Thredup, Inc. ((TDUP)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for ThredUp, Inc. painted a largely positive picture, underscoring robust growth in customer acquisition and technological advancements that are significantly boosting conversion rates and financial performance. Despite these positive developments, there were some concerns about a decline in active buyers and potential challenges posed by tariffs and economic conditions.
Strong Customer Acquisition and Retention
ThredUp has reported impressive results in customer acquisition, with new customer volume up by 32% year-over-year in Q4. The first quarter is anticipated to be one of the strongest in the company’s history for acquiring new customers, highlighting the effectiveness of their strategies in attracting and retaining buyers.
AI and Technology Investments
The company is making significant strides in AI and technology, which are paying off handsomely. ThredUp’s AI search functionality has resulted in an 85% higher conversion rate for sessions involving image searches. Additionally, AI-generated pivots have achieved click-through rates above 15%, and the introduction of 360-degree photos has boosted 30-day sell-through rates by up to 12%.
Financial Performance and Growth
ThredUp’s financial performance in Q4 was strong, with revenue reaching $67.3 million, marking a 9.5% increase year-over-year. The company also reported a gross margin of 80.4%, which is a 290 basis point improvement from the previous year. Adjusted EBITDA stood at $5 million, representing 7.4% of revenue, showcasing the company’s solid financial footing.
Positive Outlook for 2025
Looking ahead, ThredUp is optimistic about its financial future, expecting to achieve positive free cash flow on an annual basis by 2025. The company is planning for revenue growth of 6% at the midpoint for the full year, indicating a positive trajectory in its financial performance.
Decline in Active Buyers
Despite the positive trends, ThredUp experienced a decline in active buyers, which fell to 1.3 million, a 6% decrease year-over-year. This decline poses a challenge that the company will need to address moving forward.
Potential Challenges from Tariffs and Economic Conditions
The earnings call also highlighted concerns about external economic factors, such as tariffs and inflation, which could impact consumer spending. With 51% of consumers indicating that higher prices due to inflation affect their apparel spending, ThredUp may face challenges in maintaining its growth momentum.
Forward-Looking Guidance
ThredUp’s forward-looking guidance remains optimistic, with substantial progress reported in reaccelerating growth while maintaining free cash flow and adjusted EBITDA targets. The company anticipates revenue growth between $270 million and $280 million in 2025, representing a 6% increase year-over-year. The positive momentum in customer acquisition and AI-driven improvements positions ThredUp well for achieving its revenue and profitability goals.
In conclusion, ThredUp, Inc.’s earnings call presented a generally positive outlook, with strong growth in customer acquisition and technological advancements driving improved financial performance. However, the decline in active buyers and potential economic challenges pose areas of concern. Overall, the company’s forward-looking guidance suggests a promising future, with expectations of continued growth and profitability.