Earnings Call Transcript - TDUP Q2 2023

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to the thredUP Second Quarter 2023 Results Conference Call. This call is being recorded on Tuesday, 8th of August, 2023. I would like to turn the conference over to Alon Rotem, Chief Legal Officer. Please go ahead, Sir.

Alon Rotem, Chief Legal Officer

Good afternoon, everyone. Thank you for joining us on today's conference call to discuss thredUP's second quarter 2023 financial results. With me are James Reinhart, thredUP CEO and Co-Founder; and Sean Sobers, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.thred.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, including but not limited to statements regarding our earnings guidance for the third and fourth fiscal quarters and full year of 2023, future financial performance, including our goal of reaching adjusted EBITDA breakeven, market demand, growth prospects, business strategies and plans, our ability to attract new buyers and the effects of inflation, increased interest rates, changing consumer habits and general global economic uncertainty. These forward-looking statements are not guarantees of future performance, involve known and unknown risks and uncertainties and our actual results could differ materially from any projections or future performance or results expressed or implied by such forward-looking statements. 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, 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 the 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 non-GAAP measures, including reconciliations and 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.

James Reinhart, CEO

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining ThredUp's second quarter of 2023 earnings call. We are excited to share financial results and key business highlights from our second quarter. In addition to our financial results, we will provide an update on key company-specific initiatives that are contributing to our growth and the expansion of adjusted EBITDA. I will then hand it over to Sean Sobers, our Chief Financial Officer, to talk about our second quarter 2023 financials in more detail and provide our outlook for the third and fourth quarters of 2023. We'll close out today's call with a question and answer session. We are proud to share that we exceeded the high end of our guidance for revenue, gross margin, and adjusted EBITDA. Revenue was at $82.7 million, increasing 8.2% year-over-year. Consolidated gross margin declined 150 basis points year-over-year due to the continued growth of our lower margin European business. However, US gross margins were a record 76.4%, increasing 220 basis points year-over-year. Our active buyers in Q2 slightly decreased year-over-year, but sequentially, it was up 2.5% from Q1 to Q2. We're very pleased with our improvements to adjusted EBITDA as we posted a loss of just $5 million, which was a 1,160 basis point expansion year-over-year and a sequential improvement of 250 basis points from the prior quarter. When we dive into the rest of the call, I wanted to take a moment to reflect on the past few years of being a public company. It's been a wild ride. Since ThredUp's initial public offering in March 2021, we have consistently hit or exceeded every single quarterly guidance. Faced with a persistently challenging macro environment and the competitive retail landscape, our team has demonstrated exceptional rigor in forecasting, predicting, and managing the business. I'm proud that we continue to make progress toward our growth and profitability goals, and that notably, at the midpoint of guidance through 2023, we are aiming to grow revenues 13.4% and expand EBITDA 1,000 basis points. When we look across the consumer universe, on a revenue growth and margin expansion basis, we believe we are one of the very best-performing companies in 2023. Our leadership philosophy has always been to control the controllable: how we spend our time, the quality of the decisions we make during times of uncertainty, the urgency we have to innovate on behalf of our customers, and the willingness to keep learning what's different this time around. My hat goes off to the incredible team here at ThredUp that's making this happen every day. Now let me provide an update on some of the key initiatives that powered our growth and market expansion. First, we're continuing to refine our marketplace acceptance strategy. As I shared in our last quarter’s call, we started testing a new deeper cleanout service to improve the quality of supply in our marketplace. After validating that this increases our sellable item yield, as well as the quality of the items we received, we've rolled out this new feed to nearly all sellers in our marketplace. Demand for our cleanout service accelerated in Q2, and we don't anticipate any pullback in demand. With increased processing power, our backlog is now at six weeks for regular buyers and under one week for those who pay for our VIP services. Second, we're doubling down on efforts to boost growth, retention, and achieve the highest levels of customer satisfaction in our history. Last quarter, I detailed our efforts to intercept customers when they're most likely to be unhappy with their experience. After a month of detecting and offering deeper credit where customers can opt to keep select often low-priced items in exchange for store credit instead of making a costly return, we've now rolled this offer out to 100% of our customers. The work we've done in that area has generated meaningful improvements to our unit economics. With that, our return rate year-over-year in Q2 increased by more than 500 basis points. In connection with our buyer promise efforts, we also rolled out a new resolution portal in July, a self-service portal that offers instant fixes to common issues that cause our experience to fall short of being a 10 out of 10 for customers. We believe that collectively, through these initiatives, we will deliver an ever better experience that keeps customers coming back again and again. Third, we continue to be impressed with the performance and progress of Remix, our European business. The shift to consignment sales is in process, and early feedback from customers has been positive. We believe that this change will improve Remix's margins over the long term and also expand the selection of high-quality supply. Fourth, our Reseller as a Service (RaaS) business continues to provide brands and retailers with the fastest and easiest way to deliver customizable and scalable retail experiences to their customers. In Q2, we launched new programs with 11 brands, including American Eagle and SoulCycle. As a reminder, RaaS is the leading provider of end-to-end retail solutions for the apparel ecosystem, including global brands like Big Brew and smaller heritage brands like Michael Stars. By leveraging ThredUp's marketplace infrastructure, RaaS amplifies our supply advantage, increases sell-through, and return on assets, and expands our long-term profitability metrics by adding sources of recurring high-margin revenue. Finally, given the proliferation of dialogue around artificial intelligence, I want to briefly mention how we are deploying AI at ThredUp. As a business that has now processed more than 172 million secondhand items, we have relied on AI for many years across our distribution network. AI has helped us to reduce processing costs by substituting activities that would otherwise be done manually, in turn creating greater economic value. We're leveraging AI in various ways across our product experience, including enhanced search functionality, so customers can more easily find what they're looking for across our vast selection. Each of these investments positions our business to drive sustainable growth in the quarters and years to come. Now I'd like to provide an update on our goal of reaching adjusted EBITDA breakeven. In Q2, we saw yet another quarter of sequential EBITDA improvements. Since announcing our intention to reach breakeven earlier this year, our confidence level in achieving this goal increases with each quarter. We have an even clearer sight of hitting this milestone in Q4 2023. Let me emphasize that breakeven is just a waypoint. We are committed to building an enduring business to generate significant free cash flow over time. On our road to profitability and growth, it's also important that we don't lose sight of our pursuit of purpose. ThredUp has always been a business rooted in an ambitious mission to inspire a new generation of consumers to think secondhand first. As we work to further our mission and make a dent in the universe, we hold ourselves accountable to following a business and brand-aligned environmental, social, and governance strategy that guides us and fuels our success. We recently published our Second Annual Impact report, which outlines our strategy and provides a transparent look at how we're impacting our people, our communities, and the planet. We're committed to disclosing our progress this year and raising the bar for what it means to balance purpose and profit. I'm also proud to share that we were recognized for the impact we're having as one of the TIME100's Most Influential Companies of 2023. This list highlights 100 companies making an extraordinary impact globally. We are honored to be listed alongside some of the world's most iconic brands, including Apple, Patagonia, and Microsoft. In conclusion, before I turn it over to Sean, I want to restate the strength of our future results and our management team's ability to forecast, predict, and manage the business effectively quarter after quarter, driving top-line growth and EBITDA expansion. As we enter our third year as a public company, I could not be more proud of the work we are doing and the progress we have made. We are eager to tackle the opportunity in front of us and remain committed and focused on our mission to usher in a more sustainable era for the fast fashion industry.

Sean Sobers, CFO

Thanks, James, and again, thanks everyone for joining us on our second quarter 2023 earnings call. I'll begin with an overview of results and follow up with guidance for the third and fourth quarters and the full year. I will discuss non-GAAP results throughout my remarks. Our GAAP financials and reconciliation between GAAP and non-GAAP are found in our earnings release, supplemental financials, and our 10-Q filing. We're very proud of our Q2 results. For the second quarter of 2023, revenue totaled $82.7 million, an increase of 8% year-over-year; consignment revenue grew 10% year-over-year, and our product revenue grew 5%. We're happy to report that consignment revenue has inflected growth for the first time in four quarters as we make progress in transitioning our European business and our RaaS supply to a consignment model. While the transition of these businesses to consignment should serve as a tailwind to growth margin over time, we expect it to slightly mute revenue growth due to the accounting treatment. As a reminder, consignment payout reduces revenue, while own payouts are included in COGS and reduce gross margin. Orders increased 5% year-over-year to 1.8 million. Active buyers declined slightly year-over-year to 1.7 million for the trailing 12 months but improved 2.5% quarter-over-quarter. As we evolve our customer acquisition strategy to focus on higher quality buyers, we are pleased with the quarter-over-quarter improvement. The second quarter of 2023 gross margin was 67.4%, a 150 basis point decline over the same quarter last year. The decline in our consolidated gross margin was due to the dynamics driven by our European business. The continued growth of Europe's lower margin operating model continued to affect our consolidated results as it becomes a larger portion of our total revenue. We are proud to report that our consolidated results exceeded the high end of our guidance driven by record US growth margins at 76.4%. This outperformance was a result of continued improvement in how we optimize our marketplace, including pricing, promotions, returns, payouts, and fees. For the second quarter of 2023, GAAP net loss was $18.8 million, compared to GAAP net loss of $28.4 million in the same quarter of last year. Adjusted EBITDA loss was $5 million, or negative 6.1% for the second quarter of 2023. This represents an approximate 1,160 basis point improvement compared to the same quarter last year as we tightly manage expenses and leverage our investments on higher revenue. We began the second quarter with $99.5 million in cash and marketable securities and ended the quarter with $83 million. Our cash usage from operations was $10.4 million, including our annual payment of D&O insurance of $3.5 million while we spent $6.6 million on CapEx as we complete our investment in our Dallas Distribution Center. Based on our progress and our strategic initiatives, we remain confident in our ability to reach adjusted EBITDA breakeven in the fourth quarter of 2023. For us, reaching breakeven is a key milestone on our path to free cash flow and profitability. And we believe that this timeline balances our commitment to reaching breakeven with foundational investments in our long-term goals of growth and expanded profits. When modeling our free cash flow, adjusted EBITDA and our CapEx, our key drivers of positive cash flow, given that, as a marketplace, our working capital needs are minimal. After spending $56 million in CapEx over the last six quarters, we expect to spend $4 million in the back half of 2023 and anticipate maintenance CapEx of $1 million to $2 million per quarter until 2026. Due to our significantly reduced CapEx needs and our ability to manage our expense structure, we expect to fund the core business through existing cash. As a result, we want to reiterate that we do not anticipate our cash and marketable securities balance falling below $50 million before reaching free cash flow positivity, nor do we expect to turn to the capital markets or draw down our existing debt before then. We are pleased to provide guidance that emphasizes our control over the levers of long-term revenue growth and free cash flow. Turning to the guidance for the third quarter, we expect revenue in the range of $82 million to $84 million, which represents a 22% growth rate at the midpoint; gross margin in the range of 66.5% to 68.5% of revenue; adjusted EBITDA loss of 6.5% to 4.5% of revenue, which is an 1,080 basis point improvement at the midpoint; and basic weighted average shares outstanding of approximately 106 million. For the fourth quarter, we expect revenue in the range of $84.5 million to $86.5 million, which reflects a 20% growth rate at the midpoint; gross margin in the range of 64.5% to 66.5% of revenue; adjusted EBITDA breakeven, which is an 820 basis point improvement; and basic weighted average shares outstanding of approximately 108 million. For the full year of 2023, we now expect revenue in the range of $325 million to $329 million, with margins in the range of 66.5% to 67.5%, adjusted EBITDA loss of 5.5% to 4.5% of revenue, and basic weighted average shares of approximately 105 million. In closing, we are excited to deliver our second-half outlook that illustrates our confidence in our ability to generate strong growth while achieving adjusted EBITDA breakeven and ultimately profitability. We believe that our first-half results and second-half guidance demonstrate our capacity to flex our marketplace model as we execute on various strategic initiatives, allowing us to distinguish ourselves in the current environment. James and I are now ready for your questions. Operator, please open the line.

Operator, Operator

Your first question comes from the line of Ike Boruchow from Wells Fargo.

Ike Boruchow, Analyst

Hey guys, congrats on the quarter. Just wanted to dig in a little bit more on the scale to profitability. Sounds like you're quite confident in the margin progression into next year. I was wondering if James or Sean could give a little more color. It sounds like adjusted EBITDA profitability is the plan for next year. Just curious if you could give a little bit more framework for fiscal 2024, whether it's on the gross margin line or adjusted EBITDA margin line, and then again, on CapEx, Sean. So we should be thinking $1 million to $2 million a quarter throughout next year as well. Thanks.

James Reinhart, CEO

Sure, thanks, Ike. Yes, I mean, I think, as we said, we feel very good about the path to Q4 breakeven. We continue to generate that through margin expansion and the elements of our marketplace that are really working. As we get into 2024, I think we feel confident that you can continue to see expansion quarter after quarter, obviously, there is some seasonality in our business. So it's probably not a straight line. But hopefully, we can put the question of whether ThredUp can be breakeven behind us, and I'm excited about the ability to expand those margins into 2024. And then I think that relates to the free cash flow question, which I'll let Sean address around CapEx.

Sean Sobers, CFO

Yes, and I would say even when you're thinking about, we end the year at breakeven in Q4, and then we march our way through expansion of EBITDA in 2024, free cash flow shouldn't be too far off of that, right. It's not far away from when we get to breakeven EBITDA, but as it relates to our CapEx question, yes, I think $1 million to $2 million is kind of the maintenance mode, actually all the way through 2025. So not until 2026 do we start to think about CapEx again at a greater size than that.

Trevor Young, Analyst

Great, thanks. Just on RaaS for a second. You're continuing to add some well-known brands there, and some of the brands that you've had for a year or more like Hilfiger, for example, are those programs ramping - not specific to any one brand, but just overall their volumes and engagement from buyers as well as the brands themselves? Were you expecting any key learnings there or changes in strategy? And then any sort of mark-to-market in terms of the proportion of inventory or volumes or even revenue coming from RaaS programs?

James Reinhart, CEO

Sure. Thanks, Trevor. Yes, I mean, I think I'm pleased with the overall adoption of RaaS by the brands. You've seen significant growth, but it varies a bit brand by brand regarding momentum. It's been a difficult time for retailers over the last six quarters, so I expect to continue to see momentum as we get into a more normal inventory environment. Many of these brands have gotten started, and I think you're going to see continued momentum year-over-year. We put in our impact report how many bags we've been processing through our RaaS partners, and it's a significant amount of supply that we're continuing to generate through that platform. We expect to grow that again in 2024. So I think RaaS is an integral part of our business, and I think we'll continue to see momentum there.

Trevor Young, Analyst

That's really helpful, James. And just a quick follow-up, what do you see in the competitive environment from retail in terms of promotions? What are you seeing today, and what do you think evolves over the next couple of months?

James Reinhart, CEO

I think things seem to be getting better, Trevor. But I still think there is a lingering inventory overhang that's going to be real. As we get into back to school, which we're sort of already in, and as we approach the holiday season, I think it's going to continue to be competitive out there. From where we sit, the holiday season has never really been the strong suit of resale. So, it’s an area where we are observing what happens in Q4 across the retail environment, but I expect things to improve. As we move into 2024, you will start to see the purchasing behavior of retailers hit their profit and loss statements, and that should benefit resale.

Dylan Carden, Analyst

Hey, thanks. I'll kind of just follow up on the debt thought, actually, James, why then sort of in the guidance is fourth quarter? And albeit take this moderately, but inflecting from just a pure absolute dollar number from $82 million to $85 million-86 million and your expectation?

James Reinhart, CEO

Hey, Dylan, part of that is the seasonality in our business. Specifically in Europe, Q4 tends to be a seasonally stronger quarter for them than Q3, which is what you're seeing as you move from Q3 to Q4.

Sean Sobers, CFO

Dylan, I would add to that, too, because you'll see it in the guide that the Q4 guidance for gross margins is down for that same reason. Europe becomes a bigger piece of the pie in Q4, which has a structurally lower gross margin now, so that will drag down gross margin a bit in Q4.

Dylan Carden, Analyst

Thank you. Actual question just on the fee. It's exciting that you're rolling that out. Can you speak to timing, when you rolled it out more broadly in the quarter? And then how that shows up in the model? Is that something where we would expect to see higher revenue per order? Or is that kind of a cost contract? What's the best way to think about modeling that rollout?

James Reinhart, CEO

Yes, I'll start with that. We've treated it as an experiment for some time. I think month over month, we've expanded the number of sellers that are in that treatment. Almost all sellers are now exposed to it. There are obviously some pockets of experimentation that we do around when to waive fees and when to provide expedited service. Those are areas we will continue to investigate, but it is fully deployed. As for where it'll hit in the P&L, it shows up in consignment revenue on the line and will also appear in revenue per order.

Dylan Carden, Analyst

Okay. And then if you'd indulge me here, just from a capacity utilization standpoint, how are you thinking about the new distribution capacity ramp, any sort of change there in expectation as far as timing, but I guess because the breakeven target remains in place, probably not a lot, but just wanted to make sure.

James Reinhart, CEO

No change on timing. We actually provided incremental guidance around the CapEx, meaning no new CapEx until 2026. Previously, we thought that would come in 2025. We feel very good about the capacity we have in place and the fact that we can continue to grow into that capacity for the next 10 quarters before we have any incremental CapEx. That's a nice position to grow the business and generate free cash flow over time.

Sean Sobers, CFO

Yes, just for a point of reference, you guys know that Dallas has all been in about a million and a half slots are available spaces.

Anna Andreeva, Analyst

Great, thank you so much. And congrats, guys. Nice quarter. A couple of questions. Curious if there was any variability in the business by month in the second quarter? And what are you seeing quarter to date? James, anything to call out about the budget shopper behavior? You had talked about seeing some stabilization there previously. And to Sean, as we think about the bridge to get to EBITDA breakeven in the fourth quarter, just anything we should be mindful of in the model by line item. Thank you, guys.

James Reinhart, CEO

Sure. On the variability by month, I think, consistent with what we've seen in prior years, June was a little stronger than previous June's. We did a bunch of work to engage consumers as they moved into their summer holiday. So I think June was better compared to previous years. Quarter-to-date, we're seeing that same pattern as seen in previous years, and we're starting to see back-to-school kick in now. As for the budget shopper, we continue to see that as a customer who feels more challenged. I think they are feeling the pinch across their discretionary purchasing power. While the numbers have stabilized, I would not say that that customer is in better shape than they were 90 days ago. We'll continue evolving the supply mix and our customer acquisition strategy and how we retain those customers over time. Now, Sean can talk about the bridge for the fourth quarter.

Sean Sobers, CFO

Yes, I think of it this way: revenues in RaaS and Europe expand at the same point; that drives gross margin rate down a little bit in Q4. It's offset by leveraging OpEx across the board—SG&A, OP&T, and marketing. Historically, you guys have known for quite a while that from a US perspective, marketing is slightly less in Q4 than in any other quarter. That helps us drive towards breakeven when we get to Q4.

James Reinhart, CEO

One thing, Anna, which I think should make people feel good is that the fourth quarter tends to be the softest for us in the year. The fact we can achieve breakeven in what is traditionally not our best quarter is significant. As we roll forward to 2024, the first three quarters tend to be historically stronger, giving us confidence in the momentum building in the business.

Ed Yruma, Analyst

Hey, good afternoon. Thanks for taking the questions. I guess, two for me first, I know you've implemented this new fee. But are there other enhancements that you can do to the supply-side economics given the backlog that can kind of put you back on or continue on down the adjusted EBITDA profitability path? And then as a second question, I noticed that Anthony departed the business. Have you moved around his responsibility?

James Reinhart, CEO

Sure. We continue to look at other ways to balance the monetization of the seller community while delivering a great experience. We've become confident that the fees help us deliver a high-quality seller experience by enabling the best sellers in the marketplace to have their bags processed timely. Processing times have continued to improve, with VIP sellers receiving processing times in under one week. I think Anthony has been with ThredUp for about 10 years, and was an integral part of everything we did. He has decided to pursue another passion in his life. We have an incredibly talented bench of folks and feel confident in picking up that mantle.

Dana Telsey, Analyst

Hi, good afternoon, everyone. It's nice to see the progress. As you think about the number of active customers, it was down just under 1%. How are you thinking of the active customer cohorts? What are you seeing, and how is it different at all? Then James, you've given out some product trends in terms of what you're seeing based on the consumer environment. Anything you'd note there? Lastly, on the gross margin, anything to unpack regarding how you're thinking about the components of gross margin going forward? Thank you.

James Reinhart, CEO

Sure, Dana. Regarding active buyer cohorts, we are really focusing on the quality of the customer and how she is engaging with the mix of goods we have on ThredUp. We have put in a strong effort to sculpt the mix of sellers and generate incrementally better products on the site. This strategy is generating an incrementally more premium buyer—it's not a luxury buyer by any means, but one that is incrementally more premium and stable in the macro environment. You're seeing some changes in tactics that will compound as we push into 2024. On the product side, we don't have any news to break, but we're focused on ensuring that the seasonal mix on ThredUp remains solid and that we have educated sellers about what we want. This gives me confidence as we move through the back half of the year and will help in 2024 as well.

Sean Sobers, CFO

In Q2, we posted record US gross margins due to the transition of the RaaS business more to consignment, as well as improving unit economics. We still have more room to go in transitioning the RaaS business. Europe has just started the consignment transition, which may take some time but will ultimately provide a tailwind. While this transition may act as a headwind on revenue growth, you can expect nice tailwinds on the gross margin side through next year.

Pierre Martinez, Analyst

Hi, this is Pierre on for Alexandra. Thank you so much for taking our questions. Just one from us on fulfillment and contribution margins. You've previously talked about how your more recent distribution centers can carry higher contribution margins relative to older generations. I'm wondering how we should think about the broad messaging around that bigger potential tailwind from margins for the US business, both in current results and over the next several quarters, as you see utilization improving and assume those volumes come in at higher unit margins. Thank you.

James Reinhart, CEO

Yes, Pierre. You nailed it. We're focusing on our most productive distribution centers that would be DC-6 in Atlanta and DC-7 in Dallas. As we flow more product through those two important hubs, you will see some flow-through on the contribution basis, on the shipping and outbound logistics side as well as labor and fulfillment. We believe these are tailwinds over time, and even as we roll into 2025 and beyond, there will be continued flow-through. So I'm feeling very good about contribution margin expansion and ultimately how this will benefit free cash flow.

Ashley Owens, Analyst

Hi, this is Ash on for Noah. Just wanted to dial in a little bit on the backlog. The timing continues to tick down. I'm curious about any updated thoughts on the timeline to reach that two- to three-week target. On RaaS, I'm hoping you can provide some more color around the line of sight for additional clients in the back half. Also, how you're thinking about 2024 and the impact on the P&L as you transition many of these clients to consignment. Thanks.

James Reinhart, CEO

Hi, Ashley. Regarding the backlog, we continue to make progress. Customers who want superfast service are paying for VIP services and we're getting it to them in under a week. Regular service customers are at around a six-week range. We believe we've identified two separate populations: those who want normal speeds and those who want VIP. We expect to continue improving our backlog conditions. For RaaS, we ended last year with roughly 40 clients, and we continue to grow from there. We're focused on adding new clients and increasing engagement with current clients. As the inventory environment improves, RaaS should also have an opportunity to expand.

Rick Patel, Analyst

Hey, guys, congrats on the progress. Can you talk about what you're seeing with Remix early on? Is that moving to a consignment model? Are you getting products that you would deem attractive from a merchandising perspective, like you are in the US? Does this take time? Any additional color on the drivers for the quarter-over-quarter acceleration in active customers? Just curious if that represents higher income consumers or a different cohort than you've seen in the past.

James Reinhart, CEO

Yes, on the Remix consignment side, we've been pleasantly surprised at the team's execution and customer adoption. There's clearly a product-market fit for the cleanout kit among consumers. The willingness to pay in the US reinforces our strong belief in this fit. So far, we have not seen that the European sellers differ in their need for convenience. Consignment has been accepted as a means of selling online, and the team is doing well with implementation. Looking at active customers, we see a slightly higher income but we're also improving our product mix. You're seeing improvements in conversion rates, and I remain optimistic regarding our plans leading into 2024.

Operator, Operator

There are no further questions at this time. I will now hand the call back to James. Please continue.

James Reinhart, CEO

Well, thanks, everyone for joining us on the earnings call. I appreciate all the good questions. For those of you who dialed in, a big shout-out to the ThredUp team for continuing to execute at such a high level. I appreciate all the work you guys have been doing and will continue to do. We're optimistic and excited for the year ahead. So, thank you everyone.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.