11 unchanged sentences
• Our continued growth depends on attracting new, and retaining existing, buyers.
−Removed: • If we fail to generate a sufficient amount of high-quality and desirable secondhand items, our business, results of operations and financial condition could be harmed.
+Added: • If we fail to attract a sufficient amount of high-quality and desirable secondhand items, our business, results of operations and financial condition could be harmed.
• Our business, including our costs and supply of secondhand items, is subject to risks associated with sourcing, itemizing, warehousing and shipping.
−Removed: • We have experienced rapid growth in many of our recent periods and those growth rates may not be indicative of our future growth.
+Added: • We have experienced growth in many of our recent periods and those growth rates may not be indicative of our future growth.
If we fail to manage our growth effectively, we may be unable to execute our business plan and our business, results of operations and financial condition could be harmed.
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• We may experience quarterly fluctuations in our results of operations due to a number of factors that make our future results difficult to predict and could cause our results of operations to fall below analyst or investor expectations.
+Added: • Our advertising activity and strategic RaaS offerings may fail to efficiently drive growth in buyers and sellers, which could harm our business, results of operations and financial condition.
• We may not be able to expand our distribution center operations, attract and retain personnel to efficiently and effectively manage the operations required to process, itemize, list, sell, pack and ship secondhand and resale items or identify and lease distribution centers in geographic regions that enable us to effectively scale our operations.
−Removed: • Material weaknesses in our internal control over financial reporting may cause us to fail to timely and accurately report our financial results or result in a material misstatement of our consolidated financial statements.
−Removed: • The global COVID-19 pandemic has had and may continue to have an adverse impact on our business, results of operations and financial condition.
• Compromises of our data security could cause us to incur unexpected expenses and may materially harm our reputation and results of operations.
−Removed: • Our advertising activity and strategic RaaS offerings may fail to efficiently drive growth in buyers and sellers, which could harm our business, results of operations and financial condition.
• The market price of our Class A common stock may be volatile or may decline regardless of our operating performance, and you could lose all or part of your investment.
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Consequently, failure to attract new buyers and to retain existing buyers could harm our business, results of operations and financial condition.
−Removed: If we fail to generate a sufficient amount of high-quality and desirable secondhand items, our business, results of operations and financial condition could be harmed.
+Added: If we fail to attract a sufficient amount of high-quality and desirable secondhand items, our business, results of operations and financial condition could be harmed.
Our success depends on our ability to cost-effectively attract high-quality secondhand items by attracting new sellers and retaining existing sellers, such that they choose ThredUp to list their items.
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Our business and results of operations are subject to global economic conditions and their impact on consumer discretionary spending, particularly in the retail market.
−Removed: Some of the factors that may negatively influence consumer spending on retail items include economic downturns, high levels of unemployment, high consumer debt levels, reductions in net worth, declines in asset values, home foreclosures and reductions in home values, fluctuating interest rates and credit availability, inflation, fluctuating fuel and other energy costs, fluctuating commodity prices and general uncertainty regarding the overall future political and economic environment.
−Removed: Economic conditions in particular regions may also be affected by natural disasters, such as earthquakes, hurricanes and wildfires;
−Removed: unforeseen public health crises, such as pandemics and epidemics, including the COVID-19 pandemic, political crises, such as Russia’s invasion of Ukraine, terrorist attacks, war and other incidents of political instability or other catastrophic events, whether occurring in the United States or internationally.
+Added: Some of the factors that may negatively influence consumer spending on retail items include economic downturns, high levels of unemployment, high consumer debt levels, reductions in net worth, declines in asset values, home foreclosures and reductions in home values, higher interest rates, limited credit availability, inflation, resumption of federal student loan payments, higher fuel and other energy costs, increased costs of logistics, higher commodity prices and general uncertainty regarding the overall future political and economic environment.
+Added: Economic conditions in particular regions may also be affected by natural disasters, such as earthquakes, extreme weather events and wildfires;
+Added: unforeseen public health crises, such as pandemics and epidemics, including the COVID-19 pandemic;
+Added: political crises, such as a government shutdown, terrorist attacks, war and other incidents of political instability, such as Russia’s invasion of Ukraine, and the Israel-Hamas war and other conflicts in the Middle East or other catastrophic events, whether occurring in the United States or internationally.
Traditionally, consumer purchases of new retail items have declined during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence.
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Such economic uncertainty and decrease in the rate of retail purchases in the primary market may slow the rate at which individuals choose to supply their secondhand items to us, which could result in a decrease of items available in our marketplaces, and may also slow the rate at which individuals choose to buy secondhand items and their value on our marketplaces, including through a relative increase in purchases in the primary market compared with the resale market.
−Removed: For instance, from the beginning of the COVID-19 pandemic and throughout 2022, we experienced an increase in the supply of Clean Out Kits with secondhand items from sellers.
−Removed: Additionally, at the onset of the COVID-19 pandemic, we experienced a reduction in operations productivity at our distribution centers as we were unable to process Clean Out Kits at our normal rate.
The presence or absence of government stimulus funding programs has had and may continue to have an impact on consumer discretionary spending and, consequently, purchases through our marketplaces.
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We believe our ability to compete depends on many factors, many of which are beyond our control, including:
−Removed: • attracting and retaining buyers and sellers and increasing the volume of secondhand items they buy and sell;
+Added: • cost effectively attracting and retaining buyers and sellers and increasing the volume of secondhand items they buy and sell;
• further developing our data science and automation capabilities;
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Many of our existing competitors have, and some of our potential competitors or potential alliances among competitors could have, substantial competitive advantages such as greater brand name recognition and longer operating histories, larger fulfillment infrastructures, greater technical capabilities, faster shipping times, lower cost shipping, broader supply, established relationships with a larger existing buyer and/or seller base, superior or more desirable secondhand items for sale or resale, greater customer service resources, greater financial, marketing, institutional and other resources than we do, greater resources to make acquisitions, lower labor and development costs, larger and more mature intellectual property portfolios, and substantially greater financial, technical and other resources than we do.
−Removed: Such competitors with greater financial and operating resources may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements and derive greater revenue and profits from their existing buyer bases, adopt more aggressive pricing policies to build larger buyer or seller bases, or respond more quickly than we can to new or emerging technologies and changes in consumer shopping behavior.
+Added: Such competitors with greater financial and operating resources may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements and derive greater revenue and profits from their existing buyer bases, adopt more aggressive pricing policies to build larger buyer or seller bases, or respond more quickly than we can to new or emerging technologies, such as artificial intelligence and machine learning and changes in consumer shopping behavior.
Potential buyers may also prefer to purchase retail items from larger online or brick-and-mortar competitors that they currently shop from, rather than a newer marketplace, regardless of offerings.
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Even if these partnerships and any future partnerships we undertake are successful, we cannot assure you that these relationships will result in increased buying and selling through our marketplaces or increased revenue.
−Removed: Conditions in our market could also change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation or strategic changes we or our competitors make in response to the COVID-19 pandemic, and it is uncertain how our market will evolve.
+Added: Conditions in our market could also change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation, and it is uncertain how our market will evolve.
These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer buyers and sellers, reduced revenue, gross profit, and gross margins, increased net losses and loss of market share.
Any failure to meet and address these factors could harm our business, results of operations and financial condition.
−Removed: We have experienced rapid growth in many of our recent periods and those growth rates may not be indicative of our future growth.
+Added: We have experienced growth in many of our recent periods and those growth rates may not be indicative of our future growth.
If we fail to manage our growth effectively, we may be unable to execute our business plan and our business, results of operations and financial condition could be harmed.
−Removed: We have experienced, and may continue to experience, rapid growth in certain recent periods, which has placed, and may continue to place, significant demands on our management and our operational and financial resources.
+Added: We have experienced, and may continue to experience, growth in certain recent periods, which has placed, and may continue to place, significant demands on our management and our operational and financial resources.
Additionally, our organizational structure is becoming more complex as we scale our operational, financial and management controls as well as our reporting systems and procedures.
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Our expansion has placed, and our expected future growth will continue to place, a significant strain on our management, marketing, operations, administrative, financial, customer support, engineering and other resources.
−Removed: If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, our employee morale, productivity and retention could suffer, which could negatively affect our brand and reputation and harm our ability to attract new buyers and sellers and to grow our business.
+Added: If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, our employee morale, productivity and retention could suffer, which could negatively affect our brand and reputation and harm our ability to cost effectively attract new buyers and sellers and to grow our business.
In addition, future growth, such as the potential expansion of our operations internationally or expansion into new categories of offerings, either organically or through acquisitions, would require significant capital expenditures, which could adversely affect our results of operations, and the allocation of valuable management resources to grow and change in these areas.
−Removed: Our revenue was $288.4 million, $251.8 million and $186.0 million for the years ended December 31, 2022, 2021, and 2020, respectively, representing annual growth of 15% and 35%, respectively.
+Added: Our revenue was $322.0 million and $288.4 million for the years ended December 31, 2023 and 2022, respectively, representing annual growth of 12% and 15%, respectively.
In future periods, we may not be able to sustain or increase revenue growth rates consistent with recent history, or at all.
−Removed: Our revenue growth has been and may continue to be affected by the COVID-19 pandemic.
We believe our success and revenue growth depends on a number of factors, including, but not limited to, our ability to:
−Removed: • attract and retain new and existing buyers and sellers and grow our supply of high-quality secondhand items for resale through our marketplaces;
+Added: • cost effectively attract and retain new and existing buyers and sellers and grow our supply of high-quality secondhand items for resale through our marketplaces;
• scale our revenue and achieve the operating efficiencies necessary to achieve and maintain profitability;
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• maintain a high level of customer service and satisfaction;
−Removed: • adapt to changing conditions in our industry and related to the COVID-19 pandemic and measures implemented to manage its spread;
+Added: • adapt to changing conditions in our industry ;
• comply with regulations applicable to our business.
3 unchanged sentences
We may not be able to achieve and maintain profitability.
−Removed: We experienced net losses of $92.3 million, $63.2 million, and $47.9 million in the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: We experienced net losses of $71.2 million and $92.3 million in the years ended December 31, 2023 and 2022, respectively.
We expect to continue to incur net losses and we may not achieve or maintain profitability in the future.
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• fluctuations in capacity as we expand our operations;
−Removed: • our success in engaging existing buyers and sellers and attracting new buyers and sellers;
+Added: • our success in engaging existing buyers and sellers and cost effectively attracting new buyers and sellers;
• our ability to meet the expectations of sellers that we will process their Clean Out Kits in a timely manner;
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• the timing of the grant or vesting of equity awards to employees, directors, contractors or consultants;
−Removed: • pricing pressure as a result of competition, economic conditions, shipment delays or otherwise, including as a result of the effects of the COVID-19 pandemic;
+Added: • pricing pressure as a result of competition, economic conditions, shipment delays or otherwise;
• costs and timing of expenses related to the acquisition of talent, technologies, intellectual property or businesses, including potentially significant amortization costs and possible write-downs;
• public health crises, including the COVID-19 pandemic;
−Removed: • general economic conditions throughout the world, including the inflation and interest rate environment, military conflicts, including Russia’s invasion of Ukraine, and geopolitical uncertainty and instability.
+Added: • general economic conditions throughout the world, including the inflation and interest rate environment, military conflicts, including Russia’s invasion of Ukraine, the Israel-Hamas war, other conflicts in the Middle East, and geopolitical uncertainty and instability.
Any one or more of the factors above may result in significant fluctuations in our quarterly results of operations.
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If we fail to meet or exceed such expectations for these or any other reasons, the market price of our Class A common stock could decline, and we could face costly lawsuits, including securities class action suits.
+Added: Our advertising activity and strategic RaaS offerings may fail to efficiently drive growth in buyers and sellers, which could harm our business, results of operations and financial condition.
+Added: Our future growth and potential profitability will depend in large part upon the effectiveness and efficiency of our advertising, promotion, public relations and marketing programs as well as our strategic RaaS offerings, and we are investing heavily in these activities.
+Added: Our advertising activities may not yield increased revenue and the efficacy of these activities will depend on a number of factors, including our ability to:
+Added: • determine the effective creative message and media mix for advertising, marketing and promotional expenditures;
+Added: • select the right markets, media and specific media vehicles in which to advertise;
+Added: • identify the most effective and efficient level of spending in each market, media and specific media vehicle;
+Added: • effectively manage marketing costs, including creative and media expenses, to maintain acceptable buyer and seller acquisition costs.
+Added: We closely monitor the effectiveness of our advertising campaigns and changes in the advertising market, and adjust or re-allocate our advertising spend across channels, customer segments and geographic markets in real-time to optimize the effectiveness of these activities.
+Added: For instance, we have previously experienced, and may experience in the future, variability in the number of customers we are able to reach in our email marketing campaigns.
+Added: We expect to increase advertising spend in future periods to continue driving our growth.
+Added: We have previously experienced, and may experience in the future, increases in the pricing of one or more of our marketing and advertising channels.
+Added: These pricing increases could increase our marketing and advertising expenses or cause us to choose less expensive but possibly less effective marketing and advertising channels.
+Added: If we implement new marketing and advertising strategies, we may incur significantly higher costs than our current channels, which, in turn, could adversely affect our results of operations.
+Added: Implementing new marketing and advertising strategies also could increase the risk of devoting significant capital and other resources to endeavors that do not prove to be cost effective.
+Added: We also may incur marketing and advertising expenses significantly in advance of the time we anticipate recognizing revenue associated with such expenses and our marketing and advertising expenditures may not generate sufficient levels of brand awareness or result in increased revenue.
+Added: Even if our marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures.
+Added: If we are unable to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially, our buyer and seller base could be adversely affected, our brand could suffer and our business, results of operations and financial condition could be harmed.
+Added: We have invested and expect to continue to invest significant time and resources into our RaaS offerings and our RaaS clients include national retail stores, premium fashion brands, fashion-focused e-commerce sites and marketplaces for the buying and selling of secondhand items.
+Added: We maintain a robust and varied set of RaaS offerings including provision of our Clean Out Kits at our RaaS clients’ retail stores, our cash out marketplace offering, white-label resale shops, the resale of worn retail items provided to us by our RaaS clients and cross-listing our products on our RaaS clients’ websites.
+Added: To grow our business and build out our marketplaces, we anticipate that we will continue to depend on relationships with third parties.
+Added: Identifying RaaS clients, and negotiating, documenting and maintaining relationships with them, requires significant time and resources.
+Added: Further, our competitors may be effective in providing incentives to third parties to favor their offerings over our marketplaces, mobile application or in-store offerings.
+Added: There is significant uncertainty around the future profitability of our RaaS offerings and whether they will result in an increased number of new and repeat buyers, an increased number of new and repeat sellers selling high-quality secondhand items, increased awareness of our brand and an additional source of revenue.
+Added: Further, if the retail industry suffers in general, there may be fewer customers visiting our RaaS clients’ retail stores, our RaaS clients may discontinue their white-label resale shops in an effort to cut back newer partnerships, and therefore our kit distribution offering for gift cards to our clients’ stores could be less desirable.
+Added: Additionally, our RaaS clients could go out of business or declare bankruptcy.
+Added: If our RaaS offerings are not profitable and do not result in us acquiring a high-quality supply of secondhand items from our RaaS clients and/or their customers, who become our sellers, and reaching additional buyers, our business, results of operations and financial condition could be harmed.
We may not be able to continue to improve our distribution center operations, attract and retain personnel to efficiently and effectively manage the operations required to process, itemize, list, sell, pack and ship secondhand and resale items or identify and lease distribution centers in geographic regions that enable us to effectively scale our operations.
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Further, the success of our business depends on our ability to maintain our current distribution centers and, in the future, secure additional distribution centers that meet our business needs and are also in geographic locations with access to a large, qualified talent pool.
−Removed: We have distribution centers across four strategic U.S.
+Added: We have processing and distribution centers across four strategic U.S.
Arizona, Georgia, Pennsylvania and Texas.
−Removed: Space in well-positioned geographic locations is becoming increasingly scarce, and where it is available, the lease terms offered by landlords are increasingly competitive, particularly in geographic locations with access to the large, qualified talent pools required for us to run our logistics infrastructure.
+Added: Space in well-positioned geographic locations has in the past, and may in the future be scarce, and where it is available, the lease terms offered by landlords are increasingly competitive, particularly in geographic locations with access to the large, qualified talent pools required for us to run our logistics infrastructure.
Incentives currently offered by local, state and federal entities to offset operating expenses may be reduced or become unavailable.
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We may not realize expected savings or benefits from restructuring activities.
−Removed: We have entered into restructuring activities and may enter into additional restructuring initiatives in the future to improve our operations, respond to changes in business conditions and markets and to streamline certain key functions to reduce costs.
+Added: We have reduced our cost structure to better align the operational needs of the business to current economic conditions.
+Added: We may have additional restructuring initiatives in the future to improve our operations, respond to changes in business conditions and markets and to streamline certain key functions to reduce costs.
We may not realize expected savings or benefits from restructuring activities, incur additional restructuring charges and experience loss of key personnel, disruptions in our operations, and difficulties in the timely delivery of products.
1 unchanged sentence
If we are unable to successfully leverage technology to automate and drive efficiencies in our operations, our business, results of operations and financial condition could be harmed.
−Removed: We are continuing to build automation, machine learning and other capabilities to drive efficiencies in our distribution center operations.
+Added: We are continuing to build automation, artificial intelligence, machine learning and other capabilities to drive efficiencies in our distribution center operations.
As we continue to enhance automation and add capabilities, our operations may become increasingly complex.
1 unchanged sentence
We are increasing our investment in technology, software and systems to support these efforts, but such investments may not increase productivity, maintain or improve the experience for buyers and sellers or result in more efficient operations.
+Added: In addition, the evolution of these technologies may create unforeseen competitive pressures or cause disruption.
While we have created our own proprietary technology to operate our business, we also rely on technology from third parties.
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In order to attract buyers to our marketplaces, the prices for the secondhand and resale items sold through our marketplaces may need to be lowered in order to compete with pricing strategies employed by national retailers and brands for their own new retail items, which could negatively affect revenue growth, results of operations and financial condition.
−Removed: We have experienced a reduction in our revenue in the past due to reductions and fluctuations in the price of new retail items sold by national retailers and brands, and we anticipate similar reductions and fluctuations could occur in the future, such as due to a decrease in the price of new retail items in light of economic downturns, including in response to pandemics, such as the COVID-19 pandemic, macroeconomic uncertainty, inflation or other geopolitical instability.
+Added: We have experienced a reduction in our revenue in the past due to reductions and fluctuations in the price of new retail items sold by national retailers and brands, and we anticipate similar reductions and fluctuations could occur in the future, such as due to a decrease in the price of new retail items in light of economic downturns, macroeconomic uncertainty, inflation or other geopolitical instability.
These pricing changes and promotional discounts could, as a result, adversely affect our business, results of operations and financial condition.
−Removed: The global COVID-19 pandemic has had and may continue to have an adverse impact on our business, results of operations and financial condition.
−Removed: In March 2020, the World Health Organization declared COVID-19 a global pandemic and this contagious disease outbreak has continued to spread.
−Removed: The related public health measures, including orders to shelter-in-place, travel restrictions, mandated business closures and vaccination mandates, have adversely affected work forces, organizations, customers, economies and financial markets globally, leading to increased market volatility.
−Removed: The fear associated with pandemics such as COVID-19 and the reactions of governments around the world in response to such pandemics, which include regulating the flow of labor and products and impeding the travel of individuals, have and may continue to impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity.
−Removed: For example, in 2021, due to shelter-in-place orders and mandatory business closures, for a period of time, we were required to limit operations at our distribution centers, resulting in a delay in our ability to process our Clean Out Kits.
−Removed: Additionally, we were required to implement enhanced safety and cleaning measures, resulting in increased costs and reduced profitability.
−Removed: Federal, state and local COVID-19 regulations may continue to evolve and we cannot predict what policies we may determine to, or be required to, implement in the future, or the effect thereof on our business, including whether the imposition of certain policies could cause us to result in attrition and impede our ability to recruit and retain our workforce.
−Removed: Disruptions to our business operations have included and could include personnel absences, temporary closures of our distribution centers, further or ongoing reduced capacity at our distribution centers, delays in processing Clean Out Kits shipped by sellers to us, delays in our shipment of items purchased by our buyers, a slow-down in our ability to hire if we are unable to interview candidates in person, decreased foot traffic at and/or closure of our and our RaaS clients’ physical retail locations, disruptions in internet connections and a decrease or volatile patterns in spending on retail in general.
−Removed: For instance, decreased processing capacity at our distribution centers during the onset of the COVID-19 pandemic resulted in fewer items being listed as available for sale, which adversely impacted our revenue growth.
−Removed: If a critical number of our employees become too ill to work or are unable to work due to personal reasons related to the effects of COVID-19, our ability to process merchandise through our distribution centers could be significantly slowed or halted.
−Removed: Our third-party vendors and partners have also experienced and may continue to experience disruptions to their business operations, which in turn affects us.
−Removed: Further, developing various responses to the challenges caused by COVID-19 and its effects has and may continue to divert the attention of our management team.
−Removed: The continued scope and duration of the COVID-19 pandemic (including any new strains or variants of the virus), whether additional actions may be taken to contain the virus, the impact on our buyers, sellers and RaaS clients, the speed and extent to which markets fully recover from the disruptions caused by the COVID-19 pandemic, and the impact of these factors on our business, will depend on future developments that are highly uncertain and cannot be predicted with precision.
−Removed: In addition, to the extent COVID-19 adversely affects our operations and global economic conditions more generally, it may heighten other risks disclosed in this report.
−Removed: Public health concerns, such as COVID-19, have resulted and could continue to result in social, economic and labor instability in the localities in which we or our vendors, buyers and sellers reside.
−Removed: Any of these uncertainties and actions we take to mitigate the effects of COVID-19 and uncertainties related to COVID-19 could harm our business, results of operations and financial condition.
We use data science to predict buyer and seller preferences, and if we do not accurately predict evolving preferences of our buyers and sellers it could harm our business, results of operations and financial condition.
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To the extent we do not accurately predict the evolving preferences of our buyers and sellers, it could harm our business, results of operations and financial condition.
+Added: In addition, issues in the use of artificial intelligence in our platform may result in reputational harm or liability.
+Added: ThredUp’s data science portfolio also leverages machine learning algorithms, predictive analytics, and other artificial intelligence technologies to identify trends, anomalies and correlations, provide alerts and initiate business processes.
+Added: Artificial intelligence presents risks and challenges that could affect its adoption, and therefore our business.
+Added: Artificial intelligence algorithms may be flawed, unreliable or we may not have access to certain artificial intelligence technologies.
+Added: Datasets may be insufficient or contain biased information.
+Added: Inappropriate or controversial data practices by us or others could impair the acceptance of artificial intelligence solutions.
+Added: These deficiencies could undermine the decisions, predictions, or analysis artificial intelligence applications produce, subjecting us to competitive harm, legal liability, and brand or reputational harm.
We may experience damage or destruction to our distribution centers in which we store all of the secondhand and resale items we offer through our marketplaces, which may harm our business, results of operations and financial condition.
−Removed: We store the majority of the secondhand items we offer through our marketplaces in our current distribution centers in Arizona, Georgia, Pennsylvania and Texas.
−Removed: Our distribution centers, as well as our headquarters, are located in areas that have a history of natural disasters, including severe weather events, rendering our distribution centers vulnerable to damage.
+Added: We store the majority of the secondhand items we offer through our marketplaces in our current processing and distribution centers in Arizona, Georgia, Pennsylvania and Texas.
+Added: Our processing and distribution centers, as well as our headquarters, are located in areas that have a history of natural disasters, including severe weather events, rendering our distribution centers vulnerable to damage.
Any large-scale damage to or catastrophic loss of secondhand and resale items stored in one of our distribution centers, due to natural disasters or man-made disasters such as arson, theft or otherwise would result in liability to our sellers for the expected payout commission liability for the lost items, reduction in the value of our inventory and a significant disruption to our business.
Additionally, given the nature of the unique selection of secondhand and resale items we offer on our marketplaces, our ability to restore such secondhand items on our marketplaces would take time and would result in a limitation and delay of available supply for buyers, which would negatively impact our revenue and results of operations.
−Removed: Further, natural disasters, such as earthquakes, hurricanes, tornadoes, fires, floods and other adverse weather and climate conditions; unforeseen public health crises, such as pandemics and epidemics; political crises, such as Russia’s invasion of Ukraine, terrorist attacks, war and other political instability; or other catastrophic events, whether occurring in the United States or internationally, could disrupt our operations in any of our offices and distribution centers or the operations of one or more of our third-party providers or vendors.
+Added: Further, natural disasters, such as earthquakes, hurricanes, tornadoes, fires, floods and other adverse weather and climate conditions; unforeseen public health crises, such as pandemics and epidemics; political crises, such as Russia’s invasion of Ukraine and the Israel-Hamas war, terrorist attacks, war and other political instability; or other catastrophic events, whether occurring in the United States or internationally, could disrupt our operations in any of our offices and distribution centers or the operations of one or more of our third-party providers or vendors.
Further, while we carry insurance for the secondhand and resale items in our distribution centers, the number of carriers which provide for such insurance has declined, which has resulted in increased premiums and deductibles.
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In the event that we suffer a catastrophic loss of any or all of our distribution centers and the secondhand items in such facilities, our liabilities may exceed the maximum insurance coverage amount, which would harm our business and results of operations.
+Added: Our business is affected by seasonality and we may be adversely affected by weather conditions, including any potential effects from climate change.
+Added: Seasonality in our core marketplace does not necessarily follow that of traditional retailers, such as typical concentration of revenue in the holiday quarter, and we have seen a relatively linear revenue pattern throughout the year compared to traditional retailers.
+Added: However, our business has in the past, and may in the future be adversely affected by unseasonable weather conditions, including those resulting from climate change in both our U.S.
+Added: and EU markets.
+Added: For example, we have observed that periods of unseasonably warm weather in the fall and winter may lead to reduced consumer spending on winter apparel that tends to have a higher average selling price, which negatively impacts our business.
+Added: The effects of unseasonably warm weather are particularly pronounced on our Remix platform, which unlike our core marketplace, tends to see an increased concentration of revenue in winter months due to increased sales of winter apparel.
+Added: As the effects of climate change increase, we expect the frequency and impact of weather and climate related events and conditions to increase as well.
+Added: Any and all of these risks may materially and adversely affect our financial condition, results of operations and cash flows.
Shipping is a critical part of our business and any changes in our shipping arrangements or any interruptions in shipping could harm our business, results of operations and financial condition.
−Removed: We currently rely on both national and regional vendors for our shipping of purchases to buyers and the shipping of supplied secondhand items by sellers.
+Added: We currently rely on both national and regional vendors for our shipping of purchases to buyers, the shipping of supplied secondhand items by sellers and the shipping of items between our distribution centers to consolidate orders.
If we are not able to negotiate acceptable pricing and other terms with these vendors or they experience performance problems or other difficulties, it could negatively impact our business and results of operations and negatively affect the experiences of our buyers and sellers, which could affect the degree to which they continue to buy and supply secondhand items on our marketplaces.
8 unchanged sentences
In the future, however, we may not be able to pass such increases on to our customers.
−Removed: Our advertising activity and strategic RaaS offerings may fail to efficiently drive growth in buyers and sellers, which could harm our business, results of operations and financial condition.
−Removed: Our future growth and potential profitability will depend in large part upon the effectiveness and efficiency of our advertising, promotion, public relations and marketing programs as well as our strategic RaaS offerings, and we are investing heavily in these activities.
−Removed: Our advertising activities may not yield increased revenue and the efficacy of these activities will depend on a number of factors, including our ability to:
−Removed: • determine the effective creative message and media mix for advertising, marketing and promotional expenditures;
−Removed: • select the right markets, media and specific media vehicles in which to advertise;
−Removed: • identify the most effective and efficient level of spending in each market, media and specific media vehicle;
−Removed: • effectively manage marketing costs, including creative and media expenses, to maintain acceptable buyer and seller acquisition costs.
−Removed: We closely monitor the effectiveness of our advertising campaigns and changes in the advertising market, and adjust or re-allocate our advertising spend across channels, customer segments and geographic markets in real-time to optimize the effectiveness of these activities.
−Removed: For instance, we have previously experienced, and may experience in the future, variability in the number of customers we are able to reach in our email marketing campaigns.
−Removed: We expect to increase advertising spend in future periods to continue driving our growth.
−Removed: We have previously experienced, and may experience in the future, increases in the pricing of one or more of our marketing and advertising channels.
−Removed: These pricing increases could increase our marketing and advertising expenses or cause us to choose less expensive but possibly less effective marketing and advertising channels.
−Removed: If we implement new marketing and advertising strategies, we may incur significantly higher costs than our current channels, which, in turn, could adversely affect our results of operations.
−Removed: Implementing new marketing and advertising strategies also could increase the risk of devoting significant capital and other resources to endeavors that do not prove to be cost effective.
−Removed: We also may incur marketing and advertising expenses significantly in advance of the time we anticipate recognizing revenue associated with such expenses and our marketing and advertising expenditures may not generate sufficient levels of brand awareness or result in increased revenue.
−Removed: Even if our marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures.
−Removed: If we are unable to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially, our buyer and seller base could be adversely affected, our brand could suffer and our business, results of operations and financial condition could be harmed.
−Removed: We have invested and expect to continue to invest significant time and resources into our RaaS offerings and our RaaS clients include national retail stores, premium fashion brands, fashion-focused e-commerce sites and marketplaces for the buying and selling of secondhand items.
−Removed: We maintain a robust and varied set of RaaS offerings including provision of our Clean Out Kits at our RaaS clients’ retail stores, our cash out marketplace offering, white-label resale shops, the resale of worn retail items provided to us by our RaaS clients and cross-listing our products on our RaaS clients’ websites.
−Removed: To grow our business and build out our marketplaces, we anticipate that we will continue to depend on relationships with third parties.
−Removed: Identifying RaaS clients, and negotiating, documenting and maintaining relationships with them, requires significant time and resources.
−Removed: Further, our competitors may be effective in providing incentives to third parties to favor their offerings over our marketplaces, mobile application or in-store offerings.
−Removed: There is significant uncertainty around the future profitability of our RaaS offerings and whether they will result in an increased number of new and repeat buyers, an increased number of new and repeat sellers selling high-quality secondhand items, increased awareness of our brand and an additional source of revenue.
−Removed: Further, if the retail industry suffers in general, there may be fewer customers visiting our RaaS clients’ retail stores, our RaaS clients may discontinue their white-label resale shops in an effort to cut back newer partnerships, and therefore our kit distribution offering for gift cards to our clients’ stores could be less desirable.
−Removed: Additionally, our RaaS clients could go out of business or declare bankruptcy.
−Removed: If our RaaS offerings are not profitable and do not result in us acquiring a high-quality supply of secondhand items from our RaaS clients and/or their customers, who become our sellers, and reaching additional buyers, our business, results of operations and financial condition could be harmed.
+Added: Greater than expected item return rates have, and in the future could have, a negative impact on our revenue.
+Added: We allow buyers to return certain purchases from our website and mobile application under our return policy.
+Added: We record a reserve for returns against proceeds to us from the resale of items on our marketplaces in calculating revenue.
+Added: We estimate this reserve based on historical return trends.
+Added: The introduction of new products in the retail market, changes in consumer confidence or other competitive and general economic conditions have caused, and may in the future cause, actual returns to exceed our reserve for return rates.
+Added: Further, we believe that on a macro level across e-commerce platforms, without the ability to try on items such as clothing and shoes, customers are increasingly accustomed to over-purchasing with the intent to return items, which has caused an increase in returns and may in the future continue to increase our amount of return rates.
+Added: In addition, from time to time, the secondhand items sold through our marketplaces are damaged in transit which can increase return rates, increase our costs and harm our brand.
+Added: Returned items may also be damaged in transit as part of the return process, which can significantly impact the price we are able to charge for such items on our marketplaces.
+Added: Any significant increase in returns that exceeds our reserves could adversely affect our revenue and results of operations.
Unfavorable conditions in our industry or the global economy could limit our ability to grow our business and negatively affect our results of operations.
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Current or future economic uncertainties or downturns could adversely affect our business and results of operations.
−Removed: Weak or volatile economic conditions in the global economy or individual markets, including due to the COVID-19 pandemic, changes in gross domestic product growth, financial and credit market fluctuations, inflation, labor shortages, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States and in the European region or elsewhere, and other events outside of our control could cause customers and prospective customers to reduce spending, and demand for our offerings may decline.
+Added: Weak or volatile economic conditions in the global economy or individual markets, changes in gross domestic product growth, financial and credit market fluctuations, inflation, labor shortages, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States and in the European region or elsewhere, including the Israel-Hamas war and other conflicts in the Middle East, and other events outside of our control could cause customers and prospective customers to reduce spending, and demand for our offerings may decline.
Additionally, economic downturns could result in our RaaS relationships terminating or limiting their arrangements with us as retailers focus on general cost reductions in the face of macroeconomic uncertainty.
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We cannot predict the timing, strength, or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
−Removed: If the conflict in the Ukraine persists and our Ukrainian personnel are unable to work as a result, our results of our operations and our financial condition could be adversely affected.
+Added: If the conflict in Ukraine persists and our Ukrainian personnel are unable to work as a result, our results of our operations and our financial condition could be adversely affected.
We rely on third parties to drive traffic to our website and mobile application, and these providers may change their algorithms or pricing in ways that could negatively impact our business, results of operations, financial condition and prospects.
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For example, disruption to processing of Clean Out Kits and distribution caused by a backlog of Clean Out Kits has led and could potentially lead to additional delays in our ability to process secondhand items sellers send in for resale, resulting in delays in sellers receiving payouts and less refreshing of our supply on our marketplaces, and could harm our brand and reputation.
+Added: Our reputation or brand image could be adversely impacted by any failure to maintain satisfactory practices for all our operations and activities, including greenwashing concerns regarding our advertising campaigns and marketing programs related to our sustainability initiatives.
Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and harm our results of operations and financial condition.
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Our failure to address these risks or other issues encountered in connection with acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities and harm our business generally.
−Removed: Certain estimates of our buyer metrics included in this Annual Report on Form 10-K may prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.
−Removed: Certain metrics presented in this Annual Report on Form 10-K, including the numbers of Active Buyers, are based on internal company data, assumptions and estimates and we use these numbers in managing our business.
−Removed: We believe that these figures are reasonable estimates, and we take measures to improve their accuracy, such as eliminating known fictitious or duplicate accounts.
−Removed: There are, however, inherent challenges in gathering accurate data across large online and mobile populations.
−Removed: For example, there may be individuals who have multiple email accounts in violation of our terms of service, despite our efforts to detect and enforce our terms of service.
−Removed: If individuals have multiple unique email addresses that are undetected, then we could be overestimating the number of Active Buyers.
−Removed: We regularly review and may adjust our processes for calculating these metrics to improve their accuracy.
−Removed: If investors or analysts do not perceive our metrics to be accurate representations of our business, or if we discover material inaccuracies in our metrics, our reputation, business, results of operations and financial condition would be harmed.
−Removed: Greater than expected item return rates have, and in the future could have, a negative impact on our revenue.
−Removed: We allow buyers to return certain purchases from our website and mobile application under our return policy.
−Removed: We record a reserve for returns against proceeds to us from the resale of items on our marketplaces in calculating revenue.
−Removed: We estimate this reserve based on historical return trends.
−Removed: The introduction of new products in the retail market, changes in consumer confidence or other competitive and general economic conditions have caused, and may in the future cause, actual returns to exceed our reserve for return rates.
−Removed: Further, we believe that on a macro level across e-commerce platforms, without the ability to try on items such as clothing and shoes, customers are increasingly accustomed to over-purchasing with the intent to return items, which has caused an increase in returns and may in the future continue to increase our amount of return rates.
−Removed: In addition, from time to time, the secondhand items sold through our marketplaces are damaged in transit which can increase return rates, increase our costs and harm our brand.
−Removed: Returned items may also be damaged in transit as part of the return process, which can significantly impact the price we are able to charge for such items on our marketplaces.
−Removed: Any significant increase in returns that exceeds our reserves could adversely affect our revenue and results of operations.
As an online secondhand marketplace, our success depends on the accuracy of our item acceptance process.
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Despite measures taken by us to detect stolen items, to cooperate fully with law enforcement, and to respond to inquiries regarding potentially stolen items, any resulting claims or liabilities could harm our business and results of operations.
+Added: Certain estimates of our buyer metrics included in this Annual Report on Form 10-K may prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.
+Added: Certain metrics presented in this Annual Report on Form 10-K, including the numbers of Active Buyers, are based on internal company data, assumptions and estimates and we use these numbers in managing our business.
+Added: We believe that these figures are reasonable estimates, and we take measures to improve their accuracy, such as eliminating known fictitious or duplicate accounts.
+Added: There are, however, inherent challenges in gathering accurate data across large online and mobile populations.
+Added: For example, there may be individuals who have multiple email accounts in violation of our terms of service, despite our efforts to detect and enforce our terms of service.
+Added: If individuals have multiple unique email addresses that are undetected, then we could be overestimating the number of Active Buyers.
+Added: We regularly review and may adjust our processes for calculating these metrics to improve their accuracy.
+Added: If investors or analysts do not perceive our metrics to be accurate representations of our business, or if we discover material inaccuracies in our metrics, our reputation, business, results of operations and financial condition would be harmed.
Risks Relating to Information Technology, Intellectual Property, Data Security and Privacy
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Any actual or perceived compromise of our systems or data security measures or those of third parties with whom we do business, or any failure to prevent or mitigate the loss of personal or other confidential information and delays in detecting or providing notice of any such compromise or loss could disrupt our operations, harm the perception of our security measures, damage our reputation, cause some participants to decrease or stop their use of our marketplaces and subject us to litigation, government action, increased transaction fees, regulatory fines or penalties or other additional costs and liabilities that could adversely affect our business, results of operations and financial condition.
−Removed: With many of our employees and contractors now working remotely, and as our vendors and other business partners have also moved to permanent or hybrid remote work, we and our vendors may be more vulnerable to cyberattacks.
+Added: With some of our employees and contractors now working remotely or on a hybrid schedule, and as our vendors and other business partners have also moved to permanent or hybrid remote work, we and our vendors may be more vulnerable to cyberattacks.
We are taking steps to monitor and enhance the security of our systems, information technology infrastructure, networks, and data, including with respect to remote access to systems and data.
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Such requirements are constantly evolving, and we expect that there will continue to be new proposed requirements relating to privacy, data protection and information security in the United States and other jurisdictions, or changes in the interpretation of existing privacy requirements.
−Removed: For example, the California Consumer Privacy Act (the “CCPA”) took effect on January 1, 2020 and broadly defines personal information, imposes stringent consumer data protection requirements, gives California residents expanded privacy rights, provides for civil penalties for violations and introduces a private right of action for data breaches.
−Removed: Additionally, on November 3, 2020, Proposition 24 was approved in California which creates a new privacy law, the California Privacy Rights Act (the “CPRA”).
−Removed: The CPRA creates additional obligations relating to processing and safeguarding personal information that took effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022).
−Removed: The CPRA’s implementing regulations have not yet been finalized, but enforcement is scheduled to begin July 1, 2023.
−Removed: The California Attorney General may independently bring administrative actions for civil penalties of $2,500 per violation, or up to $7,500 per violation if intentional.
−Removed: We will continue to monitor developments related to the CPRA and anticipate additional costs and expenses associated with CPRA compliance.
+Added: For example, the California Consumer Privacy Act of 2018 as amended by the California Privacy Rights Act (the “CCPA”) broadly defines personal information, imposes stringent consumer data protection requirements, gives California residents expanded privacy rights, provides for civil penalties for violations and introduces a private right of action for certain data breaches.
+Added: The CCPA is already the subject of active enforcement by the California Attorney General, who may independently bring administrative actions for civil penalties of $2,500 per violation, or up to $7,500 per violation if intentional, and is also enforced by the new California Privacy Protection Agency.
+Added: We will continue to monitor developments related to the CCPA and anticipate additional costs and expenses associated with CCPA compliance.
Additionally, the CCPA has prompted other states, including Virginia, Colorado, Connecticut and Utah to propose and enact similar laws and regulations relating to privacy.
−Removed: For example, in March 2021, Virginia enacted the Virginia Consumer Data Protection Act (the “CDPA”), which became effective January 1, 2023, and on June 8, 2021, Colorado enacted the Colorado Privacy Act (the “CPA”), which takes effect on July 1, 2023.
−Removed: The CDPA and CPA share similarities with the CCPA, the CPRA, and legislation proposed and enacted in other states.
Aspects of these state privacy laws, and their interpretation, remain unclear, and we cannot yet fully predict the impact of these laws or regulations on our business or operations.
−Removed: Further, as our operations expand internationally, including in connection with the Remix Acquisition, we may become subject to additional laws and regulations relating to privacy and data protection.
+Added: Further, as our operations expand internationally, including as a result of acquisitions, we may become subject to additional laws and regulations relating to privacy and data protection.
Regulatory authorities in the European Economic Area, United Kingdom and Switzerland, for example, traditionally have imposed stricter obligations under laws and regulations relating to privacy and data protection.
−Removed: For example, in May 2018, the European Union’s regulation governing data practices and privacy in these jurisdictions called the General Data Protection Regulation (“GDPR”), became effective.
−Removed: The GDPR requires companies to meet stringent requirements regarding the handling of personal data of individuals in the relevant jurisdictions.
+Added: For example, in Europe, the collection and use of personal information is governed by the European Union’s General Data Protection Regulation and the United Kingdom’s implementation of the same (collectively, the “GDPR”).
+Added: The GDPR requires companies to meet stringent requirements regarding the handling, protection, and cross-border transfers of personal data of individuals in the relevant jurisdictions.
The GDPR provides for substantial penalties for non-compliance, which may result in monetary penalties of up to 20 million Euros or 4% of a company’s worldwide turnover, whichever is greater.
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There is no harmonized approach to these laws and regulations globally.
−Removed: Consequently, international expansion, including in connection with the Remix Acquisition, increases our risk of non-compliance with applicable foreign data protection laws and regulations.
+Added: Consequently, international expansion, including as a result of acquisitions, increases our risk of non-compliance with applicable foreign data protection laws and regulations.
Future requirements, or changes in the interpretation of existing requirements, relating to privacy, data protection and information security may require us to implement, enhance or modify privacy and security policies, provide certain types of notices, grant certain rights to individuals, inform individuals of security breaches, and, in some cases, obtain individuals’ consent to use personal data for certain purposes.
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Any failure or perceived failure by us or any third parties with which we do business to comply with these privacy requirements, with our posted privacy policies or with other obligations to which we or such third parties are or may become subject relating to privacy, data protection or information security, may result in investigations or enforcement actions against us by governmental entities, private claims, public statements against us by consumer advocacy groups or others, and fines, penalties or other liabilities.
−Removed: For example, California consumers whose information has been subject to a security incident may bring civil suits under the CCPA, for statutory damages between $100 and $750 per consumer.
+Added: For example, California consumers whose information has been subject to certain security incidents may bring civil suits under the CCPA, for statutory damages between $100 and $750 per consumer.
Any such action would be expensive to defend, likely would damage our reputation and market position, could result in substantial liability and could adversely affect our business and results of operations.
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Our principal trademark assets include the registered trademarks “THREDUP” and “Think Secondhand First” and our logos and taglines.
+Added: We also hold European Union trademarks for our Remix logo.
Our trademarks are valuable assets that support our brand and buyers’ perception of our services and merchandise.
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We use open source software to facilitate the development and operation of our marketplaces, including our website and mobile application, and may use more open source software in the future.
+Added: Some open source software may include generative artificial intelligence software or other software that incorporates or relies on generative artificial intelligence.
From time to time, there have been claims challenging both the use of open source software against companies that incorporate open source software into their products and whether such use is permissible under various open source licenses.
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Risks Relating to Legal, Regulatory, Accounting and Tax Matters
−Removed: Material weaknesses in our internal control over financial reporting may cause us to fail to timely and accurately report our financial results or result in a material misstatement of our consolidated financial statements.
−Removed: In connection with the audit of our 2022 consolidated financial statements, and as previously described in our Annual Report on Form 10-K for the year ended December 31, 2021 in connection with the audits of our consolidated financial statements in certain prior years, we and our independent registered public accounting firms identified control deficiencies in the design and operation of our internal control over financial reporting that constituted a material weakness, as further described in “Item 9A.
−Removed: Controls and Procedures” in this Annual Report on Form 10-K.
−Removed: A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.
−Removed: Our material weakness related to the following control deficiency:
−Removed: • We did not design and maintain adequate controls over the preparation and review of certain account reconciliations and journal entries.
−Removed: Specifically, we did not design and maintain controls and we did not maintain a sufficient complement of accounting personnel to ensure account reconciliations were prepared and reviewed at the appropriate level of precision on a consistent and timely basis.
−Removed: The deficiency described above, if not remediated, could result in a misstatement of one or more account balances or disclosures in our annual or interim consolidated financial statements that would not be prevented or detected, and, accordingly, we determined that this control deficiency constitute a material weakness.
−Removed: To address our material weakness, we have added accounting and finance personnel and implemented new financial accounting processes.
−Removed: We intend to continue to take steps to remediate the material weakness described above through hiring additional qualified accounting and finance resources and further evolving our accounting and quarterly and annual close processes.
−Removed: We will not be able to fully remediate these control deficiencies until these steps have been completed and have been operating effectively for a sufficient period of time.
−Removed: If we fail to remediate our material weakness, identify future material weaknesses in our internal control over financial reporting or fail to meet the demands that have been placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), we may be unable to accurately report our financial results or report them within the timeframes required by law or stock exchange regulations.
−Removed: Failure to comply with Section 404 of the Sarbanes-Oxley Act could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.
−Removed: If additional material weaknesses exist or are discovered in the future, and we are unable to remediate any such material weakness, our reputation, results of operations and financial condition could suffer.
Failure to comply with applicable laws or regulations, including those relating to the resale of secondhand items, or changes to such laws, rules or regulations may subject us to fines, penalties, registration and approval or other governmental enforcement action.
−Removed: Our business and financial condition could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to us and our business, including those relating to the internet and e-commerce, such as geo-blocking and other geographically based restrictions, internet advertising and price display, consumer protection, anti-corruption, antitrust and competition, economic and trade sanctions, tax, banking, data security, network and information systems security, data protection, privacy and escheatment.
+Added: Our business and financial condition could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to us and our business, including those relating to the internet and e-commerce, such as geo-blocking and other geographically based restrictions, internet advertising and price display, consumer protection, anti-corruption, antitrust and competition, economic and trade sanctions, tax, banking, data security, network and information systems security, data protection, privacy and escheatment and unclaimed property.
As a result, regulatory authorities could prevent or temporarily suspend us from conducting some or all of our activities or otherwise penalize us if our practices were found not to comply with applicable regulatory or licensing requirements or any binding interpretation of such requirements.
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§ 201, the United States.
−Removed: Travel Act, the USA PATRIOT Act, and are subject to similar anti-corruption and anti-bribery laws to the extent of the international expansion of our operations.
+Added: Travel Act, the USA PATRIOT Act, and are subject to similar anti-corruption and anti-bribery laws to the extent of the international expansion of our operations, such as our European operations in Bulgaria.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies, their employees and third-party business partners, representatives and agents from promising, authorizing, making or offering improper payments or other benefits, directly or indirectly, to government officials and others in the private sector in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business.
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Often these cases raise complex factual and legal issues and create risks and uncertainties.
−Removed: In January 2021, we filed an Illinois Worker Adjustment and Retraining Notification Act notice related to our plan to close our Illinois distribution center (DC03) and reduce our workforce.
−Removed: The closure of DC03 could give rise to additional employment law-related claims and litigation, which could harm our business, results of operations and financial condition.
−Removed: In addition, in 2022 we took certain restructuring actions to reduce our workforce and we may become subject to employment claims in connection with such actions.
−Removed: If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired.
+Added: We have previously identified a material weakness in our internal control over financial reporting in the Annual Report on Form 10-K and if we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting and provide an annual management report on the effectiveness of internal controls over financial reporting.
We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
−Removed: We are also continuing to improve our internal control over financial reporting and remediate a material weakness in our internal control over financial reporting.
−Removed: For example, we have worked to improve the controls around our key accounting processes and our quarterly and annual close processes and we have hired additional accounting and finance personnel to help us implement these processes and controls.
−Removed: In order to maintain and improve the effectiveness of our disclosure controls and procedures and remediate a material weakness in our internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.
−Removed: If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls or we may be unable to remediate the existing material weakness in our controls as discussed in “—Material weaknesses in our internal control over financial reporting may cause us to fail to timely and accurately report our financial results or result in a material misstatement of our consolidated financial statements.”
+Added: We have previously identified control deficiencies in the design and operation of our internal control over financial reporting that constituted a material weakness, as further described in “Item 9A.
+Added: Controls and Procedures” in this Annual Report on Form 10-K.
+Added: A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.
+Added: As described in Item 9A in this Annual Report on Form 10-K, we have completed the remediation measures related to our previously reported material weakness and concluded that our internal control over financial reporting was effective as of December 31, 2023.
+Added: However, completion of remediation does not provide assurance that our remediated controls will continue to operate properly or that our financial statements will be free from error.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
−Removed: Further, additional weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
+Added: Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods.
−Removed: Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.
+Added: Any failure to maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.
Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our common stock.
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Changes in existing financial accounting standards or practices may harm our results of operations.
−Removed: General accepted accounting principles (“GAAP”) is subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
+Added: Generally accepted accounting principles (“GAAP”) is subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
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Our NOLs may also be subject to limitations under state law.
−Removed: We are an emerging growth company and a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our Class A common stock less attractive to investors.
−Removed: We are an emerging growth company and a smaller reporting company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including:
+Added: We are an emerging growth company and a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our Class A common stock less attractive to investors.
+Added: We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including:
• not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;
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• the last day of the fiscal year ending after the fifth anniversary of the completion of the IPO.
−Removed: We cannot predict if investors will find our Class A common stock less attractive if we choose to rely on the exemptions afforded emerging growth companies.
−Removed: If some investors find our Class A common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our Class A common stock and the market price of our Class A common stock may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies.
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As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
+Added: We are also a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K.
+Added: As a smaller reporting company, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to:
+Added: • Reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements;
+Added: • Not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002; and
+Added: • Have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports.
+Added: We will remain a smaller reporting company until the end of the fiscal year in which (1) we have a public common equity float of more than $250.0 million, or (2) we have annual revenues for the most recently completed fiscal year of more than $100.0 million plus we have any public common equity float or public float of more than $700.0 million.
+Added: We also would not be eligible for status as smaller reporting company if we become an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent company that is not a smaller reporting company.
+Added: We cannot predict if investors will find our Class A common stock less attractive if we choose to rely on the exemptions afforded emerging growth companies and smaller reporting companies.
+Added: If some investors find our Class A common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our Class A common stock and the market price of our Class A common stock may be more volatile.
Risks Relating to Our Indebtedness and Liquidity
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Our loan and security agreement provides our lender with a first-priority lien against substantially all of our assets and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations.
−Removed: We are party to an amended and restated loan and security agreement with Western Alliance Bank, which contains a number of covenants that restrict our and our subsidiaries’ ability to, among other things, incur additional indebtedness, materially change our business, convey, sell, lease, transfer or dispose of the business or our property, except under certain circumstances, merge or consolidate with other companies or acquire other companies, create or incur liens, pay any dividends on our Class A common stock, make certain investments and engage in certain other activities.
+Added: We are party to an amended and restated loan and security agreement with Western Alliance Bank, which was amended on December 14, 2023, which contains a number of covenants that restrict our and our subsidiaries’ ability to, among other things, incur additional indebtedness, materially change our business, convey, sell, lease, transfer or dispose of the business or our property, except under certain circumstances, merge or consolidate with other companies or acquire other companies, create or incur liens, pay any dividends on our Class A common stock, make certain investments and engage in certain other activities.
We are also required to maintain financial covenants, including minimum cash and liquidity requirements, a debt service requirement and quarterly and annual minimum net revenue and revenue growth thresholds.
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We have relied in part on borrowed funds to meet our liquidity needs and fund our operations and may continue to do so in the future.
−Removed: In July 2022, we entered into a Second Amended and Restated Loan and Security Agreement to, among other things, increase our aggregate borrowing ability to $70.0 million, reduce the applicable margin for borrowings under the Term Loan to the prime rate published in The Wall Street Journal plus a margin of 1.25% with a floor of 6.00% and extend the maturity date of our outstanding term loan to July 14, 2027.
−Removed: Continued increases in interest rates will increase the cost of servicing our outstanding indebtedness as well as the cost of any new indebtedness we may incur, including as a result of any future refinancings, and could negatively impact our business, results of operations and financial condition.
+Added: As of December 31, 2023, we have the ability to incur up to $48.8 million in indebtedness under our loan and security agreement, as amended, with a maturity date of July 14, 2027 and as of December 31, 2023 had incurred $26.3 million of indebtedness pursuant to this agreement.
+Added: The indebtedness generally bears interest at the prime rate published in the Wall Street Journal plus a margin of 1.25% with a floor of 4.75% per annum;
+Added: the applicable interest rate as of December 31, 2023 was 9.75% per annum.
+Added: Continued or sustained increases in interest rates will increase the cost of servicing our outstanding indebtedness as well as the cost of any new indebtedness we may incur, including as a result of any future refinancing, and could negatively impact our business, results of operations and financial condition.
In addition, uncertainty and volatility in the capital markets and other factors may negatively impact our access to debt and equity financing and such financing may not be available on terms favorable to us or at all.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, we could face significant limitations on our ability to invest in our operations and otherwise suffer harm to our business.
+Added: Recent events affecting the financial services industry could have an adverse impact on our business, results of operations and financial conditions.
+Added: On March 10, March 12 and May 1 of 2023, the Federal Deposit Insurance Corporation (the “FDIC”) took control and was appointed receiver of Silicon Valley Bank, Signature Bank and First Republic Bank, respectively, after each bank was unable to continue their operations.
+Added: These events exposed vulnerabilities in the regional banking sector, including liquidity constraints, contagion and solvency risk and other legal uncertainties and caused significant volatility in the market prices of the common stock of certain other regional banks.
+Added: Although we do not have any deposits with any of the banks that have been placed into receivership to date, if any of our banking partners, lenders, or counterparties to certain financial instruments were to be placed into receivership, we may be unable to access such funds.
+Added: For example, our loan and security agreement is with Western Alliance Bank, a regional bank, and while our amended and restated loan and security agreement requires that we maintain minimum cash deposits with Western Alliance Bank that exceed the FDIC insurance limits, we utilize an insured cash sweep program to extend FDIC insurance to this balance.
+Added: Further, while we maintain the contractual minimum cash deposits with Western Alliance Bank, most of our cash is invested in managed assets outside of Western Alliance Bank.
+Added: If Western Alliance Bank or other financial institutions with which we have relationships were to enter into receivership or become insolvent, our ability to access the cash and cash equivalents that we hold at such institutions, as well as our ability to draw on our credit facility, may be impacted.
+Added: In such an event, it could become more difficult for us to access sufficient liquidity or acquire financing on commercially reasonable terms or at all.
+Added: Any such event could adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, which could result in breaches of our financial and other contractual obligations, any of which could materially and adversely impact our business, results of operations and financial condition.
Risks Relating to Ownership of Our Class A Common Stock
18 unchanged sentences
• costs and timing of expenses related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs;
−Removed: • other events or factors, including those resulting from war (including Russia’s invasion of Ukraine), incidents of terrorism, pandemics (including the COVID-19 pandemic), elections or responses to these events;
+Added: • other events or factors, including those resulting from war (including Russia’s invasion of Ukraine , the Israel-Hamas war and other conflicts in the Middle East), incidents of terrorism, pandemics (including the COVID-19 pandemic), elections or responses to these events;
• whether investors or securities analysts view our stock structure unfavorably, particularly our dual-class structure and the significant voting control of our executive officers, directors and their affiliates;
42 unchanged sentences
Shares held by directors, executive officers and other affiliates will also be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements.
−Removed: As of December 31, 2022, we had 17,871,709 options outstanding that, if fully exercised, would result in the issuance of shares of Class B common stock, as well as 7,854,822 shares of Class A common stock subject to RSU awards.
+Added: As of December 31, 2023, we had 16,246,975 options outstanding that, if fully exercised, would result in the issuance of shares of Class B common stock, as well as 8,537,618 shares of Class A common stock subject to Restricted Stock Units (“RSU”) awards.
All of the shares of common stock issuable upon the exercise of stock options, settlement of RSU awards and the shares reserved for future issuance under our equity incentive plans have been registered for public resale under the Securities Act.
57 unchanged sentences
Volatility or lack of appreciation in the stock price of our Class A common stock may also affect our ability to attract and retain our executive officers and key personnel.
−Removed: Many of our senior personnel and other key personnel have become, or will soon become, vested in a substantial amount of stock, stock options or restricted stock units (RSUs).
+Added: Many of our senior personnel and other key personnel have become, or will soon become, vested in a substantial amount of stock, stock options or RSUs.
Employees and contractors may be more likely to leave us if the shares they own or the shares underlying their RSUs or vested options have significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of our Class A common stock or the value of the shares they hold or that underlie their RSUs has declined.
33 unchanged sentences
If such claims are successful, our business, results of operations and financial condition could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, results of operations and financial condition.
−Removed: Unresolved Staff Comments
−Removed: Not applicable.
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.