UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~June~~September 30, 2022

ORor


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

For the transition period from ~~__________to __________~~____________________ to ____________________

Commission ~~file number:~~File Number: 001-40249

ThredUp Inc.

(Exact name of registrant as specified in its charter)


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

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

(415) 402-5202

(~~Registrant's~~Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A ~~common stock,~~Common Stock, $0.0001 par value per share

TDUP

The Nasdaq Stock Market LLC

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

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

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


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

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

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

~~The registrant had 65,594,295~~There were 69,960,710 shares of Class A common stock ~~$0.0001 par value per share,~~ and ~~34,487,761~~30,844,696 shares of Class B common stock ~~$0.0001 par value per share,~~ outstanding as of ~~August 8,~~November 7, 2022.

TABLE OF CONTENTS


		Page ~~No.~~Number
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Unaudited Condensed Consolidated Balance Sheets	5
	Unaudited Condensed Consolidated Statements of Operations	6
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	7
	Unaudited Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity	8
	Unaudited Condensed Consolidated Statements of Cash Flows	910
	Notes to Unaudited Condensed Consolidated Financial Statements	1011
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3127
Item 4.	Controls and Procedures	28

	PART II. ~~FINANCIAL~~OTHER INFORMATION
Item 1.	Legal Proceedings	3430
Item 1A.	Risk Factors	3430
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3430
Item 3.	Defaults Upon Senior Securities	3530
Item 4.	Mine Safety Disclosures	3530
Item 5.	Other Information	3530
Item 6.	Exhibits	3630
	~~Signature~~Signaturess	3732

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

•our ability to continue to generate revenue from new Resale-as-a-Service (“RaaS”) offerings ~~that are our future~~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 ~~inflation~~interest rates and changing consumer habits and general global economic uncertainty;

•our ability to comply with laws and regulations;

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

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

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

•the increased expenses associated with being a public company.

You should not rely upon forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in ~~the section titled “Risk Factors” in~~Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K ~~filed with~~for the ~~SEC~~year ended December 31, 2021, Part II, Item 1A, Risk Factors of our Quarterly Report on ~~March 22,~~Form 10-Q for the quarter ended June 30, 2022 and elsewhere in this Quarterly Report on Form 10-Q, as well as in our other filings with the Securities and Exchange Commission (“SEC”). Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

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

***

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

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

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

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THREDUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		June 30,		December 31,
		2022		2021			September 30, 2022		December 31, 2021
		(in thousands, except par value amounts)					(in thousands, except par value amounts)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	52,197	$	84,550	Cash and cash equivalents	$	36,713	$	84,550
Marketable securities	Marketable securities	96,326		121,277		Marketable securities	86,501		121,277
Accounts receivable, net	Accounts receivable, net	3,368		4,136		Accounts receivable, net	3,175		4,136
Inventory, net	Inventory, net	13,941		9,825		Inventory, net	15,003		9,825
Other current assets	Other current assets	11,862		8,625		Other current assets	10,126		8,625
Total current assets	Total current assets	177,694		228,413		Total current assets	151,518		228,413
Operating lease right-of-use assets	Operating lease right-of-use assets	49,420		39,340		Operating lease right-of-use assets	46,760		39,340
Property and equipment, net	Property and equipment, net	84,045		55,466		Property and equipment, net	89,529		55,466
Goodwill	Goodwill	11,312		12,238		Goodwill	10,645		12,238
Intangible assets	Intangible assets	11,522		13,854		Intangible assets	10,242		13,854
Other assets	Other assets	11,905		11,515		Other assets	10,896		11,515
Total assets	Total assets	$	345,898	$	360,826	Total assets	$	319,590	$	360,826
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	16,183	$	13,336	Accounts payable	$	8,642	$	13,336
Accrued and other current liabilities	Accrued and other current liabilities	48,590		45,253		Accrued and other current liabilities	53,365		45,253
Seller payable	Seller payable	22,564		19,125		Seller payable	18,690		19,125
Operating lease liabilities, current	Operating lease liabilities, current	5,014		3,931		Operating lease liabilities, current	4,931		3,931
Current portion of long-term debt	Current portion of long-term debt	7,791		7,768		Current portion of long-term debt	3,881		7,768
Total current liabilities	Total current liabilities	100,142		89,413		Total current liabilities	89,509		89,413
Operating lease liabilities, non-current	Operating lease liabilities, non-current	51,497		36,997		Operating lease liabilities, non-current	50,623		36,997
Long-term debt, net of current portion	Long-term debt, net of current portion	23,705		27,559		Long-term debt, net of current portion	26,859		27,559
Other non-current liabilities	Other non-current liabilities	2,625		1,123		Other non-current liabilities	2,904		1,123
Total liabilities	Total liabilities	177,969		155,092		Total liabilities	169,895		155,092
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)	0		0		Commitments and contingencies (Note 11)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of June 30, 2022 and December 31, 2021; 99,953 and 98,435 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		10		10
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of September 30, 2022 and December 31, 2021; 100,732 and 98,435 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively						Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of September 30, 2022 and December 31, 2021; 100,732 and 98,435 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	10		10
Additional paid-in capital	Additional paid-in capital	537,760		522,161		Additional paid-in capital	545,449		522,161
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5,391)		(1,094)		Accumulated other comprehensive loss	(7,636)		(1,094)
Accumulated deficit	Accumulated deficit	(364,450)		(315,343)		Accumulated deficit	(388,128)		(315,343)
Total stockholders’ equity	Total stockholders’ equity	167,929		205,734		Total stockholders’ equity	149,695		205,734
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	345,898	$	360,826	Total liabilities and stockholders’ equity	$	319,590	$	360,826

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 Ended				Six Months Ended
		June 30,				June 30,					Three Months Ended				Nine Months Ended
		2022		2021		2022		2021			September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
		(in thousands, except per share amounts)									(in thousands, except per share amounts)
Revenue:	Revenue:									Revenue:
Consignment	Consignment	$	48,536	$	48,597	$	95,971	$	93,285	Consignment	$	41,553	$	48,071	$	137,524	$	141,356
Product	Product	27,885		11,362		53,145		22,354		Product	26,392		15,203		79,537		37,557
Total revenue	Total revenue	76,421		59,959		149,116		115,639		Total revenue	67,945		63,274		217,061		178,913
Cost of revenue:	Cost of revenue:									Cost of revenue:
Consignment	Consignment	10,218		10,687		20,267		21,519		Consignment	9,087		10,080		29,354		31,599
Product	Product	13,555		5,140		25,973		10,270		Product	14,362		7,100		40,335		17,370
Total cost of revenue	Total cost of revenue	23,773		15,827		46,240		31,789		Total cost of revenue	23,449		17,180		69,689		48,969
Gross profit	Gross profit	52,648		44,132		102,876		83,850		Gross profit	44,496		46,094		147,372		129,944
Operating expenses:	Operating expenses:									Operating expenses:
Operations, product and technology	Operations, product and technology	43,961		31,062		83,122		59,374		Operations, product and technology	38,702		32,081		121,824		91,455
Marketing	Marketing	19,640		15,957		36,618		31,403		Marketing	14,752		16,941		51,370		48,344
Sales, general and administrative	Sales, general and administrative	17,380		10,999		32,044		21,637		Sales, general and administrative	15,232		12,569		47,276		34,206
Total operating expenses	Total operating expenses	80,981		58,018		151,784		112,414		Total operating expenses	68,686		61,591		220,470		174,005
Operating loss	Operating loss	(28,333)		(13,886)		(48,908)		(28,564)		Operating loss	(24,190)		(15,497)		(73,098)		(44,061)
Interest expense	Interest expense	(238)		(573)		(661)		(1,132)		Interest expense	103		619		764		1,751
Other income (expense), net		181		93		484		(814)
Other income, net										Other income, net	(624)		(1,418)		(1,108)		(604)
Loss before provision for income taxes	Loss before provision for income taxes	(28,390)		(14,366)		(49,085)		(30,510)		Loss before provision for income taxes	(23,669)		(14,698)		(72,754)		(45,208)
Provision for income taxes	Provision for income taxes	9		13		22		40		Provision for income taxes	9		17		31		57
Net loss	Net loss	$	(28,399)	$	(14,379)	$	(49,107)	$	(30,550)	Net loss	$	(23,678)	$	(14,715)	$	(72,785)	$	(45,265)
Net loss per share, basic and diluted		$	(0.29)	$	(0.15)	$	(0.50)	$	(0.54)
Weighted-average shares used in computing net loss per share, basic and diluted		99,331		94,435		98,979		56,777
Loss per share, basic and diluted										Loss per share, basic and diluted	$	(0.24)	$	(0.15)	$	(0.73)	$	(0.65)
Weighted-average shares used in computing loss per share, basic and diluted										Weighted-average shares used in computing loss per share, basic and diluted	100,253		96,349		99,409		70,113

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 Ended				Six Months Ended
		June 30,				June 30,					Three Months Ended				Nine Months Ended
		2022		2021		2022		2021			September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
		(in thousands)									(in thousands)
Net loss	Net loss	$	(28,399)	$	(14,379)	$	(49,107)	$	(30,550)	Net loss	$	(23,678)	$	(14,715)	$	(72,785)	$	(45,265)
Other comprehensive loss, net of tax:
Other comprehensive income (loss), net of tax:										Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(2,333)		—		(3,041)		—		Foreign currency translation adjustments	(2,217)		—		(5,258)		—
Unrealized loss on available-for-sale debt securities		(254)		(36)		(1,256)		(36)
Unrealized gain (loss) on available-for-sale securities										Unrealized gain (loss) on available-for-sale securities	(28)		8		(1,284)		(28)
Total other comprehensive income (loss)										Total other comprehensive income (loss)	(2,245)		8		(6,542)		(28)
Total comprehensive loss	Total comprehensive loss	$	(30,986)	$	(14,415)	$	(53,404)	$	(30,586)	Total comprehensive loss	$	(25,923)	$	(14,707)	$	(79,327)	$	(45,293)

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

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(Unaudited)

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

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


	Convertible Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	(in thousands)
Balance as of December 31, 2021	—	$	—	98,435	$	10	$	522,161	$	(1,094)	$	(315,343)	$	205,734
Exercise of stock options				334	—		754						754
Stock-based compensation							3,618						3,618
Issuance of common stock to settle restricted stock units				173	—								—
Other comprehensive loss									(1,710)				(1,710)
Net loss											(20,708)		(20,708)
Balance as of March 31, 2022	—	—		98,942	10		526,533		(2,804)		(336,051)		187,688
Exercise of stock options				160	—		874						874
Stock-based compensation							10,353						10,353
Issuance of common stock to settle restricted stock units				685	—								—
Issuance of common stock from employee stock purchase plan				166	—								—
Other comprehensive loss									(2,587)				(2,587)
Net loss											(28,399)		(28,399)
Balance as of June 30, 2022	—	—		99,953	10		537,760		(5,391)		(364,450)		167,929
Exercise of stock options				139	—		229						229
Stock-based compensation							7,460						7,460
Issuance of common stock to settle restricted stock units				640	—								—
Other comprehensive loss									(2,245)				(2,245)
Net loss											(23,678)		(23,678)
Balance as of September 30, 2022	—	$	—	100,732	$	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)~~

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


	Convertible Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	(in thousands)
Balance as of December 31, 2020	65,971	$	247,041	12,890	$	1	$	29,989	$	—	$	(252,167)	$	(222,177)
Exercise of stock options				1,458	—		1,875						1,875
Stock-based compensation							3,498						3,498
Conversion of preferred stock warrants to Class B common stock warrants							1,827						1,827
Preferred stock conversion to Class B common stock	(65,971)	(247,041)		65,971	7		247,034						247,041
Sale of Class A common stock upon initial public offering, net of issuance costs				13,800	1		175,533						175,534
Cashless exercise of common stock warrant				25	—								—
Net loss											(16,171)		(16,171)
Balance as of March 31, 2021	—	—		94,144	9		459,756		—		(268,338)		191,427
Exercise of stock options				525	—		959						959
Stock-based compensation							2,896						2,896
Cashless exercise of common stock warrant				104	—								—
Issuance of common stock to settle restricted stock units				8	—								—
Withholding taxes for the net share settlement of restricted stock units				(1)	—		(29)						(29)
Other comprehensive loss									(36)				(36)
Net loss											(14,379)		(14,379)
Balance as of June 30, 2021	—	—		94,780	9		463,582		(36)		(282,717)		180,838
Exercise of stock options				534	—		1,023						1,023
Stock-based compensation							2,995						2,995
Issuance of Class A common stock upon closing of follow-on offering				2,000	1		45,524						45,525
Issuance of common stock to settle restricted stock units				14	—								—
Other comprehensive income									8				8
Net loss											(14,715)		(14,715)
Balance as of September 30, 2021	—	$	—	97,328	$	10	$	513,124	$	(28)	$	(297,432)	$	215,674

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, 2022		September 30, 2021
	(in thousands)
Cash flows from operating activities:
Net loss	$	(72,785)	$	(45,265)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	10,217		6,147
Stock-based compensation expense	20,758		9,389
Reduction in carrying amount of right-of-use assets	4,820		3,201
Other	1,409		1,768
Changes in operating assets and liabilities:
Accounts receivable, net	795		(72)
Inventory, net	(6,222)		(587)
Other current and non-current assets	(1,732)		(4,720)
Accounts payable	(3,000)		574
Accrued and other current liabilities	6,918		14,082
Seller payable	(380)		4,582
Operating lease liabilities	2,396		(3,235)
Other non-current liabilities	(133)		4
Net cash used in operating activities	(36,939)		(14,132)
Cash flows from investing activities:
Purchases of marketable securities	(3,475)		(102,715)
Maturities of marketable securities	35,830		1,600
Purchases of property and equipment, net	(39,316)		(15,207)
Net cash used in investing activities	(6,961)		(116,322)
Cash flows from financing activities:
Proceeds from debt, net of discount	491		4,625
Repayment of debt	(5,333)		(2,000)
Proceeds from issuance of Class A common stock, net of underwriting discounts and commissions	—		226,905
Payment of costs for the initial public offering and the follow-on offering	—		(4,251)
Proceeds from exercise of stock options and employee stock purchase plan	3,878		3,782
Tax withholding related to vesting of restricted stock units	(1,958)		(29)
Net cash provided by (used in) financing activities	(2,922)		229,032
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(918)		—
Net change in cash, cash equivalents and restricted cash	(47,740)		98,578
Cash, cash equivalents and restricted cash, beginning of period	91,840		67,539
Cash, cash equivalents and restricted cash, end of period	$	44,100	$	166,117

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

2. Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying 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"~~(“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10‑Q and Article 10 of Regulation S-X. As permitted under those rules, certain footnotes or other financial information can be condensed or omitted.

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

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

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

Reclassifications

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

~~Concentrations of Credit Risk~~

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

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~~Revenue from Loyalty Reward Redemption or Expiration~~

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

~~Net Loss Per Share~~

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

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

~~Cash, Cash Equivalents and Restricted Cash~~

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

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

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

~~Fair Value Measurements~~

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

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

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

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

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

New Accounting Pronouncements

In June 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, and subsequent amendments to~~. This ASU changes the ~~initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, ASU 2020-02, ASU 2020-03 and ASU 2022-02 which replaces the existing incurred loss~~ impairment model ~~with~~for most financial assets, requiring the use of an expected loss model which requires entities to estimate the lifetime expected credit loss ~~model and requires a~~on financial ~~asset~~assets measured at amortized cost. Such credit losses will be recorded as an allowance to offset the amortized cost ~~to be presented at~~of the financial asset, resulting in a net presentation of the amount expected to be ~~collected.~~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 Company does not expect that the adoption of this standard will have a material impact on its condensed consolidated financial statements.

Revenue from Loyalty Reward Redemption and Expiration

As of September 30, 2022 and December 31, 2021, the Company had a liability of $3.3 million and $4.0 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 and expiration of $2.2 million and $3.6 million for the three months ended September 30, 2022 and 2021, respectively, and $7.4 million and $10.3 million for the nine months ended September 30, 2022 and 2021, respectively.

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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, 2022		December 31, 2021
	(in thousands)
Cash and cash equivalents	$	36,713	$	84,550
Restricted cash included in Other current assets	1,685		560
Restricted cash included in Other assets	5,702		6,730
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	44,100	$	91,840

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.

•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 both September 30, 2022 and December 31, 2021, 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 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 both September 30, 2022 and December 31, 2021.

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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:~~values as of September 30, 2022 and December 31, 2021:


		Fair Value as of June 30, 2022									September 30, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	11,157	$	—	$	—	$	11,157	Money market funds	$	8,025	$	—	$	—	$	8,025
Commercial paper	Commercial paper	—		9,590		—		9,590		Commercial paper	—		5,646		—		5,646
Total cash equivalents	Total cash equivalents	11,157		9,590		—		20,747		Total cash equivalents	8,025		5,646		—		13,671
Marketable securities:	Marketable securities:									Marketable securities:
Corporate debt securities	Corporate debt securities	35,725		—		—		35,725		Corporate debt securities	32,473		—		—		32,473
U.S. treasury securities	U.S. treasury securities	30,131		—		—		30,131		U.S. treasury securities	29,073		—		—		29,073
Commercial paper		—		2,399		—		2,399
U.S. government agency bonds	U.S. government agency bonds	28,071		—		—		28,071		U.S. government agency bonds	24,955		—		—		24,955
Total marketable securities	Total marketable securities	93,927		2,399		—		96,326		Total marketable securities	86,501		—		—		86,501
Total		$	105,084	$	11,989	$	—	$	117,073
Total assets at fair value										Total assets at fair value	$	94,526	$	5,646	$	—	$	100,172


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

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


		June 30, 2022														September 30, 2022
		Cost or Amortized Cost			Unrealized					Fair Value						Cost or Amortized Cost				Unrealized								Fair Value
				Gains			Losses							Gains						Losses
				(in thousands)														(in thousands)
Corporate debt securities	Corporate debt securities	$	36,319		$	—		$	(594)			$	35,725		Corporate debt securities			$	32,984			$	—			$	(511)			$	32,473
U.S. treasury securities	U.S. treasury securities	30,625			—			(494)		30,131		U.S. treasury securities				29,596				—				(523)				29,073
Commercial paper		2,399			—			—		2,399
U.S. government agency bonds	U.S. government agency bonds	28,604			1			(534)		28,071		U.S. government agency bonds				25,553				—				(598)				24,955
Total	Total	$	97,947		$	1		$	(1,622)	$	96,326	Total				$	88,133			$	—			$	(1,632)			$	86,501

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

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

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

For ~~all of~~ the 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’s money market funds, U.S. treasury securities, corporate debt securities and U.S. government agency bonds were valued using Level 1 inputs because they are valued using quoted ~~market prices.~~prices in active markets.

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

There were no transfers between levels during the ~~six~~nine months ended ~~June~~September 30, 2022. As of ~~June~~September 30, 2022, of the ~~$96.3~~$86.5 million carrying amount of marketable securities, ~~$78.7~~$83.0 million had a contractual maturity date of less than one year and ~~$17.6~~$3.5 million had a contractual maturity date between one to two years.

4. Property and Equipment, Net

Property and equipment, net ~~consists~~consisted of the following:


		June 30,		December 31,
		2022		2021			September 30, 2022		December 31, 2021
		(in thousands)					(in thousands)
Property and equipment	Property and equipment	$	110,018	$	76,028	Property and equipment	$	118,244	$	76,028
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(25,973)		(20,562)		Less: accumulated depreciation and amortization	(28,715)		(20,562)
Property and equipment, net	Property and equipment, net	$	84,045	$	55,466	Property and equipment, net	$	89,529	$	55,466

Depreciation and amortization expense of property and equipment was ~~$2.8~~$2.9 million and ~~$1.9~~$2.2 million for the three months ended ~~June~~September 30, 2022 and ~~June 30,~~ 2021, respectively, and ~~$5.4~~$8.3 million and ~~$3.9~~$6.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~June 30,~~ 2021, 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 ~~not amortized to earnings, but instead is~~ reviewed for impairment at least annually, absent any interim indicators of impairment. ~~The carrying amount of goodwill~~Goodwill was ~~$11.3~~$10.6 million ~~as of June 30, 2022~~ and $12.2 million as of September 30, 2022 and December 31, ~~2021.~~2021, respectively. The ~~change is~~decrease in goodwill during the nine months ended September 30, 2022 was due to foreign currency translation adjustments.

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The gross carrying amounts and accumulated amortization of the Company’s intangible assets with determinable lives ~~are~~as of September 30, 2022 and December 31, 2021 were as follows:


			As of June 30, 2022								September 30, 2022
		Amortization Period	Gross carrying amount		Accumulated amortization		Carrying amount, net			Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
		(in years)	(in thousands)							(in years)	(in thousands)
Customer relationships	Customer relationships	8	$	4,697	$	(428)	$	4,269	Customer relationships	8	$	4,420	$	(542)	$	3,878
Developed technology	Developed technology	3	4,426		(1,075)		3,351		Developed technology	3	4,166		(1,362)		2,804
Trademarks	Trademarks	9	4,246		(344)		3,902		Trademarks	9	3,995		(435)		3,560
Total	Total		$	13,369	$	(1,847)	$	11,522	Total		$	12,581	$	(2,339)	$	10,242


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

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

~~Developed~~Amortization expense related to developed technology, customer relationships, and trademarks ~~intangibles amortization~~ is recorded within operations, product and ~~technology,~~technology; sales, general and ~~administrative,~~administrative; and marketing expense, ~~lines,~~ respectively, within the Company’s condensed consolidated statements of operations. ~~The amortization~~Amortization expense of intangible assets with determinable lives was $0.6 million and zero for the three months ended ~~June~~September 30, 2022 and ~~June 30,~~ 2021, respectively, and ~~$1.3~~$1.9 million and zero for the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~June 30,~~ 2021, respectively.

6. Balance Sheet Components

Inventories ~~consist~~consisted of the following:


		June 30,		December 31,			September 30, 2022		December 31, 2021
		2022		2021			(in thousands)
		(in thousands)
Raw materials						Raw materials	$	888	$	908
Work in process						Work in process	592		670
Finished goods	Finished goods	$	11,939	$	8,247	Finished goods	13,523		8,247
Raw materials		1,416		908
Work in progress		586		670
Total	Total	$	13,941	$	9,825	Total	$	15,003	$	9,825

Accrued and other current liabilities consisted of the following:


	September 30, 2022		December 31, 2021
	(in thousands)
Gift card and site credit liabilities	$	18,980	$	13,223
Accrued vendor liabilities	8,701		6,031
Allowance for returns	7,326		6,209
Accrued compensation	5,623		6,438
Deferred revenue	6,326		5,878
Accrued taxes	4,440		5,728
Accrued other	1,969		1,746
Total	$	53,365	$	45,253

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~~Accrued and other current liabilities consist of the following:~~

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

7. ~~Lease Agreements~~

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

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

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

In December 2021, the Company entered into a ten-year agreement to lease a distribution center in Sofia, Bulgaria. The leased property, which contains both logistics and office areas, is divided into 3 stages of delivery. The base rent and maintenance for the first stage, commenced in March 2022, was approximately €6.1 million, or $6.4 million translated at the June 30, 2022 spot rate, over the life of the lease. The base rent and maintenance for the second stage, commenced in May 2022, was approximately €6.0 million, or $6.3 million translated at the June 30, 2022 spot rate, over the life of the lease. The targeted commencement date for the third stage is June 2023.

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

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8. Long-Term Debt

In February 2019, the Company entered into a loan and security agreement (“Term Loan”) with Western Alliance Bank for an aggregate amount of up to $40.0 million to refinance its prior loan and security agreement with Silicon Valley Bank. AsThe Company incurred an immaterial amount of ~~December 31, 2021,~~debt issuance costs in connection with the ~~amended interest rate~~Term Loan. The debt issuance costs are recorded on the Company’s condensed consolidated balance sheet and are being amortized over the life of the Term Loan using the effective-interest method.

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~~the Wall Street Journal plus a margin of ~~1.5%~~1.25%, with a floor of ~~5.50%~~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 ~~was amended 5 times before December 31, 2021.~~

requires the Company to comply with certain financial covenants, including, among other things, liquidity requirements, 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 ~~June 30, 2022, the nominal interest rate was 6.25% and the effective interest rate was 6.65%. As of June~~September 30, 2022 and December 31, 2021, 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 also permitted to make voluntary prepayments without penalty or premium at any time.

As of September 30, 2022 and December 31, 2021, the effective interest rate for borrowings under the Term Loan was 8.22% and 6.65%, respectively.

During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company borrowed an aggregate amount of $0.7 million under the Term Loan and repaid a total of ~~$4.0~~$5.3 million on amounts outstanding under the Term Loan. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company ~~did not make any repayments~~borrowed an aggregate amount of $5.0 million under the Term Loan and repaid a total of $2.0 million on amounts outstanding under the Term Loan. As of ~~June~~September 30, 2022 and December 31, 2021, the amount outstanding under the Term Loan was ~~$32.0~~$31.3 million and $36.0 million, respectively.

During the three months ended ~~June~~September 30, 2022 and ~~June 30,~~ 2021, the Company recognized ~~$0.2~~$0.1 million and $0.6 million, respectively, of interest expense relating to the Term ~~Loan.~~Loan, which included $0.1 million and $0.1 million, respectively, relating to amortization of debt discount and issuance costs. During the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~June 30,~~ 2021, the Company recognized ~~$0.7~~$0.8 million and ~~$1.1~~$1.8 million, respectively, of interest expense relating to the Term ~~Loan.~~Loan, which included $0.3 million and $0.3 million, respectively, relating to amortization of debt discount and issuance costs.

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


		Amount			Amount
		(in thousands)			(in thousands)
2022	2022	$	4,000	2022	$	1,000
2023	2023	8,000		2023	4,000
2024	2024	20,000		2024	4,000
2025				2025	4,000
2026				2026	4,000
Thereafter	Thereafter	—		Thereafter	14,333
Total future principal		32,000
Total principal payments				Total principal payments	31,333
Less: unamortized debt discount	Less: unamortized debt discount	(504)		Less: unamortized debt discount	(593)
Less: current portion of long-term debt	Less: current portion of long-term debt	(7,791)		Less: current portion of long-term debt	(3,881)
Non-current portion of long-term debt	Non-current portion of long-term debt	$	23,705	Non-current portion of long-term debt	$	26,859

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

9.8. Common Stock

Each share of Class A common stock is entitled to 1one vote per share. Each share of Class B common stock is entitled to 10ten votes per share and is convertible at any time into 1one 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 ~~June~~September 30, ~~2022.~~2022 and December 31, 2021:


		As of June 30, 2022			September 30, 2022
		Authorized	Issued and Outstanding		Authorized	Issued and Outstanding
		(in thousands)			(in thousands)
Class A common stock	Class A common stock	1,000,000	65,465	Class A common stock	1,000,000	69,887
Class B common stock	Class B common stock	120,000	34,488	Class B common stock	120,000	30,845
Total common stock		1,120,000	99,953
Total				Total	1,120,000	100,732


	December 31, 2021
	Authorized	Issued and Outstanding
	(in thousands)
Class A common stock	1,000,000	57,779
Class B common stock	120,000	40,656
Total	1,120,000	98,435

~~10.~~9. Stock-Based Compensation ~~Plans~~

The ~~Company's~~Company has stock-based compensation plans, which are ~~described in~~ more ~~detail~~fully described in Note 11, Stock-Based Compensation Plans, to the ~~consolidated financial statements~~Consolidated Financial Statements included in the 2021 ~~Form~~ 10-K. During the nine months ended September 30, 2022, the Company granted 10.2 million restricted stock unit awards with a weighted-average grant date fair value of $7.09 per award.

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~~2021 Stock Option and Incentive Plan~~

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

~~2021 Employee Stock Purchase Plan~~

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

~~Restricted Stock Units~~

The Company issues service-based and performance-based restricted stock units (“RSU”) to employees. The RSUs automatically convert to shares of the Company’s common stock on a 1-for-one basis as the awards vest. RSUs granted to newly hired employees typically vest 25% annually over four years commencing on the date of grant. The RSUs are measured at grant date fair value, at the market price of the Company’s Class A common stock on the grant date. The Company records stock-based compensation expense related to the RSUs ratably over the employee’s respective requisite service period. During the six months ended June 30, 2022, the Company granted 9,444,468 shares of RSUs with a weighted average grant date fair value at $7.43 under the 2021 Plan.

~~Stock-Based Compensation~~

~~Total~~following table provides information about stock-based compensation expense by ~~department is as follows:~~financial statement line item:


		Three Months Ended				Six Months Ended
		June 30,				June 30,					Three Months Ended				Nine Months Ended
		2022		2021		2022		2021			September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
		(in thousands)									(in thousands)
Operations, product and technology	Operations, product and technology	$	3,970	$	984	$	5,362	$	2,334	Operations, product and technology	$	2,480	$	1,024	$	7,842	$	3,358
Marketing	Marketing	1,226		289		1,559		726		Marketing	818		341		2,377		1,067
Sales, general and administrative	Sales, general and administrative	4,862		1,623		6,660		3,334		Sales, general and administrative	3,879		1,630		10,539		4,964
Total stock-based compensation expense	Total stock-based compensation expense	$	10,058	$	2,896	$	13,581	$	6,394	Total stock-based compensation expense	$	7,177	$	2,995	$	20,758	$	9,389

~~11.~~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 ~~general indemnification.~~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.

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~~12.~~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 ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 was determined based upon estimates of the Company’s annual effective tax rate for the years ending December 31, 2022 and 2021, respectively. Since the Company is in a full valuation allowance position due to losses incurred since inception, the provision for taxes consists solely of certain state income taxes.

~~13. Net~~12. Loss Per Share

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


		As of June 30,
		2022	2021		September 30, 2022	September 30, 2021
		(in thousands)			(in thousands)
Outstanding stock options	Outstanding stock options	18,514	21,600	Outstanding stock options	17,966	20,796
Restricted stock units	Restricted stock units	9,285	218	Restricted stock units	8,693	352
Delayed share issuance related to acquisition	Delayed share issuance related to acquisition	131	—	Delayed share issuance related to acquisition	131	—
Employee stock purchase plan	Employee stock purchase plan	59	101	Employee stock purchase plan	230	101
Total	Total	27,989	21,919	Total	27,020	21,249

~~14. Subsequent Events~~

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

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

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

The following discussion and analysis of our financial condition and results of operations should be read ~~together~~in conjunction with other information, including our condensed consolidated financial statements and related notes ~~thereto~~ included ~~elsewhere~~ in Part I, Item 1, Financial Statements, of this Quarterly Report on Form ~~10-Q~~10-Q; Part I, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q; and our ~~audited~~consolidated financial statements and related notes ~~and~~appearing in our Annual Report on Form 10-K ~~filed with~~for the ~~SEC on March 22, 2022.~~year ended December 31, 2021 (the “2021 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 is one of the world’s largest online resale platforms for women’s and kids’ apparel, shoes and accessories. Our mission is to inspire a new generation of consumers to think secondhand first. We believe in a sustainable fashion future and we are proud that our business model creates a positive impact to the benefit of our buyers, sellers, clients, employees, investors and the environment. Our custom-built operating platform consists of distributed processing infrastructure, proprietary software and systems and data science expertise. This platform is powering the rapidly emerging resale economy, one of the fastest growing sectors in retail, according to a GlobalData market survey conducted in ~~April 2021.~~February 2022.

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

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

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

Recent Business Developments

COVID-19 Update

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

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

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~~Financial Impact~~

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

~~Impact on Processing at our Distribution and Processing Centers~~

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

We expect that the COVID-19 pandemic will continue to have an adverse impact on our business, results of operations and financial condition, including our revenue and cash flows in the short term. Due to the unpredictable nature of the pandemic, it is difficult to predict the long-term impact on our business. See Part I, Item 1A, Risk Factors, of the ~~section titled “Risk Factors” in our Annual Report on Form~~2021 10-K ~~filed with the SEC on March 22, 2022~~ for further discussion of the possible impact of the COVID-19 pandemic on our business, operations and financial condition.

Inflation

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

Foreign Currency

In recent months, the U.S. dollar has been appreciating against major European currencies, including the Bulgarian ~~Lev,~~lev, for both economic and geopolitical reasons. AThe strengthening U.S. dollar ~~will have~~had a negative impact on our consolidated sales. We are managing the currency risk related to earnings through natural hedges and have offsetting costs relating to operating our business and a regional source of supply. Therefore, changes to exchange rates have not had a significant impact to our earnings. We continue to monitor our foreign exchange exposure as we grow our business globally. For further details, please refer to ~~"Foreign Currency Exchange Rate Risk" in~~ Part I, Item 3. 3, Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk, of this Quarterly Report on Form 10-Q.

Restructuring

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

Overview of ~~Second~~Third Quarter Results

Revenue: Total revenue was ~~a record at $76.4~~$67.9 million, an increase of ~~27%~~7.4% year-over-year.

Gross Profit and Margin: Gross profit totaled ~~$52.6~~$44.5 million, representing ~~growth~~a decline of ~~19%~~3.5% year-over-year. Gross margin decreased by ~~471~~736 basis points to ~~69%~~65.5% from ~~74%~~72.8% in the comparable quarter last year.

Net Loss: ~~GAAP net~~Net loss was ~~$28.4~~$23.7 million, or a negative ~~37%~~34.8% of revenue, for the ~~second~~third quarter of 2022, compared to a ~~GAAP~~ net loss of ~~$14.4~~$14.7 million for the ~~second~~third quarter of 2021.

Adjusted EBITDA: Adjusted EBITDA loss was ~~$13.5~~$11.0 million, or a negative ~~18%~~16.2% of revenue, for the ~~second~~third quarter of 2022 compared to an Adjusted EBITDA loss of ~~$9.0~~$7.8 million, ~~for the second quarter~~or a negative 12.4% of ~~2021, or negative 15% of the~~ revenue, for the ~~second~~third quarter of 2021.

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Active Buyers and Orders: Active Buyers totaled ~~1.72~~1.7 million and Orders totaled ~~1.70~~1.6 million in the ~~second~~third quarter of 2022, representing growth of ~~29%~~17.7% and ~~40%~~24.5%, respectively, compared to the ~~second~~third quarter of 2021.

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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 Ended								Six Months Ended
		June 30,								June 30,									Three Months Ended								Nine Months Ended
		2022			2021			Change		2022			2021			Change			September 30, 2022			September 30, 2021			Change		September 30, 2022			September 30, 2021			Change
		(in thousands, except percentages and basis points)																	(in thousands, except percentages)
Active Buyers (as of period end)	Active Buyers (as of period end)	1,724			1,341			29	%	1,724			1,341			29	%	Active Buyers (as of period end)	1,694			1,439			17.7	%	1,694			1,439			17.7	%
Orders	Orders	1,704			1,218			40	%	3,344			2,346			43	%	Orders	1,618			1,300			24.5	%	4,962			3,646			36.1	%
Net loss	Net loss	$	(28,399)		$	(14,379)		(98)	%	$	(49,107)		$	(30,550)		(61)	%	Net loss	$	(23,678)		$	(14,715)		60.9	%	$	(72,785)		$	(45,265)		60.8	%
Net loss margin	Net loss margin	(37)		%	(24)		%	(1,318)	bps	(33)		%	(26)		%	(651)	bps	Net loss margin	(34.8)		%	(23.3)		%			(33.5)		%	(25.3)		%
Adjusted EBITDA loss(1)		$	(13,541)		$	(9,036)		(50)	%	$	(26,504)		$	(18,155)		(46)	%
Adjusted EBITDA margin		(18)		%	(15)		%	(262)	bps	(18)		%	(16)		%	(210)	bps

Adjusted EBITDA loss(1)																		Adjusted EBITDA loss(1)	$	(11,041)		$	(7,816)		41.3	%	$	(37,545)		$	(25,971)		44.6	%
Adjusted EBITDA loss margin																		Adjusted EBITDA loss margin	(16.2)		%	(12.4)		%			(17.3)		%	(14.5)		%

(1)See below for a reconciliation of Adjusted EBITDA 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 or purchased in our ~~marketplace~~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 ~~marketplace~~marketplaces and we expect the number of Active Buyers to increase over time.

Orders

Orders means the total number of orders placed by buyers across our ~~marketplace,~~marketplaces, including through our RaaS clients, in a given period, net of cancellations. We expect Orders to increase over time.

Adjusted EBITDA

Adjusted EBITDA means net loss adjusted to exclude, where applicable in a given period, depreciation and amortization, stock-based compensation expense, interest expense, acquisition related expenses, restructuring charges, change in fair value of convertible preferred stock warrant liability and provision for income taxes. We use Adjusted EBITDA, a non-GAAP metric, to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes. We believe that Adjusted EBITDA, when taken collectively with our GAAP results, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

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The following table provides a reconciliation of net loss to Adjusted EBITDA:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
		2022		2021		2022		2021			(in thousands)
		(in thousands)
Adjusted EBITDA Reconciliation:
GAAP net loss		$	(28,399)	$	(14,379)	$	(49,107)	$	(30,550)
Net loss										Net loss	$	(23,678)	$	(14,715)	$	(72,785)	$	(45,265)
Interest expense										Interest expense	103		619		764		1,751
Provision for income taxes										Provision for income taxes	9		17		31		57
Depreciation and amortization	Depreciation and amortization	3,407		1,861		6,678		3,899		Depreciation and amortization	3,539		2,248		10,217		6,147
Stock-based compensation expense	Stock-based compensation expense	10,058		2,896		13,581		6,394		Stock-based compensation expense	7,177		2,995		20,758		9,389
Interest expense		238		573		661		1,132
Acquisition-related expenses	Acquisition-related expenses	70		—		274		—		Acquisition-related expenses	—		1,020		274		1,020
Restructuring charges	Restructuring charges	1,076		—		1,387		—		Restructuring charges	1,809		—		3,196		—
Change in fair value of convertible preferred stock warrant liability	Change in fair value of convertible preferred stock warrant liability	—		—		—		930		Change in fair value of convertible preferred stock warrant liability	—		—		—		930
Provision for income taxes		9		13		22		40
Non-GAAP Adjusted EBITDA		$	(13,541)	$	(9,036)	$	(26,504)	$	(18,155)
Adjusted EBITDA loss										Adjusted EBITDA loss	$	(11,041)	$	(7,816)	$	(37,545)	$	(25,971)

~~Results of Operations~~

~~The following table sets forth our results of operations for the periods presented:~~

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

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Comparison of the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2022 and 2021

Revenue


		Three Months Ended										Six Months Ended
		June 30,						Change				June 30,						Change					Three Months Ended						Change				Nine Months Ended						Change
		2022			2021			Amount		%		2022			2021			Amount		%			September 30, 2022			September 30, 2021			Amount		%		September 30, 2022			September 30, 2021			Amount		%
		(in thousands, except percentages)																					(in thousands, except percentages)
Consignment revenue	Consignment revenue	$	48,536		$	48,597		$	(61)	—	%	$	95,971		$	93,285		$	2,686	3	%	Consignment revenue	$	41,553		$	48,071		$	(6,518)	(13.6)	%	$	137,524		$	141,356		$	(3,832)	(2.7)	%
Product revenue	Product revenue	27,885			11,362			16,523		145	%	53,145			22,354			30,791		138	%	Product revenue	26,392			15,203			11,189		73.6	%	79,537			37,557			41,980		111.8	%
Total revenue	Total revenue	$	76,421		$	59,959		$	16,462	27	%	$	149,116		$	115,639		$	33,477	29	%	Total revenue	$	67,945		$	63,274		$	4,671	7.4	%	$	217,061		$	178,913		$	38,148	21.3	%
Consignment revenue as a % of total revenue		64		%	81		%			(17)	%	64		%	81		%			(17)	%
Product revenue as a % of total revenue		36		%	19		%			17	%	36		%	19		%			17	%
Consignment revenue as a percentage of total revenue																						Consignment revenue as a percentage of total revenue	61.2		%	76.0		%					63.4		%	79.0		%
Product revenue as a percentage of total revenue																						Product revenue as a percentage of total revenue	38.8		%	24.0		%					36.6		%	21.0		%

Total revenue increased ~~by $16.5~~$4.7 million, or ~~27%~~7.4%, for the three months ended ~~June~~September 30, 2022 as compared to the ~~three months ended June 30,~~same period in 2021. ~~This~~The increase ~~in total revenue~~ was primarily attributable to ~~a 40% increase in Orders and a 29% growth in Active Buyers resulting from our acquisition~~the inclusion of our European operations inbeginning October 2021, which is included in product revenue, and ~~the~~resultant increases in ~~our domestic~~total Orders and Active ~~Buyers.~~ Buyers of 24.5% and 17.7%, respectively, partially offset by a decrease in U.S. revenue from lower Orders, higher returns and increased promotional strategy in response to the U.S. macroeconomic environment.

Total revenue increased $38.1 million, or 21.3%, for the nine months ended September 30, 2022 as compared to the same period in 2021. The increase was primarily attributable to the inclusion of our European operations beginning October 2021, which is included in product revenue, and resultant increases in total Orders and Active Buyers of 36.1% and 17.7%, respectively.

We experienced slowing revenue and Order growth beginning in the back half of June 2022 and continuing into the third quarter that is attributable to various factors including, but not limited to, general global economic uncertainty, rising interest rates, increased inflation and weakening consumer discretionary spending. Overall, revenue per Order decreased by 9% primarily due to lower revenue per Order for our European operations; domestic revenue per Order increased by 6% in the comparative period due to intensified marketing, advertising and promotional efforts and sales acceleration connected with revamp of our loyalty program.

Total revenue increased by $33.5 million, or 29%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. Orders increased by 43% and Active Buyers grew by 29% partially offset by a 10% decrease in revenue per Order due to lower pricing in Europe; domestic revenue per Order increased by 4% in the comparative period. Our intensified marketing, advertising and promotional efforts largely contributed to the increases in Orders and Active Buyers.

Product revenue increased by 145% and 138%, respectively, for the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021. The increase was mainly due to the addition of our European operations, which is primarily product revenue, and an increase in our domestic product revenue which is due to increased upfront finished goods purchases, for which revenue is recognized as product revenue when shipped to the end customer.

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Table of Contents

Cost of Revenue


		Three Months Ended										Six Months Ended
		June 30,						Change				June 30,						Change					Three Months Ended						Change				Nine Months Ended						Change
		2022			2021			Amount		%		2022			2021			Amount		%			September 30, 2022			September 30, 2021			Amount		%		September 30, 2022			September 30, 2021			Amount		%
		(in thousands, except percentages)																					(in thousands, except percentages)
Cost of consignment revenue	Cost of consignment revenue	$	10,218		$	10,687		$	(469)	(4)	%	$	20,267		$	21,519		$	(1,252)	(6)	%	Cost of consignment revenue	$	9,087		$	10,080		$	(993)	(9.9)	%	$	29,354		$	31,599		$	(2,245)	(7.1)	%
Cost of product revenue	Cost of product revenue	13,555			5,140			8,415		164	%	25,973			10,270			15,703		153	%	Cost of product revenue	14,362			7,100			7,262		102.3	%	40,335			17,370			22,965		132.2	%
Total cost of revenue	Total cost of revenue	$	23,773		$	15,827		$	7,946	50	%	$	46,240		$	31,789		$	14,451	45	%	Total cost of revenue	$	23,449		$	17,180		$	6,269	36.5	%	$	69,689		$	48,969		$	20,720	42.3	%
Gross profit	Gross profit	$	52,648		$	44,132		$	8,516	19	%	$	102,876		$	83,850		$	19,026	23	%	Gross profit	$	44,496		$	46,094		$	(1,598)	(3.5)	%	$	147,372		$	129,944		$	17,428	13.4	%
Gross profit margin		69		%	74		%					69		%	73		%
Cost of revenue as a % of total revenue		31		%	26		%					31		%	27		%
Cost of consignment revenue as a % of total cost of revenue		43		%	68		%					44		%	68		%
Cost of product revenue as a % of total cost of revenue		57		%	32		%					56		%	32		%
Gross margin																						Gross margin	65.5		%	72.8		%					67.9		%	72.6		%

~~Total cost of revenue as a percentage of total revenue~~Gross margin was ~~31%~~65.5% and 72.8% for the three months ended ~~June~~September 30, 2022 and 2021, respectively, or an ~~increase~~unfavorable change of ~~471~~736 basis points, ~~from 26%~~and 67.9% and 72.6% for the nine months endedSeptember 30, 2022 and 2021, respectively, or an unfavorable change of 474 basis points.

The decrease in gross margin for the three and nine months ended ~~June~~September 30, ~~2021. Total cost of revenue as a percentage of total revenue was 31% for the six months ended June 30,~~ 2022 ~~an increase of 352 basis points from 27% for the six months ended June 30, 2021. This decrease in gross profit margin~~ was primarily due to the inclusion of operating results of our European operations from October 2021 onward. Revenue from our European operations is primarily derived from product sales with a lower gross ~~profit~~ margin. Consignment sales have a higher gross ~~profit~~ margin than product sales but made up a smaller percentage of total revenue for both the three and ~~six~~nine months ended ~~June~~September 30, 2022 ~~due~~as compared to ~~combination with revenue coming from our European operations.~~the same periods in 2021. Revenue for consignment sales is recognized net of seller payouts and cost of items sold, whereas for product sales, seller payouts and cost of items sold are included as a component of cost of revenue.

~~We expect cost of revenue to decrease in absolute dollars but increase as a percentage of revenue as our European operations become a greater share of our overall business in the short-term.~~

Cost of Consignment Revenue


		Three Months Ended										Six Months Ended
		June 30,						Change				June 30,						Change					Three Months Ended						Change				Nine Months Ended						Change
		2022			2021			Amount		%		2022			2021			Amount		%			September 30, 2022			September 30, 2021			Amount		%		September 30, 2022			September 30, 2021			Amount		%
		(in thousands, except percentages)																					(in thousands, except percentages)
Cost of consignment revenue	Cost of consignment revenue	$	10,218		$	10,687		$	(469)	(4)	%	$	20,267		$	21,519		$	(1,252)	(6)	%	Cost of consignment revenue	$	9,087		$	10,080		$	(993)	(9.9)	%	$	29,354		$	31,599		$	(2,245)	(7.1)	%
As a percent of consignment revenue		21		%	22		%					21		%	23		%
Consignment gross margin	Consignment gross margin	79		%	78		%					79		%	77		%					Consignment gross margin	78.1		%	79.0		%					78.7		%	77.6		%

~~Cost of consignment revenue decreased by $0.5 million, or 4%~~Consignment gross margin was 78.1% and 79.0% for the three months ended ~~June~~September 30, 2022 ~~compared to~~and 2021, respectively, or an unfavorable change of 90 basis points, and 78.7% and 77.6% for the nine months endedSeptember 30, 2022 and 2021, respectively, or a favorable change of 101 basis points.

The decrease in consignment gross margin for the three months ended ~~June~~September 30, ~~2021. Cost of consignment revenue decreased by $1.3 million or 6% for the six months ended June 30,~~ 2022 as compared to the ~~six~~same period in 2021 was primarily due to an unfavorable impact of outbound shipping of 49 basis points, unfavorable impact of direct labor of 27 basis points, and other unfavorable cost changes of 29 basis points, partially offset by a favorable impact of packaging of 15 basis points.

The increase in consignment gross margin for the nine months ended ~~June~~September 30, 2022 as compared to the same period in 2021 was primarily due to a favorable impact of outbound shipping of 222 basis points as a result of order consolidation and a favorable impact of packaging of 3 basis points, partially offset by an unfavorable impact of direct labor of 87 basis points and other unfavorable cost changes of 37 basis points.

Table of Contents

Cost of Product Revenue


	Three Months Ended						Change				Nine Months Ended						Change
	September 30, 2022			September 30, 2021			Amount		%		September 30, 2022			September 30, 2021			Amount		%
	(in thousands, except percentages)
Cost of product revenue	$	14,362		$	7,100		$	7,262	102.3	%	$	40,335		$	17,370		$	22,965	132.2	%
Product gross margin	45.6		%	53.3		%					49.3		%	53.8		%

Product gross margin was 45.6% and 53.3% for the three months ended September 30, 2022 and 2021, respectively, or an unfavorable change of 772 basis points, and 49.3% and 53.8% for the nine months endedSeptember 30, 2022 and 2021, respectively, or an unfavorable change of 446 basis points.

Our European operations, which have been included in our operating results beginning October 2021, have lower product gross margin mainly due to the capitalization of production costs into inventory.

The decrease in product gross margin for the three months ended September 30, 2022 as compared to the same period in 2021 was primarily due to the net unfavorable impact of including our European operations of 1,245 basis points, an unfavorable impact of packaging of 41 basis points, and an unfavorable impact of direct labor of 39 basis points, partially offset by a favorable impact of inventory costs of 450 basis points and a favorable impact of outbound shipping of 104 basis points.

The decrease in product gross margin for the nine months ended September 30, 2022 as compared to the same period in 2021 was primarily due to the net unfavorable impact of including our European operations of 1,002 basis points, an unfavorable impact of direct labor of 81 basis points, and an unfavorable impact of packaging of 13 basis points, partially offset by a favorable impact of inventory costs of 395 basis points and a favorable impact of outbound shipping of 254 basis points.

Operations, Product and Technology


	Three Months Ended						Change				Nine Months Ended						Change
	September 30, 2022			September 30, 2021			Amount		%		September 30, 2022			September 30, 2021			Amount		%
	(in thousands, except percentages)
Operations, product and technology	$	38,702		$	32,081		$	6,621	20.6	%	$	121,824		$	91,455		$	30,369	33.2	%
Operations, product and technology as a percentage of total revenue	57.0		%	50.7		%					56.1		%	51.1		%

Operations, product and technology expenses increased $6.6 million, or 20.6%, for the three months ended September 30, 2022 as compared to the same period in 2021. The ~~decreases in the comparative periods were~~increase was primarily due to ~~consignment revenue being~~ a ~~smaller percentage~~$2.1 million increase in facilities, technology and other allocated costs due to the expansion of ~~total revenue~~our distribution network and ~~changes~~European operations and a $3.3 million increase in personnel-related costs related to our European operations, restructuring, higher stock based compensation expense mainly from restricted stock vesting and expenses associated with our distribution network. In addition, we experienced a $1.2 million increase in inbound shipping and other costs ~~outlined in the table as follows.~~due mainly to our European operations and increased bag processing and other costs.

Table of Contents

Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 Amount % 2022 2021 Amount %
(in thousands, except percentages)
Outbound shipping $ 6,471 $ 7,942 $ (1,471) (19) % $ 13,088 $ 16,059 $ (2,971) (19) %
Direct labor 2,554 1,918 636 33 % 5,013 3,783 1,230 33 %
Packaging 883 620 263 42 % 1,619 1,533 86 6 %
Other 310 207 103 50 % 547 144 403 280 %
Total cost of consignment revenue $ 10,218 $ 10,687 $ (469) (4) % $ 20,267 $ 21,519 $ (1,252) (6) %
Operations, product and technology expenses increased $30.4 million, or 33.2%, for the nine months ended September 30, 2022 as compared to the same period in 2021. Personnel-related costs increased by $18.5 million due to our European operations, higher stock-based compensation expense from restricted stock vesting, expenses associated with our distribution network, restructuring and increase in employee salaries and wages. Facilities, technology and other allocated costs increased by $7.1 million due to expansion of our distribution network, our European operations and higher technology and other costs. In addition, inbound shipping and other expenses increased by $4.7 million due to our European operations, increased bag processing and other costs.

Marketing

Consignment gross margin increased 94 basis points to 79% for the three months ended June 30, 2022. Consignment gross margin increased 195 basis points to 79% for the six months ended June 30, 2022. Outbound shipping costs decreased mainly due to consolidation of our outbound shipping process across distribution centers which was partially offset by higher shipping rates and increased direct labor.

~~Cost of Product Revenue~~


	Three Months Ended						Change				Nine Months Ended						Change
	September 30, 2022			September 30, 2021			Amount		%		September 30, 2022			September 30, 2021			Amount		%
	(in thousands, except percentages)
Marketing	$	14,752		$	16,941		$	(2,189)	(12.9)	%	$	51,370		$	48,344		$	3,026	6.3	%
Marketing as a percentage of total revenue	21.7		%	26.8		%					23.7		%	27.0		%

Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 Amount % 2022 2021 Amount %
(in thousands, except percentages)
Cost of product revenue $ 13,555 $ 5,140 $ 8,415 164 % $ 25,973 $ 10,270 $ 15,703 153 %
As a percent of product revenue 49 % 45 % 49 % 46 %
Product gross margin 51 % 55 % 51 % 54 %

~~Cost of product revenue increased $8.4~~Marketing expenses decreased $2.2 million, or ~~164%~~12.9%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Cost of product revenue increased $15.7 million or 153% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. The increases in cost of product revenue in the comparative periods were primarily driven by higher domestic product revenue and inclusion of our European operations in 2022 onward. The cost components are detailed in the table as follows.

Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 Amount % 2022 2021 Amount %
(in thousands, except percentages)
Inventory costs $ 9,610 $ 3,035 $ 6,575 217 % $ 18,442 5,861 $ 12,581 215 %
Outbound shipping 2,633 1,625 1,008 62 % 5,053 3,333 1,720 52 %
Direct labor 988 365 623 171 % 1,875 757 1,118 148 %
Packaging 324 115 209 182 % 603 319 284 89 %
Total cost of product revenue $ 13,555 $ 5,140 $ 8,415 164 % $ 25,973 $ 10,270 $ 15,703 153 %

Product gross margin decreased 337 basis points to 51% for the three months ended June 30, 2022. Product gross margin decreased 293 basis points to 51% for the six months ended June 30, 2022. Our European operations have lower product profit margin mainly due to capitalization of production costs into inventory and release from inventory to cost of product revenue as items are shipped. The increase in outbound shipping from the inclusion of our European operations in 2022 was offset by a decrease in domestic outbound shipping relative to the revenue growth due to consolidation of our outbound shipping process across distribution centers. The 171% and 148% increases in direct labor for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021 were due primarily to the 145% and 138% growth in product revenue during the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021.

~~Table of Contents~~

~~Operating Expenses~~

Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 Amount % 2022 2021 Amount %
(in thousands, except percentages)
Operations, product and technology $ 43,961 $ 31,062 $ 12,899 42 % $ 83,122 $ 59,374 $ 23,748 40 %
Marketing 19,640 15,957 3,683 23 % 36,618 31,403 5,215 17 %
Sales, general and administrative 17,380 10,999 6,381 58 % 32,044 21,637 10,407 48 %
Total operating expenses $ 80,981 $ 58,018 $ 22,963 40 % $ 151,784 $ 112,414 $ 39,370 35 %
Operations, product and technology as a % of total revenue 58 % 52 % 56 % 51 %
Marketing as a % of total revenue 26 % 27 % 25 % 27 %
Sales, general and administrative as a % of total revenue 23 % 18 % 21 % 19 %

Operating expenses increased $23.0 million, or 40%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Operating expenses increased $39.4 million, or 35%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 in the same period. We continue to invest in the expansion of distribution center processing capacity, marketing efforts, infrastructure to support being a public company and expansion into Europe. Results by operating expenses line item are discussed below.

~~Operations, Product and Technology~~

Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 Amount % 2022 2021 Amount %
(in thousands, except percentages)
Personnel-related costs $ 27,674 $ 19,272 $ 8,402 44 % $ 53,168 $ 37,951 $ 15,217 40 %
Facilities and other allocated costs 9,203 6,481 2,722 42 % 17,533 12,501 5,032 40 %
Inbound and other shipping 6,537 5,077 1,460 29 % 11,413 8,632 2,781 32 %
Other 547 232 315 136 % 1,008 290 718 248 %
Total operations, product and technology expenses $ 43,961 $ 31,062 $ 12,899 42 % $ 83,122 $ 59,374 $ 23,748 40 %
Operations, product and technology as % of total revenue 58 % 52 % 56 % 51 %

Personnel-related costs were $27.7 million for the three months ended June 30, 2022, a 44% increase from $19.3 million for the three months ended June 30, 2021. Personnel-related costs were $53.2 million for the six months ended June 30, 2022, which increased by 40% from $38.0 million for the six months ended June 30, 2021. Our average headcount in distribution and processing centers, corporate and general operational support functions increased 37% and 55% for the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021.

~~Table of Contents~~

Facilities and other allocated costs were $9.2 million for the three months ended June 30, 2022, which increased by 42% from $6.5 million for the three months ended June 30, 2021, driven by increases of $1.9 million in rent, depreciation, supplies and third-party logistics related to distribution and processing centers and $0.8 million in software subscriptions and hosting fees. Facilities and other allocated costs were $17.5 million for the six months ended June 30, 2022, which increased by 40% from $12.5 million for the six months ended June 30, 2021, driven by increases of $3.8 million in rent, depreciation and other operating expenses in distribution and processing centers and $1.3 million in software subscriptions and hosting fees.

Inbound and other shipping costs were $6.5 million for the three months ended June 30, 2022, which increased by 29% from $5.1 million for the three months ended June 30, 2021. Inbound and other shipping costs were $11.4 million for the six months ended June 30, 2022, which increased by 32% from $8.6 million for the six months ended June 30, 2021. The increases in the comparative periods were driven by higher shipping rates and increases in transfers between our processing centers and distribution centers.

~~We expect operating, product and technology costs to decrease in absolute dollars but to be a higher percentage of revenue next quarter due to fixed facilities and technology costs.~~

~~Marketing~~

Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 Amount % 2022 2021 Amount %
(in thousands, except percentages)
Marketing and advertising costs $ 15,245 $ 13,743 $ 1,502 11 % $ 29,172 $ 26,963 $ 2,209 8 %
Personnel-related costs 3,122 1,555 $ 1,567 101 % 5,197 3,239 $ 1,958 60 %
Facilities and technology allocated costs 239 337 (98) (29) % 607 650 (43) (7) %
Professional services 346 176 170 97 % 613 271 342 126 %
Other 688 146 542 371 % 1,029 280 749 268 %
Total marketing expense $ 19,640 $ 15,957 $ 3,683 23 % $ 36,618 $ 31,403 $ 5,215 17 %
Marketing as % of total revenue 26 % 27 % 25 % 27 %

Marketing costs increased 23% for the three months ended June 30, 2022. Marketing and advertising costs were $15.2 million for the three months ended June 30, 2022, which increased by 11% from $13.7 million for the three months ended June 30, 2021. The increase in marketing and advertising costs was driven by an increase of $2.4 million from our acquisition of our European operations in 2021, offset by $0.9 million from the discontinuance of our Goody Box program. Marketing costs increased 17% for the six months ended June 30, 2022. Marketing and advertising costs were $29.2 million for the six months ended June 30, 2022, which increased by 8% from $27.0 million for the six months ended June 30, 2021. The increase in marketing and advertising costs was driven by an increase of $4.2 million from our acquisition of our European operations in 2021, offset by $2.0 million from the discontinuance of our Goody Box program and reduction in other domestic marketing costs.

Personnel-related costs were $3.1 million for the three months ended June 30, 2022, which increased by 101% from $1.6 million for the three months ended June 30, 2021. Personnel-related costs were $5.2 million for the six months ended June 30, 2022, which increased by 60% from $3.2 million for the six months ended June 30, 2021. The average headcount increased 86% and 88%, respectively, for the three and six months ended JuneSeptember 30, 2022 as compared to the ~~three~~same period in 2021. The decrease was primarily due to a $4.1 million decrease in marketing and ~~six~~advertising costs, partially offset by a $1.1 million increase in personnel-related costs related to salaries, stock compensation, restructuring and other expenses, a $0.6 million increase in technology and other costs, and a $0.2 million increase in professional services.

Marketing expenses increased $3.0 million, or 6.3%, for the nine months ended ~~June 30, 2021. Stock-based compensation expenses for the U.S. increased $0.9 million and $0.8 million, respectively, for the three and six months ended June~~September 30, 2022 as compared to the ~~three~~same period in 2021. The increase was primarily due to a $3.0 million increase in personnel-related costs related to salaries, stock compensation and ~~six months ended June 30, 2021.~~

~~We expect marketing~~other expenses, a $1.3 million increase in technology and other costs, toand a $0.6 million increase in professional services, partially offset by a $1.9 million decrease in ~~absolute dollars but be a higher percentage of revenue next quarter due to fixed personnel-related~~marketing and advertising costs.

~~Table of Contents~~

Sales, General and Administrative

Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 Amount % 2022 2021 Amount %
(in thousands, except percentages)
Personnel-related costs $ 11,123 $ 5,267 $ 5,856 111 % $ 18,495 $ 10,803 $ 7,692 71 %
Professional services 2,008 1,456 552 38 % 4,514 3,291 1,223 37 %
Payment processing fees 2,264 2,029 235 12 % 4,481 3,826 655 17 %
Other 1,985 2,247 (262) (12) % 4,554 3,717 837 23 %
Total sales, general and administrative expenses $ 17,380 $ 10,999 $ 6,381 58 % $ 32,044 $ 21,637 $ 10,407 48 %
Sales, general and administrative as % of total revenue 23 % 18 % 21 % 19 %


	Three Months Ended						Change				Nine Months Ended						Change
	September 30, 2022			September 30, 2021			Amount		%		September 30, 2022			September 30, 2021			Amount		%
	(in thousands, except percentages)
Sales, general and administrative	$	15,232		$	12,569		$	2,663	21.2	%	$	47,276		$	34,206		$	13,070	38.2	%
Sales, general and administrative as a percentage of total revenue	22.4		%	19.9		%					21.8		%	19.1		%

Sales, general and administrative expenses increased ~~58%~~$2.7 million, or 21.2%, for the three months ended ~~June~~September 30, 2022 as compared to the ~~three months ended June 30,~~same period in 2021. The increase was primarily due to a $4.6 million increase in personnel-related costs related to salaries, stock compensation, restructuring, our European operations and other costs, partially offset by a $1.8 million decrease in professional services due to expenses related to our follow-on offering incurred in 2021 and the impact of cost savings initiatives in 2022, and a $0.2 million decrease in other costs.

Sales, general and administrative ~~expense~~expenses increased ~~48%~~$13.1 million, or 38.2%, for the ~~six~~nine months ended ~~June~~September 30, 2022 as compared to the ~~six months ended June 30,~~same period in 2021. The ~~increases for both comparative periods~~increase was ~~mainly the result of investments, primarily in personnel and, to a lesser extent, professional services costs, made towards scaling our business and improving our processes as a public company.~~

Personnel-related costs were $11.1 million for the three months ended June 30, 2022, which increased by 111% from $5.3 million for the three months ended June 30, 2021. Personnel-related costs were $18.5 million for the six months ended June 30, 2022, which increased by 71% from $10.8 million for the six months ended June 30, 2021. The average headcount increased 97% and 91%, respectively, for the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021.

~~Professional services costs were $2.0 million for the three months ended June 30, 2022, which increased 38% from $1.5 million compared to the three months ended June 30, 2021~~ primarily due to ~~the inclusion of our European operations~~an $12.2 million increase in ~~legal fees and customer support services. Professional services~~personnel-related costs ~~were $4.5 million for the six months ended June 30, 2022, which increased 37% from $3.3 million compared~~related to ~~the six months ended June 30, 2021 due to an increase of $0.5 million in legal services, the inclusion of~~salaries, stock compensation, restructuring, our European operations and other personnel costs and a ~~general~~$2.8 million increase in ~~services including customer support~~technology, payment processing, insurance, workplace and other ~~services.~~

Payment processing fees were $2.3 million for the three months ended June 30, 2022, which increased 12% from $2.0 million for the three months ended June 30, 2021. The increase was mainly due to the 27% increase in overall salescosts, partially offset by ~~lower payment processing rate in our European operations. Payment processing fees were $4.5~~a $1.9 million for the six months ended June 30, 2022, which increased 17% from $3.8 million for the six months ended June 30, 2021. The increase was mainly due to the 29% increase in overall revenue, partially offset by lower payment processing rate in our European operations.

~~Other expenses were $2.0 million for the three months ended June 30, 2022, a decrease of 12% from $2.2 million for the three months ended June 30, 2021, primarily driven by a~~ decrease in ~~sales & use~~ tax ~~reserves~~ and payroll service fees. Other expenses were $4.6 million for the six months ended June 30, 2022, an increase of 23% from $3.7 million for the six months ended June 30, 2021, primarily driven by higher insurance premiums associated with our public company status.

~~We expect sales, general and administrative costs to decrease in absolute dollars but be a higher percentage of revenue next quarter due to fixed corporate overhead costs.~~professional fee expenses.

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Liquidity and Capital Resources

~~As of June 30, 2022, we had cash, cash equivalents and short-term marketable securities of $148.5 million.~~ 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, 2022, we had cash, cash equivalents and short-term marketable securities of $123.2 million. Additionally, we have a term loan facility ~~with Western Alliance Bank (the “Term~~(“Term Loan”) ~~for~~under which ~~we have~~$38.0 million remained available to be drawn ~~$40.0 million and repaid $8.0 million, with $32.0 million outstanding~~ as of ~~June~~September 30, ~~2022. In July~~ 2022 and we entered into a Second Amended and Restated Loan and Security Agreement, which amends and restates the Term Loan to, among other things, increase the aggregate borrowing ability to $70.0 million, reduce the applicable margin for borrowingswere in full compliance with our debt covenants under the Term Loan as of that date. See Note 7, Long-Term Debt, to the ~~prime rate published~~Condensed Consolidated Financial Statements included in ~~the Wall Street Journal plus~~Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a ~~margin of 1.25% with a floor of 6.00% and extend the maturity date of the outstanding~~further discussion on our Term ~~Loan to July 14, 2027.~~Loan.

We expect operating losses and negative cash flows from operations to continue into the foreseeable future as we continue to invest in growing our business and expanding our infrastructure. Our primary use of cash includes operating costs such as ~~processing center and~~ distribution ~~center~~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 ~~processing centers and~~ distribution ~~centers~~network and may be accelerated or delayed based on our operating position and ~~needs of the Company.~~business needs. Based upon our current operating plans, we believe that our existing cash, cash equivalents and short-term marketable securities will be sufficient to meet our ~~short-term~~short- and long-term capital ~~requirements.~~requirements and we do not anticipate expanding our distribution network to include additional locations in the near term. Our forecast of the period of time through which our financial resources will be adequate to support our operations 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 marketplace and overall economic conditions. We may seek additional equity or debt financing. If we raise equity financing, our stockholders may experience significant dilution of their ownership interests. If we conduct an additional debt financing, the terms of such debt financing may be similar or more restrictive than our current ~~term loan facility,~~Term Loan, and we would have additional debt service obligations. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be harmed.

Cash Flows

The following table summarizes our cash flows for the periods indicated:


		Six Months Ended
		June 30,					Nine Months Ended
		2022		2021			September 30, 2022		September 30, 2021
		(in thousands)					(in thousands)
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	(24,835)	$	(9,090)	Operating activities	$	(36,939)	$	(14,132)
Investing activities	Investing activities	(4,764)		(66,417)		Investing activities	(6,961)		(116,322)
Financing activities	Financing activities	(2,332)		184,081		Financing activities	(2,922)		229,032
Effect of exchange rate changes on cash and cash equivalents		(521)		—
Net increase (decrease) in cash, cash equivalents and restricted cash		$	(32,452)	$	108,574
Effect of exchange rate changes on cash, cash equivalents and restricted cash						Effect of exchange rate changes on cash, cash equivalents and restricted cash	(918)		—
Net change in cash, cash equivalents and restricted cash						Net change in cash, cash equivalents and restricted cash	$	(47,740)	$	98,578

Changes in Cash ~~Flow~~Flows from Operating Activities

For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash used in operating activities increased by $22.8 million and was ~~$24.8~~$36.9 million ~~which consisted~~compared to $14.1 million for the same period in 2021. The increase in net cash used in operating activities was partially the result of a $27.5 million increase in net loss ~~of $49.1 million, partially~~for the nine months ended September 30, 2022 as compared to the same period in 2021. This was offset by non-cash ~~charges~~increases in stock based compensation of ~~$24.3 million. The cash flow decrease in operating assets and liabilities was primarily~~$11.4 million due to ~~a $4.7~~higher restricted stock vesting, depreciation and amortization of $4.1 million increase in inventory to support seasonal sales for our European operations and to support business growth. We also experienced a $1.5 million increase in prepaid expenses for insurance, software and other expenses. Offsetting these cash flow decreases was a $6.2 million increase in accounts payable, accrued and other current liabilities and seller payable flows due to ~~payment timing, increased sales~~intangibles relating to the Remix acquisition, capital and ~~higher operating expenses as we grow our business.~~infrastructure investments, and reduction in the carrying amount of right of use assets of $1.6 million.

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~~For the six months ended June 30, 2021,~~Net cash used in operating activities further decreased due to a $12.0 million decrease in flows from operating assets and liabilities. The increase in net cash used in operating activities was $9.1 million, which consisted of a net loss of $30.6 million, partially offset by non-cash charges of $13.9 million and a net change of $7.6 million in our operating assets and liabilities. The change in operating assets and liabilities is due to ~~an $8.2 million increase~~build of inventory in ~~accrued~~2022 to meet European seasonal demand and ~~other current liabilities, primarily resulting from an increase~~higher owned inventory in ~~accrued marketing~~the U.S and ~~accrued compensation, a $3.0 million increase in seller payable due to the timing of payments, a $2.7 million increase~~reduction in accounts payable, accrued liabilities and seller payable flows due to ~~the~~ timing ~~of payments~~ and ~~higher operating expenses as we grow our business. These changes were partially~~reduction in spend, offset by ~~a $3.4 million increase in~~flows from other current and non-current assets ~~resulting~~due to growth of prepaid expenses in 2021 and inflow from ~~an increase in prepaid insurance, a reduction in~~ operating lease liabilities ~~of $2.3 million~~ resulting from ~~the payment of leases, and a $0.8 million increase in net inventory.~~lease incentives.

Changes in Cash ~~Flow~~Flows from Investing Activities

For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash used in investing activities decreased by $109.4 million and was ~~$4.8~~$7.0 million ~~which was driven by $27.6~~compared to $116.3 million ~~of capital expenditures primarily~~ for ~~our new distribution centers and $3.5 million purchases of marketable securities, partially offset by $26.3 million~~the same period in ~~maturities of marketable securities.~~

~~For the six months ended June 30, 2021,~~2021. The decrease in net cash used in investing activities during the nine months ended September 30, 2022 was ~~$66.4~~primarily due a $133.5 million ~~which was driven by $57.4 million~~decrease in ~~new purchases of~~net cash used to purchase marketable securities and ~~$9.0 million~~provided by marketable security maturities. The change in net cash from marketable securities was partially offset by an increase in purchases of ~~capital expenditures primarily for our distribution centers.~~property and equipment of $24.2 million.

Changes in Cash ~~Flow~~Flows from Financing Activities

For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash used in financing activities decreased by $232.0 million and was ~~$2.3~~$2.9 million ~~which consisted mainly of $4.0 million in debt repayment, partially offset by $1.7 million in proceeds from the exercise of common stock options and employee stock purchases.~~

~~For the six months ended June 30, 2021,~~net cash used as compared to net cash provided by financing activities ~~was $184.1~~of $229.0 million ~~which consisted mainly of $180.3 million~~for the same period in 2021. The increase in net ~~proceeds from~~cash used in financing activities during the ~~sale~~nine months ended September 30, 2022 was primarily due to $222.7 million decrease in equity offerings and payments of ~~Class A common stock in our IPO, $4.6 million~~offering transaction costs, an increase in net debt ~~financing proceeds,~~payments of $7.5 million and ~~$2.8 million from the exercise~~an increase in tax withholding related to vested restricted stock of ~~common stock options. This was partially offset by $3.6 million in offering costs for the IPO.~~$1.9 million.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statementsU.S. GAAP requires us to make ~~judgments~~estimates and ~~estimates~~assumptions that affect the reported amounts of assets and liabilities and ~~the disclosure~~disclosures of contingent assets and liabilities at the date of the ~~condensed consolidated~~ financial statements ~~as well as~~and the reported amounts of revenue ~~generated,~~ and expenses ~~incurred~~ during the ~~reporting periods. Our~~year. We base our estimates ~~are based~~and assumptions on ~~our~~current facts, historical experience and on various other factors that we believe ~~are~~to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying ~~value~~values of assets and liabilities ~~that are not readily apparent from other sources.~~and the recording of revenue, costs and expenses. Actual results ~~may~~could differ from ~~these judgments and estimates under different assumptions or conditions and any such differences may be material.~~those estimates.

There have been no ~~significant~~material changes to our critical accounting policies since ~~December 31, 2021.~~the 2021 10-K. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our ~~unaudited~~ condensed consolidated financial statements, ~~refer to the section titled “Management’s~~see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations” included in our Annual Report on Form 10-K filed with the SEC on March 22, 2022.~~

~~Recent Accounting Pronouncements~~

~~See discussion under Note 2,~~ ~~Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1,~~ ~~Financial Statements~~Operations, of ~~this Quarterly Report on Form 10-Q, for information on new accounting pronouncements.~~the 2021 10-K.

~~Table of Contents~~

JOBS Act Accounting Election

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Accordingly, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

New Accounting Pronouncements

See discussion under Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for information on new accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include:

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Interest Rate Risk

As of ~~June~~September 30, 2022, we had ~~unrestricted~~ cash and cash equivalents of ~~$52.2~~$36.7 million and marketable securities of ~~$96.3~~$86.5 million, consisting primarily of money market funds, commercial paper, corporate debt securities, ~~commercial paper,~~ U.S. treasury securities and U.S. government agency bonds, which carry a degree of interest rate risk. ~~Fluctuations in interest rates have not been significant to date.~~ The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the ~~short-term~~short- to ~~intermediate term~~intermediate-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to ~~changes~~fluctuations in interest rates. ~~Fluctuations in~~

The Term Loan bears variable interest rates ~~have not been significant to date.~~

~~Interest rates under our loan and security agreement with Western Alliance Bank are~~ tied to the prime rate, with a floor of ~~5.50%~~6.00%, and therefore carry interest rate risk. ~~As of June 30, 2022, we had borrowed $40.0 million under our loan and security agreement, with $32.0 million principal outstanding as of such date, at an interest rate of 6.25%. Fluctuations in~~If interest rates ~~have not been significant~~were to ~~date. See Note 14, Subsequent Events for discussion of our loan amendment and impact on interest rates effective July 14, 2022.~~

~~A hypothetical 100 basis point change in interest rates would not have a material impact on our financial condition~~increase or ~~results of operations~~decrease by 1% for the ~~periods presented.~~year and our borrowing amounts on the Term Loan remained constant, our annual interest expense could increase or decrease by approximately $0.3 million, respectively.

Inflation Risk

In recent months, inflation has increased significantly in the ~~United States~~U.S. and overseas where we conduct our business, resulting in rising interest rates, fuel, ~~wages,~~labor and processing, freight and other ~~costs.~~costs that have affected our gross margin and operating expenses. We do not believe that inflation has had a material effect on our business, financial condition, or results of operations to date. However, these increases could negatively impact our business by driving up our operating and borrowing costs. ~~In addition, the~~Although difficult to quantify, we believe inflation is potentially having an adverse effect ~~of inflation~~ on ~~consumers’ budgets could result in a decrease~~our customers’ ability to purchase in our ~~customers’ spending.~~marketplaces, resulting in slowing revenue and Order growth. If we are unable to increase our prices to sufficiently offset the rising costs of doing business, our profitability and financial position could be adversely impacted.

Foreign Currency Exchange Rate Risk

We transact business in Europe through Remix in multiple currencies. As a result, our operating results, cash flows and net investment in Remix are subject to fluctuations due to changes in foreign currency exchange rates. As of ~~June~~September 30, 2022, our most significant currency exposure was the Bulgarian ~~lev (BGN).~~lev. We manage our foreign currency exchange rate risks through natural hedges including foreign currency revenue and costs matching, as well as foreign currency assets offsetting liabilities. We have not entered into any hedging arrangements with respect to foreign currency risk, but we may do so in the future if our exposure to foreign currency becomes more significant.

Assets and liabilities of our foreign operations are translated into dollars at period-end rates, while income and expenses are translated using the average exchange rate during the period in which the transactions occurred. The related translation adjustments ~~are~~were reflected as ~~a negative~~an unfavorable foreign currency translation adjustment of ~~$3.0~~$5.3 million ~~impacting equity for~~during the ~~six~~nine months ended ~~June~~September 30, 2022, which was recognized in accumulated other comprehensive ~~loss.~~loss within our condensed consolidated balance sheet.

A hypothetical 10% change in foreign currency exchange rates would not have had a material impact on our financial condition or results of operations during any of the periods presented.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this report. The term “disclosure controls and procedures,” as defined under the Exchange Act, means controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, no evaluation of control can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

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Because of the material weakness in our internal control over financial reporting discussed below, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June~~September 30, 2022, our disclosure controls and procedures were not effective. In light of this fact, our management, including our Chief Executive Officer and Chief Financial Officer, has ~~performed additional reconciliations~~put in place processes and controls and other post-closing procedures and has concluded that, notwithstanding the material weakness in our internal control over financial reporting, the unaudited interim condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Previously Reported Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed in ~~our Annual Report on Form~~the 2021 10-K, ~~filed with the SEC on March 22, 2022,~~ in connection with the audit of our financial statements for the fiscal years ended December 31, 2021, 2020, 2019 and 2018 we ~~and our independent registered public accounting firm~~ identified certain control deficiencies in the design and implementation of our internal control over financial reporting that in the aggregate constituted a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

Our material weakness related to the following control deficiencies:

•We did not design and maintain effective control over our accounting and proprietary data systems used in our financial reporting process. These systems lacked controls over user access, program change management, computer operation and data validation to ensure that IT program and data changes affecting financial accounting applications and underlying accounting records are identified, tested, authorized and implemented appropriately.

•We did not design and maintain adequate controls over the preparation and review of certain account reconciliations and journal entries. Specifically, we did not design and maintain controls and we did not maintain a sufficient complement of accounting personnel to ~~ensure~~ensure: (i) the appropriate segregation of duties in the preparation and review of account reconciliations and journal entries, and (ii) account reconciliations were prepared and reviewed at the appropriate level of precision on a consistent and timely basis.

The deficiencies described above, if not remediated, could result in a misstatement of one or more account balances or disclosures in our annual or interim consolidated financial statements that would not be prevented or detected, and, accordingly, we determined that these control deficiencies constitute a material weakness.

Remediation Plans

To address our material weakness, we have added accounting, finance and information technology personnel and implemented new financial accounting ~~processes.~~processes, controls, and systems. We are continuing to take steps to remediate the material weakness described above through implementing enhancements and controls within our accounting and proprietary systems, hiring additional qualified accounting, finance and information technology resources and further evolving our accounting and quarterly close processes. We will not be able to fully remediate these control deficiencies until these steps have been completed and the controls have been operating effectively for a sufficient period of time.

~~Table of Contents~~

Changes in Internal Control over Financial Reporting

We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting, as described above. Except as described above, there was not any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ~~We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.~~

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business.

Item 1A. Risk Factors

~~The Company is supplementing the risk factors previously disclosed in the section titled “Risk Factors”~~Risks affecting our business are discussed in Part I, Item 1A,Risk Factors, of our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, 2021 ~~filed with the SEC on March 22, 2022 (our “Fiscal~~ (“2021 10-K”) and Part II, Item 1A, Risk Factors, of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (“Q2 2022 10-Q”). There have been no material changes to ~~include the following~~our risk factors ~~which should be read in conjunction with the other risk factors presented~~as previously disclosed in our ~~Fiscal~~ 2021 ~~10-K.~~

~~Our international operations may subject us to exchange rate fluctuations~~10-K and ~~other currency risks.~~

Assets, liabilities, revenues and related expenses of our international operations are denominated in foreign currencies. Exchange rate fluctuations between a local currency and the U.S. dollar may negatively impact the financial conditions and operating results of our international operations when converted into U.S. dollars. In addition, the relative change in currency values creates fluctuations in product pricing for foreign end-customers, which may result in lost orders and reduce the competitiveness of our products in certain foreign markets. The reduction of our revenue as a result of exchange rate fluctuations could negatively impact our future growth prospects, results of operations and financial condition.

~~We may not realize expected savings or benefits from restructuring activities.~~

We have entered into restructuring activities and may enter into such initiatives in the future to improve our operations, respond to changes in business conditions and markets and to streamline certain key functions to reduce costs. We may not realize expected savings or benefits from restructuring activities, incur additional restructuring charges and experience loss of key personnel, disruptions in our operations, and difficulties in the timely delivery of products. These factors could negatively impact our business, results of operations and financial condition.

~~Recent increases in interest rates and volatility in the capital markets may increase our borrowing costs and affect our ability to raise additional funds.~~

~~We have relied in part on borrowed funds to meet our liquidity needs and fund our operations and may continue to do so in the future. In July~~Q2 2022 we entered into a Second Amended and Restated Loan and Security Agreement to, among other things, increase our aggregate borrowing ability to $70.0 million, reduce the applicable margin for borrowings under the Term Loan to the prime rate published in The Wall Street Journal plus a margin of 1.25% with a floor of 6.00% and extend the maturity date of the outstanding Term Loan to July 14, 2027. Continued increases in interest rates will increase the cost of servicing our outstanding indebtedness as well as the cost of any new indebtedness we may incur, including as a result of any future refinancings, and could negatively impact our business, results of operations and financial condition. In addition, uncertainty and volatility in the capital markets and other factors may negatively impact our access to debt and equity financing and such financing may not be available on terms favorable to us or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, we could face significant limitations on our ability to invest in our operations and otherwise suffer harm to our business.10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)None.

(b)On March 30, 2021, we closed our IPO, in which we sold 13,800,000 shares of our Class A common stock at an offering price of $14.00 per share, including 1,800,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares of our Class A common stock, resulting in net proceeds to us of $175.5 million after deducting offering costs, underwriting discounts and commissions of $17.7 million. All of the shares offered, issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-253834), which was declared effective by the SEC on March 25, 2021. There has been no material change in the planned use of proceeds from the IPO as disclosed in our final prospectus filed pursuant to Rule 424(b) on March 26, 2021.

~~Table of Contents~~

On August 2, 2021, the Company issued and sold 2,000,000 shares of Class A common stock at a price of $24.25 per share in a registered public offering. The aggregate net proceeds were $45.5 million, after deducting $3.3 million of underwriting discounts and commissions and offering costs. There has been no material change in the planned use of proceeds from the registered public offering completed in August 2021.

(c)None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)None.

(b)None.

~~Table of Contents~~

Item 6. Exhibits

(a)~~Exhibits~~Exhibit Index:

Incorporation by Reference
Exhibit
Number Exhibit Title Form File No. Exhibit Filing Date
3.1
Amended and Restated Certificate of Incorporation of the Registrant.
S-1 333-253834 3.2 3/3/2021
3.2
Amended and Restated Bylaws of the Registrant.
S-1 333-253834 3.4 3/3/2021
4.1
Form of Class A common stock certificate of the Registrant.
S-1 333-253834 4.1 3/3/2021
4.2
Tenth Amended and Restated Investors’ Rights Agreement, dated February 16, 2021, by and among the Registrant and certain of its stockholders.
S-1 333-253834 4.2 3/3/2021
31.1
Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
31.2
Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
32.1*
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith
32.2*
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith
101.INS XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith
101.SCH Inline XBRL Taxonomy Extension Schema Document. Filed herewith
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith
104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). Filed herewith

Table of Contents

Incorporated by Reference

Exhibit Number

Description

Form

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of the Registrant

S-1

3.2

3/3/2021

3.2

Amended and Restated Bylaws of the Registrant

S-1

3.4

3/3/2021

4.1

Form of Class A common stock certificate of the Registrant

S-1

4.1

3/3/2021

4.2

Tenth Amended and Restated Investors’ Rights Agreement, dated February 16, 2021, by and among the Registrant and certain of its stockholders

S-1

4.2

3/3/2021

10.1†^

Second Amended and Restated Loan and Security Agreement dated as of July 14, 2022, by and among ThredUp Inc., ThredUp Intermediary Holdings LLC, Knitwit GC LLC, the lenders from time to time party thereto, and Western Alliance Bank, as agent

8-K

10.1

7/20/2022

31.1*

Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

*~~The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed~~ Filed herewith.

** Furnished herewith.

† Certain schedules have been omitted pursuant to ~~accompany this Quarterly Report on Form 10-Q and are not deemed “filed” for purposes~~Item 601(a)(5) of ~~Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing~~Regulation S-K under the Securities ~~Act~~Act. The Company agrees to furnish supplementally any omitted schedules to the Securities and Exchange Commission upon request.

^ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because they are both (i) not material and (ii) the type that the registrant treats as private or confidential. A copy of the omitted portions will be furnished to the Securities and Exchange ~~Act, irrespective of any general incorporation language contained in such filing.~~Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			THREDUP INC.

			By:			/s/ SEAN SOBERS
						Sean Sobers
						Chief Financial Officer
						(Principal Financial and Accounting Officer)

~~Dated: August 15,~~Date: November 14, 2022

3732


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