ThredUp (TDUP) risk factors, FY2024 10-K

Risks Relating to Our Business and Industry

1. 01Our continued growth depends on attracting new, and retaining existing, buyers
2. 02If we fail to attract a sufficient amount of high-quality and desirable secondhand items, our business, results of operations and financial condition could be harmed
3. 03Our ability to incorporate artificial intelligence and machine learning and other emergent technologies into our business operations successfully may affect our reputation and results of operations
4. 04Our business, including our costs and supply of secondhand items, is subject to risks associated with sourcing, itemizing, warehousing and shipping
5. 05We rely on consumer discretionary spending and have been and may continue to be adversely affected by economic downturns and other macroeconomic conditions or trends
6. 06The market in which we participate is competitive and rapidly changing, and if we do not compete effectively with established companies as well as new market entrants or maintain and develop strategic relationships with third parties, our business, results of operations and financial condition could be harmed
7. 07We have experienced growth in many of our recent periods and those growth rates may not be indicative of our future growth. If we fail to manage our growth effectively, we may be unable to execute our business plan and our business, results of operations and financial condition could be harmed
8. 08We have a history of losses and we anticipate increasing operating expenses in the future. We may not be able to achieve and maintain profitability
9. 09We have a limited operating history in an evolving industry, which makes it difficult to forecast our revenue, plan our expenses and evaluate our business and future prospects
10. 10We may experience quarterly fluctuations in our results of operations due to a number of factors that make our future results difficult to predict and could cause our results of operations to fall below analyst or investor expectations
11. 11Any one or more of the factors above may result in significant fluctuations in our quarterly results of operations. You should not rely on our past results as an indicator of our future performance
12. 12Our advertising activity and strategic RaaS offerings may fail to efficiently drive growth in buyers and sellers, which could harm our business, results of operations and financial condition
13. 13We may not realize expected savings or benefits from restructuring activities
14. 14If we are unable to successfully leverage technology to automate and drive efficiencies in our operations, our business, results of operations and financial condition could be harmed
15. 15National retailers and brands set their own retail prices and promotional discounts on new items, which could adversely affect our value proposition to buyers and harm our business, results of operations and financial condition
16. 16We use data science to predict buyer and seller preferences, and if we do not accurately predict evolving preferences of our buyers and sellers it could harm our business, results of operations and financial condition
17. 17We may experience damage or destruction to our distribution centers in which we store all of the secondhand and resale items we offer through our marketplaces, which may harm our business, results of operations and financial condition
18. 18Our business is affected by seasonality and we may be adversely affected by weather conditions, including any potential effects from climate change
19. 19Shipping is a critical part of our business and any changes in our shipping arrangements or any interruptions in shipping could harm our business, results of operations and financial condition
20. 20Greater than expected item return rates have, and in the future could have, a negative impact on our revenue
21. 21Unfavorable conditions in our industry or the global economy could limit our ability to grow our business and negatively affect our results of operations
22. 22We rely on third parties to drive traffic to our website and mobile application, and these providers may change their algorithms or pricing in ways that could negatively impact our business, results of operations, financial condition and prospects
23. 23We believe that maintaining our brand and reputation is critical to driving buyer and seller engagement. An important goal of our brand promotion strategy is establishing trust with our buyers and sellers
24. 24Acquisitions, divestitures, strategic investments, partnerships and alliances involve numerous risks and uncertainties, could divert the attention of key management personnel, disrupt our business, dilute stockholder value and harm our results of operations and financial condition
25. 25As an online secondhand marketplace, our success depends on the accuracy of our item acceptance process. Failure by us to identify counterfeit or stolen retail items could adversely affect our reputation and expose us to liability for the resale of counterfeit or stolen items
26. 26Certain estimates of our buyer metrics included in this Annual Report on Form 10-K may prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business

Risks Relating to Information Technology, Intellectual Property, Data Security and Privacy

1. 27Compromises of our data security could cause us to incur unexpected expenses and may materially harm our reputation and results of operations
2. 28Further, due to political uncertainty and military actions associated with Russia’s invasion of Ukraine, we and our vendors and service providers are vulnerable to heightened risks of cybersecurity incidents and security and privacy breaches from or affiliated with nation-state actors
3. 29Interruptions or delays in the services provided by third-party data centers, Internet service providers, our managed infrastructure or our payment processors could prevent existing and potential buyers and sellers from accessing our marketplaces, and our business could suffer
4. 30Activity on mobile devices by buyers and sellers depends upon effective use of mobile operating systems, networks and standards that we do not control
5. 31We may be accused of infringing intellectual property or other proprietary rights of third parties
6. 32If we cannot successfully protect our intellectual property, our business could suffer
7. 33We use open source software in our marketplaces, which could negatively affect our ability to operate our business and subject us to litigation or other actions
8. 34We rely on software, services and technology from other parties. Defects in or the loss of access to software, services or technology from third parties could increase our costs and adversely affect the quality of our products

Risks Relating to Legal, Regulatory, Accounting and Tax Matters

1. 35Failure to comply with applicable laws or regulations, including those relating to the resale of secondhand items, or changes to such laws, rules or regulations may subject us to investigations, audits, fines, penalties, registration and approval or other governmental enforcement action
2. 36We have recorded, and may be required to record in the future, significant charges if our long-lived assets and goodwill become impaired
3. 37Our failure to address risks associated with payment methods, credit card fraud and other consumer fraud, or our failure to control any such fraud, could damage our reputation and brand and could harm our business, results of operations and financial condition
4. 38We and our directors and executive officers may be subject to litigation for a variety of claims, which could harm our reputation and adversely affect our business, results of operations and financial condition
5. 39We are subject to anti-corruption, anti-bribery and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation
6. 40Labor-related matters, including labor disputes, may adversely affect our operations
7. 41If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired
8. 42Changes in existing financial accounting standards or practices may harm our results of operations
9. 43We could be required to collect additional sales taxes or be subject to other tax liabilities. This could adversely affect our business and results of operations
10. 44Changes in tax laws or regulations in the various tax jurisdictions we are subject to or adverse application of existing tax laws could increase our costs and harm our business
11. 45Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
12. 46We are an emerging growth company and a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our Class A common stock less attractive to investors

Risks Relating to Our Indebtedness and Liquidity

1. 47We may require additional capital to support business growth, and this capital might not be available or may be available only by diluting existing stockholders
2. 48Our loan and security agreement provides our lender with a first-priority lien against substantially all of our assets and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations
3. 49Recent increases in interest rates and volatility in the capital markets may increase our borrowing costs and affect our ability to raise additional funds
4. 50Recent events affecting the financial services industry could have an adverse impact on our business, results of operations and financial conditions

Risks Relating to Ownership of Our Class A Common Stock

1. 51The market price of our Class A common stock may be volatile or may decline regardless of our operating performance. You may lose all or part of your investment
2. 52Our failure to meet Nasdaq’s or the Long-Term Stock Exchange’s continued listing requirements could result in a delisting of our Class A common stock, which could materially adversely affect the liquidity of our Class A common stock
3. 53We cannot predict the effect our dual-class structure may have on the market price of our Class A common stock
4. 54If securities or industry analysts do not publish or cease publishing research, or publish inaccurate or unfavorable research, about our business, the market price of our Class A common stock and trading volume could be adversely affected
5. 55Sales of substantial amounts of our Class A common stock in the public markets, or the perception that sales might occur, could cause the market price of our Class A common stock to decline
6. 56Our issuance of additional capital stock or equity-linked securities in connection with financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders
7. 57We do not intend to pay dividends on our Class A common stock in the foreseeable future and, consequently, the ability of Class A common stockholders to achieve a return on investment will depend on appreciation in the price of our Class A common stock
8. 58Provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current board of directors and depress the market price of our Class A common stock
9. 59Our amended and restated bylaws designate specific state or federal courts located as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us

General Risks

1. 60We depend on our executive officers and other key personnel, and if we are unable to recruit and retain highly skilled employees or contractors our business could be harmed
2. 61Use of social media, emails and text messages may adversely impact our reputation or subject us to fines or other penalties
3. 62The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members