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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 September 30, 2023
or
    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
https://cdn.kscope.io/f788f6ee07b7f2a9123033c2604df7ca-thredUP_Wordmark_RGB_Black.jpg
ThredUp Inc.
(Exact name of registrant as specified in its charter)

Delaware26-4009181
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
969 Broadway, Suite 200
Oakland, California
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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per shareTDUP
The Nasdaq Stock Market LLC
Long-Term Stock Exchange

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 filerAccelerated filer
Non-accelerated filerSmaller 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  
There were 77,290,731 shares of Class A common stock and 29,959,781 shares of Class B common stock outstanding as of October 31, 2023.



TABLE OF CONTENTS
Page Number
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2

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 as 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, inflationary pressures, increased interest rates, changing consumer habits, climate change and general global economic uncertainty;
our ability to comply with applicable laws and regulations;
our ability to remediate our material weakness in our internal control over financial reporting; and
our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments.
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 Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2022, in Part II, Item 1A, Risk Factors, in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023 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.
***
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 apparel, shoes and accessories, based primarily on items processed, items sold and the capacity of our distribution centers.
3

Table of Contents
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 marketplaces.
4

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
THREDUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30,
2023
December 31,
2022
(in thousands, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents$68,552 $38,029 
Marketable securities5,575 66,902 
Accounts receivable, net5,993 4,669 
Inventory18,173 17,519 
Other current assets7,199 7,076 
Total current assets105,492 134,195 
Operating lease right-of-use assets43,090 46,153 
Property and equipment, net90,270 92,482 
Goodwill11,455 11,592 
Intangible assets8,460 10,499 
Other assets6,621 7,027 
Total assets$265,388 $301,948 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$12,426 $7,800 
Accrued and other current liabilities40,225 50,155 
Seller payable21,516 16,166 
Operating lease liabilities, current6,383 6,413 
Current portion of long-term debt3,834 3,879 
Total current liabilities84,384 84,413 
Operating lease liabilities, non-current45,257 48,727 
Long-term debt, net of current portion22,968 25,788 
Other non-current liabilities3,231 3,019 
Total liabilities155,840 161,947 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of September 30, 2023 and December 31, 2022; 106,837 and 101,532 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
11 10 
Additional paid-in capital577,740 551,852 
Accumulated other comprehensive loss(3,941)(4,234)
Accumulated deficit(464,262)(407,627)
Total stockholders’ equity109,548 140,001 
Total liabilities and stockholders’ equity$265,388 $301,948 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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THREDUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except per share amounts)
Revenue:
Consignment$57,838 $41,553 $157,732 $137,524 
Product24,211 26,392 82,897 79,537 
Total revenue82,049 67,945 240,629 217,061 
Cost of revenue:
Consignment10,131 9,087 28,931 29,354 
Product15,291 14,362 48,246 40,335 
Total cost of revenue25,422 23,449 77,177 69,689 
Gross profit56,627 44,496 163,452 147,372 
Operating expenses:
Operations, product, and technology40,355 38,702 118,473 121,824 
Marketing19,406 14,752 54,919 51,370 
Sales, general, and administrative15,058 15,232 47,147 47,276 
Total operating expenses74,819 68,686 220,539 220,470 
Operating loss(18,192)(24,190)(57,087)(73,098)
Interest expense732 103 1,530 764 
Other income, net(845)(624)(2,006)(1,108)
Loss before provision for income taxes(18,079)(23,669)(56,611)(72,754)
Provision for income taxes3 9 24 31 
Net loss$(18,082)$(23,678)$(56,635)$(72,785)
Loss per share, basic and diluted$(0.17)$(0.24)$(0.54)$(0.73)
Weighted-average shares used in computing loss per share, basic and diluted105,898 100,253 103,918 99,409 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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THREDUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)
Net loss$(18,082)$(23,678)$(56,635)$(72,785)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(1,080)(2,217)(772)(5,258)
Unrealized gain (loss) on available-for-sale securities152 (28)1,065 (1,284)
Total other comprehensive income (loss)(928)(2,245)293 (6,542)
Total comprehensive loss$(19,010)$(25,923)$(56,342)$(79,327)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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THREDUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Common Stock
SharesAmountAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
(in thousands)
Balance as of December 31, 2022101,532 $10 $551,852 $(4,234)$(407,627)$140,001 
Issuance of common stock from exercise of stock options and restricted stock units1,484 — 275 275 
Stock-based compensation9,720 9,720 
Shares withheld for net share settlement(180)— (270)(270)
Net loss(19,793)(19,793)
Other comprehensive income1,154 1,154 
Balance as of March 31, 2023102,836 10 561,577 (3,080)(427,420)131,087 
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan2,663 1 593 594 
Stock-based compensation7,958 7,958 
Shares withheld for net share settlement(164)— (348)(348)
Net loss(18,760)(18,760)
Other comprehensive income67 67 
Balance as of June 30, 2023105,335 $11 $569,780 $(3,013)$(446,180)$120,598 
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan1,673 $— $490 490 
Stock-based compensation$8,190 8,190 
Shares withheld for net share settlement(171)— $(720)(720)
Net loss(18,082)(18,082)
Other comprehensive loss(928)(928)
Balance as of September 30, 2023106,837 $11 $577,740 $(3,941)$(464,262)$109,548 
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Common Stock
SharesAmountAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
(in thousands)
Balance as of December 31, 202198,435 $10 $522,161 $(1,094)$(315,343)$205,734 
Issuance of common stock from exercise of stock options and restricted stock units507 — 754 754 
Stock-based compensation3,618 3,618 
Net loss(20,708)(20,708)
Other comprehensive loss(1,710)(1,710)
Balance as of March 31, 202298,942 10 526,533 (2,804)(336,051)187,688 
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan1,030 — 1,031 1,031 
Stock-based compensation10,353 10,353 
Shares withheld for net share settlement(19)— (157)(157)
Net loss(28,399)(28,399)
Other comprehensive loss(2,587)(2,587)
Balance as of June 30, 202299,953 $10 $537,760 $(5,391)$(364,450)$167,929 
Issuance of common stock from exercise of stock options, restricted stock units, and employee stock purchase plan779 $— $229 $229 
Stock-based compensation$7,460 $7,460 
Net loss$(23,678)$(23,678)
Other comprehensive loss$(2,245)$(2,245)
Balance as of September 30, 2022100,732 $10 $545,449 $(7,636)$(388,128)$149,695 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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THREDUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
2023
September 30,
2022
(in thousands)
Cash flows from operating activities:
Net loss$(56,635)$(72,785)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization13,881 10,217 
Stock-based compensation expense24,907 20,758 
Reduction in carrying amount of right-of-use assets4,788 4,820 
Other59 1,409 
Changes in operating assets and liabilities:
Accounts receivable, net(1,373)795 
Inventory(873)(6,222)
Other current and non-current assets1,055 (1,732)
Accounts payable4,049 (3,000)
Accrued and other current liabilities(4,331)6,918 
Seller payable5,358 (380)
Operating lease liabilities(5,426)2,396 
Other non-current liabilities(75)(133)
Net cash used in operating activities(14,616)(36,939)
Cash flows from investing activities:
Purchases of marketable securities(9,851)(3,475)
Maturities of marketable securities71,979 35,830 
Purchases of property and equipment(13,775)(39,316)
Net cash provided by (used in) investing activities48,353 (6,961)
Cash flows from financing activities:
Proceeds from debt, net of discount 491 
Repayment of debt(3,000)(5,333)
Proceeds from issuance of stock-based awards3,761 3,878 
Payment of withholding taxes on stock-based awards(3,744)(1,958)
Net cash used in financing activities(2,983)(2,922)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(230)(918)
Net change in cash, cash equivalents, and restricted cash30,524 (47,740)
Cash, cash equivalents, and restricted cash, beginning of period44,051 91,840 
Cash, cash equivalents, and restricted cash, end of period$74,575 $44,100 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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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 operates a large resale platform that enables consumers to buy and sell primarily secondhand apparel, shoes, and accessories.
2. Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying unaudited 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 may be condensed or omitted.
The preparation of consolidated financial statements in accordance 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; breakage on loyalty points and rewards, and gift cards; valuation of inventory, stock-based compensation, right-of-use assets, goodwill and acquired intangible assets, 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 September 30, 2023, 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 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”).
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU changes the impairment model for most financial assets, requiring the use of an expected loss model that requires entities to estimate the lifetime expected credit loss on financial assets measured at amortized cost. Such credit losses will be recorded as an allowance to offset the amortized cost of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In addition, credit losses relating to available-for-sale debt securities will now be recorded through an allowance for credit losses rather than as a direct write-down to the security. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this guidance during the first quarter of 2023 did not have a material impact on the Company’s condensed consolidated financial statements.
Revenue from Loyalty Reward Redemption and Expiration
The Company has a customer loyalty program, which allows end-customers to earn and accumulate points with each qualifying purchase. Earned points can be redeemed for reward coupons, such as discounts, free shipping, or waived restocking fee, which can be applied to future purchases or returns. Unredeemed points expire after one year from the date the points were earned. Reward coupons expire six months from the date the reward is claimed. Points earned on purchases are a material right, representing a separate performance obligation.
The allocated consideration for the points earned through qualifying purchase transactions is deferred based on the standalone selling price of the points and recorded within deferred revenue under accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue is recognized for these performance obligations at a point in time when rewards are redeemed by the end customer or expired.
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As of September 30, 2023 and December 31, 2022, the Company had a deferred revenue liability of $3.4 million and $3.3 million, respectively, related to its customer loyalty program, which is included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. The Company recognized revenue from loyalty reward redemption of $2.1 million and $2.2 million for the three months ended September 30, 2023 and 2022, respectively, and $6.7 million and $7.4 million for the nine months ended September 30, 2023 and 2022, respectively. As our loyalty points expire in 12 months and coupon rewards expire in six months, the revenue for the remaining performance obligation is expected to be recognized within a 12-month period.
Gift Cards and Site Credits
The Company sells thredUP gift cards on its e-commerce website and may also convert site credits to thredUP gift cards after one year at the discretion of the Company. thredUP gift cards do not expire or lose value over periods of inactivity. The Company accounts for gift cards by recognizing a gift card liability at the time a gift card is delivered to the customer. As of September 30, 2023 and December 31, 2022, $8.9 million and $10.9 million, respectively, of gift card liability was included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue from gift cards is generally recognized when the gift cards are redeemed by the customer and amounted to $0.5 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively, and $1.7 million and $0.7 million for the nine months ended September 30, 2023 and 2022, respectively.
The Company issues site credits for returns, which can be applied toward future charges but may not be converted into cash. Site credits may also be converted to thredUP gift cards after one year at the discretion of the Company. These credits are recognized as revenue when used. As of September 30, 2023 and December 31, 2022, $4.8 million and $7.2 million, respectively, of such customer site credits were included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue recognized from the redemption of site credits was $10.2 million and $11.9 million for the three months ended September 30, 2023 and 2022, respectively, and $30.1 million and $35.9 million for the nine months ended September 30, 2023 and 2022, respectively.
The Company recognizes breakage revenue when it determines that the redemption of gift cards is remote. Breakage revenue was $1.9 million and $2.3 million for the three and nine months ended September 30, 2023, respectively. Breakage revenue was not material for the three and nine months ended September 30, 2022.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s condensed consolidated balance sheets that sum to the total of the same such amounts shown in the Company’s condensed consolidated statements of cash flows:
September 30,
2023
December 31,
2022
(in thousands)
Cash and cash equivalents$68,552 $38,029 
Restricted cash included in Other current assets644 383 
Restricted cash included in Other assets5,379 5,639 
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$74,575 $44,051 
Fair Value Measurements
The Company applies the provisions of FASB ASC Topic 820, Fair Value Measurements and Disclosures, for its financial and non-financial assets and liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
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Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 inputs are unobservable inputs for the asset or liability.
The Company measures certain assets and liabilities at fair value as discussed throughout the notes to its condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022, the carrying amounts of the Company’s accounts receivable, other current assets, other assets, accounts payable, seller payable and accrued and other current liabilities approximated their estimated fair values due to their relatively short maturities. Management believes the terms of its long-term variable-rate debt reflect current market conditions for an instrument with similar terms and maturity, and as such, the carrying value of the Company’s long-term debt approximated its fair value as of September 30, 2023 and December 31, 2022.
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 as of September 30, 2023 and December 31, 2022:
September 30, 2023
Level 1Level 2Level 3Total
(in thousands)
Assets:
Cash equivalents:
Money market funds$10,096 $ $ $10,096 
U.S. treasury securities 17,571  17,571 
Commercial paper 19,333  19,333 
U.S. government agency discount notes 2,874  2,874 
Total cash equivalents10,096 39,778  49,874 
Marketable securities:
U.S. treasury securities 2,480  2,480 
U.S. government agency bonds 3,095  3,095 
Total marketable securities 5,575  5,575 
Total assets at fair value$10,096 $45,353 $ $55,449 
December 31, 2022
Level 1Level 2Level 3Total
(in thousands)
Assets:
Cash equivalents:
Money market funds$1,110 $ $ $1,110 
Commercial paper 14,460  14,460 
Total cash equivalents1,110 14,460  15,570 
Marketable securities:
Corporate debt securities25,488   25,488 
U.S. treasury securities19,176   19,176 
U.S. government agency bonds22,238   22,238 
Total marketable securities66,902   66,902 
Total assets at fair value$68,012 $14,460 $ $82,472 
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The following tables summarize the cost, gross unrealized gains, gross unrealized losses and fair value of the marketable securities as of September 30, 2023 and December 31, 2022:
September 30, 2023
Cost or Amortized CostUnrealizedFair Value
GainsLosses
(in thousands)
U.S. treasury securities2,482  (2)2,480 
U.S. government agency bonds3,110  (15)3,095 
Total$5,592 $ $(17)$5,575 
December 31, 2022
Cost or Amortized CostUnrealizedFair Value
GainsLosses
(in thousands)
Corporate debt securities$25,774 $ $(286)$25,488 
U.S. treasury securities19,531  (355)19,176 
U.S. government agency bonds22,679  (441)22,238 
Total$67,984 $ $(1,082)$66,902 
As of September 30, 2023 and December 31, 2022, 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 the Company’s marketable securities, which were all classified as available-for-sale, 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 determined that the declines in the fair value of its marketable securities were not driven by credit-related factors. During the three and nine months ended September 30, 2023 and 2022, the Company did not recognize any losses on its marketable securities due to credit-related factors.
As of September 30, 2023, the Company’s money market funds were valued using Level 1 inputs because they were valued using quoted prices in active markets. The Company’s U.S. treasury securities, commercial paper, U.S. government agency discount notes, and U.S. government agency bonds were valued using Level 2 inputs because they were 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.
As of September 30, 2023, there were no transfers into or out of Level 3 during the three and nine months ended September 30, 2023. As of September 30, 2023, of the $5.6 million carrying amount of marketable securities, all had a contractual maturity date of less than one year.
4. Property and Equipment, Net
Property and equipment, net consisted of the following:
September 30,
2023
December 31,
2022
(in thousands)
Property and equipment$133,980 $124,412 
Less: accumulated depreciation and amortization(43,710)(31,930)
Property and equipment, net$90,270 $92,482 
Depreciation and amortization expense of property and equipment was $4.7 million and $2.9 million for the three months ended September 30, 2023 and 2022, respectively, and $11.9 million and $8.3 million for the nine months ended September 30, 2023 and 2022, respectively.
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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 reviewed for impairment at least annually, absent any interim indicators of impairment. Goodwill was $11.5 million and $11.6 million as of September 30, 2023 and December 31, 2022, respectively. The decrease in goodwill during the nine months ended September 30, 2023 was due to foreign currency translation adjustments.
The gross carrying amounts and accumulated amortization of the Company’s intangible assets with determinable lives as of September 30, 2023 and December 31, 2022 were as follows:
September 30, 2023
Amortization PeriodGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in years)(in thousands)
Customer relationships8$4,757 $(1,178)$3,579 
Developed technology34,482 (2,959)1,523 
Trademarks94,305 (947)3,358 
Total$13,544 $(5,084)$8,460 
December 31, 2022
Amortization PeriodGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in years)(in thousands)
Customer relationships8$4,814 $(742)$4,072 
Developed technology34,536 (1,864)2,672 
Trademarks94,351 (596)3,755 
Total$13,701 $(3,202)$10,499 
The changes in the gross carrying amounts were due to foreign currency translation adjustments.
Amortization expense related to developed technology, customer relationships, and trademarks is recorded within operations, product, and technology; sales, general, and administrative; and marketing expense, respectively, within the Company’s condensed consolidated statements of operations. Amortization expense of intangible assets with determinable lives was $0.7 million and $0.6 million for the three months ended September 30, 2023 and 2022, respectively, and $2.0 million and $1.9 million for the nine months ended September 30, 2023 and 2022, respectively.
6. Balance Sheet Components
Inventories consisted of the following:
September 30,
2023
December 31,
2022
(in thousands)
Work in process$3,222 $2,639 
Finished goods14,951 14,880 
Total$18,173 $17,519 
Work in process inventory relates to items that are currently undergoing preparation for sale, including itemization, cleaning, and repair.

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Accrued and other current liabilities consisted of the following:
September 30,
2023
December 31,
2022
(in thousands)
Gift card and site credit liabilities$13,784 $18,101 
Deferred revenue6,807 7,582 
Accrued compensation4,751 4,993 
Accrued taxes4,500 4,326 
Accrued vendor liabilities4,303 9,116 
Allowance for returns4,195 4,907 
Accrued other1,885 1,130 
Total$40,225 $50,155 
7. 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.
The Term Loan was subsequently amended several times, with the most recent amendment taking place in July 2022. As amended, the Term Loan matures on July 14, 2027 and provides for an aggregate borrowing amount of up to $70.0 million, which bears interest at the prime rate published in the Wall Street Journal plus a margin of 1.25%, with a floor of 6.00%. The Company incurred an immaterial amount of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to FASB ASC Topic 470, Debt, this transaction was accounted for as a modification of the Term Loan. The debt issuance costs were recognized in interest expense within the Company’s condensed consolidated statement of operations during the third quarter of 2022.
The Term Loan requires the Company to comply with certain financial covenants, including, among other things, liquidity requirements, minimum cash deposits with Western Alliance Bank, performance metrics, and a debt service coverage ratio. The Term Loan also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, loans and investments, additional indebtedness, liens, mergers, asset sales and transactions with affiliates. In addition, the Term Loan contains customary events of default. As of September 30, 2023 and December 31, 2022, the Company was in compliance with its debt covenants under the Term Loan.
The Term Loan is payable in consecutive monthly installments. Interest is due monthly on amounts outstanding under the Term Loan. The Company is permitted to make voluntary prepayments without penalty or premium at any time.
As of September 30, 2023 and December 31, 2022, the effective interest rate for borrowings under the Term Loan was 10.73% and 9.70%, respectively.
During the nine months ended September 30, 2023, the Company did not make any borrowings under the Term Loan and repaid a total of $3.0 million on amounts outstanding under the Term Loan. During the nine months ended September 30, 2022, the Company borrowed $0.7 million under the Term Loan and repaid a total of $5.3 million on amounts outstanding under the Term Loan. As of September 30, 2023 and December 31, 2022, the amounts outstanding under the Term Loan were $27.3 million and $30.3 million, respectively.
During the three months ended September 30, 2023 and 2022, the Company incurred $0.7 million and $0.6 million, respectively, of interest costs relating to the Term Loan. There was no capitalized interest during the three months ended September 30, 2023 and $0.5 million was capitalized as part of an asset for the three month ended September 30, 2022.
During the nine months ended September 30, 2023 and 2022, the Company incurred $2.0 million and $1.8 million, respectively, of interest costs relating to the Term Loan, of which $0.6 million and $1.0 million, respectively, were capitalized as part of an asset.

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As of September 30, 2023, the future annual principal payments of the Term Loan were as follows:
Amount
(in thousands)
2023$1,000 
20244,000 
20254,000 
20264,000 
202714,333 
Total principal payments27,333 
Less: unamortized debt discount(531)
Less: current portion of long-term debt(3,834)
Non-current portion of long-term debt$22,968 
8. Common Stock and Stockholders’ Equity
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 authorized, issued and outstanding as of September 30, 2023 and December 31, 2022:
September 30, 2023
AuthorizedIssued and Outstanding
(in thousands)
Class A common stock1,000,000 76,866 
Class B common stock120,000 29,971 
Total1,120,000 106,837 
December 31, 2022
AuthorizedIssued and Outstanding
(in thousands)
Class A common stock1,000,000 70,723 
Class B common stock120,000 30,809 
Total1,120,000 101,532 

9. Stock-Based Compensation
The Company has stock-based compensation plans, which are more fully described in Note 11, Stock-Based Compensation Plans, to the Consolidated Financial Statements included in the 2022 10-K. During the nine months ended September 30, 2023, the Company granted restricted stock units subject to service conditions.
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Stock-Based Compensation Expense
The following table provides information about stock-based compensation expense by financial statement line item:
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)
Operations, product, and technology$2,858 $2,480 $9,442 $7,842 
Marketing1,264 818 3,392 2,377 
Sales, general, and administrative3,766 3,879 12,073 10,539 
Total stock-based compensation expense$7,888 $7,177 $24,907 $20,758 
Stock-based compensation expense capitalized in internal use software was not material for the three months ended September 30, 2023 and 2022, respectively, and was $0.5 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively.
Stock Options
The following table summarizes the activities for all stock options under the Company’s share-based compensation plans for the nine months ended September 30, 2023:
Number of Options OutstandingWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contractual LifeAggregate Intrinsic Value (1)
(in thousands)(in thousands)
Outstanding as of December 31, 202217,872 $1.97 5.20 years$1,442 
Granted $ 
Exercised(505)$1.86 
Forfeited or expired(347)$3.36 
Outstanding as of September 30, 202317,020 $1.95 4.50 years$36,049 
Exercisable as of September 30, 202315,128 $1.91 4.21 years$32,498 
(1)The intrinsic value is the amount by which the current market value of the underlying stock exceeds the exercise price of the stock awards.
There were no options granted during the three and nine months ended September 30, 2023 and 2022. The total intrinsic value of stock options exercised during the nine months ended September 30, 2023 was $0.6 million.
As of September 30, 2023, the total unrecognized compensation cost related to all nonvested stock options was $1.7 million and the related weighted-average period over which it is expected to be recognized was approximately 1.06 years.
Restricted Stock Units
The following table summarizes the activities for all restricted stock units (“RSUs”) under the Company’s share-based compensation plans for the nine months ended September 30, 2023:
Number of SharesWeighted-Average Grant Date Fair Value Per Share
(in thousands)
Outstanding and nonvested as of December 31, 20227,855 $8.01 
Granted8,917 $1.86 
Vested(4,788)$5.14 
Forfeited(1,075)$4.65 
Outstanding and nonvested as of September 30, 202310,909 $4.57 
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The total vesting date fair value of RSUs that vested during the nine months ended September 30, 2023 was $24.6 million.
During the three months ended March 31, 2023, the Company modified the vesting schedule of substantially all RSUs outstanding as of December 31, 2022 from 4 years to 3 years and recognized compensation expense of $2.4 million related to the acceleration of the vesting schedule.
As of September 30, 2023, the total unrecognized compensation cost related to all nonvested RSUs was $47.0 million and the related weighted-average period over which it is expected to be recognized was approximately 1.88 years.
10. 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 limited and customary indemnification obligations. 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.
11. 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 nine months ended September 30, 2023 and 2022 was determined based upon estimates of the Company’s annual effective tax rate for the years ending December 31, 2023 and 2022, 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.
12. Loss Per Share
The following participating securities have been excluded from the computation of diluted loss per share for the periods presented because including them would have been anti-dilutive:
September 30,
2023
September 30,
2022
(in thousands)
Outstanding stock options17,020 17,966 
Restricted stock units10,909 8,693 
Delayed share issuance related to acquisition 131 
Employee stock purchase plan97 230 
Total28,026 27,020 
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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 in conjunction with other information, including our condensed consolidated financial statements and related notes included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q; Part I, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q; and our consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”). 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 operates one of the world’s largest online resale platforms for 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 January 2023.
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 marketplaces we have built enable buyers in the U.S. and in Europe to browse and purchase resale items for primarily 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. Aside from Clean Out Kits, thredUP also sources inventory from a variety of supply channels, such as wholesale supply in Europe.
In addition to our core marketplace, some of the world’s leading brands and retailers are 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.
Key Factors Affecting Our Performance
Macroeconomic Factors
Macroeconomic factors, including inflation, increased interest rates, significant capital market volatility, and global economic and geopolitical developments have direct and indirect impacts on our results of operations that are difficult to isolate and quantify. These factors contributed to increases in our operating costs during 2022 and the first three quarters of 2023 primarily due to increased transportation costs and wage rates. In addition, rising fuel, utility, and food costs, rising interest rates, and recessionary fears may impact customer demand and our ability to forecast consumer spending patterns. We expect some or all of these factors to continue to impact our operations at least throughout the rest of 2023.
Overview of Third Quarter Results
Revenue: Total revenue was $82.0 million, representing an increase of 20.8% year-over-year.
Gross Profit and Margin: Gross profit totaled $56.6 million, representing an increase of 27.3% year-over-year. Gross margin was 69.0%, an increase of 350 basis points from 65.5% in the comparable quarter last year.
Net Loss: Net loss was $18.1 million, or a negative 22.0% of revenue, for the third quarter of 2023, compared to a net loss of $23.7 million, or a negative 34.8% of revenue, for the third quarter of 2022.
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Non-GAAP Adjusted EBITDA Loss: Non-GAAP Adjusted EBITDA loss was $3.6 million, or a negative 4.4% of revenue, for the third quarter of 2023, compared to Non-GAAP Adjusted EBITDA loss of $11.0 million, or a negative 16.2% of revenue, for the third quarter of 2022. Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies. See below for a reconciliation of Non-GAAP Adjusted EBITDA loss to net loss.
Active Buyers and Orders: Active Buyers totaled 1.8 million and Orders totaled 1.8 million in the third quarter of 2023, representing an increase of 4.1% and an increase of 11.4%, respectively, compared to the third quarter of 2022.
Key Financial and Operating Metrics
We review a number of operating and financial metrics, including the following key business and non-GAAP metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. These key financial and operating metrics are set forth below for the periods presented.
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
ChangeSeptember 30,
2023
September 30,
2022
Change
(in thousands, except percentages)
Active Buyers (as of period end)1,763 1,694 4.1 %1,763 1,694 4.1 %
Orders1,803 1,618 11.4 %5,103 4,962 2.8 %
Total revenue$82,049 $67,945 20.8 %$240,629 $217,061 10.9 %
Gross profit$56,627 $44,496 27.3 %$163,452 $147,372 10.9 %
Gross margin69.0 %65.5 %350  bps67.9 %67.9 %—  bps
Net loss$(18,082)$(23,678)(23.6)%$(56,635)$(72,785)(22.2)%
Net loss margin(22.0)%(34.8)%1,280  bps(23.5)%(33.5)%1,000  bps
Non-GAAP Adjusted EBITDA loss(1)$(3,588)$(11,041)(67.5)%$(15,235)$(37,545)(59.4)%
Non-GAAP Adjusted EBITDA loss margin(1)(4.4)%(16.2)%1,180  bps(6.3)%(17.3)%1,100  bps
(1)Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies. See below for a reconciliation of Non-GAAP Adjusted EBITDA loss to net loss.
Active Buyers
An Active Buyer is a thredUP buyer who has made at least one purchase in the last twelve months. A thredUP buyer is a customer who has created an account and purchased in our marketplaces, including through our RaaS clients, and is identified by a unique email address. A single person could have multiple thredUP accounts and count as multiple Active Buyers. The number of Active Buyers is a key driver of revenue for our marketplaces.
Orders
Orders means the total number of orders placed by buyers across our marketplaces, including through our RaaS clients, in a given period, net of cancellations.

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Non-GAAP Financial Metrics
Non-GAAP Adjusted EBITDA Loss and Non-GAAP Adjusted EBITDA Loss Margin
Non-GAAP Adjusted EBITDA loss means net loss adjusted to exclude, where applicable in a given period, interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, acquisition-related expenses, and severance and other charges. Non-GAAP Adjusted EBITDA loss margin represents Non-GAAP Adjusted EBITDA loss divided by Total revenue. We use Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin, non-GAAP metrics, to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes. We believe that Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.
The following table provides a reconciliation of net loss to Non-GAAP Adjusted EBITDA loss:
Three Months EndedNine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)
Net loss$(18,082)$(23,678)$(56,635)$(72,785)
Interest expense732 103 1,530 764 
Provision for income taxes24 31 
Depreciation and amortization5,364 3,539 13,881 10,217 
Stock-based compensation expense7,888 7,177 24,907 20,758 
Severance and other507 1,809 1,058 3,470 
Non-GAAP Adjusted EBITDA loss$(3,588)$(11,041)$(15,235)$(37,545)
Total revenue$82,049 $67,945 $240,629 $217,061 
Non-GAAP Adjusted EBITDA loss margin(4.4)%(16.2)%(6.3)%(17.3)%
Comparison of the Three and Nine Months Ended September 30, 2023 and 2022
Revenue
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Consignment revenue$57,838 $41,553 $16,285 39.2 %$157,732 $137,524 $20,208 14.7 %
Product revenue24,211 26,392 (2,181)(8.3)%82,897 79,537 3,360 4.2 %
Total revenue$82,049 $67,945 $14,104 20.8 %$240,629 $217,061 $23,568 10.9 %
Consignment revenue as a percentage of total revenue70.5 %61.2 %65.5 %63.4 %
Product revenue as a percentage of total revenue29.5 %38.8 %34.5 %36.6 %
Total revenue increased $14.1 million, or 20.8%, for the three months ended September 30, 2023 as compared to the same period in 2022. The increase in revenue for the three months ended September 30, 2023 as compared to the same period in 2022 was due to an 11.4% increase in Orders and a 4.1% increase in Active Buyers.
Total revenue increased $23.6 million, or 10.9%, for the nine months ended September 30, 2023 as compared to the same period in 2022. The increase in revenue for the nine months ended September 30, 2023 as compared to the same period in 2022 was due to a 4.1% increase in Active Buyers and a 2.8% increase in Orders.
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Cost of Revenue
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Cost of consignment revenue$10,131 $9,087 $1,044 11.5 %$28,931 $29,354 $(423)(1.4)%
Cost of product revenue15,291 14,362 929 6.5 %48,246 40,335 7,911 19.6 %
Total cost of revenue$25,422 $23,449 $1,973 8.4 %$77,177 $69,689 $7,488 10.7 %
Gross profit$56,627 $44,496 $12,131 27.3 %$163,452 $147,372 $16,080 10.9 %
Gross margin69.0 %65.5 %67.9 %67.9 %
Gross margin was 69.0% and 65.5% for the three months ended September 30, 2023 and 2022, respectively, or an increase of 350 basis points, and 67.9% for the nine months ended September 30, 2023 and 2022.
Consignment revenue is recognized net of seller payouts and cost of items sold, whereas for product revenue, seller payouts and cost of items sold are included as a component of cost of revenue. As such, product revenue has a lower gross margin than consignment revenue.
The increase in gross margin for the three months ended September 30, 2023 as compared to the same period in 2022 was primarily due to the mix shift between consignment and product revenue as our RaaS partners transition to the consignment model. Consignment revenue increased by 39.2% while product revenue decreased by 8.3%. The increase in gross margin was primarily due to a 340 basis point decrease in shipping, labor and packaging costs as a percentage of revenue.
Gross margin for the nine months ended September 30, 2023 was flat as compared to the same period in 2022, which was due to a 210 basis point increase in payouts, offset by a similar decrease in shipping, labor and packaging costs.
Cost of Consignment Revenue
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Cost of consignment revenue$10,131 $9,087 $1,044 11.5 %$28,931 $29,354 $(423)(1.4)%
Consignment gross margin82.5 %78.1 %81.7 %78.7 %
Consignment gross margin was 82.5% and 78.1% for the three months ended September 30, 2023 and 2022, respectively, or an increase of 440 basis points, and 81.7% and 78.7% for the nine months ended September 30, 2023 and 2022, respectively, or an increase of 300 basis points.
The increase in consignment gross margin for the three months ended September 30, 2023 as compared to the same period in 2022 was primarily due to a 410 basis point decrease in outbound shipping, labor and packaging costs.
The increase in consignment gross margin for the nine months ended September 30, 2023 as compared to the same period in 2022 was primarily due to a 290 basis point decrease in outbound shipping, labor and packaging costs.
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Cost of Product Revenue    
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Cost of product revenue$15,291 $14,362 $929 6.5 %$48,246 $40,335 $7,911 19.6 %
Product gross margin36.8 %45.6 %41.8 %49.3 %
Product gross margin was 36.8% and 45.6% for the three months ended September 30, 2023 and 2022, respectively, or a decrease of 880 basis points, and 41.8% and 49.3% for the nine months ended September 30, 2023 and 2022, respectively, or a decrease of 750 basis points.
The decrease in product gross margin for the three months ended September 30, 2023 as compared to the same period in 2022 was primarily due to the growth of our European operations as a percentage of product revenue, which has lower gross margin, partially offset by a 340 basis point decrease in labor, shipping and packaging costs.
The decrease in product gross margin for the nine months ended September 30, 2023 as compared to the same period in 2022 was due to the growth of our European operations as a percentage of product revenue, which has lower gross margin, partially offset by a 100 basis point decrease in labor, shipping and packaging costs.
Operations, Product, and Technology
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Operations, product, and technology$40,355 $38,702 $1,653 4.3 %$118,473 $121,824 $(3,351)(2.8)%
Operations, product, and technology as a percentage of total revenue49.2 %57.0 %49.2 %56.1 %
Operations, product, and technology expenses increased $1.7 million, or 4.3%, for the three months ended September 30, 2023 as compared to the same period in 2022. The increase was primarily due to a $1.7 million increase in facilities, technology, and other allocated costs and a $0.4 million increase in personnel-related costs, offset by a $0.3 million decrease in inbound shipping costs and a $0.2 million decrease in professional services.
Operations, product, and technology expenses decreased $3.4 million, or 2.8% for the nine months ended September 30, 2023 as compared to the same period in 2022. The decrease was due to a $4.7 million decrease in personnel-related costs, a $1.0 million decrease in inbound shipping, and a $0.9 million decrease in professional services, offset by a $3.2 million increase in facilities, technology, and other allocated costs.
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Marketing
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Marketing$19,406 $14,752 $4,654 31.5 %$54,919 $51,370 $3,549 6.9 %
Marketing as a percentage of total revenue23.7 %21.7 %22.8 %23.7 %
Marketing expenses increased $4.7 million, or 31.5%, for the three months ended September 30, 2023 as compared to the same period in 2022. The increase was due to a $4.6 million increase in social advertising and other lead generation costs and a $0.8 million increase in personnel-related costs, partially offset by a $0.6 million decrease in professional services and other costs.
Marketing expenses increased $3.5 million, or 6.9%, for the nine months ended September 30, 2023 as compared to the same period in 2022. The increase was due to a $2.9 million increase in social advertising and other lead generation costs and a $1.8 million increase in personnel-related costs, of which $1.0 million was related to stock-based compensation expense, partially offset by a $1.1 million decrease in professional services and other costs.
Sales, General and Administrative
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Sales, general, and administrative$15,058 $15,232 $(174)(1.1)%$47,147 $47,276 $(129)(0.3)%
Sales, general, and administrative as a percentage of total revenue18.4 %22.4 %19.6 %21.8 %
Sales, general and administrative decreased $0.2 million, or 1.1%, for the three months ended September 30, 2023 as compared to the same period in 2022. The decrease was due to a $0.3 million decrease in personnel-related costs, partially offset by a $0.1 million increase in facilities, technology, and other costs.
Sales, general, and administrative expenses remained flat for the nine months ended September 30, 2023 as compared to the same period in 2022, which was due to a $2.3 million decrease in professional services, partially offset by a $1.6 million increase in personnel-related costs and a $0.6 million increase in facilities, technology, and other costs.
Interest Expense
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Interest expense$732 $103 $629 610.7 %$1,530 $764 $766 100.3 %
Interest expense increased $0.6 million for the three months ended September 30, 2023 as compared to the same period in 2022. The increase during the three months ended September 30, 2023 was primarily due to $0.5 million of capitalized interest expense during the three months ended September 30, 2022 in conjunction with the build-out of our distribution centers. There was no such capitalized interest during the three months ended September 30, 2023.
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Interest expense increased $0.8 million for the nine months ended September 30, 2023 as compared to the same period in 2022. This increase was primarily due to a $0.6 million increase in interest costs and a $0.3 million decrease in capitalized interest expense in conjunction with the build-out of our distribution centers, offset by a $0.1 million decrease in amortization of debt issuance costs.
Other Income, Net
Three Months EndedChangeNine Months EndedChange
September 30,
2023
September 30,
2022
Amount%September 30,
2023
September 30,
2022
Amount%
(in thousands, except percentages)
Other income, net$(845)$(624)$(221)35.4 %$(2,006)$(1,108)$(898)81.0 %
Other income, net increased $0.2 million for the three months ended September 30, 2023 as compared to the same period in 2022. The increase was primarily due to an increase in interest income on our marketable securities due to a higher interest rate environment.
Other income, net increased $0.9 million for the nine months ended September 30, 2023 as compared to the same period in 2022. The increase was primarily due to an increase in interest income on our marketable securities due to a higher interest rate environment.
Liquidity and Capital Resources
We have historically generated negative cash flows from operations and have primarily financed our operations through private and public sales of equity securities and debt. As of September 30, 2023, we had cash, cash equivalents and short-term marketable securities of $74.1 million. Additionally, we have a term loan facility (“Term Loan”) under which $38.0 million remained available to be drawn as of September 30, 2023 and we were in full compliance with our debt covenants under the Term Loan as of that date. See Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further discussion on our Term Loan.
We expect operating losses and negative cash flows from operations to continue in 2023 as we continue to invest in growing our business and our infrastructure. Our primary use of cash includes operating costs such as distribution network spend, product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our operations and our growth. Additionally, our primary capital expenditures are related to the set-up, expansion and/or automation of our distribution network. Based upon our current operating plans, we believe that our existing cash, cash equivalents and short-term marketable securities will be sufficient for at least the next 12 months to meet our short- and long-term capital requirements, and we do not anticipate expanding our distribution network to include additional locations in the near term. Our cash flow forecast is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.
Our future capital requirements will depend on many factors, including but not limited to, the timing of our increased distribution center automation and expansion plans to support planned revenue growth, the expansion of sales and marketing activities, the potential introduction of new offerings and new RaaS clients, the continuing growth of our marketplaces and overall economic conditions. However, we expect that our capital expenditures will be limited in the remainder of 2023 as we have completed the first phase of our new distribution center in Texas. We may seek additional equity or debt financing. See the section titled “Risk Factors—Risks Relating to Our Indebtedness and Liquidity—We may require additional capital to support business growth, and this capital might not be available or may be available only by diluting existing stockholders” within the 2022 10-K.
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Cash Flows
The following table summarizes our cash flows for the periods indicated:
Nine Months Ended
September 30,
2023
September 30,
2022
(in thousands)
Net cash provided by (used in):
Operating activities$(14,616)$(36,939)
Investing activities48,353 (6,961)