602		(2,343)
Other non-current liabilities	20		4
Net cash used in operating activities	(24,835)		(9,090)
Cash flows from investing activities:
Purchase of marketable securities	(3,475)		(57,418)
Maturities of marketable securities	26,294		—
Purchase of property and equipment	(27,583)		(8,999)
Net cash used in investing activities	(4,764)		(66,417)
Cash flows from financing activities:
Proceeds from debt issuance	—		4,625
Repayment of debt	(4,000)		—
Proceeds from issuance of Class A common stock, net of underwriting discounts and commissions	—		180,284
Proceeds from stock issued under incentive and purchase plans, net of forfeitures	1,668		2,805
Payment of costs for the initial public offering	—		(3,633)
Net cash provided by (used in) financing activities	(2,332)		184,081
Effect of exchange rate changes on cash and cash equivalents	(521)		—
Net (decrease) increase in cash, cash equivalents and restricted cash	(32,452)		108,574
Cash, cash equivalents and restricted cash:
Beginning of period	91,840		67,539
End of period	$	59,388	$	176,113

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

THREDUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

ThredUp Inc. (“ThredUp” or the “Company”) was formed as a corporation in the State of Delaware in January 2009. ThredUp is a large resale platform that enables consumers to buy and sell primarily secondhand women’s and kid’s apparel, shoes and accessories. The Company has corporate offices in Oakland, California; Scottsdale, Arizona; and Sofia, Bulgaria; distribution centers in Pennsylvania, Georgia, Arizona and Bulgaria; and a processing center in Texas. We have additional distribution centers in Texas and Bulgaria under construction.

2. Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany account balances and transactions have been eliminated upon consolidation. The unaudited condensed consolidated financial statements were prepared in accordance with the United States ("U.S.") Generally Accepted Accounting Principles ("GAAP") for interim financial information and with the instructions to Quarterly Report on Form 10‑Q and Article 10 of Regulation S-X. As permitted under those rules, certain footnotes or other financial information can be condensed or omitted.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and the related disclosures. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the useful lives of property and equipment and intangibles, allowance for sales returns, allowance for bad debts, breakage on loyalty points and rewards and valuation of inventory, stock-based compensation, right-of-use assets, goodwill and acquired intangibles and income taxes.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 2022, and the results of operations and cash flows for the interim periods presented.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 22, 2022.

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated statement of operations to conform to the current period presentation. The Company reclassified interest expense from Interest and other (expense) income, net to a separate line item within the condensed consolidated statements of operations.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. The Company deposits cash at major financial institutions, and at times, such cash may exceed federally insured limits. The credit risk is believed to be minimal due to the financial position of the depository institutions in which those deposits are held. The Company has never experienced any losses on deposits since inception. The Company’s investment policy restricts cash investments to highly liquid, short- to intermediate-term, high-grade fixed income securities, and as a result, the Company believes its cash equivalents and marketable securities represent minimal credit risk.

Table of Contents

Revenue from Loyalty Reward Redemption or Expiration

As of June 30, 2022 and December 31, 2021, the Company had a liability of $3.3 million and $4.0 million, respectively, related to the loyalty program which is included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. The Company recognized $2.5 million and $3.4 million of revenue from loyalty reward redemption or expiration for the three months ended June 30, 2022 and June 30, 2021, respectively, and $5.2 million and $6.7 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Net Loss Per Share

The Company follows the two-class method when computing net loss per share when shares issued meet the definition of participating securities. The rights, including the liquidation and dividend rights and sharing of losses, of the Class A common stock and Class B common stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.

For periods in which the Company reports net losses, diluted net loss per share is the same as basic net loss per share , because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:


	June 30,		December 31,
	2022		2021
	(in thousands)
Cash and cash equivalents	$	52,197	$	84,550
Restricted cash, current	660		560
Restricted cash, non-current	6,531		6,730
Total cash, cash equivalents and restricted cash	$	59,388	$	91,840

Restricted cash, non-current of $6.5 million and $6.7 million is included in the other assets in the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively.

Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value within the Company’s condensed consolidated financial statements on a recurring basis (at least annually). As of June 30, 2022 and December 31, 2021, the carrying amount of accounts receivable, other current assets, other assets, accounts payable, seller payable and accrued and other current liabilities approximated their estimated fair value due to their relatively short maturities. Management believes the terms of its long-term debt reflect current market conditions for an instrument with similar terms and maturity, therefore the carrying value of the Company’s debt approximated its fair value.

Assets and liabilities recorded at fair value on a recurring basis within the Company’s condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 — Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Inputs (other than quoted prices in active markets included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Table of Contents

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, ASU 2020-02, ASU 2020-03 and ASU 2022-02 which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not expect that the adoption of this standard will have a material impact on its condensed consolidated financial statements.

3. Financial Instruments and Fair Value Measurements

The following tables provide information about the Company’s financial instruments that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such values:


	Fair Value as of June 30, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	11,157	$	—	$	—	$	11,157
Commercial paper	—		9,590		—		9,590
Total cash equivalents	11,157		9,590		—		20,747
Marketable securities:
Corporate debt securities	35,725		—		—		35,725
U.S. treasury securities	30,131		—		—		30,131
Commercial paper	—		2,399		—		2,399
U.S. government agency bonds	28,071		—		—		28,071
Total marketable securities	93,927		2,399		—		96,326
Total	$	105,084	$	11,989	$	—	$	117,073


	Fair Value as of December 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market fund	$	41,376	$	—	$	—	$	41,376
Commercial paper	—		12,098		—		12,098
Total cash equivalents	41,376		12,098		—		53,474
Marketable securities:
Corporate debt securities	55,921		—		—		55,921
U.S. treasury securities	37,190		—		—		37,190
U.S. government agency bonds	28,166		—		—		28,166
Total marketable securities	121,277		—		—		121,277
Total	$	162,653	$	12,098	$	—	$	174,751

Table of Contents

The following tables summarize the cost or amortized cost, gross unrealized gains, gross unrealized losses and fair value of the marketable securities as of June 30, 2022 and December 31, 2021:


	June 30, 2022
	Cost or Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(in thousands)
Corporate debt securities	$	36,319	$	—	$	(594)	$	35,725
U.S. treasury securities	30,625		—		(494)		30,131
Commercial paper	2,399		—		—		2,399
U.S. government agency bonds	28,604		1		(534)		28,071
Total	$	97,947	$	1	$	(1,622)	$	96,326


	December 31, 2021
	Cost or Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(in thousands)
Corporate debt securities	$	56,098	$	—	$	(177)	$	55,921
U.S. treasury securities	37,286		—		(96)		37,190
U.S. government agency bonds	28,258		—		(92)		28,166
Total	$	121,642	$	—	$	(365)	$	121,277

As of June 30, 2022 and December 31, 2021, the amortized cost of the Company’s cash equivalents approximated their estimated fair value. As such, there are no unrealized gains or losses related to the Company’s cash equivalents.

For all of the marketable securities, the Company utilizes third-party pricing services to obtain fair value. Third-party pricing methodologies incorporate bond terms and conditions, current performance data, proprietary pricing models, real-time quotes from contributing dealers, trade prices and other market data.

The Company’s money market funds, U.S. treasury securities, corporate debt securities and U.S. government agency bonds were valued using Level 1 inputs because they are valued using quoted market prices.

The Company’s commercial papers were valued using Level 2 inputs because they are valued using quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

There were no transfers between levels during the six months ended June 30, 2022. As of June 30, 2022, of the $96.3 million carrying amount of marketable securities, $78.7 million had a contractual maturity date of less than one year and $17.6 million had a contractual maturity date between one to two years.

4. Property and Equipment, Net

Property and equipment, net consists of the following:


	June 30,		December 31,
	2022		2021
	(in thousands)
Property and equipment	$	110,018	$	76,028
Less: accumulated depreciation and amortization	(25,973)		(20,562)
Property and equipment, net	$	84,045	$	55,466

Depreciation and amortization expense of property and equipment was $2.8 million and $1.9 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $5.4 million and $3.9 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Table of Contents

5. Goodwill and Other Intangible Assets

Goodwill is primarily attributable to the planned growth in the combined business after the acquisition of Remix Global EAD (“Remix”). Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually, absent any interim indicators of impairment. The carrying amount of goodwill was $11.3 million as of June 30, 2022 and $12.2 million as of December 31, 2021. The change is due to foreign currency translation adjustments.

The gross carrying amounts and accumulated amortization of the intangible assets with determinable lives are as follows:


		As of June 30, 2022
	Amortization Period	Gross carrying amount		Accumulated amortization		Carrying amount, net
	(in years)	(in thousands)
Customer relationships	8	$	4,697	$	(428)	$	4,269
Developed technology	3	4,426		(1,075)		3,351
Trademarks	9	4,246		(344)		3,902
Total		$	13,369	$	(1,847)	$	11,522


		As of December 31, 2021
	Amortization Period	Gross carrying amount		Accumulated amortization		Carrying amount, net
	(in years)	(in thousands)
Customer relationships	8	$	5,092	$	(150)	$	4,942
Developed technology	3	4,798		(373)		4,425
Trademarks	9	4,602		(115)		4,487
Total		$	14,492	$	(638)	$	13,854

The changes in the gross carrying amounts are due to foreign currency translation.

Developed technology, customer relationships, and trademarks intangibles amortization is recorded within operations, product and technology, sales general and administrative, and marketing expense lines, respectively, within the consolidated statements of operations. The amortization expense of intangible assets with determinable lives was $0.6 million and zero for the three months ended June 30, 2022 and June 30, 2021, respectively, and $1.3 million and zero for the six months ended June 30, 2022 and June 30, 2021, respectively.

6. Balance Sheet Components

Inventories consist of the following:


	June 30,		December 31,
	2022		2021
	(in thousands)
Finished goods	$	11,939	$	8,247
Raw materials	1,416		908
Work in progress	586		670
Total	$	13,941	$	9,825

Table of Contents

Accrued and other current liabilities consist of the following:


	June 30,		December 31,
	2022		2021
	(in thousands)
Gift card and site credit liabilities	$	15,191	$	13,223
Accrued vendor liabilities	10,580		6,031
Allowance for returns	5,860		6,209
Accrued compensation	5,572		6,438
Deferred revenue	5,277		5,878
Accrued taxes	4,822		5,728
Accrued other	1,288		1,746
Total	$	48,590	$	45,253

7. Lease Agreements

The Company’s operating lease expense was $2.5 million and $1.8 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $4.9 million and $3.9 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Future maturities of operating lease liabilities were as follows as of June 30, 2022:


	Amount
	(in thousands)
2022	$	5,659
2023	9,611
2024	8,667
2025	7,864
2026	7,509
Thereafter	35,927
Total lease payments	75,237
Less: imputed interest	(17,275)
Less: tenant improvement allowance yet to be received	(1,451)
Total lease liabilities	56,511
Less: current lease liabilities	(5,014)
Total non-current lease liabilities	$	51,497

In December 2021, the Company entered into a ten-year agreement to lease a distribution center in Sofia, Bulgaria. The leased property, which contains both logistics and office areas, is divided into three stages of delivery. The base rent and maintenance for the first stage, commenced in March 2022, was approximately €6.1 million, or $6.4 million translated at the June 30, 2022 spot rate, over the life of the lease. The base rent and maintenance for the second stage, commenced in May 2022, was approximately €6.0 million, or $6.3 million translated at the June 30, 2022 spot rate, over the life of the lease. The targeted commencement date for the third stage is June 2023.

In January 2022, the Company entered into a ten-year agreement to lease office space in Sofia, Bulgaria and the leased property was delivered in the second quarter of 2022. The base rent, parking and maintenance was approximately €5.0 million, or $5.2 million, translated at the June 30, 2022 spot rate.

Table of Contents

8. Long-Term Debt

In February 2019, the Company entered into a loan and security agreement (“Term Loan”) with Western Alliance Bank for an aggregate amount of up to $40.0 million to refinance its prior loan and security agreement with Silicon Valley Bank. As of December 31, 2021, the amended interest rate on the Term Loan was the prime rate published in The Wall Street Journal plus a margin of 1.5%, with a floor of 5.50%. The Term Loan was amended five times before December 31, 2021.

As of June 30, 2022, the nominal interest rate was 6.25% and the effective interest rate was 6.65%. As of June 30, 2022 and December 31, 2021, the Company was in compliance with its debt covenants under the Term Loan.

During the six months ended June 30, 2022, the Company repaid a total of $4.0 million on amounts outstanding under the Term Loan. During the six months ended June 30, 2021, the Company did not make any repayments on amounts outstanding under the Term Loan. As of June 30, 2022 and December 31, 2021, the amount outstanding under the Term Loan was $32.0 million and $36.0 million, respectively.

During the three months ended June 30, 2022 and June 30, 2021, the Company recognized $0.2 million and $0.6 million, respectively, of interest expense relating to the Term Loan. During the six months ended June 30, 2022 and June 30, 2021, the Company recognized $0.7 million and $1.1 million, respectively, of interest expense relating to the Term Loan.

As of June 30, 2022, future annual scheduled principal payments of the Term Loan were as follows:


	Amount
	(in thousands)
2022	$	4,000
2023	8,000
2024	20,000
Thereafter	—
Total future principal	32,000
Less: unamortized debt discount	(504)
Less: current portion of long-term debt	(7,791)
Non-current portion of long-term debt	$	23,705

On July 14, 2022, the Term Loan was amended. Refer to Note 14, Subsequent Events, for additional information.

9. Common Stock

Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common stock.

The table below summarizes the Class A common stock and Class B common stock issued and outstanding as of June 30, 2022.


	As of June 30, 2022
	Authorized	Issued and Outstanding
	(in thousands)
Class A common stock	1,000,000	65,465
Class B common stock	120,000	34,488
Total common stock	1,120,000	99,953

10. Stock-Based Compensation Plans

The Company's stock-based compensation plans are described in more detail in Note 11, Stock-Based Compensation Plans, to the consolidated financial statements in the 2021 Form 10-K.

Table of Contents

2021 Stock Option and Incentive Plan

In February 2021, in connection with the Initial Public Offering (“IPO”), the Company’s board of directors adopted the 2021 Stock Option and Incentive Plan (“2021 Plan”) to replace the Second Amended and Restated 2010 Stock Plan, which was subsequently approved by the Company’s stockholders in March 2021. The 2021 Plan became effective on March 24, 2021.

2021 Employee Stock Purchase Plan

In February 2021, the Company’s board of directors adopted the Employee Stock Purchase Plan (“ESPP”), which was subsequently approved by the stockholders in March 2021. The ESPP became effective on March 24, 2021. The Company recognized $0.2 million and $0.2 million in stock-based compensation expense related to the ESPP for the three months ended June 30, 2022 and June 30, 2021, respectively, and $0.4 million and $0.2 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Restricted Stock Units

The Company issues service-based and performance-based restricted stock units (“RSU”) to employees. The RSUs automatically convert to shares of the Company’s common stock on a one-for-one basis as the awards vest. RSUs granted to newly hired employees typically vest 25% annually over four years commencing on the date of grant. The RSUs are measured at grant date fair value, at the market price of the Company’s Class A common stock on the grant date. The Company records stock-based compensation expense related to the RSUs ratably over the employee’s respective requisite service period. During the six months ended June 30, 2022, the Company granted 9,444,468 shares of RSUs with a weighted average grant date fair value at $7.43 under the 2021 Plan.

Stock-Based Compensation

Total stock-based compensation expense by department is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(in thousands)
Operations, product and technology	$	3,970	$	984	$	5,362	$	2,334
Marketing	1,226		289		1,559		726
Sales, general and administrative	4,862		1,623		6,660		3,334
Total stock-based compensation expense	$	10,058	$	2,896	$	13,581	$	6,394

11. Commitments and Contingencies

Legal Contingencies

The Company is subject to litigation claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made.

Table of Contents

12. Income Taxes

The quarterly income tax provision reflects an estimate of the corresponding quarter’s state taxes in the United States. The provision for income tax expense for the three and six months ended June 30, 2022 and 2021 was determined based upon estimates of the Company’s annual effective tax rate for the years ending December 31, 2022 and 2021, respectively. Since the Company is in a full valuation allowance position due to losses incurred since inception, the provision for taxes consists solely of certain state income taxes.

13. Net Loss Per Share

The following participating securities have been excluded from the computation of diluted net loss per share for the periods presented, because including them would have been anti-dilutive:


	As of June 30,
	2022	2021
	(in thousands)
Outstanding stock options	18,514	21,600
Restricted stock units	9,285	218
Delayed share issuance related to acquisition	131	—
Employee stock purchase plan	59	101
Total	27,989	21,919

14. Subsequent Events

On July 14, 2022, (the “Closing Date”), the Company entered into a Second Amended and Restated Loan and Security Agreement (the “Second Amended Term Loan”), which amends and restates the Term Loan to, among other things, increase the aggregate borrowing ability to $70.0 million, reduce the applicable margin for borrowings under the Term Loan to the prime rate published in The Wall Street Journal plus a margin of 1.25%, with a floor of 6.00%, and extend the maturity date of the outstanding Term Loan to July 14, 2027. The Second Amended Term Loan contains several financial covenants, including cash availability and cash holding requirements, minimum revenue amounts and, beginning in the first quarter of fiscal year 2025, a minimum Fixed Charge Coverage Ratio.

The Second Amended Term Loan provides for an aggregate principal amount of $70.0 million of term loans, to be made available as either the “Term A Loan” or “Term B Loan.” The Term A Loan is for an aggregate principal amount of $32.0 million and was fully advanced on the Closing Date to refinance the outstanding obligations under the Term Loan. The Term B Loan is for an aggregate principal amount of $38.0 million. The Term B Loan is available to be drawn by the Company through the four-year anniversary of the Closing Date to finance the purchase price of eligible equipment purchased by the Company.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes and our Annual Report on Form 10-K filed with the SEC on March 22, 2022. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full calendar year or any other period.

Overview

thredUP is one of the world’s largest online resale platforms for women’s and kids’ apparel, shoes and accessories. Our mission is to inspire a new generation of consumers to think secondhand first. We believe in a sustainable fashion future and we are proud that our business model creates a positive impact to the benefit of our buyers, sellers, clients, employees, investors and the environment. Our custom-built operating platform consists of distributed processing infrastructure, proprietary software and systems and data science expertise. This platform is powering the rapidly emerging resale economy, one of the fastest growing sectors in retail, according to a GlobalData market survey conducted in April 2021.

thredUP’s proprietary operating platform is the foundation for our managed marketplace, where we have bridged online and offline technology to make the buying and selling of tens of millions of unique items easy and fun. The marketplace we have built enables buyers to browse and purchase resale items for primarily women’s and kids’ apparel, shoes and accessories across a wide range of price points. Buyers love shopping value, premium and luxury brands all in one place, at up to 90% off estimated retail price. Sellers love thredUP because we make it easy to clean out their closets and unlock value for themselves or for the charity of their choice while doing good for the planet. thredUP’s sellers order a Clean Out Kit, fill it and return it to us using our prepaid label. We take it from there and do the work to make those items available for resale.

In 2018, based on our success with consumers directly, we extended our platform to enable brands and retailers to participate in the resale economy. Some of the world’s leading brands and retailers are already taking advantage of our RaaS offering, which allows them to conveniently offer a scalable closet clean out service and/or resale shop to their customers. We believe RaaS will accelerate the growth of this emerging category and form the backbone of the modern resale experience domestically and internationally.

In 2021, we completed our acquisition of Remix Global EAD (“Remix”), a fashion resale company based in Sofia, Bulgaria. With this acquisition, we further expanded our reach to European customers, added a complementary operational infrastructure and added an experienced management team to enable our expansion into Europe. In addition, Remix’s product assortment extended our resale offering to include men’s items and items sourced from a variety of supply channels, such as wholesale supply.

Recent Business Developments

COVID-19 Update

The ongoing development of the COVID-19 pandemic has continued to impact our business, primarily driven by the emergence of new variants and related subvariants. Our performance was adversely affected by market instability, supply chain disruptions, labor challenges caused by the pandemic and the U.S. government response to the COVID-19 pandemic, including the absence of any economic stimulus in 2022. We are actively engaging with our customers and are continuing to take measures to protect the health and safety of our employees. As of June 30, 2022, our remote work model remains largely in place.

The long-term impact of COVID-19 on our operations and financial performance remains uncertain and will depend on various unpredictable factors, including the duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants, the effectiveness of COVID-19 vaccines and treatments and government actions to prevent and manage disease spread. The long-term impact of the pandemic on demand and supply for our products and services is also difficult to predict, but could negatively affect our future results and performance.

Table of Contents

Financial Impact

In the six months ended June 30, 2022, we experienced an increase in consumer demand partially due to the reduced severity of the COVID-19 pandemic and shift in consumer and lifestyle patterns. Gross margin and operating expenses were impacted due to rising labor, processing and other costs to support the consumer demand experienced to date.

Impact on Processing at our Distribution and Processing Centers

The COVID-19 pandemic and the ongoing recovery also contributed to a tightened labor supply. We continue to face challenges in hiring and retaining employees in our distribution and processing centers. We have implemented compensation and benefits programs to attract potential employees and to improve employee retention. These programs caused, along with an inflationary labor market, higher Cost of Revenue and higher Operations, Product and Technology expenses and negatively impacted our results of operations.

We expect that the COVID-19 pandemic will continue to have an adverse impact on our business, results of operations and financial condition, including our revenue and cash flows in the short term. Due to the unpredictable nature of the pandemic, it is difficult to predict the long-term impact on our business. See the section titled “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 22, 2022 for further discussion of the possible impact of the COVID-19 pandemic on our business, operations and financial condition.

Inflation

The Russia-Ukraine conflict and other geopolitical conflicts, as well as the related international response, have exacerbated inflationary pressures during the pandemic. We continue to actively monitor, evaluate and respond to developments relating to operational challenges in an inflationary environment. Global supply chain disruptions and the higher inflationary environment remain unpredictable and our past results may not be indicative of future performance.

Foreign Currency

In recent months, the U.S. dollar has been appreciating against major European currencies, including the Bulgarian Lev, for both economic and geopolitical reasons. A strengthening U.S. dollar will have a negative impact on our consolidated sales. We are managing the currency risk related to earnings through natural hedges and have offsetting costs relating to operating our business and a regional source of supply. Therefore, changes to exchange rates have not had a significant impact to our earnings. We continue to monitor our foreign exchange exposure as we grow our business globally. For further details, please refer to "Foreign Currency Exchange Rate Risk" in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Restructuring

In June 2022, we restructured certain back-office functions to improve efficiencies and to reduce overhead costs. In addition, we closed our processing center in Tennessee and consolidated its operations into our distribution center in Texas, which is under construction. These and future restructuring activities are expected to provide future growth and efficiency benefits; however, the actual results may differ.

Overview of Second Quarter Results

Revenue: Total revenue was a record at $76.4 million, an increase of 27% year-over-year.

Gross Profit and Margin: Gross profit totaled $52.6 million representing growth of 19% year-over-year. Gross margin decreased by 471 basis points to 69% from 74% in the comparable quarter last year.

Net Loss: GAAP net loss was $28.4 million, or a negative 37% of revenue, for the second quarter of 2022, compared to a GAAP net loss of $14.4 million for the second quarter 2021.

Adjusted EBITDA: Adjusted EBITDA loss was $13.5 million, or negative 18% of revenue for the second quarter of 2022, compared to an Adjusted EBITDA loss of $9.0 million for the second quarter of 2021, or negative 15% of the revenue for the second quarter of 2021.

Table of Contents

Active Buyers and Orders: Active Buyers totaled 1.72 million and Orders totaled 1.70 million in the second quarter of 2022, representing growth of 29% and 40%, respectively, compared to the second quarter of 2021.

Key Financial and Operating Metrics