ThredUp Inc. Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing provides full-year results; it does not provide a clear standalone fourth-quarter financial statement.
Business Context
ThredUp operates an online resale marketplace primarily for women’s and children’s apparel, shoes and accessories. Revenue is generated from consignment sales, owned-inventory product sales, and Resale-as-a-Service integration and service fees. The company completed its acquisition of Remix Global AD in October 2021, expanding into Europe and adding men’s merchandise and wholesale sourcing capabilities.
- Active Buyers: 1.69 million, up 36% from 2020.
- Orders: 5.328 million, up 34%.
- RaaS clients: 28 as of December 31, 2021.
- Employees and professional contractors: 2,894, including 2,496 distribution-center employees.
Financial Performance and Key Metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $251.8 million | $186.0 million | Up 35% |
| Consignment revenue | $186.1 million | $138.1 million | Up 35% |
| Product revenue | $65.7 million | $47.9 million | Up 37% |
| Gross profit | $178.1 million | $128.1 million | Up 39% |
| Gross margin | 71% | 69% | Up 185 basis points |
| Operating loss | $62.4 million | $46.6 million | Higher loss |
| GAAP net loss | $63.2 million | $47.9 million | Loss increased 32% |
| Adjusted EBITDA loss | $36.5 million | $33.4 million | Loss increased 9% |
| Adjusted EBITDA margin | (14%) | (18%) | Improved |
| Net loss per share | $0.82 | $4.14 | Not directly comparable due to IPO and share-count changes |
Revenue growth was primarily driven by a 34% increase in orders, supported by buyer growth, increased marketing, and the Remix acquisition. Revenue per order increased 1%. Consignment revenue represented approximately 74% of total revenue, while product revenue represented 26%.
Operating expenses increased 38% to $240.5 million. Operations, product and technology expense rose 26% to $128.1 million, marketing expense rose 42% to $63.6 million, and sales, general and administrative expense rose 71% to $48.8 million. The increases reflected distribution-capacity expansion, higher labor costs, marketing investment, public-company costs, and Remix-related expenses.
Cash Flow, Liquidity and Debt
- Cash, cash equivalents and short-term marketable securities totaled $205.8 million at December 31, 2021, including $84.6 million of cash and cash equivalents and $121.3 million of marketable securities.
- Net cash used in operating activities was $35.0 million, compared with $19.1 million in 2020.
- Net cash used in investing activities was $169.6 million, including $23.6 million for Remix, $19.8 million of capital expenditures, $125.2 million of marketable-security purchases, and a $3.8 million equity investment.
- Net cash provided by financing activities was $229.0 million, primarily from $226.9 million of net equity-offering proceeds.
- The company completed its IPO in March 2021, generating $175.5 million of net proceeds, and a follow-on offering in August 2021, generating $45.5 million of net proceeds.
- Debt principal outstanding was $36.0 million at year-end, with maturities of $8.0 million in each of 2022 and 2023 and $20.0 million in 2024. The stated interest rate was 5.50%.
- The company was in compliance with its Western Alliance Bank debt covenants at December 31, 2021. The facility is secured by substantially all corporate assets and includes minimum cash, liquidity, revenue and debt-service requirements.
- Operating lease obligations totaled $60.9 million, and non-cancellable purchase commitments totaled $17.0 million.
Management believes existing cash and cash equivalents will fund operations for at least the next twelve months, but expects operating losses and negative operating cash flow to continue for the foreseeable future. Additional financing may be required and could dilute stockholders or impose more restrictive debt terms.
Material Changes and Unusual Items
- Remix contributed $11.1 million of revenue and a $1.2 million net loss from the October 7, 2021 acquisition date through year-end. The acquisition generated $12.2 million of goodwill and $13.9 million of net intangible assets at December 31, 2021.
- Product revenue increased faster than in 2020 as the European business primarily used an owned-inventory model. Management expects the European mix could pressure consolidated gross margin until the consignment model is expanded.
- Stock-based compensation increased to $13.0 million from $7.3 million.
- The company recognized $1.6 million of other income, primarily related to claim proceeds for lost shipments and changes in preferred-stock warrant values.
- The company’s common stock began trading publicly in March 2021, materially increasing the weighted-average share count and affecting year-over-year per-share comparisons.
Outlook, Commentary and Risks
Management expects continued investment in distribution centers, automation, technology, marketing, RaaS, international expansion and public-company infrastructure. The company expects operating expenses and capital requirements to remain elevated and does not expect sustained profitability in the near term.
- COVID-19 recovery and reopening supported demand in 2021, but management expected the pandemic and related labor, supply-chain and demand uncertainty to adversely affect revenue and cash flow at least into early 2022.
- Labor availability and wage pressure remain significant risks to distribution-center capacity and cost of revenue.
- Growth depends on attracting and retaining buyers and sellers and maintaining sufficient quality and volume of resale supply.
- Competition includes online resale marketplaces, retailers, off-price chains, department stores and traditional thrift and consignment businesses.
- Remix integration, European expansion, foreign-currency exposure and compliance with European privacy laws, including GDPR, create additional execution and regulatory risks.
- The company identified a material weakness in internal control over financial reporting relating to accounting and proprietary systems, user access, change management, data validation, account reconciliations, journal entries and segregation of duties. Disclosure controls were therefore deemed ineffective as of December 31, 2021. Management initiated remediation but had not fully remediated the weakness.
- Cybersecurity, data privacy, payment processing, third-party technology, distribution-center disruptions, shipping delays, product authenticity, product liability and changing e-commerce regulations could materially affect results.
- The dual-class structure gives Class B holders ten votes per share. Class B holders collectively controlled approximately 87.6% of voting power at year-end, limiting public stockholders’ influence.
Important Facts for Investors to Verify
- Review the full consolidated financial statements and notes for the precise composition and maturity of cash, marketable securities, debt, lease obligations and purchase commitments.
- Assess whether Active Buyer and order growth can continue as marketing spending, labor costs and competition increase.
- Evaluate the effect of Remix integration and the shift between consignment and lower-margin product revenue on future gross margin.
- Monitor operating cash burn, capital expenditures, debt-covenant compliance and the timing of potential additional financing.
- Track remediation of the material weakness and any future restatements or delays in financial reporting.
- Review the impact of COVID-19, labor availability, supply-chain conditions, inflation, geopolitical events and the conflict involving Ukraine on operations and demand.
- Consider dilution from equity compensation, the delayed issuance of 130,597 Class A shares related to Remix, and potential future equity or debt financing.