UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023

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

For the transition period from ____________________ to ____________________

Commission File Number: 001-40249

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, California			94607
(Address of principal executive offices)			(Zip Code)

(415) 402-5202

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value per share

TDUP

The Nasdaq Stock Market LLC

Long-Term Stock Exchange

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

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

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


Large accelerated 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 ☒

There were ~~69,960,710~~72,605,495 shares of Class A common stock and ~~30,844,696~~30,484,786 shares of Class B common stock outstanding as of ~~November 7, 2022.~~May 2, 2023.

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		Page 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	109
	Notes to Unaudited Condensed Consolidated Financial Statements	1110
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2725
Item 4.	Controls and Procedures	2827

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3028
Item 1A.	Risk Factors	3028
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3028
Item 3.	Defaults Upon Senior Securities	3028
Item 4.	Mine Safety Disclosures	3029
Item 5.	Other Information	3029
Item 6.	Exhibits	3029
	Signatures	3230

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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”~~“potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

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

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

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

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

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

•our ability to continue to generate revenue from new Resale-as-a-Service (“RaaS”) offerings as sources of revenue;

•trends in our key financial and operating metrics;

•our estimated market opportunity;

•economic and industry trends, projected growth or trend analysis, including the effects of foreign currency exchange rate fluctuations, inflationary pressures, increased interest rates, ~~and~~ changing consumer habits and general global economic uncertainty;

•our ability to comply with applicable laws and regulations;

•the effect of uncertainties related to the ongoing global COVID-19 pandemic, including 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 Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, ~~2021, Part II, Item 1A, Risk Factors of our Quarterly Report on 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.

***

~~Table of Contents~~

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.

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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.~~marketplaces.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THREDUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30,
2022 December 31,
2021
(in thousands, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 36,713 $ 84,550
Marketable securities 86,501 121,277
Accounts receivable, net 3,175 4,136
Inventory, net 15,003 9,825
Other current assets 10,126 8,625
Total current assets 151,518 228,413
Operating lease right-of-use assets 46,760 39,340
Property and equipment, net 89,529 55,466
Goodwill 10,645 12,238
Intangible assets 10,242 13,854
Other assets 10,896 11,515
Total assets $ 319,590 $ 360,826
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 8,642 $ 13,336
Accrued and other current liabilities 53,365 45,253
Seller payable 18,690 19,125
Operating lease liabilities, current 4,931 3,931
Current portion of long-term debt 3,881 7,768
Total current liabilities 89,509 89,413
Operating lease liabilities, non-current 50,623 36,997
Long-term debt, net of current portion 26,859 27,559
Other non-current liabilities 2,904 1,123
Total liabilities 169,895 155,092
Commitments and contingencies (Note 11)
Stockholders’ equity:
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 545,449 522,161
Accumulated other comprehensive loss (7,636) (1,094)
Accumulated deficit (388,128) (315,343)
Total stockholders’ equity 149,695 205,734
Total liabilities and stockholders’ equity $ 319,590 $ 360,826


	March 31, 2023		December 31, 2022
	(in thousands, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	50,739	$	38,029
Marketable securities	42,733		66,902
Accounts receivable, net	4,232		4,669
Inventory	20,933		17,519
Other current assets	6,338		7,076
Total current assets	124,975		134,195
Operating lease right-of-use assets	45,180		46,153
Property and equipment, net	95,806		92,482
Goodwill	11,805		11,592
Intangible assets	10,044		10,499
Other assets	6,960		7,027
Total assets	$	294,770	$	301,948
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,747	$	7,800
Accrued and other current liabilities	47,976		50,155
Seller payable	17,868		16,166
Operating lease liabilities, current	5,792		6,413
Current portion of long-term debt	3,882		3,879
Total current liabilities	88,265		84,413
Operating lease liabilities, non-current	47,521		48,727
Long-term debt, net of current portion	24,831		25,788
Other non-current liabilities	3,066		3,019
Total liabilities	163,683		161,947
Commitments and contingencies (Note 10)
Stockholders’ equity:
Class A and B common stock, $0.0001 par value; 1,120,000 shares authorized as of March 31, 2023 and December 31, 2022; 102,836 and 101,532 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	10		10
Additional paid-in capital	561,577		551,852
Accumulated other comprehensive loss	(3,080)		(4,234)
Accumulated deficit	(427,420)		(407,627)
Total stockholders’ equity	131,087		140,001
Total liabilities and stockholders’ equity	$	294,770	$	301,948

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

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THREDUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Nine Months Ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
(in thousands, except per share amounts)
Revenue:
Consignment $ 41,553 $ 48,071 $ 137,524 $ 141,356
Product 26,392 15,203 79,537 37,557
Total revenue 67,945 63,274 217,061 178,913
Cost of revenue:
Consignment 9,087 10,080 29,354 31,599
Product 14,362 7,100 40,335 17,370
Total cost of revenue 23,449 17,180 69,689 48,969
Gross profit 44,496 46,094 147,372 129,944
Operating expenses:
Operations, product and technology 38,702 32,081 121,824 91,455
Marketing 14,752 16,941 51,370 48,344
Sales, general and administrative 15,232 12,569 47,276 34,206
Total operating expenses 68,686 61,591 220,470 174,005
Operating loss (24,190) (15,497) (73,098) (44,061)
Interest expense 103 619 764 1,751
Other income, net (624) (1,418) (1,108) (604)
Loss before provision for income taxes (23,669) (14,698) (72,754) (45,208)
Provision for income taxes 9 17 31 57
Net loss $ (23,678) $ (14,715) $ (72,785) $ (45,265)
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 100,253 96,349 99,409 70,113


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in thousands, except per share amounts)
Revenue:
Consignment	$	46,479	$	47,435
Product	29,443		25,260
Total revenue	75,922		72,695
Cost of revenue:
Consignment	9,220		10,049
Product	15,609		12,418
Total cost of revenue	24,829		22,467
Gross profit	51,093		50,228
Operating expenses:
Operations, product, and technology	38,347		39,161
Marketing	16,870		16,978
Sales, general, and administrative	16,059		14,664
Total operating expenses	71,276		70,803
Operating loss	(20,183)		(20,575)
Interest expense	77		423
Other income, net	(476)		(303)
Loss before provision for income taxes	(19,784)		(20,695)
Provision for income taxes	9		13
Net loss	$	(19,793)	$	(20,708)
Loss per share, basic and diluted	$	(0.19)	$	(0.21)
Weighted-average shares used in computing loss per share, basic and diluted	101,984		98,624

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 Nine Months Ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
(in thousands)
Net loss $ (23,678) $ (14,715) $ (72,785) $ (45,265)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (2,217) — (5,258) —
Unrealized gain (loss) on available-for-sale securities (28) 8 (1,284) (28)
Total other comprehensive income (loss) (2,245) 8 (6,542) (28)
Total comprehensive loss $ (25,923) $ (14,707) $ (79,327) $ (45,293)


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in thousands)
Net loss	$	(19,793)	$	(20,708)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	544		(708)
Unrealized gain (loss) on available-for-sale securities	610		(1,002)
Total other comprehensive income (loss)	1,154		(1,710)
Total comprehensive loss	$	(18,639)	$	(22,418)

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)


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	(in thousands)
Balance as of December 31, 2022	101,532	$	10	$	551,852	$	(4,234)	$	(407,627)	$	140,001
Issuance of common stock from exercise of stock options and restricted stock units	1,484	—		275						275
Stock-based compensation				9,720						9,720
Shares withheld related to net share settlement	(180)	—		(270)						(270)
Net income								(19,793)		(19,793)
Other comprehensive income						1,154				1,154
Balance as of March 31, 2023	102,836	10		561,577		(3,080)		(427,420)		131,087

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

~~Table of Contents~~

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


	Common Stock
	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
Issuance of common stock from exercise of stock options and restricted stock units	507	—		754						754
Stock-based compensation				3,618						3,618
Net income								(20,708)		(20,708)
Other comprehensive loss						(1,710)				(1,710)
Balance as of March 31, 2022	98,942	10		526,533		(2,804)		(336,051)		187,688

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


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in thousands)
Cash flows from operating activities:
Net loss	$	(19,793)	$	(20,708)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,681		3,271
Stock-based compensation expense	9,391		3,523
Reduction in carrying amount of right-of-use assets	1,207		1,398
Other	41		481
Changes in operating assets and liabilities:
Accounts receivable, net	1,010		1,143
Inventory	(3,157)		(2,313)
Other current and non-current assets	22		(2,162)
Accounts payable	4,102		1,601
Accrued and other current liabilities	(1,851)		4,912
Seller payable	1,696		1,521
Operating lease liabilities	(2,062)		539
Other non-current liabilities	1,255		115
Net cash used in operating activities	(4,458)		(6,679)
Cash flows from investing activities:
Maturities of marketable securities	24,579		4,726
Purchases of property and equipment	(5,679)		(12,638)
Net cash provided by (used in) investing activities	18,900		(7,912)
Cash flows from financing activities:
Repayment of debt	(1,000)		(2,000)
Proceeds from exercise of stock options and employee stock purchase plan	446		965
Payment of withholding taxes on stock-based awards	(638)		(156)
Net cash used in financing activities	(1,192)		(1,191)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(540)		(172)
Net change in cash, cash equivalents, and restricted cash	12,710		(15,954)
Cash, cash equivalents, and restricted cash, beginning of period	44,051		91,840
Cash, cash equivalents, and restricted cash, end of period	$	56,761	$	75,886

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

109

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THREDUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

ThredUp Inc. (“thredUP” or the “Company”) was formed as a corporation in the State of Delaware in January 2009. thredUP isoperates a large resale platform that enables consumers to buy and sell primarily secondhand ~~women’s and kid’s~~ apparel, shoes, and accessories.

2. Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany account balances and transactions have been eliminated upon consolidation. The unaudited condensed consolidated financial statements were prepared in accordance with the United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10‑Q and Article 10 of Regulation S-X. As permitted under those rules, certain footnotes or other financial information can be condensed or omitted.

The preparation of consolidated financial statements in ~~conformity~~accordance with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and the related disclosures. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the useful lives of property and equipment and intangibles, allowance for sales returns, ~~allowance for bad debts,~~ breakage on loyalty points and rewards and gift cards, 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 ~~September 30, 2022,~~March 31, 2023, and the results of operations and cash flows for the interim periods presented.

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

Reclassifications

Certain reclassifications were made to the prior period condensed consolidated statement of cash flows to conform to the current period presentation.

~~New~~Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU changes the impairment model for most financial assets, requiring the use of an expected loss model which requires entities to estimate the lifetime expected credit loss on financial assets measured at amortized cost. Such credit losses will be recorded as an allowance to offset the amortized cost of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In addition, credit losses relating to available-for-sale debt securities will now be recorded through an allowance for credit losses rather than as a direct write-down to the security. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The ~~Company does not expect that the~~ adoption of this ~~standard will~~guidance during the first quarter of 2023 did not have a material impact on ~~its~~the Company’s condensed consolidated financial statements.

Revenue from Loyalty Reward Redemption and Expiration

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had a liability of $3.3 million and ~~$4.0~~$3.3 million, respectively, related to its customer loyalty program, which is included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. The Company recognized revenue from loyalty reward redemption ~~and expiration~~ of ~~$2.2~~$2.1 million and ~~$3.6~~$2.7 million for the three months ended ~~September 30,~~March 31, 2023 and 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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Gift Cards and Site Credits

The Company sells thredUP gift cards on its e-commerce website. thredUP gift cards do not expire or lose value over periods of inactivity. The Company accounts for gift cards by recognizing a gift card liability at the time a gift card is delivered to the customer. As of March 31, 2023 and December 31, 2022, $10.8 million and $10.9 million of gift card liability, respectively, was included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue from gift cards is generally recognized when the gift cards are redeemed by the customer and amounted to $0.5 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

The Company issues site credits for order refunds. Site credits can be applied toward future charges but may not be converted into cash. Site credits may also be converted to thredUP gift cards after one year at the discretion of the Company. These credits are recognized as revenue when used. As of March 31, 2023 and December 31, 2022, $6.3 million and $7.2 million, respectively, of such customer site credits were included in accrued and other current liabilities within the Company’s condensed consolidated balance sheets. Revenue recognized from the redemption of site credits was $9.4 million and $11.0 million for the three months ended March 31, 2023 and 2022, respectively.

The Company recognizes breakage revenue when it determines that the redemption of gift cards and site credits is remote. Breakage was not material for the three months ended March 31, 2023 and 2022.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s condensed consolidated balance sheets that sum to the total of the same such amounts shown in the Company’s condensed consolidated statements of cash flows:

September 30,
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


	March 31, 2023		December 31, 2022
	(in thousands)
Cash and cash equivalents	$	50,739	$	38,029
Restricted cash included in Other current assets	475		383
Restricted cash included in Other assets	5,547		5,639
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	56,761	$	44,051

Fair Value Measurements

The Company applies the provisions of FASB ASC Topic 820, Fair Value Measurements and Disclosures, for its financial and non-financial assets and liabilities. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

•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~~March 31, 2023 and December 31, ~~2021,~~2022, the carrying amounts of the Company’s accounts receivable, other current assets, other assets, accounts payable, seller payable and accrued and other current liabilities approximated their estimated fair values due to their relatively short maturities. Management believes the terms of its long-term variable-rate debt reflect current market conditions for an instrument with similar terms and maturity, and as such, the carrying value of the Company’s long-term debt approximated its fair value as of ~~both September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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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 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


	March 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	10,052	$	—	$	—	$	10,052
Commercial paper	—		21,062		—		21,062
U.S. government agency discount notes	2,992		—		—		2,992
Total cash equivalents	13,044		21,062		—		34,106
Marketable securities:
Corporate debt securities	13,505		—		—		13,505
U.S. treasury securities	12,322		—		—		12,322
U.S. government agency bonds	16,906		—		—		16,906
Total marketable securities	42,733		—		—		42,733
Total assets at fair value	$	55,777	$	21,062	$	—	$	76,839

September 30, 2022
Level 1 Level 2 Level 3 Total
(in thousands)
Assets:
Cash equivalents:
Money market funds $ 8,025 $ — $ — $ 8,025
Commercial paper — 5,646 — 5,646
Total cash equivalents 8,025 5,646 — 13,671
Marketable securities:
Corporate debt securities 32,473 — — 32,473
U.S. treasury securities 29,073 — — 29,073
U.S. government agency bonds 24,955 — — 24,955
Total marketable securities 86,501 — — 86,501
Total assets at fair value $ 94,526 $ 5,646 $ — $ 100,172

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


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	1,110	$	—	$	—	$	1,110
Commercial paper	—		14,460		—		14,460
Total cash equivalents	1,110		14,460		—		15,570
Marketable securities:
Corporate debt securities	25,488		—		—		25,488
U.S. treasury securities	19,176		—		—		19,176
U.S. government agency bonds	22,238		—		—		22,238
Total marketable securities	66,902		—		—		66,902
Total assets at fair value	$	68,012	$	14,460	$	—	$	82,472

The following tables summarize the cost, gross unrealized gains, gross unrealized losses and fair value of the marketable securities as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

September 30, 2022
Cost or Amortized Cost Unrealized Fair Value
Gains Losses
(in thousands)
Corporate debt securities $ 32,984 $ — $ (511) $ 32,473
U.S. treasury securities 29,596 — (523) 29,073
U.S. government agency bonds 25,553 — (598) 24,955
Total $ 88,133 $ — $ (1,632) $ 86,501


	March 31, 2023
	Cost or Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(in thousands)
Corporate debt securities	$	13,568	$	—	$	(63)	$	13,505
U.S. treasury securities	12,501		—		(179)		12,322
U.S. government agency bonds	17,138		—		(232)		16,906
Total	$	43,207	$	—	$	(474)	$	42,733

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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


	December 31, 2022
	Cost or Amortized Cost		Unrealized				Fair Value
			Gains		Losses
	(in thousands)
Corporate debt securities	$	25,774	$	—	$	(286)	$	25,488
U.S. treasury securities	19,531		—		(355)		19,176
U.S. government agency bonds	22,679		—		(441)		22,238
Total	$	67,984	$	—	$	(1,082)	$	66,902

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company’s cash equivalents approximated their estimated fair value. As such, there are no unrealized gains or losses related to the Company’s cash equivalents.

For the Company’s marketable securities, which were all classified as available-for-sale, the Company utilizes third-party pricing services to obtain fair value. Third-party pricing methodologies incorporate bond terms and conditions, current performance data, proprietary pricing models, real-time quotes from contributing dealers, trade prices and other market data. The Company determined that the declines in the fair value of its marketable securities were not driven by credit-related factors. During the three months ended March 31, 2023 and 2022, the Company did not recognize any losses on its marketable securities due to credit-related factors.

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

The Company’s commercial paper is valued using Level 2 inputs because 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 ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. As of ~~September 30, 2022,~~March 31, 2023, all of the ~~$86.5~~$42.7 million carrying amount of marketable securities, ~~$83.0 million~~all had a contractual maturity date of less than one ~~year and $3.5 million had a contractual maturity date between one to two years.~~year.

4. Property and Equipment, Net

Property and equipment, net consisted of the following:

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


	March 31, 2023		December 31, 2022
	(in thousands)
Property and equipment	$	130,819	$	124,412
Less: accumulated depreciation and amortization	(35,013)		(31,930)
Property and equipment, net	$	95,806	$	92,482

Depreciation and amortization expense of property and equipment was ~~$2.9~~$3.0 million and ~~$2.2~~$2.6 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $8.3 million and $6.1 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

5. Goodwill and Other Intangible Assets

Goodwill is primarily attributable to the planned growth in the combined business after the acquisition of Remix Global EAD (“Remix”). Goodwill is reviewed for impairment at least annually, absent any interim indicators of impairment. Goodwill was ~~$10.6~~$11.8 million and ~~$12.2~~$11.6 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The ~~decrease~~increase in goodwill during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 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 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		March 31, 2023
	Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)	(in thousands)
Customer relationships	8	$	4,902	$	(907)	$	3,995
Developed technology	3	4,619		(2,278)		2,341
Trademarks	9	4,436		(728)		3,708
Total		$	13,957	$	(3,913)	$	10,044

September 30, 2022
Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount
(in years) (in thousands)
Customer relationships 8 $ 4,420 $ (542) $ 3,878
Developed technology 3 4,166 (1,362) 2,804
Trademarks 9 3,995 (435) 3,560
Total $ 12,581 $ (2,339) $ 10,242

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


		December 31, 2022
	Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)	(in thousands)
Customer relationships	8	$	4,814	$	(742)	$	4,072
Developed technology	3	4,536		(1,864)		2,672
Trademarks	9	4,351		(596)		3,755
Total		$	13,701	$	(3,202)	$	10,499

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

Amortization expense related to developed technology, customer relationships, and trademarks is recorded within operations, product, and technology; sales, general, and administrative; and marketing expense, respectively, within the Company’s condensed consolidated statements of operations. Amortization expense of intangible assets with determinable lives was $0.6 million and ~~zero~~$0.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $1.9 million and zero for the nine months ended September 30, 2022 and 2021,~~ respectively.

6. Balance Sheet Components

Inventories consisted of the following:


	March 31, 2023		December 31, 2022
	(in thousands)
Work in process	$	2,432	$	2,639
Finished goods	18,501		14,880
Total	$	20,933	$	17,519

September 30,
2022 December 31,
2021
(in thousands)
Raw materials $ 888 $ 908
Work in process 592 670
Finished goods 13,523 8,247
Total $ 15,003 $ 9,825

Work in process inventory relates to items that are currently undergoing preparation for sale, including itemization, cleaning, and repair.

Accrued and other current liabilities consisted of the following:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
Gift card and site credit liabilities	Gift card and site credit liabilities	$	18,980	$	13,223	Gift card and site credit liabilities	$	17,093	$	18,101
Accrued vendor liabilities	Accrued vendor liabilities	8,701		6,031		Accrued vendor liabilities	8,936		9,116
Deferred revenue						Deferred revenue	6,398		7,582
Accrued compensation						Accrued compensation	4,459		4,993
Allowance for returns	Allowance for returns	7,326		6,209		Allowance for returns	4,779		4,907
Accrued compensation		5,623		6,438
Deferred revenue		6,326		5,878
Accrued taxes	Accrued taxes	4,440		5,728		Accrued taxes	4,195		4,326
Accrued other	Accrued other	1,969		1,746		Accrued other	2,116		1,130
Total	Total	$	53,365	$	45,253	Total	$	47,976	$	50,155

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7. Long-Term Debt

In February 2019, the Company entered into a loan and security agreement (“Term Loan”) with Western Alliance Bank for an aggregate amount of up to $40.0 ~~million to refinance its prior loan and security agreement with Silicon Valley Bank.~~million. The Company incurred an immaterial amount of debt issuance costs in connection with the Term Loan. The debt issuance costs are recorded on the Company’s condensed consolidated balance ~~sheet~~sheets 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 Wall Street Journal plus a margin of 1.25%, with a floor of 6.00%. The Company incurred an immaterial amount of debt issuance costs in connection with the amendment. For accounting purposes, pursuant to FASB ASC Topic 470, Debt, this transaction was accounted for as a modification of the Term Loan. The debt issuance costs were recognized in interest expense within the Company’s condensed consolidated statement of operations during the third quarter of 2022.

The Term Loan requires the Company to comply with certain financial covenants, including, among other things, liquidity requirements, minimum cash deposits with Western Alliance bank, performance metrics, and a debt service coverage ratio. The Term Loan also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, loans and investments, additional indebtedness, liens, mergers, asset sales and transactions with affiliates. In addition, the Term Loan contains customary events of default. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company was in compliance with its debt covenants under the Term Loan.

The Term Loan is payable in consecutive monthly installments. Interest is due monthly on amounts outstanding under the Term Loan. The Company is also permitted to make voluntary prepayments without penalty or premium at any time.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the effective interest rate for borrowings under the Term Loan was ~~8.22%~~10.22% and ~~6.65%~~9.70%, respectively.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company ~~borrowed an aggregate amount of $0.7 million~~did not make any borrowings under the Term Loan and repaid a total of ~~$5.3~~$1.0 million on amounts outstanding under the Term Loan. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company ~~borrowed an aggregate amount of $5.0 million~~did not make any borrowings under the Term Loan and repaid a total of $2.0 million on amounts outstanding under the Term Loan. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the amount outstanding under the Term Loan was ~~$31.3~~$29.3 million and ~~$36.0~~$30.3 million, respectively.

During the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company ~~recognized $0.1~~incurred $0.7 million and $0.6 million, respectively, of interest ~~expense~~costs relating to the Term Loan, of which ~~included $0.1~~$0.6 million and $0.1 million, respectively, ~~relating to amortization~~was capitalized as part of debt discount and issuance costs. During the nine months ended September 30, 2022 and 2021, the Company recognized $0.8 million and $1.8 million, respectively, of interest expense relating to the Term Loan, which included $0.3 million and $0.3 million, respectively, relating to amortization of debt discount and issuance costs.

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an asset.

As of ~~September 30, 2022,~~March 31, 2023, annual scheduled principal payments of the Term Loan were as follows:

Amount
(in thousands)
2022 $ 1,000
2023 4,000
2024 4,000
2025 4,000
2026 4,000
Thereafter 14,333
Total principal payments 31,333
Less: unamortized debt discount (593)
Less: current portion of long-term debt (3,881)
Non-current portion of long-term debt $ 26,859


	Amount
	(in thousands)
2023	$	3,000
2024	4,000
2025	4,000
2026	4,000
2027	14,333
Total principal payments	29,333
Less: unamortized debt discount	(620)
Less: current portion of long-term debt	(3,882)
Non-current portion of long-term debt	$	24,831

8. Common Stock and Stockholders’ Equity

Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common stock.

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The table below summarizes the Class A common stock and Class B common stock authorized, issued and outstanding as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


	March 31, 2023
	Authorized	Issued and Outstanding
	(in thousands)
Class A common stock	1,000,000	72,351
Class B common stock	120,000	30,485
Total	1,120,000	102,836


		September 30, 2022			December 31, 2022
		Authorized	Issued and Outstanding		Authorized	Issued and Outstanding
		(in thousands)			(in thousands)
Class A common stock	Class A common stock	1,000,000	69,887	Class A common stock	1,000,000	70,723
Class B common stock	Class B common stock	120,000	30,845	Class B common stock	120,000	30,809
Total	Total	1,120,000	100,732	Total	1,120,000	101,532

Accumulated Other Comprehensive Loss

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
The following table summarizes changes in accumulated other comprehensive loss by component during the three months ended March 31, 2023 and 2022:


	Change in Accumulated Other Comprehensive Loss by Component
	Three Months Ended
	March 31, 2023						March 31, 2022
	Foreign Currency Translation Adjustments		Unrealized Gain (Loss) on Available-For-Sale Securities		Total		Foreign Currency Translation Adjustments		Unrealized Loss on Available-For-Sale Securities		Total
	(in thousands)
Beginning balance	$	(3,147)	$	(1,087)	$	(4,234)	$	(729)	$	(365)	$	(1,094)
Other comprehensive income (loss) before reclassifications	544		610		1,154		(708)		(1,002)		(1,710)
Amounts reclassified from accumulated other comprehensive loss to income	—		—		—		—		—		—
Total other comprehensive income (loss), net of reclassifications	544		610		1,154		(708)		(1,002)		(1,710)
Ending balance	$	(2,603)	$	(477)	$	(3,080)	$	(1,437)	$	(1,367)	$	(2,804)

9. Stock-Based Compensation

The Company has stock-based compensation plans, which are more fully described in Note 11, Stock-Based Compensation Plans, to the Consolidated Financial Statements included in the ~~2021~~2022 10-K. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company granted ~~10.2 million~~ restricted stock ~~unit awards with a weighted-average grant date fair value of $7.09 per award.~~units subject to service conditions.

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The following table provides information about stock-based compensation expense by financial statement line item:


	Three Months Ended
	March 31, 2023		March 31, 2022

Operations, product, and technology	$	3,671	$	1,392
Marketing	1,205		333
Sales, general, and administrative	4,515		1,798
Total stock-based compensation expense	$	9,391	$	3,523

During the three months ended March 31, 2023, the Company modified the vesting schedule of substantially all restricted stock unit awards outstanding as of December 31, 2022 from 4 years to 3 years and recognized compensation expense of $2.4 million related to the acceleration of the vesting schedule. As of March 31, 2023, the total unrecognized compensation cost related to all nonvested stock options was $3.1 million and the related weighted-average period over which it is expected to be recognized was approximately 1.27 years. As of March 31, 2023, the total unrecognized compensation cost related to all nonvested restricted stock units was $64.0 million and the related weighted-average period over which it is expected to be recognized was approximately 2.36 years.

The following table summarizes the activities for all stock options under the Company’s share-based compensation plans for the three months ended March 31, 2023:


	Number of Options Outstanding	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value(1)
	(in thousands)				(in thousands)
Outstanding as of December 31, 2022	17,872	$	1.97	5.20 years	$	1,442
Granted	—	$	—
Exercised	(178)	$	1.48
Forfeited or expired	(126)	$	3.61
Outstanding as of March 31, 2023	17,568	$	1.96	4.98 years	$	11,622
Exercisable as of March 31, 2023	14,787	$	1.91	4.55 years	$	10,351

(1)The intrinsic value is the amount by which the current market value of the underlying stock exceeds the exercise price of the stock awards.

Three Months Ended Nine Months Ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
(in thousands)
Operations, product and technology $ 2,480 $ 1,024 $ 7,842 $ 3,358
Marketing 818 341 2,377 1,067
Sales, general and administrative 3,879 1,630 10,539 4,964
Total stock-based compensation expense $ 7,177 $ 2,995 $ 20,758 $ 9,389
There were no options granted during the three months ended March 31, 2023 and 2022. The total intrinsic value of stock options exercised during the three months ended March 31, 2023 and 2022 was $0.1 million and $2.1 million, respectively.

The following table summarizes the activities for all restricted stock units under the Company’s share-based compensation plans for the three months ended March 31, 2023:


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
	(in thousands)
Outstanding and nonvested as of December 31, 2022	7,855	$	8.01
Granted	8,310	$	1.78
Vested	(1,383)	$	5.79
Forfeited	(167)	$	5.70
Outstanding and nonvested as of March 31, 2023	14,615	$	4.71

The total vesting date fair value of restricted stock units which vested during the three months ended March 31, 2023 and 2022 was $8.0 million and $2.7 million, respectively.

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10. Commitments and Contingencies

Legal Contingencies

The Company is subject to litigation claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for limited and customary indemnification obligations. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made.

11. Income Taxes

The quarterly income tax provision reflects an estimate of the corresponding quarter’s state taxes in the United States. The provision for income tax expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was determined based upon estimates of the Company’s annual effective tax rate for the years ending December 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Since the Company is in a full valuation allowance position due to losses incurred since inception, the provision for taxes consists solely of certain state income taxes.

12. Loss Per Share

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

September 30,
2022 September 30,
2021
(in thousands)
Outstanding stock options 17,966 20,796
Restricted stock units 8,693 352
Delayed share issuance related to acquisition 131 —
Employee stock purchase plan 230 101
Total 27,020 21,249


	March 31, 2023	March 31, 2022
	(in thousands)
Outstanding stock options	17,569	18,825
Restricted stock units	14,615	1,830
Delayed share issuance related to acquisition	130	130
Employee stock purchase plan	152	105
Total	32,466	20,890

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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 in conjunction with other information, including our condensed consolidated financial statements and related notes included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q; Part I, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q; and our consolidated financial statements and related notes appearing in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 10-K”). The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full calendar year or any other period.

Overview

thredUP isoperates 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 ~~February 2022.~~January 2023.

thredUP’s proprietary operating platform is the foundation for our managed marketplace, where we have bridged online and offline technology to make the buying and selling of tens of millions of unique items easy and fun. The core marketplace we have built in the U.S. 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~~addition to our ~~success with consumers directly, we extended our platform to enable brands and retailers to participate in the resale economy. Some~~core marketplace, 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~~acquired 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~~Key Factors Affecting Our Performance

~~COVID-19 Update~~Macroeconomic Factors

~~The ongoing COVID-19 pandemic~~Macroeconomic factors, including inflation, increased interest rates, significant capital market volatility, and ~~its varied social~~global economic and ~~macroeconomic consequences~~geopolitical developments have ~~continued~~direct and indirect impacts on our results of operations that are difficult to isolate and quantify. These factors contributed to increases in our operating costs during 2022 and the first quarter of 2023 primarily due to increased transportation costs and wage rates. In addition, rising fuel, utility, and food costs, rising interest rates, and recessionary fears may impact customer demand and our ability to forecast consumer spending patterns. We expect some or all of these factors to continue to impact our ~~business. Our performance has been adversely affected by market instability, supply chain disruptions, labor challenges caused by~~operations throughout the ~~pandemic and the U.S. government response to the COVID-19 pandemic, including the absence~~rest of ~~any U.S. economic stimulus in 2022. If any~~2023.

Overview of ~~these conditions are sustained then our future results and performance may be be similarly adversely affected.~~First Quarter Results

~~During the nine months ended September 30, 2022, we experienced~~Revenue: Total revenue was $75.9 million, representing 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.4.4% year-over-year.

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The COVID-19 pandemic and the ongoing recovery also contributed to a tightened labor supply. We continue to experience challenges in hiring and retaining employees in our distribution 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 2021 10-K 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, for both economic and geopolitical reasons. The strengthening U.S. dollar 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 Part I, Item 3, ~~Quantitative and Qualitative Disclosures About Market Risk, of this Quarterly Report on Form 10-Q.~~

~~Restructuring~~

In 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 centers in Tennessee and Texas and consolidated 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 Third Quarter Results~~

~~Revenue:~~ ~~Total revenue was $67.9 million, an increase of 7.4% year-over-year.~~

Gross Profit and Margin: Gross profit totaled ~~$44.5~~$51.1 million, representing ~~a decline~~an increase of ~~3.5%~~1.7% year-over-year. Gross margin ~~decreased by 736~~was 67.3%, a decrease of 180 basis points ~~to 65.5%~~ from ~~72.8%~~69.1% in the comparable quarter last year.

Net Loss: Net loss was ~~$23.7~~$19.8 million, or a negative ~~34.8%~~26.1% of revenue, for the ~~third~~first quarter of ~~2022,~~2023, compared to a net loss of ~~$14.7~~$20.7 million for the ~~third~~first quarter of ~~2021.~~2022.

Non-GAAP Adjusted ~~EBITDA:~~EBITDA Loss: Non-GAAP Adjusted EBITDA loss was ~~$11.0~~$6.6 million, or a negative ~~16.2%~~8.7% of revenue, for the ~~third~~first quarter of ~~2022~~2023, compared to anNon-GAAP Adjusted EBITDA loss of ~~$7.8~~$13.0 million, or a negative ~~12.4%~~17.8% of revenue, for the ~~third~~first quarter of ~~2021.~~2022. Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies. See below for a reconciliation of Non-GAAP Adjusted EBITDA loss to net loss.

Active Buyers and Orders: Active Buyers totaled 1.7 million and Orders totaled ~~1.6~~1.5 million in the ~~third~~first quarter of ~~2022,~~2023, representing ~~growth~~a decrease of ~~17.7%~~2.7% and ~~24.5%~~7.9%, respectively, compared to the ~~third~~first quarter of ~~2021.~~2022.

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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								Nine Months Ended									Three Months Ended
		September 30, 2022			September 30, 2021			Change		September 30, 2022			September 30, 2021			Change			March 31, 2023			March 31, 2022			Change
		(in thousands, except percentages)																	(in thousands, except percentages)
Active Buyers (as of period end)	Active Buyers (as of period end)	1,694			1,439			17.7	%	1,694			1,439			17.7	%	Active Buyers (as of period end)	1,668			1,715			(2.7)	%
Orders	Orders	1,618			1,300			24.5	%	4,962			3,646			36.1	%	Orders	1,511			1,640			(7.9)	%
Total revenue																		Total revenue	$	75,922		$	72,695		4.4	%
Gross profit																		Gross profit	$	51,093		$	50,228		1.7	%
Gross margin																		Gross margin	67.3		%	69.1		%	(180)	bps
Net loss	Net loss	$	(23,678)		$	(14,715)		60.9	%	$	(72,785)		$	(45,265)		60.8	%	Net loss	$	(19,793)		$	(20,708)		(4.4)	%
Net loss margin	Net loss margin	(34.8)		%	(23.3)		%			(33.5)		%	(25.3)		%			Net loss margin	(26.1)		%	(28.5)		%	240	bps
Adjusted EBITDA loss(1)		$	(11,041)		$	(7,816)		41.3	%	$	(37,545)		$	(25,971)		44.6	%
Adjusted EBITDA loss margin		(16.2)		%	(12.4)		%			(17.3)		%	(14.5)		%
Non-GAAP Adjusted EBITDA loss(1)																		Non-GAAP Adjusted EBITDA loss(1)	$	(6,635)		$	(12,963)		(48.8)	%
Non-GAAP Adjusted EBITDA loss margin(1)																		Non-GAAP Adjusted EBITDA loss margin(1)	(8.7)		%	(17.8)		%	910	bps

(1)Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies. See below for a reconciliation of Non-GAAP Adjusted EBITDA loss to net loss.

Active Buyers

An Active Buyer is a thredUP buyer who has made at least one purchase in the last twelve months. A thredUP buyer is a customer who has created an account orand purchased in our marketplaces, including through our RaaS clients, and is identified by a unique email address. A single person could have multiple thredUP accounts and count as multiple Active Buyers. The number of Active Buyers is a key driver of revenue for our ~~marketplaces and we expect the number of Active Buyers to increase over time.~~marketplaces.

Orders

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

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Non-GAAP Financial Metrics

Non-GAAP Adjusted EBITDA

Loss and Non-GAAP Adjusted EBITDA Loss Margin

Non-GAAP Adjusted EBITDA loss means net loss adjusted to exclude, where applicable in a given period, interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, ~~interest expense, acquisition related~~acquisition-related expenses, and restructuring ~~charges, change in fair value of convertible preferred stock warrant liability and provision for income taxes.~~charges. Non-GAAP Adjusted EBITDA loss margin represents Non-GAAP Adjusted EBITDA loss divided by Total revenue. We use Non-GAAP Adjusted EBITDA aloss and Non-GAAP Adjusted EBITDA loss margin, non-GAAP ~~metric,~~metrics, to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes. We believe that Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin, when taken collectively with our GAAP results, may be helpful to investors because ~~it provides~~they provide consistency and comparability with past financial performance and ~~assists~~assist 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 Non-GAAP Adjusted ~~EBITDA:~~EBITDA loss:

Three Months Ended Nine Months Ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
(in thousands)
Net loss $ (23,678) $ (14,715) $ (72,785) $ (45,265)
Interest expense 103 619 764 1,751
Provision for income taxes 9 17 31 57
Depreciation and amortization 3,539 2,248 10,217 6,147
Stock-based compensation expense 7,177 2,995 20,758 9,389
Acquisition-related expenses — 1,020 274 1,020
Restructuring charges 1,809 — 3,196 —
Change in fair value of convertible preferred stock warrant liability — — — 930
Adjusted EBITDA loss $ (11,041) $ (7,816) $ (37,545) $ (25,971)


	Three Months Ended
	March 31, 2023			March 31, 2022
	(in thousands)
Net loss	$	(19,793)		$	(20,708)
Interest expense	77			423
Provision for income taxes	9			13
Depreciation and amortization	3,681			3,271
Stock-based compensation expense	9,391			3,523
Acquisition-related expenses	—			204
Restructuring charges	—			311

Non-GAAP Adjusted EBITDA loss	$	(6,635)		$	(12,963)
Total revenue	75,922			72,695
Non-GAAP Adjusted EBITDA loss margin	(8.7)		%	(17.8)		%

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

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)
Consignment revenue $ 41,553 $ 48,071 $ (6,518) (13.6) % $ 137,524 $ 141,356 $ (3,832) (2.7) %
Product revenue 26,392 15,203 11,189 73.6 % 79,537 37,557 41,980 111.8 %
Total revenue $ 67,945 $ 63,274 $ 4,671 7.4 % $ 217,061 $ 178,913 $ 38,148 21.3 %
Consignment revenue as a percentage of total revenue 61.2 % 76.0 % 63.4 % 79.0 %
Product revenue as a percentage of total revenue 38.8 % 24.0 % 36.6 % 21.0 %


	Three Months Ended						Change
	March 31, 2023			March 31, 2022			Amount		%
	(in thousands, except percentages)
Consignment revenue	$	46,479		$	47,435		$	(956)	(2.0)	%
Product revenue	29,443			25,260			4,183		16.6	%
Total revenue	$	75,922		$	72,695		$	3,227	4.4	%
Consignment revenue as a percentage of total revenue	61.2		%	65.3		%
Product revenue as a percentage of total revenue	38.8		%	34.7		%

Total revenue increased ~~$4.7~~$3.2 million, or ~~7.4%~~4.4%, for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021.~~2022. 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 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~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021. The increase~~2022 was primarily ~~attributable~~due to ~~the inclusion of~~a $4.2 million increase in product revenue as our European operations ~~beginning October 2021,~~continue to scale and grow as well as a mix shift due to growth in supply from our RaaS partners, which ~~is included in~~are recognized as part of product revenue, ~~and resultant increases~~partially offset by a $1.0 million decrease in ~~total Orders and Active Buyers of 36.1% and 17.7%, respectively.~~

~~We experienced slowing~~consignment revenue ~~and Order growth beginning in~~due to 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.mix shift described previously.

2221

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Cost of 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 consignment revenue $ 9,087 $ 10,080 $ (993) (9.9) % $ 29,354 $ 31,599 $ (2,245) (7.1) %
Cost of product revenue 14,362 7,100 7,262 102.3 % 40,335 17,370 22,965 132.2 %
Total cost of revenue $ 23,449 $ 17,180 $ 6,269 36.5 % $ 69,689 $ 48,969 $ 20,720 42.3 %
Gross profit $ 44,496 $ 46,094 $ (1,598) (3.5) % $ 147,372 $ 129,944 $ 17,428 13.4 %
Gross margin 65.5 % 72.8 % 67.9 % 72.6 %


	Three Months Ended						Change
	March 31, 2023			March 31, 2022			Amount		%
	(in thousands, except percentages)
Cost of consignment revenue	$	9,220		$	10,049		$	(829)	(8.2)	%
Cost of product revenue	15,609			12,418			3,191		25.7	%
Total cost of revenue	$	24,829		$	22,467		$	2,362	10.5	%
Gross profit	$	51,093		$	50,228		$	865	1.7	%
Gross margin	67.3		%	69.1		%

Gross margin was ~~65.5%~~67.3% and ~~72.8%~~69.1% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, or an unfavorable change of ~~736 basis points, and 67.9% and 72.6% for the nine months endedSeptember 30, 2022 and 2021, respectively, or an unfavorable change of 474~~180 basis points.

The decrease in gross margin for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 as compared to the same period in 2022 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~~a 410 basis point increase in product ~~sales with~~revenue as a ~~lower gross margin. Consignment sales have a higher gross margin than product sales but made up a smaller~~ percentage of total revenue, partially offset by favorable labor variances for ~~both the three and nine months ended September 30, 2022 as compared to the same periods in 2021. Revenue for~~cost of consignment ~~sales~~revenue. Consignment revenue is recognized net of seller payouts and cost of items sold, whereas for product ~~sales,~~revenue, seller payouts and cost of items sold are included as a component of cost of revenue. As such, product revenue has a lower gross margin than consignment revenue.

Cost of Consignment 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 consignment revenue $ 9,087 $ 10,080 $ (993) (9.9) % $ 29,354 $ 31,599 $ (2,245) (7.1) %
Consignment gross margin 78.1 % 79.0 % 78.7 % 77.6 %


	Three Months Ended						Change
	March 31, 2023			March 31, 2022			Amount		%
	(in thousands, except percentages)
Cost of consignment revenue	$	9,220		$	10,049		$	(829)	(8.2)	%
Consignment gross margin	80.2		%	78.8		%

Consignment gross margin was ~~78.1%~~80.2% and ~~79.0%~~78.8% for the three months ended ~~September 30, 2022 and 2021, respectively, or an unfavorable change of 90 basis points, and 78.7% and 77.6% for the nine months ended~~ ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, or a favorable change of ~~101~~140 basis points. Consignment gross profit dollars were flat year-over-year.

The ~~decrease~~increase in consignment gross margin for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021~~2022 was primarily due to ~~an unfavorable impact of outbound shipping of 49~~120 basis points ~~unfavorable impact~~ of lower 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 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.

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costs.

Cost of Product Revenue


	Three Months Ended						Change
	March 31, 2023			March 31, 2022			Amount		%
	(in thousands, except percentages)
Cost of product revenue	$	15,609		$	12,418		$	3,191	25.7	%
Product gross margin	47.0		%	50.8		%

Product gross margin was ~~45.6%~~47.0% and ~~53.3%~~50.8% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, or an unfavorable change of ~~772~~380 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~~ Product gross ~~margin mainly due to the capitalization of production costs into inventory.~~profit dollars were up 8% year-over-year.

The decrease in product gross margin for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021~~2022 was primarily due to ~~the net unfavorable impact of including our European operations of 1,245~~290 basis points of higher inventory costs and an ~~unfavorable impact of packaging of 41~~60 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 ofhigher 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 increase was primarily due to a $2.1 million increase in facilities, technology and other allocated costs due to the expansion of our distribution network and 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 due mainly to our European operations and increased bag processing and other costs.

2422

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Operations, Product, and Technology


	Three Months Ended						Change
	March 31, 2023			March 31, 2022			Amount		%
	(in thousands, except percentages)
Operations, product, and technology	$	38,347		$	39,161		$	(814)	(2.1)	%
Operations, product, and technology as a percentage of total revenue	50.5		%	53.9		%

The $0.8 million decrease in operations, product, and technology expenses ~~increased $30.4 million, or 33.2%,~~ for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021. Personnel-related costs increased by $18.5 million~~2022 was primarily due to ~~our European operations, higher stock-based compensation expense from restricted stock vesting, expenses associated with our distribution network, restructuring and~~a $1.4 million decrease in personnel-related costs, partially offset by a $0.8 million 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


	Three Months Ended						Change
	March 31, 2023			March 31, 2022			Amount		%
	(in thousands, except percentages)
Marketing	$	16,870		$	16,978		$	(108)	(0.6)	%
Marketing as a percentage of total revenue	22.2		%	23.4		%

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 %

~~Marketing~~The $0.1 million decrease in marketing expenses ~~decreased $2.2 million, or 12.9%,~~ for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021. The decrease~~2022 was primarily due to a ~~$4.1~~$1.1 million decrease in ~~marketing~~social and other advertising costs and a $0.2 million decrease in professional services, partially offset by a ~~$1.1~~$1.0 million increase in personnel-related costs, of which $0.9 million was related to ~~salaries, stock~~stock-based compensation ~~restructuring and other expenses, a $0.6 million increase in technology and other costs,~~expense and a $0.2 million increase in ~~professional services.~~facilities, technology, and other allocated costs.

~~Marketing~~Sales, General and Administrative


	Three Months Ended						Change
	March 31, 2023			March 31, 2022			Amount		%
	(in thousands, except percentages)
Sales, general, and administrative	$	16,059		$	14,664		$	1,395	9.5	%
Sales, general, and administrative as a percentage of total revenue	21.2		%	20.2		%

The $1.4 million increase in sales, general, and administrative expenses ~~increased $3.0 million, or 6.3%,~~ for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021. The increase~~2022 was primarily due to a $3.0 million increase in personnel-related costs, of which $2.7 million was related to ~~salaries, stock~~stock-based compensation expense, and ~~other expenses,~~ a ~~$1.3~~$0.1 million increase in facilities, technology, and other allocated costs, ~~and a $0.6 million increase in professional services,~~ partially offset by a ~~$1.9~~$1.2 million decrease in ~~marketing~~professional services and ~~advertising costs.~~a $0.5 million decrease in other corporate expenses.

~~Sales, General and Administrative~~Interest Expense


	Three Months Ended				Change
	March 31, 2023		March 31, 2022		Amount		%
	(in thousands, except percentages)
Interest expense	$	77	$	423	$	(346)	(81.8)	%

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 $2.7~~The $0.3 million ~~or 21.2%,~~decrease in interest expense for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021. The increase~~2022 was primarily due to ~~a $4.6~~an increase in amounts capitalized as part of an asset in conjunction with the build-out of our distribution centers and reclassified from interest expense.

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Other Income, Net


	Three Months Ended				Change
	March 31, 2023		March 31, 2022		Amount		%
	(in thousands, except percentages)
Other income, net	$	(476)	$	(303)	$	(173)	57.1	%

The $0.2 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 expenses increased $13.1 million, or 38.2%,~~income, net for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021. The increase~~2022 was primarily due to an ~~$12.2 million~~ increase in ~~personnel-related costs related~~interest income on our marketable securities due to ~~salaries, stock compensation, restructuring, our European operations and other personnel costs and~~ a ~~$2.8 million increase in technology, payment processing, insurance, workplace and other costs, partially offset by a $1.9 million decrease in tax and professional fee expenses.~~higher interest rate environment.

~~Table of Contents~~

Liquidity and Capital Resources

We have historically generated negative cash flows from operations and have primarily financed our operations through private and public sales of equity securities and debt. As of ~~September 30, 2022,~~March 31, 2023, we had cash, cash equivalents and short-term marketable securities of ~~$123.2~~$93.5 million. Additionally, we have a term loan facility (“Term Loan”) under which $38.0 million remained available to be drawn as of ~~September 30, 2022~~March 31, 2023 and we were in full compliance with our debt covenants under the Term Loan as of that date. See Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for a further discussion on our Term Loan.

We expect operating losses and negative cash flows from operations to continue ~~into~~in the ~~foreseeable future~~near term as we continue to invest in growing our business and expanding our infrastructure. Our primary use of cash includes operating costs such as distribution network spend, product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our operations and our growth. Additionally, our primary capital expenditures are related to the set-up, expansion and/or automation of our distribution ~~network and may be accelerated or delayed based on our operating position and business needs.~~network. 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- and long-term capital 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~~marketplaces and overall economic conditions. However, we expect that our capital expenditures will decline significantly in 2023 as we complete the first phase of our new distribution center in Texas. We may seek additional equity or debt financing. ~~If we raise equity financing, our stockholders~~See the section titled “Risk Factors—Risks Relating to Our Indebtedness and Liquidity—We may ~~experience significant dilution of their ownership interests. If we conduct an~~require additional ~~debt financing, the terms of such debt financing~~capital to support business growth, and this capital might not be available or may be ~~similar or more restrictive than our current Term Loan, and we would have additional debt service obligations. In~~available only by diluting existing stockholders” within 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.2022 10-K.

Cash Flows

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

Nine Months Ended
September 30,
2022 September 30,
2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (36,939) $ (14,132)
Investing activities (6,961) (116,322)
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

~~Changes in Cash Flows from Operating Activities~~

For the nine months ended September 30, 2022, net cash used in operating activities increased by $22.8 million and was $36.9 million 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 for the nine months ended September 30, 2022 as compared to the same period in 2021. This was offset by non-cash increases in stock based compensation of $11.4 million due to higher restricted stock vesting, depreciation and amortization of $4.1 million due to intangibles relating to the Remix acquisition, capital and infrastructure investments, and reduction in the carrying amount of right of use assets of $1.6 million.


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in thousands)
Net cash provided by (used in):
Operating activities	$	(4,458)	$	(6,679)
Investing activities	18,900		(7,912)
Financing activities	(1,192)		(1,191)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(540)		(172)
Net change in cash, cash equivalents and restricted cash	$	12,710	$	(15,954)

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Changes in Cash Flows from Operating Activities

Net cash used in operating activities ~~further~~for the three months ended March 31, 2023 decreased ~~due~~$2.2 million, or 33.3%, as compared to ~~a $12.0 million~~the same period in 2022. The decrease ~~in flows from operating assets and liabilities. The increase~~ in net cash used in operating activities was due to ~~build~~a $6.6 million decrease in net loss excluding non-cash and reconciling items disclosed within our consolidated statement of ~~inventory~~cash flows, partially offset by $4.3 million of unfavorable changes in ~~2022 to meet European seasonal demand~~operating assets and ~~higher owned inventory~~liabilities. The $6.6 million decrease in net loss excluding non-cash and reconciling items was primarily driven by a favorable change in the ~~U.S~~reconciling impact of stock-based compensation expense as well as lower net loss. The $4.3 million of unfavorable changes in operating assets and ~~reduction~~liabilities was primarily driven by unfavorable changes in accrued and other current liabilities, operating lease liabilities, and inventory, partially offset by favorable changes in accounts payable, ~~accrued liabilities and seller payable flows due to timing and reduction in spend, offset by flows from~~ other current and non-current assets, ~~due to growth of prepaid expenses in 2021~~ and ~~inflow from operating lease liabilities resulting from lease incentives.~~other non-current liabilities.

Changes in Cash Flows from Investing Activities

~~For~~Net cash provided by investing activities for the ~~nine~~three months ended ~~September 30, 2022, net cash used in investing activities decreased by $109.4~~March 31, 2023 increased $26.8 million ~~and was $7.0 million~~as compared to ~~$116.3 million for~~ the same period in ~~2021.~~2022. The ~~decrease~~increase in net cash ~~used in~~provided by investing activities ~~during the nine months ended September 30, 2022~~ was primarily due to a ~~$133.5~~$19.9 million ~~decrease~~increase in ~~net cash used to purchase~~maturities of marketable securities and ~~provided by marketable security maturities. The change in net cash from marketable securities was partially offset by an increase~~a $7.0 million decrease in purchases of property and ~~equipment of $24.2 million.~~equipment.

Changes in Cash Flows from Financing Activities

~~For the nine months ended September 30, 2022, net~~Net cash used in financing activities ~~decreased by $232.0 million and was $2.9 million net cash used~~for the three months ended March 31, 2023 remained flat as compared ~~to net cash provided by financing activities of $229.0 million for~~ the same period in ~~2021. The increase in net cash used in financing activities during the nine months ended September 30,~~ 2022 ~~was primarily~~ due to ~~$222.7~~offsetting impacts of a $1.0 million decrease in ~~equity offerings and payments~~repayments of ~~offering transaction costs, an~~debt against a $1.0 million net increase in ~~net debt payments of $7.5 million and an increase in tax withholding~~cash outflows related to ~~vested restricted stock of $1.9 million.~~stock-based award activity.

Critical Accounting Policies and Estimates

U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses. Actual results could differ from those estimates.

There have been no material changes to our critical accounting policies since the ~~2021~~2022 10-K. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our condensed consolidated financial statements, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the ~~2021~~2022 10-K.

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 ~~September 30, 2022,~~March 31, 2023, we had cash and cash equivalents of ~~$36.7~~$50.7 million and marketable securities of ~~$86.5~~$42.7 million, consisting primarily of money market funds, commercial paper, corporate debt securities, U.S. treasury securities and U.S. government agency bonds, which carry a degree of interest rate risk. 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- to intermediate-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to fluctuations in interest rates.

The Term Loan bears variable interest rates tied to the prime rate, with a floor of 6.00%, and therefore ~~carry~~carries interest rate risk. If interest rates were to increase or decrease by 1% for the 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. See the risk factor discussion captioned "Risks Relating to Our Indebtedness and Liquidity—Recent events affecting the financial services industry could have an adverse impact on our business, results of operations and financial conditions" under Part II, Item 1A of this Quarterly Report on Form 10-Q for more discussion on adverse developments affecting the financial services industry that may have an adverse impact on our business, results of operations and financial conditions.

Inflation Risk

In recent months, inflation has increased significantly in the U.S. and overseas where we conduct our business, resulting in rising interest rates and fuel, labor and processing, freight and other costs that have affected our gross margin and operating expenses. We ~~do not~~ believe ~~that inflation has had a material effect on~~these increases have negatively impacted 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. Although~~although difficult to quantify, ~~we believe~~ inflation is potentially having an adverse effect on our customers’ ability to purchase in our 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 ~~September 30, 2022,~~March 31, 2023, our most significant currency exposure was the Bulgarian 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 were reflected as an unfavorable foreign currency translation adjustment of ~~$5.3~~$0.5 million during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, which was recognized in accumulated other comprehensive 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.

~~Table of Contents~~

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 ~~September 30, 2022,~~March 31, 2023, 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 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~~described in the ~~2021~~2022 10-K, in connection with the ~~audit~~audits of our consolidated financial statements ~~for the fiscal~~in certain prior years, ~~ended December 31, 2021, 2020, 2019~~we and ~~2018 we~~our independent registered public accounting firms 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 consolidated 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.deficiency:

•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: (i) the appropriate segregation of duties in the preparation and review of account reconciliations and journal entries, and (ii)~~ensure account reconciliations were prepared and reviewed at the appropriate level of precision on a consistent and timely basis.

The ~~deficiencies~~deficiency 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~~this control ~~deficiencies constitute~~deficiency constitutes a material weakness.

Remediation Plans

To address our material weakness, we have added accounting ~~finance~~ and ~~information technology~~finance personnel and implemented new financial accounting 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~~finance resources and further evolving our accounting ~~and quarterly~~ close processes. We will not be able to fully remediate ~~these~~this control ~~deficiencies~~deficiency until these steps have been completed and the controls have been operating effectively for a sufficient period of time.

Changes in Internal Control over Financial Reporting

We are taking actions to remediate the material ~~weaknesses~~weakness 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.

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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

~~Risks affecting our business are discussed~~The Company is supplementing the risk factors previously disclosed in the section titled “Risk Factors” in Part I, Item 1A~~Risk Factors~~, of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021 (“2021~~2022 filed with the SEC on March 7, 2023 (our “Fiscal 2022 10-K”) to include the following risk factor, which should be read in conjunction with the other risk factors presented in our Fiscal 2022 10-K.

Risks Relating to Our Indebtedness and ~~Part II, Item 1A,~~ ~~Risk Factors~~,Liquidity

Recent events affecting the financial services industry could have an adverse impact on our business, results of operations and financial conditions.

On March 10, March 12 and May 1 of 2023, the Federal Deposit Insurance Corporation (the “FDIC”) took control and was appointed receiver of Silicon Valley Bank, Signature Bank and First Republic Bank, respectively, after each bank was unable to continue their operations. These events exposed vulnerabilities in the regional banking sector, including liquidity constraints, contagion and solvency risk and other legal uncertainties and caused significant volatility in the market prices of the common stock of certain other regional banks.

Although we do not have any deposits with any of the banks that have been placed into receivership to date, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. For example, we are party to an amended and restated loan and security agreement with Western Alliance Bank, a regional bank, which provides a term loan and credit facility for an aggregate borrowing amount of up to $70.0 million. As of March 31, 2023, the balance of this debt is $29.3 million. While our restated loan and security agreement requires that we maintain minimum cash deposits with Western Alliance Bank that exceed the FDIC insurance limits, we utilize an insured cash sweep program to extend FDIC insurance to this balance. Further, while we maintain the contractual minimum cash deposits with Western Alliance Bank, most of our ~~Quarterly Report~~cash is invested in managed assets outside of Western Alliance Bank. If Western Alliance Bank or other financial institutions with which we have relationships were to enter into receivership or become insolvent, our ability to access the cash and cash equivalents that we hold at such institutions, as well as our ability to draw on ~~Form 10-Q~~our credit facility, may be impacted. In such an event, it could become more difficult for ~~the quarter ended June 30, 2022 (“Q2 2022 10-Q”). There have been no material changes~~us to access sufficient liquidity or acquire financing on commercially reasonable terms or at all. Any such event could adversely impact our ~~risk factors as previously disclosed~~ability to meet our operating expenses, financial obligations or fulfill our other obligations, which could result in breaches of our ~~2021 10-K~~financial and ~~Q2 2022 10-Q.~~other contractual obligations, any of which could materially and adversely impact our business, results of operations and financial condition.

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

(a)~~None.~~Pursuant to a share purchase agreement entered into on July 24, 2021, on April 17, 2023 we issued 130,597 shares of our Class A common stock to four sellers who were accredited investors in connection with the acquisition of Remix Global EAD. The share issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

(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.

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.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)None.

(b)None.

Item 6. Exhibits

(a)Exhibit Index:

~~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)

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, as adopted on February 16, 2023

8-K

3.1

2/21/2023

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)

* Filed herewith.

** Furnished herewith.

† Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K under the Securities 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 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)

Date: ~~November 14, 2022~~May 9, 2023

3230


	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


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


	Amount
	(in thousands)
2022	$	1,000
2023	4,000
2024	4,000
2025	4,000
2026	4,000
Thereafter	14,333
Total principal payments	31,333
Less: unamortized debt discount	(593)
Less: current portion of long-term debt	(3,881)
Non-current portion of long-term debt	$	26,859