What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-21 · 95 added, 99 removed, 427 unchanged (31% of the section changed)

11 unchanged sentences

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.

Our growth playbook centers on scalable supply engine, and helps us forge enduring relationships with our 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.

1 unchanged sentence

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

We leverage our proprietary transactional database and market insights from approximately 44.5 million item sales since our inception to deliver optimal pricing and rapid sell-through.

We leverage our proprietary transactional database and market insights from over 50 million item sales since our inception to deliver optimal pricing and rapid sell-through.

For buyers, we offer highly coveted and exclusive authenticated pre-owned luxury goods at attractive values, as well as a high-quality experience befitting the products we offer.

6 unchanged sentences

In 2025 and 2024, our overall take rate on consigned goods was 37.7% and 38.4% respectively.

The increase in our take rate was due to the update of our consignor commission structure (effective November 1, 2022).

The decrease in our take rate was due to sales mix into higher value items.

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

4 unchanged sentences

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

Shipping services revenue excludes the effect of buyer incentives and sales tax.

Shipping services revenue is recognized net of immaterial buyer incentives and excludes the effect of sales tax.

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

1 unchanged sentence

We have a global base of more than 40 million members as of December 31, 2025.

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.

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

Factors Affecting Our Performance

11 unchanged sentences

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

In 2025, our online marketplace sell-through ratio was over 80%.

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

11 unchanged sentences

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.

Our GMV from buyers who are also consignors has increased over time due to the effectiveness of our flywheel and more recently through tools to encourage flywheel behavior like the "Reconsign" module on our platform.

Buyer acquisition cost.

3 unchanged sentences

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.

Our BAC may vary from year to year, depending upon when we choose to make more significant investments.

Scaling operations and technology.

3 unchanged sentences

In addition to scaling our physical infrastructure, growing our single-SKU business operations requires 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 have invested substantially in technology to automate our operations and support growth.

We have continued to elevate our authentication operations through the combination of technology, our proprietary data, and artificial intelligence capabilities to support efficiency and quality.

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

18 unchanged sentences

AOV $ 594 $ 545 $ 523

Gross Merchandise Value ("GMV")

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

6 unchanged sentences

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")

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.

13 unchanged sentences

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

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

Shipping services revenue excludes the effect of buyer incentives and sales tax.

We recognize shipping services revenue over time as the shipping activity occurs, net of immaterial buyer incentives.

Shipping services revenue excludes the effect of sales tax.

Number of Orders

6 unchanged sentences

Our take rate reflects the high level of service that we provide to our consignors across multiple touch points and the consistently high velocity of sales for their goods.

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 our take rate structure and may implement further changes in the future.

8 unchanged sentences

Average Order Value (“AOV”)

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

AOV means the average value of all orders placed across our online marketplace and retail stores, excluding the effect of buyer incentives, shipping fees and sales taxes.

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

15 unchanged sentences

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 activit y occurs.

Shipping services revenue excludes the effect of buyer incentives and sales tax.

We recognize shipping services revenue over time as the shipping activit y occurs, net of immaterial buyer incentives.

Shipping services revenue excludes the effect of sales tax.

Cost of Revenue

52 unchanged sentences

201,589 187,737 183,793

Restructuring 196 43,462 896

Restructuring charges

Total operating expenses

2 unchanged sentences

Change in fair value of warrant liability

(35,769) (68,167) —

Gain on extinguishment of debt

40,785 4,177 —

Interest income 4,257 7,943 8,805

19 unchanged sentences

Selling, general and administrative

Restructuring

Restructuring charges

Total operating expenses

16 unchanged sentences

Consignment revenue increased by $62.5 million, or 13%, in 2025 compared to 2024.

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.

The increase in revenue was driven primarily by a 15% increase in consignment GMV in the year ended December 31, 2025.

Our take rate decreased to 37.7% from 38.4% during the year ended December 31, 2025 compared to last year due to sales mix into higher value items.

Direct Revenue

3 unchanged sentences

Direct revenue $ 91,091 $ 64,580 $ 26,511 41 %

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

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.

Direct revenue increased by $26.5 million, or 41%, in 2025 compared to 2024.

The increase was primarily driven by higher sales of items acquired from businesses, individual sellers, and from out of policy returns.

Direct revenue as a percentage of total revenue may vary from period to period primarily based on the amount of consignment revenue.

4 unchanged sentences

Shipping services revenue $ 65,877 $ 62,508 $ 3,369 5 %

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.

Shipping services revenue increased by $3.4 million, or 5%, in 2025 compared to 2024 primarily due to a 7% increase in the number of orders in the year ended December 31, 2025.

Cost of Consignment Revenue

4 unchanged sentences

As a percent of consignment revenue 11 % 11 %

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 consignment revenue increased by $2.8 million, or 5%, in 2025 compared to 2024, driven by higher consignment volume, partially offset by increased operational efficiencies.

Consignment revenue gross margin increased by 81 basis points in the year ended December 31, 2025 compared to the year ended December 31, 2024, driven by the increase in consignment revenue and increased operational efficiencies.

Cost of Direct Revenue

4 unchanged sentences

As a percent of direct revenue 78 % 86 %

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

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.

Cost of direct revenue increased by $14.9 million, or 27%, in 2025 compared to 2024.

The increase was primarily attributable to the increase in direct revenue compared to the prior year, partially offset by improved sell-through and less discounting.

Direct revenue gross margin increased by 882 basis points in the year ended December 31, 2025 compared to the year ended December 31, 2024.

This improvement was primarily the result of the increase in direct revenue and improved product margins, which were attributed to planned inventory purchases of higher value items that have higher product margins.

Cost of Shipping Services Revenue

4 unchanged sentences

As a percent of shipping services revenue 74 % 69 %

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.

Cost of shipping services revenue increased by $5.4 million, or 12%, in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a 7% increase in the number of orders and higher carrier costs.

Shipping services revenue gross margin decreased by 466 basis points in the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to higher carrier costs.

Total Gross Margin

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.

Our total gross margin remained flat in the year ended December 31, 2025 compared to the year ended December 31, 2024.

Gross margin may vary from period to period.

3 unchanged sentences

Marketing $ 63,251 $ 55,256 $ 7,995 14 %

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.

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

Marketing expense increased by $8.0 million, or 14%, in 2025 compared to 2024.

The increase was primarily due to increased advertising costs.

As a percentage of revenue, marketing expense remained flat at 9% in 2025 and 2024.

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

4 unchanged sentences

Operations and technology expense increased by $15.1 million, or 6%, in 2025 compared to 2024.

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.

The increase was driven by higher employee costs due to increased volume compared to the prior period.

As a percentage of revenue, operations and technology expense decreased to 40% in 2025 from 43% in 2024 due to an increase in consignment revenue and improved operating efficiencies in our authentication centers.

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

6 unchanged sentences

Selling, general and administrative expense increased by $13.9 million, or 7%, in 2025 compared to 2024.

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

The increase was primarily due to increased employee costs, primarily offset by a decrease in legal fees.

As a percentage of revenue, selling, general and administrative decreased to 29% in 2025 from 31% in 2024.

7 unchanged sentences

$ — $ 196 $ (196) (100) %

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.

We did not incur any restructuring charges during the year ended December 31, 2025, compared to the $0.2 million incurred during the year ended December 31, 2024.

Change in Fair Value of Warrant Liability

4 unchanged sentences

$ (35,769) $ (68,167) $ 32,398 (48) %

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).

The warrant liability is subsequently re-measured to fair value at each reporting date with changes in the fair value included in earnings.

During the year ended December 31, 2025, we incurred a loss of $35.8 million due to the increase in the fair value of the warrants outstanding at December 31, 2025.

The increase in the fair value of the warrant liability was primarily driven by an increase in the Company’s stock price during the period, which resulted in a higher valuation of the warrants.

Gain on Extinguishment of Debt

4 unchanged sentences

$ 40,785 $ 4,177 $ 36,608 100 %

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).

Gain on extinguishment of debt increased by $36.6 million, or over 100% in 2025 compared to 2024.

The increase was due to the gain recorded from the extinguishment of the 2025 Exchanged Notes (as defined below) and the issuance of the 2031 Notes during the year ended December 31, 2025 (See Note 7 — Convertible Senior Notes, Net).

Interest Income

9 unchanged sentences

Interest expense $ (27,701) $ (21,384) $ 6,317 30 %

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.

Interest expense increased by $6.3 million, or 30%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The increase was due to the full-period impact of the 2029 Notes during the year ended December 31, 2025 compared to a partial period of interest expense during the year ended December 31, 2024, as well as the issuance of the 2031 Notes in February 2025 and August 2025.

Liquidity and Capital Resources

1 unchanged sentence

We had restricted cash of $14.8 million as of December 31, 2025, consisting of cash deposited with a financial institution as collateral for our letters of credit, facility leases and credit cards.

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

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

However, during the years ended December 31, 2025 and 2024, we achieved positive cash flow from operations.

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

1 unchanged sentence

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.

In February 2024, we exchanged $145.8 million of our 2025 Notes and $6.5 million of our 2028 Notes for $135.0 million in aggregate principal amount of the 2029 Notes (the "2024 Note Exchange") (see Note 6 — Non-convertible Notes, Net).

In February 2025, we exchanged $183.3 million aggregate principal amount of the 2028 Notes for $146.7 million aggregate principal amount of our 2031 Notes (the "February 2025 Note Exchange") (see Note 7 — Convertible Senior Notes, Net).

In June 2025, the 2025 Notes matured, and the Company repaid the outstanding principal amount and accrued interest in full.

The total cash payment upon maturity was $27.2 million, which included the outstanding principal amount and accrued interest through the maturity date.

In August 2025, we exchanged $49.5 million aggregate principal amount of the 2028 Notes for $43.4 million aggregate principal amount of additional 2031 Notes (the "August 2025 Note Exchange") (see Note 7 — Convertible Senior Notes, Net).

As a result of the 2024 Note Exchange and the 2025 Note Exchanges, we significantly extended the average maturity date of our outstanding indebtedness.

We expect that operating losses from operations may continue in the foreseeable future.

We believe our existing cash and cash equivalents as of December 31, 2025 will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months.

18 unchanged sentences

$ (21,084) $ (3,500) $ (103,170)

Net Cash Used in Operating Activities

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.

Net Cash Provided by Operating Activities

During 2025, net cash provided by operating activities was $37.0 million, which consisted of a net loss of $41.8 million, adjusted by $88.1 million of non-cash inflows and cash outflows due to a net change of $9.3 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 a decrease of $22.2 million in operating lease liabilities, an increase of $12.5 million in accounts receivable, and an increase of $9.5 million in inventory, partially offset by cash inflows due to an increase of $21.8 million

in consignor payables and an increase of $12.7 million in other accrued and current 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.

Net Cash Used in Investing Activities

During 2024, net cash used in investing activities was $25.6 million, which consisted of $14.2 million for purchases of property and equipment, net, including leasehold improvements, and $11.8 million for capitalized proprietary software costs.

Net Cash Provided by Financing Activities

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.

During 2025, net cash used in investing activities was $29.2 million, which primarily consisted of $18.6 million for purchases of property and equipment, net, including leasehold improvements, and $12.9 million for capitalized proprietary software costs.

Net Cash Used in Financing Activities

During 2025, net cash used in financing activities was $28.9 million, which primarily consisted of cash outflows of a $26.7 million repayment of our 2025 Notes and a $6.6 million payment for debt issuance costs related to the 2025 Note Exchanges, partially offset by $1.9 million cash received due to settlement of Capped Calls in conjunction with the 2025 Note Exchanges.

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.

In connection with the February 2025 Note Exchange, on February 10, 2025, we entered into private, separately negotiated transactions and 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.

In connection with the August 2025 Note Exchange, on August 20, 2025, we entered into private, separately negotiated transactions and issued an additional $43.4 million in aggregate principal amount of our 2031 Notes in exchange for $49.5 million in aggregate principal amount of our 2028 Notes.

As of December 31, 2025, we had 2028 Notes outstanding in an aggregate principal amount of $48.2 million.

As a result of the 2025 Note Exchanges, as of December 31, 2025, we had 2031 Notes outstanding in an aggregate principal amount of $190.1 million (together, the "Convertible Senior Notes").

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

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

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.

In connection with the issuance of 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 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 converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap.

For additional details related to our Convertible Senior Notes and the 2025 Note Exchanges, please see “Note 7 – Convertible Senior Notes, Net” 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.

On February 29, 2024, the Company entered into exchange agreements with certain holders (the “Exchange Holders”) of its then outstanding 2025 Notes and 2028 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 the 2029 Notes 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).

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 (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.

4 unchanged sentences

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

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.

21 unchanged sentences

CEO separation benefits and transition costs (2)

782 159 2,499

Payroll taxes on employee stock transactions 1,454 371 195

Legal settlements (3)

600 1,340 456

Restructuring (4)

196 43,462 896

Gain on extinguishment of debt (5)

(40,785) (4,177) —

Change in fair value of warrant liability (6)

35,769 68,167 —

One time expenses (7)

1 unchanged sentence

Adjusted EBITDA $ 42,104 $ 9,308 $ (55,169)

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

(1) As of December 31, 2025 and December 31, 2024, interest expense includes $6.0 million and $4.8 million of PIK interest, respectively, 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 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.

(3) 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.

(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.

(4) 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 in connection with the savings plan implemented in February 2023.

(5) The gain on extinguishment of debt for the year ended December 31, 2025 reflects the difference between the carrying value of the 2025 Exchanged Notes and the fair value of the 2031 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.

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

(6) The change in fair value of warrant liability for the years ended December 31, 2025 and December 31, 2024 reflects the remeasurement of the Warrants issued by the Company in connection with the 2024 Note Exchange in February 2024.

(7) One time expenses for the year ended December 31, 2025 consist of employee severance costs associated with a departmental reorganization, including certain executives, recorded within Marketing and Selling, General and Administrative expenses on the statements of operations.

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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As of December 31, 2025, our cash requirements related to our Convertible Senior Notes that are included on our balance sheet and the related periodic interest payments were $281.3 million, of which $8.1 million is expected to be paid within the next 12 months.

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.

Our 2028 Notes will mature on March 1, 2028, unless earlier redeemed or repurchased by the Company or converted and our 2031 Notes will mature on February 15, 2031, unless earlier redeemed or repurchased by the Company or converted.

• Non-convertible Notes.

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Our cash requirements related to certain other non-cancellable purchase commitments associated primarily with software services and hosting arrangements, were approximately $17.2 million, of which approximately $9.2 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.

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.

2025 Note Exchanges

During the year ended December 31, 2025 , we accounted for the February 2025 Note Exchange and August 2025 Note Exchange as debt extinguishments and recorded gains on extinguishment of $37.1 million and $3.7 million, respectively, as the difference between the carrying amount of the respective Exchanged Notes and the fair value of the 2031 Notes issued in the respective 2025 Note Exchanges.

The fair value of the 2031 Notes is considered a critical estimate because of the judgment required in the valuation methods utilized and in assessing an interest rate that would be available to the Company for a similar debt instrument.

2024 Note Exchange

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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.

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 judgment 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.

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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.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise requested under this item.

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