All right. Morning, everyone. My name is Ike Boruchow , Softlines Analyst at Wells Fargo. We are here in Laguna Beach again, for our consumer conference, talking about the discretionary space with a lot of our companies. We have one of those companies with us this morning, ThredUp. We have the CEO and Co-Founder, James Reinhart, Sean Sobers, CFO. I would like to talk about recent Q2 results. I want to talk about the value consumer. I want to talk about the low end. I want to talk about AI and agentic. We are going to go through a litany of topics here, but maybe just start with Q2, James-
Yeah.
-revenues, I think were up 17%, buyers up 20%+ , orders up 20%+, so a lot of healthy demand. Talk about the drivers that you have been seeing to demand the sustainability of those drivers.
Yeah, sure. Thanks for having us. Q2 was a record quarter for us across all those dimensions, buyers, sellers, orders, revenue. I think it was the result of six plus quarters of record new buyer growth. We had been very successful acquiring new buyers, turning them into repeat buyers, and a lot of that was going well. All the work that we did on improving the customer experience, conversion rates were strong, prices were strong. There was a number of things, I think, that were all going quite well in Q2. It was also the seventh quarter for us of record top line and expanding EBITDA, right? Generating free cash flow. In general, Q2 was strong across the board, I think.
Yeah, no, I think if you just looked at Q2, you would be like, "Everything is awesome.
Yeah.
But at the point of where you're looking forward, or you look back at what we did through Q2, it just got harder. I know we're g oing to talk about the consumer and all that too, but the numbers for Q2, record across the board.
Yeah. Before we get to the go forward, which we will go through, it's interesting you guys have attended this event for years, and EBITDA had been negative, free cash flow has been negative, balance sheet questions, and you look at the business now, positive EBITDA, generating free cash, $60 million in cash on the balance sheet. How'd you get there, and what do we think about the future, just thinking about the capital structure and the balance sheet? How do we think about the future from here?
Yeah, I think the catalyst was really Q4 of 2024. So in Q4, for those of you who haven't followed it over the last few years, when we went public in 2021, at the end of 2021, we bought a business in Europe, end of 2021, called Remix. We'd owned that business for a number of years, but in 2022, when interest rates and inflation went up in the U.S., it was equally bad or worse in Europe. So, our Remix business really struggled. So we tried to turn that business around over a couple of years. The net of it was that our U.S. business was actually reasonably healthy during that period, but it had to effectively cover up the challenges we were having in Europe.
So we eventually got rid of the European business in, we announced that we were going to get rid of it in the summer of 2024, an d then we closed that transaction in November of 2024. I think that was really the turning point where it was like, okay, the business was simpler, we were U.S. only. We could turn all of our investments, our best people back to the U.S. So beginning in Q4 of 2024, you saw the business just rapidly accelerate growth. It was +10% to +12% to plus-
16%.
-16% to + 33% to Q4 was + 18%. So 2025 was really a nice run of growth, all driven by improvements in both new customer acquisition and the product experience, which we invested a ton of in 2024, really rebuilding the fundamentals of the business. Once you had the fundamental funnel in much better shape, and you are able to add new buyers, that was the healthy growth. Now, right now, in the second half of this year, we are comping 23%, 24% growth in the second half last year. We always knew that comps in the second half would be challenging, and here we are.
Yeah, and before we go to the go forward, it might be a silly question, but just with the cash on the balance sheet and the fact that you are still growing and still have good visibility, the model works, thoughts on uses of cash? Is it just continued reinvestment? Would you ever think about the idea of a buyback or anything that we have not done since you have been public?
No, not right now. We think that market is too big in second-hand, opportunity is too big, customer acquisition is efficient. So I think the best thing to do with the cash is to invest it and grow the business. The business is still $350 million. It is still modest size, and so I think we have got a long way to run before that. So I would not say never, but it is probably not the best use of it.
Do not model the buybacks.
Don't model the buybacks.
You shouldn't ask M&A.
The main question I wanted to get to is, I always really find your perspective helpful. Your business is relatively small, but I feel like you have your arms around that value consumer in the U.S. pretty well.
Yep.
You guys report usually typically early, and you are sometimes a canary in the coal mine.
Yeah.
It feels like that is what happened on your Q2 call. Can you talk to us about how you view the state of, let us call it the value consumer, maybe the transition of Q2 to Q3, what you saw in those months, and just the biggest changes that you saw in behavior?
Yeah. Being a canary is not always a good thing. The canaries die, right? Maybe we could stop using that.
Sorry about that.
No, but the reason I think that we are a useful indicator is, despite $350 million in net revenue, we will sell 25 million units this year across 35,000 brands, 100 categories. So it is a pretty wide indicator, right, of what is happening. We can see across the brands and the categories and the price points, what is happening, I think in some ways maybe earlier than a lot of other folks. What we saw, beginning in really after Memorial Day, early mid-June, we just saw the consumer being much more picky. This was primarily customers who were, I would consider budget shoppers. To give you an illustrative example, it would be an item that a budget shopper might have bought for $20 last year. There was no demand curve at $20.
Because of our technology, we are able to probe, well, what is willingness to pay for that unique item? It turns out, I am sort of making these examples up, instead of wanting to pay $20, they are like, "Actually, the clearing price is $18." For this brand, it used to be $22, and now it is $19. Because of the breadth of our assortment, and we are putting 100,000 new items online every day, very quickly, the data science can be like, "Oh, there is actually a mismatch among segments of the demand curve that show that there is some weakening there." We started to see it in June, and I think we were able to react to it in June, but it got a little harder, right? As we got into July, all those things we were seeing were materializing.
We just knew, Sean and I were just like, "Look, it is going to be tough for the next few months." We made the conscious decision to focus on meeting the customer where they were. From a strategy perspective, our point of view is it is a vastly superior strategy to maintain customer engagement, even at lower prices, than it is to say, oh, we are going to protect unit margins and abandon the demand curve. You know what? It is a lot more expensive to go out and acquire all those customers again, than it is to inflect price $0.50, $1, right, as things get better. The way I would think about the business is, and this is where I think people get a little bit lost in the plot, is we guided that the second half would be about $7 million less.
We are going to sell 14 million items roughly in the second half. So we are talking about $0.50, right? Because there are so many dials to turn in the business. I would much rather trade that $0.50 and have some very strong and engaged buyer cohorts. Then whenever this resolves itself, we do not know when, I feel extremely confident we can get that $0.50 back, or $0.60, or $0.70, or $1. I think the business has that real snapback opportunity, but that snapback opportunity only comes when you have lots of buyers. Otherwise, you have great unit economics, and then you are at the whim of Meta and Pinterest and Google.
Who can go back and acquire the half a million buyers you lost. So we were very disciplined in thinking through the strategy, and I have a lot of confidence. We really understand what is going on, and we just have to navigate through it.
What's the line that gets crossed when the outlook you're giving shifts a bit, and you start to talk about more margin versus demand? What has to happen? Is it a certain amount? Is it duration, or is it a step down further?
Well, two things can happen, which is in a world where your demand curve is. Let's just say that the world doesn't change at all, right? So gas prices are where they are, and consumer uncertainty is the same way. There's basically two things that you can do that change this, independent of that. One is you expand the surface areas in which you sell. So right now, we're primarily a direct-to-consumer online business, but you could launch new ways to sell that product. For example, our Direct Listing business, right? Or we're talking actively about what to do with live selling, right, as an example. So you expand the services, which increases the overall demand curve, and then that gives you some ability to inflect price. So that's one. The second is just your mix of goods.
And so that same item that you could sell for $20 that you now need to sell for $18, maybe that item was an Athleta pair of leggings. Maybe athleisure isn't the way we should talk about this. Maybe it was a $20 J.Crew dress, right? But now, instead of that J.Crew dress, because of your improvements in your premium mix, which is what we're working on, that's now not a $20 J.Crew dress, that's a $38 Reformation dress. And there are superior unit economics on a Reformation $38 dress than a J.Crew dress. So we're basically taking two approaches, expand surface areas and improve the mix. And I think those are things that can help us inflect irrespective of the demand environment.
How do you separate, clearly since you guys reported, there's been other names come out.
Every day it feels like.
Yeah. I think that's fair. Before that, I feel like you were more all alone on the idea. How did you know, or how do you know that this is macro versus micro, that the underlying model still works? What gives you that confidence?
You could just see it in the visit rates of customers. You can see it in the buyers are there. I think that's the thing, is buyers were there. You had buyers hanging around the hoop. It's just that you weren't getting the supply-demand curve to match up. When you look, you've got people coming to the store, you've got sellers coming.
Sellers, and our premium mix was at an all-time high. You've got sellers, you've got buyers there. To me, that suggested fundamental health. You can see it pretty clearly. We tracked this, the daily, weekly visitors, unique visitors, conversion rates, and if I showed you the chart, you'd be like, "What happened there?" You'd be like, "Oh, that's when consumers started to be like, 'I've gorged on my Memorial Day sale, and now summer gas prices are starting to creep up on me.'" We saw it, and we responded to it, and I think it feels great, actually, as a business, to be able to see it in the data so clearly, be able to respond, because for all the reasons that we were able to respond on the downside, we can also respond just as quickly on the upside. We plan to.
Well, I think we would just add to that, too, is I think we fought really hard not to assume it was the macro.
Yes, absolutely.
James is always like, "Okay, if it's not the macro, what is it?
Yeah.
We spent a good week plus trying to prove that it wasn't the macro.
Yeah.
It was the macro.
Yeah. I told the team, "You're not allowed to say that word. If I hear that word again
Yeah.
Right? But at some point, you've ruled out all the things, and the only thing that we could not rule out was some consumer softening.
When was the last time, because again, this has happened a few times where you've been able to pinpoint this.
Yeah.
When was the last time this happened? Are the learnings helping you in terms of how you are combating it at this time? Walk us through your thought process as you become a bigger business.
Yeah, I think past, what is it? Past results don't predict the future. I think we have lived through various volatile times in the past, but I think just generally, our data and the way we are able to look at the business is far superior to anything we had five, seven years ago. I think 2017, 2018, there was some consumer softness that I remember seeing. But now, the business almost is a victim of we almost have too much data at times. That you get so micro. But we can see everything, and yeah, we are confident we can navigate through it.
At this point, you have a new guide for the back half. You have a view of the consumer. Can you just remind us, what is your expectation? How do you expect this to play out? When would you hope to get to a more normalized environment where margins and demand are back to healthier levels?
Tell me what I missed. Jump in.
Yeah.
Or you go ahead.
No, go ahead.
No, go ahead.
No, I think James hit it, is we lowered the back half by $7 million. Not vey significant. Still growing, still EBITDA positive, still cash flow generative, and I think you'd probably take a better shot at how does it recover, when does it recover? I think there's a lot tied up in-
Yeah.
-the consumer and gas prices that we cannot say, because we just do not know. It is not like we have the secret answer, and I think, from the time we did earnings to now, it is not like it has gotten better.
Yep.
I think we are where we are until something changes, and I think I am a little more positive on when there is resolution in the Strait that that lack of uncertainty will help. It is not even a gas price change, it is just the fact that we know it is going to change. I think you probably get a lot more activity at that point, and then it should be a slow burn in a good way over a long period of time, because I do think it is going to take months to come back.
Yeah, and I think as customers start to feel a little bit better, I do think that the strategy of maintaining customer engagement, and having cohorts be visiting the site, maybe they are purchasing a little less frequently than they did before, or they needed a better deal. But I think having them on the sideline ready to go, I think is valuable as, even if things, to Sean's point, just normalize a little bit, we can start to really press there. And the nice thing is we can probe on price and mix. A lot of brands are thinking about these in dollars or 10. We probe at the penny.
At any moment in time, there are half a dozen to 10 pricing experiments running where we are probing different mixes to different customers, trying to find the right way to drive top line and margin, and they are all named after vegetables. Right? When I look at a dashboard, it is like, here is how Carrot is performing against, I kid you not, Carrot versus Tomato versus. And so we are constantly probing these things, and what they do is that the same way they caught the signal on the way down, like, "Oh, actually, there is actually greater willingness to pay with this setup." Which drives better contribution, better net revenue. And so right now, we are just managing the dials to deliver what we think is appropriate cash flows and appropriate top line. But I think we will be able to see as things change over the next couple of quarters.
How do you think holiday plays out from a pricing, demand perspective within the value space?
Generally, holiday is not a big quarter for secondhand. People don't often buy secondhand for gifts and so forth. It will be interesting this year. I honestly don't know. Maybe in a world where consumers are more stretched than buying the secondhand handbag as a gift becomes more popular. I think our strategy is to probe that and figure out where. Leather goods tend to be an area for us around the holiday that can be good, and so we're trying to make sure we've got the right assortment.
Can we talk about innovations around AI, what you've been leaning into, what's interesting? I know you're-
Yeah.
-at the forefront of it, and you talk. What do you think is going on overall high level within AI, but then more specifically, how have you been using that in your business? What are more opportunities that are early innings or game hasn't started?
Yeah, I think agentic commerce broadly is the next wave that I think is similar to online. I think if you went from offline to online, I think we are going from online to agentic. The reason I think about it like that, because when businesses moved online, people still shopped in stores. I think even as agentic commerce takes off, people are still going to shop online. People are still going to shop in stores. I think businesses need to be prepared for the shift of what their agentic strategy is, right? What their online strategy is, what their physical, if you have physical stores. I have been thinking a lot about that transition. I think fashion and retail is probably going to be a later adopter to this because I think about fashion as a more considered purchase.
I think, maybe for men it comes a little quicker because I think men tend to be simpler in our fashion purchases. I am not convinced that agents are going to be wildly successful shopping for women out of the gate. There is going to be a lot of innovation here. I think it is actually a really exciting space. The way we think about it is we need to do three things. One, we need to make sure that in any chat client, right, that the way we used to think about SEO, we think about agentic optimization. Somebody says, "I want to clean out my closet," or, "I want to sell some items into ChatGPT." We got to make sure we are right there. Whether that is Perplexity, or it is ChatGPT, or it is Claude, we have to nail agentic optimization.
The second is we need to, and we are, develop MCPs to make sure that any of the agents that do want to shop for secondhand, that our data is structured in the back end to serve, whether it is the MCP from Instinct or it is from Muse, however that, or Town or ones that have not been invented yet, but are likely coming.
You got to nail that. The third is what does our agent experience look like for customers on the buying and selling side? You can imagine building an agent experience that for sellers, right, that is quite valuable, that helps index their closets and things like that. So we are thinking about it both from a consumer angle, an agent level, and then AIO.
Where do you think the biggest opportunity for you lies potentially?
I am a believer that agents are going to. If you were to ask, for those of you who have played with Instinct or if you have played with Muse lately, if you were to ask them to go out and acquire, find me a, just use Reformation, right? Find me a Reformation dress size four, and I want it to be used. Let's imagine that that customer is like, "And I want it to be used." I think ThredUp has a really powerful right to win there because we have got this broad selection. The way agents are going to evaluate businesses when they go to shop is based on the structure of the data. ThredUp's data structure, I think is as clean as it gets in secondhand. We have got all the metadata because we are doing it versus in eBay, for example, right? It is all peer-to-peer or Poshmark, right?
Peer-to-peer data, if you have ever looked at the data set, it is much messier. The pictures are lower quality, the consistency with which the data is actually put together. Our data is actually structured and quite clean. It is a long way of saying, I actually think the agent, right, the machine will be like, "Oh, that data is clean. Oh, that image is nice. Oh, these guys have a return policy." There is actually trust quality of the data that I actually think puts ThredUp in a superior position relative to other secondhand companies. We are spending a lot of time nailing that, because when the agent comes back and says, "Hey, Ike, I found your size for a Reformation dress," or, "I found multiple size for Reformation dresses." They are going to return a very clean experience on ThredUp.
Or Cindy Lou in St. Louis with a dress that is shot on her bed, who has shipping fees potentially and doesn't take returns and you have to negotiate with, or this buy it now option through ThredUp, right? I do think there is actually some real advantage for us here, and we are going to lean into that.
It sounds like where you started, agentic, you wouldn't put fashion or softlines in the risky bucket when it comes to agentic.
I think it's going to be much harder to crack. I really do. I think for the same reason that people still love to shop in stores, right? If you believe when online launched, that stores went to 10% and online went to 90%, then I'd be much more confident that agentic would get to that. But I think still people, women in particular, it's a considered purchase.
AI or any of the new innovations that are hitting, has it affected your go-to market strategies to acquire new consumers? Has anything shifted in that front of late?
No, but I think what it does, it's accelerated, I think the setting up the data infrastructure to communicate with all of these folks. We knew this was coming and had been building stuff on our own, but I think we've accelerated making sure that our protocols are set for those. But I think there's other innovations, like I think live shopping is quite interesting. What eBay is doing, eBay Live, Whatnot. I think this year is really a breakout moment for live selling, and so I think we're thinking a lot about that, which is AI-enabled. Because I think a lot of what we will have to do to do that well will require using our technology to efficiently scale one of one items.
Those parts of the business that are younger-
Yeah.
-and you're thinking about them, like direct or live selling.
Yeah.
Can you talk about some of those and what you're seeing?
Yeah. On our direct business, Direct Listing continues to go well. We didn't put out much public around that business, but it's continuing to drive engagement, sellers, buyers, and I think.
Just to remind everyone, direct selling is
Direct selling, yeah, it's different than our core marketplace. You as a seller can list your own item on ThredUp, but with certain constraints, and it's really designed for casual sellers. Somebody who has a history of sending ThredUp their clean-out kits. On our core marketplace, if there's a few items that maybe you used to sell on eBay, we want to consolidate all that selling on ThredUp. It's designed to really consolidate, and really own the supply chain.
Is that more for high ticket, more premium product?
Yes. The direct selling items typically are twice the price of our core marketplace. Yeah, so direct selling and then, we talked a little bit about live selling as something we're exploring. I think agentic and agent-based commerce. We're spending a lot of time thinking about how social creators drive awareness, and if you're familiar with businesses like a ShopMy or an LTK, these tend to be pretty hands-on for creators, because they have to tag product. We've been thinking a lot about what is an AI-driven approach to help them build second-hand affiliate stores. Yeah, to where we started, we're thinking about all the various surface areas that we've been planning to build into. I think we've probably accelerated our timeline on them of those.
Anything changing on resale overall, your view of the market growth rates, just as you think about the industry at a big picture?
I think the challenge in the economy is going to accelerate resale over time. I think, again, despite our business selling items at slightly lower prices, we are selling more units than ever. More people are shopping resale, I think, than ever. You can see it with Vinted coming into the U.S., you can see with Depop and what eBay is doing there. I think the whole industry is growing as well as it has. How that industry ultimately generates flow-through, because when you read the resale reports, those are all GMV. We all know you can not pay your bills with GMV. I think how businesses monetize this growing category, I think is the area to watch.
I am going to end with my last question. I was actually listening to a podcast at the gym this morning about having the best conversations.
Okay.
I was giving you the best questions and the worst questions you can ask for small talk.
Yeah.
I'm going to use the one that basically sounded like the best one. Feel free to use this at your next get together.
Can't wait. I'm all about it.
What are you most excited about?
Can I give you a better one than that?
Wow.
Wow. There's an Oliver Wendell Holmes, former Supreme Court No, he's dead. Supreme Court justice, who said, and I learned this from Al Gore, "What have you come to know lately?
Okay.
Which is, what have you learned? I'll answer your question, if we have time. I think-
I'll have to push down my questions.
Look, I am most excited by the fact that the structure of our business, the fundamentals are as good as they have been in a long time. The economy is challenging. We are not going to be permanently in this state. It might be longer than any of us would like, this level of uncertainty, but it will end, and we are going to have more customers, more great supply, more product services than ever. We just kind of have to navigate through it. It is a feeling of knowing that we are working on all the right stuff and we have a real competitive advantage and moat in our business. Nobody is trying to do what we are trying to do because we have built infrastructure over the last 10 years, it makes it very hard to do what we do.
When you have a real defensible advantage and you believe the macro stuff is temporary and the fundamentals are good, you just kind of have to keep executing. I am excited about the idea that we will get through this and nothing like a little pain. As a Founder, pain and constraint breeds creativity, it breeds speed, and I think that the way that as an organization, we have responded to this is great. I think people are like, "Yeah. How do we punch through it?" I think that makes me excited.
Great. All right. Well, James, Sean, appreciate you guys. Thanks for coming.
Thanks, Ike.
Thanks, everyone.
Thanks, guys. Bye.