THREDUP INC. Management report and analysis of the financial situation and operating results. (Form 10-K)

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The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements
and related notes thereto included elsewhere in this Annual Report on Form 10-K.
The following discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ materially from
those discussed in the forward-looking statements. You should review the section
titled "Special Note Regarding Forward-Looking Statements" for a discussion of
forward-looking statements and the section titled "Risk Factors" for a
discussion of factors that could cause actual results to differ materially from
the results described in or implied by the forward-looking statements contained
in the following discussion and analysis. Our historical results are not
necessarily indicative of the results that may be expected for any period in the
future, and our interim results are not necessarily indicative of the results we
expect for the full calendar year or any other period.

A discussion regarding our financial condition and results of operations for the
year ended December 31, 2021 compared to the year ended December 31, 2020 is
presented below. A discussion regarding our financial condition and results of
operations for the year ended December 31, 2020 compared to the year ended
December 31, 2019 is included under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our final prospectus filed
pursuant to Rule 424(b) on March 26, 2021 ("Prospectus").

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Overview

thredUP is one of the world's largest online resale platforms for women's and
kids' apparel, shoes and accessories. Our mission is to inspire a new generation
of consumers to think secondhand first. We believe in a sustainable fashion
future and we are proud that our business model creates a positive impact to the
benefit of our buyers, sellers, clients, employees, investors and the
environment. Our custom-built operating platform consists of distributed
processing infrastructure, proprietary software and systems and data science
expertise. This platform is powering the rapidly emerging resale economy, one of
the fastest growing sectors in retail, according to a GlobalData market survey
conducted in April 2021.

thredUP's proprietary operating platform is the foundation for our managed
marketplace, where we have bridged online and offline technology to make the
buying and selling of tens of millions of unique items easy and fun. The
marketplace we have built enables buyers to browse and purchase resale items for
women's and kids' apparel, shoes and accessories across a wide range of price
points. Buyers love shopping value, premium and luxury brands all in one place,
at up to 90% off estimated retail price. Sellers love thredUP because we make it
easy to clean out their closets and unlock value for themselves or for the
charity of their choice while doing good for the planet. Sellers order a Clean
Out Kit, fill it and return it to us using our prepaid label. We take it from
there and do the work to make those items available for resale. In 2018, based
on our success with consumers directly, we extended our platform to enable
brands and retailers to participate in the resale economy. A number of the
world's leading brands and retailers are already taking advantage of our RaaS
offering. In October 2021, we closed the acquisition of Remix, a fashion resale
company headquartered in Sofia, Bulgaria, which further expands our reach to the
European customer. With this acquisition, we added a complementary operational
infrastructure and an experienced management team to enable our expansion into
Europe.

Recent Business Developments

IPO and IPO

Historically, we have financed our operations primarily through private sales of
equity securities and debt. Our registration statement related to the initial
public offering (the "IPO") was declared effective on March 25, 2021 by the SEC,
and our Class A common stock began trading on the Nasdaq Global Select Market
("Nasdaq") on March 26, 2021. Upon the completion of our IPO, we sold
13.8 million shares of Class A common stock at a price to the public of $14.00
per share. We received aggregate net proceeds of $175.5 million after deducting
offering costs, underwriting discounts and commissions of $17.7 million.

At August 2, 2021we issued and sold a total of two million Class A common shares at a price of $24.25 per share in a registered public offering. The total net proceeds were approximately $45.5 millionafter deducting the issue costs of $1.1 million and rebates and subscription fees of $2.2 million.

Acquisition of Remix Global AD

On July 24, 2021, we entered into Share Purchase Agreements (collectively, the
"Share Purchase Agreement"), with the shareholders of Remix to purchase 100% of
the outstanding equity interests of Remix and its subsidiary (the "Remix
Acquisition"). On October 7, 2021, we completed our acquisition of Remix and
paid approximately $7.2 million in cash to shareholders of Remix and its
subsidiary, and $12.1 million in cash to pay off Remix's outstanding term loan.
Shortly after the completion of Remix Acquisition, we paid on behalf of Remix
approximately $6.2 million in cash for its outstanding tax and other
liabilities. Subject to customary purchase price adjustments, we will issue
130,597 shares of our Class A common stock 18 months following the completion of
the Remix Acquisition to four shareholders of Remix.


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Impact of COVID-19

In December 2019, a novel strain of coronavirus was first identified, and in
March 2020, the World Health Organization categorized COVID-19 as a pandemic.
The COVID-19 pandemic has adversely impacted businesses worldwide and has
impacted aspects of our business and operations.

In March 2020, we shifted all of our corporate employees and contract engineers
to a remote work model and implemented additional measures to better enable
remote work. As of December 31, 2021, our remote work model remains largely in
place.

Financial Impact

In the twelve months ended December 31, 2021, we saw increased demand, which we
believe was partly related to COVID-19 recovery and re-opening efforts such as
the vaccine roll out, easing of social distancing restrictions and federal
stimulus legislation. We also saw increased operating expenses due to the
additional labor costs associated with increased processing to support the
demand experienced to date and in anticipation of accelerating demand.

Impact on processing in our fulfillment centers

We still face challenges in hiring and retaining employees and have implemented
compensation and benefits programs to enhance hiring and retention, which has
contributed to higher Cost of Revenue and higher Operations, Product and
Technology expenses. These programs are primarily aimed at mitigating the macro
trend of increased competition for labor, including seasonal employment
opportunities.

We have been monitoring and continue to monitor the varied impact of COVID-19 on
our business and operations. In the twelve months ended December 31, 2021, we
saw increased demand from the prior year, which we believe was partly related to
COVID-19 recovery and re-opening efforts such as the vaccine roll out, easing of
social distancing restrictions and federal stimulus legislation. More broadly
however, we expect the evolving COVID-19 pandemic to continue to have an adverse
impact on our business, results of operations and financial condition, including
our revenue and cash flows, for at least the first part of 2022. For instance, a
slowdown or further uncertainty in the United States economy may result in
additional changes in buyer and seller behavior, which could cause either a
potential reduction in discretionary spending on our marketplace or increased
activity on our marketplace as customers look for high-value, lower-priced
alternatives. In particular, following the stimulus package in March 2021, we
experienced a brief increase in Orders followed by a return to expected Orders
activity. Additionally, future developments, such as new information which may
emerge concerning COVID-19, the new COVID-19 strains (e.g., delta and omicron
variants), and the actions to contain the coronavirus or treat its impact, could
have an adverse impact to our business. Due to the unknown duration and
unprecedented impact of the COVID-19 pandemic and the range of national, state
and local responses thereto, the related financial impact on our business could
change and cannot be accurately predicted at this time. See the section titled
"Risk Factors-Risks Relating to our Business and Industry-The global COVID-19
pandemic has had and may continue to have an adverse impact on our business,
results of operations and financial condition."


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Overview of 2021 results

Turnover: total turnover reached a record at $251.8 millionan increase of 35% year over year.

Gross Profit and Margin: Gross profit totaled $178.1 million representing growth
of 39% year-over-year. Gross margin expanded by 185 basis points to 71% from 69%
last year.

Net Loss: GAAP net loss was $63.2 million for the year ended December 31, 2021,
representing a 32% increase from the GAAP net loss of $47.9 million for the year
ended December 31, 2020.

Adjusted EBITDA: Adjusted EBITDA loss was $36.5 millionnegative revenue of 14%, compared to an adjusted EBITDA loss of $33.4 million for the year ended
December 31, 2020a negative turnover of 18% in 2020.

Active buyers and orders: Total active buyers in 2021 of 1.69 million and orders of 5.3 million increased by 36% and 34%, respectively, compared to 2020.

Main financial and operational indicators

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

                                              Year Ended December 31,                                % Change
                                  2021               2020               2019            2021 vs 2020          2020 vs 2019

                                                   (in thousands)
Active Buyers (as of period
end)                              1,691              1,240                997                    36  %                24  %

Orders                            5,328              3,965              3,134                    34  %                27  %

Net loss                      $ (63,176)         $ (47,877)         $ (38,197)                   32  %                25  %
Net loss margin                     (25) %             (26) %             (23) %                  1  %                (3) %
Adjusted EBITDA loss(1)       $ (36,506)         $ (33,398)         $ (24,343)                    9  %                37  %
Adjusted EBITDA margin              (14) %             (18) %             (15) %                  4  %                (3) %

(1) See below for a reconciliation between Adjusted EBITDA and Net Loss.

Active buyers

An Active Buyer is a thredUP buyer who has made at least one purchase in the
last twelve months. A thredUP buyer is a customer who has created an account in
our marketplace. A thredUP buyer is identified by a unique email address and a
single person could have multiple thredUP accounts and count as multiple Active
Buyers. The number of Active Buyers is a key driver of revenue for our
marketplace and we expect the number of Active Buyers to increase over time.

Orders

Orders means the total number of orders placed by buyers across our marketplace,
including through our RaaS clients, in a given period, net of cancellations. We
expect Orders to increase over time.

Adjusted EBITDA

Adjusted EBITDA means net loss adjusted to exclude, where applicable in a given
period, depreciation and amortization, stock-based compensation expense,
acquisition and offering related expenses, interest expense, change in fair
value of convertible preferred stock warrant liability, loss on extinguishment
of debt, and provision for income taxes. We use Adjusted EBITDA, a Non-GAAP
metric,

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to evaluate and assess our operating performance and the operating leverage in
our business, and for internal planning and forecasting purposes. We believe
that Adjusted EBITDA, when taken collectively with our GAAP results, may be
helpful to investors because it provides consistency and comparability with past
financial performance and assists in comparisons with other companies, some of
which use similar non-GAAP financial information to supplement their GAAP
results.

The following table provides a reconciliation of net loss to Adjusted EBITDA (in
thousands):

                                                             Year Ended December 31,
                                           2021                     2020                     2019
Adjusted EBITDA Reconciliation:
GAAP Net loss                       $       (63,176)         $       (47,877)         $       (38,197)
Depreciation and amortization                 9,155                    5,581                    4,274
Stock-based compensation expense             12,959                    7,336                    7,678
Acquisition and offering related
expenses                                      1,271                        -                        -
Interest expense                              2,275                    1,305                    1,428
Change in fair value of convertible
preferred stock warrant liability               930                      201                        6
Loss on extinguishment of debt                    -                        -                      432
Provision for income taxes                       80                       56                       36
Non-GAAP Adjusted EBITDA            $       (36,506)         $       

(33,398) ($24,343)

Components of operating results

Income

Our revenue is made up of consignment revenue and product revenue.

Consignment Recipes

We generate consignment revenue from the sale of secondhand women's and kids'
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 grow our business.

Product revenue

We also generate product revenue from the sale of items that we own, which we
refer to as our inventory. While we shifted our business to primarily
consignment sales in mid-2019, historically, we purchased most of our inventory
from our sellers prior to inclusion on our online marketplace. The sales from
our newly acquired European operations are primarily from sale of owned items.
We recognize product revenue, net of discounts, incentives and returns. We
expect product revenue to increase in absolute dollars and as a percentage of
total revenue in the near term as we continue to grow our international
business. We expect the percentage share of product revenue to decrease in the
long term as we introduce the consignment model to our European operations.

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Cost of Revenue

Cost of consignment revenue

Cost of consignment revenue consists of outbound shipping, outbound labor and
packaging costs. We expect cost of consignment revenue to decrease and gross
margin to increase as a percentage of total consignment revenue as we continue
to scale our business due to our ability to drive leverage in shipping, labor
and packaging.

Cost of product revenue

Cost of product revenue mainly consists of inventory cost, inbound shipping
related to the sold merchandise, outbound shipping, outbound labor, packaging
costs and inventory write-downs. We expect cost of product revenue to increase
in absolute dollars and decrease as a percentage of total revenue, leading to an
increase in gross margin. We expect further gross margin to increase as we
continue to scale our business due to our ability to drive leverage in shipping,
labor and packaging.

Operating Expenses

Operations, Product and Technology

Operations, product and technology expenses consist primarily of distribution
center operating costs and product and technology expenses. Distribution center
operating costs mainly include inbound shipping costs, other than those
capitalized in inventory, as well as personnel costs, distribution center rent,
maintenance and depreciation of equipment and leasehold improvements. Product
and technology costs include personnel costs for the design and development of
product and the related technology that is used to operate our distribution
centers, merchandise science, website development and related expenses for these
departments. Operations, product and technology expenses also include an
allocation of corporate facilities and information technology costs such as
equipment, depreciation and rent. We expect operations, product and technology
expenses to increase in absolute dollars in future periods to support our
growth, especially as costs to increase our supply (inbound costs) are generally
incurred prior to the expected revenue growth. Additionally, we expect to bring
on additional distribution centers and continue investing in automation and
other technology improvements to support and drive efficiency in our operations.
These expenses may vary from period to period as a percentage of revenue,
depending primarily upon when we choose to make more significant investments,
including business acquisitions. 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

Marketing expenses mainly consist of expenses for advertising, public relations and personnel costs for employees engaged in marketing. Marketing expenses also include an allocation of business facilities and information technology costs such as equipment, depreciation and rent. We expect our marketing spend to fluctuate as a percentage of revenue as we intend to increase marketing spend to drive our business growth.

Sales, general and administrative

Sales, general and administrative expense consists of personnel costs for
employees involved in general corporate functions, including accounting,
finance, tax, legal and people services, customer service, and retail stores.
Sales, general and administrative also includes payment processing fees,
professional fees and allocation of corporate facilities and information
technology costs such as equipment, depreciation and rent. We expect to increase
sales, general and administrative expense as we grow our infrastructure to
support operating as a public company and the overall growth in our business.
While these expenses may vary from period to period as a percentage of revenue,
we expect them to increase in absolute dollars and decrease as a percentage of
revenue over the longer term.

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Interest expense

In 2019, we entered into a loan and security agreement with Western Alliance
Bank. As of December 31, 2021, we had borrowed $40.0 million under our loan and
security agreement, with $36.0 million principal outstanding. For the years
ended December 31, 2021, 2020 and 2019, we recorded $2.3 million, $1.3 million
and $1.4 million of interest expense, respectively.

Other income, net

Other income, net for the year ended December 31, 2021 is primarily comprised of
claim proceeds for lost shipments, offset by change in preferred stock warrants.
Other income, net for the years ended December 31, 2020 and 2019 was immaterial.

Operating results

The results of operations presented below should be reviewed in conjunction with
our consolidated financial statements and notes included elsewhere in this
Annual Report on Form 10-K:

                                                             Year Ended December 31,
                                               2021                    2020                    2019

Revenue:                                              (in thousands, except per share data)
Consignment                             $       186,114          $      138,096          $       97,763
Product                                          65,678                  47,919                  66,049
Total revenue                                   251,792                 186,015                 163,812
Cost of revenue:
Consignment                                      41,856                  34,184                  22,764
Product                                          31,804                  23,683                  28,544
Total cost of revenue                            73,660                  57,867                  51,308
Gross profit                                    178,132                 128,148                 112,504
Operating expenses:
Operations, product and technology              128,079                 101,408                  82,078
Marketing                                        63,625                  44,765                  44,980
Sales, general and administrative                48,814                  28,564                  22,253
Total operating expenses                        240,518                 174,737                 149,311
Operating loss                                  (62,386)                (46,589)                (36,807)
Interest expense                                 (2,275)                 (1,305)                 (1,428)
Other income, net                                 1,565                      73                      74
Loss before provision for income taxes          (63,096)                (47,821)                (38,161)
Provision for income taxes                           80                      56                      36
Net loss                                $       (63,176)         $      (47,877)         $      (38,197)
Net loss per share attributable to
common stockholders, basic and diluted  $         (0.82)         $        (4.14)         $        (3.72)
Weighted-average shares used in
computing net loss per share
attributable to common stockholders,
basic and diluted                                   77,092                  11,565                  10,265



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Comparison of completed exercises December 31, 2021 and 2020

Revenue

                                                Year Ended December 31,                           Change

                                                2021                  2020              Amount                %

                                                              (in thousands, except percentages)
Consignment revenue                       $      186,114          $ 138,096          $  48,018                  35  %
Product revenue                                   65,678             47,919             17,759                  37  %
Total revenue                             $      251,792          $ 186,015          $  65,777                  35  %
Consignment revenue as a % of total
revenue                                               74  %              74 

%

Product revenue as a % of total revenue               26  %              26 

%


The $65.8 million increase in total revenue represents a 35% increase in total
revenue for the year ended December 31, 2021, as compared to the year ended
December 31, 2020. This increase was primarily attributable to a 34% increase in
Orders and a 1% increase in revenue per Order over the same period. The 34%
increase in Orders was primarily driven by growth in Active Buyers of 36% over
the same period mainly due to our increased marketing and advertising efforts
and our expansion into Europe through the acquisition of Remix.


Cost of Revenue

                                                   Year Ended December 31,                          Change

                                                   2021                  2020             Amount               %

                                                                (in thousands, except percentages)
Cost of consignment revenue                  $       41,856          $  34,184          $  7,672                 22  %
Cost of product revenue                              31,804             23,683             8,121                 34  %
Total cost of revenue                        $       73,660          $  57,867          $ 15,793                 27  %
Gross profit                                 $      178,132          $ 128,148
Gross profit margin                                      71  %              69  %
Cost of revenue as a % of total revenue                  29  %              31  %
Cost of consignment revenue as a % of total
cost of revenue                                          57  %              59  %
Cost of product revenue as a % of total cost
of revenue                                               43  %              

41%


Total cost of revenue as a percentage of total revenue was 29% for the year
ended December 31, 2021, a decrease of 200 basis points from 31% for the year
ended December 31, 2020. This increase in gross profit margin was primarily
attributable to an increase in revenue and efficiencies in our shipping process.
However, we do expect cost of revenue to increase in absolute dollars and the
resulting gross margin to decrease due to growth in the sales of our European
operations, which are primarily product sales.

Consignment sales result in higher gross profit margin than product sales
because revenue for consignment sales is recognized net of seller payouts,
whereas, for product sales, seller payouts are recognized as a component of cost
of revenue, leading to different gross margin profiles between consignment sales
and product sales.

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Cost of Consignment Revenue

                                                Year Ended December 31,                  Change

                                               2021                  2020         Amount         %

                                                      (in thousands, except percentages)
Cost of consignment revenue               $    41,856             $ 34,184       $ 7,672        22  %
As a percent of consignment revenue                22   %               25  %
Consignment gross margin                           78   %               75  %

the $7.7 million the increase in consignment revenue cost represents a 22% increase in consignment revenue cost for the year ended December 31, 2021
compared to the year ended December 31, 2020.

The increase in cost of consignment revenue for the year ended December 31, 2021
was primarily driven by higher consignment revenue and related costs outlined in
the below table. Consignment gross margin increased 300 basis points to 78% for
the year ended December 31, 2021. Consignment revenue growth outpaced the
increase in outbound shipping and packaging costs due to increased revenue per
order and efficiencies in our shipping process.

                                             Year Ended December 31,                  Change
                                                2021                2020        Amount         %
                                                  (in thousands, except percentages)
Outbound shipping                      $      30,255             $ 24,593      $ 5,662        23  %
Direct labor                                   8,473                6,962        1,511        22  %
Packaging                                      2,514                2,259          255        11  %
Other                                            614                  370          244        66  %
Total cost of consignment revenue      $      41,856             $ 34,184      $ 7,672        22  %


Cost of Product Revenue

                                             Year Ended December 31,                 Change
                                            2021                  2020         Amount         %

                                                  (in thousands, except percentages)
Cost of product revenue                $    31,804             $ 23,683       $ 8,121        34  %
As a percent of product revenue                 48   %               49  %
Product gross margin                            52   %               51  %


The $8.1 million increase in cost of product revenue represents a 34% increase
in the cost of product revenue for the year ended December 31, 2021 compared to
the year ended December 31, 2020.

The increase in cost of product revenue in the year ended December 31, 2021 was
primarily driven by higher product revenue and related costs outlined in the
below table. Product gross margin increased 100 basis points to 52% for the year
ended December 31, 2021. We expect cost of product revenue to increase in
absolute dollar value and the resulting gross margin to decrease due to growth
in the sales of our European operations, which are primarily product sales.
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                                        Year Ended December 31,                  Change
                                           2021                2020        Amount         %
                                               (in thousands, except percentages)
Inventory costs                   $      20,707             $ 13,036      $ 7,671        59  %
Outbound shipping                         8,317                7,730          587         8  %
Direct labor                              2,113                2,169          (56)       (3) %
Packaging                                   667                  748          (81)      (11) %
Total cost of product revenue     $      31,804             $ 23,683      $ 8,121        34  %


Operating Expenses

                                                          Year Ended December 31,                        Change
                                                       2021                  2020              Amount                %

                                                                     (in thousands, except percentages)
Operations, product and technology               $      128,079          $ 101,408          $  26,671                  26  %
Marketing                                                63,625             44,765             18,860                  42  %
Sales, general and administrative                        48,814             28,564             20,250                  71  %
Total Total operating expenses                   $      240,518          $ 174,737          $  65,781                  38  %
Operations, product and technology as a %
of total revenue                                             51  %              55  %
Marketing as a % of total revenue                            25  %              24  %
Sales, general and administrative as a %
of total revenue                                             19  %          

15%

Operating expenses increased $65.8 millionor 38%, for the year ended
December 31, 2021 compared to the year ended December 31, 2020. Gross profit increased $50.0 millionor 39%, during the same period.

Operating expenses increased as we continue to invest in expanding distribution center processing capacity, marketing efforts and infrastructure to support being a public company and expanding in Europe through the acquisition of Remix.

The results by operating expense item are presented below.

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Operations, Product and Technology

                                                          Year Ended December 31,                          Change
                                                       2021                 2020              Amount                %

                                                                     (in thousands, except percentages)
Personnel-related costs                           $     82,896          $  60,799          $  22,097                  36  %
Facilities and other allocated costs                    26,088             23,335              2,753                  12  %
Inbound shipping                                        18,007             15,782              2,225                  14  %
Other                                                    1,088              1,492               (404)                (27) %
Total operations, product and technology
expenses                                          $    128,079          $ 101,408          $  26,671                  26  %
Operations, product and technology as % of
total revenue                                               51  %           

55%


Personnel-related costs were $82.9 million for the year ended December 31, 2021,
which increased by 36% from $60.8 million for the year ended December 31, 2020
due to a 35% increase in the average headcount for operations, research and
development, including growth in headcount from the acquisition of Remix. There
was an increase in compensation cost at distribution centers primarily to
attract and retain processing center staff in order to support our distribution
center operations growth.

Facilities and other allocated costs were $26.1 million for the year ended
December 31, 2021, which increased by 12% from $23.3 million for the year ended
December 31, 2020. The increase was primarily due to the addition of our new
Georgia distribution center in June 2020.

Inbound shipping costs were $18.0 million for the year ended December 31, 2021,
which increased by 14% from $15.8 million for the year ended December 31, 2020.
The increase was primarily due to growth in items per bag and higher shipping
rates. We lifted restrictions on the ability of sellers to order Clean Out Kits
at the end of February 2021, resulting in more Clean Out Kits being received.

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Marketing

                                                         Year Ended December 31,                            Change
                                                    2021                     2020              Amount                %

                                                                    (in thousands, except percentages)
Marketing and advertising costs                $    54,053               $  38,398          $  15,655                  41  %
Personnel-related costs                              6,628                   4,762              1,866                  39  %
Facilities and technology allocated
costs                                                1,396                     949                447                  47  %
Professional Services                                  824                     160                664                 415  %
Other                                                  724                     496                228                  46  %
Total marketing expense                        $    63,625               $  44,765          $  18,860                  42  %
Marketing as % of total revenue                         25   %              

24%


Marketing costs increased 42% for the year ended December 31, 2021 compared to
39% gross profit growth. Marketing and advertising costs were $54.1 million for
the year ended December 31, 2021, which increased by 41% from $38.4 million for
the year ended December 31, 2020. This increase was primarily due to higher
customer retention and goody box marketing spend as well as higher CPM (cost per
thousand impression).

Personnel-related costs were $6.6 million for the year ended December 31, 2021,
which increased by 39% from $4.8 million for the year ended December 31, 2020.
The $0.3 million increase was due to non-cash stock-based compensation.
Facilities and technology allocated costs were $1.4 million for the year ended
December 31, 2021, which increased from $0.9 million for the year ended
December 31, 2020. These increases were primarily due to a 19% average headcount
increase and higher software, support, computer equipment depreciation and other
costs.

Professional services costs were $0.8 million for the year ended December 31,
2021, which increased by 415% from $0.2 million for the year ended December 31,
2020. The increase was mainly due to higher spend in consulting services to
support marketing initiatives, including our growing RaaS business.

Sales, general and administrative

                                                                   Year Ended December 31,                         Change
                                                              2021                    2020             Amount              %

                                                                               (in thousands, except percentages)
Personnel-related costs                                  $    23,505               $ 14,061          $  9,444               67  %
Professional services                                          8,322                  4,811             3,511               73  %
Payment processing fees                                        8,107                  6,264             1,843               29  %
Other                                                          8,880                  3,428             5,452              159  %
Total sales, general and administrative costs            $    48,814               $ 28,564          $ 20,250               71  %
Sales, general and administrative as % of total
revenue                                                           19   %                 15  %


Selling, general and administrative expenses increased by 71% for the year ended
December 31, 2021, against a 39% growth in gross margin. This increase is primarily the result of investments, primarily in personnel and professional services costs, made to evolve our business and improve our processes as we become a public company.

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Personnel-related costs were $23.5 million for the year ended December 31, 2021,
which increased from $14.1 million for the year ended December 31, 2020. The
increase was primarily due to 35% average headcount increase to support growth
in our corporate functions and other costs related to being a public company. In
addition, non-cash stock-based compensation increased by $4.8 million for the
year ended December 31, 2021.

Professional services costs were $8.3 million for the year ended December 31,
2021, increased 73% from $4.8 million for the year ended December 31, 2020. The
increase was mainly due to an increase in accounting, consulting and legal fees
of $3.5 million for the year ended December 31, 2021 related to being a public
company and the acquisition of Remix.

Payment processing fees were $8.1 million for the year ended December 31, 2021,
which increased 29% from $6.3 million for the year ended December 31, 2020. The
increase was mainly due to an increase in overall sales.

Other expenses were $8.9 million for the year ended December 31, 2021, an
increase from $3.4 million for the year ended December 31, 2020. This increase
was primarily due to a $4.1 million increase in insurance expenses, mainly
related to higher insurance premiums associated with our public company status,
and a $1.3 million increase in software expenses to support and scale our
growing business.

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Cash and capital resources

As of December 31, 2021, we had cash, cash equivalents and short-term marketable
securities of $205.8 million and an accumulated deficit of $315.3 million. Since
our founding, we have generated negative cash flows from operations and have
primarily financed our operations through private and public sales of equity
securities and debt. Additionally, we currently have a term loan facility with
Western Alliance Bank. In March 2021, we completed our IPO for aggregate net
proceeds of $175.5 million, net of offering costs, underwriter discounts and
commissions of $17.7 million. In August 2021, we completed our follow-on public
offering and sold an aggregate of two million shares. The aggregate net proceeds
were $45.5 million after deducting $3.3 million of underwriter discounts and
commissions and offering costs.

We expect operating losses and negative cash flows from operations to continue
into the foreseeable future as we continue to invest in growing our business and
expanding our infrastructure. Our primary use of cash includes operating costs
such as distribution center operating costs and product and technology expenses,
marketing expenses, personnel expenses and other expenditures necessary to
support our operations and our growth. Additionally, our primary capital
expenditures are related to the set-up, automation and expansion of our
distribution centers. Based upon our current operating plans, we believe that
our existing cash and cash equivalents will be sufficient to fund our operations
for at least the next twelve months. Our forecast of the period of time through
which our financial resources will be adequate to support our operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary materially.

Our future capital requirements will depend on many factors, including, but not
limited to the timing of our increased distribution center automation and
expansion plans to support planned revenue growth, the expansion of sales and
marketing activities, the potential introduction of new offerings and new RaaS
clients, the continuing growth of our marketplace and overall economic
conditions. We may seek additional equity or debt financing. If we raise equity
financing, our stockholders may experience significant dilution of their
ownership interests. If we conduct an additional debt financing, the terms of
such debt financing may be similar or more restrictive than our current term
loan facility and we would have additional debt service obligations. In the
event that additional financing is required from outside sources, we may not be
able to raise it on terms acceptable to us or at all. If we are unable to raise
additional capital when desired, our business, financial condition and results
of operations could be harmed. See the section titled "Risk Factors-Risks
Relating to Our Business and Industry-We may require additional capital to
support business growth, and this capital might not be available or may be
available only by diluting existing stockholders."

Cash flow

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

                                                                        Year ended December 31,
                                                                       2021                    2020

                                                                            (in thousands)
Net cash provided by (used in):
Operating activities                                           $     (35,019)             $   (19,105)
Investing activities                                                (169,576)                 (19,424)
Financing activities                                                 228,960                   18,215
Effect of exchange rate changes on cash and cash equivalents             (64)                       -
Net increase (decrease) in cash, cash equivalents and
restricted cash                                                $      24,301              $   (20,314)


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Changes in cash flow from operating activities

For the year ended December 31, 2021, net cash used in operating activities was
$35.0 million, which consisted of a net loss of $63.2 million, partially offset
by non-cash charges of $28.4 million. Operating cash flows from operating assets
and liabilities was immaterial with increases in receivables, inventory and
other assets, offset by increases in payables, seller payables and other
liabilities.

For the year ended December 31, 2020, net cash used in operating activities was
$19.1 million, which consisted of a net loss of $47.9 million, partially offset
by non-cash adjustment of $17.5 million and a net change of $11.3 million in our
operating assets and liabilities.

Changes in cash flows from investing activities

For the year ended December 31, 2021, net cash used in investing activities was
$169.6 million, which was driven by $125.2 million in purchases of marketable
securities, $23.6 million for the acquisition of Remix net of Remix cash
acquired, $19.8 million of capital expenditures primarily for our distribution
centers and a $3.8 million equity investment, partially offset by $2.8 million
maturities of marketable securities.

For the year ended December 31, 2020the net cash used in investing activities was
$19.4 millionwhich consisted of capital expenditures primarily for our distribution centers.

Changes in cash flows from financing activities

For the year ended December 31, 2021, net cash provided by financing activities
was $229.0 million, which consisted of $226.9 million in net proceeds from
equity offerings, $5.2 million in proceeds from exercise of common stock options
and withholding taxes for the net share settlement of restricted stock units,
$4.6 million in proceeds from debt issuance, and $1.0 million in proceeds from
employee purchases of common stock under the ESPP. These proceeds were partially
offset by $4.7 million in payment of costs for equity offerings, and
$4.0 million in repayment of debt.

For the year ended December 31, 2020net cash provided by financing activities was $18.2 millionwhich consisted primarily of proceeds from the debt financing of
$18.4 million.

Contractual obligations and commitments

Our purchase obligations consist of agreements to purchase goods and services
entered into in the ordinary course of business. As of December 31, 2021, the
value of our non-cancellable unconditional purchase obligations was
$17.0 million. See Note 12 of our Notes to Consolidated Financial Statements for
additional information regarding our purchase obligations.

We lease office spaces and distribution centers under non-cancellable operating
lease arrangements that expire at various dates through 2032. As of December 31,
2021, the value of our obligations under operating leases was $60.9 million. See
Note 8 of our Notes to Consolidated Financial Statements for additional
information regarding our lease obligations.

We have a loan and security agreement with Western Alliance Bank ("Bank"). As of
December 31, 2021, we had borrowed $40.0 million under our loan and security
agreement, with $36.0 million principal outstanding as of such date, which
mature at various dates through 2024. See Note 9 of our Notes to Consolidated
Financial Statements for additional information regarding our debt obligations.

Indemnification agreements

In the ordinary course of business, we enter into agreements of varying scope
and terms pursuant to which we agree to indemnify vendors, lessors, business
partners and other parties with respect to certain matters, including, but not
limited to, losses arising out of the breach of such agreements, services to be

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provided by us or from intellectual property infringement claims made by third
parties. In addition, we have entered into indemnification agreements with our
directors and certain officers and employees that will require us, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors, officers or employees. No demands have
been made upon us to provide indemnification under such agreements and there are
no claims that we are aware of that could have a material effect on our
consolidated balance sheets, consolidated statements of operations and
comprehensive loss or consolidated statements of cash flows.

Significant Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of these consolidated
financial statements requires us to make judgments and estimates that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements, as
well as the reported revenue generated, and expenses incurred during the
reporting periods. Our estimates are based on our historical experience and on
various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these judgments and estimates under
different assumptions or conditions and any such differences may be material. We
believe that the accounting policies discussed below are critical to
understanding our historical and future performance, as these policies relate to
the more significant areas involving management's judgments and estimates.

Revenue recognition

We generate revenue primarily from the sale of secondhand women's and kids'
apparel, shoes and accessories on behalf of sellers. We retain a percentage of
the proceeds received as payment for our consignment service. We report
consignment revenue on a net basis as an agent and not the gross amount
collected from the buyer. We recognize consignment revenue upon purchase of the
seller's secondhand item by the buyer.

We also generate revenue from the sale of our purchased inventory which we refer
to as product revenue. We sell our purchased inventory mainly through our online
marketplace. We recognize product revenue on a gross basis. Online sales and
sales to our retail partners are recognized upon shipment of the purchased
secondhand items to the buyer. Sales at retail stores are recognized upon
checkout and sales of accepted items from goody boxes are recognized upon
acceptance, which generally occurs at the same time as payment.

Both consignment and product revenue are recognized net of discounts, incentives
and returns. Sales tax assessed by governmental authorities is excluded from
revenue.

Stock-Based Compensation

We estimate the fair value of stock options and the ESPP at the grant date using
the Black-Scholes option-pricing model (the "Black-Scholes Model"). The fair
values of Restricted Stock Units ("RSU") are determined based on our stock price
on the date of grant. 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.

The Black-Scholes model considers several variables and assumptions to estimate the fair value of stock-based awards. These variables include the fair value per share of the underlying common stock,

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expected term, risk-free interest rate, expected annual dividend yield and
expected stock price volatility over the expected term. For all stock options
granted to date, we calculated the expected term using the simplified method
(based on the mid-point between the vesting date and the end of the contractual
term). We determine volatility using the historical volatility of the stock
price of similar publicly traded peer companies. 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.

Business combinations

We account for our business combinations using the acquisition method of
accounting, which requires, among other things, allocation of the fair value of
purchase consideration to the tangible and intangible assets acquired and
liabilities assumed at their estimated fair values on the acquisition date. The
excess of the fair value of purchase consideration over the values of these
identifiable assets and liabilities is recorded as goodwill. When determining
the fair value of assets acquired and liabilities assumed, we make significant
estimates and assumptions, especially with respect to intangible assets. Our
estimates of fair value are based upon assumptions believed to be reasonable,
but which are inherently uncertain and unpredictable and, as a result, actual
results may differ from estimates. Once the purchase accounting is finalized,
any subsequent adjustments are reflected in the consolidated statements of
operations. Acquisition costs, such as legal and consulting fees, are expensed
as incurred.

Intangible assets acquired

When we acquire a business, a portion of the purchase price is typically
allocated to identifiable intangible assets, such as trademarks, acquired
technology and customer relationships. Fair value of these assets is determined
primarily using the income approach, which requires us to project future cash
flows and apply an appropriate discount rate. We amortize intangible assets with
finite lives over their expected useful lives. Our estimates are based upon
assumptions believed to be reasonable but which are inherently uncertain and
unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated
events and circumstances may occur. Incorrect estimates could result in future
impairment charges, and those charges could be material to our results of
operations.

Good will

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.

Recent accounting pronouncements

For more information on recently issued accounting pronouncements, refer to Note 2 to our Consolidated Financial Statements entitled “Significant Accounting Policies”.

Accounting election of the JOBS law

We are an "emerging growth company," as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards until such time as those standards apply to private companies. We have
elected to use this extended transition period until we are no longer an
emerging growth company or until we affirmatively and irrevocably opt out of the
extended transition period. Accordingly, our consolidated financial statements
may not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.

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