8-K: ThredUp Announces Q3 2024 Results, Raises Guidance for US Business Amid European Divestiture

ThredUp reported a decrease in revenue for the third quarter of 2024, but raised its guidance for the US business and announced a management buyout of its European operations.

Summary

• ThredUp's total revenue for the third quarter of 2024 was $73.0 million, an 11% decrease year-over-year.
• U.S. total revenue was $61.5 million, a 10% decrease year-over-year.
• Gross profit decreased by 8% year-over-year to $52.0 million, with a gross margin of 71.2%.
• U.S. gross profit decreased by 9% year-over-year to $48.8 million, with a U.S. gross margin of 79.3%.
• Active buyers decreased by 7% to 1.632 million, and orders decreased by 14% to 1.553 million year-over-year.
• U.S. active buyers decreased by 7% to 1.248 million, and U.S. orders decreased by 10% to 1.172 million year-over-year.
• The company reported a net loss of $24.8 million, which included a $9.8 million impairment of long-lived assets related to European operations.
• Adjusted EBITDA loss was $2.5 million, or a negative 3.4% of total revenue.
• U.S. Adjusted EBITDA was $0.7 million, or 1.1% of U.S. total revenue.
• ThredUp has signed a non-binding term sheet for a management buyout of its European business.
• The company is raising its Q4 and full year 2024 guidance for the U.S. business.
• For Q4 2024, ThredUp expects total revenue between $67.2 million and $69.2 million, and U.S. total revenue between $58.0 million and $60.0 million.
• For the full year 2024, ThredUp expects total revenue between $300 million and $302 million, and U.S. total revenue between $250.8 million and $252.8 million.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While there are positive aspects like improved gross margins and raised guidance for the U.S. business, the overall revenue decline, net loss, and divestiture of the European business temper the positive outlook. The company is facing challenges but is taking steps to address them.

Positives

• Gross margin increased to 71.2% in Q3 2024, up from 69.0% in Q3 2023.
• U.S. gross margin increased to 79.3% in Q3 2024, up from 78.5% in Q3 2023.
• U.S. Adjusted EBITDA was $0.7 million, or 1.1% of U.S. total revenue, compared to $0.1 million or 0.2% in Q3 2023.
• The company is raising its Q4 and full year 2024 guidance for the U.S. business.
• ThredUp launched its suite of AI tools in August, with over 60% of searches leading to item exploration and a doubling of search term diversity.
• ThredUp helped shape a California-statewide bill (SB707) aiming to minimize landfill disposal and environmental impacts.

Negatives

• Total revenue decreased by 11% year-over-year to $73.0 million in Q3 2024.
• Active buyers decreased by 7% year-over-year to 1.632 million in Q3 2024.
• Orders decreased by 14% year-over-year to 1.553 million in Q3 2024.
• The net loss for Q3 2024 was $24.8 million, including a $9.8 million impairment related to European operations.
• The company is exiting its European business.

Risks

• The company's ability to successfully exit its European business and find a strategic alternative for it is uncertain.
• The company faces risks related to attracting new users and converting them into buyers.
• The company's ability to achieve profitability is not guaranteed.
• The company operates in an intensely competitive market.
• The company's ability to effectively deploy new technologies, such as AI, is a risk.
• Economic and industry trends, including foreign currency exchange rate fluctuations, inflation, and changing consumer habits, pose risks.
• The company's ability to comply with applicable laws and regulations is a risk.
• The company's ability to successfully integrate and realize the benefits of past or future strategic acquisitions or investments is a risk.

Future Outlook

ThredUp expects total revenue in the range of $67.2 million to $69.2 million for Q4 2024 and $300 million to $302 million for the full year 2024. U.S. total revenue is expected to be in the range of $58.0 million to $60.0 million for Q4 2024 and $250.8 million to $252.8 million for the full year 2024. The company also provided guidance for gross margin and adjusted EBITDA loss margin for both Q4 and the full year.

Management Comments

• ThredUp CEO and co-founder James Reinhart stated, 'Though we know there is still work ahead, we have made clear progress in course-correcting in the U.S. since last quarter.'
• James Reinhart also said, 'With momentum in our marketplace, we are pleased to be raising our U.S. Q4 and 2024 revenue outlook and are excited for the opportunities in front of us.'

Industry Context

The announcement reflects the challenges and shifts in the online resale market, with ThredUp focusing on its core U.S. business while divesting its European operations. The company's investment in AI and its efforts to shape legislation indicate a proactive approach to adapting to industry trends and regulatory changes.

Comparison to Industry Standards

• While ThredUp's gross margin improvements are positive, the overall revenue decline and decrease in active buyers and orders are concerning when compared to other e-commerce platforms.
• Companies like Poshmark and The RealReal, while operating in slightly different segments of the resale market, have shown varying degrees of success in maintaining growth and user engagement.
• ThredUp's move to divest its European business is a significant strategic shift, potentially indicating a need to focus on core markets, similar to how some other e-commerce companies have streamlined operations to improve profitability.
• The company's adjusted EBITDA loss, while improved year-over-year, still lags behind some of the more profitable e-commerce players, highlighting the need for further cost management and efficiency improvements.
• The investment in AI is a positive step, but its impact on user engagement and revenue growth will need to be closely monitored against industry benchmarks for technology adoption.

Stakeholder Impact

• Shareholders may be concerned about the revenue decline and net loss, but may be encouraged by the raised guidance for the U.S. business and the divestiture of the European operations.
• Employees may be affected by the restructuring and divestiture of the European business.
• Customers may see changes in the company's offerings and focus as it shifts its strategy.
• Suppliers and creditors may be impacted by the company's financial performance and strategic changes.

Next Steps

• ThredUp will work towards closing the management buyout of its European business by the end of 2024.
• The company will focus on its U.S. business and continue to invest in AI and technology.
• ThredUp will continue to monitor and adapt to trends in the online resale market.

Key Dates

Keywords

ThredUp, Resale, Secondhand, E-commerce, Apparel, Financial Results, Earnings, Active Buyers, Gross Margin, Adjusted EBITDA, AI, Management Buyout, European Business, Guidance