Good afternoon and thank you for joining us on today's conference call to discuss ThredUp's Second Quarter 2022 Financial Results. With us are James Reinhart, ThredUp's CEO and Co-Founder; and Sean Sobers, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.thredup.com. This call is also being webcast on our IR website, and a replay of this call will be available on the site shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call, including, but not limited to, statements regarding our earnings guidance for the third fiscal quarter and full year of 2022, future financial performance, market demand, growth prospects, business strategies and plans, and the impacts of inflation, changing consumer habits and general global economic uncertainty. These forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties, and our actual results could differ materially from any projections of future performance or results expressed or implied by such forward-looking statement. Words such as anticipate, believe, estimate, and expect, as well as similar expressions, are intended to identify forward-looking statements. You can find more information about these risks and uncertainties and other factors that could affect our operating results in our SEC filings, earnings press release and supplemental information posted on our IR website. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition, during the call, we will present certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from GAAP measures. You can find additional disclosures regarding these known GAAP measures, including reconciliations of comparable GAAP measures in our earnings press release and supplemental information posted on our IR website. Now I'd like to turn the call over to James Reinhart.

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining us for ThredUp's second quarter 2022 earnings call. We're pleased to share ThredUp's financial results and key business highlights from our second quarter. In addition to our financial results, I'll give a closer look at how the ThredUp customer is faring in this difficult economic environment, discuss the unique advantages of our marketplace business model, and provide some details on our progress towards profitability. I'll wrap up with a discussion of investments in our customer experience, our progress in Europe following last year's acquisition of Remix, and updates on our Resale-As-A-Service offering. I will then hand it over to Sean Sobers, our Chief Financial Officer, to talk about our second quarter of 2022 financials in more detail and provide our outlook for the third quarter of 2022. We'll close out today's call with a question-and-answer session. I'd like to start by acknowledging that we are facing a consumer environment that is much different than it was just two months ago. All the data that we're seeing indicates that consumer health is deteriorating, especially among the budget consumer, who makes up a meaningful portion of our customer base. As such, we saw our business slow in the final weeks of Q2, a trend that has continued into Q3. Given the volatility we're seeing with the consumer, it's incredibly hard to predict exactly how the customer is going to behave in the back half of the year, a period during which we also have challenging year-over-year comparisons. With that said, our priority in the coming quarters and into 2023 is reaching breakeven on an adjusted EBITDA level, and we are planning to get there by managing the variables within our control. We are actively making adjustments to reduce our cost structure and modify our CapEx plans to not only weather this challenging economic period but importantly to come out profitable on the other side, positioning us for market share gains when consumer health returns. I'll provide additional details on our path to profitability later in the call, but first let's turn to our Q2 results. We achieved another quarter of strong financial performance, seeing record revenue, resilient gross margins, and continued growth in active buyers and orders compared to the same time last year. Our revenue of $76.4 million is an increase of 27% year-over-year, even with the deceleration beginning in mid-June. We are particularly proud of our gross profit totaling $52.6 million, representing growth of 19% year-over-year. We finished the quarter with gross margins at 68.9% on a consolidated basis and record gross margins in our U.S. business at 74.2%, as our progress in our logistics strategy more than offset a highly promotional environment. Active buyers and active orders this quarter increased 29% and 40% year-over-year, respectively. Our adjusted EBITDA loss of $13.5 million is primarily due to planned investments across our operating infrastructure and technology stack. Let's turn to the macro environment and the consumer. Our second quarter results were solid, building off a strong first quarter, but as I noted, our consumer began to really struggle in the back half of June, and that persists today. As has been well documented, the American consumer, and particularly the budget consumer, has pulled back on discretionary spending amidst today's economic climate. Inflation continues to squeeze the purchasing power of all, with the wealthiest Americans. Recall that approximately 60% of our customer base has a household income below $100,000, and our customer data is telling us that this budget consumer is feeling particularly pinched. As a rigorous data-driven company, we're sharing some incremental learnings this quarter to demonstrate how consumer behavior in the U.S. has evolved in our marketplace. We're witnessing a clear bifurcation of ThredUp customers, with premium shoppers trading up and value shoppers trading down. Year-over-year, the average order value of the discount segment of our customers declined 7%, while our upscale shoppers' average order value increased 15%. When we look at the items being purchased, the bifurcation is even more pronounced. The deep discount shoppers are trading down to items that are 24% less expensive, and the typical budget shopper is trading down to items that are 8% less expensive. Meanwhile, the upscale shopper is doing the opposite, trading up to items that are 8% more expensive. While we've only seen a slight dip in the number of upscale shoppers buying with us, we've seen a 23% decline across discount and budget shoppers in July compared to the same period in May. Discount and budget shoppers make up about one-third of our customer base, so essentially nearly one in four of them are sidelining themselves from apparel purchases right now. Across all our shoppers, we've seen return rates climb over the past several months, which we believe is an indicator that customers are being more selective when it comes to their discretionary purchases. What this tells us is that while there are many customers on the sidelines right now, even the customers in the end market are behaving differently. We expect these trends to continue for some time. Given this backdrop, I want to call your attention to two areas. First, the advantages of our marketplace model and how we can flex our platform to adjust the demand. And second, how we're approaching variable expenses and our march towards both sustainable growth and sustainable profits. Let me start with the structural advantages and built-in resiliency of being a marketplace. I want to remind everyone that we're not a retailer or direct-to-consumer e-commerce company. Unlike traditional retailers, whose brand equity around pricing, inventory commitments, and fashion manufacturing lead times can become a liability in a hyper-promotional and slowing macro environment, our consignment structure and flexible responsive supply chain enable us to take minimal inventory risk. We don't set trends or have to bet on trends in many quarters into the future; we can let the data drive our decision-making. We think of every listed item in our marketplace as a snowflake, which means we have the flexibility to adjust our prices, seller payouts, processing cadence, recommendation algorithms, and merchandising mix to adapt to the consumer environment. For example, if we see resilience in spending from higher income customers, we can adjust our assortment and pricing strategy toward items that are trading with that demographic. If customers are trading down into lower price goods, we can adjust our selection and payouts for those items to drive sell-through while protecting margins. One of the lessons learned coming out of the pandemic was how to flex our mix of goods to meet the moment. Right now, it's a prime example of how we can flex, while traditional retailers have overbought and must work through a glut of inventory, we can more easily dial back inbound supply and shape our assortment from our customers to best match the forecasted demand environment. As macro conditions begin to improve, we can dial back up our processing to meet the demand curve. Next, I'd like to address in more detail the steps we've taken to reduce expenses across the organization as a proactive step towards our profitability goals. It's very important to note that again, as a marketplace, many of our expenses are variable, not just in supply processing, but more broadly across the P&L. This past quarter, we reduced expenses across headcount, R&D, CapEx, and discretionary spending, not pertinent to the current growth trajectory of the business. This includes making the difficult decision to lay off about 50% of our corporate workforce, as well as shutter one of our processing centers. We believe these actions will position us well for the uncertain demand environment ahead and accelerate our path to profitability. While we prioritize the new approach to expenses, it's proving hard to predict exactly how the customer is going to behave in the back of the year and into the first part of 2023. With that in mind, we thought it best to be conservative to guide investors to three operating principles on which we're running the business. First, we are focused on maintaining our active customer numbers and engaging our core buyers and sellers through continuous improvements in the product experience. We will seek to acquire new customers as acquisition costs continue to come down, and we will plan to be spring-loaded to search item processing and growth spend as we've seen green shoots of a recovery. Second, we are focused on maintaining our strong gross margins, pricing power of buyers, our payout power over sellers, and reducing inventory risk to provide maximum flexibility as the customer recovers. We plan to drive our processing backlog down to allow us to be nimble in sourcing and shaping the best possible assortment. Third, we will rigorously manage variable expenses and CapEx as needed to achieve our profitability targets and regulate our cash levels. While we expect a challenging consumer environment for the foreseeable future and can reduce variable expenses further if needed, we will also be positioning our product and growth strategy to take advantage of the recovering consumer. Importantly, we expect to be adjusted EBITDA breakeven in the back half of 2023. This is assuming a quarterly revenue run rate between $80 million and $85 million and on a clear path to sustainable profits thereafter. Now that we've covered the consumer, the advantages in our marketplace, and our path to profitability, I'd like to update you on what we're doing to improve the customer experience and provide some commentary on our progress with our European and Resale-As-A-Service businesses. Across our marketplace, our team is honed in on high impact, high conviction improvement to ThredUp product experience that will pay dividends in the short and long term. First, it's all about delivering a world-class shopping experience that keeps customers coming back. We offer a one-of-a-kind catalog where fresh new items across thousands of brands, categories, styles, and price points are listed every day. With our expansive assortment, one area we're particularly focused on is building tools like visual filters, style matching algorithms, occasion-based recommendations, and mobile swiping favoring features to empower the customer to get exactly what she wants in an increasingly effortless way. If you've used a ThredUp app, you may have seen some of this already in beta form. Of course, we also remain disciplined in acquiring new customers and delighting them the first time they engage with ThredUp. To that end, I'm excited to share that Noelle Sadler has joined ThredUp as our Chief Marketing Officer. Noelle comes from online fashion retailer, Lulu, where she served as Chief Marketing Officer. Her deep expertise in e-commerce marketing and merchandising will be immensely beneficial as we look to capture an even larger mind share of Gen Z consumers. Shifting to the international front, we remain focused on Remix, the European fashion resale company we acquired in Q4 of last year. As mentioned on last quarter's call, we are focused on driving supply growth and margin expansion within the Remix business. We're also learning to manage and optimize the more seasonal nature of its operations in Central and Eastern Europe, where Q3 tends to be sales of low-priced tees, tanks, and shorts, and Q4 tends to be sales of higher-priced pants, jackets, and outerwear. As we learn more about these customer preferences, we're leveraging the ThredUp playbook to improve pricing, merchandising, payouts, and sell-through. We are pleased that Remix continues to exhibit resiliency in its top line and margins, despite economic turbulence in Europe. Turning to ThredUp's Resale-as-a-Service business, also known as RaaS, we recently launched Resale 360 for Tommy Hilfiger, a classic American brand dedicated to embracing circularity. At the same time, we launched Oak + Fort, a minimalist sustainable fashion brand, showing that our RaaS platform can effectively serve brands across the apparel ecosystem. In addition, Madewell, one of our early RaaS clients, expanded into 15 categories outside of denim, growing listings on its resale shop by over 400%. Despite a tough environment for retailers, we remain on track to have more than 40 brands on our RaaS platform by year-end. And many of our existing clients are expanding their businesses with us as we prove out the value of our model. By leveraging our marketplace infrastructure, RaaS amplifies our supply advantage, places our brand in front of new customers, increases our sell-through and return on assets, and expands our long-term profitability metrics by adding sources of recurring high-margin revenue. In conclusion, let me reemphasize that our priority in the coming quarters and in 2023 is reaching breakeven on an adjusted EBITDA level. And we are planning to get there by managing the variables within our control while positioning us for share gains when consumer health returns. I also want to acknowledge that the mission of ThredUp, which is to inspire a new generation of consumers to think secondhand first, ultimately comes to life through the incredible work of our team. And I'm really proud of their collective resilience. The year-to-date corporate employee retention rate remains a remarkable 96%, with the average tenure of our most senior executives approaching eight years. This quarter, we also released our 10th annual 2022 resale report conducted by a third-party retail analytics firm, Global Data. According to Global Data, the resale market is expected to exceed $80 billion by 2026. And while we remain confident in its long-term growth prospects, we are acutely aware of the near-term economic challenges in front of us. One final comment, before I turn it over to Sean, I'd like to note that while this is a challenging moment for the budget shopper in a discretionary category, the American consumer has proven to be incredibly resilient over time. And when discretionary spend comes roaring back, as it has in every other previous recovery, we will be poised to serve that surging demand with an incredible selection of great clothing in an ever-improving marketplace with strong unit economics and with a meaningfully improved cost structure. With that, I'll now turn it over to Sean to walk through our financial results and our guidance.

Thanks, James. And again, thanks everyone for joining us on our second quarter of 2022 earnings call. I’ll begin with an overview of our results and follow with guidance for the third quarter and the full year. I will discuss non-GAAP results throughout my remarks; our GAAP financials and our reconciliation between GAAP and non-GAAP are found in our earnings release, supplemental financials and our upcoming 10-Q filing. We are extremely proud of our Q2 results. For the second quarter of 2022, revenue totaled $76.4 million, an increase of 27% year-over-year. Consignment revenue was flat year-over-year, while product revenue grew 145%. Q2 consignment revenue saw an outsized impact from slowing demand in the U.S. in the final weeks of the quarter, a deceleration that so far has continued into Q3. Product revenue's growth is due to our Q4 2021 European acquisition and growth in our RaaS channel. Currently, the majority of revenue from both RaaS and our European business falls under product revenue, though we plan to transition these businesses toward consignment revenue over time. For the trailing 12 months, active buyers rose 29% to 1.7 million. Second quarter orders totaled 1.7 million, increasing 40% as compared to the same period last year. For the second quarter of 2022, U.S. gross margins expanded to 74.2%, a 60 basis point increase over 73.6% for the same quarter last year, representing our highest U.S. gross margin ever. Our progress in outbound shipping logistics, along with our ongoing work in improved automation, larger distribution centers, and expanded utilization, despite elevated returns and a more promotional strategy towards the end of the quarter. Over the course of Q2 2022, we did see return rates move higher as consumers became more selective, negatively impacting our revenue by an incremental $2.5 million over Q2 of 2021. We have seen this trend continue in Q3. Consolidated gross margin was 68.9%, a 470 basis point decline over the same quarter last year, due to the consolidation of the lower margin European business. Over the next few years, we plan to migrate the European business towards higher margin consignment. In the near term, Europe’s product revenue margins are materially lower than ThredUp U.S.’s product margin, and we see ample opportunities to improve its product revenue margins through investments in automation and data science in order to be closer to the 50% range that U.S. product margins command. For the second quarter of 2022, GAAP net loss was $28.4 million compared to GAAP net loss of $14.4 million in the second quarter of 2021. Adjusted EBITDA loss was $13.5 million, or 17.7% of revenue for the second quarter of 2022, an approximate 265 basis point decline compared to the adjusted EBITDA loss of $9 million, or 15.1% of revenue for the second quarter of 2021. The deleverage was largely the result of operations, product, and technology investments as we continue to build out our Texas DC, which will ultimately increase our current unit capacity by over 150% in the U.S. alone. Q2 GAAP operating expenses increased by $23 million, or 40% year-over-year, just over half of this increase was related to higher operations, product, and technology costs related to our infrastructure expansion in both the U.S. and Europe. Our stock-based compensation accounted for $7 million of the increase as we awarded employees our annual RFQ refresh. Turning to the balance sheet, we began the second quarter with $191.1 million in cash and investments and ended the quarter with $155.7 million. Our cash usage from operations was $18.2 million while we spent $14.9 million on CapEx, largely attributable to our infrastructure build-out. As we look forward, our priority in the balance of the year and into 2023 is to direct the business towards adjusted EBITDA breakeven on our way to profitability. With the acknowledgment that the challenges in the macro economy are something we cannot control and that we will likely be facing a slower demand environment in the near term. We believe we have mapped a path to adjusted EBITDA breakeven that’s dependent upon what we can control: expenses. ThredUp is clearly aligned on our adjusted EBITDA breakeven goal with the entire organization prioritizing expense rationalization and cost efficiency. At the same time, we remain dedicated to investing in our customer experience and operations so that we are well-positioned to take share when consumer health returns to steadier footing. We acknowledge that the timeframe to reach adjusted EBITDA breakeven on a quarterly basis could shift depending on the macro environment. But based on our current assumptions, we believe we’ll be able to reach breakeven by the back half of 2023, assuming we reach a quarterly revenue base of $80 million to $85 million. To give you an example, the work we have done in reexamining our expense structure is that we have made the difficult decision to lay off 15% of our corporate workforce towards the end of Q2, closed one of our processing centers, and eliminated a significant portion of discretionary spend. We are continuing to find opportunities to reduce costs, and we expect many of the expense rationalization initiatives we put in place will materialize over future quarters. We are also pulling back on variable spending in response to slowing demand in areas such as marketing and inbound processing. In Q3 and Q4, we expect to realize approximately $12 million and $18 million of savings from these initiatives, respectively. Based on the current revenue trends in 2023, we expect $70 million in savings, over half of which are operations and marketing related, which we expect to redeploy when revenue trends improve. Even in the slowing demand environment that we are facing, we are confident in our ability to reach adjusted EBITDA breakeven due to the fact that our expense structure is highly variable. This expense flexibility is a key part of our business model that can serve us well in a weaker economic environment. For example, inbound costs that sit in operations, product, and technology are responsive to revenue trends. If we’re selling fewer items, then we need to process fewer items, naturally reducing our expenses. Furthermore, we have the ability to react to revenue trends and defer or reprioritize our CapEx commitments as well. For example, we have taken a modular approach to building our Texas DC. This means we can push out the second phase and the associated CapEx and costs until demand requires additional capacity. Based on the current environment, we expect to spend $12 million to $13 million in Q3, $5 million to $6 million in Q4, and are planning for less than $20 million in total for 2023. We spent $33 million in cash in Q2. We expect the spend level to significantly decrease by Q4 as our CapEx spending eases as we near the end of completion of Phase 1 of our Texas DC, combined with the significant improvements in EBITDA we expect due to the ongoing cost-saving initiatives we're implementing. Even in a slower growth environment, the variable nature of our expenses combined with the ongoing work we're doing to drive out excess costs provides us with the confidence that we expect to be able to fund the business through our existing cash balance and/or debt facility until we reach free cash flow positive. In fact, we believe our recently refinanced $70 million debt facility could entirely finance our near-term CapEx requirements if needed. As a result, we do not anticipate our balance of cash, cash equivalents, restricted cash, and marketable securities falling below $50 million before reaching free cash flow positive, nor do we expect the need to turn to the capital markets before then. We are electing to take a highly conservative approach in the second half as visibility on consumer behavior is low, particularly among the low-end consumer. In addition, we are facing a difficult second half comparison to the step up in processing power in 2021. Our outlook assumes that the trends we are seeing today extend through the balance of the year. With these factors in mind, I would now like to share our financial outlook. For the third quarter of 2022, we expect revenue in the range of $64 million to $66 million. Gross margin in the range of 65% to 67%. Keep in mind that our European business is highly seasonal, with its lowest gross margin quarter in Q3 during the summer selling period. In addition to our weaker-than-expected U.S. performance, our lower margin European business will be a larger portion of our business in Q3. An adjusted EBITDA loss of 18% to 16% of revenue, which is a 70 basis point sequential improvement at the midpoint of our outlook, and basic weighted average shares of approximately 100.4 million. For the fourth quarter of 2022, we expect revenue in the range of $70 million to $72 million. Gross margin in the range of 64% to 66%. Our lower margin European business has its seasonally strongest quarter in Q4, making it a greater percentage of total revenue for the year. This is pressuring gross margins, with an adjusted EBITDA loss of 10% to 8% of revenue, which is an 800 basis point sequential improvement at the midpoint, as we expect to benefit from a full quarter of our cost-saving initiatives. Basic weighted average shares outstanding are approximately 101.3 million. For the full year of 2022, we now expect revenue in the range of approximately $283 million to $287 million. Gross margins should be in the range of approximately 67% to 69%, with an adjusted EBITDA loss of approximately 16% to 15%. We continue to expect sequential progress in our adjusted EBITDA rate and dollars until we reach breakeven. Despite the top-line pressures to our business, we expect an improved EBITDA loss versus the midpoint of our previous guidance due to the meaningful actions we have taken to reduce expenses across the organization, and basic weighted average shares of approximately 100 million. In closing, while we are pleased with our second quarter performance, we know there is much more work to be done. We are lowering our top-line expectations for the remainder of the year due to the consumer environment, and we want to reiterate that our adjusted EBITDA margins continue to improve sequentially and are in line with our previous guidance for the full year. We are confident that we will make progress on our path to profitability as we flex the variable costs within our control, and we believe that our marketplace model is uniquely positioned to weather this uncertain economic period. As James mentioned, we are not sure when the consumer environment will recover, but we know that when it does, we will be in a position to emerge as a stronger, more profitable business on the other side. James and I are now ready for your questions. Operator, please open the line.

Great, thanks. On that path to breakeven in the second half of 2023, and I think you said $80 million to $85 million rate revenue required to get there. Can you just help us understand what needs to go right for that to come to fruition? And does that outlook imply that current trends that you saw in July and August from underlying consumers persist? Does it get better a little bit? Does it get worse? Just trying to understand or get a sense as to what's baked into that?

Sure. Hey, Trevor. Yes, I mean, I think we saw this step down in the back half of Q2. And I think the way we're thinking about the back half of the year and into 2023 is that things sort of remain where they are at these depressed levels. But we continue to work on the business and continue to optimize what we can do around pricing, promotions, payouts. But we're not assuming any big recovery in that. But we're also not assuming that things get materially worse, right. So I think we've sort of hit kind of the level that we're seeing right now, and we expect that to persist for several quarters.

Hey guys. Thanks for taking the questions. I guess two for me. First, just to underscore the last question, are you seeing trends stabilize at this lower level or are they continuing to deteriorate? I guess what does guidance contemplate? And then as a bigger picture question, as the traditional first-party environment gets more promotional, is it your belief that you need to come down in price further so that you maintain kind of a differential, secondhand versus new, or how do you think about adjusting pricing across your offering and kind of when should we start to see those changes? Thank you.

Yes, thanks Ed. Yes, I mean, I think we're starting to see the trend stabilize. I think you saw that step down end of June and into July, but now we've been seeing it be pretty consistent. And so we're projecting that we're going to kind of live in these levels for some time Ed. But then the way we're managing the business is being super flexible where things start to recover, we can accelerate into that recovery and if things somehow were to get materially worse, we can pull the levers to manage that variability. So I think our posture running the business is to be flexible. But we do think the world is stabilizing. I think on the competition piece, your second question, we've sort of built that into our assumptions that it's going to be more competitive. And so we're going to have to flex price, promotion, discounts, payouts to our sellers. So we're willing to flex all of those things to be competitive in the environment. But our guidance reflects what we expect to be a competitive environment in the back half of the year and into 2023.

Hey everybody. Thanks for taking my question. James, you mentioned in your prepared remarks, when you gave kind of like the three principles or three pillars that you were focusing on, you talked about maintaining your customer account and you made a comment about acquiring new customers as acquisition costs come down. Is that something that you're already seeing? Are you seeing the CAC come down or are you kind of saying that you are assuming that in the environment of more moderate demand that CACs would come down and you would be able to continue acquiring new customers in that environment?

Yes, Tom, I think, just to double-click on both parts of that, I mean, on the one hand you are seeing our existing customers, many of them are in market and purchasing, and there is a segment of customers who I think are sitting out and buying. And I think it's a really important thing to understand around what's happening with our active customer base, which is customers who are in market, they are buying lots of stuff, but there are people who are on the sidelines. And I think that influences our thinking. And then frankly, what we're seeing around the marketing piece, which is we are seeing ad rates come down. I think all the ad marketplaces have talked about cost per click and CPMs coming down, and we are seeing that trickle through, but we're not expecting like that to materially change over the next few quarters. It's just that it is lower than it has been over the prior few quarters. And so I think we're kind of watching both parts of the business, existing, active customers and new customers coming in, and feeling like there may be a chance to take advantage of some discontinuities over the next couple quarters.

Great, thanks. Just to, I guess, put a finer point on one of the earlier questions, I guess, what level of promotional activity is assumed in the second half gross margin outlook? And then what are you seeing on the supply side? Are you seeing customers or sellers perhaps wanting to monetize their clauses a little bit more? Curious any changes there? Thanks.

Yes, Lauren, I mean, I think we're anticipating it's going to be very competitive in Q3 and Q4. I think our guidance reflects what we expect to be a very competitive environment. We've seen some of that already quarter-to-date. I think, as you know, on the supplier side, I mean, we just have never had trouble attracting sellers and we continue to see strong demand from our sellers and think there is going to be resilience in that selling community. But I'm not sure that necessarily there is going to be more and more sellers in market than there was historically, given what we're seeing. So hopefully that answers your question.

Great, thank you so much. Good afternoon guys. Two quick ones. I wasn't sure if you covered this Sean or James, how did Remix perform during the quarter versus your plan? And what are you guys implying for Remix in the back half? And secondly, we saw you started charging for clean out bags. Can you talk about what's behind that decision? And just curious, how has customer reaction been? Thank you so much.

So on the Remix side, they are performing really well, performing pretty much up to our expectations. I think the piece to keep in mind, as you start to look at Q3 and Q4, is that there is a much more seasonal business than we've seen in the U.S. So in Europe, when it's summer, it's pretty much summer everywhere; when it's winter and fall, it's cold everywhere. So I think you see overall ASPs decline in Q3: pants, t-shirts, shorts, things like that, so their GM goes down. And then you get to Q4; it's their biggest quarter, ASPs are higher, gross margin is higher, and actually their revenue contribution to the whole company is at its highest. So that's where you're looking forward; Q4 will be their biggest quarter.

And on your question around charging for cleanout kits, this is an experiment we've run over time, over many years. In this current variation, we've just seen continued real demand for our cleanout service and so exploring willingness to pay on the cleanout side and how that affects the customer experience. And there is some interesting data that hopefully we will be able to share next quarter around how that influences the types of customers that choose to clean out with ThredUp because, as I said, in the prepared remarks, we're really looking to the assortment. And this is one experiment that we've been running to see how that materially changes what people send us. So stay tuned for more information on that.

Good afternoon, everyone. As you think about the categories, the merchandise that are selling and the difference between the income cohorts, what are you seeing there? And how is your pricing adjusted? And lastly, you mentioned about one of the processing facilities, are you delaying it, closing it or what exactly is happening there? Thank you.

I'll let Sean talk about the processing centers and then I'll hit your question Dana on the merchandise mix.

Yes. As part of our restructuring, we closed one of the processing centers. I think we mentioned that in our prepared remarks. And then as it relates to DCO7, which is the large facility in Dallas, we've been able to flex that down and slow down the build-out. We'll build out Phase 1 at first, which will hold about five million items, and then we'll build out the second half as needed as we go through it. What that really does is allow us to conserve CapEx, spending throughout 2023, and kind of fits in nicely with what I talked about, spending CapEx less than $20 million in 2023.

On the shopping trends, Dana, I think what we're seeing is you are definitely seeing this trade-down where your discount shoppers or your budget shoppers, they are buying cheaper items, but they're buying a fair amount of them. Right? So I think we're capturing incremental share in the closet, whereas your upscale shopper is buying more expensive items. And I think still remains pretty resilient on the luxury side. I think that's what we're projecting will be true over the next few quarters. Our job is really to shape that assortment to best serve where the customer is, and that's where it focuses right now.

Thanks for taking my question. I just wanted to follow up on your higher income shoppers. Could you maybe talk about how you can attract more of the buyers to your platform and how quickly can you actually adjust your assortment? Thank you so much.

Yes, I mean, I think it’s been reported widely that the upscale shopper is actually faring pretty well in this economy. And so we’re confirming that in our data. I think we said that they’re trading up to items that are 8% more expensive. And so I think what we’ve been doing is continuing to focus our sourcing strategy on products that are going to delight that customer. And I think what we’ve found is that in many marketplaces, ThredUp is not unlike others. It’s really the product that you have really drives the customers who come onto the platform. And so I think we will continue to try and find great product to serve that more premium shopper. But I don’t think we’re going to materially go good chasing in that direction; I think we have a great selection, a broad assortment we can do an incrementally better job of making sure that product’s available.

Thanks a lot. Just curious on the scaled down DC07 plan, does that affect the maturity curve and the profit contribution as you had sort of previously envisioned it? And sort of a related question, thinking of breakeven by the back half of next year, if you could kind of quantify or bucket or rank kind of, are you getting there evenly between cost cutting and sort of a maturing fleet, or is it more cost cutting? Appreciate it. Thanks.

Yes, I think from the DC07 perspective, I think it’ll be about half the size as we close out this 2022. We are actually starting a quarter later due to some, basically some challenges in the supply chain. So that's instead of starting in Q3, we will be starting in Q4. So that has an impact on EBITDA in that quarter of about the same as what it was before, about $2.2 million, $2.3 million, and this will open up for revenue in Q4 and it’ll start to move that headwind. So I don’t think the overall scale of the business other than starting later is going to change what we had already assumed. It’s going to take time to ramp into the $5 million and then further time to build out the final 5 million and then go up to the total 10 million in the DC.

Yes, and Dylan, on the profitability piece, I think it’s more about managing through the variable costs in the business that I think gives us the confidence in profitability on the back half of the year. We’re not, as we gave you explicit guidance around the revenue run rate, like we’re not expecting a massive consumer recovery to get us there. But we are expecting to see the benefits of a lot of the things we’ve done on the variable expense side. And also the work we continue to do around pricing and promotions and discounts and returns and all those sorts of things that we’ve been working on. And I think kind of speaks to the power of the marketplace that we can bend those cost curves and those decisions to get to where we want to be.

Thank you. Good afternoon. And appreciate you squeezing me in here. You touched on this earlier, but can you provide additional color on the puts and takes for gross margins as we think about the U.S. and Remix businesses separately? And I know you’re not guiding the 2023 specifically, but I’m hoping you can help us have a better understanding of what you see as the low-hanging fruit to improve gross margins once we presumably get through this rough economic patch?

Yes, in the gross margin fees, we kind of touched on it on the seasonality as it relates to Remix. So as you add the business, it’s a little lower than us and they take – they become a bigger portion of our business. It drags down gross margin overall. I think the piece to keep in mind is, Remix itself is mostly direct and their margins are well below our 50% for our direct business. So we have a great opportunity there to move that business up to what the standard rate is for ThredUp. In addition, we’ll be moving that business over time over two to three years on a consignment model that will be a tailwind overall. In addition to them moving into more automated facilities, using more data, more algorithms, a larger unified facility. There’s a ton of other things to get out here.

Yes, Rick, and the only thing I would add is you go into 2023 is the – is you can see the economy potentially improving over time, is there some improvements you get from promotions from returns, normalizing back to where they were pre-distress, I would say, in the apparel market. So I think there’s a bunch of things in there. And I think what we’re really trying to do is focus on how do we surge out of this recovery as we start to see the green shoots to that. And I think you’ll see that top one. I think you’ll see that in gross margin. And I think you’ll see that in EBITDA. So really trying to be able to manage the business through a time when you really don’t have a lot of clarity right around what the next few quarters are going to look like. Great. Well, thanks everybody for joining us for this earnings call. And I look forward to seeing you next time around. Thanks.

Thank you. And that does conclude today’s conference. We thank you all for your participation. You may now disconnect.