Good afternoon, ladies and gentlemen, and welcome to the ThredUp Q2 2025 Earnings Call. This call is being recorded on August 4, 2025. And I would now like to turn the conference over to Lauren Frasch. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ThredUp's second quarter 2025 financial results. With me 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 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. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, supplemental financial information and our Forms 10-K and 10-Q for more information on these expectations, assumptions and related risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and the supplemental financial information, which are distributed and available to the public through our Investor Relations website located at ir.thredup.com. Now I'd like to turn the call over to James.

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining our second quarter 2025 earnings call. Today, we'll discuss financial results for Q2 and update our expectations for Q3, Q4 and fiscal year 2025. I will provide an update on our thinking about the macro environment, discuss ongoing innovation in our AI-driven product experiences and end with a refresher on our compounding competitive advantages in the growing resale market. I'll then hand it over to Sean Sobers, our Chief Financial Officer, to talk through our financials in more detail. As always, we'll close out today's call with a question-and-answer session. First to the results. The second quarter was strong. Revenue growth accelerated to 16.4% year-over-year. Gross margin landed at 79.5% and adjusted EBITDA was 3.9%, all of which exceeded our own internal expectations. These results were driven by the underlying fundamentals of strong customer growth and orders in our business. We acquired more new customers in the second quarter than at any other time in our history, with new buyer acquisition up 74% year-over-year. Active buyers were up 17% year-over-year and orders were up 21% year-over-year. Again, our approach in 2025 is simple: maintain our gross margin and bottom line efficiency and reinvest incremental dollars we generate back into growing new buyers and sellers in our marketplace. We are continuing to do this with success in the third quarter and believe this approach creates the greatest long-term shareholder value. Turning to the macro. We talked about the impact of tariffs at some length on our last call. Let me reiterate a few points that remain relevant. First and by far the most impactful to ThredUp is the closure of the de minimis loophole. Though the full impact is still uncertain, we believe the closure of the de minimis exemption is likely to cause higher prices for ultrafast fashion goods and to reduce production volumes, both of which could continue to be positives for ThredUp. Second, the increase in the price of new apparel that may result from broad-based tariffs could enhance the comparative value proposition for consumers who are shopping for value on ThredUp. Third, ad markets remain dynamic. As we predicted the short-term gains we experienced from companies like Shein and Temu aggressively pulling back lasted from mid-April to mid-May before they began spending again. Regardless of how advertising rates trend, we're continuing to see efficiency throughout our funnel, driven by improvements in the ThredUp experience. So let's turn to that. We are now more than 18 months into our AI-led product journey and positive results continue to compound. It's not as though any one feature is driving the outcome, but rather the whole set of ways that shoppers can now engage on ThredUp is improving. While we've shared some of the individual feature results previously, including visual search, style chat, image search, and shop similar, I thought it might be useful to review how the aggregate nature of these improvements is rolling up to create better business fundamentals. Conversion rates on sign-up on ThredUp are up 30% year-over-year and sign-up to purchase rate is up 60%. Combined, this is an 18% improvement in how visitors turn into ThredUp customers. Typically, when you accelerate marketing spend as we have and drive more traffic, you get degradation in the funnel. But the work we've done has created the opposite outcome. This is the flywheel we will continue to lean into. And we continue to invest in new ways to leverage AI technology in the prompt experience. This quarter, we debuted our first AI-generated images on roughly 100,000 individual product pages that showed how an item might look on a model, something that fashion brands can easily do, but we can't given our massive assortment of secondhand SKUs. The results were fascinating. For existing heavy ThredUp buyers, AI model images had modest conversion impact. But for those new to shopping secondhand, it was a big deal. Customer satisfaction of AI model photos has been on par with our very best features. We think this is because this is the way the new customers are used to shopping elsewhere. We have taken this feedback and are retooling how the images are created and displayed at further scale and expect to be back in the market in the coming quarters. Again, this is in service of our goal to make the experience of shopping secondhand virtually indistinguishable from shopping for new products. Our social commerce work continues to delight customers with easy ways to shop their inspiration from Instagram and other social media. Our new feature is live on the ThredUp iOS app, and we expect to roll it out to more platforms later this year. We believe that enabling customers to seamlessly shop their style inspiration from influencers and creators is a meaningful opportunity for us to drive social proof and capture wallet share. We plan to continue to invest in engineering, design and data science resources over multiple cycles to nail this experience all the way through the product funnel. Turning to the seller side of our marketplace. We continue to make substantial improvements across the seller experience with our ambition to make ThredUp the default place to sell secondhand clothing online. Given the top line growth in Q2 and the expectations for Q3, it will come as no surprise that we set all-time records in requests, receipts and cleanout kits processed. Our strategy involves expanding the number of ways customers can sell and the frequency with which they sell on ThredUp. Premium service kits with service fees up to $34.99 continue to grow as a mix of kits received, growing 44% quarter-over-quarter. We are particularly excited by the mix of new sellers joining ThredUp as premium service customers. Roughly a quarter of premium kits are coming from sellers who have never previously sold on ThredUp. Earlier this year, we launched the ability to resell items when you're returning a product you bought on ThredUp, and that volume has increased more than 4x quarter-over-quarter despite no measurable increase in our overall buyer return rates. We are leveraging our return supply chain to lower selling costs, but more importantly, making it easier for buyers to become sellers on ThredUp. Let me provide a brief update on Resale as a Service or RaaS. Our change to an open-source model in our RaaS strategy is in the earliest stages, and we are seeing promising engagement from brands. We have renewed conversations with more than 60 apparel brands after the announcement of our new strategy. Again, we believe value for this ecosystem is created in the operations and technology layer to ingest secondhand items at scale and make them available for resale as efficiently as possible. Over the long term, as brand resale becomes more prevalent in the industry, we believe this ecosystem will benefit from a powerful affordable "universal recommerce layer" akin to what Amazon Web Services has done for cloud or Shopify has done for small business. This can then enable any brand to do everything they need across the resale ecosystem. We will have more to share in the coming quarters as we launch new brands under this model. Before I turn it over to Sean, I want to reiterate three important competitive advantages in our model that are working together to drive the positive momentum you're seeing today. First, the operational infrastructure and supply chain that we have invested in over many years is working as well as ever. We've invested over $400 million in infrastructure, software and data to invent how a managed marketplace can work at scale from the humble cleanout kit to advanced photography technology from inbound automation of item identification and measurements to the outbound carousel automation for shipping out unique apparel SKUs tens of thousands of times a day. Our tailored purpose-built supply chain is unique, and we believe that replicating our success would take many years, significant capital investment, and the creation of a great deal of new intellectual property. Second, the technology investments we've made over many years to build a proprietary resale database and data expertise have enabled us to take advantage of the leaps in AI technology you're seeing today. It is precisely the hundreds of millions of pieces of clothing that we've processed and the vast stores of data about those items that have helped us leverage AI so quickly and expertly to sell more items at better margins. Third, as we all know, marketplaces are hard to build and sustain. But once you get the flywheels going, they are very hard to stop. Our innovations on both the buyer and seller side are helping us delight both sets of customers, expanding the addressable opportunity while deepening engagement and capturing wallet share. I have said multiple times that ThredUp's marketplace should uniquely benefit from advances in AI, and I believe we are seeing that come to fruition so far this year. As a parting thought, if you zoom out and ask how to compete with ThredUp over time, we think you will run into a lot more questions than answers. What will it cost to acquire millions of secondhand buyers and sellers? How will you acquire, process, and fulfill the broadest selection of quality secondhand apparel anywhere? Can you price the apparel attractively while maintaining healthy and sustainable unit economics, a feat only possible through advanced automation infrastructure? Will you be able to compete with a well-known and trusted brand backed by superior technology infrastructure and the decade-plus head start? These are hard questions to answer, especially while ThredUp is accelerating. In sum, we believe the conditions for our future success are very bright, and we are going to be relentless in executing our playbook. With that, I'll turn it over to Sean to talk to the financials in more detail.

Thanks, James. I'll begin with an overview of our results and follow up with guidance for the third quarter, fourth quarter, and full year 2025. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and a reconciliation between our GAAP and non-GAAP measures are found in our earnings release, supplemental financials, and our 10-Q filing. We are extremely proud of our Q2 results in which we accelerated revenue growth, exceeded our adjusted EBITDA expectations, and generated cash. For the second quarter of 2025, revenue totaled $77.7 million, an increase of 16.4% year-over-year. Our outperformance was driven by significant investments into marketing and inbound processing in order to drive our marketplace flywheel. These investments resulted in our second consecutive record quarter of new buyer acquisition with new buyers up 74% year-over-year. We finished the quarter with 1.5 million active buyers for the trailing 12 months, up 16.5% over last year, while orders were up 20.8% to $1.5 million. For the second quarter of 2025, gross margin was 79.5%, a 70 basis point increase versus the same quarter last year as a result of higher average selling prices due to the rapid growth in our premium supply. This dynamic was slightly offset by new buyer growth as new buyers require higher incentives to convert on their first purchase. Adjusted EBITDA was $3 million or 3.9% of revenue for the second quarter of 2025. We doubled our adjusted EBITDA dollars versus last year, representing a 170 basis point margin improvement as we leveraged our multi-year investments and benefited from our revenue outperformance. As our momentum accelerated through May, we were unable to hire fast enough in our processing operations, driving our EBITDA beat. As we've entered Q3 with encouraging momentum, we are spending on marketing and inbound processing earlier in the quarter, which I will further discuss later. Turning to the balance sheet. We began the second quarter with $55.4 million in cash and securities and ended the quarter with $56.2 million, generating $800,000 in cash. We spent $3.3 million on CapEx in Q2 and continue to expect maintenance CapEx levels of approximately $8 million in 2025. Now I'd like to provide a bit of context for our updated guidance, which should sound similar to last quarter. We delivered a significant revenue beat in the second quarter, and we are flowing that through to the full-year revenue outlook. Though we remain cautious on the current consumer environment, we are pleased to be raising our top line expectations for the balance of the year to align with the positive trends we are currently seeing in the business. We also delivered a strong beat on Q2 adjusted EBITDA, which we are flowing through to our raised year guide. With contribution margins in the low 40% range and healthy customer acquisition costs driven by AI improvements in our customer experience and marketing tactics, we see continued opportunity to invest in marketing and inbound processing. As we have increasing confidence in our quarter-to-date momentum, we are making these investments earlier in the quarter. Therefore, we are maintaining our profitability expectations for the remainder of the year as we continue to focus on driving growth and generating cash. With all this in mind, in the third quarter, we now expect revenue in the range of $76 million to $78 million, representing 25% year-over-year growth at the midpoint; gross margin in the range of 77% to 79%, adjusted EBITDA of approximately 4.5% of revenue, in line with our previous expectation, and basic weighted average shares outstanding of approximately 125 million shares. In the fourth quarter, we expect revenue in the range of $73 million to $75 million, representing 10% year-over-year growth at the midpoint. The sequential step down reflects the seasonal slowdown in resale around the holidays. Gross margin in the range of 77% to 79%, adjusted EBITDA of approximately 3% of revenue, in line with our previous expectations, and basic weighted average shares outstanding of approximately 129 million shares. For the full year of 2025, we now expect revenue in the range of $298 million to $302 million, reflecting 15% year-over-year growth at the midpoint. This updated view is $14 million above our previous guidance, incorporating our Q2 beat and our raised outlook for the remainder of the year. We are narrowing our gross margin range to 78% to 79%, adjusted EBITDA of approximately 4.2% of revenue. This reflects our Q2 beat, while we are holding our assumptions for the remainder of the year to be broadly similar to our previous outlook and basic weighted average shares outstanding of approximately 123 million shares. In closing, we are extremely proud of our Q2 performance. We accelerated revenue growth, generated cash, and we remain focused on doing the same in Q3. The momentum we're seeing in the business provides us with increased confidence in our ability to deliver on our goals. James and I are now ready for your questions. Operator, please open the line.

Your first question comes from Irwin Boruchow from Wells Fargo.

Let me add my congrats. I guess a couple of quick ones. I guess, first for James, and then I have a follow-up for Sean. But just, James, maybe just at a high level, just more detail on what drove this kind of Q2 revenue outperformance and the new buyers. It's just the business has inflected so strongly, and it seems like it's happened pretty fast. So I'm just kind of curious underlying what you think was the biggest driver there because there are so many different things you guys are doing right now to improve the business. I'm curious if you could kind of like level set that or rank order those for us.

Yes, sure. I mean I think rank ordering is difficult. What I would say, though, is that we've really got this flywheel working of improved product experience, sort of put some numbers in the prepared remarks around this, around conversion rate across the product experience. And then our new buyer acquisition continues to be strong, really driven by product. And so when you combine that with strong operations processing and high-quality supply, what you get is this trifecta of great supply, great product experience, and efficient acquisition. And what we're seeing is that as those things continue to get better and better, we're able to then deploy more dollars into the growth flywheel. And I think that's what's driving sort of momentum in the business. And yes, it feels great to be able to see the model really working and to feel like the marketplace is really humming on all cylinders.

I assume you don't want to get into like the monthly cadence or anything, but I mean, just to see the 16% growth in 2Q and you're guiding to 25% in the third quarter, like is the business just sequentially building every month? Has that been going on for a while? Just kind of curious if you could kind of help us understand what's going on under the covers.

Yes. I mean we're definitely seeing the new buyers that we were acquiring starting back in Q4 of last year, right, that momentum continued into Q1 and I think into Q2, and we're seeing it in the first month of Q3. So certainly, you're getting that acceleration. But then if you get a normal seasonal slowdown in Q4. And yes, I think as you all know, right, that when you're driving that many new buyers into the business, as long as you're maintaining strong engagement rates and retention rates, that really does start to compound, and we're seeing that in the numbers for Q3 and Q4.

Great. For the last question, maybe for Sean or James, dropping to 10 in the fourth quarter seems very conservative. Can you discuss the parameters you're considering for that? I'm curious about how many active buyers you're expecting to drop off, as there needs to be a significant number to reduce revenue from 25 to 10. I'm interested in the guidelines you're implementing for the fourth quarter.

Yes, I can respond to that. We've been discussing the typical quarterly patterns, and for Q4, it's important to note that there's usually a seasonal decline in resale, which has been the trend for over ten years. We generally see a drop from Q3 to Q4 during this time. Additionally, marketing expenses usually rise in Q4, leading us to slightly reduce our own investments to keep our customer acquisition cost to lifetime value strategy in check. Furthermore, to be frank, both Sean and I feel a bit uncertain about the macroeconomic conditions. With weak job numbers and a sluggish housing market, it seems wise to take a more cautious approach regarding how Q4 might unfold. However, once we report Q3 and provide guidance for Q4 in November, we'll have more information to share. We believe this is a more sensible way to proceed.

And your next question comes from the line of Dylan Carden from William Blair.

On the gross margin side of things, typically, I think there's sort of an inverse relationship between new customers and gross margin, and yet you were able to sort of set records in both this quarter. Just curious the dynamics there and you're kind of keeping the wide range go forward, kind of the puts and takes on that. And maybe it's a related question, but you had sort of mentioned some timing on costs as it relates to sort of some of the upside in earnings in the second quarter. Can you just provide maybe some more details as to what those were and how that rolls through third and fourth quarter?

Yes. Dylan, this is Sean. I think on the gross margin outperformance in Q2, we saw the premium supply piece continue to grow and really drive average selling prices. And then as you look towards kind of the back half of the year, you see gross margin kind of tick down a little bit. I mean we still expect premium supply to be there, but we really want to focus on the customer experience as we've added all these new customers in the first half of the year. And by that, I mean, we're going to focus on things like pick, pack, and ship, which is stuff that kind of rolls into COGS and impacts gross margins to give a better overall customer experience just to drive it home and really allow those new customers to become second-time purchasers, or third-time purchase, and fourth-time purchasers.

And then we don't spend a lot of time typically talking about supply, and we're kind of talking about here on this call. And I'm just curious sort of as you see the business accelerate, it sounds like you're kind of keeping pace from a supply standpoint and then sort of the processing times, keeping those in check.

Yes, Dylan, it's James. Yes, we continue to see record requests, receipts processed on the supply side. And we're really focused on innovating in the supply chain. We really want to make ThredUp the default place to sell online and make it as easy as possible for anyone to get engaged. And so I think premium has done a very good job of capturing that more premium seller. We obviously have our sort of donation program for our customers who are really just doing a non-financially motivated cleanout and really trying to capture that whole market, Dylan, and it's worked so well so far year-to-date, and I think we're going to continue to innovate there as we get in the back half of the year.

And your next question comes from the line of Dana Telsey from Telsey Group.

Congratulations, everyone. As you think about this inflow of new buyers, what are the demographics of those new buyers? How are you seeing them different or the same from your core? And is part of this due to the closure of the de minimis? And then what are the category trends? Did they differ at all from the first quarter to second quarter? And then I have a follow-up.

Hey Dana, it's James. There isn't anything significantly different about the new demographic of customers compared to those we had before. We believe the market for female secondhand shoppers in the U.S. is quite substantial, and we're starting to regain our focus on this market after divesting in Europe. The new customers resemble our previous best-case ThredUp customers, which is encouraging. Looking at the trends from Q1 to Q2, we saw a significant increase in dress sales as we transitioned into spring and summer. This category remains strong for us, and we believe there’s an opportunity to capture even more market share as we progress through the year.

Got it. And then on the marketing spend, can you talk a little bit about the cadence of marketing spend? How much difference there is quarter-by-quarter now? And then just on the RaaS with the change to the open-source model, any further expansion of RaaS and its implications?

Yes. I think on the marketing side, aside from the seasonal downturn in Q4 when ad rates become highly competitive around the holidays, we are targeting around 18% to 20% of our revenue for marketing. We are currently in a phase of growth and acceleration, which has been quite consistent. As a reminder, Dana, we aim to maintain our LTV to CAC ratio below 1 so that we can recoup our investment in under a year, and we have been very focused on that. Therefore, if we can acquire more customers within that framework, we will continue to push forward, and that is what we have been doing throughout the year. I believe you are beginning to see some momentum building with our marketing expenditure. And could you remind me of your second question?

RaaS, the open-source model.

Yes, I believe that we are just a few months into our new strategy, and it seems to be resonating well with the apparel brands we are engaging with. We are now in discussions with over 60 brands. The goal is to establish ThredUp as a scalable partner that can assist these brands in achieving their goals related to take-back programs and integrating sustainability and circularity into their offerings. Additionally, we can help them provide a wide variety of secondhand goods that are high quality and meet their customers’ needs. We are optimistic about our strategy. Although it's summer and it may take some time to finalize these deals, we feel confident about the direction we are taking.

And your next question comes from the line of Bobby Brooks from Northland Capital Markets.

Congratulations on a strong quarter. During the Q1 call, you mentioned that any additional revenue beyond your 4% guidance would be invested back into marketing, which aligns with earlier comments in this call. I am trying to grasp the reasoning behind the Q3 guidance of 4.5%. I understand that the Q4 guidance is set at 3%. Perhaps it is simply that you plan to maintain an overall average of 4% for the year, but I would appreciate some further insight on this.

Yes. It's just due to the kind of the seasonality of Q4's revenue versus Q3. And I think the full-year guide takes into account the beat for Q1 and Q2, getting you to the 4.2%.

Okay. And so it's just so that's really just kind of baking in the first half beat, but anything more on like the Q3? Because it seems like you guys are investing more heavily upfront. So I just kind of surprised that you'd be above that 4% threshold.

Yes, Bobby, I think we are continuing to invest in marketing, but we also have sort of committed to modest EBITDA expansion over the course of the year. We certainly want to be able to deliver to investors clarity around the business generating free cash flow, the business having a strong margin profile that we can control. And so I think what you're seeing in Q3 and the rest of the year is the growth is strong, and we wanted to make sure that it was clear we were dropping some of those dollars to the bottom line, consistent with what we said earlier in the year. But to emphasize, we're really sort of growth-oriented at the moment. And I think we've been trying to focus on, let's not consume any capital, let's generate cash, let's maintain our gross margin efficiency, our EBITDA efficiency and then really grow as fast as we can, and that's how the numbers shake out.

That's very helpful information. I was curious about the supply dynamics and the composition of what you’re seeing. You have different bandwidths for payouts between 5 and 20, 20 and 50, 50 and 100, and so on, with your take rate decreasing as the sale price increases in each band. Could you provide some insight into how much of your business falls into each category?

Yes. We do not disclose what comes into each band, but I will say that the growth in premium has been strong. Those products typically have higher payout amounts. It's important to understand that while the rates may vary, the dollars flowing through are strong. We can take those dollars and reinvest them in the business. We believe that the consignment premium segment is beneficial not only for sellers but also has a strong market fit right from the start, and it helps drive buyer acquisition. Buyers are looking for great products and value, and that premium supply plays a key role in this. Our focus is on maximizing opportunities for the buyer, the seller, and ThredUp simultaneously.

Got it. One last question from me is about your business's network effect, which is clearly starting to take hold. Considering you just posted your best quarter in customer acquisitions, could you discuss the balance between the new suppliers joining the platform and first-time customers? I’m curious about the mix, including long-time customers becoming suppliers or long-term suppliers becoming customers and vice versa. I would like to hear about those trends.

Yes. I think what you're observing is that we've been emphasizing the importance of ThredUp as a marketplace focused on attracting the right number of buyers and sellers to achieve market efficiency. It's crucial for us to maintain high liquidity. Currently, we are experiencing significant buyer growth, and our operational capabilities have never been better. We can support that buyer demand with high-quality supply. The boundaries concerning buyer and seller growth are now more flexible. We're bringing in many new sellers, and those sellers are becoming buyers. Moreover, many new buyers are now receiving complementary cleanout kits with their orders, which encourages them to start selling. This movement between buyers and sellers is becoming increasingly evident, and it’s contributing to a strong network effect within the marketplace.

And your next question comes from the line of Bernie McTernan from Needham & Company.

Just wanted to start on new buyers. Obviously, really strong results during the quarter. But just wanted to get a sense in terms of like it seems like there was less competition for new buyers in the first half of the quarter and then so there was more competition in the second half. So how did that play into the new buyer growth? And what's contemplated for the guide in 3Q and 4Q?

Hey, Bernie, it's James. Yes, I mean, as we mentioned on the last call, April was strong. And you did see Temu and Shein and a few others sort of pull back a little bit, but they kind of came back into the market in mid-May. And so a lot of the performance throughout the quarter, in the last couple of months of the quarter was really driven by the team doing a wonderful job on the growth side, the product experience continuing to get better. And we've continued to see strong momentum into July. So I think a lot of the back half of the year, we expect to see more of the same. And so it will remain to be seen how some of these guys play. I know Amazon has made some changes into how they're spending on Google Shopping. The Trump administration just rolled out that the de minimis exemption is now not just for Chinese goods, but for all goods coming into the U.S. So that will have some dynamics around who's buying ads and the ad rate. So I think it's a pretty dynamic environment, but I'm pretty confident that regardless of the macro trends, we are going to be able to spend and acquire our customers at real predictable and strong rates.

Okay, that's great. I also want to discuss RaaS. You mentioned having conversations with over 60 brands. What are some of the challenges in securing those brands? Additionally, how many new brand partnerships do we need to achieve a significant impact on your supply?

Yes. I mean I think it depends on the brand, Bernie. I think for some large brands, they can be impactful right away. But I think from a timing perspective, some of these brands are currently in contracts with others. Some of them are trying to navigate the tariff news and how that's impacting what they're doing. And so the launch of Resale as a Service brands has never been something that just happens overnight. It does take a little bit of time. But I do think you're going to see some momentum by year-end. Whether that's material, I think, remains to be seen. I don't expect it to be material in '25, but I'm optimistic that it will have a real impact in 2026.

And your next question comes from the line of Oliver Chen from TD Cowen.

The AI acceleration has been impressive. What do you consider the most challenging aspects of that AI journey? Additionally, while customer acquisition seems to have the highest financial impact, how would you rank the impact of the models? Regarding new buyer growth rates, what are your expectations for long-term growth rates in that area? The growth has been remarkable, but do you view it as a one-time occurrence, or how do the new customers compare to existing ones?

It's great to hear from you, Oliver. The most challenging aspect of AI for us has been managing our extensive catalog, with over 4.5 million SKUs that change daily. Our focus is on refining product recommendations and filtering through this technology. Recently, we have made strides in enhancing how customers find the right products and what items they should consider together. The main challenge is getting the AI models to perform at their theoretical potential, which is exciting given the progress seen in services like ChatGPT. We believe that we can continually improve the shopping experience on ThredUp through AI. Our team is dedicated to this effort, even though these problems are complex. Regarding the new buyer growth rate, I don’t anticipate it being consistently high every quarter. There has been a significant acceleration, and we remain optimistic about the addressable market. The U.S. market is expected to double by 2030, which presents a tremendous opportunity. There are many women who either occasionally shop secondhand or have never done so, and we believe we can attract these customers consistently and in large numbers. While I can’t provide a precise steady-state rate, we currently have 1.5 million customers, and there are many more potential customers out there who have not yet shopped with ThredUp. That summarizes our perspective on the opportunity. You also inquired about another question related to the model, but I need clarification on that.

Yes, linking AI to financial modeling, like how some of that?

Yes, I think you mentioned that customer acquisition is a top priority, and I agree. It has significantly improved our conversion rates and made our ad spending more efficient. Additionally, the shopping experience on ThredUp has become more refined, and we are continuing to enhance it further. The improvements we've made in image clarity, on-model photography, and merchandising have all contributed to a better shopping journey. Customers have noted that ThredUp now offers a more elevated experience compared to a few years ago, which is attracting more customers and enhancing their perception of the site and what it means to shop with us. I don't have a clear prediction on how the market will evolve, but I believe it is significant and growing. I don't see this as a trend that will fade; people won't suddenly decide to stop shopping secondhand in the future. Instead, I see it as a fundamental change in consumer behavior, much like how off-price retail transformed shopping over the last few decades. Secondhand shopping is on a similar trajectory. I believe there will be substantial companies emerging from this space, and I hope ThredUp will be among them. Overall, the large market and the ongoing shift indicate that we can expect the rise of notable companies. Yes. I mean we've seen some change on CPMs, I think, on Meta and on Google, which I think are consistent with some of the changes with how big ad buyers like Temu or Shein are moving in and out of the market. But by far, the biggest driver has been the conversion rate. And so conversion rates, right, when they go up significantly, like it changes all the math in a pretty dramatic way. And so our customer acquisition costs have come down commensurate with our improvements in the product experience. That has allowed us to spend more money. And by spending more money, we're actually able to optimize the funnel even more. And so you really do have this virtuous cycle driven by the product experience. Well, thank you all for joining us on this call. We're really excited about the momentum in the business. And I want to send a big thank you to the ThredUp team that I think has done an incredible job continuing to do the really hard work to serve customers. So thank you all, and thank you to the team, and we'll see you next time.

Thank you. And this concludes today's call. Thank you for participating. You may now disconnect.