Overview of the Company’s Financial Performance

The company is the world’s largest online marketplace for authenticated resale luxury goods. In the first quarter of 2025, the company reported strong financial results, with revenue growing 11% year-over-year to $160 million. This growth was driven by a 7% increase in consignment revenue and a 61% increase in direct revenue.

Gross profit increased by 12% to $120 million, with the company’s overall gross margin expanding by 40 basis points to 75%. This margin expansion was due to improved operational efficiencies and higher-margin direct sales. However, the company’s shipping services revenue gross margin declined by 404 basis points due to higher carrier costs.

On the bottom line, the company reported net income of $62.4 million, a significant turnaround from the $31.1 million net loss in the prior year period. This was driven by a $58.1 million unrealized gain on the change in fair value of the company’s warrant liability, as well as a $32.9 million gain on the extinguishment of debt. Adjusted EBITDA, a key profitability metric, improved from a $2.3 million loss to a $4.1 million gain.

Revenue and Profit Trends

The company’s revenue is primarily generated from consignment sales, which accounted for 77% of total revenue in Q1 2025. Consignment revenue grew 7% year-over-year, driven by a 5% increase in average order value (AOV) and a 3% increase in the number of orders. The company’s take rate on consignment sales also increased slightly to 38.6%.

Direct revenue, which comes from the sale of the company’s own inventory, grew 61% year-over-year. This was due to higher sell-through of inventory acquired from customer returns and the company’s “Get Paid Now” program, which allows businesses and consignors to receive payment upfront for high-value items.

Shipping services revenue, which includes fees charged to customers for outbound shipping as well as returns, grew 2% in the quarter. This slower growth was due to a 404 basis point decline in the shipping services gross margin, as the company faced higher carrier costs.

On the profitability side, the company’s gross margin expanded by 40 basis points to 75%, driven by improved operational efficiencies and the higher-margin direct sales. However, this was partially offset by the decline in shipping services gross margin.

Operating expenses increased 6% year-over-year, with the largest increases in operations and technology (up 6%) and selling, general and administrative (up 7%) expenses. Marketing expenses grew a more modest 4%. As a percentage of revenue, operating expenses declined from 87% to 83%, reflecting the company’s operating leverage.

The company’s net income of $62.4 million was boosted by a $58.1 million unrealized gain on the change in fair value of its warrant liability, as well as a $32.9 million gain on the extinguishment of debt. Excluding these non-operating items, the company’s underlying profitability improved, with Adjusted EBITDA turning positive at $4.1 million compared to a $2.3 million loss in the prior year.

Strengths and Weaknesses

Strengths:

• Dominant market position in the online luxury resale space, with a loyal and growing base of consignors and buyers
• Proprietary technology platform and logistics infrastructure that provide a differentiated customer experience
• Diversified revenue streams from consignment, direct sales, and shipping services
• Improving operational efficiency and profitability, as evidenced by gross margin expansion
• Strong balance sheet with $139.6 million in cash and cash equivalents as of March 31, 2025

Weaknesses:

• Reliance on consignment revenue, which can be volatile and dependent on macroeconomic conditions
• Exposure to litigation risk, as demonstrated by the ongoing trademark infringement lawsuit with Chanel
• Continued operating losses and negative cash flows from operations, though the company expects to have sufficient liquidity for the next 12 months
• High stock-based compensation expenses, which dilute shareholders

Outlook and Future Prospects

Looking ahead, the company is well-positioned to continue capitalizing on the growing demand for authenticated luxury resale. The company’s investments in technology, logistics, and customer experience are expected to drive further growth in its consignor and buyer base, as well as improved operational efficiency.

The company’s ability to successfully navigate the ongoing litigation with Chanel will be an important factor in its future performance. While the ultimate outcome of the case is uncertain, the company’s counterclaims against Chanel for antitrust violations suggest it is taking a proactive approach to defending its business model.

Additionally, the company’s recent debt refinancing, which extended the maturity of its outstanding notes, has improved its financial flexibility and reduced near-term liquidity risks. However, the company will need to continue managing its cash flow and profitability to ensure long-term sustainability.

Overall, the company’s strong market position, diversified revenue streams, and improving operational efficiency suggest it is well-positioned to capitalize on the growing luxury resale market. However, the company will need to navigate ongoing legal challenges and maintain a disciplined approach to managing its costs and cash flow to deliver consistent profitability and shareholder value.