ThredUp Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our condensed financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our final prospectus (“Prospectus”), dated March 25, 2021, filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended (“Securities Act”). The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full calendar year or any other period. Overview thredUP is one of the world’s largest online resale platforms for women’s and kids’ apparel, shoes and accessories. Our custom-built operating platform is powering the rapidly emerging resale economy, the fastest growing sector in retail. thredUP’s platform consists of distributed processing infrastructure, proprietary software and systems and data science expertise. Since our founding in 2009, we have processed over 100 million unique secondhand items from 35,000 brands across 100 categories, saving our buyers an estimated $3.3 billion off estimated retail price. We estimate that we have positively impacted the environment by saving 1.0 billion pounds of CO2 emissions, 2.0 billion kWh of energy and 4.4 billion gallons of water simply by empowering consumers to buy and sell secondhand. thredUP’s proprietary operating platform is the foundation for our managed marketplace, where we have bridged online and offline technology to make the buying and selling of tens of millions of unique items easy and fun. The marketplace we have built enables buyers to browse and purchase resale items for women’s and kids’ apparel, shoes and accessories across a wide range of price points. Buyers love shopping value, premium and luxury brands all in one place, at up to 90% off estimated retail price. Sellers love thredUP because we make it easy to clean out their closets and unlock value for themselves or for the charity of their choice while doing good for the planet. Sellers order a Clean Out Kit, fill it and return it to us using our prepaid label. We take it from there and do the work to make those items available for resale. In 2018, based on our success with consumers directly, we extended our platform to enable brands and retailers to participate in the resale economy. A number of the world’s leading brands and retailers are already taking advantage of our Resale-as-a-Service (“RaaS”) offering. Recent Business Developments Initial Public Offering Historically, we have financed our operations primarily through private sales of equity securities and debt. Our registration statement related to the initial public offering (the “IPO”) was declared effective on March 25, 2021 by the Securities and Exchange Commission (the “SEC”), and our Class A common stock began trading on the Nasdaq Global Select Market (“Nasdaq”) on March 26, 2021. Upon the completion of our IPO, we s old 13,800,000 shares of Class A common stock (which included 1,800,000 shares that were offered and sold pursuant to the full exercise of the IPO underwriters’ option to purchase additional shares) at a price to the public of $14.00 per share. Including the option exercise, we received aggregate net proceeds of $175.5 million after deducting offering costs, underwriting discounts and commissions of $17.7 million. Immediately prior to the completion of the IPO, we filed the amended and restated certificate of incorporation, which authorized a total of 1,000,000,000 shares of Class A common stock, 120,000,000 14 shares of Class B common stock and 100,000,000 shares of undesignated preferred stock. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share. Immediately prior to the completion of the IPO, 65,970,938 shares of convertible preferred stock then outstanding were converted into an equivalent number of shares of Class B common stock and 12,889,760 shares of the outstanding existing common stock were re-classed into an equivalent number of shares of Class B common stock. 164,973 shares of the convertible preferred stock warrants were converted to an equivalent number of shares of Class B common stock warrants. COVID-19 Impact In December 2019, a novel strain of coronavirus was first identified, and in March 2020, the World Health Organization categorized COVID-19 as a pandemic. The COVID-19 pandemic has adversely impacted businesses worldwide and has impacted aspects of our business and operations. To help control the spread of the virus and protect the health and safety of our employees, we modified certain operational protocols in our distribution centers. We implemented and maintained numerous health and safety measures in our distribution centers, including mandatory temperature checks, increased paid time off for illness, distribution of personal protective equipment to employees, regular facility cleanings and comprehensive contact tracing. We have enabled social distancing by reconfiguring workstations and break rooms and staggering shifts. In March 2020, we shifted all of our corporate employees and contract engineers to a remote work model and implemented additional measures to better enable remote work. As of March 31, 2021 our remote work model remains in place. Financial Impact In the first quarter of 2020, we temporarily reduced marketing spend to take time to better understand the impact of COVID-19 on consumer demand. Later, as advertising auctions stabilized, we gradually scaled up acquisition marketing spend towards normal levels. Also, beginning in the second quarter of 2020, we chose to strategically increase discounts and incentives to encourage our existing buyer base to shop with us, as consumers generally prioritize value in times of economic uncertainty. This increase negatively impacted our year-over-year revenue growth in the second, third and fourth quarters of 2020, as discounts and incentives remained at elevated levels relative to pre-pandemic levels. Further, in 2020, we also implemented several cost saving measures to address challenges presented by the COVID-19 pandemic. For example, in April 2020, we reduced salaries by 20% for the vast majority of corporate employees and, in June 2020, we laid off staff at our three small retail stores and permanently closed our retail stores during 2020. We have since granted stock options to the corporate employees affected by the salary reductions in an amount proportional to the respective employee’s salary reduction. Beginning in January 2021, we restored full salaries for corporate employees. In the three months ended March 31, 2021, we saw increased demand, which we believe was partly related to COVID-19 recovery and re-opening efforts such as the vaccine roll out, easing of social distancing restrictions and federal stimulus legislation. We also saw increased operating expenses due to increased processing to support the increased demand experienced to date and in anticipation of accelerating demand. The growth in net loss is primarily related to the growth in operating expenses. Impact on Processing at our Distribution Centers The onset of the COVID-19 pandemic led to a significant reduction in our ability to process Clean Out Kits. As a result of the pandemic, we took actions to protect our business and our employees, which impacted our distribution center productivity, staffing and processing capacity. The existing configuration of our distribution centers pre-pandemic enabled us to implement social distancing protocols, including the reconfiguring of workstations for the safety of our employees, without reducing the total steady-state 15 throughput capacity of our facilities, however, macro-developments such as shelter-in-place orders and the federal unemployment stimulus negatively affected the rate of hiring and retention for our distribution center workforce, which impacted throughput in the first three quarters of 2020. Since those events have abated somewhat, we have seen increases in our supply throughput, which began to increase in the fourth quarter of 2020. Our supply throughput continued to improve in the first quarter of 2021, however, we still face challenges in retaining employees and have implemented compensation and benefits programs to enhance retention, which has contributed to higher costs in our Operations, Product and Technology line. As a consequence of these constraints, the number of unprocessed Clean Out Kits in our distribution centers has been elevated since March 2020, which also impacted listings of product on our marketplace. Starting in July 2020, we took measures to reduce the number of unprocessed Clean Out Kits, and also temporarily limited the number of Clean Out Kits available for sellers. As a result of this processing delay, our 2020 growth rates were negatively impacted by a lesser number of new listings on our marketplace. In the fourth quarter of 2020, the average number of unprocessed Clean Out Kits began to normalize to pre-pandemic levels, although they remain slightly elevated. During the three months ended March 31, 2021, the number of unprocessed Clean Out Kits continued to decline, when compared to the three months ended December 31, 2020, due to increased processing and as a result we added a higher volume of new listings to support the growth in orders. We have been monitoring and continue to monitor the impact of COVID-19 on our business and operations. We expect the evolving COVID-19 pandemic to continue to have an adverse impact on our business, results of operations and financial condition, including our revenue and cash flows, for at least the remainder of 2021. Due to the unknown duration and unprecedented impact of the COVID-19 pandemic and the range of national, state and local responses thereto, the related financial impact on our business could change and cannot be accurately predicted at this time. See the section titled “Risk Factors—Risks Relating to our Business and Industry—The global COVID-19 pandemic has had and may continue to have an adverse impact on our business, results of operations and financial condition.” Current Period Highlights Revenue: Total revenue was a record at $55.7 million, an increase of 15% year-over-year. Gross Profit and Margin: Gross profit totaled $39.7 million representing growth of 22% year-over-year. Gross margin expanded to 71% from 68% in the comparable quarter last year. Net Loss: GAAP net loss was $16.2 million for the first quarter 2021, compared to a GAAP net loss of $13.2 million for the first quarter 2020. Adjusted EBITDA: The Adjusted EBITDA loss was $9.1 million, which was a negative 16% of revenue. Active Buyers and Orders: Total first quarter Active Buyers of 1.29 million and Orders of 1.13 million grew 14% and 18%, respectively, over the comparable quarter last year. Key Financial and Operating Metrics We review a number of operating and financial metrics, including the following key business and non-GAAP metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. These key financial and operating metrics are set forth below for the periods presented. 16 Three months ended March 31, 2021 2020 (in thousands) Active Buyers (as of period end) 1,290 1,135 Orders 1,128 956 Net loss $ (16,171) $ (13,215) Adjusted EBITDA (1) $ (9,119) $ (10,427) (1) See below for a reconciliation of Adjusted EBITDA to net loss. Active Buyers An Active Buyer is a thredUP buyer who has made at least one purchase in the last twelve months. A thredUP buyer is a customer who has created an account in our marketplace. A thredUP buyer is identified by a unique email address and a single person could have multiple thredUP accounts and count as multiple Active Buyers. The number of Active Buyers is a key driver of revenue for our marketplace and we expect the number of Active Buyers to increase over time. Orders Orders means the total number of orders placed by buyers across our marketplace, including through our RaaS partners, in a given period, net of cancellations. We expect Orders to increase over time. Adjusted EBITDA Adjusted EBITDA means net loss adjusted to exclude depreciation and amortization, stock-based compensation expense, interest expense, change in fair value of convertible preferred stock warrant liability and provision for income taxes. We use Adjusted EBITDA to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes. We believe that Adjusted EBITDA, when taken collectively with our GAAP results, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The following table provides a reconciliation of net loss to Adjusted EBITDA (in thousands): Three months ended March 31, 2021 2020 Adjusted EBITDA Reconciliation: Net loss $ (16,171) $ (13,215) Depreciation and amortization 2,038 1,245 Stock-based compensation expense 3,498 1,442 Interest expense 559 273 Change in fair value of convertible preferred stock warrant liability 930 (172) Provision for income taxes 27 — Adjusted EBITDA $ (9,119) $ (10,427) 17 Results of Operations The following table sets forth our results of operations for the periods presented: Three months ended March 31, 2021 2020 Revenue: (in thousands) Consignment $ 44,688 $ 35,314 Product 10,992 13,001 Total revenue 55,680 48,315 Cost of revenue: Consignment 10,832 8,816 Product 5,130 6,873 Total cost of revenue 15,962 15,689 Gross profit 39,718 32,626 Operating expenses: Operations, product and technology 28,312 25,475 Marketing 15,446 13,001 Sales, general and administrative 10,638 7,433 Total operating expenses 54,396 45,909 Operating loss (14,678) (13,283) Interest and other (expense) income, net (1,466) 68 Loss before provision for income taxes (16,144) (13,215) Provision for income taxes 27 — Net loss $ (16,171) $ (13,215) Comparison of the Three Months Ended March 31, 2021 and 2020 Revenue Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Consignment revenue $ 44,688 $ 35,314 $ 9,374 27 % Product revenue 10,992 13,001 (2,009) (15) % Total revenue $ 55,680 $ 48,315 $ 7,365 15 % Consignment revenue as a % of total revenue 80 % 73 % 7 % Product revenue as a % of total revenue 20 % 27 % (7) % The $7.4 million represents a 15% increase in total revenue for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020 . This increase was primarily attributable to an 18% increase in Orders, which was primarily driven by growth in Active Buyers of 14%, and partially offset by a 2% decrease in revenue per Order over the same period. The decrease in revenue per Order was due primarily to a higher concentration of consignment sales. 18 Consignment sales result in higher gross profit margin than product sales because revenue for consignment sales is recognized net of seller payouts, whereas, for product sales, seller payouts are recognized as a component of cost of revenue, leading to different gross margin profiles between consignment sales and product sales. Consignment Revenue The $9.4 million represents a 27% increase in consignment revenue for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020 . This increase was primarily attributable to the mix shift from product to consignment sales, which resulted in consignment sales representing 80% of our total revenue mix, up from 73% in the three months ended March 31, 2020 , as well as an 18% increase in overall Orders. Product Revenue The $2.0 million, or 15%, decrease in product revenue for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020 , was primarily attributable to the mix shift from product to consignment sales. Cost of Revenue Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Cost of consignment revenue $ 10,832 $ 8,816 $ 2,016 23 % Cost of product revenue 5,130 6,873 (1,743) (25) % Total cost of revenue $ 15,962 $ 15,689 $ 273 2 % Gross profit $ 39,718 $ 32,626 $ 7,092 22 % Gross profit margin 71 % 68 % 3 % Cost of revenue as a % of total revenue 29 % 32 % (3) % Cost of consignment revenue as a % of total cost of revenue 68 % 56 % 12 % Cost of product revenue as a % of total cost of revenue 32 % 44 % (12) % Total cost of revenue as a percentage of total revenue, decreased 300 basis points from 32% for the three months ended March 31, 2020 to 29% for the three months ended March 31, 2021. The mix shift from product to consignment sales resulted in a decreased costs of revenue as a percent of revenue as consignment revenue has a higher gross margin profile than product sales due to the treatment of payout cost in cost of goods sold for product revenue. 19 Cost of Consignment Revenue Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Cost of consignment revenue $ 10,832 $ 8,816 $ 2,016 23 % As a percent of consignment revenue 24 % 25 % (1) % Consignment gross margin 76 % 75 % 1 % The $2.0 million represents a 23% increase in the cost of consignment revenue for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This increase was primarily driven by the increase in consignment revenue and increased costs listed in the below table. Consignment gross margin remained relatively consistent at 76% for the three months ended March 31, 2021 compared to 75% for the three months ended March 31, 2020. Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Outbound shipping $ 8,117 $ 6,428 $ 1,689 26 % Direct labor 1,865 1,713 152 9 % Packaging 913 494 419 85 % Other (63) 181 (244) (135) % Total change in consignment costs $ 10,832 $ 8,816 $ 2,016 23 % Cost of Product Revenue Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Cost of product revenue $ 5,130 $ 6,873 $ (1,743) (25) % As a percent of product revenue 47 % 53 % (6) % Product gross margin 53 % 47 % 6 % The $1.7 million represents a 25% decrease in the cost of product revenue for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This decrease was primarily driven by the decrease in product revenue and decreased costs listed in the below table. Product gross margin increased from 47% to 53%, primarily due to higher average selling prices per item 20 and, to a lesser extent, lower direct labor costs and lower product cost due to lower outbound shipping costs. Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Inventory costs $ 2,826 $ 3,830 $ (1,004) (26) % Outbound shipping 1,708 2,261 (553) (24) % Direct labor 392 606 (214) (35) % Packaging 204 176 28 16 % Total change in product costs $ 5,130 $ 6,873 $ (1,743) (25) % We believe that our gross profit margin will remain relatively flat in the second quarter of 2021. Operating Expenses Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Operations, product and technology $ 28,312 $ 25,475 $ 2,837 11 % Marketing 15,446 13,001 2,445 19 % Sales, general and administrative 10,638 7,433 3,205 43 % Total operating expenses $ 54,396 $ 45,909 $ 8,487 18 % Operations, product and technology as a % of total revenue 51 % 53 % (2) % Marketing as a % of total revenue 28 % 27 % 1 % Sales, general and administrative as a % of total revenue 19 % 15 % 4 % Operating expenses increased $8.5 million and 18% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, compared to $7.1 million and 22% gross profit growth in the same period. We compare operating expense growth to gross profit growth as a measure of our operating leverage given the shift in revenue mix towards primarily consignment since mid-2019. Results by operating expenses line item are discussed below. 21 Operations, Product and Technology Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Personnel-related costs $ 18,679 $ 14,813 $ 3,866 26 % Facilities and other allocated costs 6,020 6,009 11 — % Inbound shipping 3,555 4,344 (789) (18) % Other 58 309 (251) (81) % Total change in operations, product and technology expenses $ 28,312 $ 25,475 $ 2,837 11 % Operations, product and technology expense represented 51% of total revenue for the three months ended March 31, 2021, a 200 basis points decrease, compared to 53% for the three months ended March 31, 2020 . Operations, product and technology expense increased 11% in the same period, compared to 22% gross profit growth demonstrating the leverage of our business model. Personnel-related costs increased by 26% from $14.8 million for the three months ended March 31, 2020 to $18.7 million for the three months ended March 31, 2021. The increase was due to investments to support growth in our distribution center operations and increases in headcount in our corporate functions. Facilities and other allocated costs remained relatively flat at $6.0 million for both the three months ended March 31, 2020 and March 31, 2021. Inbound shipping costs decreased by 18% from $4.3 million for the three months ended March 31, 2020 compared to $3.6 million for the three months ended March 31, 2021. The decrease was due to fewer Clean Out Kits received in the three months ended March 31, 2020 compared to the three months ended March 31, 2021, as we maintained restrictions on the ability of sellers to order Clean Out Kits until the end of February 2021. Marketing Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Marketing and advertising costs $ 13,220 $ 11,327 $ 1,893 17 % Other 2,226 1,674 552 33 % Total change in marketing expense $ 15,446 $ 13,001 $ 2,445 19 % Marketing represented 28% of revenue for the three months ended March 31, 2021, a 100 basis points increase compared to 27% for the three months ended March 31, 2020 . Marketing expense increased by 19% for the period, compared to 22% gross profit growth demonstrating the leverage of our business model. Marketing and advertising costs increased by 17% from $11.3 million for the three months ended March 31, 2020, compared to $13.2 million for the three months ended March 31, 2021 due to increased efforts to attract new buyers for our marketplace. Marketing and advertising costs increased by 17%, compared to a 22% increase in gross profit. 22 Sales, General and Administrative Three months ended March 31, Change 2021 2020 Amount % (in thousands, except percentages) Personnel-related costs $ 5,536 $ 3,438 $ 2,098 61 % Professional services 1,835 1,375 460 33 % Payment processing fees 1,797 1,732 65 4 % Other 1,470 888 582 66 % Total change in sales, general and administrative costs $ 10,638 $ 7,433 $ 3,205 43 % Sales, general and administrative represented 19% of total revenue for the three months ended March 31, 2021, a 400 basis points increase, compared to 15% for the three months ended March 31, 2020 . Sales, general and administrative expense increased 43% in the period, compared to 22% gross profit growth. This increase was mainly the result of investments, primarily personnel and professional services costs, made towards scaling our business and improving our processes as we became a public company. Personnel-related costs increased from $3.4 million for the three months ended March 31, 2020, compared to $5.5 million for the three months ended March 31, 2021. The increase was primarily due to increased headcount by 10% over the same period to support growth in our corporate functions and increased stock-based compensation of $1.2 million. Professional services costs increased from $1.4 million for the three months ended March 31, 2020 compared to $1.8 million for the three months ended March 31, 2021. The increase was mainly due to an increase in accounting and consulting fees as we became a public company. We believe that our expenses in operations, product and technology, marketing, and sales, general and administrative will continue to increase in absolute dollars in the second quarter of 2021 as revenue grows and as we continue to make investments for our future growth and expand our business and infrastructure to support being a public company. Liquidity and Capital Resources As of March 31, 2021, we had cash and cash equivalents of $246.5 million and an accumulated deficit of $268.3 million. Since our founding, we have generated negative cash flows from operations and have primarily financed our operations through private sales of equity securities and debt. Additionally, we currently have a term loan facility with Western Alliance Bank . In March 2021 , we completed our IPO for aggregate net proceeds of $175.5 million, net of offering costs, underwriter discounts and commissions of $17.7 million. We expect operating losses and negative cash flows from operations to continue into the foreseeable future as we continue to invest in growing our business and expanding our infrastructure. Our primary use of cash includes operating costs such as distribution center operating costs and product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our operations and our growth. Additionally, our primary capital expenditures are related to th e set-up, automation and expansion of our distribution centers. Based upon our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months. Our forecast of the period of time through which our financial resources will be adequate 23 to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. Our future capital requirements will depend on many factors, including, but not limited to the timing of our increased distribution center automation and expansion plans to support planned revenue growth, the expansion of sales and marketing activities, the potential introduction of new offerings and new RaaS partnerships, the continuing growth of our marketplace and overall economic conditions. We may seek additional equity or debt financing. If we raise equity financing, our stockholders may experience significant dilution of their ownership interests. If we conduct an additional debt financing, the terms of such debt financing may be similar or more restrictive than our current term loan facility and we would have additional debt service obligations. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be harmed. See the section titled “Risk Factors—Risks Relating to Our Business and Industry—We may require additional capital to support business growth, and this capital might not be available or may be available only by diluting existing stockholders.” Cash Flows The following table summarizes our cash flows for the periods indicated. Three months ended March 31, 2021 2020 (in thousands) Net cash provided by (used in): Operating activities $ 1,077 $ (9,102) Investing activities (4,099) (4,673) Financing activities 185,051 (785) Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents $ 182,029 $ (14,560) Changes in Cash Flow from Operating Activities For the three months ended March 31, 2021, net cash provided by operating activities was $1.1 million, which consisted of non-cash charges of $7.9 million and a net change of $9.3 million in our operating assets and liabilities, partially offset by a net loss of $16.2 million. The change in operating assets and liabilities is primarily due to a $4.8 million increase in accrued and other current liabilities, a $4.7 million increase in accounts payable due to the timing of payments and increased operating expenses as we grow our business, and a $1.5 million increase in seller payable due to the timing of payments, partially offset by a reduction in operating lease liabilities of $1.3 million. The $4.8 million increase in accrued and other current liabilities is primarily due to an increase in accrued marketing of $2.3 million, an increase in allowance for returns of $1.2 million, and an increase in accrued compensation of $1.0 million. For the three months ended March 31, 2020, net cash used in operating activities was $9.1 million, which consisted of a net loss of $13.2 million, partially offset by non-cash adjustment of $3.4 million and a net change of $0.7 million in our operating assets and liabilities. The net change of $0.7 million in our operating assets and liabilities is largely driven by an increase of $1.8 million in accrued and other current liabilities due to the timing of vendor payables, a $1.2 million increase in seller payables, and a $1.1 million increase in accounts payable, partially offset by a 24 $2.0 million increase in other current and non-current assets, primarily due to $1.0 million increase in non-trade receivables, and a $1.2 million decrease in operating lease liabilities. Changes in Cash Flow from Investing Activities For the three months ended March 31, 2021, net cash used in investing activities was $4.1 million, which is attributable to purchases of property and equipment, primarily for automation assets for DC06 in Georgia, our newest distribution center. For the three months ended March 31, 2020, net cash used in investing activities was $4.7 million, which consisted of additional purchases of property and equipment. Changes in Cash Flow from Financing Activities For the three months ended March 31, 2021, net cash provided by financing activities was $185.1 million, which consisted mainly of $180.3 million in proceeds from the sale of Class A common stock in the IPO, net of underwriting discounts and commissions, $4.6 million in debt financing proceeds, net of issuance costs, and $1.9 million in proceeds from the exercise of common stock options, partially offset by $1.7 million in connection with the payment of offering costs for the IPO. For the three months ended March 31, 2020, net cash used in financing activities was $0.8 million, which was mainly driven by $0.7 million repayment of debt. Contractual Obligations and Commitments Other than the additional $5.0 million term loan borrowed from Western Alliance Bank in February 2021, there have been no material changes to our contractual obligations as of March 31, 2021, as compared to those disclosed as of December 31, 2020 in the Prospectus. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including any entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions. There have been no significant changes to our critical accounting policies since December 31, 2020. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Prospectus. 25 Recent Accounting Pronouncements For information on recently issued accounting pronouncements, refer to Note 2 titled “Significant Accounting Policies” to our unaudited condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements. JOBS Act Accounting Election We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Accordingly, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. 26