ThredUp Inc. (TDUP) Bundle
Understanding ThredUp Inc. (TDUP) Revenue Streams
Understanding ThredUp Inc.’s Revenue Streams
ThredUp Inc. generates revenue through two primary sources: consignment revenue and product revenue. The breakdown for the three months ended September 30, 2024, is as follows:
| Revenue Source | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Year-over-Year Change (in thousands) | Year-over-Year Percentage Change |
|---|---|---|---|---|
| Consignment Revenue | $59,850 | $57,838 | $2,012 | 3.5% |
| Product Revenue | $13,171 | $24,211 | ($11,040) | (45.6%) |
| Total Revenue | $73,021 | $82,049 | ($9,028) | (11.0%) |
For the nine months ended September 30, 2024, the revenue breakdown is:
| Revenue Source | YTD 2024 Revenue (in thousands) | YTD 2023 Revenue (in thousands) | Year-over-Year Change (in thousands) | Year-over-Year Percentage Change |
|---|---|---|---|---|
| Consignment Revenue | $184,930 | $157,732 | $27,198 | 17.2% |
| Product Revenue | $47,434 | $82,897 | ($35,463) | (42.8%) |
| Total Revenue | $232,364 | $240,629 | ($8,265) | (3.4%) |
The year-over-year revenue growth rate indicates a significant transition in ThredUp's business model. The consignment revenue has increased, reflecting a strategic shift towards this model, particularly in the European market, while product revenue has faced a notable decline.
In terms of revenue contribution, consignment revenue represented 82.0% of total revenue in Q3 2024 compared to 70.5% in Q3 2023. Conversely, product revenue accounted for 18.0% of total revenue in Q3 2024 down from 29.5% in Q3 2023.
The following table summarizes the contribution of different business segments to overall revenue:
| Business Segment | Q3 2024 Contribution (%) | Q3 2023 Contribution (%) |
|---|---|---|
| Consignment Revenue | 82.0% | 70.5% |
| Product Revenue | 18.0% | 29.5% |
Significant changes in revenue streams highlight the company’s pivot to focus on consignment over product sales, driven by strategic decisions to enhance profitability and operational efficiency. This transition has resulted in a 3.5% increase in consignment revenue year-over-year, contrasting sharply with the 45.6% decrease in product revenue.
A Deep Dive into ThredUp Inc. (TDUP) Profitability
Profitability Metrics
Gross Profit: For the third quarter of 2024, gross profit totaled $51.98 million, representing a decrease of 8.2% year-over-year. The gross margin was 71.2%, an increase of 220 basis points from 69.0% in the same quarter of 2023.
Operating Profit: The operating loss for the third quarter of 2024 was $24.87 million, compared to an operating loss of $18.19 million in the third quarter of 2023.
Net Profit Margin: The net loss for the third quarter of 2024 was $24.77 million, or a negative 33.9% of revenue. This compares to a net loss of $18.08 million, or a negative 22.0% of revenue, for the same quarter in 2023.
Trends in Profitability Over Time
Three-Month Comparison:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $73.02 million | $82.05 million | -11.0% |
| Gross Profit | $51.98 million | $56.63 million | -8.2% |
| Net Loss | $24.77 million | $18.08 million | +37.0% |
| Net Loss Margin | -33.9% | -22.0% | -11.9% |
Year-to-Date Comparison:
| Metric | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $232.36 million | $240.63 million | -3.4% |
| Gross Profit | $163.43 million | $163.45 million | -0.01% |
| Net Loss | $55.28 million | $56.64 million | -2.4% |
| Net Loss Margin | -23.8% | -23.5% | -0.3% |
Comparison of Profitability Ratios with Industry Averages
Industry Averages: The industry average gross margin for similar companies in the e-commerce sector is approximately 50-60%. The reported gross margin of 71.2% indicates a strong position relative to industry peers.
Net Profit Margin Comparison: The average net profit margin for e-commerce companies typically hovers around 3-5%. The current net loss margin of -33.9% highlights areas for improvement.
Analysis of Operational Efficiency
Cost Management: Operating expenses for the third quarter of 2024 totaled $76.85 million, up from $74.82 million in the prior year, reflecting a 2.7% increase.
Gross Margin Trends:
- For the three months ended September 30, 2024, the gross margin was 71.2%, compared to 69.0% in 2023.
- For the nine months ended September 30, 2024, the gross margin was 70.3%, compared to 67.9% in 2023.
Product and Consignment Gross Margins:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Consignment Gross Margin | 81.0% | 82.5% |
| Product Gross Margin | 26.5% | 36.8% |
The decrease in product gross margin is attributed to increased inventory costs, particularly from European operations, impacting overall profitability.
Debt vs. Equity: How ThredUp Inc. (TDUP) Finances Its Growth
Debt vs. Equity: How ThredUp Inc. Finances Its Growth
As of September 30, 2024, ThredUp Inc. reported total liabilities amounting to $145.7 million. This includes both short-term and long-term debt components.
The company's total long-term debt includes a term loan facility with an outstanding balance of $23.3 million as of September 30, 2024. The loan was initially structured for up to $48.8 million, with specific provisions for equipment purchases. The effective interest rate on this loan was 10.22% .
In terms of short-term liabilities, ThredUp reported $34.2 million in current liabilities, including accrued expenses and deferred revenue .
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, was calculated at 2.10, reflecting a significant reliance on debt financing compared to equity. This ratio is notably higher than the industry average of approximately 1.5, indicating a more leveraged position .
Recent Debt Issuances and Credit Ratings
ThredUp has not issued any new debt in the recent quarter, maintaining its existing term loan. The company has consistently complied with its debt covenants, ensuring operational flexibility .
As of the latest reports, the company does not have a formal credit rating from major agencies. However, the terms of the existing loan reflect a cautious approach to debt management, focusing on maintaining liquidity while managing operational costs .
Balancing Debt Financing and Equity Funding
ThredUp has historically financed its operations through a mix of debt and equity. As of September 30, 2024, the total stockholders' equity was reported at $69.3 million, down from $103.9 million at the end of 2023 .
The company has raised funds through equity offerings, including stock options and restricted stock units, which contributed to its capital structure. In the last quarter, stock-based compensation amounted to $20.7 million, indicating ongoing reliance on equity to attract and retain talent .
| Financial Metric | Amount (in millions) |
|---|---|
| Total Liabilities | $145.7 |
| Long-term Debt | $23.3 |
| Short-term Liabilities | $34.2 |
| Debt-to-Equity Ratio | 2.10 |
| Total Stockholders' Equity | $69.3 |
| Stock-based Compensation (last quarter) | $20.7 |
ThredUp's financial strategy reflects a careful balance between leveraging debt to fuel growth while managing equity to maintain operational resilience. The ongoing investments in technology and infrastructure are expected to continue to drive its capital needs into the future .
Assessing ThredUp Inc. (TDUP) Liquidity
Assessing ThredUp Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.29, compared to 1.24 as of September 30, 2023.
Quick Ratio: The quick ratio was 0.92 as of September 30, 2024, slightly improved from 0.89 in the previous year.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was $19.2 million, reflecting an increase from $18.6 million on September 30, 2023. This indicates a positive trend in short-term financial health.
| Period | Current Assets ($ in thousands) | Current Liabilities ($ in thousands) | Working Capital ($ in thousands) |
|---|---|---|---|
| September 30, 2024 | 71,350 | 52,150 | 19,200 |
| September 30, 2023 | 69,800 | 51,200 | 18,600 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash used in operating activities was $(0.2 million), a significant improvement from $(14.6 million) for the same period in 2023.
Investing Cash Flow: Net cash used in investing activities totaled $(8.4 million) for the nine months ended September 30, 2024, compared to $48.4 million in cash provided during the same period in 2023.
Financing Cash Flow: Net cash used in financing activities was $(3.9 million) for the nine months ended September 30, 2024, compared to $(2.98 million) for the same period in 2023.
| Cash Flow Activity | 2024 ($ in thousands) | 2023 ($ in thousands) |
|---|---|---|
| Operating Activities | (232) | (14,616) |
| Investing Activities | (8,436) | 48,353 |
| Financing Activities | (3,925) | (2,983) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash, cash equivalents, and short-term marketable securities totaling $55.3 million. The term loan facility available for drawdown was $22.5 million, indicating strong liquidity positions and compliance with debt covenants.
Despite ongoing operating losses, the company projects that existing cash reserves will be sufficient to meet capital requirements for at least the next 12 months.
Is ThredUp Inc. (TDUP) Overvalued or Undervalued?
Valuation Analysis
To assess whether ThredUp Inc. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is not directly available due to the company reporting losses. However, the trailing twelve months (TTM) loss per share is ($0.50) for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The book value per share is calculated from total stockholders’ equity, which is $69.272 million as of September 30, 2024. The total number of shares outstanding is 113,758,000. Thus, the book value per share is:
Book Value per Share = Total Stockholders' Equity / Total Shares Outstanding
Book Value per Share = $69,272,000 / 113,758,000 ≈ $0.609
The most recent stock price is approximately $0.45 (as of the latest close), resulting in a P/B ratio of:
P/B Ratio = Stock Price / Book Value per Share = $0.45 / $0.609 ≈ 0.738
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) calculation requires market capitalization and total debt. As of September 30, 2024, the company has $22.5 million in available term loan. Assuming a market cap based on the stock price of approximately $51.1 million (113,758,000 shares at $0.45), the EV is:
EV = Market Cap + Total Debt - Cash
With cash and equivalents at $55.3 million:
EV = $51.1 million + $22.5 million - $55.3 million = $18.3 million
For EBITDA, the Non-GAAP Adjusted EBITDA loss for the nine months ended September 30, 2024, is ($4.740 million). Therefore, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $18.3 million / ($4.740 million) = -3.86
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly. The stock traded at a high of approximately $1.75 and a low of $0.34. As of the last closing price, it stands at $0.45.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, and thus the dividend yield is 0%.
Analyst Consensus on Stock Valuation
Current analyst consensus indicates a rating of Hold for the stock. This reflects a cautious stance given the company's ongoing operational challenges and recent financial performance.
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Losses reported) |
| P/B Ratio | 0.738 |
| EV/EBITDA Ratio | -3.86 |
| Stock Price (Latest) | $0.45 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing ThredUp Inc. (TDUP)
Key Risks Facing ThredUp Inc. (TDUP)
ThredUp Inc. faces several internal and external risks that could impact its financial health and operational performance. Key risks include industry competition, regulatory changes, market conditions, and operational challenges.
Industry Competition
The resale apparel industry is highly competitive, with numerous players vying for market share. The company reported a decrease in Active Buyers, totaling 1.6 million in the third quarter of 2024, down 7.4% from the previous year, along with a 13.9% decrease in Orders. This decline indicates increased competition and potential challenges in retaining customers.
Regulatory Changes
Changes in regulations pertaining to e-commerce, data privacy, and consumer protection can significantly affect operations. The company must adapt to new laws, which can lead to increased compliance costs and operational disruptions.
Market Conditions
Economic fluctuations can influence consumer spending behavior. The total revenue for the third quarter of 2024 was $73.0 million, representing an 11.0% year-over-year decline. This decrease reflects shifts in consumer preferences and spending patterns, which may be exacerbated by economic downturns.
Operational Risks
Operational challenges include managing inventory and supply chain logistics. The company recognized an impairment of long-lived assets of $9.8 million due to its decision to exit the European market. This impairment included $5.6 million related to property and equipment and $4.2 million related to intangible assets.
Financial Risks
Financial performance is impacted by high operational costs. The company reported a net loss of $24.8 million for the third quarter of 2024, which represented a 33.9% loss margin. Additionally, the total cost of revenue was $21.0 million, a decrease of 17.2% from the previous year. The financial health of the company may be jeopardized if these losses continue.
Strategic Risks
The shift from product revenue to consignment revenue poses strategic risks. The product revenue decreased by 45.6%, while consignment revenue increased by 3.5%. This strategic pivot may take time to stabilize as the company aligns its operations to focus on the consignment model.
Mitigation Strategies
To mitigate these risks, ThredUp is focusing on restructuring its operations, including a workforce reorganization that resulted in a $1.4 million decrease in personnel-related costs for the third quarter. The company is also evaluating strategic alternatives for its Remix business to enhance profitability and efficiency.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Increased competition leading to a decrease in Active Buyers and Orders. | Revenue decline of 11.0% to $73.0 million in Q3 2024. |
| Regulatory Changes | Changes in e-commerce and data privacy regulations. | Increased compliance costs and operational disruptions. |
| Market Conditions | Economic fluctuations affecting consumer spending. | Revenue down 11.0% year-over-year. |
| Operational Risks | Inventory management and supply chain challenges. | Impairment of long-lived assets of $9.8 million. |
| Financial Risks | High operational costs leading to net losses. | Net loss of $24.8 million in Q3 2024. |
| Strategic Risks | Transition from product revenue to consignment revenue. | Product revenue decreased by 45.6%. |
Future Growth Prospects for ThredUp Inc. (TDUP)
Future Growth Prospects for ThredUp Inc.
Analysis of Key Growth Drivers
The primary growth drivers for the company include:
- Product Innovations: The transition from a product revenue model to a consignment model has been significant. In the third quarter of 2024, product revenue decreased by 45.6% year-over-year, while consignment revenue increased by 3.5%.
- Market Expansions: The introduction of the consignment model to European operations began in Q3 2023, although the company is currently evaluating strategic alternatives for its European market, leading to an impairment of long-lived assets of $9.8 million.
- Acquisitions: No recent acquisitions have been reported, but strategic partnerships through the RaaS (Resale-as-a-Service) model are being leveraged to expand market presence.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections indicate a challenging landscape ahead due to recent declines. Total revenue for the nine months ended September 30, 2024, was $232.4 million, a decrease of 3.4% from the prior year. The forecast suggests continued pressure, particularly on product revenue which has seen declines of 42.8% year-over-year.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $73.0 million | $82.0 million | -11.0% |
| Consignment Revenue | $59.9 million | $57.8 million | +3.5% |
| Product Revenue | $13.2 million | $24.2 million | -45.6% |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is focusing on enhancing its technology platform to support the RaaS offering, which is expected to accelerate growth. This initiative allows brands to offer resale options directly to their customers, enhancing the overall customer experience and driving new revenue streams.
Competitive Advantages That Position the Company for Growth
The company benefits from:
- Strong Brand Recognition: As a leading player in the online resale market, it attracts a significant number of active buyers.
- High Gross Margins: The gross margin for consignment revenue was 81.0% in Q3 2024, showcasing a strong profitability model compared to product sales, which had a gross margin of 26.5%.
- Robust Technology Infrastructure: The proprietary platform facilitates efficient operations and customer engagement, critical for scaling the business.
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Resources:
- ThredUp Inc. (TDUP) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ThredUp Inc. (TDUP)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ThredUp Inc. (TDUP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.