ThredUp Inc. (TDUP) September 23, 2026 Conference Transcript

All right. Good morning, everyone. So, uh... My name is Ike Borschau, Softlines Analyst at Wells Fargo. We're here in Laguna Beach, again, for our consumer conference, talking about the discretionary space. A lot of our companies, we have one of those companies with us this morning, ThredUp. I have the CEO and co-founder, James Reinert, Sean Sobers, CFO. I'd like to talk about, you know, recent, you know, Q2 results I want to talk about. I want to talk about the value consumer. I want to talk about the low end. I want to talk about AI and agentic. So we're going to kind of go through a, you know, a litany of topics here. But maybe just start with Q2, James. Rebs, I think, are up 17. Buyers up 20 plus. Orders up 20 plus. So a lot of healthy demand. Talk about the drivers that you have been seeing to demand the sustainability of those drivers.

Yeah, sure. Thanks for having us. Yeah, Q2 was like a record quarter for us across all those dimensions. Buyers, sellers, orders, revenue. And I think it was the result of six plus quarters of record new buyer growth. So we've been very successful acquiring new buyers, turning them into repeat buyers, and a lot of that was going well. You know, all the work that we did on, you know, improving the customer experience, conversion rates, you know, were strong. Prices were strong. So there was like a number of things I think that were all, you know, going quite well in Q2. It was also the seventh quarter for us of, you know, record top line and expanding EBITDA, right, and generating free cash flow. So in general, Q2 was strong across the board.

I think if you just looked at Q2, you'd be like, everything's awesome. But at the point of where you're looking forward or you look back at what we did through Q2, it just got harder. I know we're going to talk about the consumer and all that, too. But the numbers for Q2, records across the board.

Yeah. Before we get to the go forward, which we will go through, it's interesting. You guys have attended this event for years, and EBITDA had been negative. Free cash flow has been negative. Balance sheet questions. You look at the business now, positive EBITDA, generating free cash, $60 million in cash on the balance sheet. How did you get there, and what do we think about the future, just thinking about the capital structure and the balance sheet? How do we think about the future from here?

Yeah, I mean, I think the catalyst was really Q4 of 24. So in Q4, for those of you who haven't followed it over the last few years, when we went public in 2021, at the end of 2020, we bought a business in Europe. Um, uh, end of 21 and called remix. We'd own that business for a number of years, but in 22 and interest rates, um, and inflation, you know, went up in the U S it was equally bad or worse in Europe. And so, um, our remix business really struggled. And so we tried to turn that business around over a couple of years. Um, the net of it was that our U S business was actually like reasonably healthy, um, during that period, but it had to effectively cover up the challenges we were having in Europe. So we eventually got rid of the European business in, we announced that we were going to get rid of it in the summer of 24. And then we closed that transaction in November of 24. And I think that was really the turning point where it was like, okay, the business was simpler. We were U.S. only. We could turn all of our investments, our best people, back to the U.S. So beginning in Q4 of 24, you saw the business just rapidly accelerate growth. And, you know, it was plus 10 to plus 12 to plus 16 to plus 33. Q4 was plus 18. So, 25 was really like a nice run of growth, you know, all driven by improvements in both new customer acquisition and then the product experience, which we invested a ton of in 24, really rebuilding the fundamentals of the business. And so, once you had the fundamental kind of funnel in much better shape, and then you're able to add new buyers, that was the healthy growth. And so, and now, right now, in the second half of this year, we're comping. We had 23%, 24% growth in the second half last year. And so we always knew that comps in the second half would be challenging, and here we are.

Yeah, and before we go forward, it might be a silly question, but just with the cash on the balance sheet and the fact that you're still growing and still have good visibility of the model works, thoughts on uses of cash? I mean, is it just continued reinvestment? Would you ever think about the idea of a buyback or anything that we haven't kind of done since you've been public?

Um, I know, not, not, not right now. I mean, I think we think that market is too big in secondhand opportunities, too big customer acquisitions, you know, efficient. Uh, so I think the most, uh, the best thing to do with the cash is to invest it and grow the business. The business is still, you know, 350 million, right? It's still, you know, modest size. And so I think we've got a long way to run before, before that. Um, so I wouldn't say never. Right. But I, but I, but I, but it's probably not the best use of it. Don't model the buybacks. Don't model the buybacks. See she didn't ask M&A.

So the main question I wanted to get to is, I always really find your perspective helpful. Your business is relatively small, but I feel like you have your arms around that value consumer in the U.S. pretty well. You guys report usually typically early, and you kind of are sometimes a canary in the coal mine. Kind of feels like that's what happened on your Q2 call. Can you talk to us about how you view the state of, let's call it the value consumer, maybe the transition of Q2 to Q3, what you kind of saw in those months, and just the biggest changes you saw in behavior?

Yeah, being a canary is not always a good thing. You know, the canaries die, right? So maybe we could stop using that. No, but the reason I think that we are a useful indicator is despite $350 million in net revenue, we'll sell 25 million units this year across 35,000 brands, 100 categories. So it's a pretty wide indicator of what's happening. And so we can see across the brands and the categories and the price points what is happening, I think, in some ways, maybe earlier than a lot of other folks. And so what we saw, you know, beginning in really after Memorial Day, you know, kind of early June, early mid-June, we just saw the consumer being much more picky. And so this was primarily, you know, customers who were, you know, I would consider budget shoppers, but to give you like an illustrative example, it would be an item that a budget shopper might have bought for $20 last year. They were just, there was no demand curve at $20. And so because of our technology, we're able to probe, okay, well, what is willingness to pay? For that unique item. And it turns out, and I'm sort of making these examples up, instead of wanting to pay 20, they're like, ah, actually the clearing price is 18. And for this brand, it used to be 22, and now it's 19. And because of the breadth of our assortment, and we're putting 100,000 new items online every day, very quickly, the data science can be like, oh, there's actually a mismatch among segments of the demand curve that show that there's some weakening there. We started to see it in June, and I think, you know, we were able to react to it in June, but it just, you know, it got a little harder, right? And so as we got into July, all those things we were seeing, you know, were materializing. We just knew, Sean and I were just like, look, it's going to be tough for the next few months. And so we made the conscious decision to... Focus on meeting the customer where they were. So from a strategy perspective, our point of view is it's a vastly superior strategy to maintain customer engagement, even at lower prices, than it is to say, oh, we're going to protect unit margins and abandon the demand curve. Because you know what? It's a lot more expensive to go out and acquire all those customers again than it is to inflect price. 50 cents a dollar as things get better. So the way I would think about the business is, and this is where I think people get a little bit lost in the plot, is we guided that the second half would be about $7 million less. We're going to sell 14 million items, roughly, in the second half. So we're talking about 50 cents. Right? That is like because, you know, where there's so many, you know, dials to turn in the business. So I would much rather trade that 50 cents and have some very strong and engaged buyer cohorts. And then whenever this resolves itself, we don't know when, I feel extremely confident we can get that 50 cents back or 60 cents or 70 cents or a dollar. And so I think the business has the real like snapback opportunity, but that snapback opportunity only comes when you've got lots of buyers. Otherwise, you've got great economics, and then you're at the whim of Meta and Pinterest and Google, and we can go back and acquire the half a million buyers you lost. So we were very disciplined in thinking through the strategy. You know, I have a lot of confidence, like, we really understand what's going on, and we just have to navigate through it.

What's the line that, you know, gets crossed when the outlook you're kind of giving shifts a bit, and you start to talk about more, you know, margin versus demand? Like, what has to happen? Is it a certain amount? Is it duration, or is it a step down further?

Yeah, two things can happen, which is in a world where your demand curve is, so what's to say that the world doesn't change at all, right? So gas prices are where they are, and consumer uncertainty is the same way. There's basically two things that you can do that change this independent of that. One is you expand the surface areas in which you sell. So right now, we're primarily like a direct-to-consumer online business, but you could launch new ways to sell that product, like, for example, our direct listings business, right? Or, you know, we're talking actively about what to do with live selling, right, as an example. So you expand services, which increases the overall demand curve, and then that gives you some ability to inflect price. So that's sort of one. And then the second is just your mix of goods. And so that same item that you could sell for $20 that you need $9 to sell for $18, maybe that item was an athletic pair of leggings. Maybe athleisure isn't the way we should talk about this. Maybe that was a $20 J.Crew dress, right? But now, instead of that J.Crew dress, because of your improvements in your premium mix, which is what we're working on, that's now not a $20 J.Crew dress. That's a $38 Reformation dress. And there are superior unit economics on a Reformation $38 dress and a J.Crew dress. So we're basically taking two approaches, expand surface areas and improve the mix. And I think those are things that can help us inflect irrespective of the demand environment.

How do you kind of separate? I mean, clearly, since you guys reported, there's been other... Every day, it feels like. Yeah, so I think that's fair. But before that, I feel like you were more alone on the idea. How did you kind of know or how do you know that this is macro versus micro, that the underlying model still works? What gives you that confidence?

I mean, you can just see it in the visit rates of customers. You can see it in the – like buyers are there. And I think that's the thing is buyers were there, right? So you had buyers hanging around the hoop. It's just... You weren't getting a supply-demand curve to match up. You've got people coming to the store. You've got sellers coming. Our premium mix was at an all-time high. You've got sellers. You've got buyers there. To me, that suggested fundamental health. You can see it pretty clearly. We track this daily, weekly, unique visitors, conversion rates. And if I showed you kind of the chart, you'd be like, what happened there? And be like, oh, that's like when consumers started to be like. I've gorged on my Memorial Day sale, and now summer gas prices are starting to creep up on me. And so we saw it, and we responded to it, and I think it feels great actually as a business to be able to see it in the data so clearly, be able to respond, because for all the reasons that we were able to respond on the downside, we can also respond just as quickly on the upside. And, um, and we plan to, well, I think we were just added to that too.

It's like, I think we fought really hard not to assume it was the macro. Yes, absolutely. James is always like, okay, if it's not the macro, we spent a good week plus trying to prove that it wasn't the macro. Yeah. And it was macro.

Yeah. I told the team, like, you're not allowed to say that word. If I hear that word again, right. But at some point you've like ruled out all the things. And the only thing that. That we could not rule out was, you know, some consumer softening.

When was the last time, because again, this has happened a few times where you've been able to pinpoint this. When was the last time this happened? Did you, like, did you, are the learnings helping you in terms of how you're kind of like combating it at this time? Like, kind of walk us through, like, your thought process as you kind of get to become a bigger business.

Yeah, I mean, I think. You know, past, what is it, past results, you know, don't predict the future. I mean, I think, like, we've lived through, you know, various volatile times in the past, but I, um. I think just generally, like, our data and the way we were able to look at the business is far superior to anything we had, you know, five, seven years ago. I think 2017, 2018, you know, there was some consumer softness that I remember seeing. But now, I mean, the business almost is a victim of, like, we almost have too much data at times, right, that you get so micro. But we can see everything. Yeah, I mean, we're confident we can navigate through it.

And so at this point, you know, you have a new guide for the back half. You have a view of the consumer. Can you just remind us, like, what is your expectation? How do you expect this to kind of play out? When would you hope to get to a more normalized environment where margins and demand are back to more healthier levels?

Tell me what I missed. Jump in.

You go ahead. Go ahead. No, go ahead. No, I think that I think James kind of hit it. It is like we lowered the back half by like $7 million. Not very significant. Still growing. Still EBITDA positive. Still cash flow generative. And I think you probably take a better shot at how does it recover? When does it recover? I think there's a lot tied up in the consumer and gas prices that we can't. Say, because we just don't know. It's not like we have the secret answer. And I think, you know, from the time we did earnings to now, it's not like it's gotten better. So I think we are where we are until something changes. And I think I'm a little more positive on when there's resolution in the straight that that lack of uncertainty will help. It's not even a gas price change. It's just the fact that we know it's going to change. So I think you probably get a lot more activity at that point. And then it should be a slow burn in a good way over a long period of time because I do think it's going to take months to come back.

Yeah, and I think as customers start to feel a little bit better, you know, I do think that the strategy of maintaining customer engagement, you know, and having cohorts be visiting the site, you know, maybe they're purchasing a little less frequently than they did before, or they, you know, needed a better deal, right? But I think having them on the sideline ready to go, I think is valuable as, even if things, to Sean's point, just normalize a little bit, we can start to really, you know, press there. And the nice thing is we can probe on price and mix. A lot of brands are thinking about these in dollars or 10. We probe at the penny. At any moment in time, there are... Half a dozen to 10 pricing experiments running where we were probing different mixes to different customers, trying to find, like, the right way to drive, you know, top line and margin. And they're all named after vegetables. Right? Like, you know, so like, when I look at a dashboard, it's like, here's like, here's how carrot is performing against, I mean, I kid you not, like carrot versus tomato versus, right? And so we're constantly probing these things. And what they do is that the same way they caught the signal on the way down, like, oh, actually, there is actually greater willingness to pay with this setup, which drives better contribution, better net revenue. And so right now, we're just managing the dials to deliver what we think is appropriate cash flows and appropriate top line. But I think we'll be able to see as things change, you know, over the next couple of quarters.

How do you think holiday plays out from a pricing demand perspective within the value space?

I mean, generally, holiday is not like a big quarter for secondhand. You know, people don't often buy secondhand for gifts and so forth. It'll be interesting this year. Like, I honestly don't know. I mean, maybe in a world where consumers are more stretched than buying the secondhand handbag. As a gift becomes more popular. So I think our strategy is to probe that and figure out where leather goods tend to be like an area for us around the holiday that can be good. And so we're trying to make sure we've got the right assortment.

Can we talk about innovations around AI, what you've been leaning into, what's interesting? I know you're at the forefront of it. What do you think is going on overall high level within AI, but then more specifically, how have you been using that in your business, and then what are more opportunities that are kind of early innings or not, the game hasn't started?

Yeah, I mean, I think like agentic commerce broadly is like the next wave that I think is similar to online. So I think like, you know, if you went from offline to online, I think we're going from online to agentic. And the reason I sort of think about it like that, because when businesses moved online, people still shopped in stores. And I think even as agentic commerce takes off, people are still going to shop online. People are still going to shop in stores. And so I think businesses need to be prepared for the shift of what their agentic strategy is, right? What their online strategy is, you know, what their physical, you know, if you have physical stores. So I've been thinking a lot about that transition. I think fashion and retail. It's probably going to be a later adopter to this because I think about fashion as a more considered purchase. And so I think maybe for men it comes a little quicker because I think, you know, men tend to be a simpler, tend to be simpler in our fashion purchases. But I'm not convinced that, like, agents are going to be wildly successful. I'm shopping for women like out of the gate. And so there's going to be a lot of innovation here. I think it's like actually a really exciting space. So the way we think about it is we need to do three things. One, we need to make sure that in. All of the, any chat client, right, that the way we used to think about SEO, we think about, you know, agentic optimization. So somebody says, I want to clean out my closet, or I want to sell some items into ChatGPT. We got to make sure we're, we're right there. Whether that's, yeah, whether that's perplexity, or it's ChatGPT, or it's called like, with the nail agentic optimization. The second is we need to, and we are, like, develop MCPs to make sure that any of the agents that do want to shop for secondhand, that our data is structured in the back end to serve, you know, whether it's the NPC from Instinct or it's from Muse, however, that, like, we're town, we're ones that haven't been invented yet but are likely coming. So we're going to nail that. And then the third is what does our agent experience look like for customers on the buying and selling side? And so you can imagine building an agent experience that for sellers, right, that's like quite valuable, that helps index their closets and things like that. So we're thinking about it both as a, from a consumer angle, like an agent level, and then AEL.

Where do you think the biggest opportunity for you lies potentially?

Yeah, I mean, I think, I'm like a believer that agents are going to, like, if you were to ask, for those of you who have played with Instinct, or if you've played with Muse lately, if you were to ask them to go out and, like, acquire, you know, find me a, just use Reformation, right, like, find me a Reformation dress size 4. You know, and I want it to be used. Let's imagine that that customer is like, and I want it to be used. I think startup has a really powerful right to win there because we've got this broad selection. And the way agents are going to evaluate businesses when they go to shop is based on the structure of the data. And Thredub's data structure, I think, is as clean as it gets in secondhand. So we've got all the metadata because we're doing it versus in like an eBay, for example, right? It's all peer-to-peer or Poshmark, right? So peer-to-peer data, if you've ever looked at the data set, it's much messier. So the pictures are lower quality, the consistency with which the data is actually put together. Our data is actually structured and quite clean. And so it's a long way of saying I actually think the agent, right, the machine will be like, oh, that data is clean. Oh, that image is nice. Oh, these guys have a return policy. Like, there's actually, like, trust quality of the data that I actually think puts ThredUP in a superior position relative to other secondhand companies, and so we're spending a lot of time nailing that because when the agent comes back and says, hey, Ike, I found your size for a Reformation dress, or I found multiple size for Reformation dresses, they're going to return a very clean experience on ThredUP or… Cindy Lou in St. Louis with a dress that's, like, shot on her bed, who has shipping fees potentially and doesn't take returns and you have to negotiate with, or... Or this buy it now option through ThredUP, right? And so I do think there's actually some real advantage for us here, and we're going to lean into that.

So it sounds like when you started, Agentic, you wouldn't put fashion or soft lines in the risky bucket when it comes to Agentic.

I don't. I think it's, yeah, I think it's going to be much harder to crack. Yeah, I really do. I think for the same reason that people still love to shop in stores. Right? Like, if you believe when online launched that stores went to 10% and online went to 90%, then I'd be much more confident that Agentic would get to that. But I think still people, women in particular, like, it's a considered purchase.

AI or any of the new innovations that are hitting, has it affected your go-to-market strategies to acquire new consumers? Has anything kind of shifted in that front of late?

No, but I think what it does, it's accelerated, I think, the setting up the data infrastructure to communicate with all of these folks. And so we knew this was coming and had been building stuff on our own, but I think we've accelerated making sure that our... protocols, right, are set for those. But I think there's other innovations, like I think live shopping is quite interesting, like I, you know, what eBay is doing, eBay Live, whatnot. And I think consumers are, I think, this year is really a breakout moment for live selling. And so I think we're thinking a lot about that, right, which is Um, AI-enabled, right? Because I think a lot of what we will have to do to do that well will require using our technology to efficiently kind of scale, you know, one-on-one items.

Those parts of the business that are younger and you're thinking about them, so like direct or live selling, can you talk about some of those and what you're seeing?

I mean, yeah, on our direct business, so direct listings, you know, continues to go, like, well. I think, you know, we don't have any, like. We didn't put out much public around, like, that business, but, like, it's continuing to, you know, drive engagement, sellers, buyers, and I think… Just to remind everyone, so direct selling is… Direct selling is, yeah, it's different than our core marketplace. So you as a seller can list your own item on ThredUp, but with, like, certain constraints, and it's really designed for casual sellers. So, somebody who has a history of sending ThredUp their clean-out kits, right, or on our core marketplace, if there's a few items that maybe you used to sell on eBay, we want to consolidate all that selling on ThredUp. And so, it's designed to really consolidate and really own the supply chain.

Is that more for high-ticket, more premium product?

Yes. So, the direct selling items typically are twice the price of our core marketplace. But yeah, so direct selling, and then Uh, yeah, we talked a little bit about live selling is something like we're, we're, we're exploring. Um, I think agentic and sort of, you know, agent based commerce. Uh, we're spending a lot of time thinking about how, um, social creators drive, um, awareness. And so if you're familiar with businesses like a shop, my ride or an LTK, um, these are, these tend to be. Pretty hands-on for creators because they have to tag product. We've been thinking a lot about what is an AI-driven approach to help them, you know, build second-hand affiliate stores. So, yeah, so we're, you know, to kind of where we started, we're thinking about all the various surface areas that we, you know, been planning to build into. I think we've probably accelerated our timeline on none of those.

Anything changing on resale overall, your view of the market, market growth rates, just? As you think about the, you know, the industry at a, you know, big picture?

I think the industry, you know, when, when typically, like, so the, I think the, the challenge in the economy is going to accelerate resale, like, over time. Like, I think, again, like, despite the, you know, our business selling items at slightly lower prices, we're selling more units than ever. And so more people are shopping resale, I think, than ever. You can see it with Vinted coming into the U.S. You can see with Depop and what eBay is doing there. So I think the whole industry is growing as well as it has. How that industry ultimately generates flow through, I think, is because a lot of, you know, when you read the resale reports, those are all GMV. We all know you can't pay your bills at GMV. And so I think how businesses monetize this growing category, I think, is the area to watch.

I'm going to end with my last question. I was actually listening to a podcast at the gym this morning about… Having the best conversations. I was giving you the best questions and the worst questions you can ask for small talk. I'm going to use the one that basically sounded like the best one. So feel free to use this. What are you most excited about?

Can I give you a better one than that? So there's a quote from, there's an Oliver Wendell Holmes, former Supreme Court, no, he's dead, Supreme Court Justice, who said, and I learned this from Al Gore, so this is, is, what have you come to know lately? Which is, what have you learned? What have you learned? But I'll answer your question if we have time. I have to push down my question. I mean, I'm most excited by the fact that the structure of our business, like the fundamentals, are as good as they've been in a long time. The economy is challenging, right? We're not going to be permanently in this state, right? It might be longer than any of us would like, this level of uncertainty, but it will end. And we're going to have more customers, more great supply, more product services than ever. And so we just kind of have to navigate through it. And so it's a feeling of knowing that. We're working on all the right stuff, and we have a real competitive advantage and moat in our business, right? Nobody is trying to do what we're trying to do because we've built infrastructure over the last 10 years. It makes it very hard to do what we're doing. So when you have a real defensible. Um, advantage and you believe the macro stuff is temporary and the fundamentals are good. You just kind of have to keep executing. So I'm excited about like the idea that like we'll get through this and, you know, nothing like a little pain, pain as an, as a founder, like pain and constraint breeds creativity. It breeds speed. And so, like, I think that the way that as an organization, we've responded to this is great, right? I think people are like, yeah, how do we punch through it? And so I think that makes me excited.

Great. All right. Well, James, Sean, appreciate you guys. Thanks for coming.