What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-03-01 · 140 added, 145 removed, 386 unchanged (42% of the section changed)

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

For consignors, we offer concierge at-home consultation and pickup as well as virtual consultations via online face-to-face platforms.

For consignors, we offer concierge at-home consultation and pickup as well as virtual consultations.

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

Our Neighborhood and Flagship Stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts.

Our retail stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts.

Consignors may also utilize our complimentary shipping directly to our authentication centers.

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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, 2023, we have cumulatively paid approximately $4.0 billion in commissions to our consignors.

Our GMV decreased to $1.7 billion in 2023 from $1.8 billion in 2022.

Our AOV increased to $523 in 2023

Table of C ontents

from $483 in 2022.

In 2023 and 2022, our total revenue was $549.3 million and $603.5 million, respectively, representing a decrease of 9% in 2023.

In 2023 and 2022, our gross profit was $376.3 million and $348.7 million, respectively, representing an increase of 8% in 2023.

Impact of Public Health Emergencies and Macroeconomic Conditions on Our Business

The impact of public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases such as the COVID-19 pandemic has affected, and may continue to affect our business and results of operations.

During any public health emergency, our top priority is to protect the health and safety of our employees and our customers.

Macroeconomic uncertainty and inflationary pressure have and may in the future drive lower demand for the end customer and increase costs of labor and shipping.

Business Developments

On February 15, 2023, we implemented a savings plan intended to reduce operating expenses by (a) terminating approximately 230 employees, representing approximately 7% of our workforce, and (b) reducing our real estate presence (see Note 10 — Leases, for further information).

We may not be able to fully realize the cost savings and benefits initially anticipated from the savings plan, and the expected costs may be greater than expected.

See “Risk Factors—Risks Related to Our Business and Industry— The savings plan we implemented in February 2023 may not result in anticipated savings, could resul t in total costs and expenses that are greater than expected and could disrupt our business.

Other Factors Affecting Our Performance

Other key business and marketplace factors, independent of the health and economic impact of public health emergencies and macroeconomic conditions, impact our business.

Factors Affecting Our Performance

To analyze our business performance, determine financial forecasts and help develop long-term strategic plans, we focus on the factors described below.

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We grow our supply both by attracting new consignors and by creating lasting engagement with existing consignors.

We generate leads for new consignors principally through our advertising activity.

We convert those leads into active consignors through the activities of our sales professionals, who are trained and incentivized to identify and source high-quality, coveted luxury goods from consignors.

Our sales professionals form a consultative relationship with consignors and deliver a high-quality, rapid consigning experience.

Our existing relationships with consignors allow us to unlock valuable supply across multiple categories, including women’s fashion, men’s fashion, and jewelry and watches.

We generate leads for new consignors through our advertising activity and through the activity of our sales team.

Our sales professionals, who are trained and incentivized to identify and source high-quality, coveted luxury goods, convert those leads into active consignors.

Our sales professionals form a consultative relationship with consignors and deliver a high-quality, full-service consigning experience.

Our existing relationships with consignors allow us to unlock valuable supply across multiple categories, including women’s fashion, men’s fashion, jewelry and watches.

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 2023 and 2022, our marketplace sell-through ratios were 92% and 91%, respectively.

In 2024, our online marketplace sell-through ratio was approximately 85%.

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

In 2023 and 2022, repeat consignors accounted for approximately 84% and 83% of GMV, respectively.

In 2024 and 2023, repeat consignors accounted for over 80% of GMV.

Buyer growth and retention .

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We measure our success in attracting and retaining buyers by tracking buyer satisfaction and purchasing activity over time.

We have experienced higher than average buyer satisfaction, as evidenced by our buyer net promoter score of 51 in 2023, and compared to our online shopping industry average of 45 according to NICE Satmetrix U.S.

Consumer 2023 data.

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 below shows trends in purchasing activity for buyer cohorts for each year beginning in 2017.

Each coho rt 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 2023.

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

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

We believe there is substantial opportunity to grow our business by having buyers also become consignors and vice versa.

As of December 31, 2023, 15% of our buyers had become consignors and 49% of our consignors had become buyers.

As of December 31, 2024, 15% of our buyers during the last twelve months also consigned items, and 48% of our consignors also made purchases.

We believe this approach effectively captures the flywheel effect that strengthens the network dynamics of our online marketplace.

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 below shows the percentage of GMV in each year from buyers who have participated as both buyers and consignors on our online marketplace.

GMV attributable to consigning activity of such buyers is not included.

Our GMV from buyers who are also consignors has increased over time due to the effectiveness of our flywheel.

Buyer acquisition cost.

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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 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

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.

Our BAC has declined over time, which has been driven by improving acquisition efficiencies.

Scaling operations and technology.

To support the future growth of our business, we continue to invest in physical infrastructure, talent and technology.

To support the future growth of our business, we continue to invest in physical infrastructure, technology and talent.

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

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As a result of this seasonality, we typically see stronger AOV and more rapid sell-through in the fourth quarter.

Table of C ontents

Key Financial and Operating Metrics

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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.

While GMV is the primary driver of our revenue, it is not a proxy for revenue or revenue growth.

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

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.

While GMV is the primary driver of our revenue, it is not a proxy for revenue or revenue growth (see Note 2—Summary of Significant Accounting Policies—Revenue Recognition—Consignment Revenue).

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.

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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.

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Shipping Services Revenue

Shipping services revenue is generated from shipping fees we charge to buyers for outbound shipping and handling activities related to delivering purchased items to our buyers.

We also generate shipping services revenue from the shipping fees for consigned products returned by our buyers to us within policy.

We also generate shipping services revenue from the shipping

fees for consigned products returned by our buyers to us within policy.

We recognize shipping services revenue over time as the shipping activity occurs.

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In November 2022, we updated our take rate structure with the goals of optimizing take rate, limiting consignment of lower value items, and increasing supply of higher value items.

We continue to assess the impact of our updated take rate structure and may implement further changes in the future.

Previously, our take rate was primarily based on a tiered commission structure for consignors, where the more they sell the higher percent commission they earn.

Consignors typically started at a 55% commission (which equals a 45% take rate for us) and could earn up to a 70% commission.

In addition, there were commission exceptions from the tiered commission structure based on category and price point of the items.

We continue to assess our take rate structure and may implement further changes in the future.

Our take rate structure is primarily based on the category and the price point of the sold items.

For example, under the updated take rate structure, consignors can earn 20% commission on all sold items under $100, and up to 90% commission on watches sold for over $7,500.

For example, under the current take rate structure, consignors can earn 20% commission on all sold items under $100, and up to 90% commission on watches sold for over $7,500.

We launched a pricing tool for our consignors that provides detail on commission rates for specific categories and other aspects of the take rate structure.

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Our AOV is a key driver of our operating leverage.

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Components of our Operating Results

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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.

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

Operations and Technology

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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 continue to decrease as a percentage of revenue.

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

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

Table of C ontents

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

Restructuring

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The assumptions used such as projected future cash flows, discount rates, and determination of appropriate market comparable, are subject to volatility and may differ from actual results.

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

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We expect to maintain this full valuation allowance for the foreseeable future.

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Results of Operations

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Restructuring 196 43,462 896

Legal settlement 1,340 456 13,389

Total operating expenses

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Loss from operations (56,495) (166,293) (189,163)

Change in fair value of warrant liability

Gain on extinguishment of debt

Interest income 7,943 8,805 3,191

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Net loss $ (134,202) $ (168,472) $ (196,445)

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Year Ended December 31,

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Restructuring

Legal settlement — — 3

Total operating expenses

Loss from operations (8) (31) (32)

Change in fair value of warrant liability

Gain on extinguishment of debt

Interest income 1 2 1

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(In thousands, except percentage)

Consignment revenue, net $ 415,572 $ 384,979 $ 30,593 8 %

Consignment revenue

$ 473,396 $ 415,572 $ 57,824 14 %

Consignment revenue increased by $57.8 million, or 14%, in 2024 compared to 2023.

The increase in revenue was driven primarily by an increase in consignment GMV, and improvement in our take rate during the year ended December 31, 2023.

Overall GMV decreased by 5% during the year ended December 31, 2023.

The decrease in GMV is driven by a decrease in direct GMV, partially offset by the increase in consignment GMV.

Returns and cancellations as a percentage of GMV for the year ended December 31, 2023 was 26.4%, compared to 26.5% for the year ended December 31, 2022.

The increase in revenue was driven primarily by an increase in consignment GMV, a 4% increase in our AOV and a 240 basis point improvement in our take rate during the year ended December 31, 2024.

Overall GMV increased by 6% during the year ended December 31, 2024.

The increase in GMV is driven by an increase in consignment GMV, slightly offset by a decrease in direct GMV.

Our take rate increased to 38.4% from 37.5% during the year ended December 31, 2024 compared to last year due to the update of our consignor commission structure which went into effect on November 1, 2022.

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Direct Revenue

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Direct revenue decreased by $14.6 million, or 18%, in 2024 compared to 2023.

The decrease was primarily driven by our planned actions to minimize vendor-purchased company-owned inventory as the margin profile of our direct revenue is lower than consignment revenue.

The decrease was primarily driven by our planned actions to rebalance vendor-purchased company-owned inventory as the margin profile of our direct revenue is lower than consignment revenue.

We recognize direct revenue upon shipment of the purchased good to the buyer.

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Shipping services revenue $ 62,508 $ 54,572 $ 7,936 15 %

Shipping services revenue decreased by $5.2 million, or 9%, in 2023 compared to 2022 primarily due to a decrease in the number of orders.

Shipping services revenue increased by $7.9 million, or 15%, in 2024 compared to 2023 primarily due to an increase in the standard shipping fee per order.

Cost of Consignment Revenue

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As a percent of consignment revenue 11 % 14 %

Cost of consignment revenue increased by $1.2 million, or 2%, in 2023 compared to 2022.

The increase was primarily attributable to the 8% increase in consignment revenue compared to the prior year, partially offset by efficiencies in our cost leverage.

Consignment revenue gross margin increased by 81 basis points in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the 8% increase in consignment revenue.

Cost of consignment revenue decreased by $4.3 million, or 7%, in 2024 compared to 2023, driven by a decrease in overhead costs, including packaging, employee compensation related expenses and website hosting fees, partially offset by costs directly associated with the increase in consignment revenue.

Consignment revenue gross margin increased by 262 basis points in the year ended December 31, 2024 compared to the year ended December 31, 2023, driven by the improvement in take rate and the reduction in overhead costs.

Cost of Direct Revenue

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Cost of direct revenue decreased by $18.5 million, or 25%, in 2024 compared to 2023.

The decrease was primarily attributable to the 50% decrease in direct revenue compared to the prior year as a result of our planned actions to minimize vendor-purchased company-owned inventory.

Direct revenue gross margin decreased by 467 basis points in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by strategic liquidation of company owned inventory sold at discounted prices, which resulted in the sell through of inventory that was previously reserved.

The decrease was primarily attributable to the 18% decrease in direct revenue compared to the prior year as a result of our planned actions to rebalance vendor-purchased company-owned inventory.

Direct revenue gross margin increased by 750 basis points in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by strategic liquidation of company owned inventory sold at discounted prices, which resulted in the sell through of inventory that was previously reserved.

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

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Cost of Shipping Services Revenue

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As a percent of shipping services revenue 69 % 74 %

Cost of shipping services revenue decreased by $15.6 million, or 28%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

The decrease is primarily due to a decrease in the number of orders, and due to realizing benefits of cost savings initiatives.

Shipping services revenue gross margin increased by 1,963 basis points in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to decreased costs related to cost savings initiatives.

Cost of shipping services revenue increased by $2.8 million, or 7%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to increased cost per shipment.

Shipping services revenue gross margin increased by 497 basis points in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the increase in the standard shipping fee per order.

Total Gross Margin

Our total gross margin increased by 1,072 basis point in the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily driven by the increase in higher margin consignment revenue and decrease in lower margin direct revenue.

Our total gross margin increased by 603 basis points in the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily driven by the increase in higher margin consignment revenue and decrease in lower margin direct revenue.

Gross margin may vary from period to period.

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Marketing expense decreased by $3.0 million, or 5%, in 2024 compared to 2023.

The decrease was primarily due to a decrease in advertising costs and lower employee compensation related expenses due to a decrease in headcount.

As a percentage of revenue, marketing remained flat at 11% in the years ended December 31, 2023 and 2022.

The decrease was primarily due to a decrease in advertising costs.

As a percentage of revenue, marketing expense decreased to 9% in 2024 from 11% and 2023.

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

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Operations and technology $ 260,827 $ 257,041 $ 3,786 1 %

Operations and technology expense decreased by $21.6 million, or 8%, in 2023 compared to 2022.

The decrease was primarily due to lower employee compensation related expenses due to a decrease in headcount related to the savings plan implemented during 2023.

The decrease was also attributed to lower rent and lease related expenses due to retail store closures related to the savings plan implemented during 2023.

As a percentage of revenue, operations and technology expense increased to 47% in 2023 from 46% in 2022 due to a decrease in direct revenue.

Operations and technology expense increased by $3.8 million, or 1%, in 2024 compared to 2023.

The increase was primarily due to higher employee costs and software and service expenses, partially offset by a decrease in stock based compensation expense.

As a percentage of revenue, operations and technology expense decreased to 43% in 2024 from 47% in 2023 due to an increase in consignment revenue.

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 decrease as a percentage of revenue over the longer term.

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Selling, General and Administrative

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Selling, general and administrative $ 187,737 $ 183,793 $ 3,944 2 %

Selling, general and administrative expense decreased by $12.4 million, or 6%, in 2023 compared to 2022.

The decrease was due to lower employee compensation expenses due to a decrease in headcount related to the savings plan implemented during 2023.

The decrease was also attributed to lower rent and lease related expenses due to office closures related to the savings plan implemented during 2023.

As a percentage of revenue, selling, general and administrative remained flat at 33% in the years ended December 31, 2023 and 2022 .

Selling, general and administrative expense increased by $3.9 million, or 2%, in 2024 compared to 2023.

The increase was primarily due to increased employee compensation related expenses due to an increase in headcount compared to the prior period.

As a percentage of revenue, selling, general and administrative decreased to 31% in 2024 from 33% in 2023.

These expenses may vary from period to period as a percentage of revenue.

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

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

Restructuring

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$ 196 $ 43,462 $ (43,266) (100) %

Restructuring increased by $42.6 million, or over 100%, in 2023 compared to 2022.

The increase was primarily due to charges to reduce our real estate presence and operating expenses through the closure of certain retail and office locations and workforce reduction.

Restructuring consisted of right-of-use asset impairment charge of $31.1 million, leasehold improvements impairment charge of $8.6 million, employee severance of $3.0 million, and other related charges of $1.5 million, partially offset by a $0.7 million gain on lease terminations.

As of the date of this annual report, the real estate reduction plan we implemented in February 2023 is substantially complete.

Interest Income

Year Ended December 31, Change

Restructuring decreased by $43.3 million, or over 100%, in 2024 compared to 2023.

We incurred charges to reduce our real estate presence and operating expenses through the closure of certain retail and office locations and workforce reduction during 2023, which were substantially completed during 2023.

Change in Fair Value of Warrant Liability

Year Ended December 31,

2024 2023 Amount %

(In thousands, except percentage)

Interest income $ 8,805 $ 3,191 $ 5,614 176 %

Interest income increased by $5.6 million, or over 100%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase was primarily driven by higher average interest rates.

Interest Expense

Year Ended December 31, Change

Change in fair value of warrant liability

$ (68,167) $ — $ (68,167) 100 %

The fair value of warrant liability increased by $68.2 million, or 100% in 2024 compared to 2023.

The Company issued warrants to acquire an aggregate of up to 7,894,737 shares (subject to adjustment in accordance with the terms of the warrants) of the Company's common stock as part of the 2024 Note Exchange (as defined below) in February 2024.

The change was due to the unrealized loss on the change in fair value of the warrant liability from the issuance date to December 31, 2024 (See Note 6 — Non-convertible Notes, Net).

Gain on Extinguishment of Debt

Year Ended December 31,

2024 2023 Amount %

(In thousands, except percentage)

Interest expense $ (10,701) $ (10,472) $ 229 2 %

Interest expense increased by $0.2 million, or 2%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Other Income, Net

Gain on extinguishment of debt

$ 4,177 $ — $ 4,177 100 %

Gain on extinguishment of debt increased by $4.2 million, or 100% in 2024 compared to 2023.

The increase was due to the gain recorded from the extinguishment of the Exchanged Notes (as defined below) and the issuance of the 2029 Notes (See Note 6 — Non-convertible Notes, Net).

Interest Income

Year Ended December 31, Change

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(In thousands, except percentage)

Other income, net $ — $ 171 $ (171) -100 %

Table of C ontents

Other income decreased by $0.2 million, or 100%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

Legal Settlement

Interest income $ 7,943 $ 8,805 $ (862) (10) %

Interest income decreased by $0.9 million, or 10%, in the year ended December 31, 2024 compared to the year ended December 31, 2023 due to lower average cash balances.

Interest Expense

Year Ended December 31, Change

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(In thousands, except percentage)

Legal settlement $ 1,340 $ 456 $ 884 194 %

Legal settlement expense increased by $0.9 million, or over 100%, in 2023 compared to 2022.

This increase was primarily due to settlements of two former employees’ individual claims and California Private Attorney General Actions initiated against the Company.

Interest expense $ (21,384) $ (10,701) $ 10,683 100 %

Interest expense increased by $10.7 million, or 100%, for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to the contractual interest expense related to the 2029 Notes issued in February 2024.

Liquidity and Capital Resources

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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 our 3.00% Convertible Senior Notes due 2025 (the “2025 Notes”) and the related capped call transactions.

In March 2021, we received net proceeds of $244.5 million from our 1.00% Convertible Senior Notes due 2028 (the “2028 Notes” and together with the 2025 Notes, the "Notes”) and the related capped call transactions.

On February 29, 2024, we entered into an exchange agreement with certain holders of our Notes (the “Holders” and such agreement the “Exchange Agreement”).

Under the terms of the Exchange Agreement the Holders agreed to exchange $145,751,000 aggregate principal amount of the 2025 Notes and $6,480,000 aggregate principal amount of the 2028 Notes for $135,000,000 aggregate principal amount of our new senior notes due 2029 (the “2029 Notes”, and such transaction the “Exchange”).

Additionally, in connection with the Exchange, we issued warrants to acquire an aggregate of up to 7,894,737 shares of the Company’s common stock to the Holders.

The Exchange was consummated on February 29, 2024.

The 2029 Notes bear cash interest at a rate of 8.75% per annum payable semi-annually in arrears and bear interest at a rate of 4.25% payable in kind.

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

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

In February 2024, we exchanged $145.8 million of the 2025 Notes and $6.5 million of the 2028 Notes for $135.0 million in aggregate principal amount of the 2029 Notes (the “2024 Note Exchange”).

As a result of the 2024 Note Exchange, we significantly extended the average maturity date of our outstanding indebtedness (see Note 6 - Non-convertible Notes, Net).

On February 10, 2025, we entered into an exchange agreement with certain holders of our 2028 Notes (the “2025 Exchange Agreement”).

Under the terms of the 2025 Exchange Agreement, certain holders of the 2028 Notes agreed to exchange $183.3 million aggregate principal amount of the 2028 Notes for $146.7 million aggregate principal amount of our new 2031 Notes (the “2025 Notes Exchange”).

The 2031 Notes bear cash interest at a rate of 4.00% per annum payable semi-annually in arrears and mature on February 15, 2031.

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, 2024 will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months.

Our primary capital requirements include contractual obligations related to our operating leases, payments on our debt, certain non-cancellable contracts and compensation and benefits payments to support our strategic plans.

The remaining 2025 Notes not exchanged will mature on June 15, 2025, unless earlier redeemed or repurchased by the Company or converted and the remaining 2028 Notes not exchanged will mature on March 1, 2028, unless earlier redeemed or repurchased by the Company or converted.

Our future capital requirements and the adequacy of available funds will depend on many factors, including, but not limited to, those set forth under the heading “Risk Factors” in this Annual Report, and 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.

Our primary capital requirements include contractual obligations related to our operating leases, our indebtedness, certain non-cancellable contracts and compensation and benefits payments to support our strategic plans.

Our future capital requirements will depend on many factors, including, but not limited to, those set forth under the heading “Risk Factors” in this Annual Report, and 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.

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If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be adversely affected.

In April 2021, the Company entered into a loan and security agreement (“Revolving Credit Agreement”) with a lender, to provide a revolving line of credit of up to $50 million.

As of June 30, 2023, $0 had been drawn on the Revolving Credit Agreement, and the credit facility has expired and was not renewed.

Table of C ontents

The following table summarizes our cash flows for the periods indicated.

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(4,759) 226 4,101

Net (decrease) increase in cash and cash equivalents

Net decrease in cash, cash equivalents and restricted cash

$ (3,500) $ (103,170) $ (124,378)

Net Cash Used in Operating Activities

During 2023, net cash used in operating activities was $61.3 million, which consisted of a net loss of $168.5 million, adjusted by non-cash charges of $136.3 million and cash outflows due to a net change of $29.1 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 a decrease of $26.5 million in operating lease liabilities, a decrease of $4.4 million in consignor payables, an increase of $7.0 million in accounts receivable, and an increase of $3.1 million in other assets, partially offset by cash inflows due to a decrease of $10.9 million in inventory driven by a decrease in direct purchases of inventory from vendors.

During 2024, net cash provided by operating activities was $26.8 million, which consisted of a net loss of $134.2 million, adjusted by non-cash charges of $158.2 million and cash inflows due to a net change of $2.8 million in our operating assets and liabilities.

The net change in our operating assets and liabilities was primarily the result of cash inflows due to an increase of $11.5 million in consignor payables and an increase of $13.1 million in other accrued and current liabilities, partially offset by cash outflows due to a decrease of $20.9 million in operating lease liabilities.

Our primary uses of cash in operating activities include operating costs such as operating lease obligations, compensation and benefits, marketing, and other expenditures necessary to support our business growth.

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Net Cash Provided by Financing Activities

During 2023, net cash provided by financing activities was $0.2 million, which primarily consisted of $0.9 million of proceeds from the issuance of common stock related to the Company's employee stock purchase plan, partially offset by $0.7 million of taxes related to restricted stock units vesting.

Table of C ontents

During 2024, net cash used in financing activities was $4.8 million, which primarily consisted of cash outflows of $5.3 million for debt issuance costs related to the 2024 Note Exchange and $1.6 million of taxes related to restricted stock units vesting, partially offset by $1.4 million of proceeds from the issuance of common stock related to the Company's employee stock purchase plan.

Convertible Senior Notes

As of December 31, 2024, we had 2025 Notes outstanding in an aggregate principal amount of $26.7 million and 2028 Notes outstanding in an aggregate principal amount of $281.0 million.

A portion of the net proceeds from the sale of the 2025 Notes and the 2028 Notes was used to fund the net cost of entering into the capped call transactions described below.

The 2025 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, at an initial conversion rate of 56.2635 shares of our common stock per $1,000 principal amount of the 2025 Notes, which is equivalent to an initial conversion price of approximately $17.77 per share of our common stock.

The initial conversion price of the 2025 Notes represents a premium of approximately 27.5% over the $13.94 closing price of our common stock on June 10, 2020.

The 2028 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, at an initial conversion rate of 31.4465 shares of our common stock per $1,000 principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $31.80 per share of our common stock.

The initial conversion price of the notes represents a premium of approximately 32.5% over the $24.00 closing price of our common stock on March 3, 2021.

In connection with the the 2025 Notes and the 2028 Notes, we entered into privately negotiated capped call transactions, with certain of the initial purchasers or their affiliates.

The capped call transactions cover, subject to anti-dilution adjustments, the number of shares of common stock underlying the 2025 Notes and the 2028 Notes sold in the offering.

The capped call transactions are generally expected to reduce potential dilution to our common stock upon any conversion of the notes and/or offset any cash payments we are required to make in excess of the principal amount of the 2025 Notes and the 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap.

The cap price of the capped call transactions related to the 2025 Notes was initially $27.88 per share, which represents a premium of 100.0% over the closing price of our common stock of $13.94 per share on June 10, 2020, and is subject to certain adjustments under the terms of the capped call transactions.

The cap price of the capped call transactions related to the 2028 Notes was initially $48.00 per share, which represents a premium of 100.0% over the closing price of our common stock of $24.00 per share on March 3, 2021, and is subject to certain adjustments under the terms of the capped call transactions.

On February 10, 2025, pursuant to the 2025 Notes Exchange, we issued $146.7 million in aggregate principal amount of the 2031 Notes in exchange for $183.3 million in aggregate principal amount of our 2028 Notes.

The 2031 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, at an initial conversion rate of 95.5795 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $10.46 per share of our common stock.

The initial conversion price represents a premium of approximately 26.9% over the $8.24 closing price of our common stock on February 10, 2025.

As a result of the 2025 Notes Exchange, we have $97.7 million outstanding in aggregate principal amount of the 2028 Notes as of the date hereof.

We did not receive any cash proceeds from the issuance of the 2031 Notes in the 2025 Notes Exchange.

For additional details related to our Convertible Senior Notes, please see “Note 7 – Convertible Senior Notes, Net” and "Note 17 — Subsequent Events" to the financial statements included in this report.

2029 Notes and Warrants

On February 29, 2024, the Company entered into exchange agreements with certain holders (the “Exchange Holders”) of its Convertible Senior Notes to exchange (i) $145.8 million in aggregate principal amount of the 2025 Notes and (ii) $6.5 million in aggregate principal amount of the 2028 Notes (together, the “Exchanged Notes”) for $135.0 million in aggregate principal amount of the Company’s 4.25%/8.75% PIK/Cash Senior Secured Notes due 2029 (the “2029 Notes”), pursuant to an indenture.

The 2029 Notes bear interest at a rate of 13.00% per annum, consisting of cash interest at a rate of 8.75% per annum payable semi-annually in arrears and payment in-kind interest at a rate of 4.25% per annum payable semi-annually.

The 2029 Notes will mature on the earlier of (a) March 1, 2029 and (b) any date, if any, on or after December 1, 2027 on which (a) the aggregate principal amount of the 2028 Notes then outstanding is greater than $20 million and (b) the difference between (i) the amount of unrestricted cash and cash equivalents held by the Company and its subsidiaries (if any) as of such date of determination and (ii) the aggregate principal amount of 2028 Notes outstanding as of such date of determination is less than $75 million.

In connection with the 2024 Note Exchange, the Company issued warrants to acquire an aggregate of up to 7,894,737 shares (subject to adjustment in accordance with the terms of the warrants) of the Company’s common stock to the holders of the Exchanged Notes at an exercise price of $1.71, subject to certain cashless exercise provisions and adjustment in accordance with the terms of the warrants (the “Warrants”) (see “Note 4 – Fair Value Measurement” to the financial statements included in this report for further details on the terms of the Warrants).

For additional details related to our 2029 Notes, please see “Note 6 – Non-convertible Notes, Net” to the financial statements included in this report.

Non-GAAP Financial Measures

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

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, payroll taxes on employee stock transactions, restructuring, CEO separation benefits, CEO transition costs, and certain one-time expenses.

Adjusted EBITDA means net loss before interest income, interest expense, provision for income taxes, and depreciation and amortization, further adjusted to exclude stock-based compensation, payroll taxes on employee stock transactions, restructuring, CEO separation benefits and transition costs, gain on extinguishment of debt, change in fair value of warrant liability 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 believe are not indicative of our core operating performance.

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Interest expense (1)

21,384 10,701 10,472

Provision for income taxes 276 283 172

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29,082 34,273 46,138

CEO separation benefits (2)

CEO transition costs (3)

Payroll taxes on employee stock transactions 195 451 1,168

Legal fees reimbursement benefit (4)

CEO separation benefits and transition costs (3)

782 159 2,499

Payroll taxes on employee stock transactions 371 195 451

Legal settlements (4)

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196 43,462 896

Other expense, net

Gain on extinguishment of debt (6)

Change in fair value of warrant liability (7)

One time expenses (8)

1,672 — (1,571)

Adjusted EBITDA $ 9,308 $ (55,169) $ (112,454)

(1) As of December 31, 2024, interest expense includes $4.8 million of accrued PIK interest which is a non-cash interest expense.

PIK interest is added to the principal balance of the 2029 Notes semi-annually.

(2) The stock-based compensation expense for the year ended December 31, 2022 includes a one time charge of $1.0 million related to the modification of certain equity awards pursuant to the terms of the transition and separation agreement entered into with our founder, Julie Wainwright, in connection with her resignation as Chief Executive Officer ("CEO") on June 6, 2022 (the "Separation Agreement").

(2) The CEO separation benefit charges for the year ended December 31, 2022 consist of base salary, bonus and benefits for the 2022 fiscal year, as well as an additional twelve months of base salary and benefits payable to Julie Wainwright pursuant to the Separation Agreement.

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(3) The CEO transition charges for the year ended December 31, 2022 consist of general and administrative fees, including legal and recruiting expenses, as well as retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.

The CEO transition charges for the year ended December 31, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation in 2022.

(4) During the year ended December 31, 2022, we received insurance reimbursement of $1.4 million related to a legal settlement expense.

During the year ended December 31, 2021, we received insurance reimbursement of $4.3 million related to legal fees for a certain matter, of which $3.1 million were applied to legal expenses for the year ended December 31, 2021.

(3) The CEO separation benefits and transition costs for the year ended December 31, 2024 consist of severance and benefits payable to John Koryl pursuant to his separation agreement.

The CEO separation benefits and transition costs for the year ended December 31, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation in 2022.

The CEO separation benefits and transition costs for the year ended December 31, 2022 consist of separation benefits for the 2022 fiscal year, as well as general and administrative fees, including legal and recruiting expenses, as well as retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.

(4) The legal settlement charges for the year ended December 31, 2023 reflect legal settlement expenses arising from the settlement of two former employees’ individual claims and California Private Attorney General Actions initiated against the Company on behalf of such former employees and those similarly situated.

The legal settlement charges for the year ended December 31, 2021 reflect legal settlement expenses arising from the settlement of a putative shareholder class action and derivative case.

(5) Restructuring for the year ended December 31, 2023 consists of impairment of right-of-use assets and property and equipment, employee severance charges, gain on lease terminations, and other charges, including legal and transportation expenses.

Restructuring for the year ended December 31, 2022 consists of employee severance payments and benefits.

Restructuring for the year ended December 31, 2021 consist of the costs to transition operations from the Brisbane warehouse to our new Phoenix warehouse.

(6) The gain on extinguishment of debt for the year ended December 31, 2024 reflects the difference between the carrying value of the Exchanged Notes and the fair value of the 2029 Notes.

(7) The change in fair value of warrant liability for the year ended December 31, 2024 reflects the remeasurement of the warrants issued by the Company in connection with the 2024 Note Exchange in February 2024.

(8) One time expenses for the year ended December 31, 2024 consists of vendor services settlement and estimated losses, net of estimated insurance recoveries related to the fire at one of our New Jersey authentication centers.

See "Note 12 - Commitments and Contingencies" in the notes to the audited financial statements for disclosure regarding the event.

One time expense for the year ended December 31, 2022 primarily consists of insurance reimbursement of $1.4 million related to a legal settlement expense.

Material Contractual and Other Obligations

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Our 2025 Notes will mature on June 15, 2025, unless earlier redeemed or repurchased by the Company or converted and our 2028 Notes will mature on March 1, 2028, unless earlier redeemed or repurchased by the Company or converted.

On February 29, 2024, we entered in an exchange agreement with certain holders of our Notes (see Note 16 – Subsequent Events for further information).

• Non-convertible Notes.

As of December 31, 2024, our cash requirements related to our Non-convertible Notes that are included on our balance sheet and the related periodic interest payments were $225.8 million, of which $12.2 million is expected to be paid within the next 12 months.

• Non-cancellable purchase commitments.

Our cash requirements related to certain other non-cancellable purchase commitments associated primarily with software services and hosting arrangements, were approximately $17.6 million, of which approximately $8.1 million is expected to be paid within the next 12 months.

On February 10, 2025, pursuant to the 2025 Notes Exchange, we issued $146.7 million in aggregate principal amount of our 2031 Notes in exchange for $183.3 million in aggregate principal amount of our 2028 Notes.

Critical Accounting Estimates

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

For the year ended December 31, 2023, we have not identified critical accounting estimates that involve a significant level of estimation uncertainty and would have a material impact on our results.

Refer to our significant accounting policies are more fully described in Note 2—Summary of Significant Accounting Policies.

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 involve a significant level of estimation uncertainty by management.

2024 Note Exchange

During the year ended December 31, 2024 , we accounted for the 2024 Note Exchange as a debt extinguishment and recorded a gain on extinguishment as the difference between the carrying amount of the Exchanged Notes and the fair value of the 2029 Note s.

We estimated fair value of the 2029 Notes by using projected future payments of interest and principal discounted at the effective yield.

The fair value of the 2029 Notes is considered a critical estimate because the judgment in the valuation methods utilized and assessing an interest rate that would be available to us for a similar debt instrument.

The Warrants are accounted for as liabilities under ASC 480 as the warrants may be required to be settled in cash in case of a fundamental change, which could occur outside of our control.

The fair value of the warrant liability is estimated using the Black-Scholes-Merton option-pricing model, which incorporates inherent uncertainties and generally requires significant judgement including factors such as the risk-free interest rate and the expected volatility of the price of the underlying stock.

Changes in fair value are recognized on our statements of operations.

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.

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Quantitative and Qualitative Disclosures About Market Risk.

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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