ThredUp Inc. (TDUP)

Item 2.    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 II, 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, 2025 (the “2025 10-K”). There have been no material changes to the risk factors described in our 2025 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 operates one of the world’s largest online resale platforms for apparel, shoes and accessories. Our mission is to inspire the world 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 and artificial intelligence expertise. This platform is powering the rapidly emerging resale economy, one of the fastest growing sectors in retail, according to a GlobalData market survey conducted in April 2026.

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 marketplaces we have built, enhanced by artificial intelligence-powered search and personalization tools, enable buyers to browse and purchase resale items for primarily apparel, shoes and accessories across a wide range of price points. Buyers enjoy shopping value, premium and luxury brands all in one place, at up to 90% off estimated retail price. Sellers enjoy 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 Bag or a prepaid shipping label, fill a bag or a box and return it to us. We take it from there and do the work to make those items available for resale. In addition to our core marketplace, some of the world’s leading brands and retailers are taking advantage of our Resale-as-a-Service (“RaaS”) offering, which leverages our generative artificial intelligence technology to allow them to conveniently offer a scalable closet clean out service and/or resale shop to their customers. We believe that RaaS will accelerate the growth of this emerging category and supplements our overall supply strategy and other services.

Overview of Second Quarter Results

Revenue totaled $90.8 million for the second quarter of 2026, compared to $77.7 million for the second quarter of 2025, representing an increase of 16.9% year over year.

Gross Profit and Margin: Gross profit totaled $72.5 million for the second quarter of 2026, compared to $61.7 million for the second quarter of 2025, representing an increase of 17.5% year over year. Gross margin was 79.9%, an increase of 40 basis points from 79.5% in the comparable quarter last year.

Net Loss was $5.9 million, or a negative 6.5% of revenue, for the second quarter of 2026, compared to $5.2 million, or a negative 6.7% of revenue, for the second quarter of 2025, representing an increase of 14.7% year over year.

Non-GAAP Adjusted EBITDA(1) was $4.8 million, or 5.3% of revenue, for the second quarter of 2026, compared to $3.0 million, or 3.9% of revenue, for the second quarter of 2025, representing an increase of 58.4% year over year.

Active Buyers and Orders: Active Buyers totaled 1.8 million and Orders totaled 1.9 million in the second quarter of 2026, compared to 1.5 million and 1.5 million, respectively, in the second quarter of 2025, representing increases of 20.9% and 21.9%, respectively, year over year.

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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.

(1)Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted EBITDA 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 to its most directly comparable GAAP measure, 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 and 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.

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.

Non-GAAP Financial Measures

Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted EBITDA Margin

Non-GAAP Adjusted EBITDA means Net loss adjusted to exclude, where applicable in a given period, stock-based compensation expense, depreciation and amortization, interest expense, provision for income taxes, severance and other reorganization costs, and gains related to non-marketable equity investments. Non-GAAP Adjusted EBITDA margin represents Non-GAAP Adjusted EBITDA divided by Revenue. We use these non-GAAP measures to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes. We believe these non-GAAP measures, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and 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:

Comparison of Financial Results for the Three and Six Months Ended June 30, 2026 and 2025

Revenue

Revenue increased $13.1 million, or 16.9%, for the three months ended June 30, 2026 as compared to the same period in 2025. The growth in revenue was mainly driven by a 21.9% increase in Orders, supported by higher engagement from both new and returning buyers, partially offset by a 2.9% decrease in the average order value, primarily driven by a higher mix of smaller orders. These trends reflect the continued strength in our core marketplace business and our ongoing focus on driving platform growth.

Revenue increased $23.5 million, or 15.8%, for the six months ended June 30, 2026 as compared to the same period in 2025. The growth in revenue was mainly driven by a 20.6% increase in Orders, supported by higher engagement from both new and returning buyers, partially offset by a 2.3% decrease in the average order value, primarily driven by a higher mix of smaller orders. These trends reflect the continued strength in our core marketplace business and our ongoing focus on driving platform growth.

Gross Margin

Gross

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 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 operates one of the world’s largest online resale platforms for apparel, shoes and accessories. Our mission is to inspire the world 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 January 2025.

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 marketplaces we have built enable buyers to browse and purchase resale items for primarily apparel, shoes and accessories across a wide range of price points. Buyers enjoy shopping value, premium and luxury brands all in one place, at up to 90% off estimated retail price. Sellers enjoy 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 Bag, fill 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 addition to our core marketplace, some of the world’s leading brands and retailers are 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 supplements our overall supply strategy and other services.

Recent Business Developments

Discontinued Operations

On November 30, 2024, we divested 91% of our European business and Bulgarian subsidiary, Remix, which qualified for reporting as a discontinued operation. As a result, Remix’s results for 2024, reflecting the period from the beginning of the year through the transaction date, are presented as a single line item, loss from discontinued operations, net of tax, and excluded from continuing operations in the consolidated statements of operations for the year ended December 31, 2024. Cash flows attributable to Remix are segregated and presented separately as net cash flow used in discontinued operating activities and net cash flow used in discontinued investing activities for the period through the transaction date during the year ended December 31, 2024 in the consolidated statements of cash flows. Accordingly, any discussion of historical information in the following sections reflects Remix’s results as a discontinued operation, and amounts, including key operating metrics, and disclosures below pertain to our continuing operations for all periods presented, unless otherwise noted.

Tax Reform

On July 4, 2025, the U.S. enacted a budget reconciliation package known as the One Big Beautiful Bill Act of 2025 (OBBBA) which includes both tax and non-tax provisions. The changes resulting from the tax provisions in OBBBA did not have a material impact on the Company’s consolidated financial statements.

Overview of 2025 Results from Continuing Operations

Revenue: Revenue totaled $310.8 million for the year ended December 31, 2025, compared to $260.0 million for the year ended December 31, 2024, representing an increase of 19.5% year over year.

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Gross Profit and Margin: Gross profit totaled $246.8 million for the year ended December 31, 2025, compared to $207.1 million for the year ended December 31, 2024, representing an increase of 19.1% year over year. Gross margin was 79.4%, a decrease of 30 basis points from 79.7% for the same period in 2024.

Loss from continuing operations: Loss from continuing operations was $20.2 million, or a negative 6.5% of revenue, for the year ended December 31, 2025, compared to a loss of $40.0 million, or a negative 15.4% of revenue, for the same period in 2024, representing a decrease of 49.5% year over year.

Non-GAAP Adjusted EBITDA from continuing operations(1): Non-GAAP Adjusted EBITDA from continuing operations was $13.5 million, or 4.4% of revenue, for the year ended December 31, 2025, compared to $8.7 million, or 3.3% of revenue, for the same period in 2024, representing an increase of 55.8% year over year.

Active Buyers and Orders: Active Buyers totaled 1.7 million and Orders totaled 6.1 million in 2025, compared to 1.3 million and 4.9 million, respectively, in 2024, representing increases of 29.5% and 25.3%, respectively, year over year.

Key Financial and Operating Metrics from Continuing Operations

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.

(1)Non-GAAP Adjusted EBITDA from continuing operations and Non-GAAP Adjusted EBITDA from continuing operations 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 from continuing operations to its most directly comparable GAAP measure, loss from continuing operations.

Active Buyers

An Active Buyer is a ThredUp buyer who has made at least one purchase in the last twelve months. A ThredUp buyer is a customer who has created an account or purchased in our 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.

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.

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Non-GAAP Financial Measures from Continuing Operations

Non-GAAP Adjusted EBITDA from continuing operations and Non-GAAP Adjusted EBITDA from continuing operations Margin

Non-GAAP Adjusted EBITDA from continuing operations means loss from continuing operations adjusted to exclude, where applicable in a given period, stock-based compensation expense, depreciation and amortization, interest expense, impairment of long-lived assets, legal settlement and fees, provision for income taxes, severance and other reorganization costs, and gains related to non-marketable equity investment. Non-GAAP Adjusted EBITDA from continuing operations margin represents Non-GAAP Adjusted EBITDA from continuing operations divided by Revenue. We use Non-GAAP Adjusted EBITDA from continuing operations and Non-GAAP Adjusted EBITDA from continuing operations margin, which are non-GAAP measures, 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 from continuing operations and Non-GAAP Adjusted EBITDA from continuing operations margin, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

The following table provides a reconciliation of loss from continuing operations to non-GAAP Adjusted EBITDA from continuing operations:

Presentation

Revenue

Beginning in the first quarter of 2025, we combined consignment revenue and product revenue into a single line item, revenue, on the consolidated statements of operations and similarly combined related cost of revenue line items. With our transition to a primarily consignment model, product revenue is not material to warrant separate presentation on the consolidated statements of operations. Prior period amounts have been reclassified to conform to the current period’s presentation.

We generate revenue primarily from the sale of secondhand apparel, shoes and accessories on behalf of sellers. Revenue is recognized net of seller payouts, discounts, incentives and returns. Additionally, revenue includes sales of company-owned inventory and bag fees charged to sellers for processing Clean Out Bags. We expect revenue to continue to increase as we grow our Active Buyers and Orders.

Cost of Revenue

Cost of revenue primarily consists of outbound shipping, outbound labor, and packaging costs. We expect cost of revenue and gross profit as a percentage of revenue to remain relatively stable.

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Operating Expenses

Operations, Product and Technology

Operations, product and technology expenses consist primarily of distribution center operating costs and product and technology expenses.

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