What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-03-05 · 107 added, 93 removed, 195 unchanged (51% of the section changed)

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ThredUp’s proprietary operating platform is the foundation for our managed marketplace, where we have bridged online and offline technology to make the buying and selling of tens of millions of unique items easy and fun.

The marketplaces we have built enable buyers in the U.S.

and in Europe to browse and purchase resale items for primarily apparel, shoes and accessories across a wide range of price points.

Buyers love shopping value, premium and luxury brands all in one place, at up to 90% off estimated retail price.

Sellers love ThredUp because we make it easy to clean out their closets and unlock value for themselves or for the charity of their choice while doing good for the planet.

ThredUp’s sellers order a Clean Out Kit, fill it and return it to us using our prepaid label.

The marketplaces we have built enable buyers to browse and purchase resale items for primarily apparel, shoes and accessories across a wide range of price points.

Buyers enjoy shopping value, premium and luxury brands all in one place, at up to 90% off estimated retail price.

Sellers enjoy ThredUp because we make it easy to clean out their closets and unlock value for themselves or for the charity of their choice while doing good for the planet.

ThredUp’s sellers order a Clean Out Kit, fill and return it to us using our prepaid label.

We take it from there and do the work to make those items available for resale.

Aside from Clean Out Kits, ThredUp also sources inventory from a variety of supply channels, such as wholesale supply in Europe.

In addition to our core marketplace, some of the world’s leading brands and retailers are taking advantage of our RaaS offering, which allows them to conveniently offer a scalable closet clean out service and/or resale shop to their customers.

We believe RaaS will accelerate the growth of this emerging category and form the backbone of the modern resale experience domestically and internationally.

Overview of 2023 Results

We believe RaaS will accelerate the growth of this emerging category and form the backbone of the modern resale experience.

Recent Business Developments

Discontinued Operations

On November 30, 2024, we divested 91% of our European business and Bulgarian subsidiary, Remix, which qualified for reporting as a discontinued operation.

As a result, Remix’s results, including the loss on divestiture, are presented as a single line item, loss from discontinued operations, net of tax in the consolidated statements of income and excluded from continuing operations for all periods presented.

Accordingly, any discussion of historical information in Management’s Discussion and Analysis below reflects Remix’s results as a discontinued operation, and amounts, including key operating metrics, and disclosures below pertain to our continuing operations for all periods presented, unless otherwise noted.

In the third quarter of 2024, we recorded a $9.8 million impairment of long-lived assets in connection with the decision to exit the European market, coupled with the decline in our market capitalization.

In the fourth quarter, we recognized an $11.3 million loss on the Remix divestiture.

Both amounts were included within loss from discontinued operations, net of tax in the consolidated statements of operations for the year ended December 31, 2024.

See Note 15, Discontinued Operations, to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for further details on the transaction.

Overview of 2024 Results from Continuing Operations

Total revenue was $260.0 million, an increase of 0.6% year-over-year.

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Gross profit totaled $207.1 million, representing an increase of 4.4% year-over-year.

Gross margin decreased by 30 basis points to 66.4% from 66.7% year-over-year.

Net loss was $71.2 million, or a negative 22.1% of revenue, for the year ended December 31, 2023 as compared to a net loss of $92.3 million, or a negative 32.0% of revenue, for the same period in 2022.

Non-GAAP Adjusted EBITDA (1) :

Non-GAAP Adjusted EBITDA loss was $17.4 million, or a negative 5.4% of revenue, for the year ended December 31, 2023 as compared to a non-GAAP Adjusted EBITDA loss of $43.4 million, or a negative 15.0% of revenue, for the same period in 2022.

Gross margin increased by 290 basis points to 79.7% from 76.8% year-over-year.

Loss from continuing operations:

Loss from continuing operations was $40.0 million, or a negative 15.4% of revenue, for the year ended December 31, 2024 as compared to a loss of $52.4 million, or a negative 20.3% of revenue, for the same period in 2023.

Non-GAAP Adjusted EBITDA (loss) from continuing operations (1) :

Non-GAAP Adjusted EBITDA from continuing operations was $8.7 million, or 3.3% of revenue, for the year ended December 31, 2024 as compared to a non-GAAP Adjusted EBITDA (loss) from continuing operations of $(5.3) million, or (2.1)% of revenue, for the same period in 2023.

Active Buyers and Orders:

Active Buyers totaled 1.8 million and Orders totaled 6.9 million in 2023, representing growth of 8.8% and 6.2%, respectively, compared to the prior year.

Key Financial and Operating Metrics

Active Buyers totaled 1.3 million and Orders totaled 4.9 million in 2024, representing decreases of 6.1% and 0.6%, respectively, compared to the prior year.

Key Financial and Operating Metrics from Continuing Operations

We review a number of operating and financial metrics, including the following key business and non-GAAP metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

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Gross margin 79.7 % 76.8 %

Net loss $ (71,248) $ (92,284) (22.8) %

Net loss margin (22.1) % (32.0) %

Non-GAAP Adjusted EBITDA loss (1)

Loss from continuing operations

$ (39,999) $ (52,356) 23.6 %

Non-GAAP Adjusted EBITDA loss margin (5.4) % (15.0) %

(1) Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies.

See below for a reconciliation of Non-GAAP Adjusted EBITDA loss to net loss.

Loss from continuing operations margin (15.4) % (20.3) %

Non-GAAP Adjusted EBITDA (loss) from continuing operations (1)

$ 8,679 $ (5,319) 263.2 %

Non-GAAP Adjusted EBITDA (loss) from continuing operations margin 3.3 % (2.1) %

(1) Non-GAAP Adjusted EBITDA (loss) from continuing operations and Non-GAAP Adjusted EBITDA (loss) from continuing operations margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies.

See below for a reconciliation of Non-GAAP Adjusted EBITDA (loss) from continuing operations to its most directly comparable GAAP measure, loss from continuing operations.

Active Buyers

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Orders means the total number of orders placed by buyers across our marketplaces, including through our RaaS clients, in a given period, net of cancellations.

Non-GAAP Financial Measures

Non-GAAP Adjusted EBITDA Loss and Non-GAAP Adjusted EBITDA Loss Margin

Non-GAAP Adjusted EBITDA loss means net loss adjusted to exclude, where applicable in a given period, stock-based compensation expense, depreciation and amortization, interest expense, severance and other charges, provision for income taxes, impairment of non-marketable equity investment, and acquisition-related expenses.

Non-GAAP Adjusted EBITDA loss margin represents Non-GAAP Adjusted EBITDA loss divided by Total revenue.

We use Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin, which are non-GAAP measures, to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes.

We believe that Non-GAAP Adjusted EBITDA loss and Non-GAAP Adjusted EBITDA loss margin, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

The following table provides a reconciliation of net loss to non-GAAP Adjusted EBITDA loss:

Non-GAAP Financial Measures from Continuing Operations

Non-GAAP Adjusted EBITDA (Loss) from continuing operations and Non-GAAP Adjusted EBITDA (Loss) from continuing operations Margin

Non-GAAP Adjusted EBITDA (loss) from continuing operations means loss from continuing operations adjusted to exclude, where applicable in a given period, stock-based compensation expense, depreciation and amortization, severance and other reorganization costs, interest expense, and provision for income taxes.

Non-GAAP Adjusted EBITDA (loss) from continuing operations margin represents Non-GAAP Adjusted EBITDA (loss) from continuing operations divided by Total revenue.

We use Non-GAAP Adjusted EBITDA (loss) from continuing operations and Non-GAAP Adjusted EBITDA (loss) from continuing operations margin, which are non-GAAP measures, to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes.

We believe that Non-GAAP Adjusted EBITDA (loss) from continuing operations and Non-GAAP Adjusted EBITDA (loss) from continuing operations margin, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

The following table provides a reconciliation of loss from continuing operations to non-GAAP Adjusted EBITDA (loss) from continuing operations:

Year Ended December 31,

(in thousands)

Net loss $ (71,248) $ (92,284)

Loss from continuing operations $ (39,999) $ (52,356)

Stock-based compensation expense 25,847 29,652

Depreciation and amortization 17,328 14,227

Severance and other reorganization costs 2,949 900

Interest expense 2,525 2,239

Severance and other 1,196 3,182

Provision for income taxes 29 19

Impairment of non-marketable equity investment — 3,750

Acquisition and offering-related expenses — 274

Non-GAAP Adjusted EBITDA loss $ (17,380) $ (43,388)

Non-GAAP Adjusted EBITDA (loss) from continuing operations $ 8,679 $ (5,319)

Our revenue is comprised of consignment revenue and product revenue.

Consignment revenue

We generate consignment revenue from the sale of secondhand apparel, shoes and accessories on behalf of sellers.

We generate consignment revenue primarily from the sale of secondhand apparel, shoes and accessories on behalf of sellers.

We recognize consignment revenue, net of seller payouts, discounts, incentives and returns.

We expect consignment revenue to continue to increase as we increase our Active Buyers and Orders, and as we recently transitioned our RaaS partners to the consignment model and introduced the consignment model to our European operations.

We expect consignment revenue to continue to increase as we grow our Active Buyers and Orders.

Additionally, consignment revenue includes bag fees charged to sellers for processing Clean Out Kits.

Product revenue

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

The sales from our European operations are primarily from sale of owned items.

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

We recognize product revenue, net of discounts, incentives and returns.

We expect the percentage share of product revenue to decrease in the long term as we recently transitioned our RaaS partners to the consignment model and introduced the consignment model to our European operations.

We expect the percentage share of product revenue to decrease in the long term as we continue to focus on our consignment model and reduce owned inventory.

Cost of Revenue

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We expect these expenses to increase in absolute dollars and decrease as a percentage of revenue over the longer term due to better leverage in our operations.

Marketing expense consists primarily of advertising, public relations expenditures and personnel costs for employees engaged in marketing.

Marketing expense consists primarily of advertising and public relations costs, and personnel costs for employees engaged in marketing.

Marketing costs also include an allocation of corporate facilities and information technology costs such as equipment, depreciation and rent.

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Interest expense consists of interest and debt issuance costs relating to our term loan facility.

Certain interest costs in conjunction with the build-out of our distribution centers in 2022 were reclassified from interest expense and capitalized.

Certain 2023 interest costs in conjunction with the build-out of our distribution centers were reclassified from interest expense and capitalized.

Other Income (Expense), Net

Other income (expense), net consists of non-operating income and expenses such as interest income earned on our investments in marketable securities, impairments of non-marketable equity investments and claim proceeds for lost shipments.

Financial Results for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Other income (expense), net primarily consists of non-operating income and expenses such as interest income earned on our investments in marketable securities.

Financial Results from Continuing Operations for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Year Ended December 31, Change

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Consignment revenue as a percentage of Total revenue

94.7 % 82.4 %

Product revenue as a percentage of Total revenue

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The increase in revenue for the year ended December 31, 2024 as compared to the same period in 2023 was driven by a 15.5% growth in consignment revenue, partially offset by a 69.5% decrease in product revenue.

The increase in total revenue was due primarily to an 8.8% increase in Active Buyers and 6.2% increase in Orders combined with a 5.1% increase in net revenue per Order.

Cost of Revenue

The shift reflects our strategic decision to transition our RaaS clients from a product to a consignment model in the third quarter of 2023.

The increase in total revenue was due primarily to a 10.6% increase in the average order value, offset by a 6.1% decrease in Active Buyers and a 0.6% decrease in Orders.

Year Ended December 31, Change

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Gross margin 79.7 % 76.8 %

Gross margin was 66.4% and 66.7% for the years ended December 31, 2023 and 2022, respectively, representing a decrease of 30 basis points.

Consignment revenue is recognized net of seller payouts.

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As such, product revenue has a lower gross margin than consignment revenue.

The decrease in gross margin for the year ended December 31, 2023 as compared to the same period in 2022 was due to a decrease in product gross margin by 1110 basis points, primarily driven by our European operations, which have a lower gross margin.

This lower product gross margin was offset by a 250 basis point increase in consignment gross margin, primarily driven by lower shipping, labor and packaging costs.

The changes in consignment and product gross margins, coupled with the 22.1% increase in consignment revenue and the 4.4% decrease in product revenue, resulted in overall gross margin declining 30 basis points for the year ended December 31, 2023.

Cost of Consignment Revenue

Gross margin was 79.7% and 76.8% for the years ended December 31, 2024 and 2023, respectively, representing an increase of 290 basis points.

The increase in gross margin for the year ended December 31, 2024 as compared to the same period in 2023 was primarily driven by a significantly higher proportion of revenue from the consignment model, which has a higher gross margin than the product model.

The transition of our RaaS clients to the consignment model in 2023 contributed to the growth in our consignment revenue, positively impacting our gross margin.

Consignment Gross Margin

Year Ended December 31, Change

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Consignment gross margin 81.5 % 81.4 %

Consignment gross margin was 81.4% and 78.8% for the years ended December 31, 2023 and 2022, respectively, representing an increase of 260 basis points.

The increase in consignment gross margin for the year ended December 31, 2023 as compared to the same period in 2022 was primarily due to a 250 basis point decrease in outbound shipping, labor and packaging costs.

Cost of Product Revenue

Consignment gross margin was 81.5% and 81.4% for the years ended December 31, 2024 and 2023, respectively, remaining relatively flat with a modest increase of 10 basis points, primarily driven by slightly lower outbound shipping and labor costs.

Product Gross Margin

Year Ended December 31, Change

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Product gross margin was 47.2% and 55.3% for the years ended December 31, 2024 and 2023, respectively, representing a decrease of 810 basis points.

The decrease in product gross margin for the year ended December 31, 2023 as compared to the same period in 2022 was primarily due to our European operations, which have a lower product gross margin.

Product gross margin decreased primarily due to higher seller payouts and an impairment of aged inventory in our European operations, which unfavorably impacted product gross margin by 1150 and 280 basis points, respectively.

This decrease was partially offset by a 170 basis point decrease in inventory costs in the U.S.

and a 140 basis point decrease in shipping and labor costs.

The decrease in product gross margin for the year ended December 31, 2024 as compared to the same period in 2023 was primarily due to a 840 basis point increase in product inventory costs.

This decrease was partially offset by a 30 basis point decrease in shipping, labor, and packaging costs.

The significant decline in cost of product revenue was primarily driven by the transition of our RaaS clients to the consignment model in 2023.

Operations, Product and Technology

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Operations, product, and technology as a percentage of total revenue 54.7 % 55.4 %

Operations, product, and technology expenses increased $1.1 million or 0.7% for the year ended December 31, 2023 as compared to the same period in 2022.

The increase was primarily due to a $4.4 million increase in facilities, technology, and other costs, of which $2.9 million relates to recognizing incremental rent and depreciation expense on assets related to our Texas distribution center and a $0.3 million increase in inbound shipping.

This increase was partially offset by a $2.6 million decrease in personnel-related costs and a $1.0 million decrease in professional services.

Operations, product, and technology expenses decreased $1.1 million or 0.8% for the year ended December 31, 2024 as compared to the same period in 2023.

The decrease was primarily driven by a $4.6 million decrease in personnel-related costs following our workforce reorganization in March 2024 and a $0.9 million decrease in facilities, technology and other costs, partially offset by a $3.0 million increase in accelerated depreciation of certain warehouse equipment , a $0.8 million increase in inbound shipping related to consignment revenue, and a $0.6 million increase in severance costs as a result of our workforce reorganization.

The decrease in operations, product, and technology expenses as a percentage of total revenue was primarily due to a decrease in operations, product, and technology spend offset by an increase in total revenue, reflecting our ongoing efforts to optimize costs, improve operational efficiency, and leverage economies of scale.

Year Ended December 31, Change

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Marketing as a percentage of total revenue 18.7 % 19.9 %

Marketing expenses increased $1.9 million or 3.0% for the year ended December 31, 2023 as compared to the same period in 2022.

The increase was primarily due to a $0.8 million increase in advertising costs and a $1.1 million increase in personnel-related costs, of which $0.6 million was related to stock-based compensation expense.

Marketing expenses decreased $2.7 million or 5.3% for the year ended December 31, 2024 as compared to the same period in 2023.

The decrease was primarily due to a $5.6 million decrease in personnel-related costs following our workforce reorganization in March 2024, of which $3.0 million was related to stock-based compensation expense, partially offset by a $2.7 million increase in advertising costs and a $0.2 million increase in facilities, technology and other costs.

The decrease in marketing expenses as a percentage of total revenue was due to a decrease in marketing spend offset by an increase in total revenue, reflecting our efforts to optimize marketing efficiency while leveraging higher revenue growth.

Sales, General and Administrative

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Sales, general and administrative as a percentage of total revenue 21.9 % 21.9 %

Sales, general, and administrative expenses increased $0.8 million or 1.4% for the year ended December 31, 2023 as compared to the same period in 2022.

The increase was primarily due to a $2.6 million increase in personnel-related costs, of which $2.2 million was related to stock-based compensation expense, and a $1.2 million increase in facilities, technology, and other costs, offset by a $3.0 million decrease in professional services.

Sales, general, and administrative expenses remained relatively flat, with a modest increase of $0.2 million or 0.3% for the year ended December 31, 2024 as compared to the same period in 2023.

The increase was primarily due to a $1.0 million increase in facilities, technology, and other costs, partially offset by a $0.8 million decrease in personnel-related costs following our workforce reorganization in March 2024.

Interest Expense

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Interest expense increased $0.3 million for the year ended December 31, 2024 as compared to the same period in 2023.

This increase was primarily due to a $0.6 million increase in interest costs due to higher interest rates and a $1.0 million decrease in capitalized interest expense in conjunction with the build-out of our distribution centers in 2022, partially offset by a $0.1 million decrease in amortization of debt issuance costs.

Other Income (Expense), Net

This increase was primarily due to a $0.6 million capitalization of interest costs in the first quarter of 2023 in conjunction with the build-out of our distribution centers, which did not recur in 2024, partially offset by $0.3 million in lower interest costs in 2024 due to reduced outstanding balances.

Other Income, Net

Year Ended December 31, Change

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(in thousands, except percentages)

Other income (expense), net

Other income, net

$ 3,174 $ 2,900 $ 274 9.4 %

Other income (expense), net increased $4.8 million for the year ended December 31, 2023 as compared to the same period in 2022.

The net increase was primarily due to a $3.8 million decrease related to an impairment charge related to our non-marketable equity investment in 2022, a $1.7 million increase in interest income on our marketable securities due to a higher interest rate environment, and a $0.1 million foreign currency transaction gain.

This increase was partially offset by a $0.8 million decrease in claim proceeds for lost shipments.

Other income, net increased $0.3 million for the year ended December 31, 2024 as compared to the same period in 2023.

The increase was primarily due to a $0.7 million increase in interest income from our marketable securities due to a higher interest rate environment, partially offset by a $0.4 million decrease in claim proceeds for lost shipments.

Liquidity and Capital Resources

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As of December 31, 2024, we had cash, cash equivalents and short-term marketable securities of $44.2 million.

Additionally, we have a term loan facility (“Term Loan”) under which $22.5 million remained available to be drawn as of December 31, 2023 for the purchase of certain equipment, and we were in full compliance with our debt covenants under the Term Loan as of that date.

Additionally, we have a term loan facility (“Term Loan”) under which $22.5 million remained available to be drawn as of December 31, 2024 for the purchase of certain equipment, and we were in compliance with our debt covenants under the Term Loan as of that date.

See Note 8, Long-Term Debt , to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for a further discussion on our Term Loan.

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Our primary sources of liquidity are cash flows generated from operations, cash on hand and borrowings available under the Term Loan.

Our primary use of cash includes operating costs such as distribution network spend, product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our operations and our growth.

Our primary use of cash includes seller payouts and product inventory costs, operating costs such as distribution network spend, product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our operations and our growth.

Additionally, our primary capital expenditures are related to the set-up, expansion and/or automation of our distribution network.

Based upon our current operating plans, we believe that our existing cash, cash equivalents and short-term marketable securities will be sufficient for at least the next 12 months to meet our short- and long-term capital requirements, and we do not anticipate expanding our distribution network to include additional locations in the near term.

Based upon our current operating plans, we believe that our existing cash, cash equivalents, short-term marketable securities, and remaining availability under the Term Loan will be sufficient for at least the next 12 months to meet our short- and long-term capital requirements, and we do not anticipate expanding our distribution network to include additional locations in the near term.

Our cash flow forecast is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

Our future capital requirements will depend on many factors, including but not limited to, the timing of our increased distribution center automation and expansion plans to support planned revenue growth, the expansion of sales and marketing activities, the potential introduction of new offerings and new RaaS clients, the continuing growth of our marketplaces and overall economic conditions.

However, we expect that our capital expenditures will be limited in 2024 as we have completed the first phase of our new distribution center in Texas.

However, we expect that our capital expenditures will remain modest in 2025.

See the section titled “Risk Factors—Risks Relating to Our Indebtedness and Liquidity—We may require additional capital to support business growth, and this capital might not be available or may be available only by diluting existing stockholders.”

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Net cash provided by (used in):

Operating activities $ (22,591) $ (52,105)

Investing activities 43,680 8,924

Financing activities (3,603) (3,936)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (68) (672)

Net change in cash, cash equivalents and restricted cash $ 17,418 $ (47,789)

Changes in Cash Flows from Operating Activities

Net cash used in operating activities was $22.6 million for the year ended December 31, 2023 compared to the net cash used of $52.1 million same period in 2022.

The decrease in cash outflows was primarily due to a $25.7 million decrease in our net loss excluding non-cash expenses.

Additionally, changes in operating assets and liabilities were favorable year over year by $3.8 million.

This change in operating assets and liabilities was due to a $13.9 million favorable change in accounts and seller payables, consistent with the growth in our consignment business and a $10.1 million reduction in inventory mainly driven by decreased upfront inventory purchases as we transitioned our RaaS partners to the consignment model.

This change was partially offset by a $9.9 million unfavorable change in accrued and other liabilities due to timing of vendor payments, an $8.0 million increase in operating lease costs and a $2.6 million unfavorable change in accounts receivable due to timing of cash receipts from payment processors.

Changes in Cash Flows from Investing Activities

Net cash provided by investing activities for the year ended December 31, 2023 increased $34.8 million as compared to the same period in 2022.

The favorable change was primarily due to a $21.9 million increase in maturities in marketable securities and a $27.3 million decrease in purchases of property and equipment as we completed the first phase of our Texas distribution center, offset by a $14.4 million increase in purchases of marketable securities.

Changes in Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2023 decreased $0.3 million as compared to the same period in 2022, which was primarily due to decreased net debt repayments of $1.9 million, increased proceeds from issuance of stock-based awards of $1.0 million, partially offset by a $2.6 million of increased taxes paid related to stock-based award activity.

Continuing operating activities

$ 4,903 $ (9,818)

Continuing investing activities

(10,260) 46,556

Continuing financing activities

(4,392) (3,603)

Net change in cash, cash equivalents and restricted cash from continuing operations

$ (9,749) $ 33,135

Changes in Cash Flows from Continuing Operating Activities

Net cash provided by continuing operating activities was $4.9 million for the year ended December 31, 2024, compared to net cash used of $9.8 million for the same period in 2023.

The $14.7 million increase in continuing operating cash inflows was primarily driven by a $12.4 million reduction in our loss from continuing operations, offset by a $2.2 million decrease in non-cash charges, and $4.5 million of improvements in operating assets and liabilities.

This Improvement in operating assets and liabilities was primarily due to:

a $12.2 million increase in accounts payables, accrued and other liabilities, primarily reflecting the timing of payments and increased vendor spending;

a $3.9 million decrease in accounts receivable due to timing of cash receipts from payment processors;

and a $1.0 million increase in operating lease liabilities.

This change was partially offset by a $10.7 million decrease in seller payables, primarily due to timing of seller credit cash-outs or redemptions and conversions to gift cards, as well as a $1.5 million decrease in cash inflow from inventory, reflecting a shift in mix from product to consignment following the transition of our RaaS partners to the consignment model in late 2023.

Changes in Cash Flows from Continuing Investing Activities

Net cash used in continuing investing activities was $10.3 million for the year ended December 31, 2024, compared to net cash provided of $46.6 million for the same period in 2023.

The $56.8 million increase in continuing investing cash outflows was primarily driven by a $49.5 million decrease in maturities in marketable securities and a $13.9 million increase in purchases of marketable securities, partially offset by a $6.5 million decrease in purchases of property and equipment following the completion of the first phase of our Texas distribution center build-out.

Changes in Cash Flows from Continuing Financing Activities

Net cash used in continuing financing activities was $4.4 million for the year ended December 31, 2024, compared to net cash used of $3.6 million for the same period in 2023.

The $0.8 million increase in continuing financing cash outflows was primarily driven by a $1.5 million decrease in proceeds from issuance of stock-based awards, partially offset by a $0.7 million increase in payroll taxes paid on stock-based award activity.

Contractual Obligations

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Revenue is recognized when the loyalty rewards are redeemed or expire.

We recognize revenue from gift cards when the gift cards are redeemed by the customer, and we recognize breakage revenue when we determine that the redemption of gift cards is remote, which is two years after issuance.

We recognize revenue from gift cards when the gift cards are redeemed by the customer.

Additionally, we recognize breakage revenue for the portion of gift card values that are not expected to be redeemed.

Previously, breakage revenue was estimated when gift card redemption was deemed remote.

Beginning in 2024, with more historical data available, breakage revenue is estimated based upon historical customer redemption patterns.

Judgment is required in determining the appropriate grouping of gift cards for analyzing breakage rates, redemption patterns, and estimating the ultimate value of gift cards not expected to be redeemed.

Stock-Based Compensation

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The fair values of equity awards are recognized as compensation expense over the requisite service period or over the period in which the related services are received (generally the vesting period), using the straight-line method.

The estimated fair value of equity awards that contain performance conditions is expensed over the term of the award once we have determined that it is probable that performance conditions will be satisfied.

We account for forfeitures as they occur.

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The risk-free interest rate is based on the yield available on United States Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award.

Goodwill and Acquired Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

Goodwill is not subject to amortization but will be reviewed for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

Acquired intangible assets with determinable lives are generally amortized over their estimated useful lives using the straight-line method.

We review intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.

Operating as one operating and reportable segment, the Company performs a qualitative assessment annually during the fourth quarter to determine if it is more likely than not that the fair value of its single reporting unit is less than its carrying amount.

If it is determined that it is more likely than not that the fair value of its single reporting unit is less than its carrying amount, the Company will perform a quantitative assessment, in which it would use a discounted cash flow approach to estimate the fair value of its single reporting unit.

If the fair value of the single reporting unit is less than its carrying amount, then an impairment charge is recognized for the difference between the fair value and carrying amount of goodwill.

JOBS Act Accounting Election

6 unchanged sentences

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What changed 10-K

Item 7. Management’s Discussion and Analysis