Q2 2021 1stdibs.Com Inc Earnings Call

August 11, 2021

[music].

Thank you for standing by and welcome to first Dibs second quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star.

One on your Touchtone telephone please be advised that today's conference maybe recorded.

You require any further assistance. Please press star zero I would now like to hand, the conference over to your host head of Investor Relations Kevin Lebow's.

Good evening and welcome to first Dibs earnings call for the quarter ended June 32021.

I'm, Kevin Lavage head of Investor Relations join.

Joining me today are CEO, David Rosenblatt, and CFO Q Gwen.

David will provide an update on our business, including our strategy and our growth opportunities at.

<unk> will review, our second quarter financial results and third quarter outlook.

This call will be available via webcast on our Investor Relations website at investors Dot first dibs dot com.

Before we begin.

Please keep in mind that our remarks include forward looking statements, including but not limited to stay.

Statements regarding guidance and future financial performance.

Market demand.

Growth prospects and business plans.

Our actual results may differ materially.

Forward looking statements involve risks and uncertainties, which are described in our SEC filings.

Any forward looking statements that we make on this call are based on our beliefs and assumptions as of today and we disclaim any obligation to update them.

Additionally, during the call, we'll present GAAP and non-GAAP financial measures.

A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release.

You can find in our Investor Relations website, along with the replay of this call.

I'll now turn the call over to our CEO David Rosenblatt.

David.

Thanks, Kevin Good evening and thank you for joining us for our first earnings call as a public company before we begin I'd like to thank our wonderful sellers buyers and employees for helping to make first dibs, a leading marketplace for connecting design lovers with highly coveted sellers and makers are vintage.

Antique and contemporary furniture home decor art jewelry watches and fashion I'd also like to thank our public and private investors for their support.

Since many of you are new tower story before discussing second quarter highlights I'll touch briefly on our history and our strategy.

<unk> was founded in 2000 and to bring the magic of the Paris flea market online today, where a classic two sided marketplace with over 4200 highly vetted sellers globally. Our sellers are small businesses makers and artisans our buyers are both consumers and <unk>.

Professional buyers interior designers and architects.

Our mission is to enrich lives with extraordinary design over the past 21 years, we've built a reputation for helping collectors design lovers and interior designers alike discover beautifully designed one of a kind items.

We operate in a $129 billion market, which is in the early stages of online adoption.

We're excited about the opportunity ahead of US. In addition to the continued secular shift to digital we have numerous growth levers we are investing in.

Luxury design lovers are everywhere, but luxury design isms before first dibs. If you didn't live in a design center like New York, Paris, or Milan much of our supply would be inaccessible for.

For buyers first dibs eliminates the constraints of geography, unlocking unique global supply and making luxury design more accessible for example last year the average distance between buyers and sellers on confirmed orders with nearly 2500 miles similar.

Similarly, we provide sellers with access to a global community of well qualified buyers and the platform to facilitate e-commerce at scale.

Trust is the foundation of our marketplace and our most valuable asset enabling highly considered purchases for example in the second quarter, our seller based in Rome. So the 7.2 carat diamond ring for over $250000 through our platform to our private client buyer in.

The state of Georgia.

While we have earned the trust to sell rare and valuable items at high price points online. The majority of our listings are within reach of the mass affluent buyer.

In 2020, our average order value was $2500, but our median order value was $1200. This trust backed by the first dibs promise our comprehensive buyer protection program enables us to expand our marketplace and our Tam.

There have been two important business model transitions since our founding first in 2016, we shifted from a listings based model in which all communication between buyer and seller up to and including the transaction itself occurred off platform too.

Two a full e-commerce model, where both communication and orders occur on platform.

This aligned our incentives with our sellers and buyers and better matched our revenue growth to our GMP growth.

Second we expanded beyond vintage and antique furniture, our initial category, two art jewelry fashion, and new and custom furniture.

In the second quarter about 50% of our new buyer orders came from new categories. This morning, we added our latest vertical and Ftes, which I'll touch on below.

In 2020, our focus shifted from business model transition and vertical expansion to managing through Covid and supporting our sellers and that difficult period.

We enter the second half of 2021, as a well capitalized public company focused on growth.

We have more growth initiatives in process and on the roadmap than at any point in our history and we believe that each major initiative represents a non incremental GMP opportunity.

For example, this morning, we launched our Nf T platform, which we launched as a blockchain native auction initially.

Initially the platform will feature by monthly exhibitions. The debut collection titled Portals is a series of work featuring 11 recognize digital artists curated by the notable artist meta guys.

We believe that the blockchain in general and Ftes in particular are a game changing technology for the art World that digital art will become a significant market in its own right and that the trust. We have gained with consumers and artists places ftes squarely within our right to win.

Our NFC launched illustrates the extensibility of the technology platform and capabilities that we have spent the last 10 years building, our tech platform and associated commercial capabilities enable us to unlock potentially large <unk> opportunities in a capital efficient manner.

In this case, we were able to conceptualize the NFC opportunity build the capability and launch within a short amount of time with an investment of less than $1 million to date.

We're still in the early stages of realizing our market opportunity. The NFC platform is the first of several new initiatives. We plan to launch over the next year. Another example is international expansion and product localization, our strategic priority of ours, while there is significant international demand for our listings.

Our product is currently only available in English and 2020, 19% of our buyers and 33% of our traffic came from outside the U S. Despite the fact that we do know local language marketing.

Additionally, our conversion rate from international buyers was about half that of U S buyers.

In addition to vertical expansion and international growth, we see opportunities to grow our buyer base by testing and scaling into new paid marketing channels, improving buyer engagement through product optimizations, introducing new purchase formats, encouraging cross vertical buying and growing supply.

Turning to second quarter initiatives, we continued to expand our marketing channels. For example in early May we launched a partnership with American Express for their Centurion Black card members, we worked with American Express to develop a comprehensive integrated marketing campaign and the partnership with successful <unk>.

<unk>, new potentially high lifetime value buyers. Additionally.

Additionally, we continue to ramp programmatic prospecting, which we began testing in December 2020, and started testing connected video in July.

We also continue to enhance our product for example, we launched an iPad app in May improved our jewelry shopping experience by adding structured data like ring sized lab reports and customization and continue to add item videos to product pages in the second quarter about 20% of our.

New jewelry listings included a video.

Alongside product we are focused on scaling sales and service for example in April we ramped up a chat customer support feature, allowing us to respond to inquiries from this channel in a matter of seconds improving customer satisfaction.

Today over 20% of our inbound support volume as Chad.

Lastly, we continued scaling our facilitated shipping program.

And then May launch sea freight as a new shipping option.

For orders between Europe, and the U S. The sea freight option is 38% cheaper on average versus air.

Two our CFO is going to walk through the second quarter numbers in more detail, but I'll quickly share some context and highlights overall Q2 was a very healthy quarter for demand <unk>.

<unk> grew 34% year over year and revenue grew 29% year over year. Additionally, our two year stacks GMB growth rate, which normalizes the COVID-19 impact remains strong at 48%.

We closed the second quarter with roughly 69000 active buyers, 50% higher than where we ended 2019.

2020, with a record year for new buyer acquisition, we now have relationships with these buyers that we plan to grow over time.

Last year as we know COVID-19 brought on a period of rapid behavior change, which we began to lap in the second quarter. The reopening of the economy has very different impacts on our two primary customer segments.

Our designers were negatively impacted by Covid related restrictions last year.

Now as the economy reopens, they're busier than ever trade <unk> growth in the second quarter benefited from continued strength in the real estate market and new and resuming projects June trade <unk> hit an all time monthly record.

While trade CMV grew throughout the quarter consumer GMP growth slowed, particularly in June. We believe this consumer trend was largely macro driven as vaccinations became readily available and the economy reopened Nevertheless, our two year stack for consumer <unk>.

A healthy 55%.

As we lap the pandemic related lockdowns and the associated rapid change in consumer behavior, our fundamentals remained strong and our long term thesis is unchanged.

Looking at the entire business gross margins expanded in the <unk> and conversion rates increased year over year.

Cohort behavior with stable encouragingly buyers, who made their first purchase between May and July of 2020 continue to have higher engagement and purchase frequency than our pre COVID-19 cohorts.

Post pandemic, we expect consumer buyers to drive the majority of our growth due to the relative size of the consumer market as compare to the professional market as well as the fact that all of our verticals are available to consumers, while naturally trade buyers only by in the furniture and art.

Verticals as.

As we look to the future. It is important to remember that not only are we still early in the online adoption curve of our industry, but we are early in the development of our own company.

Despite the fact that we have a 21 year old brand. The first <unk> business model is just five years old and I believe that we will see as much change over the next five years as we have seen in the prior five.

I'll now turn it over to two to discuss second quarter financial results and outlook.

Thanks, David Good evening, everyone.

The I think it was a major milestone for the company and I am proud of the first team for staying focused and delivering strongly during the second quarter, which I will review along with providing a third quarter outlook.

Second quarter, <unk> was 107 million, a 34% year over year with traffic conversion and average order value or increasing year on year.

On a two year stack chianti growth with 48%.

<unk> Bioconversion continues to rise year over year and average order value benefited from the rebound in trade.

Hearing that the trade has never been Bcf designers are benefiting from the homestay with that renovation.

You had mentioned June <unk> hit an all time high.

Consumers C&D growth slowed relative to the first quarter.

Clearly in June as buyer traffic growth slowed well, we openings could impact near term consumer behavior.

Fundamentals are strong and we are confident in our long term opportunity.

Yes back consumer she has equalized with 55% and trade GNP growth was 43%.

Please note that when we referenced <unk>.

We are speaking of the subsets of on platform she would be attributable to each of these neighborhoods.

From a vertical perspective fashion and new income funding that growth with fashion GNP growth accelerating.

I like to shop in QM, all verticals continue to make up a growing percentage of allergy Andy Nick.

Our newer vertical, which we defined as art jewelry, and new and constant finite chair represented 46% of our on platform G. M D.

It's very likely to allow us to reach a wider audience with about 50% of new buy or do you think the second quarter are coming from newer verticals.

We see a long runway here and expect these verticals to account for the majority of allergy MD looking ahead.

Turning to our marketplace metrics there wasn't nearly 69000 active buyers in the second quarter, representing growth of 39% year over year. As a reminder, I guess my ear is a trailing 12 month metric.

Volume grew 28% and <unk>.

<unk> increased 6% year over year, driven by trade buyers.

Total net revenue of $24.7 million grew 29% year over year, driven by TNT crust as David mentioned earlier in 2016, we transitioned to a full E. Commerce model today, we generate the majority of our net revenue from selling marketplace, which can save us transaction.

Subscriptions and listings.

These transactions is the largest accounting for about 70% of total net revenue.

Growing T&D is our priority.

Okay place expands we expect revenue growth to approximate chianti growth. Additionally, we expect transaction revenue to account for a higher percentage of our net revenue over time.

We see many opportunities to grow the first gets marketplace.

Our leadership position in online luxury behind.

We are prioritizing investments in growing <unk> in a disciplined manner, given our asset light business model, we expect to leverage our fixed cost base over time.

Gross profit was $17.4 million up 33% year over year and gross profit margin was 17, 4% up from 68, 2%. Yeah go this margin improvement was driven by operational efficiency gains and lower depreciation.

As a reminder, we account for all of our operations teams' head count costs in our cost of revenue.

Sales and marketing expenses were $11.2 million up 32% year over year, driven primarily by growth in performance marketing spend in the second quarter, We launched a partnership with American Express and Charlie and Black card members and continue to test and optimize our performance marketing efforts.

For example in June we ramped the programmatic prospecting campaigns that we started testing in late 2020 and in July we began testing connected video we are in the early stages of developing our performance marketing capabilities and plan to accelerate our testing effort to identify new channels for glass.

New buyer acquisition and new vertical growth a priority for the second half of the year.

Sales and marketing as a percentage of revenue with 46% compared to 45% a year ago. As a reminder, in the second quarter of 2020, we pulled back on performance marketing activity due to COVID-19 disruptions.

She and development expenses were $4.5 million up 11% year over year, we continually enhance our buyer and seller experience for example, adding ring sized field terrace, and lack of points to jewelry and launching an iPad app. This quarter in the second half of 2021 will be focused on optimizing the existing.

The final new bio activation and beginning product localization for international expansion.

A percentage of revenue technology and development with 18% this quarter compared to 21% a year ago.

Over the past decade, we have developed our core tech platform going forward, we will continue to build upon this platform by adding more personalization, increasing search relevancy expanding purchase format and supporting new verticals.

G&A expenses were $4.7 million up 62% year over year G&A expenses were 19% of revenue in the second quarter up from 15% a year ago.

What's driven by public company expenses, including D&O insurance and head count cost.

Lastly, provision for transaction losses were $1.5 million up 67% year over year, driven primarily by GNP growth and timing of losses provision spreads transaction lots with 6% of revenue versus 5% a year ago.

Adjusted EBITDA loss was 3 million compared to $2 million in the year ago period, and adjusted EBITDA margin loss with 12, 3% compared to 10, 7% last year.

While we expanded gross margin in the second quarter, we saw operating expenses as a percentage of revenue increase driven by G&A sales and marketing and loss provision.

Our adjusted EBITDA reflects continued investment in the growth opportunities. We see ahead with an asset light business model and highly variable cost structure. Our near term focus is investing in G. N D growth in a disciplined manner.

Overtime as we grow GNC and revenue, we expect to generate operating leverage and expand adjusted EBITDA margins.

Moving onto the balance sheet, we ended the second quarter with a strong position of $176.1 million in cash and cash equivalents, including the IPO proceeds of 123 billion.

Now turning to our outlook given the changing macro economic and public health conditions, we are only providing guidance for the third quarter. At this time, we focus third quarter G. N V up a 100 million to $104 million equating to year over year growth of between 15, and 19% and a two year stack of approximately 40.

7% to 51%.

Revenue of $23.6 million to $24.3 million equating to year over year growth between 13, and 16% and a two year stack of approximately 34% to 37% adjusted EBITDA margin loss of 21% to 18%.

Given near term uncertainties around COVID-19, and consumer behavior will like to share some additional color on the assumptions underlying our third quarter guidance. We are assuming consumers G&P growth is stable at the levels. We saw exiting June.

Trey G&A year over year growth moderates relative to the second quarter, but remains healthy and no material <unk> contribution from MTS.

While we are not providing guidance beyond the third quarter. We note that tougher year over year GNP growth comparisons will continue through the first quarter of 2022, we also noticed different recovery dynamics between consumer and trade buyers well all consumer G. N V growth started to improve in the second quarter of 2020.

Trade she NV growth didn't recover until the first quarter of 2021 as pandemic related restrictions eased.

We are excited about our future opportunities, including growing our new verticals launching in adjacent categories like <unk>, expanding internationally and adding new purchase call that most of these investments is expected to be in the form of increased head count and marketing spend we plan to continue to invest against.

Our large market opportunity in a disciplined manner.

In closing while the pandemic continues to influence the near term outlook, we are confident in our long term opportunities.

Over the past 21, yes, we have earned seller and buyer trust and build a scalable platform to transact rat and valuable items globally.

We plan to continue investing in G&A.

And our long term opportunity in a disciplined and thoughtful manner. Thank you for your time I will now turn the call over to the operator to take your questions.

As a reminder to ask a question you will need to press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask a question to withdraw your question press. The pound key we ask that you. Please ask one question and one follow up and then requeue. Please standby, while we compile the Q&A roster.

Our first question comes from the line of Justin Post of Bank of America. Your question. Please.

Great. Thank you for taking my question I guess I'll ask about the N F. T platform, David how do you think about the market opportunity for that and maybe equally important expanding auctions to other categories and then two I know you're not guiding for the year or Q4, but we are seeing some sequential.

Declines in G. M. B, how do you think about Q4 seasonality going back when you look at financials pre pre 2000. Thank you.

Hey, Justin.

So I'll take the first question on Mlps, and then I'll hand, it over to two to talk about Q4 Q3 guidance.

Implications performance thereafter, so in general in terms of Ftes.

This is not new news of course, but we do believe that the blockchain is a once in a generation technology and Ftes, which of course are enabled by it we think will be an enduring art medium and will ultimately grow into a very large market.

We also feel that creating a market for mlps and participating in that is consistent with our overall mission of course, which is to enrich lives with the extraordinary.

And also our capabilities and therefore falls squarely within our right to win so specifically why do I think that whats what I think is important in this market is curation.

Which is what we do kind of guaranteeing authenticity, which is what we do.

And we believe that we can support this market with editorial and all of the software things that help us differentiate ourselves as the marketplace versus competitors and offer real benefits to both collectors and artists.

It's still relatively early in the rollout of this product and there are some important pieces of functionality.

That are still on the roadmap that will follow.

But again.

I'm really happy that we were able to move very quickly within a matter of months and importantly to be able to launch this product with a relatively modest incremental investment we spent less than $1 million on this first version, which again I think is a testament to the flexibility and the breadth of our platform.

In terms of expanding the auction format beyond entities.

There's a good argument to do so we've got $11 billion worth of inventory, which means that just given the long sales cycle in this market over $10 billion will not be sold this year.

And I think auctions would be a logical way to help monetize that.

That said.

It's we don't have a specific announcements to make yet.

But but it's clearly something that we are thinking about to do you want to talk about the Q4.

Hey, Justin this is too and thank you for the question. So before I talk about Q4, and just some additional context as to historically, what we have seen in Q4 Q4 tends to be.

Our biggest quarter in the year and mostly due to the holiday we tend to see strength in the consumer segment, whereas the trade is relatively stable.

Q4 relative to other quarters that we have in the year.

We've got some additional context in terms of what <unk> seen in Q2 as well.

So in terms of the fundamentals we have seen that.

Provision rate continues to be very healthy <unk> grew year over year and what we saw in terms of the slowdown on the consumer side is a slight tick down.

On traffic right.

All cohorts that we've seen like a proportionate to take down and so when we look forward to ensure that we seem that hasn't been a shift between.

The traffic mix from desktop to mobile and so that's not surprising given the reopening and thats been very consistent with what we would have expected what other E. Commerce companies are seeing as well.

And so without obviously this is a very uncertain environment.

Two to continue to predict consumer behavior.

There is no reason to believe that this quarter in Q4, it would be any different from the seasonal impact that we have seen in the past.

Got it maybe one follow up just so we can think about reopening any way of quantifying your exposure to goods.

For the home versus other other areas how would you think about that.

Yeah. So I think what we've seen also is what we would have expected.

So the trade continued to strengthen throughout the quarter.

As you know we were impacted by Covid last year, and we have heard that there weren't a lot of the projects that would be delayed because of COVID-19.

And we're seeing some of that demand coming back and the trade mostly by in furniture right. So thats been an antique and UN caught them on the consumer side.

We have seen is again like even if we look at the volume of search for furniture to Google we've seen that in the summer.

Is it part of like sort of the reopening does mean a decline for search for furniture.

Conversely, you have seen that fashion, which is an out of home.

Category has saw the biggest.

Growth rate in Q2, so again I think.

The good news is that we are very diversified in terms of our buyer segments. We have moved the trade which is benefiting from the reopening and then we have some consumer which again is I think that it's great that people are out and about in the near term there could be some volatility in terms of consumer behavior with regards to finish up.

These purchases.

Alright, great. Thank you.

Great.

Thank you. Our next question comes from Ross Sandler of Barclays. Your line is open.

Hey, guys. Thanks for the question.

One of your competitors chairs, but pomono recently any thoughts on just overall level of competition that you're seeing in the space.

And that acquisition.

Just anything high level on that.

Are things changing or are pretty static on the competitive front. Thanks a lot.

Hey, Ross, Yes, so cherish, which is U S focused is merging with Pomono, which is a European focused in European based marketplace. Both of those companies that are focused primarily on vintage and antique furniture.

So listen I mean.

I actually think that's a positive thing for a couple of reasons one in general I think I'm a believer in competition at both validates the market and also helps grow it.

Hopefully there'll be more marketing dollars spent raising awareness among consumers and so on.

But at the same time I don't think it really changes anything both of those companies existed before we were already competing with them.

And.

I don't I don't feel that the combination of the two of them materially changes the competitive landscape.

And I have a high degree of confidence in our roadmap.

And I believe that with or without consolidation its going to put us in a much stronger place as we begin to rollout some of the things that we're working on.

Got it okay.

Two you just mentioned.

A little bit on the macro here in the third quarter, but the.

High end of the <unk> guidance was a little bit below our number.

And it's.

It's down sequentially from <unk> to <unk>.

Anything else it sounds like the furniture category is a little light right now, but anything else you'd call out as far as what Youre seeing.

Yes.

And the macro here in the third quarter. Thanks.

Yes, so in terms of the guidance that we gave for Q3 and again it was just to reiterate the assumptions that we have going into that guidance.

On the consumer side, we are expecting that the level of <unk> that we're seeing on the consumers I E.

The level, we exited June.

And then on the trade side, we expect that that level continues to be healthy, although we are comping Mako number.

For Q2, Q3 and for the trade and so potentially the growth rate that we are assuming that that will moderate as well and then lastly, no material contribution from <unk>, which is something that we launched today.

Thank you. Our next question comes from Ralph Schuchardt of William Blair. Your line is open.

Good evening, Thanks for taking the question first one David you talked about.

Driving our converting more international buyers that you said about 19% of the base that was from international just curious.

You've tested some of the paid search or some of the other sort of factors that you laid out what's the response and some of those new strategies.

On international.

International buyer, yes, yes, so just to clarify we have not tested paid search and non English language because in order to do that we need a non English language buyer experience, which we don't have yet so again just to reiterate the opportunity as you said.

The 19% number of plus one third of our traffic is from outside the U S and 40% of our supplies from the outside of the U S.

Spite of that because we don't have a local language experience conversion rates of non U S. Buyers are roughly half that of U S. Buyers. So when you put all that together, we're pretty optimistic in the opportunity.

And we have a team that's focused on building that out once we have that then we can start to invest in local language paid advertising along with editorial and all the other things that we use to drive demand.

Okay, sorry, I thought you had said that you were testing it.

Just.

Any impact if you could call out of the Delta there that we're seeing in the market I'm sure. It's kind of tough, but just sort of any thoughts on that and then if I could just one more on maybe referred to I think you said the consumer trends that you saw in June I guess, we're sort of.

Baked into assumptions for Q3, but just any updated thoughts on how July trended.

And perhaps into August thank you.

Sure I can take both at that questions in one.

While we're not commenting on quarter to date and in particular the July rate, what we are assuming is.

For Q3, the level of <unk> that we're going to see kind of similar on the consumer side exiting June so in terms of what we saw in Q2.

We felt like there was a slowdown in consumer G. N B study in June.

And when we looked at what was really driving that and that was all attributable to a slowdown in traffic.

Conversion rate has been very healthy and continue to grow on a year over year basis. So again, I think that because of the reopening there hasnt been that shift from desktop to mobile and potentially people are not spending as much time.

In the home online right when we do have traffic coming into the site given the conversion rate like we are seeing that those those people are buying at the same rate and they are buying at the same <unk> that we have seen historically, so again the quality of the buyers continue to be very strong.

But again in terms of the near term impact of Delta again, it's difficult to predict what's likely to happen and that's why you know in terms of our assumption going forward for Q3, while we are assuming is that there is a similar environment to what we have observed in Q2 any changes because of that obviously would in.

<unk> potentially outlook consumer behavior, and the way that they interact with us as well.

What is encouraging again is that the fundamentals of the company continues to be healthy.

All about across all of our cohort and we continue that to see that we are able to add new buyers at a very healthy rate.

Okay. That's helpful. Thanks, David Thanks Chip.

Thank you. Our next question comes from Mark Mahaney of ISI. Your line is open.

Okay two questions. Please on the.

The local language international local language rollout can you laid out some expectations for how long that will take in which languages will be first.

Yes, we're not hey, Mark we're not in a position to offer specific direction on that in terms of how we would prioritize markets I think we would start with the largest markets in the ones, where we have the highest existing demand.

With the English language experience and then as quickly as possible thereafter expand to every market, where we have buyers.

Okay, and then if you could talk a little bit David about performance marketing channels and.

What lessons you've learned so far and it sounds like this is just very early days for the company as a whole in terms of leaning into performance marketing.

Just talk about how big that has been so far is it too early to draw any lessons do you find that it's the performance marketing channels are highly competitive.

Terms of the.

What bids you need with bid prices. So any interesting color around where you are in terms of the learnings how competitive those channels are.

Yes, so I mean in general I think a bit of context is helpful. Here keep in mind, we only switch our business model that E. Commerce officially five years ago and it was only after that that we introduced our V. One paid marketing programs, we started with.

Google search Adwords.

And since then have expanded into other channels. It is still early days. So we only launched programmatic display in December on a test basis, we're still testing, although that's been highly productive and we've expanded that since then.

We only in July began testing video via connected you connected television and.

In one or two other platforms.

So again I think it is early days.

We've been very disciplined on paid.

And had stocked too.

The kind of cost per new return threshold that.

We feel is that we talked about it on the roadshow and is accretive.

And again, we feel like there are additional channels ahead of us both existing ones like <unk>.

Programmatic in video and brand new ones and the other ones. The other point I would make is that.

The black card the Centurion Black card promotion was very effective for us the way, we think about that though is we make that compete with other acquisition channels.

And so again, we feel like that as we sort of consider that yet another pay channel alongside search display via programmatic video and then potentially other channels that we're not in today.

Okay. Thank you very much.

Sure.

Thank you. Our next question comes from Aaron Kessler of Raymond James Your question. Please.

Great. Thanks, guys a couple of questions maybe just on the consumer side, maybe for Q2, specifically was there any categories that you would highlight for strength or weakness or was it really more across the board.

Slowdown in terms of traffic and just with the.

The NFC kind of what's your kind of strategy for marketing vacuum, that's a pretty new business and in terms of the auction format any thoughts on extending the auction format to other.

The core business as well thank you.

Let me start with the latter two questions and I'll kick it over to too.

So first of all in terms of FTE marketing strategy I think what's interesting about entities from a marketing point of view is most of the activity.

Is on platforms like Twitter and discord.

And it's important to us that we enter this market as kind of authentic member of the community. So Fortunately.

We were able to partner with an artist is very well known called Med <unk> met a guy used is curating. The initial set of artists that we're offering.

And so we're very much working with him and other influencers in the community and establishing our presence on both Twitter in this quarter.

So that's the that's our approach.

Ts.

In terms of auctions.

Again, I talked about this a little bit earlier, but I do feel like the opportunity for the auction format is significant again, we've got $11 billion worth of product on the marketplace.

90, plus percent of that will not sell through this year and auctions would prevent present, I think kind of efficient way to monetize that as well as creating urgency and.

And other things that we lack today on the platform but.

But we're not in a position to announce any details in terms of timing or specific plans or anything like that.

Yeah and in terms of the.

The trend by vertical that we saw in Q2, So I think I've mentioned that fashion, which is the out of the home category has accelerated throughout the quarter.

We saw obviously, we have to treat that is performing.

Very well for us in Q2, as well and they trade means mainly my furniture.

And we've seen that trend mostly.

I guess in both new and custom and then patient antique.

And I was just what I mentioned also that you know we have made a push into continuing to cross sell.

Existing verticals into our existing buyers as well.

Notably we have seen that the share of dnb coming from buyers, who buy cross vertical has increased.

And one data point that I gave during the prepared remarks is that 50% of our new buyers in Q2.

<unk> brought on in our newer verticals right. So we are seeing a lot of different pools in the marketplace, but again is very consistent with what we have expected which is the out of the home category.

Are performing well.

Great. Thank you.

Could we take one more question.

Yes, Sir our next question comes from Ron Josey of JMP Securities. Your line is open.

Great. Thanks for taking the question here and maybe David.

I don't want to go back and harp on performance or what have you, but I did want to talk about new buyer acquisition and I think too you mentioned that as a core growth priority and in the back half of the year and so I know youre testing a bunch of different paths to acquire we.

We did see pretty good new buyer acquisition in terms of growth. This quarter. So just talk about the strategy that makes it a top priority in the back half I know you talked about video, but but anything else specifically that we can look for you talked about the amax partnership but anything.

It makes us a growth priority. So we can look for sort of traffic gains. Thank you.

Yeah. So.

I think again, let's start with some data points that illustrate the opportunity we have $3.5 million registered buyers or sorry registered users of the site. We had 69000 buyers in the trailing 12 months.

So that presents a very good opportunity for us and it is something that is a core focus I think there are sort of a couple of different ways. When you think about it first of all.

We have.

Always on effort to improve conversion and improve the user experience. So as an example in Q2, we introduced I'll refer to iPad app.

Also introduced filter for ring size again.

Has it been described by others can improving conversion is a ground game.

And so that's something that again for us as an always on effort.

Beyond that though I think there are lots of opportunities on both the supply and the demand side, we've talked about a couple of them on the demand side certainly international its a big one again conversion rates from non U S.

Listeners are roughly half that of U S.

New order formats, which we've talked about.

Lauralee I think on the supply side, we have an opportunity to grow our rate of supply acquisition faster than we have historically so that's something that is in process that we're taking a look at.

And then beyond that again, what we do.

We have a funnel that is.

As more steps than conventional e-commerce experience and we think that there is an opportunity to improve conversion at each step of that funnel. So that would include things like more videos on product pages right product pages with video have a much higher conversion rate than those without so that's our focus.

Giving potentially more context to pricing.

Which is another thing that we're that we're working on improving personalization.

As well as top of funnel behave paid which I talked about as well as Seo. So again, I think sort of across the board both operationally and also strategically and at the occasion of the funnel. We do have real levers that we can we can pull in that we're working on pulling to improve activation.

<unk> and conversion.

Okay, great. Thank you David.

Thank you and at this time I would like to turn the call back over to CEO, David Rosenblatt for closing remarks, Sir.

Great. So I just like to thank.

Everyone, who joined the call.

And what we accomplished in our first quarter as a public company.

And I'm also proud of the pipeline that we've established which will produce good things in the future. Thank you very much.

And this concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Thank you for standing by and welcome to the first Dibs second quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your Touchtone telephone.

Be advised that today's conference maybe recorded.

Should you require any further assistance please press star zero.

Now I'd like to hand, the conference over to your house head of Investor Relations, Kevin La bus.

Good evening and welcome to first Dibs earnings call for the quarter ended June 30th 2021.

I'm, Kevin Lavage head of Investor Relations.

Joining me today are CEO, David Rosenblatt, and CFO Q Glenn.

David will provide an update on our business, including our strategy and our growth opportunities.

And two will review, our second quarter financial results and third quarter outlook.

This call will be available via webcast on our Investor Relations website at investors got first dibs Dot com.

Before we begin.

Please keep in mind that our remarks include forward looking statements, including but not limited to statements regarding guidance and future financial performance.

Market demand.

Growth prospects and business plans.

Our actual results may differ materially.

Forward looking statements involve risks and uncertainties, which are described in our SEC filings.

Any forward looking statements that we make on this call are based on our beliefs and assumptions as of today and we disclaim any obligation to update them.

Additionally, during the call, we'll present GAAP and non-GAAP financial measures.

A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which you can find in our Investor Relations website, along with the replay of this call.

I'll now turn the call over to our CEO David Rosenblatt.

David.

Thanks, Kevin Good evening and thank you for joining us for our first earnings call as a public company.

Before we begin I'd like to thank our wonderful sellers buyers and employees for helping to make first dibs, a leading marketplace for connecting design lovers with highly coveted sellers and makers of vintage antiques and contemporary furniture home decor art jewelry watches and fashion I'd also like.

To thank our public and private investors for their support.

As many of you are new tower story before discussing second quarter highlights I'll touch briefly on our history and our strategy.

<unk> was founded in 2000 to bring the magic of the Paris flea market online today, where a classic two sided marketplace with over 4200 highly vetted sellers globally. Our sellers are small businesses makers and artisans our buyers are both consumers and.

Professional buyers interior designers and architects.

We operate in a $129 billion market, which is in the early stages of online adoption.

We're excited about the opportunity ahead of US. In addition to the continued secular shift additional we have numerous growth levers we are investing in <unk>.

<unk> redesigned levers are everywhere, but luxury design isn't before first dibs. If you didn't live in a design center like New York, Paris, or Milan much of our supply would be inaccessible.

Similarly, we provide sellers with access to a global community of well qualified buyers and a platform to facilitate e-commerce at scale.

Trust is the foundation of our marketplace and our most valuable assets, enabling highly considered purchases for example in the second quarter of <unk>.

<unk> based in Rome, So the 7.2 carat diamond ring for over $250000 through our platform to our private client buyer in the state of Georgia.

While we have earned the trust to sell rare and valuable items of high price points online. The majority of our listings are within reach of the mass affluent buyer.

Two a whole e-commerce model, where both communication and orders occur on platform.

This aligned our incentives with our sellers and buyers and better matched our revenue growth to our GMP growth.

Second we expanded beyond vintage and antique furniture, our initial category, two art jewelry fashion and new <unk> custom furniture.

In the second quarter about 50% of our new buyer orders came from new categories.

This morning, we added our latest vertical ftes, which I'll touch on below.

In 2020, our focus shifted from business model transition and vertical expansion to managing through Covid and supporting our sellers and that difficult period.

We enter the second half of 2021 as a well capitalized public company focused on growth, we have more growth initiatives in process and on the roadmap than at any point in our history and we believe that each major initiatives represent a non incremental <unk> opportunity.

For example, this morning, we launched our <unk> platform, which we launched as a blockchain native auction.

Initially the platform will feature by monthly exhibitions. The debut collection titled Portals is a series of work featuring 11 recognize digital artists curated by the notable artist meta guys.

We believe that the block chain in general in Ftes in particular are a game changing technology for the art World that digital art will become a significant market in its own right and that the trust. We have gained with consumers and artists places and Ftes squarely within our right to win.

Our FTE launched illustrates the extensibility of the technology platform and capabilities that we have spent the last 10 years building, our tech platform and associated commercial capabilities enable us to unlock potentially large <unk> opportunities in a capital efficient manner.

In this case, we were able to conceptualize the FTE opportunity build the capability and launch within a short amount of time with an investment of less than $1 million to date.

Our product is currently only available in English and 2020, 19% of our buyers and 33% of our traffic came from outside the U S. Despite the fact that we do know local language marketing.

Additionally, our conversion rate from international buyers was about half that of U S buyers.

<unk>, new potentially high lifetime value buyers. Additionally.

Additionally, we continue to ramp programmatic prospecting, which we began testing in December 2020, and started testing connected video in July.

New jewelry listings included a video.

Today over 20% of our inbound support volume as Chad.

Lastly, we continued scaling our facilitated shipping program.

And then May launch sea freight as a new shipping option.

For orders between Europe, and the U S. The sea freight option is 38% cheaper on average versus air.

Two our CFO is going to walk through second quarter numbers in more detail, but I'll quickly share some context and highlights overall Q2 was a very healthy quarter for demand.

<unk> grew 34% year over year and revenue grew 29% year over year. Additionally, our two year stacks GMB growth rate, which normalizes the COVID-19 impact remains strong at 48%.

We closed the second quarter with roughly 69000 active buyers, 50% higher than where we ended 2019.

2020 was a record year for new buyer acquisition, we now have relationships with these buyers that we plan to grow over time.

Our designers were negatively impacted by Covid related restrictions last year.

While trade CMV grew throughout the quarter consumer GMB growth slowed, particularly in June. We believe this consumer trend was largely macro driven as vaccinations became readily available and the economy reopens. Nevertheless, our two year stack for consumer GNC.

A healthy 55%.

As we lap the pandemic related lockdowns and the associated rapid change in consumer behavior, our fundamentals remained strong and our long term thesis is unchanged.

Looking at the entire business gross margins expanded and <unk> and conversion rates increased year over year.

Cohort behavior with stable encouragingly buyers, who made their first purchase between May and July of 2020 continue to have higher engagement and purchase frequency than our pre COVID-19 cohorts.

Articles.

As we look to the future. It is important to remember that not only are we still early in the online adoption curve of our industry, but we are early in the development of our own company.

I'll now turn it over to two to discuss second quarter financial results and outlook.

Thanks, David and good evening everyone.

I think it was a major milestone for the company and I am proud of the first steps team for staying focused and delivering strong results during the second quarter.

I really view, along with providing a third quarter outlook.

Second quarter, <unk> was 107 million, a 34% year over year with traffic conversion and average order value or increasing year on year.

On a two year stack T&D growth with 48%.

Conversion continues to rise year over year and average order value benefited from the rebound in trade.

We are hearing that the trade has never been Bcf designers are benefiting from home sales and renovations Nice David mentioned June <unk> hit an all time high.

Consumers you have the gross flows relative to the first quarter, particularly in June as buyer traffic growth slowed.

Openings could impact near term.

Behavior, our fundamentals are strong and we are confident in our long term opportunity.

On a two year stack consumers, because with 55% and trade GNP growth was 43%.

Note that when we referenced <unk> <unk>, we are speaking of the subsets of on platform. She would be attributable to each of these bio goods.

From a vertical perspective fashion and new <unk> custom furniture lack growth with fashion GNP growth accelerating by her to shop in QM, all verticals continue to make up a growing percentage of allergy MD Nik Alan.

Our newer verticals, which we defined as art jewelry and new <unk> custom furniture represented 46% of our on platform G. M D.

This vertical was allow us to reach a wider audience with about 50% of new buy or do you see in the second quarter are coming from newer verticals.

We see a long runway here and expect this vertical to account for the majority of our GNP looking ahead.

Turning to our marketplace metrics there wasn't nearly 69000 active buyers in the second quarter, representing growth of 39% year over year. As a reminder, active buyers is a trailing 12 month metric.

Volume grew 28%.

<unk> increased 6% year over year, driven by trade buyers.

Total net revenue of $24.7 million grew 29% year over year, driven by <unk> as David mentioned earlier in 2016, we transitioned to a full e-commerce model.

We generate the majority of our net revenue from cell and marketplace services, which consist of transactions subscriptions and listings.

These transactions is the law.

Counting for about 70% of total net revenue.

Growing T&D is our priority.

Marketplace expands we expect revenue question your approximate chianti class. Additionally, we expect transaction revenue to account for a higher percentage of our net revenue over time.

We see many opportunities to grow the first is marketplace.

Our leadership position in online luxury design.

We are prioritizing investments in growing GNP in a discipline manner, given our asset light business model, we expect to leverage our fixed cost base over time.

Gross profit was $17.4 million up 33% year over year income.

Profit Marsh annually, 74% up from 68, 2%.

Margin improvement was driven by operational efficiency gains and lower depreciation.

As a reminder, we account for all of our operations teams' head count costs in our cost of revenue.

For example in June we ramped the programmatic prospecting campaigns that we started testing in late 2020 and in July we began testing connected video we are at the early stages of developing our performance marketing capabilities and plan to accelerate our testing effort to identify new channels for glass.

New buyer acquisition and new vertical growth a priority for the second half of the year.

Technology and development expenses were $4.5 million up 11% year over year, we continually enhance our buyer and seller experience for example, adding rig size field terrace, and lack of points jewelry and launching an iPad app this quarter.

In the second half of 2021 will be focused on optimizing the existing final new bio activation and beginning product localization for international expansion.

As a percentage of revenue technology and development with 18% this quarter compared to 21% Yeah go over.

Over the past decade, we have developed our core tech platform going forward, we will continue to build upon this platform by adding more personalization, increasing relevancy expanding purchased format and supporting new verticals.

G&A expenses were $4.7 million up 62% year over year G&A expenses were 19% of revenue in the second quarter up from 15% a year ago.

Increase was driven by public company expenses, including D&O insurance and head count cost.

Lastly, provision for transaction losses, well, one 5 million up 67% year over year, driven primarily by GNP growth and timing of losses provisions for transaction loss was 6% of revenue versus 5% a year ago.

Adjusted EBITDA loss was 3 million compared to 2 million in the year ago.

Go period, and adjusted EBITDA margin loss with 12, 3% compared to 10, 7% last year.

We expanded gross margin in the second quarter, we saw operating expenses as a percentage of revenue increase driven by G&A sales and marketing and loss provision.

Adjusted EBITDA reflects continued investment in the growth opportunities. We see ahead with an asset light business model and highly variable cost structure. Our near term focus is investing in GNP growth in a disciplined manner.

Over time, as we grow GNC and revenue, we expect to generate operating leverage and expand adjusted EBITDA margins.

Moving onto the balance sheet, we ended the second quarter with a strong position of $176.1 million in cash and cash equivalents, including the IPO proceeds of 123 billion.

Now turning to our outlook given the changing macroeconomic and public health conditions, we are only providing guidance for the third quarter. At this time, we forecast third quarter <unk> of 100 million to $104 million.

Equating to year over year growth of between 15, and 19% and a two year stack of approximately 47% to 51%.

Net revenue of $23.6 million to $24.3 million equating to year over year growth between 13, and 16% and a two year stack of approximately 34% to 37% adjusted EBITDA margin loss of 21% to 18%.

<unk> year over year growth moderates relative to the second quarter, but remains healthy and no material <unk> contribution from MTS.

While we are not providing guidance beyond the third quarter. We note that tougher year over year GNP growth comparisons will continue through the first quarter of 2022, we also noticed different recovery dynamics between consumer and trade buyers well all consumer <unk> growth started to improve in the second quarter of 2022.

<unk> didn't recover until the first quarter of 2021 as pandemic related restrictions eased.

We're excited about our future opportunities, including growing our new vehicles launching in adjacent categories like <unk>, expanding internationally and adding new purchase Paul that most of these investments is expected to be in the form of increased head count and marketing spend we plan to continue to invest against.

Our large market opportunity in a disciplined manner.

In closing while the pandemic continues to influence the near term outlook. We are confident in our long term opportunities over the past 21, yes, we have earned seller and buyer trust and build a scalable platform to transact rat and valuable items globally, we plan to continue investing in G&A growth.

And our long term opportunity in a disciplined and thoughtful manner.

For your time I will now turn the call over to the operator to take your questions.

As a reminder to ask a question you will need to press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask a question to withdraw your question press. The pound key we ask that you. Please ask one question and one follow up and then re queue. Please standby, while we compile the Q&A roster.

Sure.

Our first question comes from the line of Justin Post of Bank of America. Your question. Please.

Great. Thank you for taking my question I guess I'll ask about the <unk> T platform, David how do you think about the market opportunity for that and maybe equally important expanding auctions to other categories.

And then two I know you're not guiding for the year or Q4, but we are seeing some sequential.

Declines in <unk>, how do you think about Q4 seasonality going back when you look at financials pre pre 2000. Thank you.

Hey, Justin So I'll take the first question on <unk>, and then I'll hand, it over to two to talk about Q4, Q3 guidance and implications for months thereafter.

So in general in terms of NFC.

Well this is not new news of course, but we do believe that the blockchain is a once in a generation technology.

<unk>, which of course are enabled by it we think will be an enduring art medium and will ultimately grow into a very large market.

We also feel that creating a market for NFC and participating in that is consistent with our overall mission of course, which is to enrich lives with the extraordinary.

Also our capabilities and therefore falls squarely within our right to win so specifically why do I think that whats what I think is important in this market is curation.

Which is what we do kind of guaranteeing authenticity, which is what we do.

It's still relatively early in the rollout of this product and there are some important pieces of functionality.

That are still on the roadmap that will follow.

But again.

I'm really happy that we were able to move very quickly within a matter of months and importantly to be able to launch this product with a relatively modest incremental investment spend less than a million dollars. On this first version, which again I think is a testament to the flexibility and the breadth of our platform.

In terms of expanding the auction format beyond Ftes there.

A good argument to do so.

We've got $11 billion worth of inventory, which means that just given the long sales cycle in this market over $10 billion will not be sold this year and.

I think auctions would be a logical way to help monetize that.

That said.

It's we don't have a specific announcements to make yet.

But but it's clearly something that we are thinking about to do you want to talk about the Q4, yes.

Hey, Justin and thank you for the question. So before I talk about Q4, and just some additional context as to historically, what we have seen in Q4 Q4 tends to be.

Our biggest quarter in the year and mostly due to the holiday we tend to see strength in the consumer segment.

The trade is relatively stable in Q4 relative to other quarters that we have in the year.

We got some additional contacting tencent, what <unk> seen in Q2 as well and so you know in terms of the fundamentals we have seen that.

Conversion rate continues to be very healthy.

Grew year over year, and what we saw in terms of the slow down on the consumer side is a slight tick down on traffic right.

All cohorts that we've seen like a proportional take down and so when we look further into that we've seen that doesn't mean a shift between.

The traffic mix from desktop to mobile.

That's not surprising given the reopening and thats been very consistent with what we would have expected what other E. Commerce companies are seeing as well.

So without obviously this is a very uncertain environment.

Two to continue to predict consumer behavior, but no. There is no reason to believe that this quarter in Q4, it would be any different from the seasonal impact that we have seen in the past.

Got it maybe one follow up just so we can think about reopening.

Way of quantifying your exposure to goods for the home versus are there other areas. How would you think about that.

Yeah. So I think what we've seen also is what we would have expected and so the trade continued to strengthen throughout the quarter.

As you know we were impacted by Covid last year, and we have heard that a lot of the projects that would be delayed because of COVID-19.

And we're seeing some of that demand coming back.

And the trade, mostly by in furniture, right, So thats sanitation and antique and UN custom on the consumer side. When we have seen is again like even if we look at the volume of search for furniture to Google we've seen that in the summer. It's a part of like sort of the reopening that.

Dean.

Klein for search for furniture.

Conversely, you have seen that fashion, which is an out of home.

The category has saw the biggest growth rate in Q2, so again I think.

The good news is that we are very diversified in terms of our buyer segment. We have moved the trade which is benefiting from the reopening and then we have some consumer which again is I think that it's great that people are out and about in the near term there could be some volatility in terms of consumer behavior with regards to finish your question.

Purchases.

Alright, great. Thank you.

Great.

Thank you. Our next question comes from Ross Sandler of Barclays. Your line is open.

Hey, guys. Thanks for the question.

One of your competitors cherish spot.

Ono recently any thoughts on just overall level of competition that you're seeing in the space and.

And that acquisition.

Just anything high level on that.

Things changing.

<unk> are pretty static on the competitive front. Thanks a lot.

Hey, Ross, Yeah, So cherish, which is U S focused is merging with Pomono, which is a European focused in European based marketplace. Both of those companies are focused primarily on vintage and antique furniture.

So listen I mean.

Actually you think that it is.

A positive thing for a couple of reasons one in general I think I'm a believer in competition at both validates the market and also helps grow it.

Hopefully there'll be more marketing dollars spent raising awareness among consumers and so on.

And but at the same time.

I think it really changes anything both of those companies existed before we're already competing with them.

And.

I don't I don't feel that the combination of the two of them materially changes the competitive landscape.

I have a high degree of confidence in our roadmap.

And I believe that with or without consolidation its going to put us in a much stronger place as we begin to rollout some of the things that we're working on.

Got it okay.

Two you just mentioned.

A little bit on the macro here in the third quarter, but the.

The high end of the <unk> guidance was a little bit below our number.

And it's.

It's down sequentially from Q3, Q, so anything else it sounds like the furniture category is a little light right now, but anything else you'd call out as far as what Youre seeing.

Uh huh.

And the macro here in the third quarter. Thanks.

Yeah. So in terms of the guidance that we gave for Q3.

Again, I would just reiterate the assumption that we have going into that guidance.

Is that on the consumer side, we are expecting that the level of <unk> that we're seeing on the consumer side.

The level, we exited June.

And then on the trade side, we expect that that level continues to be healthy. Although we are comping Mako number for Q Q3 for the trade and so potentially the growth rate that we are assuming that that will moderate that as well and then lastly, no material contribution from <unk>, which is something.

That we launched today.

Thank you. Our next question comes from Ralph Schuchardt of William Blair. Your line is open.

Good evening, Thanks for taking the question first one David you talked about.

Driving our converting more international buyers that you said about 19% of the base that was from international just curious as you've tested some of the paid search or some of the other sort of factors that you laid out what's the response been some of those new strategies.

On international.

The 19% number of plus one third of our traffic is from outside the U S and 40% of our supplies from the outside of the U S.

Okay, sorry, I thought you had said that you were testing it.

Just.

Any impact if you could call out of the Delta that we're seeing in the market I'm sure. It's kind of tough, but just sort of any thoughts on that and then if I could just one more on maybe referred to I think you said the consumer trends that you saw in June I guess, we're sort of.

No.

Baked into the assumptions for Q3, but just any updated thoughts on how July trended.

And perhaps into August thank you.

Sure I can take both at that questions in one.

While we're not commenting on quarter to date and in particular the July rate.

What we are assuming is.

For Q3, the level of <unk> that we're going to see kind of similar on the consumer side exiting June so in terms of what we saw in Q2.

We felt like there was a slowdown in consumer <unk> study in June.

And when we looked at what was really driving that and that was all attributable to a slowdown in traffic.

Volume and that's what we have observed in Q2 any changes because of that obviously would impact potentially our consumer behavior and the way that they interact with us as well.

It's encouraging again is that the fundamentals of the company continues to be healthy.

All about across all of our cohort and we continue that to see that we are able to add new Myers at a very healthy rate.

Okay. That's helpful. Thanks, David Thanks Chip.

Thank you. Our next question comes from Mark Mahaney of ISI. Your line is open.

Okay two questions. Please on the.

The local language international local language rollout can you laid out some expectations for how long that will take in which languages will be first.

With the English language experience and then as quickly as possible thereafter expand to every market, where we have buyers.

Okay, and then if you could talk a little bit David about performance marketing channels and.

What lessons you've learned so far and it sounds like this is just very early days for the company as a whole in terms of leaning into performance marketing.

Just talk about how big that has been so far is it too early to draw any lessons do you find that it's the performance marketing channels are highly competitive.

What bids you need.

With bid prices, so any interesting color around where you are in terms of the learnings how competitive those channels are.

Yes, so I mean in general I think a bit of context is helpful. Here keep in mind, we only switch our business model. The ecommerce officially five years ago and it was only after that that we introduced our V. One paid marketing programs, we started with.

Google search Edwards.

We only in July began testing video via connected connected television and.

In one or two other platforms.

So again I think it is early days.

We've been very disciplined on paid.

<unk> had stopped too.

The kind of cost per new return thresholds that.

And that we feel is that we've talked about it on the road show and is accretive.

And again, we feel like there are additional channels are ahead of us both existing ones like <unk>.

Programmatic and video and brand new ones. The other ones. The other point I would make is that.

The black card the Centurion Black card promotion was very effective for us the way, we think about that though is we make that compete with other acquisition channels.

And so again, we feel like that as we sort of consider that yet another pay channel alongside search display via programmatic video and then potentially other channels that we're not in today.

Okay. Thank you very much sir.

Thank you. Our next question comes from Aaron Kessler of Raymond James Your question. Please.

Thanks, guys couple of questions, maybe just on the consumer side, maybe for Q2, specifically was there any categories that you would highlight for strength or weakness or was it really more across the board.

Slowdown in terms of traffic and just with the.

The NFC kind of what's your kind of strategy for marketing that given it's a pretty new business and in terms of the auction format any thoughts on extending the auction format to other.

Our core business as well thank you.

Let me start with the latter two questions and I'll kick it over to too.

So first of all in terms of NFC marketing strategy.

What's interesting about entities from a marketing point of view is most of the activity.

Is on platforms like Twitter and discord.

And it's important to us that we enter this market.

As a kind of authentic member of the community. So Fortunately.

We were able to partner with an artist that's very well known called <unk> met a guy used is curating. The initial set of artists that we're offering.

So we're very much working with him and other influencers in the community and establishing our presence on both Twitter in this quarter.

So that's the that's our approach.

In terms of auctions.

You know again when I talk about this a little bit earlier, but why do you feel like the opportunity for the auction format is significant again, we've got $11 billion worth of products on the marketplace.

90, plus percent of that we will not sell through this year and auctions would prevent present, I think kind of efficient way to monetize that as well as creating urgency.

And.

Other things that we lack today on the platform.

But we're not in a position to announce any details in terms of timing or specific plans or anything like that.

Yeah and in terms of the the trend by vertical that we saw in Q2.

I think I've mentioned that fashion, which is the out of the home category has accelerated throughout the quarter.

We saw obviously, we have to trade that is performing.

Very well for us in Q2, as well and the trade means mainly my furniture.

And we've seen that trend mostly.

And I guess in both new and custom and then patient antique and I would just want to mention also that we have made a push into continuing to cross sell.

Existing verticals into our existing buyers as well.

Notably we have seen that the share of dnb coming from buyers, who buy cross vertical has increased.

And one data point that I gave during the prepared remarks is that 50% of our new buyers in Q2.

<unk> brought on in our newer verticals right. So we are seeing a lot of different pools in the marketplace, but again is very consistent with what we have expected wishes to out of the home category are appropriate and are performing well.

Great. Thank you.

Could we take one more question.

Yes, Sir our next question comes from Ron Josey of JMP Securities. Your line is open.

Great. Thanks for taking the question here and maybe David.

Don't want to go back and harp on performance or what have you, but I did want to talk about new buyer acquisition and I think too you mentioned that as a core growth priority and in the back half of the year and so I know youre testing a bunch of different paths to acquire.

That makes it the growth priorities. So we can look for sort of traffic gains. Thank you.

Yeah. So.

So that presents a very good opportunity for us and it is something that is a core focus I think there is sort of a couple of different ways. When you think about it first of all.

We have.

And always on effort to improve conversion and improve the user experience. So as an example in Q2, we introduced I'll refer to iPad app.

We also introduced <unk>.

Or for ring size again.

As has been described by others can improving conversion is a ground game.

And so that's something that again for us is an always on effort.

Beyond that though I think there are lots of opportunities on both the supply and the demand side, we've talked about a couple of them on the demand side certainly international is a big one again conversion rates or non U S.

Visitors are roughly half that of U S.

New order formats, which we've talked about.

Similarly, I think on the supply side, we have an opportunity to grow our rate of supply acquisition faster than we have historically, so that's something that.

As in process that we're taking a look at.

And then beyond that again.

We have a funnel that is.

As more steps than conventional e-commerce experience and we think that there is an opportunity to improve conversion at each step of that funnel. So that would include things like more videos on product pages right product pages and video have a much higher conversion rate than those without so that's our focus.

Giving potentially more context to pricing.

Which is another thing that we're that we're working on improving personalization.

As well as top of funnel behave paid which I talked about as well as Seo. So again, I think sort of across the board both operationally and also strategically and in East Asia. The funnel, we do have real levers that we can we can pull on that we're working on pulling to improve activation.

<unk> and conversion.

Okay, great. Thank you David.

Thank you and at this time I would like to turn the call back over to CEO, David Rosenblatt for closing remarks, Sir.

Great. So I just like to thank Ed.

Everyone, who joined the call.

And what we accomplished in our first quarter as a public company.

And I'm also proud of the pipeline that we've established which will produce good things in the future. Thank you very much.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2021 1stdibs.Com Inc Earnings Call

Request a DemoDemo

DIBS

1Stdibs.Com

Earnings