What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-03-01 · 237 added, 263 removed, 222 unchanged (69% of the section changed)

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Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in the section titled “Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

We are the world’s largest online marketplace for authenticated, consigned luxury goods.

We are the world’s largest online marketplace for the resale of authenticated luxury goods.

We are revolutionizing luxury resale by providing an end-to-end service that unlocks supply from consignors and creates a trusted, curated online marketplace for buyers globally.

Since our inception in 2011, we have cultivated a loyal and engaged consignor and buyer base through continuous investment in our technology platform, logistics infrastructure and people.

Since our inception in 2011, we have cultivated a loyal and engaged consignor and buyer base through our investments in our technology platform, logistics infrastructure and people.

We offer a wide selection of authenticated, primarily pre-owned luxury goods on our online marketplace bearing the brands of thousands of luxury and premium designers.

We offer products across multiple categories including women’s, men’s, kids’, jewelry and watches, and home and art.

We offer products across multiple categories including women’s and men’s fashion, fine jewelry and watches, and home and art.

We have built a vibrant online marketplace that we believe expands the overall luxury market, promotes the recirculation of luxury goods and contributes to a more sustainable world.

We have transformed the luxury consignment experience by removing the friction and pain points inherent in the traditional consignment model.

For consignors, we offer White Glove in-home consultation and pickup, subject to safety requirements related to the COVID pandemic, and meetings with consignors via online face-to-face platforms, or Virtual Consultations.

For consignors, we offer concierge at-home consultation and pickup, subject to safety requirements related to the COVID pandemic, and meetings with consignors via online face-to-face platforms, or Virtual Consultations.

Consignors may also drop off items at our luxury consignment offices.

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In 2021 and 2020, our take rate on consigned goods was 34.7% and 35.7% respectively.

The decrease in our take rate was due to the higher sales mix of lower take rate categories such as handbags and jewelry, and a higher mix of consignors earning higher commissions.

The decrease in our take rate was due to the higher sales mix of lower take rate categories such as handbags and jewelry.

Additionally, we earn revenue from shipping fees and from our subscription program, First Look, in which we offer buyers early access to the items we sell in exchange for a monthly fee.

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In certain cases, such as when we accept out of policy returns from buyers, or when we make direct purchases from businesses and consignors, we take ownership of goods and retain 100% of the proceeds when the goods subsequently sell through our online marketplace or retail stores.

We generate revenue from orders processed through our website, mobile app and retail stores located in New York City, Los Angeles, Chicago, Palo Alto, Newport Beach, and San Francisco.

We generate revenue from orders processed through our website, mobile app and 19 retail locations.

Our omni-channel experience enables buyers to purchase anytime and anywhere.

We have a global base of more than 21 million members as of December 31, 2020.

We have a global base of more than 25

million members as of December 31, 2021.

We count as a member any user who has registered an email address on our website or downloaded our mobile app, thereby agreeing to our terms of service.

Through December 31, 2020, we have cumulatively paid more than $1.8 billion in commissions to our consignors.

Our GMV was $1.0 billion in 2020 and decreased 2% from 2019.

However, NMV increased slightly as returns decreased year over year primarily due to a higher mix of non-returnable items, including handbags and certain promoted items.

In 2020 and 2019, our total revenue was $299.9 million and $316.4 million, respectively, representing a decrease of 5% in 2020.

In 2020 and 2019, our gross profit was $187.6 million and $201.5 million, respectively, representing a decrease of 7% in 2020.

See “Impact of COVID-19 on our Business” below.

Through December 31, 2021, we have cumulatively paid approximately $2.5 billion in commissions to our consignors.

Our GMV increased to $1.5 billion in 2021 from $987.0 million in 2020.

Our AOV increased to $497 in 2021 from $442 in 2020.

In 2021 and 2020, our total revenue was $467.7 million and $299.9 million, respectively, representing an increase of 56% in 2021.

In 2021 and 2020, our gross profit was $273.5 million and $187.6 million, respectively, representing an increase of 46% in 2021.

Impact of COVID-19 on Our Business

In March 2020, the World Health Organization categorized the outbreak of a novel coronavirus (COVID-19) as a pandemic.

The COVID-19 pandemic has adversely impacted our business operations and results of operations in 2020 as described in more detail under “ Comparison of 2020 and 2019” below.

Operations in the Company’s authentication centers were initially limited in accordance with shelter-in-place orders resulting in operations below full capacity .

However, operations capacity was no longer limited by restrictions related to COVID-19 during the second half of 2020.

Additionally, our retail stores and luxury consignment offices were temporarily closed for varying periods of time, but have been open during the second half of 2020 .

In-person white glove consignment appointments were temporarily suspended and augmented with virtual appointments but remain an option for our consignor base.

At the beginning of the pandemic , GMV was significantly impacted due to adverse impacts of the COVID-19 pandemic on our business.

When many shelter-in-place directives went into effect in March 2020, and continuing through mid-April 2020, GMV declined approximately 45% year over year.

T he rates of decline in GMV have since improved .

For the three months ended June 30, 2020, the decrease in GMV was 20% compared to same period last year.

GMV continued to recover such that the year over year decreases were 3% and 1% for the three months ended September 30, 2020, and December 31, 2020, respectively compared to the same periods last year.

We expect the evolving COVID-19 pandemic to continue to have a materially adverse impact on our business operations and results of operations, including our net revenues, earnings and cash flows.

The negative COVID-19 impacts on our business could be a result of further spread of the disease, potential disruption in our authentication centers , further temporary closures of retail stores and luxury consignment offices, disruption to our supply acquisition, decreased productivity due to shelter-in-place orders, changes in buyer and consignor behaviors, and a slowdown in the U.S.

economy and uncertain global economic outlook.

It may result in changes in customer behaviors, including a potential reduction in consumer discretionary spending on our e-commerce site and in our retail stores.

Travel and border closures do not significantly affect our business as we operate a U.S.

focused marketplace.

For further discussion of the COVID-19 related risks facing our business, refer to the “Risk Factors” section included in Part I, Item 1A.

In the year ended December 31, 2020, the COVID-19 pandemic adversely impacted our business and results of operations.

During the year ended December 31, 2021, we experienced a return to our previous high growth.

Early in 2020, operations in our authentication centers were limited, in-person concierge consignment appointments were temporarily suspended and our retail stores and luxury consignment offices were temporarily closed due to restrictions related to COVID-19.

As these restrictions began to ease in the second half of 2020, our operations capacity was no longer limited and all of our luxury consignment offices and retail stores re-opened.

GMV decreased in 2020 from 2019 as supply and demand were negatively impacted by COVID-19 related disruptions.

In 2021, many COVID-19 related restrictions continued to ease , allowing the Company to resume in-person concierge consignment appointments.

GMV and net revenues have fully recovered, yielding year over year increases.

D uring 2021, we faced staffing challenges exacerbated by the effects of COVID-19 and we may continue to experience such challenges in 2022.

While supply has continued to come into our authentication centers, hiring challenges in late December 2021 and into early January 2022 negatively impacted the time for processing and launching products on our website.

Additionally, the effects of any new variants of COVID-19 that may arise make it difficult to predict the impact of COVID-19 on our business going forward, including any impacts on our vendors.

Throughout the pandemic, our top priority has been to protect the health and safety of our employees and our customers.

We have enforced social distancing in our authentication centers , enabled virtual consignment appointments, implemented curbside pick-up of products from our consignors, and enabled our corporate employees to work remotely.

The impact of these actions on our workforce are difficult to assess.

However, we do not believe that these remote work arrangements have adversely affected our ability to maintain our financial reporting systems, internal control over financial reporting and disclosure controls and procedures.

In addition, we do not expect to encounter any significant challenges to our ability to maintain these systems and controls.

We also do not expect the pandemic to affect the assets on our balance sheet and our ability to timely account for those assets.

We evaluate our estimates and assumptions used in preparing our financial statements on an ongoing basis .

We do not anticipate any material impairments with respect to inventory, long-lived assets, right-of-use assets or investments, or changes in accounting judgments that would have a material impact on our financial statements.

We have followed internally derived specific health-related criteria with an emphasis on comprehensive safety precautions, including frequent cleaning in our stores and social distancing.

Other Factors Affecting Our Performance

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We grow our sales by increasing the supply of luxury goods offered through our consignment online marketplace.

In the first three quarters of 2020 and for the full year 2019, approximately 60% and 80% of the products on our online marketplace sold within 30 days and 90 days, respectively.

In addition to sales velocity, we measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio.

We measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio.

Sell-through ratio is defined as GMV in the period divided by the aggregate initial value of items added to our online marketplace in the period.

In 2021 and 2020, our marketplace sell-through ratios were 94% and 99%, respectively.

Our growth has been driven in significant part by repeat sales by existing consignors concurrent with growth of our consignor base.

Our 2021 sell-through ratio normalized as demand remained strong but we were able to bring in more supply, compared to prior year.

The 2020 sell-through ratio was driven by continued high demand but reflected challenges in securing supply due to the adverse impacts of COVID-19.

Our GMV growth has been driven in significant part by repeat sales by existing consignors concurrent with growth of our consignor base.

In 2021 and 2020, repeat consignors accounted for approximately 84% and 83% of GMV, respectively.

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If we fail to continue to attract and retain our buyer base to our online marketplace, our operating results would be adversely affected.

The graph on the left shows trends in purchasing activity for buyer cohorts for each year beginning in 2014.

The first graph below shows trends in purchasing activity for buyer cohorts for each year beginning in 2015.

Each cohort represents all buyers that first purchased across our online marketplace in the designated year and the aggregate GMV purchased by such cohort for the initial year and each year thereafter.

As illustrated in the graph below, we have seen consistent retention of buyer activity across cohorts through 2019.

As illustrated in the first graph below, we have seen consistent retention of buyer activity across cohorts through 2021.

In 2020, buyer retention was impacted by the adverse impacts of COVID-19 on supply, and as a result, GMV.

The graph on the right shows the percentage of GMV in each year from our repeat buyers.

The second graph below shows the percentage of GMV in each year from our repeat buyers.

GMV from repeat buyers reflects purchases made after their initial purchase month.

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We closely monitor our efficiency in acquiring new buyers.

Our buyer acquisition cost (“BAC”) for a given period is comprised of our total advertising spend, which is principally the cost of television, digital and direct mail advertising, divided by the number of buyers acquired in that period.

Our buyer acquisition cost (“BAC”) for a given period is comprised of our total advertising spend for acquiring both buyers and consignors, which is principally the cost of television, digital and direct mail advertising, divided by the number of buyers acquired in that period.

We adjust or re-allocate our advertising in real-time to optimize our spend across channels, buyer demographics and geographies to improve our return on advertising spend.

With the exception of 2020, our BAC has declined over time driven by improving acquisition efficiencies.

In 2020, we experienced volatility with our marketing efficiency due to the adverse impacts of COVID-19 on our business, and we began to increase investments in advertising to position the company for future growth.

We also evaluate the success of our buyer acquisition activity by comparing the lifetime value of buyers (“BLTV”) attracted in a given period to the aggregate BAC in that same period.

We calculate BLTV as the cumulative gross profit attributable to purchases by such buyers.

The BLTV to BAC ratio in excess of 1.0 for all cohorts presented after 12 months reflects that each cohort has achieved payback at least equal to BAC within 1 year after acquisition.

We have observed that BLTV for buyers who are also consignors is significantly higher than for buyers who have not also consigned.

The following graphs depict the BLTV to BAC ratio by annual cohort since 2015 in the aggregate and for buyers who are also consignors, respectively.

BLTV in the graph on the right includes only gross profit attributable to transactions in which the members participated as buyers who are also consignors and does not include gross profit attributable to transactions in which the member participated as a consignor.

The 2020 cohorts in the graphs reflect buyers that first purchased across our online marketplace through June 30, 2020 for the six month period and September 30, 2020 for the three month period.

With the exception of 2020 due to

the adverse impacts of COVID-19 on our business, our BAC has declined over time driven by improving acquisition efficiencies.

Scaling operations and technology.

To support the future growth of our business, we are expanding our capacity through investments in physical infrastructure, talent and technology.

We principally conduct our intake, authentication, merchandising and fulfillment operations in our four leased authentication centers located in California and New Jersey comprising an aggregate of approximately 1 million square feet of space.

We secured leases on more than half of this space in 2018.

In October 2020, we secured a lease in Arizona for an additional authentication center.

The market for real estate to support operations centers such as ours is competitive, and we plan to continue to secure and efficiently bring online additional capacity to support future growth.

In 2017 and 2018, we opened our flagship retail stores in New York and Los Angeles.

We opened a second retail store with a smaller footprint in New York in May 2019.

We opened two additional flagship stores in 2020 in San Francisco and Chicago, and a neighborhood store in Palo Alto.

We intend to open additional retail stores in the future.

In addition to scaling our physical infrastructure, growing our single-SKU business operations and developing our SKU-depth capabilities require that we attract, train and retain highly-skilled personnel for purposes of authentication, copywriting, merchandising, pricing and fulfilling orders.

We invest substantially in technology to automate our operations and support growth.

We continue to strategically invest in technology despite the difficult operating environment resulting from COVID-19, as innovation positions us to scale and support growth once the economy normalizes.

Before the COVID-19 pandemic, we have observed trends in seasonality of supply and demand in our business.

We principally conduct our intake, authentication, merchandising and fulfillment operations in our four leased authentication centers located in Arizona and New Jersey comprising an aggregate of approximately 1.4 million square feet of space.

In October 2020, we secured a lease in Arizona for an additional authentication center and moved operations from our former Brisbane authentication center in June 2021.

We operate flagship retail stores in New York, Los Angeles, San Francisco, and Chicago.

In addition to our neighborhood stores in New York, Palo Alto, and Newport Beach, we opened seven new neighborhood stores in Greenwich, Dallas, Austin, Atlanta, Marin County, Manhasset, and Palm Beach during the year ended December 31, 2021.

In February 2022, we opened a neighborhood store in Brentwood, CA.

In addition to scaling our physical infrastructure, growing our single-SKU business operations require that we attract, train and retain highly-skilled personnel for purposes of authentication, copywriting, merchandising, pricing and fulfilling orders.

We have invested substantially in technology to automate our operations and support growth, including proprietary machine learning technology to support efficiency and quality.

We continue to strategically invest in technology, as innovation positions us to scale and support growth into the future.

Historically, we have observed trends in seasonality of supply and demand in our business.

Specifically, our supply increases in the third and fourth quarters, and our demand increases in the fourth quarter.

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We also incur higher operating expenses in the last four months of the year as we increase advertising spend to attract consignors and buyers and increase headcount in sales and operations to handle the higher volumes.

However, the adverse impacts of COVID-19 on our business has made it difficult to evaluate the impact of

seasonality in our business.

While we expect supply will continue to be negatively impacted by COVID-19, we believe its growth will accelerate in 2021.

Key Financial and Operating Metrics

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Year Ended December 31,

2021 2020 2019

(In thousands, except AOV and percentages)

GMV $ 1,482,432 $ 986,951 $ 1,008,344

NMV $ 1,092,353 $ 736,872 $ 731,445

Consignment and service revenue

$ 346,848 $ 247,326 $ 265,729

Direct revenue

$ 120,844 $ 52,623 $ 50,625

Number of orders 2,981 2,233 2,217

Take rate 34.7 % 35.7 % 36.3 %

Active buyers 797 649 582

Adjusted EBITDA

AOV $ 497 $ 442 $ 455

% of GMV from repeat buyers 83.9 % 83.0 % 82.6 %

GMV represents the total amount paid for goods across our online marketplace in a given period.

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Buyer incentives apply to specific buyers and consist of coupons or promotions that offer credits in connection with purchases on our platform.

We believe this is the primary measure of the scale and growth of our online marketplace and the key indicator of the health of our consignor ecosystem.

In addition to revenue, we believe this is an important measure of the scale and growth of our online marketplace and a key indicator of the health of our consignor ecosystem.

We monitor trends in GMV to inform budgeting and operational decisions to support and promote growth in our business and to monitor our success in adapting our business to meet the needs of our consignors and buyers.

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See Note 2—Summary of Significant Accounting Policies—Revenue Recognition—Consignment and Service Revenue.

NMV, or net merchandise value, represents the value of sales from both consigned goods and our inventory net of platform-wide discounts less product returns and order cancellations and excludes the effect of buyer incentives, shipping fees and sales tax.

Net merchandise value ("NMV") represents the value of sales from both consigned goods and our inventory net of platform-wide discounts less product returns and order cancellations and excludes the effect of buyer incentives, shipping fees and sales tax.

We believe NMV is a supplemental measure of the scale and growth of our online marketplace.

Like GMV, NMV is not a proxy for revenue or revenue growth.

Consignment and Service Revenue

Consignment and service revenue is generated from the sale of pre-owned luxury goods through our online marketplace and retail stores on behalf of consignors.

We retain a portion of the proceeds received, which we refer to as our take rate.

We recognize consignment revenue, net of allowances for product returns, order cancellations, buyer incentives and adjustments.

Additionally, we generate revenue from shipping fees we charge to buyers.

We also generate service revenue from subscription fees paid by buyers for early access to products.

Direct Revenue

Direct revenue is generated from the sales of company-owned inventory.

We recognize direct revenue upon shipment of the goods sold, based on the gross purchase price net of allowances for product returns, buyer incentives and adjustments.

Number of Orders

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Average order value (“AOV”) means the average value of all orders placed across our online marketplace and retail stores, excluding shipping fees and sales taxes.

Our focus on luxury goods across multiple categories drives a consistently high AOV.

Our focus on luxury goods across multiple categories drives a consistently strong AOV.

Our AOV reflects both the average price of items sold as well as the number of items per order.

Our high AOV is a key driver of our operating leverage.

Our AOV is a key driver of our operating leverage.

Percent of GMV from Repeat Buyers

Repeat buyers represents buyers who made a purchase in the months subsequent to the month they made their initial purchase across our online marketplace and retail stores.

GMV from repeat buyers reflects purchases made after their initial purchase month.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA means net loss before interest income, interest expense, other (income) expense net, provision for income taxes, and depreciation and amortization, further adjusted to exclude stock-based compensation and certain one-time expenses.

Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance.

Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our business strategies and for business planning purposes.

Adjusted EBITDA may not be comparable to similarly titled metrics of other companies.

Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we believe are not indicative of our core operating performance.

Adjusted EBITDA is a non-GAAP measure.

Please see the section titled “Selected Financial and Other Data—Non-GAAP Financial Measures” for information regarding our use of Adjusted EBITDA and its reconciliation to net loss.

Adjusted EBITDA has certain limitations as the measure excludes the impact of certain expenses that are included in our statements of operations that are necessary to run our business and should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.

The following table presents a reconciliation of net loss to Adjusted EBITDA for 2021, 2020, and 2019:

Year Ended December 31,

2021 2020 2019

(In thousands)

Adjusted EBITDA Reconciliation:

Net loss $ (236,107) $ (175,832) $ (98,429)

Add (deduct):

Depreciation and amortization

23,531 18,845 13,408

Stock-based compensation

48,802 24,322 7,711

Payroll taxes on employee stock transactions (1)

Legal fees reimbursement benefit (2)

Compensation expense related to stock sales by current and former employees

Legal settlements (3)

13,389 1,110 —

Restructuring charges (4)

Abandoned offering costs

Donation to TRR Foundation

Interest income

(365) (2,518) (4,593)

Interest expense

21,531 5,264 616

Other (income) expense, net

(23) 169 2,102

Provision for income taxes

Adjusted EBITDA $ (126,908) $ (128,025) $ (74,719)

(1) We exclude employer payroll tax expense related to employee stock-based transactions because we believe that excluding this item provides meaningful supplemental information regarding our operating results.

In particular, this expense is dependent on the price of our common stock at the time of vesting or exercise, which may vary from period to period, and other factors that are beyond our control and do not correlate to the operation of the business.

When evaluating the performance of our business and making operating plans, we do not consider these items.

Similar charges were not adjusted in prior periods as they were not material.

(2) During the year ended December 31, 2021, we received insurance reimbur sement of $4.3 million related to legal fees for a certain matter, of which $3.1 million have been applied to the current year's legal expenses.

(3) Includes the financial terms of the stipulation of settlement of the putative shareholder class action and the final settlement of the derivative case.

On November 5, 2021, a stipulation of settlement was filed with the federal court to settle the putative shareholder class action filed against us, our officers and directors, and the underwriters for the Company’s initial public offering.

The stipulation of settlement is subject to preliminary and final approval by the court.

The financial terms of the settlement stipulation provide that the Company will pay $11.0 million within thirty (30) days of the later of preliminary approval of the settlement or plaintiff’s counsel providing payment instructions.

Also on November 5, 2021, a stipulation of settlement was filed in the derivative case filed against us as a nominal defendant and our officers and directors as defendants.

The stipulation of settlement for the derivative case was finally approved by the court on February 11, 2022.

The stipulation of settlement for the derivative case was preliminarily approved on December 8, 2021, and the $0.5 million was paid within 30 days of preliminary approval, or on January 7, 2022.

(4) The restructuring charges for the year ended December 31, 2021 comprise of the costs to transition operations from the Brisbane warehouse to our new Phoenix warehouse.

The restructuring charges for the year ended December 31, 2020 consist of COVID-19 related costs including employee severance.

Components of our Operating Results

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We generate direct revenue from the sale of items that we own, which we refer to as our inventory.

We generally acquire inventory when we accept out of policy returns from buyers.

Additionally, we make direct purchases from businesses and consignors and our mix of direct purchases as a percentage of total GMV could increase in 2021.

We recognize direct revenue upon shipment based on the gross purchase price paid by buyers, net of allowances for product returns, buyer incentives and adjustments.

We generally acquire inventory when we accept out of policy returns from buyers, and when we make direct purchases from businesses and consignors.

We recognize direct revenue upon shipment based on the gross purchase price paid by buyers for goods, net of allowances for product returns, buyer incentives and adjustments.

Cost of Revenue

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Marketing expense also includes personnel-related costs for employees engaged in these activities.

We expect these expenses to continue to decrease as a percentage of revenue.

Operations and Technology

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As such, operations and technology expense also includes amortization of capitalized technology development costs.

While we have implemented cost saving measures to address the challenges from the COVID-19 pandemic, we expect operations and technology expense to increase in future periods to support our growth, including bringing on additional authentication centers and continuing to invest in automation and other technology improvements to support and drive efficiency in our operations.

We expect operations and technology expense to increase in future periods to support our growth, including continuing to invest in automation and other technology improvements to support and drive efficiency in our operations.

These expenses may vary from year to year as a percentage of revenue, depending primarily upon when we choose to make more significant investments.

We expect these expenses to decrease as a percentage of revenue over the longer term.

We expect these expenses to continue to decrease as a percentage of revenue.

Selling, General and Administrative

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Selling, general and administrative expense also includes allocated facilities and overhead costs and professional services, including accounting and legal advisors.

We expect to increase selling, general and administrative expense as we grow our infrastructure to support operating as a public company and the overall growth in our business.

While these expenses may vary from year to year as a percentage of revenue, we expect them to decrease as a percentage of revenue over the longer term.

Income Tax Provision

We expect these expenses to continue to decrease as a percentage of revenue.

Legal Settlement

Legal settlement expense primarily includes actual or estimated losses related to legal settlements when they become probable and estimable.

Provision for Income Taxes

Our provision for income taxes consists primarily of state minimum taxes in the United States.

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Year Ended December 31,

2021 2020 2019

(In thousands)

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Direct revenue

120,844 52,623 50,625

Total revenue

467,692 299,949 316,354

Cost of revenue:

Cost of consignment and service revenue

92,788 66,976 73,579

Cost of direct revenue

101,427 45,406 41,252

Total cost of revenue

194,215 112,382 114,831

Gross profit 273,477 187,567 201,523

Operating expenses:

62,749 54,813 47,734

Operations and technology

235,829 163,808 143,231

Selling, general and administrative

176,418 140,652 110,663

Legal settlement 13,389 1,110 —

Total operating expenses

488,385 360,383 301,628

Loss from operations (214,908) (172,816) (100,105)

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Interest expense (21,531) (5,264) (616)

Other expense, net

Other income (expense), net 23 (169) (2,102)

Loss before provision for income taxes (236,051) (175,731) (98,230)

Provision for income taxes 56 101 199

(1) See Note 2 to our financial statements for an explanation of the immaterial correction of errors in 2019 related to inventory associated with commissions paid outside of our normal payment cycle to consignors for returned merchandise which have been corrected within consignment revenue.

Net loss $ (236,107) $ (175,832) $ (98,429)

Year Ended December 31,

2021 2020 2019

Consignment and service revenue

74 % 82 % 84 %

Direct revenue

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Total cost of revenue

Gross profit 58 63 64

Operating expenses:

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Selling, general and administrative

Legal and administrative 3 — —

Total operating expenses

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Interest expense (5) (2) —

Other expense, net

Other income (expense), net — — (1)

Loss before provision for income taxes (51) (58) (31)

Provision for income taxes — — —

Net loss (50) % (58) % (31) %

Comparison of 2021 and 2020

Consignment and Service Revenue

Year Ended December 31,

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

Consignment and service revenue, net $ 346,848 $ 247,326 $ 99,522 40 %

Consignment and service revenue decreased by $18.4 million, or 7%, in 2020 compared to 2019.

The decrease in revenue was driven primarily by a 2% decrease in GMV resulting from the adverse effects of COVID-19 on supply, as well as a decrease from 36.3% to 35.7% in our take rate due to the higher sales mix of lower take rate categories such as handbags and jewelry, and a higher mix of consignors earning higher commissions.

Supply was negatively impacted in certain major markets, due to the impact of COVID-19 closures and disruptions, contributing to the decrease in GMV.

NMV increased as returns decreased year over year primarily due to a higher mix of non-returnable items, including handbags and certain promoted items.

While NMV increased slightly, revenue was lower year over year due to the decrease in our take rate and increased buyer incentives, particularly in the fourth quarter.

As part our effort to accelerate our GMV recovery, buyer incentives increased by $9.7 million, or 73%, to $23.0 million in 2020 from $13.3 million in 2019, which also contributed to the decrease in revenue.

Consignment and service revenue increased by $99.5 million, or 40%, in 2021 compared to 2020.

The increase in revenue was driven primarily by a 50% increase in GMV, partially offset by an increase in returns and cancellations year over year.

GMV growth during the year ended December 31, 2021 was driven by a 33% increase in orders and a 12% increase in AOV, due to an increased market demand for online luxury goods.

We believe this growth is driven by heightened interest in luxury resale due to increasing consumer desire for more affordable, accessible luxury goods in a sustainable circular economy.

Returns and cancellations as a percentage of GMV for the year ended December 31, 2021 was 26.3%, compared to 25.3% for the year ended December 31, 2020.

This increase was primarily due to a normalization of customer return patterns during the year ended December 31, 2021.

Our take rate decreased to 34.7% from 35.7% during the year ended December 31, 2021 compared to last year due to the higher sales mix of high-value items which typically have a lower take rate, such as watches and fine jewelry.

Direct Revenue

Year Ended December 31,

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

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Direct revenue increased by $68.2 million, or 130%, in 2021 compared to 2020.

The increase was driven in part by the higher sales mix of company-owned inventory, including a focus on aged inventory.

The sales of our owned-inventory drove the increase in direct revenue both on an absolute basis and as a percent of total revenue.

The increase was primarily driven by the higher sales mix of company-owned inventory due to direct purchases from businesses and consignors, along with higher sales of aged inventory primarily resulting from out of policy returns.

We recognize direct revenue on a gross basis upon shipment of the purchased good to the buyer.

Direct revenue has been increasing as a percentage of total revenue in recent quarters as a result of a higher sales mix of company-owned inventory due to direct purchases from businesses and consignors.

Direct revenue as a percentage of total revenue may vary from period to period primarily based on the growth of consignment and service revenue, as well as the amount of company-owned inventory we purchase.

We anticipate direct revenue to decrease as a percentage of total revenue over the longer term.

Cost of Consignment and Service Revenue

Year Ended December 31,

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

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As a percent of consignment and service revenue 27 % 27 %

Cost of consignment and service revenue decreased by $6.6 million, or 9%, in 2020 compared to 2019.

The decrease was primarily due to lower revenue in connection with COVID-19 related business interruptions.

Gross margin increased by 0.6% in 2020 compared to 2019.

The increase was primarily attributable to overall improvement in shipping costs relating to more favorable terms with our shipping carrier, partially offset by decreases in our take rate and increased buyer incentives .

Cost of consignment and service revenue increased by $25.8 million, or 39%, in 2021 compared to 2020.

The increase was primarily attributable to increases in shipping costs driven by fulfillment of a larger number of orders and credit card fees driven by growth in our business.

Consignment and service revenue gross margin remained flat in the year ended December 31, 2021 compared to the year ended December 31, 2020.

Cost of Direct Revenue

Year Ended December 31,

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

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As a percent of direct revenue 84 % 86 %

Cost of direct revenue increased by $4.2 million, or 10%, in 2020 compared to 2019, consistent with the increase in direct revenue.

Gross margin decreased by 4.8% in 2020 compared to 2019, primarily due to lower product margins on sales of discounted aged inventory.

As a percentage of direct revenue, cost of direct revenue increased to 86% in 2020 from 81% in 2019.

Year Ended December 31,

Cost of direct revenue increased by $56.0 million, or 123%, in 2021 compared to 2020.

Direct revenue gross margin increased by 2 percentage points in 2021 compared to 2020, primarily driven by favorable product margins.

The margin profile of our direct revenue is lower than consignment and service revenue.

Our total gross margin decreased by 5% in 2021 compared to 2020 due to the increase in direct revenue as a percentage of total revenue.

As we continue to make direct purchases from vendors, gross margin may vary from period to period.

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

Marketing $ 62,749 $ 54,813 $ 7,936 14 %

Marketing expense increased by $7.9 million, or 14%, in 2021 compared to 2020.

The increase was primarily due to increases in advertising costs and marketing program expenses as we seek to grow the number of buyers and consignors using our online marketplace.

As a percent of revenue, marketing expense increased to 18% in 2020 from 15% in 2019 due to the significant adverse impact of COVID-19 on our revenue.

The increase was primarily due to increases in advertising costs and marketing program expenses as we seek to optimize the digital experience on our online marketplace and grow the number of buyers and consignors.

As a percentage of revenue, marketing expense decreased to 13% in 2021 from 18% in 2020.

These expenses may vary from period to period as a percentage of revenue, depending primarily upon our marketing investments.

We expect these expenses to decrease as a percentage of revenue over the longer term.

Operations and Technology

Year Ended December 31,

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

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Operations and technology expense increased by $72.0 million, or 44%, in 2021 compared to 2020.

The increase was primarily due to investments to support our growth and drive long-term operational efficiencies, including investments to grow our talent including authentication and technology expertise and support our retail operations.

The opening of our retail stores in San Francisco, Chicago, and Palo Alto contributed to the increase in expense.

As a percent of revenue, operations and technology expense increased to 55% in 2020 from 45% in 2019.

This increase is primarily due to higher personnel-related costs, including stock-based compensation expense compared to lower revenue as a result of COVID-19’s negative impact on revenue.

While we have implemented cost saving measures to address the challenges from the COVID-19 pandemic, we continued to invest in automation, consignor services including virtual appointments and self-scheduling, and other technology improvements to support and drive efficiency in our operations and to support our growth.

The increase was primarily due to higher employee compensation related expenses, including stock-based compensation expense, due to increased headcount to support our growth, and higher occupancy costs due to our additional retail stores and the transition of operations to our authentication center in Arizona.

The increase was also driven by an increase in travel expense, software fees, as well as restructuring costs associated with the transition of operations from our Brisbane authentication center to our Arizona authentication center during the year ended December 31, 2021.

Stock-based compensation increased due to increased headcount, as well as an increase in long-term equity incentive awards.

As a percentage of revenue, operations and technology expense decreased to 50% in 2021 from 55% in 2020.

These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments.

We expect these expenses to continue to decrease as a percentage of revenue over the longer term.

Selling, General and Administrative

Year Ended December 31,

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

1 unchanged sentence

Selling, general and administrative expense increased by $35.8 million, or 25%, in 2021 compared to 2020.

The increase was due to higher personnel-related costs, including stock-based compensation expense and investments to support the growth of our sales organization and scale our general and administrative functions as necessary to operate as a public company including accounting, consulting and legal fees, insurance and software costs.

Additionally, there were COVID-19 related charges of $6.2 million inclusive of higher payroll expenses, personal protective equipment, deep cleanings, medical personnel at our facilities and transportation services.

As a percent of revenue, selling, general and administrative expense increased to 47% in 2020 from 35% in 2019 as we invested in the growth of the sales organization and expanded our administrative functions.

The increase was due to higher employee compensation expenses, including stock-based compensation expense, an increase in software fees, partially offset by an insurance reimbursement for legal expenses.

Stock-based compensation increased due to increased headcount, as well as an increase in long-term equity incentive awards.

As a percentage of revenue, selling, general and administrative expense decreased to 38% in 2021 from 47% in 2020.

We expect these expenses to decrease as a percentage of revenue over the long term.

Quarterly Results of Operations and Key Metrics

The following tables set forth certain unaudited financial data for each fiscal quarter for the periods indicated in dollars and as a percentage of revenue.

The information for each quarter has been prepared on a basis consistent with our audited financial statements included in this Annual Report and reflect all adjustments that we consider necessary for a fair presentation of the financial information contained in those statements.

Our historical results are not necessarily indicative of the results that may be expected for the full year or any other period in the future.

The following quarterly financial information should be read in conjunction with our audited financial statements and related notes included in this Annual Report.

Quarter Ended

September 30,

(In thousands)

Consignment and service

Direct revenue

Total revenue

Cost of revenue:

Cost of consignment and

service revenue

Cost of direct revenue

Total cost of revenue

Operating expenses:

Operations and technology

Selling, general and

administrative

Total operating expenses

Loss from operations

Interest income

Interest expense

Other income (expense), net

Loss before provision for income

Provision (benefit) for income taxes

Accretion of redeemable

convertible preferred stock

to redemption value

Net loss attributable to common

Net loss per share attributable to

common stockholders, basic and

Shares used to compute net loss

per share attributable to common

stockholders, basic and diluted

(1) During the quarter ended December 31, 2020, the Company identified an overstatement of consignment and service revenue and inventory, net as a result of an error in accounting for inventory associated with commissions paid outside of our normal payment cycle to consignors for returned merchandise.

In accordance with Financial Accounting Standards Board Accounting Standards Codification 250, Accounting Changes and Error Corrections, we evaluated the materiality of the errors from quantitative and qualitative perspectives, and concluded that the errors were immaterial to the Company’s prior period interim and annual financial statements.

Since these errors were not material to any prior period interim or annual financial statements, no amendments to previously filed interim or annual periods reports are required.

Consequently, the Company has adjusted for these errors by revising its historical financial periods presented herein for the quarterly periods from March 31, 2019 through September 30, 2020.

The correction of these immaterial errors resulted in the following:

(a) Consignment and service revenue reflects a decrease of $0.3 million, $0.1 million, $0.2 million, $1.1 million, $0.2 million, $0.2 million, and $0.2 million for the interim periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, June 30, 2019, and March 31, 2019, respectively.

(2) Including the adjustment noted in (1)(a) above, consignment and service revenue for the quarter ended December 31, 2019, includes the correction of certain out of period errors in the quarter ended December 31, 2019 resulting in a net increase in consignment and service revenue of $2.0 million, of which, $1.4 million related to periods prior to 2019.

Quarter Ended

September 30,

Consignment and

service revenue

Direct revenue

Total revenue

Cost of revenue:

Cost of consignment

and service revenue

Cost of direct revenue

Total cost of

Operating expenses:

Operations and

Selling, general and

administrative

Total operating

Loss from operations

Interest income

Interest expense

Other income (expense),

Loss before provision for

Provision (benefit) for

Key Financial and Operating Metrics

(In thousands, except AOV and percentages)

Number of Orders

Active Buyers

Adjusted EBITDA

The following table presents a reconciliation of Adjusted EBITDA from net loss:

Quarter Ended

September 30,

(In thousands)

Adjusted EBITDA

Reconciliation:

Add (deduct):

Depreciation and amortization

Stock-based compensation

Year Ended December 31, Change

2021 2020 Amount %

(In thousands, except percentage)

Legal settlement $ 13,389 $ 1,110 $ 12,279 1,106 %

Restructuring charges

Abandoned offering costs

Donation to TRR Foundation

Compensation expense related

to stock sales by current and

former employees

Interest income

Interest expense

Other (income) expense, net

Provision (benefit) for income

Adjusted EBITDA

Legal settlement expense increased by $12.3 million, or over 100%, in 2021 compared to 2020.

This increase was primarily due to the $11.0 million legal settlement for the shareholder class action filed against us and $0.5 million of attorney's fees to be paid as part of the settlement for the related derivative case filed against us.

Liquidity and Capital Resources

As of December 31, 2020, we had cash, cash equivalents and short-term investments of $354.9 million and an accumulated deficit of $529.5 million.

Since inception, we have generated negative cash flows from operations and have primarily financed our operations through equity financings.

As of December 31, 2021, we had cash and cash equivalents of $418.2 million and an accumulated deficit of $768.1 million.

Since inception, we have generated negative cash flows from operations and have primarily financed our operations through equity and convertible debt financings.

In July 2019, we received net proceeds of $315.5 million upon completion of our IPO on July 2, 2019.

In June 2020, we received net proceeds of $143.3 million from the issuance of 3% convertible senior notes due 2025 and the related cap call transactions.

We expect that operating losses and negative cash flows from operations could continue in the foreseeable future as we navigate the challenges presented by COVID-19 and invest in expansion activities in the longer term.

At the beginning of the pandemic, we implemented measures to realign our cost structure and preserve liquidity including deferring certain capital investments, renegotiating certain vendor contracts, and reducing payroll costs, including through headcount reductions, employee furloughs and reduced executive salaries.

With improving GMV trends we began to strategically reinvest in growth;

however, we continue to monitor opportunities to strengthen our financial flexibility and preserve liquidity.

We believe our existing cash and cash equivalents and short-term investments as of December 31, 2020 will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months.

Our future capital requirements will depend on many factors, including, but not limited to, our ability to grow our revenues and the timing of investments to support growth in our business, such as the build-out of new authentication centers and, to a lesser extent, the opening of new retail stores.

In June 2020, we received net proceeds of $143.3 million from the issuance of the 2025 Notes and the related capped call transactions.

In March 2021, we received net proceeds of $244.5 million from the 2028 Notes and the related capped call transactions.

We expect that operating losses and negative cash flows from operations could continue in the foreseeable future.

We believe our existing cash and cash equivalents as of December 31, 2021 will be sufficient to meet our requirements and plans for cash for at least the next 12 months.

Our future capital requirements will depend on many factors, including, but not limited to, our ability to grow our revenues and the timing of investments to support growth in our business, such as the build-out of our authentication centers and, to a lesser extent, the opening of new retail stores.

We may seek additional equity or debt financing.

4 unchanged sentences

Year Ended December 31,

2021 2020 2019

(In thousands)

1 unchanged sentence

Operating activities

$ (142,151) $ (134,419) $ (54,490)

Investing activities

(43,437) 178,004 (215,356)

Financing activities

Net increase in cash, cash equivalents and

restricted cash

252,913 152,815 378,665

Net increase in cash, cash equivalents and restricted cash

$ 67,325 $ 196,400 $ 108,819

Net Cash Used in Operating Activities

During 2021, net cash used in operating activities was $142.2 million, which consisted of a net loss of $236.1 million, adjusted by non-cash charges of $108.3 million and cash outflows due to a net change of $14.3 million in our operating assets and liabilities.

The net change in our operating assets and liabilities was primarily the result of cash outflows due to increases of $20.4 million in inventory and a $12.8 million decrease in operating lease liability, partially offset by cash inflows due to increases of $8.0 million in other accrued and current liabilities and $4.2 million in accrued consignor payable.

Net Cash Provided by (Used in) Investing Activities

During 2020, net cash provided by investing activities was $178.0 million, which consisted of $278.2 million in proceeds from maturities of short-term investments, offset by $73.3 million for purchases of short-term investments, $18.3 million for purchases of property and equipment, net, including leasehold improvements, and $8.7 million for capitalized proprietary software costs.

The net change in our operating assets and liabilities was primarily the result of cash outflows due to increases of $28.7 million in inventory driven by an increase in direct purchases of inventory from vendors, a decrease of $15.3 million in operating lease liability, and a decrease of $10.0 million in accounts payable, partially offset by cash inflows due to increases of $30.9 million in other accrued and current liabilities and $14.0 million in accrued consignor payable.

Net Cash Used in Investing Activities

During 2021, net cash used in investing activities was $43.4 million, which consisted of $37.5 million for purchases of property and equipment, net, including leasehold improvements, and $10.0 million for capitalized proprietary software costs, partially offset by $4.0 million of proceeds from maturities on short-term investments.

Net Cash Provided by Financing Activities

During 2020, net cash provided by financing activities was $152.8 million, which primarily consisted of proceeds of $166.3 million from the issuance of the convertible senior notes, net of issuance costs, $8.9 million from the exercise of stock options and warrants partially offset by $22.5 million for the purchase of capped calls related to the Notes issuance.

During 2021, net cash provided by financing activities was $252.9 million, which primarily consisted of proceeds of $278.2 million from the issuance of the 2028 Notes, net of issuance costs, $6.0 million from the exercise of stock options, and $2.3 million from the issuance of common stock related to the Company's employee stock purchase plan (the "ESPP"), partially offset by $33.7 million for the purchase of capped calls related to the 2028 Notes issuance.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2020:

The following table summarize s our material cash requirements from our known contractual obligations and other commitments as of December 31, 2021:

Payment Due by Period

Total Less Than

(In thousands)

1 unchanged sentence

Convertible Senior Notes, including interest 496,800 8,050 16,100 180,838 291,812

Unconditional endowment grant (1)

Capital leases

Non-cancellable purchase commitments

In January 2018, we entered into an agreement with the University of Arizona Foundation to endow a gemology degree program in the Department of Geosciences.

We committed to endow a total of $2.0 million, of which $0.5 million remained to be funded as of December 31, 2020.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Other commitments (1)

13,008 7,446 5,562 — —

Total $ 709,165 $ 42,932 $ 77,928 $ 237,687 $ 350,618

(1) Consists of non-cancelable purchase commitments to third-party vendors with terms of greater than one year and purchase commitments on inventory, as well as a non-cancelable purchase obligation for marketing activities.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

2 unchanged sentences

Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Revenue Recognition

Consignment and Service Revenue

We generate the majority of our revenue from consignment services for the sale of pre-owned luxury goods on behalf of consignors through our online consignment marketplace and retail stores.

For consignment sales, we retain a portion of the proceeds received, which we refer to as our take rate, and remit the balance to the consignors.

We recognize consignment revenue upon purchase of the goods by the buyer based on our take rate, net of allowances for product returns, order cancellations, buyer incentives and adjustments.

Direct Revenue

We also generate revenue from the sales of company-owned inventory.

We recognize direct revenue upon shipment of the goods sold through our online marketplace and retail stores, based on the gross purchase price net of allowances for product returns, buyer incentives and adjustments.

While our significant accounting policies are more fully described in Note 2—Summary of Significant Accounting Policies, we believe that the accounting estimates discussed below relate to the more significant areas involving management’s judgments and estimates.

For our operating leases, we record a lease liability based on the present value of the lease payments at lease inception, using the applicable incremental borrowing rate.

We estimate the incremental borrowing rate based on our own estimated synthetic credit rating, corresponding yield curve, and the terms of each lease at the lease commencement date.

Given the lack of a directly observable Company specific credit rating, there is significant judgment in the methodology used to develop the incremental borrowing rates, including the development of the synthetic credit rating.

Management also typically utilizes third party valuation specialists to provide market yield curves associated with our estimated synthetic credit rating.

The incremental borrowing rates we used ranged from

2.3% to 9.3% depending on the lease terms.

The sensitivity of the estimate is mainly due to the judgement used in the development of the synthetic credit rating and yield curves at lease inception.

Convertible Senior Notes

In recording our convertible debt instruments, we separately account for the liability and equity components by allocating proceeds between the liability component and the embedded conversion options, or equity components.

We allocate the debt components of the instruments on the basis of the estimated fair value of a similar liability that does not have an associated convertible feature and the remaining proceeds are allocated to the equity component.

The allocation was performed in a manner that reflects our non-convertible debt borrowing rate for similar debt.

The fair value borrowing rate is considered a critical estimate because the judgment in assessing an interest rate that would be available to the company of a similar debt instrument that does not have a conversion feature.

For the 2025 Notes with a principal amount of $172.5 million, an interest rate of 5.67% was used to compute the initial fair value of the liability component of $152.7 million.

For the 2028 Notes with a principal amount of $287.5 million, an interest rate of 7.18% was used to compute the initial fair value of the liability component of $191.3 million.

Recent Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies” to our financial statements included elsewhere in this Annual Report on Form 10-K for recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K.

JOBS Act Accounting Election

We were an “emerging growth company,” as defined in the JOBS Act.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We elected to use this extended transition period to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (1) were no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial statements while we were an emerging growth company may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Because the market value of the Company’s common stock held by non-affiliates exceeded $700 million as of June 30, 2020, the Company was deemed a “large accelerated filer” under the Exchange Act ceased to be an emerging growth company as of December 31, 2020.

As a result, the Company adopted all applicable standards retrospectively as of January 1, 2020 in this Annual Report on Form 10-K.

Quantitative and Qualitati ve Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business, including fluctuations in interest rates.

Such fluctuations to date have not been significant.

As of December 31, 2020, we had unrestricted cash, cash equivalents and short-term investments of approximately $354.9 million, which carry a degree of interest rate risk.

A hypothetical 10% change in interest rates would not have a material impact on our financial condition or results of operations due to the short-term nature of our investment portfolio.

We do not believe that inflation has had a material effect on our business, results of operations or financial condition.

Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs.

Our inability or failure to do so could harm our business, results of operations or financial condition.

Financial Statements and Supplementary Data.

Please refer to the Financial Statements and Notes to Financial Statements in this Form 10-K which is incorporated herein by reference.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis