Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ThredUp Inc (TDUP, Financial) reported a revenue of $79.6 million, marking a year-over-year increase of 5%.
- Consolidated gross margin reached 69.5%, with an 8% gross profit growth year over year, driven by the company's transition to consignment.
- Active buyers increased to 1.7 million, up 4% year over year, with orders growing 9% compared to the same period last year.
- ThredUp Inc (TDUP) expects to achieve positive adjusted EBITDA in Q2 and nearly triple its full-year adjusted EBITDA results compared to the last outlook.
- The company has made significant AI investments, launching new AI-powered tools and features to enhance the customer experience and drive long-term growth.
Negative Points
- Adjusted EBITDA for Q1 was negative $736,000, or -0.9% of revenue, reflecting ongoing challenges despite improvements.
- Despite revenue growth, product revenue shrank by 38% due to the ongoing transition to a consignment model.
- The transition to consignment, while beneficial for gross margins, is expected to slightly mute revenue growth due to its accounting treatment.
- ThredUp Inc (TDUP) incurred approximately $3 million of nonrecurring charges in Q1 due to a 20% reduction in its global corporate workforce.
- The company expressed caution regarding the consumer environment, noting challenges such as inflation and higher interest rates, which could impact future performance.
Q & A Highlights
Q: Can you discuss the outlook for active buyers, especially considering the quarter-over-quarter decline in Q1?
A: (James Reinhart, CEO) - Active buyer growth generally aligns with revenue growth. Seasonality effects and a pullback in Q1 spending impacted the numbers, but we expect reacceleration through the year. Active buyers are crucial to our long-term growth strategy and should closely track the underlying business growth rate.
Q: What are the main drivers behind the improved gross margin outlook for the year?
A: (Sean Sobers, CFO) - The improvement is primarily due to overall operational enhancements, such as increased items per order, reduced logistics costs, and more automation. The accelerated consignment shift also contributes to this positive outlook.
Q: How are the recent AI investments expected to impact the business, particularly regarding gross margins?
A: (James Reinhart, CEO) - The AI investments, currently in early stages and focused on customer-facing features, are expected to structurally improve gross margins over time. These investments should enhance customer experience and operational efficiency.
Q: Could you elaborate on the expected impact of the business model changes and reorganization on financial performance?
A: (James Reinhart, CEO) - The structural changes and reorganization are set to significantly reduce costs, thereby improving EBITDA and free cash flow. These adjustments are crucial for achieving profitability and sustaining long-term growth despite a challenging revenue outlook.
Q: What is the rationale behind the conservative sales guidance for Q2 and the full year?
A: (James Reinhart, CEO) - The conservative guidance is due to the uncertain macroeconomic environment and the need to observe the impact of recent significant changes within the company, including new product launches and strategic investments.
Q: How is the European market performing, especially with the transition to consignment?
A: (James Reinhart, CEO) - Europe is showing positive signs, particularly in consignment processing and receipts. Despite a challenging demand environment due to higher inflation, the appointment of a new GM with extensive marketplace experience is expected to drive further growth and efficiency in the region.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
