ThredUp Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 4, 2025

Key Takeaways

  • Positive Sentiment: Q2 results outperformed expectations with revenue up 16.4% year-over-year to $77.7 million, gross margin at 79.5%, and adjusted EBITDA of 3.9%.
  • Positive Sentiment: Record new buyer growth as new buyer acquisitions rose 74% year-over-year, active buyers increased 17%, and orders climbed 21%.
  • Positive Sentiment: AI-driven product improvements lifted visitor sign-up rates by 30% and sign-up-to-purchase rates by 60%, delivering an 18% funnel conversion gain.
  • Positive Sentiment: Raised full-year guidance by $14 million to $298–302 million in revenue, maintaining 78–79% gross margin and approximately 4.2% adjusted EBITDA.
  • Negative Sentiment: Q4 growth is expected to slow to ~10% year-over-year due to seasonal resale patterns and a cautious consumer outlook amid macro uncertainties.
AI Generated. May Contain Errors.
Earnings Conference Call
ThredUp Q2 2025
00:00 / 00:00

There are 10 speakers on the call.

Operator

afternoon, ladies and gentlemen, and welcome to the TridaUp Q2 twenty twenty five Earnings Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on 08/04/2025. And I would now like to turn the conference over to Ms.

Operator

Lauren Fresh. Thank you. Please go ahead.

Speaker 1

Good afternoon, and thank you for joining us on today's conference call to discuss ThreadUp's second quarter twenty twenty five financial results. With me are James Reinhart, ThreadUp's CEO and Co Founder and Sean Sober, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.threadup.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.

Speaker 1

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 ks 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.

Speaker 1

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.

Speaker 2

Good afternoon, everyone. I'm James Reinhart, CEO and Co Founder of ThredUP. Thank you for joining our second quarter twenty twenty five 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 resell market.

Speaker 2

I'll then hand it over to Sean Silvers, 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.

Speaker 2

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, 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.

Speaker 2

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 cost 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.

Speaker 2

Third, ad markets remain dynamic. As we predicted, the short term gains we experienced from companies like Shein and Tmall 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 ThreadUp experience. So let's turn to that. We are now more than eighteen months into our AI led product journey, and positive results continue to compound.

Speaker 2

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 Threat Up is improving. While we've shared some of the individual feature results previously, including visual search, style chat, image search, 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. Visitor sign up rates on ThreadUp 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 ThreadUp customers. Typically, you accelerate marketing spend as we have and drive more traffic, you get degradation in the funnel.

Speaker 2

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, what fashion brands who make products can do easily, but we can't given our massive assortment of secondhand SKUs. The results were fascinating.

Speaker 2

For existing heavy threat of 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 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 market in the coming quarters.

Speaker 2

Again, this is in service of our goal to make the experience of shopping secondhand virtually indistinguishable from shopping new products. Our social commerce work continued to delight customers with easy ways to shop their inspiration from Instagram and other social media. Our new feature is live on the ThreadUp iOS app, and we expect to roll 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.

Speaker 2

Turning to the seller side of our marketplace. We continue to make substantial improvements across the seller experience with our ambition to make Spread up 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 clean out kits processed. Our strategy involves expanding the number of ways customers can sell and the frequency with which they sell on product. Premium service kits with service fees up to $34.99 continue to grow as a mix of kits received, growing 44% quarter over quarter.

Speaker 2

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 resell as a service or RAS.

Speaker 2

Our change to an open source model in our RAS 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, quote, universal ecommerce 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 resell ecosystem.

Speaker 2

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 we have invested in over many years is working as well as ever. We've invested over $400,000,000 in infrastructure, software and data to invent how a managed marketplace can work at scale. From the humble clean out 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.

Speaker 2

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 resell 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 has helped us leverage AI so quickly and expertly to sell more items with better margins. Third, as we all know, marketplaces are hard to build and sustain. But when you get the flybills going, they are very hard to stop.

Speaker 2

Our innovations on the buyer and seller sides 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 ThreadUp'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 Redup 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?

Speaker 2

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 a decade plus head start? These are hard questions to answer, especially while ThreadUp 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 the financials in more detail.

Speaker 3

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.

Speaker 3

For the 2025, revenue totaled $77,700,000 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 1,500,000 active buyers for the trailing twelve months, up 16.5% over last year, while orders were up 20.8% to $1,500,000 For the 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.

Speaker 3

Adjusted EBITDA was $3,000,000 or 3.9% of revenue for the 2025. We doubled our adjusted EBITDA dollars versus last year, representing 170 basis point margin improvement as we leveraged our multiyear 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.

Speaker 3

We began the second quarter with $55,400,000 in cash and securities and ended the quarter with $56,200,000 generating $800,000 in cash. We spent $3,300,000 on CapEx in Q2 and continue to expect maintenance CapEx levels of approximately $8,000,000 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.

Speaker 3

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 tax 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. Expect this timing to drive demand throughout the quarter and beyond and more effectively enable us to flow our incremental EBITDA dollars back into our growth drivers. Therefore, we are maintaining our profitability expectations for the remainder of the year as we continue to focus on driving growth and generating cash.

Speaker 3

With all this in mind, in the third quarter we now expect revenue in the range of $76,000,000 to $78,000,000 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 125,000,000 shares. In the fourth quarter, we expect revenue in the range of 73,000,000 to $75,000,000 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 129,000,000 shares. For the full year of 2025, we now expect revenue in the range of $298,000,000 to $3.00 $2,000,000 reflecting 15% year over year growth at the midpoint.

Speaker 3

This updated view is $14,000,000 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 123,000,000 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.

Speaker 3

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.

Operator

Thank And your first question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead.

Speaker 4

Hey, everyone. Let me add let me give my congrats. Excuse me. I guess a couple quick ones. I guess first for James, and then I I have a follow-up for Sean.

Speaker 4

But, just, James, maybe just at a high level, just more detail on what what what drove this kind of q two revenue outperformance and and the new buyers. It's just, you know, the business is inflected so strongly, and it seems like it's happened pretty fast. So I'm just kinda curious the underlying what what you think was the biggest driver there because there's so many different things you guys are doing right now to improve the business. I'm curious if you could kinda, like, level set that or or rank order, those for us.

Speaker 2

Yeah. Sure, Hick. Yeah. I mean, I think, you know, rank ordering is is difficult. What I would say, though, is that we've really got this flywheel working of improved process experience, you know, sort of put some numbers in the prepared remarks around this, around conversion rate, you know, across across the product experience.

Speaker 2

And then our new buyer acquisition continues to be strong, really driven by by product. And so when 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, you know, momentum in the business. And, yeah, it it it feels great to be able to see the model really working and to feel like the marketplace is is really humming on all cylinders.

Speaker 4

I I assume you don't wanna get into, like, the monthly cadence or anything, but, I mean, just to see the 16% growth in February 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? I'm just kind of curious if you could kind of help us understand what's going on under the covers.

Speaker 2

Yeah. I mean, we're definitely seeing, you know, the new buyers that we are acquiring, you know, starting back in q four of last year, right, that momentum continued into q one and I think into q two, and and we're seeing it, you know, the '3. So so, certainly, you're getting that acceleration. But then I could get a normal seasonal slowdown, in q four. And, yeah, I think as you as you all know, right, that when you're driving that many new buyers, into the into the business, as long as you're maintaining strong engagement rates and retention rates, that really does start to compound.

Speaker 2

And, you know, we're seeing that in the numbers for q three and q four.

Speaker 4

Great. And this is the last one maybe for Sean. I'm not sure if it's for Sean or for you, James. But, to drop to 10 in the fourth quarter seems very conservative. Could maybe just talk about the guardrails you're putting on that just because I I mean, like like, how many active buyers are you assuming drop off?

Speaker 4

Because I assume there's a good amount to get the rev to go from 25 to 10. So I'm just kinda curious if the guardrails are kinda putting around Thanks.

Speaker 2

Yeah. Yeah. I I can I can jump in since we've been talking about the quarterly cadence? Really, for q four, remember that it is a seasonal downshift in resale. Right?

Speaker 2

That has been true for more than a decade. You see, you know, sequential step down from q three to to q four. And so I think one is the seasonal piece. I think the second is that we do tend to see marketing rates go up in q four, and so we tend to pull back a little bit on our own investments just to maintain our our paybacks and CAC LTV CAC strategy. So we do a little bit of that ourselves.

Speaker 2

And then the third is, to be honest, you know, I think Sean and I are a little uncertain on the macro. Jobs numbers are weak. Housing market's weak. And so I think it's probably smart to be a little conservative around exactly how q four is going to play out at this point. But, obviously, when when we get to, you know, properly, you know, reporting q three and guiding q four in November, you know, we'll have more to share.

Speaker 2

But we think that's a more prudent course.

Speaker 3

Excellent. Thanks.

Operator

Thank you. And your next question comes from the line of Yulan Carden from William Blair. Please go ahead.

Speaker 5

Thank you. 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 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 to what those were and how that rolls through third and fourth quarter?

Speaker 3

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 ASPs. And as you look towards kind of the back half of the year, you see gross margin kinda tick down a little bit. I mean, we still expect premium supply to be there, but we really wanna 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 gonna focus on things like pick, pack, and ship, which is stuff that kinda 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 purchasers and fourth time purchasers.

Speaker 2

Next question. And

Speaker 5

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

Speaker 2

Yeah, Dylan. Hey. It's James. Yeah. And we we continue to see record, you know, requests, receipts, process on the supply side, and we're really focused on innovating in the supply chain.

Speaker 2

You know, we really wanna make Thread up the default place to sell online and make it as easy as possible for anyone, you know, to to get engaged. And so I think premium has done a very good job of capturing, you know, that that more premium, seller. You know, we obviously we have our sort of donation program for our customers who are really just, you know, doing a a non financially motivated clean out and really trying to capture that whole market, Dylan, and 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.

Speaker 5

Excellent. Thank you very much. Nice job.

Operator

Thanks. Thank you. And your next question comes from the line of Dana Telsey from Telsey Group. Please go ahead.

Speaker 6

Hi. Congratulations, everyone. As you think about this inflow of new buyers, what are the demographics of those new buyers? How are you seeing diff them different or the same from your core? And is part of this due to the closure of the de minimis?

Speaker 6

And then what are the category trends? Did they differ at all from first quarter to second quarter? And then I have a follow-up.

Speaker 2

Hey, Dana. It's James. No. On the new demographic side, you know, there's nothing materially different about this customer, you know, compared to prior customers. I think our point of view is that the addressable market for, you know, female, you know, secondhand shoppers in The US is pretty large.

Speaker 2

And I think we're now, you know, just getting back into once we divested Europe, a really aggressively growing, you know, our share in that market. So the customers really do look like previous, you know, best best case, ThreadUp customers, so we feel good about that. I think from from a trend perspective, q one into q two, we really did see, you know, continued explosion in the number of dresses that we were selling, you know, in the springtime, and into summer. That continues to be a a a winning category for us, and, we think opportunity to to take even further share, you know, as we move through the year.

Speaker 6

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

Speaker 2

Yeah. I think on the marketing side, we you know, other than the seasonal shift in, downshift in q four, when when ad rates get really competitive around the holidays. Otherwise, we're really targeting, you know, somewhere in the high teens to 20%, you know, of revenue on marketing. We're really in growth, you know, in acceleration of of growth mode, and that has been pretty consistent. As a reminder, Dana, we're really focused on this LTV to CAC ratio being under one such that we're paying back, under a year, and we've been really relentless on that.

Speaker 2

And so if if we can acquire more customers under that construct, we'll we'll try and lean in. And that's what we've been trying to do, you know, year to date, and I think that's what you're starting to see some of that momentum, build, on the marketing spend. And then, sorry, your second part was around?

Speaker 6

Ras. The open source model.

Speaker 2

Yeah. I I think look. I I think we're just a few months into the new strategy, but I think it is really starting to resonate with the apparel brands that we're talking to. So, you know, more than 60 brands, we're now, you know, back engaged in conversations. And the idea really is that ThredUp is the is the real scalable partner in town that can help them meet their goals either on take back programs and building sustainability and circularity into their brand, as well as helping them position, you know, an assortment of secondhand goods that's, expansive in quality and meet the bids for for their customers.

Speaker 2

So we feel great about the strategy. I think it's summer, as you know, and and so it will take a little while, for us to ink some of these deals. But I think we're we're we're feeling good about the strategy shift.

Speaker 6

Thank you.

Operator

Thank you. And your next question comes from the line of Bobby Brooks from Northland Capital Markets. Please go ahead.

Speaker 7

Hey, good afternoon guys. Congrats on the great quarter. So on the 1Q call, you guys had discussed that each incremental dollar above your 4% guide would be reinvested into marketing and it kind of dovetail that also dovetails with what was said earlier in this call. So I'm just trying to understand what's underpinning the 3Q guide of 4.5%. I know the 4Q guide is for 3%.

Speaker 7

So maybe it's just as simple as on a full year basis, you'll be at that 4% threshold. But I was just hoping for a little bit more color there.

Speaker 3

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 beast for Q1 and Q2, getting you to the 4.2%.

Speaker 7

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

Speaker 2

Yeah. I mean, think we are in in in continue to invest in marketing, but we also have sort of committed to, you know, modest, you know, EBITDA expansion, you know, over the course of the year. We certainly wanna 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 q three and the rest of the year is the growth is strong, and we wanted to, you know, 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, you know, to emphasize that we're really 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, you know, our gross margin efficiency, our EBITDA efficiency, and then really grow as fast as as we can.

Speaker 2

And, you know, that's how the numbers shake out.

Speaker 7

That's very helpful color. And then the next one was, I was just curious to hear a bit more about the supply dynamics and kind of the makeup of what you guys are seeing. So, obviously, you guys have three or five different bandwidth on payouts between five and twenty, twenty and fifty, 50 and a 100 and so on with your take rate moving lower as the pricing the sale price moves up each band. So could you just give us some sense of, like, how much of the how much of your business falls under each category?

Speaker 2

Yeah. We don't disclose necessarily the what what comes into each band, but I will say that, you know, as we talked about the growth in premium, right, which has been growing strong, those products tend to be at those higher payout amounts, right, as as as you mentioned. And the thing to understand is while the rates might be different, the dollars flowing through are strong. Right? And so we can take those dollars and invest them, you know, or invest them back in the business.

Speaker 2

But I think what we feel like is that the consignment premium, piece, not only is it great for sellers, we think it's a very, you know, out of the gate strong product market fit, but it really does help drive buyer acquisition. Buyers are there to find great products, great value, and that premium supply is a part of that. And so we really focus the rates based on, you know, maximizing the opportunity for the buyer, and the seller and threat of all at the same time.

Speaker 7

Got it. And then just one last one for me is just, obviously, your business has clear benefits from the network effect, those are really starting to take hold. But could you just and taking into account that you just posted your best quarter in customer acquisitions, could you just maybe discuss the balance between what you're seeing in new people coming to the platform as new suppliers versus people coming to the platform as first time customers and just kind of the mix of that or maybe long term time customers becoming suppliers or long term customers becoming or long term suppliers becoming customer and vice versa? Just kind of curious to hear about those trends.

Speaker 2

Yeah. I I think what you're seeing is look. I mean, we've been saying for some time that that I think you have to really think about ThreadUp as a marketplace where you're really trying to add the right number of buyers and the right number of sellers in to get the market clearing dynamics to work. You know, you obviously want it to be highly liquid. And I think what you're seeing now is such strong buyer growth in the business, and our operational infrastructure, you know, has never been stronger.

Speaker 2

We're able to feed that buyer mix with high quality supply. And so the guardrails as far as buyer buyer growth and seller growth are off. You know, where I think we're acquiring lots of new sellers. The sellers are becoming buyers. As I mentioned, lots of buyers, that are coming in, they're now getting complimentary clean out kits in their orders, and so they're becoming sellers.

Speaker 2

And so I think you're really starting to see that crossover, happen between buyers and sellers. And, again, I think that's what built a really healthy network effector in the marketplace.

Speaker 7

Very well said. I appreciate the time. I'll return to the queue.

Operator

Thank you. And your next question comes from the line of Bernie MacTurnan from Needham and Company. Please go ahead.

Speaker 8

Great. Thanks for taking the questions. 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.

Speaker 8

So how did that play into the new buyer growth? What's contemplated for the guide in 3Q and 4Q?

Speaker 2

Hey, Bernie, it's James. Yes. I mean, we mentioned on the last call, April was strong. And you did see t Tmall and and Xian and, you know, a few others sort of pull back a little bit, but they kinda came back into the market in mid May. And so a lot of the performance throughout the quarter, you know, the last couple months of the quarter was really driven by, you know, the team doing a wonderful job on the growth side, you know, the product experience continuing to get better, and we've continued to see strong momentum into July.

Speaker 2

So I I think a lot of the back half of the year, we expect to see more of the same. And so it'll remain to be seen that, you know, how some of these guys, you know, play. I know Amazon has made some changes into how they're spending, on Google Shopping. The Trump administration just rolled out de minimis exemption is now not just for Chinese goods, but for all goods coming into The US. So that will have some dynamics around who's buying ads in the ad rate.

Speaker 2

So, I think it's a pretty dynamic environment, but I'm pretty confident that regardless of the macro trends there, like, we're gonna be able to spend and acquire our customers at, you know, at real predictable and strong rates. So

Speaker 8

Okay. No. That's great. Thank you. And then just want I also wanna touch on RAS.

Speaker 8

Obviously, you mentioned conversations with over 60 brands. What are some acknowledging that, Summer, but other than that, what are some of the bottlenecks for getting those brands over the finish line? And, like, how many new brand partnerships do we have to see for it to be a material impact on your supply?

Speaker 2

Yeah. I mean, I think it on the brand, Bernie. And I think for some, you know, large brands that if they can be impactful, you know, right away. But I think from a timing perspective, you know, some of these brands are currently in contracts with others. You know, some of them are trying to navigate, you know, the the the tariff news and how that's impacting what they're doing.

Speaker 2

And so, you know, the 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 but I do think, I do think you're gonna see some momentum by year end. Whether that's material, I think, you know, remains to be seen. I I don't expect it to be material in '25, but I I'm I'm optimistic that it will have a real impact in 2026.

Speaker 8

Understood. Thanks, James.

Operator

Thank you. And your next question comes from the line of Oliver Chen from TD Cowen. Please go ahead.

Speaker 9

Hi, James and Sean. The AI acceleration has been really, really nice. What do you think the hardest parts of that AI journey have been? And second, as you rank order the financial impact, it sounds like customer acquisition is the highest impact. But how would you rank order the model impact as you see it?

Speaker 9

Second question is on the new buyer growth rates. What are your thoughts on how that number like what kind of long term growth rates might we expect there? It's been extraordinary, but the related question is like one and done or the nature of the new customers relative to existing. Thank you.

Speaker 2

Hey, Oliver. Good good good to hear you. The, I think on the first one on the the the hardest part of the of AI for us is given the breadth of the catalog, right, four and a half million plus SKUs changing every day, is really nailing, product recommendations and and filtering using the technology. So even just in the last few weeks, we've been rolling out improvements into, how customers are getting the right sorts of product, the items that, you know, they should shop with these other items. So I think the hardest thing is is really getting the models to work as well as we we as we know they theoretically can, which I think is really exciting because I think, you know, similar to whether it's ChatGPT or or any of the other services out there, they're getting better every month.

Speaker 2

And you can see that where where we feel like the opportunity to make our experience of shopping on Threadout better every month, you know, through AI. So I think that part's exciting, and the team's working super hard. And, but these are hard, big, big problems to solve. I think on the, you know, the question around, like, new buyer growth rate, the, look. I I I don't expect it to be 95%, every every quarter or 75% every quarter.

Speaker 2

You know, there's a real acceleration there that has happened. But I think we feel good about the addressable market. I mean, this is a big market in The US, expected to double by by 2030. And so there's a lot of women out there that either are casual shop versus secondhand or never shop secondhand, and we think we can go out and acquire those customers at at very predictable and large large numbers. And so I don't have a steady state rate for you, but I but I would say that we have a million and a half customers.

Speaker 2

And, you know, there's an order of magnitude more customers out there that are not ThredUp customers than than than are. And so, so that that's sort of how we feel about the opportunity. And then you had a second your other question was in there was on the model was on which one? On the

Speaker 9

Yeah. We're linking AI to financial modeling. Like, how much

Speaker 2

was in

Speaker 9

the quarter, some of them.

Speaker 2

Yeah. I think you you sort of suggested that, really, on the customer acquisition piece was the top of the list. I would agree with that. I I think it has helped us really drive conversion, you know, throughout the funnel, make our ads been more effective. I would say, though, that the the other piece is, you know, if you shop right up today, you just the the experience feels more elevated, and I think we're working, you know, further to even elevate the shopping experience.

Speaker 2

And so I think the work that we've done improving the crispness of the images, some of the work we've done with on model photography, the merchandising has improved. A lot of that stuff has really elevated the shopping journey, and we hear that from customers that ThreadUp just feels like a more elevated experience than it was a couple years ago. And I think that's drawing more customers into the fold and and increasing kind of people's feeling of how the site is and and what it means to shop there.

Speaker 9

Okay. And, James, you've been a a visionary within this sector. What are your thoughts about, consolidation going forward or how you see the next leg of innovation over the longer term? How might that juxtapose with how you think about CapEx and what investment needs options you may have in the future?

Speaker 2

I mean, I don't I I don't, I don't have a crystal ball on on what how the market's gonna play out, but I look. I think the market is big. I think it's growing. I don't think that this is something that is a fad that people are gonna wake up someday a couple years from now and say, oh, I'm never gonna shop secondhand again. And so I think there's this is a structural shift, you know, I think similar to how Off Price, you know, spent twenty, thirty years really shifting how consumers, you know, shopped and behaved.

Speaker 2

I think secondhand is is is is on a similar journey. So I do think there'll be big big companies created. ThreadUp, I hope, will be one of them, and, we'll sort of see, you know, see what happens. But, but I think that, generally speaking, the fact that the market is big and the structural shift would suggest that there'll be some big companies.

Speaker 9

Okay. Last one on customer acquisition costs. There are a lot of puts and takes in different forces here. What's changed the most in your perspective there, framework? Or maybe not much has changed, but just the tax that's around you have?

Speaker 9

Or love any thoughts on shifts or and how what that may imply for the future on the customer acquisition costs?

Speaker 2

Yeah. I mean, we've seen some change on CPMs, I think, on on Meta and on Google, which I think are consistent with some of the changes with, you know, how big ad buyers, like, Timu or Shein are moving in and out of the market. But but by far, the biggest driver has been the conversion rate. And so, you know, conversion rates, right, when they go up, you know, significantly, like, it changes all the math in a pretty dramatic way. And so our tax have come down commensurate with our improvements in the product experience.

Speaker 2

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.

Speaker 9

Thank you. Best regards.

Operator

Thank you. And there are no further questions at this time. I will now hand the call back to Mr. James Reinhart for any closing remarks.

Speaker 2

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.

Operator

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

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