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What changed in TheRealReal, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TheRealReal, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+307 added−323 removedSource: 10-K (2024-03-01) vs 10-K (2023-02-28)

Top changes in TheRealReal, Inc.'s 2023 10-K

307 paragraphs added · 323 removed · 243 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

48 edited+8 added−9 removed40 unchanged
Biggest changeAs of December 31, 2022, we have partnerships with Stella McCartney, Jimmy Choo, Nanushka, 11Honore and Beckett Collectibles, and we believe our online marketplace cultivates customer relationships for luxury brands. Our Technology Technology powers all aspects of our business, including our complex, single-SKU inventory management system. Our supply comes from thousands of individual consignors and businesses across the United States.
Biggest changeOur Technology Technology powers all aspects of our business, including our complex, single-SKU inventory management system. Our supply comes from thousands of individual consignors and businesses across the United States. Each item we sell is a unique, individual stock keeping unit (“single-SKU”) and is exclusively available on our online marketplace or in our retail stores.
Consignors may also drop off items at our luxury consignment offices. Our Flagship and Neighborhood Stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts. Consignors may also utilize our complimentary shipping directly to our authentication centers. • We do the work on behalf of consignors.
Consignors may also drop off items at our luxury consignment offices. Our Neighborhood and Flagship Stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts. Consignors may also utilize our complimentary shipping directly to our authentication centers. • We do the work on behalf of consignors.
Our Flagship and Neighborhood Stores also offer our buyers a sophisticated shopping experience, in a beautifully designed space, where they can shop our dynamic curation of authenticated pre-owned luxury goods across all of our categories. • We build trust through our authentication process. We continue to invest and innovate in authentication, both in our people and our technology.
Our Neighborhood and Flagship Stores also offer our buyers a sophisticated shopping experience, in a beautifully designed space, where they can shop our dynamic curation of authenticated pre-owned luxury goods across all of our categories. • We build trust through our authentication process. We continue to invest and innovate in authentication, both in our people and our technology.
We rely on contractual provisions to protect our proprietary technology, brands and creative assets with consignors and buyers. Corporate Information We were incorporated in the state of Delaware in March 2011. Our principal executive offices are located at 55 Francisco Street, Suite 400, San Francisco, California 94133, and our telephone number is (855) 435-5893.
We rely on contractual provisions to protect our proprietary technology, brands and creative assets with consignors and buyers. Corporate Information We were incorporated in the state of Delaware in March 2011. Our principal executive offices are located at 55 Francisco Street, Suite 150, San Francisco, California 94133, and our telephone number is (855) 435-5893.
We continued to focus on employees’ overall well-being in 2022 through a range of programs that support access to care, along with resources and tools to address the following pillars of wellness: physical, mental/emotional, financial, and community. Seasonality Historically, we have observed trends in seasonality of supply and demand in our business.
We continued to focus on employees’ overall well-being in 2023 through a range of programs that support access to care, along with resources and tools to address the following pillars of wellness: physical, mental/emotional, financial, and community. Seasonality Historically, we have observed trends in seasonality of supply and demand in our business.
Informed by this data, we have developed proprietary machine learning technology and business processes to optimize our operations, including supply sourcing, merchandising, authentication, pricing and marketing. 7 Table of Contents Environmental, Social and Governance Our stakeholders are essential to our business—shareholders, consignors, buyers, employees and the communities in which we do business.
Informed by this data, we have developed proprietary machine learning technology and business processes to optimize our operations, including supply sourcing, merchandising, authentication, pricing and marketing. 7 Table of C ontents Environmental, Social and Governance Our stakeholders are essential to our business—shareholders, consignors, buyers, employees and the communities in which we do business.
Primarily due to these challenges, a vast quantity of consignable luxury goods languishes in homes, and buyers can be 5 Table of Contents hesitant to purchase pre-owned luxury goods. We are transforming the luxury resale experience by addressing these challenges. • We provide a seamless consignment experience enabled by our proprietary technology platform and data.
Primarily due to these challenges, a vast quantity of consignable luxury goods languishes in homes, and buyers can be 5 Table of C ontents hesitant to purchase pre-owned luxury goods. We are transforming the luxury resale experience by addressing these challenges. • We provide a seamless consignment experience enabled by our proprietary technology platform and data.
In 2022, we sold goods bearing the brands of thousands of luxury and premium designers, including highly coveted items such as rare watches and handbags. • We provide a gateway to luxury brands.
In 2023, we sold goods bearing the brands of thousands of luxury and premium designers, including highly coveted items such as rare watches and handbags. • We provide a gateway to luxury brands.
Solely for convenience, the trademarks, service marks, logos and 11 Table of Contents trade names referred to in this Annual Report are without the ® and ™ symbols, but such references are not intended to indicate that we will not assert our rights in these trademarks, service marks and trade names.
Solely for convenience, the trademarks, service marks, logos and trade names referred to in this Annual Report are without the ® and ™ symbols, but such references are not intended to indicate that we will not assert our rights in these trademarks, service marks and trade names. 11 Table of C ontents
Our Consignors By making consignment easy, convenient, reliable and fast for our consignors, we aim to unlock a vast quantity of desirable, high-quality, primarily pre-owned luxury goods. Our sales professionals remove friction from the consignment process and build lasting relationships with our consignors. In 2022, approximately 83% of our gross merchandise value ("GMV") came from repeat consignors.
Our Consignors By making consignment easy, convenient, reliable and fast for our consignors, we aim to unlock a vast quantity of desirable, high-quality, primarily pre-owned luxury goods. Our sales professionals remove friction from the consignment process and build lasting relationships with our consignors. In 2023, approximately 85% of our gross merchandise value ("GMV") came from repeat consignors.
In April 2019, we became the first company in the resale industry to join the United Nations Climate Change’s Fashion Industry Charter for Climate Action, which aims to limit global warming within the fashion industry and 8 Table of Contents inspire climate action.
In April 2019, we became the first company in the resale industry to join the United Nations Climate Change’s Fashion Industry Charter for Climate Action, which aims to limit global warming within the fashion industry and 8 Table of C ontents inspire climate action.
Our online marketplace efficiently matches supply with demand resulting in sales velocity of approximately 58% and 59% of the products on our online marketplace sold within 30 days, in 2022 and 2021 respectively. In addition to sales velocity, we measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio.
Our online marketplace efficiently matches supply with demand resulting in sales velocity of approximately 54% and 58% of the products on our online marketplace sold within 30 days, in 2023 and 2022 respectively. In addition to sales velocity, we measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio.
Our consignors can earn up to 90% of the proceeds from the sale of their consigned items in commissions and achieved an overall commission rate of approximately 64% in 2022. • We offer a range of payment options for consignors and businesses.
Our consignors can earn up to 90% of the proceeds from the sale of their consigned items in commissions and achieved an overall commission rate of approximately 63% in 2023. • We offer a range of payment options for consignors and businesses.
Our Buyers We make it easy for buyers to shop our vast, yet curated selection of authenticated, primarily pre-owned luxury goods. In 2022, we had approximately 1 million active buyers and approximately 84% of our GMV came from repeat buyers.
Our Buyers We make it easy for buyers to shop our vast, yet curated selection of authenticated, primarily pre-owned luxury goods. In 2023, we had approximately 1 million active buyers and approximately 87% of our GMV came from repeat buyers.
Our online marketplace generates and aggregates hundreds of millions of unique data points, including data from approximately 1.1 billion views of items by potential buyers on our online marketplace in 2022, which we refer to as item views, and approximately 30.9 million item sales since our inception. Each consigned item also has up to 50 unique attributes.
Our online marketplace generates and aggregates hundreds of millions of unique data points, including data from approximately 1.1 billion views of items by potential buyers on our online marketplace in 2023, which we refer to as item views, and approximately 37.5 million item sales since our inception. Each consigned item also has up to 50 unique attributes.
Sell-through ratio is defined as GMV in the measurement period divided by the aggregate initial value of 6 Table of Contents items added to our online marketplace in that period. In 2022 and 2021, our online marketplace sell-through ratios were 91% and 94%, respectively.
Sell-through ratio is defined as GMV in the measurement period divided by the aggregate initial value of 6 Table of C ontents items added to our online marketplace in that period. In 2023 and 2022, our online marketplace sell-through ratios were 92% and 91%, respectively.
National Consignment Day celebrates the positive impact consigning has on the environment. • Carbon Neutral Pledge. In November 2019, we were the first company to take the pledge in the CEO Carbon Neutral Challenge issued by the CEO of Gucci.
We founded National Consignment Day as a national recognition day that occurs on the first Monday of October. National Consignment Day celebrates the positive impact consigning has on the environment. • Carbon Neutral Pledge. In November 2019, we were the first company to take the pledge in the CEO Carbon Neutral Challenge issued by the CEO of Gucci.
In addition, a meaningful share of our consignors are buyers and vice versa, which creates a differentiated flywheel that enhances the network effect of our online marketplace. We also operate retail stores, including our larger footprint flagship stores, or Flagship Stores, in Los Angeles, California and New York, New York.
In addition, a meaningful share of our consignors are buyers and vice versa, which creates a differentiated flywheel that enhances the network effect of our online marketplace. We also operate retail stores, including our smaller footprint neighborhood retail stores, or Neighborhood Stores.
Training hours and tenure increase with expertise, with a Graduate Gemologist certification from GIA required in the highest levels of specialty in fine jewelry. In 2022, authentication managers received an additional 10 classroom hours of manager development training. Each employee receives training appropriate to the scope and nature of their role.
Training hours and tenure increase with expertise, with a Graduate Gemologist certification from GIA required in the highest levels of specialty in fine jewelry. Each employee receives training appropriate to the scope and nature of their role.
Specifically, our supply increases in the third and fourth quarters, and our demand increases in the fourth quarter. As a result of this seasonality, we typically see stronger average order value (“AOV”), and more rapid sell-through in the fourth quarter.
Specifically, our supply increases in the third and fourth quarters, and our demand increases in the fourth quarter. As a result of this seasonality, we typically see stronger average order value (“AOV”), and more rapid sell-through in the fourth quarter. Intellectual Property Our intellectual property, including copyrights and trademarks, is an important component of our business.
For example, we support our sales professionals by providing a three-week virtual onboarding sequence conducted through peer-to-peer, facilitated and self-learning sessions, followed by continuous professional development programs. In 2022, we continued to provide a Manager Development Series open to all people managers across the organization as well as performance management training. Our authentication teams receive training based on expertise level.
For example, we support our sales professionals by providing a three-week virtual onboarding sequence conducted through peer-to-peer, facilitated and self-learning sessions, followed by continuous professional development programs. In 2023, we provided a Manager Development Series to people managers in retail, sales and operations. Our authentication teams receive training based on expertise level.
As part of our work to build a culture of trust, we encourage employees to share real-time feedback on culture, bias, discrimination and harassment, or behavior that does not reflect our values and policies through our company-wide employee reporting tool. Professional Development and Partnerships. In 2022, we invested in developing a gender- and racially-diverse leadership pipeline.
As part of our work to build a culture of trust, we encourage employees to share real-time feedback on culture, bias, discrimination and harassment, or behavior that does not reflect our values and policies through our company-wide employee reporting tool. The RealReal, Inc. Foundation. The RealReal, Inc.
Below is a breakdown of how our team self-identifies as of December 31, 2022 (table does not reflect, of the total individuals surveyed, approximately 3% who chose not to self-identify and approximately 1% who identified as Native American): All Corporate Management Executives Board Black 16 % 15 % 7 % 0 % 14 % Hispanic/Latinx 30 % 13 % 17 % 0 % 0 % Asian 8 % 15 % 12 % 15 % 0 % Two or More Races 4 % 6 % 5 % 3 % 0 % White 33 % 40 % 52 % 70 % 86 % Female 66 % 65 % 61 % 52 % 57 % DEI Vision and Strategy.
Below is a breakdown of how our team self-identifies as of December 31, 2023 (table does not reflect, of the total individuals surveyed, approximately 9% who chose not to self-identify, approximately 1% who identified as Native American, and approximately 1% who identified as Hawaiian or Pacific Islander): All Corporate Management Executives Board Black 15 % 13 % 7 % 0 % 13 % Hispanic/Latinx 31 % 16 % 16 % 4 % 0 % Asian 7 % 12 % 11 % 11 % 0 % Two or More Races 4 % 6 % 4 % 4 % 0 % White 33 % 42 % 50 % 63 % 87 % Female 66 % 67 % 62 % 48 % 50 % DEI Vision and Strategy.
We increasingly use our technology platform to automate pricing, copywriting and photo retouching for goods sold through our online marketplace. Our powerful data analytics capabilities enable us to improve both consignor and buyer experiences.
Given the complexity of our inventory model, we developed specialized, proprietary applications to optimize inbound processes. We increasingly use our technology platform to automate authentication, pricing, copywriting and photo retouching for goods sold through our online marketplace. Our powerful data analytics capabilities enable us to improve both consignor and buyer experiences.
We build trust in our buyer base by thoroughly inspecting the quality and condition of every item and putting every item through our authentication process. This trust drives repeat purchases from our buyer base and instills confidence in first-time buyers to purchase pre-owned luxury goods. • We also operate Flagship and Neighborhood Store s.
All consigned items are put through our authentication process and thoroughly inspected for quality and condition, which builds trust in our buyer base. This trust drives repeat purchases from our buyer base and instills confidence in first-time buyers to purchase pre-owned luxury goods. • We also operate Neighborhood and Flagship Store s.
In light of recent inflation and macroeconomic uncertainties, demand for items in fair condition is strong. • Sustainability Task Force. In 2020, we formed a cross-functional Sustainability Task Force to identify projects throughout the organization that have the potential to reduce our environmental impact.
In 2023, demand for items in fair condition remained strong. • Sustainability Task Force. In 2020, we formed a cross-functional Sustainability Task Force to identify projects throughout the organization that have the potential to reduce our environmental impact. The Sustainability Task Force prioritizes high impact projects and aims to embed a focus on sustainability across the organization.
The charter endeavors to achieve a 50% reduction in carbon emissions in the fashion industry by 2030 and net zero emissions by 2050. • ReCollection 03 and 04. Through our ReCollection program, we transform unwearable or damaged items into unique, premium luxury upcycled items. Building on prior years, we released two more ReCollections in 2022.
The charter endeavors to achieve a 50% reduction in carbon emissions in the fashion industry by 2030 and net zero emissions by 2050. • ReCollections. Through our ReCollection program, we transform unwearable or damaged items into unique, premium luxury upcycled items. In 2023 and early 2024, we partnered with the Fashion Institute of Technology ("FIT").
We believe that creating a more sustainable future by growing the circular economy requires us to bring different perspectives together to solve problems in new and meaningful ways. Furthermore, we believe that a culture of trust, safety and belonging is key to unlocking the power of differences, and leads to creative problem solving and high performing teams.
We believe that creating a more sustainable future by growing the circular economy requires us to bring different perspectives. We believe that a more sustainable future is an equitable one, and that growing the circular economy requires us to unlock the power of differences and solve problems together in new and meaningful ways.
Our Neighborhood Stores are typically 1,800 to 3,500 square feet with items for sale reflecting a selection of the Company's online assortment and are located in areas we have identified as having a large amount of potential customers. Our Market The existing luxury resale market is outdated, fragmented, difficult to access and laden with counterfeit goods.
Our Neighborhood Stores are typically 1,800 to 3,500 square feet with items for sale reflecting a selection of the Company's online assortment and are located in areas we have identified as having a large amount of potential customers. In addition, we operate several larger footprint flagship stores, or Flagship Stores, in Los Angeles, California and New York, New York.
The Sustainability Task Force prioritizes high impact projects, meets bi-weekly and aims to embed a focus on sustainability across the organization. In early 2022, we reorganized the Sustainability Task Force into several individual working groups so we could concentrate our efforts on specific, meaningful projects, including preferred materials, transportation optimization, employee travel, employee experience and waste.
In early 2022, we reorganized the Sustainability Task Force into several individual working groups so we could concentrate our efforts on specific, meaningful projects, including preferred materials, transportation optimization, employee travel, employee experience and waste. In 2023, the Sustainability Task Force focused on reducing energy expenditures and limiting use of packaging materials.
We developed the Sustainability Calculator to measure the greenhouse gas emissions and water footprint reduction of consignment as compared to producing new products. • National Consignment Day. We founded National Consignment Day as a national recognition day that occurs on the first Monday of October.
In 2018, we launched our Sustainability Calculator on National Consignment Day as a tool to quantify the positive impact consignment has on the planet. We developed the Sustainability Calculator to measure the greenhouse gas emissions and water footprint reduction of consignment as compared to producing new products. • National Consignment Day.
This process includes, among other things, inspecting the item for attributes such as appropriate brand markings, date codes, serial tags and hologram stickers. In 2022, we implemented proprietary AI microphotography to assist in authenticating high-end handbags. Our gemologists and horologists inspect and authenticate fine jewelry and watches, and each piece we sell comes with an authentication certificate.
This process includes, among other things, inspecting the item for attributes such as appropriate brand markings, date codes, serial tags and hologram stickers. In 2022, we implemented proprietary AI microphotography to assist in authenticating high-end handbags. As of 2023, over 50% of handbags are first-pass authenticated using AI microphotography.
We utilize state-of-the-art gemological devices, including proprietary gemstone technology, to assist these experts. Additionally, across all of our categories, our experts leverage proprietary item and consignor risk scoring algorithms to assist in authentication. We have a zero-tolerance policy when it comes to counterfeit goods.
Our gemologists and horologists inspect and authenticate fine jewelry and watches, and each piece we sell comes with an authentication certificate. We utilize state-of-the-art gemological devices, including proprietary gemstone technology, to assist these experts. Additionally, across all of our categories, our experts leverage proprietary item and consignor risk scoring algorithms to assist in authentication.
Throughout 2022, we provided periodic updates to our executives and the Corporate Governance and Nominating Committee of the Board of Directors on our progress toward achieving our goals and initiatives. • Sustainability Calculator. In 2018, we launched our Sustainability Calculator on National Consignment Day as a tool to quantify the positive impact consignment has on the planet.
Throughout 2022 and 2023, members of the Sustainability Task Force provided periodic updates to our executives and the Corporate Governance and Nominating Committee of the Board of Directors on our progress toward achieving our goals and initiatives. • Sustainability Calculator.
Since 2020, our six Employee Resource Groups (“ERGs”) have continued to grow and evolve. We believe the ERGs help to engage employees and advance inclusion and belonging through education, awareness, career development, and social connection.
Our Employee Resource Groups (“ERGs”) help to engage employees and advance inclusion and belonging through opportunities for education, awareness, development, community and social connection. Since forming in 2020, our six ERGs have continued to mature and progress into impactful communities that strengthen our culture.
As a part of our onboarding program, we have developed an engagement monitoring plan for our employees in the form of personal check-ins and questionnaires. 10 Table of Contents Health, Safety and Wellness We are committed to ensuring the health and safety of all employees and require compliance with all applicable local laws and regulations governing working conditions, working hours, fair wages, and compensation.
Health, Safety and Wellness We are committed to ensuring the health and safety of all employees and require compliance with all applicable local laws and regulations governing working conditions, working hours, fair wages, and compensation.
Diversity and Inclusion We work to inspire and empower our employees to think creatively and authentically, share their ideas, bring their whole selves to work, and strive for greatness every day. We are proud to have a diverse team, and we recognize there is opportunity for us to continue improving representation, particularly among our senior leadership.
We are proud to have a diverse team, and we recognize there is opportunity for us to continue improving representation, particularly among our senior leadership.
Foundation was founded at the time of our initial public offering in 2019 with the aim of advancing equity in the communities in which we operate through access to education. Since its formation, the foundation has supported numerous community organizations, including the Success Bound Youth Leadership Academy, the Secaucus Youth Alliance, Enterprise for Youth, and Friendly House.
Foundation was founded at the time of our initial public offering in 2019 with the aim of advancing equity in the communities in which we operate through access to education.
Our Flagship Stores are typically 8,000 to 12,000 square feet with thousands of unique items for sale and are located in highly desirable, densely populated locations with strong foot traffic. In addition, we operate several smaller footprint neighborhood retail stores, or Neighborhood Stores.
Our Flagship Stores are typically 8,000 to 10,000 square feet with thousands of unique items for sale and are located in highly desirable, densely populated locations with strong foot traffic. Our Market The existing luxury resale market is outdated, fragmented, difficult to access and laden with counterfeit goods.
Where appropriate, we encourage our employees to share how they self-identify, including gender identity, LGBTQ identity, veteran status, and disability status. Recently, we introduced the ability for our employees to share preferred pronouns across our technologies, and approximately 62% of our total employee population as of December 31, 2022 has chosen to share their pronouns. Employee Resource Groups .
Since introducing the ability for our employees to share pronouns across our technologies, approximately 62% of our total employee population has chosen to share their pronouns as of December 31, 2023 in support of allyship and gender inclusion. Employee Resource Groups .
Once consigned items reach one of our four authentication centers, we authenticate, write the associated copy, photograph, price, sell and handle all fulfillment and returns logistics, making the consignment process seamless. Improvements in our automation of pricing, copywriting and photo retouching have improved the efficiency of our operations. • We generate high commissions for consignors.
All consigned items are authenticated, written up photographed, priced, sold and fulfilled on behalf of the individual consignor, making the consignment process seamless. Improvements in our automation of authentication, pricing, copywriting and photo retouching have improved the efficiency of our operations. • We generate high commissions for consignors.
We believe diversity and inclusion foster a collaborative culture, which fuels our ability to innovate as we work to create a more sustainable future. We proactively seek feedback and guidance from our employees, who we see as our partners in building a strong organizational culture. As of December 31, 2022, we had 3,468 full-time equivalent employees.
We proactively seek feedback and guidance from our employees, who we see as our partners in building a strong organizational culture. As of December 31, 2023, we had 3,032 full-time equivalent employees. Additionally, we rely on independent contractors and temporary personnel to supplement our workforce, primarily in our authentication centers.
In 2022, we conducted our annual employee engagement survey to better understand employees’ sentiment across a range of topics, including DEI, employment satisfaction, level of engagement, and sense of belonging. There were no significant changes from the prior year. Based on the 2021 survey results, in 2022 our engagement efforts focused on well-being, leadership, and communication.
In 2023, we conducted our annual employee engagement survey to better understand employees’ sentiment across a range of topics and factors; management, teamwork, alignment, enablement and inclusion were among our top scoring factors. In 2023, our engagement efforts focused on well-being, leadership, communication, and inclusion.
Our FLSA-exempt employees receive an annual performance review and our people managers have quarterly meetings with their employees to address performance and development, as appropriate.
Our Fair Labor Standards Act-exempt employees receive an annual performance review and our people managers have quarterly meetings with their employees to address performance and development, as appropriate. As a part of our onboarding program, we have developed an engagement monitoring plan for our employees in the form of personal check-ins and questionnaires.
Additionally, we rely on independent contractors and temporary personnel to supplement our workforce, primarily in our authentication centers. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relations with our employees to be positive.
None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relations with our employees to be positive. Diversity and Inclusion We work to inspire and empower our employees to think creatively and authentically, share their ideas, bring their whole selves to work, and strive for greatness every day.
Our four ReCollections have put approximately 1,000 damaged items back into circulation. Human Capital Resources Our employees are guided by our mission to empower consignors and buyers to extend the life cycle of luxury goods. We are part of a diverse global community, and we aim to reflect that diversity within our team.
As part of a design and upcycling competition, we asked eight FIT students to create one-of-a-kind coats from otherwise unwearable or damaged items. The reimagined and upcycled coats were debuted and sold in January 2024. Human Capital Resources Our employees are guided by our mission to empower consignors and buyers to extend the life cycle of luxury goods.
Following designer Virgil Abloh’s passing in 2022, and as part of our commitment to racial equity, we sponsored the Virgil Abloh™ "Post-Modern" Scholarship Fund, which aims to preserve his vision for a more diverse and equitable fashion industry. Director Refreshment.
Since its formation, the foundation has provided annual college scholarships and supported numerous community organizations, including the Success Bound Youth Leadership Academy, the Secaucus Youth Alliance, Enterprise for Youth, Friendly House, Education Forward Arizona and the Virgil Abloh™ "Post-Modern" Scholarship Fund, which aims to preserve his vision for a more diverse and equitable fashion industry. Director Refreshment.
In 2022, ERG membership remained strong with over 1,000 employees participating in programs focused on career equity, leadership, cultural competence, financial and physical well-being, destigmatizing mental health, and disability inclusion.
In 2023, we welcomed the addition of our seventh ERG, Real Chaverim, a space for our Jewish community and allies to share knowledge and experiences. In 2023, ERG membership and participation remained strong with over 9 Table of C ontents 1,000 employees participating in programs focused on leadership, culture, well-being, mental health, and community impact.
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Each item we sell is a unique, individual stock keeping unit (“single-SKU”) and is exclusively available on our online marketplace or in our retail stores. Given the complexity of our inventory model, we developed specialized, proprietary applications to optimize inbound processes, such as authentication, copywriting, photography and photo-editing.
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For inventory sold through our drop-ship consignment service that does not pass through our authentication centers, our authentication process includes diligence of our partners and procedures for establishing provenance, as well as quality checks and audits. We have a zero-tolerance policy when it comes to counterfeit goods.
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In 2022, we built on our diversity, equity and inclusion (“DEI”) vision and strategy that was launched in 2021. We aspire to be designers of an equitable future through our four-pillar strategy: People, Culture, Commerce and Community. We continue to assess self-reporting options that reflect our diverse workforce.
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We are part of a diverse global community, and we aim to reflect that diversity within our team. We believe diversity and inclusion foster a collaborative culture, which fuels our ability to innovate as we work to create a more sustainable future.
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In addition, ERG leaders participated in a leadership development program focused on critical success factors such as ERG Deployment & Engagement, Governance & Leadership, Sponsorship & Support, Career & Community, and Alignment + Impact.
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We aim to design equitable future through our four-pillar strategy: People, Culture, Commerce and Community. We are committed to building a strong culture of trust, safety, collaboration and belonging to fuel our purpose, people and performance.
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Many of the groups have 9 Table of Contents implemented learnings by building new committees, improving member recruitment and participation in strategic locations, and hosting impactful first-time volunteer initiatives. Our ERG groups are leveraging the frameworks from the leadership development program to help shape their 2023 strategic priorities. Culture.
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Since introducing our diversity, equity and inclusion (“DEI”) vision and strategy in 2021, we have taken meaningful action to follow through on those commitments, keeping our employees' voices at the center of our work, and taking a renewed look at our strategy to ensure continued alignment with our mission.
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In addition, we continued to provide managers with tools and training for mitigating bias in 2022. We have begun to introduce a platform that provides employees with learning and resources for building awareness of DEI topics (including bias, race, microaggressions, and mental health) and developing inclusive leadership skills.
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We continue to assess self-reporting options that reflect our diverse workforce and encourage our employees to share how they self-identify, including gender identity, LGBTQ identity, veteran status, and disability status.
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For example, we introduced a leadership development and coaching program for high performing women. For our first cohort, we focused on black, indigenous, and people of color ("BIPOC") women in individual contributor and manager roles.
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Our groups collaborated to host compelling conversations with diverse thought leaders and experts, test hybrid and location specific approaches for reaching our distributed workforce, and led several local service projects in our authentication centers during Earth Month in April with community partners. Culture.
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The six-month experience addressed five elements commonly found to impact women’s advancement in leadership (clarity, courage, conviction, commitment, and community) through accessible, self-paced microlearnings and virtual coaching. Participant assessment scores showed positive scores across all elements.
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In 2023, we continued to roll out our DEI learning platform throughout our businesses in 2023, expanding access to individual contributors and enabling more employees to build and develop inclusive leadership skills through self-paced learning to better serve our people, buyers, consignors and communities.
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We also hosted our second summer internship program as part of our work to build a diverse talent pathway, with 76% of participants identifying as women and 84% as BIPOC. The RealReal, Inc. Foundation. The RealReal, Inc.
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In 2023, we launched TRR 10 Table of C ontents Secure, a smartphone security app that enables field employees to discreetly contact emergency services via multiple channels if they are in a situation that makes them feel uneasy, unsafe or uncomfortable.
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We also incur higher operating expenses in the last four months of the year as we increase advertising spend to attract consignors and buyers and increase headcount in sales and operations to handle the higher volumes from increased demand. Intellectual Property Our intellectual property, including copyrights and trademarks, is an important component of our business.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

96 edited+22 added−13 removed187 unchanged
Biggest changeThese provisions include the following: • establish a classified board of directors so that not all directors are elected at one time; • permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • provide that directors may only be removed for cause; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholders from calling special meetings of stockholders; • prohibit stockholder action by written consent; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. 27 Table of Contents Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Biggest changeThese provisions include the following: • establish a classified board of directors so that not all directors are elected at one time; • permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • provide that directors may only be removed for cause; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholders from calling special meetings of stockholders; • prohibit stockholder action by written consent; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
If we are unable to provide value to our existing partners or add new partners, the growth of our business may be harmed. Risks Relating to Demand Our continued growth depends on attracting new and retaining repeat buyers.
If we are unable to provide value to our existing partners or to add new partners, the growth of our business may be harmed. Risks Relating to Demand Our continued growth depends on attracting new and retaining repeat buyers.
Our advertising activity may fail to efficiently drive growth in consignors and buyers. Our future growth and profitability depend in large part upon the effectiveness and efficiency of our advertising, promotion, public relations and marketing programs.
Our marketing and advertising activity may fail to efficiently drive growth in consignors and buyers. Our future growth and profitability depend in large part upon the effectiveness and efficiency of our marketing, promotion, public relations and advertising programs.
We lease facilities to store and accommodate the logistics infrastructure required to merchandise and ship the pre-owned luxury goods we sell through our online marketplace.
We lease facilities to store and accommodate the logistics infrastructure required to merchandise and ship pre-owned luxury goods we sell through our online marketplace.
For example, we have in the past and may in the future experience contamination, such as mold, bacteria, viruses, insects and other pests, in the goods shipped to us by our consignors, which may cause contamination of the goods stored in our authentication centers or while shipping to buyers.
For example, we have in the past and may in the future experience contamination, such as mold, bacteria, viruses, insects and other pests, in the goods shipped to us by our consignors, which may cause contamination of other goods stored in our authentication centers or while shipping to buyers.
We may incur additional expenses and our reputation could be harmed if buyers and potential buyers believe that the luxury goods we offer on behalf of our consignors are not of high-quality or may be damaged or contain contaminants.
We may incur additional expenses and our reputation could be harmed if buyers or potential buyers believe that the luxury goods we offer on behalf of our consignors are not of high-quality or may be damaged or contain contaminants.
We or our vendors, including cloud service providers, could be the subject to attacks from computer viruses, break-ins, phishing attacks , social engineering, ransomware attacks, unauthorized use, attempts to overload services with denial-of-service or other attacks, which may allow hackers or other unauthorized parties, including our employees, to gain access to personal information or other data, including payment card data or confidential business information.
We or our vendors, including cloud storage providers, could be the subject to attacks from computer viruses, break-ins phishing attacks, social engineering, ransomware attacks, unauthorized use, attempts to overload services with denial-of-service or other attacks, which may allow hackers or other unauthorized parties, including our employees, to gain access to personal information or other data, including payment card data or confidential business information.
Failure of our data security could cause us to incur unexpected expenses or compromise our data assets. In the ordinary course of our business, we collect, process and store certain personal information (including credit card information) and other data relating to individuals, such as our consignors, buyers, members and employees.
Failure of our data security could cause us to incur unexpected expenses or compromise our data assets. In the ordinary course of our business, we collect, process and store certain personal information (including credit card information) and other data relating to individuals, such as our consignors, buyers and employees.
For example, California enacted legislation that came into effect January 2020, the California Consumer Privacy Act (the “CCPA”), that requires covered companies to provide new disclosures to California consumers and afford such consumers qualified new privacy rights, such as rights of access, deletion and to opt-out of the sales of their personal information.
For example, California enacted legislation that came into effect January 2020, the California Consumer Privacy Act (the “CCPA”), that requires covered companies to provide disclosures to California consumers and afford such consumers qualified privacy rights, such as rights of access, deletion and to opt-out of the sales of their personal information.
Risks Relating to Supply • We may not be able to obtain sufficient new and recurring supply of pre-owned luxury goods. • We may be unable to attract and retain talented sales professionals. • Our growth and supply of product offerings are enhanced our ability to maintain our brand partnerships.
Risks Relating to Supply • We may not be able to obtain sufficient new and recurring supply of pre-owned luxury goods. • We may be unable to attract and retain talented sales professionals. • Our growth and supply of product offerings are enhanced by our ability to maintain our brand partnerships.
The public disclosure of our Environmental, Social and Governance ("ESG") metrics may subject us to risks. We voluntarily report certain metrics and goals for ESG. This transparency is consistent with our commitment to operate our business with positive economic, social, and environmental impact.
The public disclosure of our Environmental, Social and Governance ( “ ESG ” ) metrics may subject us to risks. We voluntarily report certain metrics and goals for ESG. This transparency is consistent with our commitment to operate our business with positive economic, social, and environmental impact.
We may also discover that the workforce reduction will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.
Furthermore, we may also discover that the workforce reduction will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.
While we currently collect and remit sales taxes in every state that requires sales taxes to be collected, including states where we do not have a physical presence, the adoption of new laws by, or a successful assertion by the taxing authorities of one or more state or local governments requiring us to collect more taxes could result in substantial additional tax liabilities, including taxes on past sales, as well as penalties and interest, which could have a materially adverse impact on our business and operating results.
While we currently collect and remit sales taxes in every state that requires sales taxes to be collected, including states where we do not have a physical presence, the adoption of new laws by, or a successful assertion by the taxing authorities of one or more state or local governments requiring us to collect more taxes could result in substantial additional tax liabilities, including taxes on past sales, as well as penalties and interest, which could have a material adverse impact on our business and operating results.
Risks Related to Marketing and Brand Management • Our success depends on the accuracy and reliability of our authentication process. • We may not succeed in promoting and sustaining our brand. • Our advertising activity may fail to efficiently drive growth in consignors and buyers. • We rely on third parties to drive traffic to our website. • Use of social media, emails and text messages may adversely impact our reputation or subject us to fines. • The public disclosure of our Environmental, Social and Governance ("ESG") metrics may subject us to risks.
Risks Related to Marketing and Brand Management • Our success depends on the accuracy and reliability of our authentication process. • We may not succeed in promoting and sustaining our brand. • Our marketing and advertising activity may fail to efficiently drive growth in consignors and buyers. • We rely on third parties to drive traffic to our website. • Use of social media, emails and text messages may adversely impact our reputation or subject us to fines. • The public disclosure of our Environmental, Social and Governance (“ESG”) metrics may subject us to risks.
Risks Related to Our Merchandising and Fulfillment • We may not be able to attract, train and retain specialized personnel and skilled employees. • We may not be able to identify and lease authentication centers in suitable geographic regions. 12 Table of Contents • We may experience damage or destruction to our authentication centers or retail stores in which we store of the majority of the consigned luxury goods we offer through our online marketplace. • Shipping is a critical part of our business and any changes in our shipping arrangements, costs, interruptions in shipping or damage to products in transit could adversely affect our operating results. • We may be unable to successfully leverage technology to automate and drive efficiencies in our operations.
Risks Related to Our Merchandising and Fulfillment 12 Table of C ontents • We may not be able to attract, train and retain specialized personnel and skilled employees. • We may not be able to identify and lease authentication centers in suitable geographic regions. • We may experience damage or destruction to our authentication centers or retail stores in which we store of the majority of the consigned luxury goods we offer through our online marketplace. • Shipping is a critical part of our business and any changes in our shipping arrangements, costs, interruptions in shipping or damage to products in transit could adversely affect our operating results. • We may be unable to successfully leverage technology to automate and drive efficiencies in our operations.
Additionally, we have been and may in the future be subject to negative press or public allegations, including on social media, that our authentication processes are inadequate. Any material failure or perceived failure in our authentication operations could cause buyers and consignors to lose confidence in our platform and adversely affect our revenue.
Additionally, we have been and may in the future be subject to negative press or public allegations, including on social media, that our authentication processes and methods are inadequate. Any material failure or perceived failure in our authentication processes and methods could cause buyers and consignors to lose confidence in our platform and adversely affect our revenue.
An epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an 15 Table of Contents extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse impact on our results of operations, cash flows and financial condition.
An epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse impact on our results of operations, cash flows and financial condition.
These exclusive-forum provisions do not apply to claims under the Securities Act of 1933 (the "Securities Act") or the Exchange Act. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision.
These exclusive-forum provisions do not apply to claims under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision.
We may be unable to successfully leverage technology to automate and drive efficiencies in our operations. We are building automation, machine learning and other capabilities to drive efficiencies in our merchandising and fulfillment operations. As we continue to add capacity, capabilities and automation, our operations will become increasingly complex and challenging.
We may be unable to successfully leverage technology to automate and drive efficiencies in our operations. We are building automation, artificial intelligence, machine learning and other capabilities to drive efficiencies in our merchandising and fulfillment operations. As we continue to add capacity, capabilities and automation, our operations will become increasingly complex and challenging.
The market price of our common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our consignor or buyer base, the level of consignor and buyer engagement, revenue or other operating results; • adverse economic and market conditions, including declines in consumer discretionary spending, currency fluctuations, inflation and geopolitical instability; • the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors; • variations between our actual operating results and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; • additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales; 26 Table of Contents • hedging activities by market participants; • sudden increased or decreased interest in our stock from retail investors; • substantial fluctuations in the daily trading volume of our common stock; • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our competitors; • price and volume fluctuations in the stock market, including as a result of trends in the economy; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and • other events or factors, including those resulting from war or incidents of terrorism, or responses to these events or threats to public health, such as the current COVID-19 pandemic and the war in Ukraine.
The market price of our common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our consignor or buyer base, the level of consignor and buyer engagement, revenue or other operating results; • adverse economic and market conditions, including declines in consumer discretionary spending, currency fluctuations, inflation, disruptions in the financial industry and geopolitical instability; • the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors; • variations between our actual operating results and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; • additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales; • hedging activities by market participants; • sudden increased or decreased interest in our stock from retail investors; • substantial fluctuations in the daily trading volume of our common stock; • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our competitors; • price and volume fluctuations in the stock market, including as a result of trends in the economy; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and • other events or factors, including those resulting from war or incidents of terrorism, or responses to these events or threats to public health.
We reach new buyers in part through television an d digital advertising, other paid marketing, press coverage, referral programs, organic word of mouth, our brand partnerships and other methods of discovery, such as converting consignors to buyers.
We reach new buyers in part through television and digital advertising, other paid marketing, press coverage, referral programs, organic word of mouth, our brand partnerships and other methods of discovery, such as converting consignors to buyers.
The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. 13 Table of Contents Risks Relating to Our Business and Industry We have a history of losses and we may not achieve or maintain profitability in the future.
The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. 13 Table of C ontents Risks Relating to Our Business and Industry We have a history of losses and we may not achieve or maintain profitability in the future.
An increasing number of states have considered or adopted laws that impose tax collection obligations on out-of-state sellers of goods. Additionally, the Supreme Court of the United States recently ruled in South Dakota v.
An increasing number of states have considered or adopted laws that impose tax collection obligations on out-of-state sellers of goods. Additionally, in 2018, the Supreme Court of the United States ruled in South Dakota v.
U.S. federal, state and local taxing authorities are currently reviewing the appropriate treatment of companies engaged in Internet commerce and considering changes to existing tax or other laws that could levy sales, income, consumption, use or other taxes relating to our activities, and/or impose 25 Table of Contents obligations on us to collect such taxes.
U.S. federal, state and local taxing authorities are currently reviewing the appropriate treatment of companies engaged in Internet commerce and considering changes to existing tax or other laws that could levy sales, income, consumption, use or other taxes relating to our activities, and/or impose obligations on us to collect such taxes.
We expect to continue investing in these and other marketing channels in the future and cannot be certain that these efforts will yield more buyers or be cost-effective. M oreover, new buyers may not purchase through our online marketplace as frequently or spend as much with us as historically has been the case with existing buyers.
We expect to continue investing in these and other marketing channels in the future and cannot be certain that these efforts will yield more buyers or be cost-effective. Moreover, new buyers may not purchase through our online marketplace as frequently or spend as much with us as historically has been the case with existing buyers.
Further, in view of new or modified federal, state or foreign laws and regulations, industry standards, contractual obligations and other legal obligations, or any changes in their interpretation, we may find it necessary or desirable to change our business activities and practices or to expend significant resources to modify our product or services and 24 Table of Contents otherwise adapt to these changes.
Further, in view of new or modified federal, state or foreign laws and regulations, industry standards, contractual obligations and other legal obligations, or any changes in their interpretation, we may find it necessary or desirable to change our business activities and practices or to expend significant resources to modify our product or services and otherwise adapt to these changes.
In any given year, our seasonal sales patterns may become more pronounced, strain our personnel or reduce our profit margin in a given period, which could substantially harm our business, operating results and financial condition.
In any given year, our seasonal sales patterns may become more pronounced, strain our personnel or reduce our profit margins in a given period, which could substantially harm our business, operating results and financial condition.
In addition, following adoption, we are required to calculate diluted earnings per share using the "if converted" method, which assumes that all of the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which can adversely affect our diluted earnings per share.
In addition, following adoption, we are required to calculate diluted earnings per share using the “if converted” method, which assumes that all of the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which can adversely affect our diluted earnings per share.
The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so on each exercise date of the capped call transactions), or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversions of the Notes or otherwise.
The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various 29 Table of C ontents derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so on each exercise date of the capped call transactions), or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversions of the Notes or otherwise.
Some of the factors that may reduce luxury spending include economic downturns, including economic recession or depression, high levels of unemployment, higher consumer debt levels, higher levels of inflation, reductions in net worth, declines in asset values, including home values, and related market and economic uncertainty, including as a result of geopolitical instability.
Some of the factors that may reduce luxury spending include economic downturns, including economic recession or depression, high levels of unemployment, higher consumer debt levels, higher levels of inflation, reductions in net worth, declines in asset values, including home values, and related market and economic uncertainty, including as a result of geopolitical instability and disruptions in the financial industry.
Additionally, adverse economic changes could reduce consumer confidence, and could thereby negatively affect our operating results. In the event of a prolonged economic downturn or acute recession, significant inflation, or decreased 18 Table of Contents supply, consumer spending habits could be adversely affected, and we could experience lower than expected revenue.
Additionally, adverse economic changes could reduce consumer confidence, and could thereby negatively affect our operating results. In the event of a prolonged economic downturn or acute recession, significant inflation, or decreased supply, consumer spending habits could be adversely affected, and we could experience lower than expected revenue.
Such recalls or voluntary removal of goods can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs and legal expenses, which could have a material adverse effect on our operating results. Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.
Such recalls or voluntary removal of goods can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs and legal expenses, which could have a material adverse effect on our operating results. 25 Table of C ontents Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.
Many of these factors have occurred, and may occur in the future, as a result of the COVID-19 pandemic and recent macroeconomic uncertainty, rising interest rates, inflationary pressures, credit constraints and geopolitical instability due in part to the conflict between Russia and Ukraine.
Many of these factors have occurred, and may occur in the future, as a result of the COVID-19 pandemic and recent macroeconomic uncertainty, rising interest rates, inflationary pressures, credit constraints and geopolitical instability due in part to the conflict between Russia and Ukraine and the Israel-Hamas war.
If we struggle to attract new consignors and buyers to our luxury resale model, or are unable 19 Table of Contents to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially, our consignor and buyer base could be adversely affected, and our business, operating results, financial condition and brand could suffer.
If we struggle to attract new consignors and buyers to our luxury resale model, or are unable to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially, our consignor and buyer base could be adversely affected, and our business, operating results, financial condition and brand could suffer.
This bifurcation resulted in a debt discount for Notes. See "Note 2-Summary of Significant Accounting Policies- Convertible Senior Notes." We used the effective interest method to amortize the debt discount to interest expense over the amortization period, which is the expected life of the Notes.
This bifurcation resulted in a debt discount for Notes. See “Note 2—Summary of Significant Accounting Policies— Convertible Senior Notes.” We used the effective interest method to amortize the debt discount to interest expense over the amortization period, which is the expected life of the Notes.
No assurances can be made that declines in the market price of our common stock will not occur in the future in connection with such activity. Delaware law and provisions in our certificate of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.
No assurances can be made that declines in the market price of our common stock will not occur in the future in connection with such activity. 27 Table of C ontents Delaware law and provisions in our certificate of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.
In June 2020, we issued $172.5 million in aggregate principal amount of 3.00% Convertible Senior Notes due 2025 (the "2025 Notes"), and in March 2021, we issued $287.5 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the "2028 Notes" and, together with the 2025 Notes, the "Notes"), each issuance in an offering exempt from registration.
In June 2020, we issued $172.5 million in aggregate principal amount of 3.00% Convertible Senior Notes due 2025, and in March 2021, we issued $287.5 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2028, each issuance in an offering exempt from registration.
Even if our marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures. We also face the unique challenge of attracting consignors and buyers to our online marketplace who may be unfamiliar with both our brand and our consignment business model.
Even if our marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures. We also face the unique challenge of attracting consignors and buyers to our online marketplace who may be unfamiliar with both our brand and our consignment business 19 Table of C ontents model.
See “Part II, Item 1 – Legal Proceedings” for a description of the Chanel litigation. 23 Table of Contents In addition, the Company, its officers and directors and the underwriters of the Company’s initial public offering (“IPO”) were named as defendants in numerous purported securities class actions in connection with the Company’s IPO (the “Securities Litigation”).
In addition, the Company, its officers and directors and the underwriters of the Company’s initial public offering (“IPO”) were named as defendants in numerous purported securities class actions in connection with the Company’s IPO (the “Securities Litigation”). See “Part II, Item 1 – Legal Proceedings” for a description of the Securities Litigation.
Because our operating expenses are relatively fixed in the short term, any failure to achieve our revenue expectations would have a direct adverse effect on our business, financial condition, operating results and the price of our stock. We have experienced seasonal and quarterly variations in our revenue and operating results.
Because our operating expenses are relatively fixed in the short 14 Table of C ontents term, any failure to achieve our revenue expectations would have a direct adverse effect on our business, financial condition, operating results and the price of our stock. We have experienced seasonal and quarterly variations in our revenue and operating results.
If we are not able to maintain acceptable pricing and other terms or if our vendors experience performance problems or other difficulties, including as a result of inflation or rising shipping costs, it could negatively impact our operating results and our consignors’ and buyers’ experience.
If we are not able to maintain acceptable pricing and other terms or if our vendors experience performance problems or other difficulties, including as a result of inflation, a labor strike by employees of our shipping vendors or rising shipping costs, it could negatively impact our operating results and our consignors’ and buyers’ experience.
However, the timing and magnitude of such discounting can be difficult to predict and can be brought on by unique factors such as a retailer or brand going out of business and liquidating its inventory, which may happen to a greater extent as a result of the COVID-19 pandemic, macroeconomic uncertainty, inflation, geopolitical instability due in part to the conflict between Russia and Ukraine, and weakened consumer demand.
However, the timing and magnitude of such discounting can be difficult to predict and can be brought on by unique factors such as a retailer or brand going out of business and liquidating its inventory, which may happen to a greater extent as a result of macroeconomic uncertainty, inflation, geopolitical instability due in part to the conflict between Russia and Ukraine, the Israel-Hamas war and weakened consumer demand.
If we fail to successfully locate, hire, train and retain personnel in the future, our operations would be negatively impacted, which would have an adverse effect on our business, financial condition and operating results. We may not be able to identify and lease authentication centers in suitable geographic regions.
If we fail to successfully locate, hire, train and retain personnel in the future, our operations would be negatively impacted, which would have an adverse effect on our business, financial condition and operating results. 20 Table of C ontents We may not be able to identify and lease authentication centers in suitable geographic regions.
If we are unable to generate such cash flow to service our debt, we may be required to adopt one or more alternatives, such as selling assets, incurring additional debt, restructuring debt or issuing additional equity on terms that may be onerous or highly dilutive. These alternatives may be insufficient to overcome macroeconomic conditions that may affect us.
If we are unable to generate such cash flow to service our debt, we may be required to adopt one or more alternatives, such as selling assets, incurring additional debt, restructuring debt or issuing additional equity on terms that may be onerous or highly dilutive. 28 Table of C ontents These alternatives may be insufficient to overcome macroeconomic conditions that may affect us.
Some of our competitors may have greater resources than we do, which may allow them to derive greater revenue and profits from their existing buyer bases, acquire consignors at lower costs, achieve more favorable total product mixes or respond more quickly than we can to new or emerging technologies and changes in consumer shopping behavior or preferences.
Some of our competitors may have greater resources than we do, which may allow them to derive greater revenue and profits from their existing buyer bases, acquire consignors at lower costs, achieve more favorable total product mixes or respond more quickly than we can to new or emerging technologies, such as artificial intelligence and machine learning, and changes in consumer shopping behavior or preferences.
We closely monitor the effectiveness of our advertising campaigns and changes in the advertising market, and adjust or re-allocate our advertising spend across channels, customer segments and geographic markets in real-time in an effort to optimize the effectiveness of these activities. We may increase advertising spend in future periods to continue driving our profitable growth.
We closely monitor the effectiveness of our advertising campaigns and changes in the advertising market, and adjust or re-allocate our advertising spend across channels, customer segments and geographic markets in real-time in an effort to optimize the effectiveness of these activities. We may increase marketing or advertising spend in future periods to drive growth.
We may be unable to attract and retain talented sales professionals. We rely on our sales professionals to drive our supply of luxury goods by identifying, developing and maintaining relationships with our consignors. The process of identifying and hiring sales professionals with the combination of skills and attributes required in these roles can be difficult and can require significant time.
We rely on our sales professionals to drive our supply of luxury goods by identifying, developing and maintaining relationships with our consignors. The process of identifying and hiring sales professionals with the combination of skills and attributes required in these roles can be difficult and can require significant time.
Prior to the adoption of ASU 2020-06, under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 470-20, Debt with Conversion and Other Options, we accounted for the liability and 28 Table of Contents equity components of the Notes separately because the Notes may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost.
Prior to the adoption of ASU 2020-06, under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options, we accounted for the liability and equity components of the Notes separately because the Notes may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost.
Any large scale damage to or catastrophic loss of goods stored in such authentication centers or retail stores, due to natural disasters, especially as catastrophic weather events become more frequent due to climate change, or man-made causes such as arson or theft would result in liability to our consignors for the expected commission liability for the lost items, reduction in the value of our inventory and a significant disruption to our business.
Any large scale damage to or catastrophic loss of goods stored in such authentication centers or retail stores or any other location where goods offered through our online marketplace are stored, due to natural disasters, especially as catastrophic weather events become more frequent due to climate change, or man-made causes such as arson or theft would result in liability to our consignors for the expected commission liability for the lost items, reduction in the value of our inventory and a significant disruption to our business.
While we carry insurance for the consigned luxury goods stored in these authentication centers as well as for business interruption and loss of income, our liabilities and expenses resulting from a catastrophic event could exceed our maximum insurance coverage amounts which could materially adversely impact our business and operating results.
While we carry insurance for the consigned luxury goods stored in these authentication centers as well as for business interruption and loss of income, our liabilities and expenses resulting from a catastrophic event could exceed our maximum insurance coverage amounts which could have a material adverse impact on our business and operating results.
Our relatively short operating history and the changes in our market make it difficult to assess our future performance. You should consider our business and prospects in light of the risks and difficulties we may encounter.
Changes in our market make it difficult to assess our future performance. You should consider our business and prospects in light of the risks and difficulties we may encounter.
Any of these developments could harm our business, financial condition and operating results. Our industry is highly competitive and we may not be able to compete effectively.
Any of these developments could harm our business, financial condition and operating results. 18 Table of C ontents Our industry is highly competitive and we may not be able to compete effectively.
Any failure to meet our goals, change in our ESG priorities or strategies, or perception that we fail to act responsibly in the areas in which we report, may negatively affect our reputation and the value of our brand, including impacting employee engagement and retention, the willingness of our consignors and buyers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.
Our compliance with these and other ESG-related laws, regulations and policies could be costly, and any failure to meet our goals, change in our ESG priorities or strategies, or perception that we fail to act responsibly in the areas in which we report, may negatively affect our reputation and the value of our brand, including by impacting employee engagement and retention, the willingness of our consignors and buyers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.
We have created our own purpose-built technology to operate our business, which may lack efficiency or become obsolete as we grow and we also rely on technology from third parties.
We have created our own purpose-built technology to operate our business, which may lack efficiency or become obsolete as 21 Table of C ontents we grow and we also rely on technology from third parties.
We cannot assure you that we will ever achieve or sustain profitability and may continue to incur significant losses going forward. Our reduction in workforce and the associated real estate reduction plan may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
We cannot assure you that we will ever achieve or sustain profitability and may continue to incur significant losses going forward. The savings plan we implemented in February 2023 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
Our ability to successfully grow our business depends on the availability and cost of leasing additional authentication centers that meet our criteria for a geographic location with access to a large, qualified talent pool as well as square footage, cost and other factors.
Our ability to successfully grow our business depends on the availability and cost of leasing additional authentication centers that meet our criteria for a geographic location with access to a large, qualified talent pool as well as square footage, cost and other factors. We currently have four authentication centers - one in Arizona and three in New Jersey.
Further, the comprehensive safety measures and protocols that we have implemented in response to the COVID-19 pandemic may not be successful in preventing the spread of the virus among our employees and we could face litigation or other claims related to unsafe working conditions, inadequate protection of our employees, or other similar or related claims.
Further, the comprehensive safety measures and protocols that we have implemented may not be successful and we could face litigation or other claims related to unsafe working conditions, inadequate protection of our employees, or other similar or related claims.
Our form of consignor agreement includes a representation that the consignor has the necessary right and title to the goods they may consign, and we include such a rule and requirement in our terms of service prohibiting the listing of stolen or otherwise illegal products. In addition, we have implemented protective measures to detect such products.
Our form of consignor agreement 22 Table of C ontents includes a representation that the consignor has the necessary right and title to the goods they may consign, and we include such a rule and requirement in our terms of service prohibiting the listing of stolen or otherwise illegal products.
Risks Relating to Our Business and Industry • We have a history of losses and we may not be able to achieve or maintain profitability in the future. • Our reduction in workforce and the associated real estate reduction plan may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business. • We may be unable to sustain our revenue growth rate or effectively manage growth or new opportunities. • We may not accurately forecast revenue and appropriately plan our expenses. • We have experienced seasonal and quarterly variations in our revenue and operating results. • Greater than expected product returns may exceed our reserve for returns. • We may require additional capital to support our business growth. • Public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases such as the COVID-19 pandemic have adversely affected, and could in the future, adversely affect our business and the business of our consignors and buyers.
Risks Relating to Our Business and Industry • We have a history of losses and we may not be able to achieve or maintain profitability in the future. • The savings plan we implemented in February 2023 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business. • We may not be able to return to historic levels of revenue growth rate or effectively manage growth or new opportunities. • We may not accurately forecast revenue and appropriately plan our expenses. • We have experienced seasonal and quarterly variations in our revenue and operating results. • Greater than expected product returns may exceed our reserve for returns. • We may require additional capital to support our business growth. • Public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases such as the COVID-19 pandemic have adversely affected, and could in the future, adversely affect our business and the business of our consignors and buyers. • The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.
See “Part II, Item 1 – Legal Proceedings” for a description of the Securities Litigation. In addition, we have in the past and could face in the future a variety of employee claims against us, including general discrimination, privacy, wage and hour, labor and employment, disability claims and claims related to the Employee Retirement Income Security Act of 1974.
In addition, we have in the past and could face in the future a variety of employee claims against us, including general discrimination, privacy, wage and hour, labor and employment, disability claims and claims related to the Employee Retirement Income Security Act of 1974.
The opening and closing of retail stores brings operational challenges. We may have to enter into long-term leases before we know whether our retail strategy or a particular geography will be successful.
We may have to enter into long-term leases before we know whether our retail strategy or a particular geography will be successful.
Risks Relating to Ownership of Our Common Stock The market price of our common stock may be volatile or may decline steeply or suddenly regardless of our operating performance and we may not be able to meet investor or analyst expectations.
Risks Relating to Ownership of Our Common Stock The market price of our common stock may be volatile or may decline steeply or suddenly regardless of our operating performance and we may not be able to meet investor or analyst expectations. 26 Table of C ontents If you purchase shares of our common stock, you may not be able to resell those shares at or above the price you paid.
For example, in November 2018, Chanel filed a lawsuit against us in the U.S. District Court for the Southern District of New York bringing various trademark and advertising-related claims under the Lanham Act and New York state law analogues. The final outcome of this litigation, including our liability, if any, with respect to Chanel’s claims, is uncertain.
For example, in November 2018, Chanel filed a lawsuit against us in the U.S. District Court for the Southern District of New York bringing various trademark and advertising-related claims under the Lanham Act and New York state law analogues.
National retailers and brands set pricing for new luxury goods that they sell and from time to time offer sales and promotional pricing, particularly during the fourth quarter holiday season, when we have historically made a substantial portion of our annual sales.
National retailers and brands set their own retail prices and promotional discounts on new luxury goods, which could adversely affect our value proposition to consignors and buyers. 17 Table of C ontents National retailers and brands set pricing for new luxury goods that they sell and from time to time offer sales and promotional pricing, particularly during the fourth quarter holiday season, when we have historically made a substantial portion of our annual sales.
If these measures prove inadequate, we may be required to spend substantial resources to take additional protective measures which could negatively impact our 22 Table of Contents operations.
In addition, we have implemented protective measures to detect such products. If these measures prove inadequate, we may be required to spend substantial resources to take additional protective measures which could negatively impact our operations.
Risks Relating to Our Intellectual Property If we cannot successfully protect our intellectual property, our business could suffer. We rely on a combination of intellectual property rights, contractual protections and other practices to protect our brand, proprietary information, technologies and processes.
In addition, increased inflation rates could adversely affect us by increasing costs, including labor and employee benefit costs. Risks Relating to Our Intellectual Property If we cannot successfully protect our intellectual property, our business could suffer. We rely on a combination of intellectual property rights, contractual protections and other practices to protect our brand, proprietary information, technologies and processes.
Our success depends on our ability to generate a consistent supply of luxury goods to sell through our stores and online marketplace. To do this we must cost-effectively attract, retain and grow relationships with consignors.
Risks Relating to Supply We may not be able to obtain sufficient new and recurring supply of pre-owned luxury goods. 16 Table of C ontents Our success depends on our ability to generate a consistent supply of luxury goods to sell through our stores and online marketplace. To do this we must cost-effectively attract, retain and grow relationships with consignors.
Failure to secure adequate authentication centers could have an adverse effect on our business and operating results. We may experience damage or destruction to our authentication centers or retail stores in which we store the majority of the consigned luxury goods we offer through our online marketplace.
We may experience damage or destruction to our authentication centers or retail stores in which we store the majority of the consigned luxury goods we offer through our online marketplace.
We may not be able to sustain our revenue growth rate or effectively manage growth or new opportunities. While we experienced negative revenue growth in 2020, our revenue grew in 2019, 2021, and 2022. Such recent revenue growth should not be considered indicative of our future performance.
We may not be able to return to historic levels of revenue growth rate or effectively manage growth or new opportunities. Our past revenue growth should not be considered indicative of future performance. While we experienced revenue growth in 2019, 2021 and 2022, our revenue for fiscal 2023 decreased compared to 2022.
We may further discover that, despite the implementation of our workforce reduction, we may require additional capital to continue expanding our business, and we may be unable to obtain such capital on acceptable terms, if at all.
We may further discover that, despite the implementation of our workforce reduction, we may require additional capital to continue expanding our business, and we may be unable to obtain such capital on acceptable terms, if at all. In addition, our real estate reduction plan could harm our brand reputation, constrain our ability generate new supply, and reduce demand in buyers.
While we continue to invest and innovate heavily in our authentication processes, and we reject any goods we believe to be counterfeit, we cannot be certain that we will identify every counterfeit item that is consigned to us. As the sophistication of counterfeiters increases, it may be increasingly difficult to identify counterfeit products.
While we continue to invest and innovate heavily in our authentication processes and methods, and we reject any goods we believe to be counterfeit, we cannot be certain that every counterfeit item consigned to us will be identified.
Risks Relating to Our Strategy • We may be unable to execute on our retail strategy. • Expansion of our operations internationally will require significant management attention and resources.
Risks Relating to Our Strategy • We may be unable to execute on our retail strategy. • Expansion of our operations internationally will require significant management attention and resources. • Our growth strategies may not be successfully implemented, help us achieve profitability or generate sustainable revenue and profit.
Aside from the negative impact the COVID-19 pandemic has had and may continue to have 14 Table of Contents on our revenues, as we grow our business, our future revenue growth rates may slow due to a number of factors, including the maturation of our business, increased market adoption against which future growth will be measured, increasing competition, slowing demand for items on our online marketplace from existing and new customers, changes to our commission structure, take rate or business model, changes in our total product mix, or our failure to capitalize on growth opportunities.
As we grow our business, our revenue growth rates may continue to decline in future periods due to a number of factors, including our inability to attract and retain consignors, general economic conditions, including a recession, increased market adoption against which future growth will be measured, increasing competition, slowing demand for items on our online marketplace from existing and new customers, changes to our commission structure, take rate or business model, changes in our total product mix, including as a result of our strategic shift to focus on higher value item or our failure to capitalize on growth opportunities.
We cannot yet fully determine the impact these or future laws, rules and regulations may have on our business or operations. These laws, rules and regulations may be inconsistent from one jurisdiction to another, subject to differing interpretations and may be interpreted to conflict with our practices.
These laws, rules and regulations may be inconsistent from one jurisdiction to another, subject to differing interpretations and may be interpreted to conflict with our practices.
If we were to become subject to work stoppages, we could experience disruption in our operations, including delays in merchandising operations and shipping, and increases in our labor costs which could materially adversely affect our business, financial condition or results of operations. In addition, increased inflation rates could adversely affect us by increasing costs, including labor and employee benefit costs.
If we were to become subject to work stoppages, we could experience disruption in our operations, including delays in merchandising operations and shipping, and increases in our labor costs, which could have a material adverse effect on our business, financial condition or results of operations.
Also, by electing to set goals and publicly disclose our ESG metrics, we may face increased scrutiny related to environmental, social, and governance activities.
Also, by electing to set goals and publicly disclose our ESG metrics, we may face increased scrutiny related to environmental, social, and governance activities. In addition, we may be required to disclose various ESG metrics, progress against goals and other detailed information under applicable laws and regulations.
In November 2022, we updated our take rate structure with the goals of optimizing take rate, limiting consignment of lower value items, and increasing supply of higher value items. If our updated take rate structure is not successful in increasing the consignment of such items, our brand and reputation could be adversely affected, and we may generate less revenue.
In November 2022, we updated our take rate structure with the goals of optimizing take rate, limiting consignment of lower value items, and increasing supply of higher value items.
We rely on consumer discretionary spending, which is adversely affected by economic downturns, including economic recession or depression, and other macroeconomic conditions or trends. Our business and operating results are subject to global economic conditions and their impact on consumer discretionary spending, particularly in the luxury goods market.
Our business and operating results are subject to global economic conditions and their impact on consumer discretionary spending, particularly in the luxury goods market.
We believe that retail stores are effective at raising brand awareness with consignors and buyers and generating new supply. We also believe that our brick-and-mortar presence complements our online marketplace and strengthens the omni-channel consigning and buying experience. We recently have and may in the future continue to reassess our retail footprint and adjust our retail strategy in particular geographies.
We also believe that an expansion of our brick-and-mortar presence complements our online marketplace and strengthens the omni-channel consigning and buying experience. We have in the past and may in the future continue to reassess our retail footprint and adjust our retail strategy in particular geographies. The opening and closing of retail stores brings operational challenges.
If these technologies do not perform in accordance with our expectations, third parties change the terms and conditions that govern their relationships with us, or if competition increases for the technology and services provided by third parties, our business may be harmed. 21 Table of Contents Risks Related to Data Security, Privacy and Fraud We rely on third parties to host our website and mobile app and to process payments.
If these technologies do not perform in accordance with our expectations, third parties change the terms and conditions that govern their relationships with us, or if competition increases for the technology and services provided by third parties, our business may be harmed. In addition, the evolution of these technologies may create unforeseen competitive pressures or cause disruption.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−2 removed2 unchanged
Biggest changeWe lease additional offices located in Los Angeles and New York City, and we have leased several retail spaces and luxury consignment offices in other high traffic areas, including flagship stores in New York City, Los Angeles, Chicago and San Francisco.
Biggest changeWe lease additional offices located in Los Angeles and New York City, and we have leased several retail spaces and luxury consignment offices in other high traffic areas, including in New York City and Los Angeles.
Removed
In February 2023, we announced our plan to rationalize our real estate footprint by closing certain of our retail locations, including our Chicago and San Francisco flagship stores, and reducing our office space usage. We will continue to evaluate our real estate presence as we deem appropriate to create efficiencies and to address trends in the marketplace and macroeconomic factors.
Removed
We believe that, following the reduction in our real estate presence described above, our properties will be suitable to meet our needs for the foreseeable future. In addition, to the extent we require additional space in the future, we believe that it would be available on commercially reasonable terms. 29 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

10 edited+8 added−16 removed1 unchanged
Biggest changeThe motion for leave to amend was granted on February 24, 2021. Chanel, Inc. moved to dismiss the Company’s counterclaims; the motion to dismiss remains pending. The parties agreed to a stay in April 2021 to engage in settlement discussions. After several mediation sessions, the parties were unable to reach a resolution, and the stay was lifted in November 2021.
Biggest changeOn March 18, 2021, Chanel moved to dismiss the Company’s Counterclaims and moved to strike the Company’s unclean hands affirmative defense. Decisions on Chanel’s motion to dismiss and motion strike are pending. The parties agreed to a stay in April 2021 to engage in settlement discussions.
On July 27, 2021, the Company reached an agreement in principle to settle this shareholder class action. On November 5, 2021, plaintiff filed the executed stipulation of settlement and motion for preliminary approval of the settlement with the federal court. On March 24, 2022, the court entered an order preliminarily approving the settlement.
On July 27, 2021, the Company reached an agreement in principle to settle the shareholder class action. On November 5, 2021, plaintiff filed the executed stipulation of settlement and motion for preliminary approval of the settlement with the federal court. On March 24, 2022, the court entered an order preliminarily approving the settlement.
The stay of the state court case has been lifted, and the opt out plaintiff filed an amended complaint on October 31, 2022 alleging putative class claims under the Securities Act on behalf of the two shareholders who opted out of the settlement and those who purchased stock from November 21, 2019 through March 9, 2020.
The stay of the state court case has been lifted, and the opt out plaintiff filed an amended complaint on October 31, 2022 alleging putative class claims under the Securities Act of 1933 (the “Securities Act”) on behalf of the two shareholders who opted out of the settlement and those who purchased stock from November 21, 2019 through March 9, 2020, based on purported new revelations.
The Company paid the settlement amount on March 29, 2022 with available resources and recorded approximately $11.0 million for the year ended December 31, 2021 under our Operating expenses as a Legal settlement. One of the plaintiffs in the state court action opted out of the settlement.
The Company paid the settlement amount on March 29, 2022 with available resources and recorded approximately $11.0 million for the year ended December 31, 2021 under our Operating expenses as a Legal settlement. One of the plaintiffs in the Marin County case opted out of the federal settlement and is pursuing the claim in Marin County Superior Court.
On May 29, 2020, the Company filed its Answer to the Amended Complaint. On October 30, 2020, the Company sought leave to amend its Answer to assert counterclaims against Chanel, Inc. for violations of the Sherman Act, 15 U.S.C. §§ 1 & 2, the Donnelly Act, N.Y. Gen. Bus. Law. § 340, and New York common law.
On November 3, 2020, the Company sought leave to amend its Answer to assert counterclaims against Chanel, Inc. for violations of the Sherman Act, 15 U.S.C. §§ 1 & 2, the Donnelly Act, N.Y. Gen. Bus. Law. § 340, and New York common law. The motion for leave to amend was granted on February 24, 2021.
On March 4, 2019, the Company filed a Motion to Dismiss the First Amended Complaint, which was granted in part and dismissed in part on March 30, 2020. The surviving claims against the Company include trademark infringement under 15 U.S.C. § 1114, false advertising under 15 U.S.C. § 1125, and unfair competition under New York common law.
The surviving claims against the Company include trademark infringement under 15 U.S.C. § 1114, false advertising under 15 U.S.C. § 1125, and unfair competition under New York common law. On May 29, 2020, the Company filed its Answer to the Amended Complaint.
Chanel then sought a partial stay of discovery on the Company's counterclaims and unclean hands defense while Chanel's motion to dismiss and strike those claims are pending, and on March 10, 2022, the Court granted Chanel's request. The parties continue to engage in fact discovery regarding Chanel's counterfeiting and false advertising claims against the Company.
After several mediation sessions, the parties were unable to reach a resolution, and the stay was lifted in November 2021. Chanel then sought a partial stay of discovery on the Company's counterclaims and unclean hands defense while Chanel's motion to dismiss and strike those claims are pending, and on March 10, 2022, the Court granted Chanel's request.
An unfavorable outcome in this or similar litigation could adversely affect our business and could lead to other similar lawsuits. On September 10, 2019, a purported shareholder class action complaint was filed against the Company, its officers and directors and the underwriters of its IPO in the Superior Court of the State of California in the County of San Mateo.
Beginning on September 10, 2019, purported shareholder class action complaints were filed against the Company, its officers and directors and the underwriters of its IPO in the San Mateo Superior Court, Marin County Superior Court, and the United States District Court for the Northern District of California.
Item 3. Legal Proceedings. We are from time to time subject to, and are presently involved in, litigation and other legal proceedings and from time to time, we receive inquiries from government agencies. See “Note 11—Commitments and Contingencies” in the notes to the audited financial statements. On November 14, 2018, Chanel, Inc. sued the Company in the U.S.
Item 3. Legal Proceedings. From time to time, the Company is subject to, and is presently involved in, litigation and other legal proceedings and from time to time, the Company receives inquiries from government agencies.
District Court for the Southern District of New York. The Complaint alleged federal and state law claims of trademark infringement, unfair competition, and false advertising. On February 1, 2019, Chanel, Inc. filed its First Amended Complaint that included substantially similar claims against the Company.
The Company discloses material contingencies when a loss is not probable but reasonably possible. On November 14, 2018, Chanel, Inc. sued the Company in the U.S. District Court for the Southern District of New York. The Complaint alleged federal and state law claims of trademark infringement, unfair competition, and false advertising.
Removed
Fact discovery is currently scheduled to be completed by August 15, 2023, and all depositions of fact witnesses will be completed by no later than July 15, 2023. The final outcome of this litigation, including our liability, if any, with respect to Chanel’s claims, is uncertain.
Added
Accounting for contingencies requires the Company to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. The 31 Table of C ontents Company records a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
Removed
Three additional purported class actions, also alleging claims arising from the IPO were subsequently filed in Marin County and San Francisco County Superior Courts. The San Mateo case was voluntarily dismissed, refiled in Marin County Superior Court and consolidated with the cases there. On January 10, 2020, the Marin County plaintiffs filed a consolidated amended complaint.
Added
On February 1, 2019, Chanel, Inc. filed its First Amended Complaint that included substantially similar claims against the Company. On March 4, 2019, the Company filed a Motion to Dismiss the First Amended Complaint, which was granted in part and dismissed in part on March 30, 2020.
Removed
The plaintiffs in the San Francisco Superior Court case have filed a request for dismissal. Separately an additional purported class action was filed in the United States District Court for the Northern District of California on November 25, 2019.
Added
On February 25, 2021, the Company filed its First Amended Answer, Affirmative Defenses and Counterclaims against Chanel. The Company’s Counterclaims allege violations of the Sherman Act, 15 U.S.C. §§ 1 & 2, the Donnelly Act, N.Y. Gen. Bus. Law. § 340, and New York common law.
Removed
On February 12, 2020, a lead plaintiff was appointed in the federal action and an Amended Consolidated Complaint was filed on March 31, 2020. Defendants filed a demurrer and motion to strike in the state court action on March 13, 2020 and filed a motion to stay the proceedings in favor of the federal action on May 1, 2020.
Added
The parties have continued to engage in fact discovery regarding Chanel's counterfeiting and false advertising claims against the Company. Fact discovery was scheduled to be completed by August 15, 2023. However, on July 19, 2023, the Court ordered a stay of the case at the parties’ request to enable the parties to attempt mediation again.
Removed
On August 4, 2020, the court granted defendants’ motion to stay the state court action and deferred ruling on the demurrer and motion to strike pending the outcome of the federal court action. A motion to dismiss the federal court action was filed on May 15, 2020.
Added
The parties are working to schedule mediation in the first half of 2024. The final outcome of this litigation, including our liability, if any, with respect to Chanel’s claims, is uncertain. An unfavorable outcome in this or similar litigation could adversely affect the Company’s business and could lead to other similar lawsuits.
Removed
On March 31, 2021, the court entered an order on the motion to dismiss, dismissing the Exchange Act claims and some of the claims alleged under the Securities Act. The court provided plaintiffs with an opportunity to amend the complaint and, on April 30, 2021, plaintiffs filed a Second Amended Complaint in federal court.
Added
The Company is not able to predict or reasonably estimate the ultimate outcome or possible losses relating to this claim.
Removed
The state court complaint, and the Second Amended Complaint in federal court each allege claims under the Securities Act of 1933 on behalf of a purported class of shareholders who acquired the Company’s stock pursuant to or traceable to the registration statement for the Company’s IPO.
Added
The claims are for alleged violations of Sections 11 and 15 of the Securities Act. On February 23, 2024, plaintiff filed a motion for class certification, which has been set for hearing on May 28, 2024. While the Company intends to defend vigorously against this litigation, there can be no assurance that the Company will be successful in its defense.
Removed
The federal complaint also alleges claims under the Exchange Act on behalf of a purported class of shareholders who purchased the Company’s stock from June 27, 2019 through November 20, 2019. The complaints seek, among other things, damages and interest, rescission, and attorneys’ fees and costs.
Added
For this reason, the Company cannot currently estimate the loss or range of possible losses it may experience in connection with this litigation. Item 4. Mine Safety Disclosures. None. 32 Table of C ontents PART II
Removed
On December 22, 2022, the Company filed a motion to dismiss and a motion to strike class allegations. 30 Table of Contents On September 10, 2020 and December 7, 2020, purported shareholders filed putative derivative actions in the United States District Court for the District of Delaware.
Removed
The derivative complaints allege factual allegations largely tracking the above referenced purported shareholder class actions. The two derivative cases have been consolidated. On September 13, 2021, the parties reached a settlement in principle of the derivative case. The settlement in principle provides for certain corporate governance reforms in exchange for a release and dismissal of the lawsuit.
Removed
On October 21, 2021, the parties reached agreement to pay up to $0.5 million in attorneys’ fees and costs to plaintiffs’ counsel in the derivative case. On November 5, 2021, the parties entered into a stipulation of settlement, and, on February 11, 2022, the court entered an order and final judgment approving the settlement.
Removed
In connection with the derivative settlement, the Company recorded approximately $0.5 million for the year ended December 31, 2021 under our Operating expenses as a Legal settlement.
Removed
The stipulation of settlement was preliminarily approved on December 8, 2021, and the $0.5 million was paid within thirty (30) days of the preliminary approval, or on January 7, 2022, with available resources . We are currently involved in, and may in the future be involved in, legal proceedings in the ordinary course of business.
Removed
While it is not possible to determine the outcome of any legal proceedings brought against us, we believe that, except for the matters described above, the resolution of all such matters will not have a material adverse effect on our financial position or liquidity, but could be material to our results of operations in any one accounting period.
Removed
Regardless of final outcomes, however, any such legal proceedings may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary and interim rulings. There are inherent uncertainties in these legal matters, some of which are beyond management’s control, making the ultimate outcomes difficult to predict.
Removed
Moreover, management’s views and estimates related to these matters may change in the future, as new events and circumstances arise and as the matters continue to develop. Item 4. Mine Safety Disclosures. None. 31 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed5 unchanged
Biggest changeRecent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. Reserved 32 Table of Contents
Biggest changeRecent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item with respect to our equity compensation plans will be incorporated by reference to our 2023 proxy statement set forth in the section titled “Equity Compensation Plan Information” that will be filed with the SEC within 120 days of the year ended December 31, 2022 (the “Proxy Statement”).
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item with respect to our equity compensation plans will be incorporated by reference to our 2024 proxy statement set forth in the section titled “Equity Compensation Plan Information” that will be filed with the SEC within 120 days of the year ended December 31, 2023 (the “Proxy Statement”).
Stockholders As of the close of business on February 21, 2023, there were 144 stockholders of record of our common stock. The actual number of holders of our common stock is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees.
Stockholders As of the close of business on February 20, 2024, there were 137 stockholders of record of our common stock. The actual number of holders of our common stock is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables set forth our results of operations (in thousands) and such data as a percentage of revenue for the periods presented: Year Ended December 31, 2022 2021 2020 (In thousands) Revenue: Consignment revenue $ 384,979 $ 302,221 $ 213,312 Direct revenue 158,726 120,844 52,623 Shipping services revenue 59,788 44,627 34,014 Total revenue 603,493 467,692 299,949 Cost of revenue: Cost of consignment revenue 56,963 44,985 30,389 Cost of direct revenue 141,661 101,427 45,406 Cost of shipping services revenue 56,178 47,803 36,587 Total cost of revenue 254,802 194,215 112,382 Gross profit 348,691 273,477 187,567 Operating expenses: Marketing 63,128 62,749 54,813 Operations and technology 279,110 235,829 163,808 Selling, general and administrative 195,160 176,418 140,652 Legal settlement 456 13,389 1,110 Total operating expenses 537,854 488,385 360,383 Loss from operations (189,163) (214,908) (172,816) Interest income 3,191 365 2,518 Interest expense (10,472) (21,531) (5,264) Other income (expense), net 171 23 (169) Loss before provision for income taxes (196,273) (236,051) (175,731) Provision for income taxes 172 56 101 Net loss $ (196,445) $ (236,107) $ (175,832) 40 Table of Contents Year Ended December 31, 2022 2021 2020 Revenue: Consignment revenue 64 % 65 % 71 % Direct revenue 26 26 18 Shipping services revenue 10 9 11 Total revenue 100 100 100 Cost of revenue: Cost of consignment revenue 9 10 10 Cost of direct revenue 24 22 15 Cost of shipping services revenue 9 10 12 Total cost of revenue 42 42 37 Gross profit 58 58 63 Operating expenses: Marketing 11 13 18 Operations and technology 46 50 55 Selling, general and administrative 33 38 47 Legal settlement — 3 — Total operating expenses 90 104 120 Loss from operations (32) (46) (57) Interest income 1 — 1 Interest expense (2) (5) (2) Other income (expense), net — — — Loss before provision for income taxes (33) % (51) (58) Provision for income taxes — — — Net loss (33) % (51) % (58) % Comparison of 2022 and 2021 Consignment Revenue Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Consignment revenue, net $ 384,979 $ 302,221 $ 82,758 27 % Consignment revenue increased by $82.8 million, or 27%, in 2022 compared to 2021.
Biggest changeThe following tables set forth our results of operations (in thousands) and such data as a percentage of revenue for the periods presented: Year Ended December 31, 2023 2022 2021 (In thousands) Revenue: Consignment revenue $ 415,572 $ 384,979 $ 302,221 Direct revenue 79,160 158,726 120,844 Shipping services revenue 54,572 59,788 44,627 Total revenue 549,304 603,493 467,692 Cost of revenue: Cost of consignment revenue 58,120 56,963 44,985 Cost of direct revenue 74,343 141,661 101,427 Cost of shipping services revenue 40,563 56,178 47,803 Total cost of revenue 173,026 254,802 194,215 Gross profit 376,278 348,691 273,477 Operating expenses: Marketing 58,275 62,988 62,749 Operations and technology 257,041 278,628 233,687 Selling, general and administrative 182,453 194,886 176,246 Restructuring 43,462 896 2,314 Legal settlement 1,340 456 13,389 Total operating expenses 542,571 537,854 488,385 Loss from operations (166,293) (189,163) (214,908) Interest income 8,805 3,191 365 Interest expense (10,701) (10,472) (21,531) Other income, net — 171 23 Loss before provision for income taxes (168,189) (196,273) (236,051) Provision for income taxes 283 172 56 Net loss $ (168,472) $ (196,445) $ (236,107) 40 Table of C ontents Year Ended December 31, 2023 2022 2021 Revenue: Consignment revenue 76 % 64 % 65 % Direct revenue 14 26 26 Shipping services revenue 10 10 9 Total revenue 100 100 100 Cost of revenue: Cost of consignment revenue 11 9 10 Cost of direct revenue 14 24 22 Cost of shipping services revenue 7 9 10 Total cost of revenue 32 42 42 Gross profit 68 58 58 Operating expenses: Marketing 11 11 13 Operations and technology 47 46 50 Selling, general and administrative 33 33 38 Restructuring 8 — — Legal settlement — — 3 Total operating expenses 99 90 104 Loss from operations (31) (32) (46) Interest income 2 1 — Interest expense (2) (2) (5) Other income, net — — — Loss before provision for income taxes (31) (33) (51) Provision for income taxes — — — Net loss (31) % (33) % (51) % Comparison of 2023 and 2022 Consignment Revenue Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Consignment revenue, net $ 415,572 $ 384,979 $ 30,593 8 % Consignment revenue increased by $30.6 million, or 8%, in 2023 compared to 2022.
See Note 2—Summary of Significant Accounting Policies—Revenue Recognition—Consignment Revenue. NMV Net merchandise value ("NMV") represents the value of sales from both consigned goods and our inventory net of platform-wide discounts less product returns and order cancellations and excludes the effect of buyer incentives, shipping fees and sales tax.
See Note 2—Summary of Significant Accounting Policies—Revenue Recognition—Consignment Revenue. NMV Net merchandise value (“NMV”) represents the value of sales from both consigned goods and our inventory net of platform-wide discounts less product returns and order cancellations and excludes the effect of buyer incentives, shipping fees and sales tax.
In addition to scaling our physical infrastructure, growing our single-SKU business operations require that we attract, train and retain highly-skilled personnel for purposes of authentication, copywriting, merchandising, pricing and fulfilling orders. We have invested substantially in technology to automate our operations and support growth, including proprietary machine learning technology to support efficiency and quality.
In addition to scaling our physical infrastructure, growing our single-SKU business operations requires that we attract, train and retain highly-skilled personnel for purposes of authentication, copywriting, merchandising, pricing and fulfilling orders. We have invested substantially in technology to automate our operations and support growth, including proprietary machine learning technology to support efficiency and quality.
Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our business strategies and for business planning purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies.
Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our business strategies and for business planning purposes and for incentive and compensation purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies.
In 2022 and 2021, repeat consignors accounted for approximately 83% and 84% of GMV, respectively. Buyer growth and retention . We grow our business by attracting and retaining buyers. We attract and retain buyers by offering highly coveted, authenticated, pre-owned luxury goods at attractive values and delivering a high-quality, luxury experience.
In 2023 and 2022, repeat consignors accounted for approximately 84% and 83% of GMV, respectively. Buyer growth and retention . We grow our business by attracting and retaining buyers. We attract and retain buyers by offering highly coveted, authenticated, pre-owned luxury goods at attractive values and delivering a high-quality, luxury experience.
Each coho rt represents all buyers that first purchased across our online marketplace in the designated year and the aggregate GMV purchased by such cohort for the initial year and each year thereafter. As illustrated in the first graph below, we have seen consistent retention of buyer activity across cohorts through 2022.
Each coho rt represents all buyers that first purchased across our online marketplace in the designated year and the aggregate GMV purchased by such cohort for the initial year and each year thereafter. As illustrated in the graph below, we have seen consistent retention of buyer activity across cohorts through 2023.
Prior year comparisons are included in "Park II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Prior year comparisons are included in "Park II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies” to our financial statements included elsewhere in this Annual Report on Form 10-K for recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K. 48 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies” to our financial statements included elsewhere in this Annual Report on Form 10-K for recently issued accounting pronouncements not yet adopted as of the date of this Annual Report on Form 10-K. 48 Table of C ontents Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
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 adversely affected.
We may seek additional equity or debt financing. 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 adversely affected.
Our Flagship and Neighborhood Stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts. Consignors may also utilize our complimentary shipping directly to our authentication centers. We leverage our proprietary transactional database and market insights from approximately 30.9 million item sales since our inception to deliver optimal pricing and rapid sell-through.
Our Neighborhood and Flagship Stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts. Consignors may also utilize our complimentary shipping directly to our authentication centers. We leverage our proprietary transactional database and market insights from approximately 37.5 million item sales since our inception to deliver optimal pricing and rapid sell-through.
Adjusted EBITDA means net loss before interest income, interest expense, other (income) expense net, provision for income taxes, and depreciation and amortization, further adjusted to exclude stock-based compensation, payroll taxes on employee stock transactions, restructuring charges, CEO transition costs, and certain one-time expenses.
Adjusted EBITDA means net loss before interest income, interest expense, other (income) expense net, provision for income taxes, and depreciation and amortization, further adjusted to exclude stock-based compensation, payroll taxes on employee stock transactions, restructuring, CEO separation benefits, CEO transition costs, and certain one-time expenses.
We do not reduce GMV to reflect product returns or order cancellations, which totaled 26.5%, 26.3%, and 25.3% of GMV in 2022, 2021, and 2020, respectively. GMV includes amounts paid for both consigned goods and our inventory net of platform-wide discounts and excludes the effect of buyer incentives, shipping fees and sales tax.
We do not reduce GMV to reflect product returns or order cancellations, which totaled 26.4%, 26.5%, and 26.3% of GMV in 2023, 2022, and 2021, respectively. GMV includes amounts paid for both consigned goods and our inventory net of platform-wide discounts and excludes the effect of buyer incentives, shipping fees and sales tax.
We expect to maintain this full valuation allowance for the foreseeable future. 39 Table of Contents Results of Operations The results of operations presented below should be reviewed in conjunction with the financial statements and notes included elsewhere in the Annual Report.
We expect to maintain this full valuation allowance for the foreseeable future. 39 Table of C ontents Results of Operations The results of operations presented below should be reviewed in conjunction with the financial statements and notes included elsewhere in the Annual Report.
If we fail to continue to attract and retain our buyer base to our online marketplace, our operating results would be adversely affected. The first graph below shows trends in purchasing activity for buyer cohorts for each year beginning in 2016.
If we fail to continue to attract and retain our buyer base to our online marketplace, our operating results would be adversely affected. The graph below shows trends in purchasing activity for buyer cohorts for each year beginning in 2017.
Sell-through ratio is defined as GMV in the period divided by the aggregate initial value of items added to our online marketplace in the period. In 2022 and 2021, our marketplace sell-through ratios were 91% and 94%, respectively. Our growth has been driven in significant part by repeat sales by existing consignors concurrent with growth of our consignor base.
Sell-through ratio is defined as GMV in the period divided by the aggregate initial value of items added to our online marketplace in the period. In 2023 and 2022, our marketplace sell-through ratios were 92% and 91%, respectively. Our growth has been driven in significant part by repeat sales by existing consignors concurrent with growth of our consignor base.
(4) During the year ended December 31, 2022, we received insurance reimbursement of $1.4 million related to a legal settlement expense. During the year ended December 31, 2021, we received insurance reimbursement of $4.3 million related to legal fees for a certain matter, of which $3.1 million were applied to legal expenses for the year ended December 31, 2021.
During the year ended December 31, 2021, we received insurance reimbursement of $4.3 million related to legal fees for a certain matter, of which $3.1 million were applied to legal expenses for the year ended December 31, 2021.
We recognize direct revenue upon shipment of the goods sold, based on the gross purchase price net of allowances for product returns, buyer incentives and adjustments. 35 Table of Contents Shipping Services Revenue Shipping services revenue is generated from shipping fees we charge to buyers for outbound shipping and handling activities related to delivering purchased items to our buyers.
We recognize direct revenue upon shipment of the goods sold, based on the gross purchase price net of allowances for product returns, buyer incentives and adjustments. 36 Table of C ontents Shipping Services Revenue Shipping services revenue is generated from shipping fees we charge to buyers for outbound shipping and handling activities related to delivering purchased items to our buyers.
We have transformed the luxury consignment experience by removing the friction and pain points inherent in the traditional consignment model. For consignors, we offer concierge at-home consultation and pickup, and meetings with consignors via online face-to-face platforms, or virtual consultations. Consignors may also drop off items at our luxury consignment offices.
We have transformed the luxury consignment experience by removing the friction and pain points inherent in the traditional consignment model. For consignors, we offer concierge at-home consultation and pickup as well as virtual consultations via online face-to-face platforms. Consignors may also drop off items at our luxury consignment offices.
These expenses may vary from year to year as a percentage of revenue, depending primarily upon when we choose to make more significant investments.
These expenses may vary from year to year as a percentage of revenue, depending primarily upon when we choose to make more significant investments. We expect these expenses to continue to decrease as a percentage of revenue.
We generate revenue from orders processed through our website, mobile app and retail stores. Our omni-channel experience enables buyers to purchase anytime and anywhere. We have a global base of more than 31.3 million members as of December 31, 2022.
We generate revenue from orders processed through our website, mobile app and retail stores. Our omni-channel experience enables buyers to purchase anytime and anywhere. We have a global base of more than 35.2 million members as of December 31, 2023.
We measure our success in attracting and retaining buyers by tracking buyer satisfaction and purchasing activity over time. We have experienced higher than average buyer satisfaction, as evidenced by our buyer net promoter score of 55 in 2022, and compared to our online shopping industry average of 41 according to NICE Satmetrix U.S. Consumer 2022 data.
We measure our success in attracting and retaining buyers by tracking buyer satisfaction and purchasing activity over time. We have experienced higher than average buyer satisfaction, as evidenced by our buyer net promoter score of 51 in 2023, and compared to our online shopping industry average of 45 according to NICE Satmetrix U.S. Consumer 2023 data.
Except as described below, prior year comparisons for 2021 and 2020 are included in “Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Prior year comparisons for 2022 and 2021 are included in “Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
In July 2019, we received net proceeds of $315.5 million upon completion of our IPO on July 2, 2019. In June 2020, we received net proceeds of $143.3 million from the issuance of the 2025 Notes and the related capped call transactions.
In July 2019, we received net proceeds of $315.5 million upon completion of our IPO on July 2, 2019. In June 2020, we received net proceeds of $143.3 million from the issuance of our 3.00% Convertible Senior Notes due 2025 (the “2025 Notes”) and the related capped call transactions.
As of December 31, 2022, our cash requirements related to our operating leases on our authentication centers, retail stores, and corporate offices that are included in our balance sheet were $175.1 million, of which $29.0 million is expected to be paid within the next 12 months. • Convertible Senior Notes.
As of December 31, 2023, our cash requirements related to our operating leases on our authentication centers, retail stores, and corporate offices that are included in our balance sheet were $146.7 million, of which $27.0 million is expected to be paid within the next 12 months. • Convertible Senior Notes.
Our future capital requirements and the adequacy of available funds will depend on many factors, including, but not limited to, those set forth under the heading “Risk Factors” in this Annual Report, and our ability to grow our revenue and the timing of investments to support growth in our business, such as the build-out of our authentication centers.
Our future capital requirements and the adequacy of available funds will depend on many factors, including, but not limited to, those set forth under the heading “Risk Factors” in this Annual Report, and our ability to grow our revenues and the timing of investments to support growth in our business, such as the build-out of our authentication centers and, to a lesser extent, the opening of new retail stores.
Take rates vary depending on the total value of goods sold through our online marketplace on behalf of a particular consignor as well as the category and price point of the items. In 2022 and 2021, our take rate on consigned goods was 36.0% and 34.7% respectively.
Take rates vary depending on the total value of goods sold through our online marketplace on behalf of a particular consignor as well as the category and price point of the items. In 2023 and 2022, our overall take rate on consigned goods was 37.5% and 36.0% respectively.
In April 2021, the Company entered into a loan and security agreement ("Revolving Credit Agreement") with a lender, to provide a revolving line of credit of up to $50 million. The credit facility expires in April 2023.
In April 2021, the Company entered into a loan and security agreement (“Revolving Credit Agreement”) with a lender, to provide a revolving line of credit of up to $50 million.
Our cash requirements related to certain other non-cancellable purchase commitments associated primarily with software services and hosting arrangements, were approximately $24.4 million, of which approximately $11.2 million is expected to be paid within the next 12 months.
Our cash requirements related to certain other non-cancellable purchase commitments associated primarily with software services and hosting arrangements, were approximately $21.5 million, of which approximately $7.9 million is expected to be paid within the next 12 months.
As of December 31, 2022, our cash requirements related to our Convertible Senior Notes that are included on our balance sheet and the related periodic interest payments were $488.8 million, of which $8.1 million is expected to be paid within the next 12 months. • Non-cancellable purchase commitments.
As of December 31, 2023, our cash requirements related to our Convertible Senior Notes that are included on our balance sheet and the related periodic interest payments were $480.7 million, of which $8.1 million is expected to be paid within the next 12 months.
The following table provides a reconciliation of net loss to Adjusted EBITDA (in thousands): Year Ended December 31, 2022 2021 2020 (In thousands) Adjusted EBITDA Reconciliation: Net loss $ (196,445) $ (236,107) $ (175,832) Add (deduct): Depreciation and amortization 27,669 23,531 18,845 Interest income (3,191) (365) (2,518) Interest expense 10,472 21,531 5,264 Provision for income taxes 172 56 101 EBITDA (161,323) (191,354) (154,140) Stock-based compensation (1) 46,138 48,802 24,322 CEO separation benefits (2) 948 — — CEO transition costs (3) 1,551 — — Payroll taxes on employee stock transactions 451 1,168 — Legal fees reimbursement benefit (4) (1,400) (1,204) — Legal settlements (5) 456 13,389 1,110 Restructuring charges (6) 896 2,314 514 Other (income) expense, net (171) (23) 169 Adjusted EBITDA (112,454) (126,908) (128,025) (1) The stock-based compensation expense for the year ended December 31, 2022 includes a one-time charge of $1.0 million related to the modification of certain equity awards pursuant to the terms of the transition and separation agreement entered into with our founder, Julie Wainwright, in connection with her resignation as Chief Executive Officer ("CEO") on June 6, 2022 (the "Separation Agreement").
The following table provides a reconciliation of net loss to Adjusted EBITDA (in thousands): Year Ended December 31, 2023 2022 2021 (In thousands) Adjusted EBITDA Reconciliation: Net loss $ (168,472) $ (196,445) $ (236,107) Add (deduct): Depreciation and amortization 31,695 27,669 23,531 Interest income (8,805) (3,191) (365) Interest expense 10,701 10,472 21,531 Provision for income taxes 283 172 56 EBITDA (134,598) (161,323) (191,354) Stock-based compensation (1) 34,273 46,138 48,802 CEO separation benefits (2) — 948 — CEO transition costs (3) 159 1,551 — Payroll taxes on employee stock transactions 195 451 1,168 Legal fees reimbursement benefit (4) — (1,400) (1,204) Legal settlements (5) 1,340 456 13,389 Restructuring (6) 43,462 896 2,314 Other expense, net — (171) (23) Adjusted EBITDA (55,169) (112,454) (126,908) (1) The stock-based compensation expense for the year ended December 31, 2022 includes a one-time charge of $1.0 million related to the modification of certain equity awards pursuant to the terms of the transition and separation agreement entered into with our founder, Julie Wainwright, in connection with her resignation as Chief Executive Officer ("CEO") on June 6, 2022 (the "Separation Agreement").
We believe this metric reflects scale, brand awareness, buyer acquisition and engagement. Average Order Value (“AOV”) Average order value (“AOV”) means the average value of all orders placed across our online marketplace and retail stores, excluding the effect of buyer incentives, shipping fees and sales taxes. Our focus on luxury goods across multiple categories drives a consistently strong AOV.
Average Order Value (“AOV”) Average order value (“AOV”) means the average value of all orders placed across our online marketplace and retail stores, excluding the effect of buyer incentives, shipping fees and sales taxes. Our focus on luxury goods across multiple categories drives a consistently strong AOV.
Throughout the pandemic, our top priority has been to protect the health and safety of our employees and our customers. Macroeconomic uncertainty and inflationary pressure have and may in the future drive lower demand for the end customer and increase costs of labor and shipping.
During any public health emergency, our top priority is to protect the health and safety of our employees and our customers. Macroeconomic uncertainty and inflationary pressure have and may in the future drive lower demand for the end customer and increase costs of labor and shipping.
See “Risk Factors—Risks Related to Our Business and Industry— Our reduction in workforce and the associated real estate reduction plan may not result in anticipated savings, could resul t in total costs and expenses that are greater than expected and could disrupt our business. ” Other Factors Affecting Our Performance Other key business and marketplace factors, independent of the health and economic impact of the COVID-19 pandemic and macroeconomic conditions, impact our business.
See “Risk Factors—Risks Related to Our Business and Industry— The savings plan we implemented in February 2023 may not result in anticipated savings, could resul t in total costs and expenses that are greater than expected and could disrupt our business. ” Other Factors Affecting Our Performance Other key business and marketplace factors, independent of the health and economic impact of public health emergencies and macroeconomic conditions, impact our business.
Provision for Income Taxes Our provision for income taxes consists primarily of state minimum taxes in the United States. We have a full valuation allowance for our net deferred tax assets primarily consisting of net operating loss carryforwards, accruals and reserves, stock-based compensation, fixed assets, and other book-to-tax timing differences.
We have a full valuation allowance for our net deferred tax assets primarily consisting of net operating loss carryforwards, accruals and reserves, stock-based compensation, fixed assets, and other book-to-tax timing differences.
The net change in our operating assets and liabilities was primarily the result of cash inflows due to a decrease in 2022 of $28.0 million in inventory driven by a decrease in direct purchases of inventory from vendors, an increase of $10.5 million in accrued consignor payables, and by a $4.9 million increase in accounts payable, partially offset by a decrease of $17.8 million in operating lease liability and a decrease of $9.8 million in other accrued and current liabilities.
The net change in our operating assets and liabilities was primarily the result of cash outflows due to a decrease of $26.5 million in operating lease liabilities, a decrease of $4.4 million in consignor payables, an increase of $7.0 million in accounts receivable, and an increase of $3.1 million in other assets, partially offset by cash inflows due to a decrease of $10.9 million in inventory driven by a decrease in direct purchases of inventory from vendors.
Interest Income Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Interest income $ 3,191 $ 365 $ 2,826 774 % Interest income increased by $2.8 million, or over 100%, in the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily driven by higher average interest rates.
Interest Income Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Interest income $ 8,805 $ 3,191 $ 5,614 176 % Interest income increased by $5.6 million, or over 100%, in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by higher average interest rates.
To support the future growth of our business, we continue to invest in physical infrastructure, talent and technology. We principally conduct our intake, authentication, merchandising and fulfillment operations in our leased authentication centers located in Arizona and New Jersey comprising an aggregate of approximately 1.4 million square feet of space. We also operate retail stores in several geographies.
We principally conduct our intake, authentication, merchandising and fulfillment operations in our leased authentication centers located in Arizona and New Jersey comprising an aggregate of approximately 1.4 million square feet of space. We also operate retail stores in several geographies.
We count as a member any user who has registered an email address on our website or downloaded our mobile app, thereby agreeing to our terms of service. 33 Table of Contents Through December 31, 2022, we have cumulatively paid approximately $3.2 billion in commissions to our consignors.
We count as a member any user who has registered an email address on our website or downloaded our mobile app, thereby agreeing to our terms of service. Through December 31, 2023, we have cumulatively paid approximately $4.0 billion in commissions to our consignors. Our GMV decreased to $1.7 billion in 2023 from $1.8 billion in 2022.
Net Cash Used in Investing Activities During 2022, net cash used in investing activities was $36.9 million, which consisted of $22.9 million for purchases of property and equipment, net, including leasehold improvements, and $14.1 million for capitalized proprietary software costs.
Net Cash Used in Investing Activities During 2023, net cash used in investing activities was $42.1 million, which consisted of $29.2 million for purchases of property and equipment, net, including leasehold improvements, and $13.0 million for capitalized proprietary software costs.
Year Ended December 31, 2022 2021 2020 (In thousands, except AOV and percentages) GMV $ 1,815,983 $ 1,482,432 $ 986,951 NMV $ 1,335,506 $ 1,092,353 $ 736,872 Consignment revenue $ 384,979 $ 302,221 $ 213,312 Direct revenue $ 158,726 $ 120,844 $ 52,623 Shipping services revenue $ 59,788 $ 44,627 $ 34,014 Number of orders 3,757 2,981 2,233 Take rate 36.0 % 34.7 % 35.7 % Active buyers 998 797 649 AOV $ 483 $ 497 $ 442 % of GMV from repeat buyers 84.0 % 83.9 % 83.0 % GMV GMV represents the total amount paid for goods across our online marketplace in a given period.
Year Ended December 31, 2023 2022 2021 (In thousands, except AOV and percentages) GMV $ 1,725,983 $ 1,815,983 $ 1,482,432 NMV $ 1,269,880 $ 1,335,506 $ 1,092,353 Consignment revenue $ 415,572 $ 384,979 $ 302,221 Direct revenue $ 79,160 $ 158,726 $ 120,844 Shipping services revenue $ 54,572 $ 59,788 $ 44,627 Number of orders 3,300 3,757 2,981 Take rate 37.5 % 36.0 % 34.7 % Active buyers 922 998 797 AOV $ 523 $ 483 $ 497 GMV GMV represents the total amount paid for goods across our online marketplace in a given period.
As a percentage of revenue, selling, general and administrative expense decreased to 33% in 2022 from 38% in 2021. These expenses may vary from period to period as a percentage of revenue. We expect these expenses to decrease as a percentage of revenue over the long term.
As a percentage of revenue, selling, general and administrative remained flat at 33% in the years ended December 31, 2023 and 2022 . These expenses may vary from period to period as a percentage of revenue. We expect these expenses to decrease as a percentage of revenue over the long term.
These expenses may vary from period to period as a percentage of revenue, depending primarily upon our marketing investments. We expect these expenses to decrease as a percentage of revenue over the longer term.
As a percentage of revenue, marketing remained flat at 11% in the years ended December 31, 2023 and 2022. These expenses may vary from period to period as a percentage of revenue, depending primarily upon our marketing investments. We expect these expenses to decrease as a percentage of revenue over the longer term.
(5) The legal settlement charges for the year ended December 31, 2021 reflects legal settlement expenses arising from the settlement of a putative shareholder class action and derivative case. (6) The restructuring charges for the year ended December 31, 2022 consists of employee severance payments and benefits.
The legal settlement charges for the year ended December 31, 2021 reflect legal settlement expenses arising from the settlement of a putative shareholder class action and derivative case.
The increase in our take rate was due to the larger sales mix of higher take rate categories such as women's apparel. Additionally, we earn revenue from our subscription program, First Look, in which we offer buyers early access to the items we sell in exchange for a monthly fee. • Direct revenue .
The increase in our take rate was due to the update of our consignor commission structure (effective November 1, 2022). Additionally, we earn revenue from our subscription program, First Look, in which we offer buyers early access to the items we sell in exchange for a monthly fee. • Direct revenue .
Year Ended December 31, 2022 2021 2020 (In thousands) Net cash (used in) provided by: Operating activities $ (91,557) $ (142,151) $ (134,419) Investing activities (36,922) (43,437) 178,004 Financing activities 4,101 252,913 152,815 Net (decrease) increase in cash and cash equivalents $ (124,378) $ 67,325 $ 196,400 Net Cash Used in Operating Activities During 2022, net cash used in operating activities was $91.6 million, which consisted of a net loss of $196.4 million, adjusted by non-cash charges of $98.2 million and cash inflows due to a net change of $6.7 million in our operating assets and liabilities.
Year Ended December 31, 2023 2022 2021 (In thousands) Net cash (used in) provided by: Operating activities $ (61,268) $ (91,557) $ (142,151) Investing activities (42,128) (36,922) (43,437) Financing activities 226 4,101 252,913 Net (decrease) increase in cash and cash equivalents $ (103,170) $ (124,378) $ 67,325 Net Cash Used in Operating Activities During 2023, net cash used in operating activities was $61.3 million, which consisted of a net loss of $168.5 million, adjusted by non-cash charges of $136.3 million and cash outflows due to a net change of $29.1 million in our operating assets and liabilities.
We believe that our existing cash and cash equivalents as of December 31, 2022 will be sufficient to meet our working capital, capital expenditures and contractual obligation requirements for at least the next 12 months. We may seek additional equity or debt financing.
We believe our existing cash and cash equivalents as of December 31, 2023 will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months.
The increase was primarily attributable to the 31% increase in direct revenue compared to the prior year. Direct revenue gross margin decreased by 5 percentage points in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by strategic liquidation of company owned inventory sold at discounted prices.
Direct revenue gross margin decreased by 467 basis points in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by strategic liquidation of company owned inventory sold at discounted prices, which resulted in the sell through of inventory that was previously reserved.
The margin profile of our direct revenue is lower than the margin profile of our consignment revenue. 42 Table of Contents Cost of Shipping Services Revenue Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Cost of shipping services revenue $ 56,178 $ 47,803 $ 8,375 18 % As a percent of shipping services revenue 94 % 107 % Cost of shipping services revenue increased by $8.4 million, or 18%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.
The margin profile of our direct revenue is lower than the margin profile of our consignment revenue. 42 Table of C ontents Cost of Shipping Services Revenue Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Cost of shipping services revenue $ 40,563 $ 56,178 $ (15,615) (28) % As a percent of shipping services revenue 74 % 94 % Cost of shipping services revenue decreased by $15.6 million, or 28%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cost of Consignment Revenue Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Cost of consignment revenue $ 56,963 $ 44,985 $ 11,978 27 % As a percent of consignment revenue 15 % 15 % Cost of consignment revenue increased by $12.0 million, or 27%, in 2022 compared to 2021.
Cost of Consignment Revenue Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Cost of consignment revenue $ 58,120 $ 56,963 $ 1,157 2 % As a percent of consignment revenue 14 % 15 % Cost of consignment revenue increased by $1.2 million, or 2%, in 2023 compared to 2022.
These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments.
As a percentage of revenue, operations and technology expense increased to 47% in 2023 from 46% in 2022 due to a decrease in direct revenue. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments.
(3) The CEO transition charges for the year ended December 31, 2022 consist of general and administrative fees, including legal and recruiting expenses, as well as retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.
(2) The CEO separation benefit charges for the year ended December 31, 2022 consist of base salary, bonus and benefits for the 2022 fiscal year, as well as an additional twelve months of base salary and benefits payable to Julie Wainwright pursuant to the Separation Agreement. 47 Table of C ontents (3) The CEO transition charges for the year ended December 31, 2022 consist of general and administrative fees, including legal and recruiting expenses, as well as retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.
Our AOV reflects both the average price of items sold as well as the number of items per order. Our AOV is a key driver of our operating leverage.
Our AOV reflects both the average price of items sold as well as the number of items per order. Our AOV is a key driver of our operating leverage. 37 Table of C ontents Components of our Operating Results Revenue Our revenue is comprised of consignment revenue, direct revenue, and shipping services revenue. • Consignment revenue .
Interest Expense Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Interest expense $ (10,472) $ (21,531) $ 11,059 -51 % Interest expense decreased by $11.1 million, or 51%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Interest Expense Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Interest expense $ (10,701) $ (10,472) $ 229 2 % Interest expense increased by $0.2 million, or 2%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Other Income, Net Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Other income, net $ 171 $ 23 $ 148 643 % Other income increased by $0.1 million, or over 100%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.
Other Income, Net Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Other income, net $ — $ 171 $ (171) -100 % 44 Table of C ontents Other income decreased by $0.2 million, or 100%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cost of Direct Revenue Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Cost of direct revenue $ 141,661 $ 101,427 $ 40,234 40 % As a percent of direct revenue 89 % 84 % Cost of direct revenue increased by $40.2 million, or 40%, in 2022 compared to 2021.
Cost of Direct Revenue Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Cost of direct revenue $ 74,343 $ 141,661 $ (67,318) (48) % As a percent of direct revenue 94 % 89 % Cost of direct revenue decreased by $67.3 million, or 48%, in 2023 compared to 2022.
Our total gross margin decreased by 1 percentage point in the year ended December 31, 2022 compared to the year ended December 31, 2021 driven by the decrease in direct revenue gross margin as discussed above. Gross margin may vary from period to period.
Total Gross Margin Our total gross margin increased by 1,072 basis point in the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily driven by the increase in higher margin consignment revenue and decrease in lower margin direct revenue. Gross margin may vary from period to period.
We expect these expenses to continue to decrease as a percentage of revenue over the longer term. 43 Table of Contents Selling, General and Administrative Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Selling, general and administrative $ 195,160 $ 176,418 $ 18,742 11 % Selling, general and administrative expense increased by $18.7 million, or 11%, in 2022 compared to 2021.
We expect these expenses to decrease as a percentage of revenue over the longer term. 43 Table of C ontents Selling, General and Administrative Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Selling, general and administrative $ 182,453 $ 194,886 $ (12,433) (6) % Selling, general and administrative expense decreased by $12.4 million, or 6%, in 2023 compared to 2022.
We believe there is substantial opportunity to grow our business by having buyers also become consignors and vice versa. As of December 31, 2022, 15% of our buyers had become consignors and 50% of our consignors had become buyers.
In 2020, buyer retention was impacted by the adverse impacts of COVID-19 on supply, and as a result, GMV. We believe there is substantial opportunity to grow our business by having buyers also become consignors and vice versa. As of December 31, 2023, 15% of our buyers had become consignors and 49% of our consignors had become buyers.
Consignors typically started at a 55% commission (which equals a 45% take rate for us) and could earn up to a 70% commission. In addition, there were commission exceptions from the tiered commission structure based on category and price point of the items.
Previously, our take rate was primarily based on a tiered commission structure for consignors, where the more they sell the higher percent commission they earn. Consignors typically started at a 55% commission (which equals a 45% take rate for us) and could earn up to a 70% commission.
Beginning in November 2022, the take rate structure is primarily based on the category and the price point of the sold items. For example, under the updated take rate structure, consignors can earn 20% commission on all sold items under $100, and up to 90% commission on watches sold for over $7,500.
For example, under the updated take rate structure, consignors can earn 20% commission on all sold items under $100, and up to 90% commission on watches sold for over $7,500. We launched a pricing tool for our consignors that provides detail on commission rates for specific categories and other aspects of the take rate structure.
We adjust or re-allocate our advertising in real-time to optimize our spend across channels, buyer demographics and geographies to improve our return on advertising spend. With the exception of 2020 due to the adverse impacts of COVID-19 on our business, our BAC has declined over time driven by improving acquisition efficiencies. Scaling operations and technology.
We adjust or re-allocate our advertising in real-time to optimize our spend across channels, buyer demographics and geographies to improve our return on advertising spend. Scaling operations and technology. To support the future growth of our business, we continue to invest in physical infrastructure, talent and technology.
Marketing Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Marketing $ 63,128 $ 62,749 $ 379 1 % Marketing expense increased by $0.4 million, or 1%, in 2022 compared to 2021.
Legal Settlement Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Legal settlement $ 1,340 $ 456 $ 884 194 % Legal settlement expense increased by $0.9 million, or over 100%, in 2023 compared to 2022.
Shipping Services Revenue Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Shipping services revenue $ 59,788 $ 44,627 $ 15,161 34 % Shipping services revenue increased by $15.2 million, or 34%, in 2022 compared to 2021 primarily due to increased shipping rates charged to buyers for outbound and return shipments and the fulfillment of a larger number of orders, which increased 26% in the year ended December 31, 2022 compared to the year ended December 31, 2021.
Shipping Services Revenue Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Shipping services revenue $ 54,572 $ 59,788 $ (5,216) (9) % Shipping services revenue decreased by $5.2 million, or 9%, in 2023 compared to 2022 primarily due to a decrease in the number of orders.
We will continue to evaluate our real estate presence as we deem appropriate to create efficiencies and to address trends in the marketplace and macroeconomic factors. We may not be able to fully realize the cost savings and benefits initially anticipated from the RIF or Real Estate Reduction Plan, and the expected costs may be greater than expected.
We may not be able to fully realize the cost savings and benefits initially anticipated from the savings plan, and the expected costs may be greater than expected.
The restructuring charges for the year ended December 31, 2021 consist of the costs to transition operations from the Brisbane warehouse to our new Phoenix warehouse. 37 Table of Contents Components of our Operating Results Revenue Our revenue is comprised of consignment revenue, direct revenue, and shipping services revenue. • Consignment revenue .
Restructuring for the year ended December 31, 2021 consist of the costs to transition operations from the Brisbane warehouse to our new Phoenix warehouse. Material Contractual and Other Obligations O ur material contractual and other obligations as of December 31, 2023 consist of: • Operating Leases.
Operations and Technology Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Operations and technology $ 279,110 $ 235,829 $ 43,281 18 % Operations and technology expense increased by $43.3 million, or 18%, in 2022 compared to 2021.
Operations and Technology Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Operations and technology $ 257,041 $ 278,628 $ (21,587) (8) % Operations and technology expense decreased by $21.6 million, or 8%, in 2023 compared to 2022.
For the year ended December 31, 2022, we have not identified critical accounting estimates that involve a significant level of estimation uncertainty and would have a material impact on our results. Refer to our significant accounting policies are more fully described in Note 2—Summary of Significant Accounting Policies.
Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. For the year ended December 31, 2023, we have not identified critical accounting estimates that involve a significant level of estimation uncertainty and would have a material impact on our results.
Our take rate increased to 36.0% from 34.7% during the year ended December 31, 2022 compared to last year due to increased contribution from higher take rate products such as women's apparel. 41 Table of Contents Direct Revenue Year Ended December 31, Change 2022 2021 Amount % (In thousands, except percentage) Direct revenue $ 158,726 $ 120,844 $ 37,882 31 % Direct revenue increased by $37.9 million, or 31%, in 2022 compared to 2021.
Our take rate increased to 37.5% from 36.0% during the year ended December 31, 2023 compared to last year due to the update of our consignor commission structure which went into effect on November 1, 2022. 41 Table of C ontents Direct Revenue Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Direct revenue $ 79,160 $ 158,726 $ (79,566) (50) % Direct revenue decreased by $79.6 million, or 50%, in 2023 compared to 2022.
The increase in revenue was driven primarily by a 23% increase in GMV, and improvement in our take rate during the year ended December 31, 2022. GMV growth during the year ended December 31, 2022 was driven by a 26% increase in orders, due to strong market demand for online luxury goods, partially offset by a 3% decrease in AOV.
The increase in revenue was driven primarily by an increase in consignment GMV, and improvement in our take rate during the year ended December 31, 2023. Overall GMV decreased by 5% during the year ended December 31, 2023. The decrease in GMV is driven by a decrease in direct GMV, partially offset by the increase in consignment GMV.
Our GMV increased to $1.8 billion in 2022 from $1.5 billion in 2021. Our AOV decreased to $483 in 2022 from $497 in 2021. In 2022 and 2021, our total revenue was $603.5 million and $467.7 million, respectively, representing an increase of 29% in 2022.
Our AOV increased to $523 in 2023 34 Table of C ontents from $483 in 2022. In 2023 and 2022, our total revenue was $549.3 million and $603.5 million, respectively, representing a decrease of 9% in 2023. In 2023 and 2022, our gross profit was $376.3 million and $348.7 million, respectively, representing an increase of 8% in 2023.
In November 2022, we updated our take rate structure with the goals of optimizing take rate, limiting consignment of lower value items, and increasing supply of higher value items. Previously, our take rate was primarily based on a tiered commission structure for consignors, where the more they sell the higher percent commission they earn.
In November 2022, we updated our take rate structure with the goals of optimizing take rate, limiting consignment of lower value items, and increasing supply of higher value items. We continue to assess the impact of our updated take rate structure and may implement further changes in the future.
As a result of this seasonality, we typically see stronger AOV and more rapid sell-through in the fourth quarter.
As a result of this seasonality, we typically see stronger AOV and more rapid sell-through in the fourth quarter. 35 Table of C ontents Key Financial and Operating Metrics The key operating and financial metrics that we use to assess the performance of our business are set forth below for 2023, 2022, and 2021.
Management assesses changes in take rates by monitoring the volume of GMV and take rate across each discrete commission grouping, encompassing commission tiers and exceptions. Active Buyers Active buyers include buyers who purchased goods through our online marketplace during the 12 months ended on the last day of the period presented, irrespective of returns or cancellations.
Active Buyers Active buyers include buyers who purchased goods through our online marketplace during the 12 months ended on the last day of the period presented, irrespective of returns or cancellations. We believe this metric reflects scale, brand awareness, buyer acquisition and engagement.
Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of $293.8 million and an accumulated deficit of $951.2 million. Since our inception, we have generated negative cash flows from operations and have primarily financed our operations through equity and convertible debt financings.
We had restricted cash of $14.9 million as of December 31, 2023, consisting of cash deposited with a financial institution as collateral for our letters of credit, facility leases and credit cards. Since our inception, we have generated negative cash flows from operations and have primarily financed our operations through equity and convertible debt financings.
We expect these expenses to continue to decrease as a percentage of revenue. 38 Table of Contents Selling, General and Administrative Selling, general and administrative expense is principally comprised of personnel-related costs for our sales professionals and employees involved in finance and administration.
Selling, General and Administrative Selling, general and administrative expense is principally comprised of personnel-related costs for our sales professionals and employees involved in finance and administration. Selling, general and administrative expense also includes allocated facilities and overhead costs and professional services, including accounting and legal advisors.
We launched a pricing tool for our consignors that provides detail on commission rates for specific categories and other aspects of the take rate structure. Consignors are eligible to receive additional commissions based on total net sales under an added tiered commission structure.
Consignors are eligible to receive additional commissions based on total net sales under an added tiered commission structure. Management assesses changes in take rates by monitoring the volume of GMV and take rate across each discrete commission grouping, encompassing commission tiers and exceptions.
The increase was primarily attributable to the 27% increase in consignment revenue compared to the prior year, as well as higher credit card fees and overhead costs driven by growth in our business. Consignment revenue gross margin remained flat in the year ended December 31, 2022 compared to the year ended December 31, 2021.
The increase was primarily attributable to the 8% increase in consignment revenue compared to the prior year, partially offset by efficiencies in our cost leverage. Consignment revenue gross margin increased by 81 basis points in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the 8% increase in consignment revenue.
We believe GMV growth is driven by interest in luxury resale due to increasing consumer desire for more affordable, accessible luxury goods in a sustainable circular economy. Returns and cancellations as a percentage of GMV for the year ended December 31, 2022 was 26.5%, compared to 26.3% for the year ended December 31, 2021.
Returns and cancellations as a percentage of GMV for the year ended December 31, 2023 was 26.4%, compared to 26.5% for the year ended December 31, 2022.
The increase was primarily driven by the sell-through of company owned inventory from previous direct purchases from businesses. We recognize direct revenue on a gross basis upon shipment of the purchased good to the buyer. Direct revenue was flat as a percentage of total revenue year over year.
The decrease was primarily driven by our planned actions to minimize vendor-purchased company-owned inventory as the margin profile of our direct revenue is lower than consignment revenue. We recognize direct revenue upon shipment of the purchased good to the buyer.
Consignment Revenue Year Ended December 31, Change 2021 2020 Amount % (In thousands, except percentage) Consignment revenue, net $ 302,221 $ 213,312 $ 88,909 42 % Consignment and service revenue increased by $88.9 million, or 42%, in 2021 compared to 2020.
Restructuring Year Ended December 31, Change 2023 2022 Amount % (In thousands, except percentage) Restructuring $ 43,462 $ 896 $ 42,566 4,751 % Restructuring increased by $42.6 million, or over 100%, in 2023 compared to 2022.

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