Q2 2022 Poshmark Inc Earnings Call
Sellers.
Our community of highly engaged and loyal users as our competitive advantage and by serving and supporting them, we drove profitability, even as we cut down marketing in the first half of 2020.
As we mentioned on our last earnings call, we're focused on making <unk>. The number one destination for sellers by empowering them with the tools and support to grow their businesses and making our market base. The most trusted destination for buyers now.
Now, let's discuss our second quarter results. We're pleased to report that our second quarter performance exceeded our initial expectations due to our strong focus on execution.
We reported a strong quarter, despite a tough consumer environment growing revenues, 9% to $89 1 million.
Meeting our expectations for the quarter.
Quarter, GMB grew 8% to $483 5 billion.
While on a two year basis, <unk> grew by 34% and revenues grew by 33%.
Our growth is driven by <unk> approach to making buying and selling fashion simple fun and sustainable our users continue to choose Bosch Mark as a top destination for selling items from their closets and shopping the closets of others. This combined with our boutique sellers continues to bank Bosch Mark a top destination for fashion.
As demonstrated by 14% TTM active buyer growth to a record $8 million in the second quarter.
We continue to evolve our marketing strategy to navigate the impact of Apple privacy changes and a volatile macro environment, we're drawing attention to Bosch Mark as a sustainable fashion destination, particularly for style and value conscious shoppers, who are feeling more constrained due to inflation and as a place to make money from your closet.
Our April marketing campaign focused on Earth month, and storytelling, highlighting secondhand styles and vintage trends this resonated, particularly well with our Gen Z and millennial customers, who are shopping vintage in secondhand for eco friendly purposes and the statue.
During the second quarter sharper scheme to Bosch, Mark for the fashion needs and to discover the latest trends while saving money.
Our marketplace continues to reflect the lives interest and changing needs of consumers during the second quarter Lugging travel bags were up 50% YY as shoppers embrace vacation in business travel again.
As people return to work sharper start, earning the resale in the hunt for formal workwear to make their budgets stretch further during the second quarter Blazers and suit jackets grew 61% and sales of <unk> were up 45% year over year, the evolution of business casual into business comfort is driving a huge spike in sales.
For comfort sneaker brands like on running and wholesale.
Orders for Birkenstocks sandals, and flip flops were up 30% YY during the quarter Saar affair genes in Abercrombie straight leg jeans were up 97% and 64% Y O Y demonstrating that we continue to be part of the seismic shift in fashion silhouette.
Silhouette changes to elastic waist.
<unk> and fed bottoms.
The power of Bosch marks community mix, selling and shopping simple social interactions combined with our marketplace platform, which provides all the tools are seller needs make selling in shopping simple and fun.
Sellers and shoppers and their engagements with their marketplace drove 70% year over year growth in social interactions to a record $57 5 billion during DPM Q2, 'twenty to <unk>.
Social interaction screens from duration to mikes comments, our offers on the platform. This social engagement drives community connection and ultimately conversion is more than 80% of all purchases are preceded by a social interaction such as alike comment our offer.
<unk>, social experience and inclusive community as a key differentiator as experienced sellers, who are often bosch ambassadors voluntarily reach out to help new sellers and provide mentorship.
<unk> sellers continue to not only share their own inventory, but curate inventory from the closets of other sellers.
After two years of Lockdowns and virtual events, we have been overjoyed to return to in person community events, which are an important part of helping our sellers grow their businesses. This important growth activation engine introduces the Bosch Mark community to new sellers fosters loyalty in connection of the microeconomic level and Roes are.
Highly engaged user base. These events create one of a kind opportunity for our community to come together to socialize and share success stories and advice on how to build their businesses on <unk> Mark.
We held 87 of these events in the second quarter up from 35% in the first quarter attracting community members from across the U S.
We're excited to host <unk> first our fashion and Entrepreneurship conference and the biggest event of the year at the end of September .
This two day event focuses on educating attendees about merchandising.
<unk> planning branding and data to help sellers grow their businesses on <unk> Mark.
As our first Quad first back in person in three years, our community is ecstatic to once again have the opportunity to connect with one another and gain valuable expertise student fees, there sales and have an immersive experience.
Looking at the second half of the year, we continue to focus on growing our core fashion categories by continuing product innovation to enhance both the seller and buyer experience fashion related categories apparel shoes bags and accessories, which is the core of Bosch mark drives more than 90% of our GMB and we remain.
On strengthening this quarter in 2022 to increase our wallet share gains with consumers and drive market share gains in <unk> growth.
Higher contribution from premium price product continues to be one of the factors that drove year over year.
Growth during the second quarter of 2022.
We remain committed to growing our market share in premium priced products and have started testing various applications of the technology from our swayed one acquisition to drive innovation in our authentication processes, we intend to expand our authentication services to price points below 500 by the end of the year.
We had a very seller centric marketplace and seller success liquidities, where everything starts at Bosch Mark. Thus, we remain focused on product innovation to give sellers better ways to market merchandise and sell their listings in new ways for buyers to discover trends and engage with our marketplace to drive conversion.
We continue to deliver innovative and easy to use solutions that contribute to the long term growth of our sellers by helping sellers of all sizes easily manage their Bosch, Mark closets and connect with customers in new ways to drive sales in May the updated my shoppers our CRM that we launched in October 2021, which enables sellers to commute.
Kate with shoppers, who are engaged with their closets and make offers to group of potential buyers. We continue to make these powerful tools available to all of our sellers with the focus on making selling simple and accessible to everyone from a seller with a few items in their closet large resellers with thousands of items. This new version has seen.
Higher adoption by sellers and resulted in an increase in seller offers.
In June <unk>.
Produced closet, QR codes, making us easy to scan shared view and engagement centers' closets with a quick scan of your phone.
Which will be particularly useful with the return of in person events, making it simple for sellers to market their closet to buyers and increase their number of followers.
Burrstone closet QR codes can be used as an identified on seller social media accounts printed on flight and business cards are included in the packages they ship to buyers.
We continue to be excited by the opportunity for Grand Plaza to contribute to the growth of our core fashion categories.
Small brand Plaza <unk> during the second quarter of 2020 to one and a half X compared to the first quarter of 2022.
We continue to have a strong pipeline of interested brands and retailers.
During the second quarter, we launched our integration with generally adviser another milestone in making it easy for high volume sellers to sell at Bosch, Mark providing them with the ability to integrate our market base to synchronize product inventory and order information with other e-commerce platforms.
As a style destination, where shoppers coming to discover following sharp product innovation enables us to guide the treasure Hunt for fashion, we continue to iterate our shop by trends feature and introduced <unk> guidelines in April . This feature allows sellers and buyers to see more details about pending products down to color brand in <unk>.
Words, it provides sellers with more ways to strengthen their trend related listings and drive conversion.
At the end of June we added a new buyer protection banner to help drive trust and confidence with the new buyers <unk> offers an amazing protection policy to all buyers, but not all by snow about this policy, which includes refunding orders that do not match. The listing description initial test of this new feature have shown an increase in buy now orders.
First time buyers, new use orders and use our GMB.
Looking beyond the core we view international expansion as a strategic long term growth opportunity in May we celebrated <unk> Canada's three year anniversary over the last two years, we have built and grown our community of over 4 million users across all provinces and territories in Canada.
<unk> secondhand lovers and entrepreneurial sellers have listed close to $1 billion worth of inventory of the <unk>.
Over $2 6 billion total search social interactions have been made on <unk>, Canada since launch and our Canadian community has attended over hundred virtual and in person events.
During the second quarter, we rolled out <unk> as a new payment service provider in Canada.
<unk> enabled us to process payments locally in Canada, instead of cross border to the U S, which saves and guard network cross border costs.
For the second half of 2022, the majority of our international investment continues to be focused on driving growth through advertising.
Munity developing and shipping innovation to grow our seller base.
In conclusion, our focus remains becoming the world's leading social marketplace and the number one destination for sellers around the world. We're focused on what we can control and continue to innovate for the future. So our sellers can succeed.
By tapping into our centers entrepreneurial spirit, we are positioning ourselves to emerge from any potential economic downturn stronger than ever.
Empower millions of sellers to easily turn their projects into shop, and connect with customers, resulting in a flexible friction less marketplace thats ready to meet the ever changing needs of shoppers.
We help Bosch Mark set us control of their destiny through good and challenging economic times by providing them a reliable and supportive lifeline to help them pay their bills build emergency funds cover college costs and go after their dreams, our competitive advantage is our loyal community of fashion lovers, who.
We live in a new way of shopping one that is simple social fund and sustainable.
Now I'd like to turn it over to Rodrigo to dive deeper into the financials.
Thank you Manish.
We mission on our last call, we overcame tough comps in April .
The strongest start to the quarter.
In the later half of the quarter, we experienced anticipated seasonality as consumers shifted their attention from cleaning out the closet to preparing for the spring and summer vacations, which was more pronounced in June .
Despite this seasonality headwinds from inflation and the slowdown in consumer spending we still beat our revenue guidance range of $86 million to $88 million.
In Q2, 2022, GMP grew 8% to $400 and ADT.
$5 million up from $449 6 million in the second quarter of 2021 or 34% growth on a two year basis. Despite the tough comparison.
Net revenues grew 9% to $89 1 million up from $81 6 billion in the second quarter of 2021.
Or 33% growth on a two year basis.
This result was ahead of our guidance of 86 to 88 million driven in part by a better than expected they create and beef.
The 14% growth in trailing 12 month active buyers to a record 8 million upfront seven needed in the second quarter of 2021.
On a two year basis trailing 12 month active buyers grew 32% things through our continued marketing investments and product innovation.
Our take rate in the second quarter was 18, 4% up slightly from 18, 2% from last year and ahead of our expectations for flat year over year due to a better than expected cancellation rates.
That's more than offset the pressure from continued mixed shift towards orders greater than $15.
Mix shift continues to be a decrease headwind as orders less than $15 have a higher take rate due to the flat fee of $2 95.
Cost of revenues of $15 million in the second quarter was 68% of revenues an increase of 17% from the second quarter of 2021.
Adjusted gross margin was 83, 2% of revenues.
Second quarter down from 84, 4% from the second quarter of 2021.
Due to higher hosting costs and the lapping of the nonrecurring credits in transaction.
<unk> processing fees, which was a 40 basis points benefit.
The second quarter of.
2021.
Marketing expenses, excluding stock based compensation or SBC.
$42 6 million in the second quarter was 47, 8% of revenues up from 38, 6% in the second quarter of 2021.
This result is in line with our guidance of high Forty's.
Market increased 35% from $31 5 million in the second quarter of 2021 due.
Due to higher CPU more.
In person events in community building initiatives build Cpus have improved slightly from near peak in.
January .
We remain supportive of our continued investments in marketing to introduce more users to our social experience, which promotes has shrunk cohort retention and loyalty over time.
Moving to other operating expenses ops and support excluding SBC.
$14 6 million in the second quarter.
64% of revenues, which is up from 14, 9% in the second quarter of 2021.
It is slightly better than expected due to lower cancellation rates and has low dummy hering.
In certain areas.
R&D, excluding SBC of $12 8 million in the second quarter was 14, 3% of revenues.
Upfront 11, 5% of revenues in the second quarter of 2021.
This was due to planned increase in hiring as we have previously discussed.
As we continue to invest additional resources across a number office with digital initiatives.
<unk> was slightly better than expected.
Delays and vendor spending and a slowdown in hiring base.
G&A, excluding SBC of $14 million in the second quarter was 15, 7% of revenues up from 11, 4% in the second quarter of 2021, primarily due to the ongoing costs of being a public company.
Stock based compensation was $12 1 million in the second quarter up from $8 1 million in the second quarter of 2021.
Adjusted EBITDA, which excludes SBC was negative $9 8 million down from $6 5 million in the second quarter of 2021.
Adjusted EBITDA margins were negative, 11% compared to 8% margin in the second quarter of 2021.
Compared to last year. The decrease in profitability was primarily driven by investments in marketing R&D and G&A.
However, it's important to note that these numbers were at the midpoint of our guidance of negative $9 million to $11 million.
We'll continue to focus on balancing marketing efficiency and investing for future growth.
Operating loss, excluding SBC was negative $10 8 million in the second quarter with operating margins of negative 12, 2%.
That compares to $5 7 billion with margins of 7% in the second quarter of 2021.
Net loss to common shareholders was negative $22 9 million in the second quarter.
Bear to negative $2 5 million in the second quarter of 2021.
Cash cash equivalents were $581 $2 million at the end of the second quarter or about $7 41, six in cash per share.
Moving to the cash flow statement for the six months ended in June 32022 free.
Free cash flow was negative three 5 million.
225 million.
For the six months ended June 32021.
We are focused on driving growth and continue to optimize our investments in product innovation and marketing to drive <unk> growth for the future.
We remain confident that our asset light and high gross margin business model positions us to grow market share.
We help our community get more value for their money.
While meeting their wardrobe needs.
<unk> 10, more in person events and travel and.
We are a relied upon destination for consumers, who want to supplement their income by unlocking the value in their closets.
However, the current macro environment and the unpredictability of consumer spending behavior in the face of inflation leads us to be cautious in our outlook for the third quarter.
We also continue to navigate changes in the digital advertising landscape and expect IBSA to maintain pressure on CPU rates in the second half of 2022.
Given the micro environment that could impact.
Our top line.
We have begun evaluating our cost structure in the third quarter and expect to begin rationalizing our spending which is reflected in our outlook.
Now on to guidance.
Looking to the third quarter, we saw typical seasonality return in July as consumers focused on some of vacations and remain cautious that inflation may continue to pressure consumer spending.
As such we expect third quarter revenues of $85 million to $87 million.
Resulting in the growth up 7% to 9%.
On a two year basis growth is expected to be 24% to 27%.
We expect our third quarter take rate to be slightly higher year over year due to lower cancellation rates.
We are focused on driving growth, while managing our cost structure and expect negative adjusted EBITDA of $9 million to $11 million in the third quarter as we continue to invest in R&D to drive product innovation.
<unk> to build the infrastructure necessary to evolve as a publicly traded company in marketing to grow our community of users.
We expect adjusted gross margin to be down slightly from Q2 2022.
Due to higher hosting costs in.
As we lap a 120 basis points of a nonrecurring credit in transaction payment processing fees during the third quarter of 2021.
Ops support excluding SBC in the third quarter is expected to be 18% of revenues as we continue to invest in customer support and authentication services.
R&D, excluding SBC in the third quarter is expected to be 16% of revenues as we continued to increase our investment in product innovation to give sellers better ways to market.
You guys and so their listings in new ways for buyers to discover trends and engaging in our marketplace to drive the conversion.
G&A, excluding SBC in the third quarter is expected to be 19% of revenues.
Should the higher cost of being a public company and as we build out the finance accounting and legal teams.
We continue to expect marketing, excluding SBC as a percentage of revenues to be in the high <unk> in the third quarter in fourth quarter as we invest in our brand.
Diverse firearm marketing channels and address higher costs and digital advertising.
We have proved that our platform is the key our cohorts delivered net positive GNP dollars retention over time.
With high gross margins and a strong balance sheet.
We have the ability in conviction to continue to invest in marketing to accelerate to GMB.
Growth for the future.
In the near term these investments will enable us to build Oracle media of sailors and grow active buyers, which will put us in a stronger position in the long run.
In closing.
Consistent to what we have shared in our last earnings call.
While we expect that macroeconomic factors could continue to impact consumer behavior. In 2022, we are focused on our core business and execution.
<unk> first continuing to enhance our product experience to help our resellers grow their businesses second continuing to build our brand with a global consumer and third investing in marketing talent.
<unk> operating mechanisms to improve execution and optimize long term growth.
I'd like to leave you with two final thoughts first we haven't started the year, putting more focus on our core business and improving our execution mechanisms.
As we plan for the second half, we have identified ways to deliver more with less and doing the third quarter, we have begun to focus on cost savings.
Appropriate as we previously mentioned.
We will continue to explore these cost savings opportunities through the second half of 2022.
Second.
I'd like to remind you of these trains uniqueness in the ability of our business.
Like some of our peers. They have seen recent transaction volume retracting to pre pandemic levels.
Our business remains strong growing.
And we continue to add users to our risk Teekay platform.
We are not seen big swings or volatility users in GMT as some of the pure e-commerce peers are seeing.
We believe our stability stems from.
The social aspects of our business that continue to attract and retain users buyers and sellers, which in turn drives high engagement and stickiness of our cohorts.
That fact, coupled with our asset light model and strong balance sheet reaffirms our conviction to continue to invest in product innovation and marketing because our business model is resilient for the current environment in.
And well positioned to benefit from secular trends in resale sustainable commerce and consumers looking for value in unique looks.
You and I will now turn the call over to the operator, so we can take your questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Please limit questions to one well pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Laura Schneck with Morgan Stanley .
Great. Thank you.
The 70% increase in engagement year over year is obviously, an encouraging number I guess, what can you do to better convert that engagement to GMB or what levers do you think are potentially the most powerful and then just one quick follow up just in terms of the macro backdrop at the end in the third quarter Guide are you sort of assuming a stable macro macro backdrop relative to <unk>.
Hugh.
Or perhaps slightly wise thanks.
I'll take the first question Larry This is <unk>.
In terms of that conversion pieces of some of the core investments we are making on better search better feed are sort of the core pieces to convert this engagement, but also better tools. So some of the work we're doing with my shoppers lead sellers to be able to engage with these shoppers and convert them enacted.
Get them into final buyers, so that sort of.
The key pieces better sell better search better and ultimately more than borrowing seller tools that they can use to connect with their shoppers directly.
Let me have <unk> will give a little bit of a color on the quarter.
Yes look.
Question about macro environment, the weather that we saw.
Getting worse and not let me kind of step backing give you the thoughts on the Q3 guidance here.
So you see a GM via deceleration.
From.
Q3, as it relates to Q2.
Number one is because we have seen these seasonal year over year growth deceleration from Q2 into Q3 over the past three years and that started in 2019.
<unk> June GNP growth is low down from me.
And we saw a typical seasonality we attorney in July as consumers focused on summer vacations.
Number three we remain cautious that inflation may continue to pressure consumer spending.
Four we also continued to navigate changes in the digital advertising landscape as we expect idea Fay to maintain pressure on our revenue growth rates for the third and the fourth quarter like I said on the call.
And finally, when providing guidance.
As usual, we are more conservative than historical performance, given the current macroeconomic environment and circumstances.
And while our business offers great value proposition.
For the fashion, we believe that consumers are buying fashion as life returns to normalcy.
We are mindful that microeconomic challenges faced by the community.
Can't affect the community and we have a conservative.
Viewing our outlook.
Okay. Thank you.
Your next question comes from the line of Alexandra Staiger with Goldman Sachs.
Thanks for taking my question, maybe one follow up on your macro commentary here could you maybe share like what youre seeing across the different markets and GSE Youre operating in.
For the past few weeks and months in terms of like how your customers, but also your salaries engaging with the platform and then maybe second just on <unk> I was wondering if you can give us an update on your push to grow your pro seller base and what type of tools and services focused on.
To improve that selling experience thus far.
Thank you.
Sure. So what we are seeing in the United States is.
And then Canada as well as sort of returned back to I would say the comps are closer to 2019 pre COVID-19 that so we're seeing seasonality in.
Sure.
Inventory mix shift more to pre pandemic levels, and we've shared a little bit of that color.
In the commentary.
All are buying more back to school floor. It's people are buying more luggage for travel. So what we feel is that the world is slowly, but surely returning back to normal.
Fashion cycles are generally caused or sort of more turns of your projects. So thats sort of a high level picture that we're seeing but inflation and other things.
Make us cautious as we look into the future.
When we think a little bit about how do we grow our grow sellers a lot of the investment. We are doing is in scaling and connection. So if you think apache market of social selling platform a lot of ways I've set ourselves is by curation and connection. So we've invested in our bulk sharing tools to make it very easy.
Sure Avi.
Also continue to invest in our CRM or customer relationship driven all by shoppers, which allows.
One on one connection between the seller, but at scale and we've added an enhanced in stores by adding pre packaged list of customers, giving them easier way to connect with more people at the same time and allowing them to also create some programmatic rules that they can use the program into these tools.
And finally, we continue to look at new ways in which centers can reach their shoppers.
And continue to innovate on that front again, making that connection process that merchandising buses both faster, but also very efficient.
And overall I think the tools have been received very well.
The last piece I would emphasize is that the world is getting back to physical so we have also invested in our physical connections back with our sellers.
Started the horse now.
Smaller events, but larger events, we had one of our larger Bosch Party lives a couple of weeks back in L. A this is our first large scale events since the pandemic started actually really since 2019, and we have another one coming up in New York next week.
Setting.
The key pieces of our key members of our team to kind of be part of that and we're seeing a lot of our professional sellers and largest sellers come to these events and then lastly, our main conference call process is also going to be in person. This year in Houston towards the end of this quarter. So very excited about all of those departments to also help our gross of our computer actually.
I'd just add one thing since the question was also related to macro.
The same way that the 90 ish is emphasizing the back to normalcy and that was a drafting the seasonality in June and July we also see a stronger start of August .
Which means back to school and people and into your vacation is also reflecting in our initial.
<unk> numbers as we kind of look through the quarter.
Great. Thank you.
Your next question comes from the line of Oliver Chen with Cowen.
Yes.
Hi regarding the trends that Youre seeing in July would love to hear.
Volatility in how inflation enter playing there and also on marketing efficiency trends.
Yes look.
Let's talk about the inflation here.
Okay.
First.
Higher food prices higher food and gas prices could be a negative impact on the apparel spending overall.
However, I mean flashing Larry environment could benefit our marketplace, particularly for the more price sensitive consumer.
As they search for value and on the seller side, we offer consumers an easy any early way to monetize their closets and make extra cash potentially offset that next tank of gas. So we help benchmark sale is portrayed their own destiny in tough economic times.
And as always so, but we have also a pretty big portfolio here. So it's hard to specifically identify the impact of inflation in terms of whether our assortment is increasing the prices.
Or seeing the price increases because also over time, we see.
The increase in the average order value is custom.
Customers look for premium priced products. So it's hard to dissect the impact in call. It the specifics, but youll see trains in higher ELV.
Impacting our platform and you'll continue to see buyers and sellers going to Falcon III benchmark. So thats one.
In terms of marketing efficiency like I said, we remain cautious just because the idea was a step change to the entire industry Mark specifically to us He Apache Mark. So we will take through at least Q4 to kind of fully lap it.
But there is a positive sign stemming from.
When do we see Cpus right now compared to beer at January peak.
It shows that we have been starting to kind of stripping advanced some of the headwinds not fully and there was always a question whether we are ever going to come back should they prior levels from <unk>, but we have seen improvements on the marketing efficiency as we tried different channels such as TV creator.
And also as <unk> said, we also diverting some of the marketing spend to support the <unk> and the events such as.
<unk> fast and we think that there was a lot of value on the community to see each other back again in person.
Please measure the activity before and after and there is always.
Higher user engagement more sales that come out of it so from a marketing efficiency standpoint, we all growth improving.
Slightly between improving overtime.
Okay.
Thank you and best regards.
Your next question comes from the line of Trevor Young with Barclays.
Great. Thanks, Rodrigo back to your commentary about the incremental investment and balancing that versus trying to find cost savings.
Some of that savings just funding some of these new investments or should we expect that to flow through to EBITDA at some point maybe in the next year and then bigger picture, given where you stand with cash on hand, how important is it for you to get back to positive EBIT sometime next year versus leaning in on spend as maybe some peers are pulling back.
Yes look.
In terms of in terms of the EBITDA. So first in terms of the cost structure as we look at those savings here and there.
Right now we are using that to do two things to continue.
Our bass and investing in marketing, especially because we are running the business for him.
A long run standpoint, and we continue to support the marketing investments as long as our lifetime value continues to be very very.
Positive in which is the issue that we had with the <unk>.
Using marketing as a percentage of revenue was essentially on the tax side the cost of acquisition increase because at IBSA, but our cohorts continue to behave well. They continue to return the net positive Jim get dollar retention over time.
With that we are balanced on.
<unk>, let's say the decreasing profitability, but also committed to continuing to invest in marketing in like I said, we are committed to the high forties at least through.
The end of the year as we guided marketing Q3 and Q4.
And your second part of your question.
Just overall, given where you stand with cash on hand, how important is it to you to get back to positive EBITDA, maybe sometime next year versus continuing to lean in on spend like you said on marketing and other areas.
Yes, let's not talk about next year, but let's talk about the long term.
We are committed to run this business for profitability. There is no question about it.
But we are also on the mortgage company and we see tremendous opportunity in the market to acquire users because we know our platform is a sticky below that when users come.
Transact they engage we saw 57 billion.
Associate interactions there so we win a green to use this year, because we know that long term will return.
Debt on that investment.
So look we prove that we can be profitable.
A couple of quarters ago, we show that more than half of our spend is variable we can be profitable at any point right. Now we can count on the power of our balance sheet and you can continue to see the positive metrics.
On the market acquisition, so we think that.
At this moment building this company for the long run is more important and then we know that we can count with our balance sheet in any case and we know that we can be profitable at anytime you want.
Thank you.
Your next question comes from the line of Ralph <unk> with William Blair.
Good afternoon. Thanks for taking the question just on retention I know, it's something you've talked about historically is a growing focus maybe just sort of an update where you are in that process. How are those efforts been trending or how are you thinking about this opportunity and then I have a follow up.
Yeah.
Yeah.
Okay. So we are talking about retention.
We don't talk specifically on the quarter.
In terms of.
What is happening in the quarter. So we didn't disclose cohort performance on a quarterly basis for your base, but that said.
This is the unique thing about Porsche once we acquired oriented delivers that consistent net positive Jim get all over the nation.
And we continue to see that as we reported a full year. So we will be reported a full year in a couple of quarters and we expect that to continue.
Our cohorts continue to remain stable and we see strong engagement from our users which is another evidence when we see the 70% growth in social interactions.
There are 57 billion interactions may or so.
We continue to see it thats why we are continuing to invest in marketing because the lifetime value.
From our users is steel.
Return on on what we invest there.
Great and you kind of referenced the large buyer base on the call obviously, the $8 million TTM active buyers is that large base, maybe talk about the opportunity to reengage.
Customer base.
More specifically to grow wallet share with them, especially given the diversity of products and categories that you offer.
Yes, actually even stepping back a little bit if you look at we have.
80 million more than 80 million brands to users.
And in a couple of million active users. So in the 8 million active buyers that we've talked about.
So the way we think about it is we.
Target the inactive users.
As well and we believe that the cost to reactivate the user or to retain the user is cheaper than acquiring a new user.
As I said, we still consider ourselves as an emerging company, but now we're also starting to divert some of the marketing spend.
New user acquisition to retention.
And there are three areas that will be kind of a use for this re activation number one is promotions, we have incentives and giveaways for both buyers and sellers matures awareness.
We have broad based campaigns through television celebrities and influencers that generate traffics.
And in the engagements for new and existing users that interesting because they are one is actually go for both for new year's acquisition, but we see pretty good in terms of irritation and finally.
It is search we have re marketing campaigns through Google shopping.
Seo in paid search there.
Okay, great. Thanks Rodrigo.
Your next question comes from the line of Rick Patel with Raymond James.
Thank you good afternoon, and thanks for taking the question.
My question is on the outlook for EBITDA.
Our new guidance for the third quarter implies roughly the same amount of loss as the second quarter. Despite the revenue growth being.
Touch lower at the midpoint I guess as we think beyond the third quarter and I know youre not guiding the fourth quarter, specifically, but im hoping we can have color on the right way to think about things because your comparisons do get a bit tougher, but youre also getting more aggressive with cost control. So should we expect EBITDA pressure to be relatively contained as you exit the year.
Or is it reasonable to expect a different outcome.
Well like I said, we're not guiding beyond Q3, but let me kind of let me kind of.
How to think about it.
In Q3, we have just begun our expand the rationalization and as mentioned on the call. The Q3 guidance reflects those cost savings that we're contemplating but those are not impacting the full quarter given it takes time to implement.
But.
Given the macroeconomic environment, we are taking that cost shows lapses on the revenue guidance and that flows through the EBITDA. So like you say with slightly lower guidance on the revenue that kind of flows through.
Again, we are not guiding Q4.
But.
High level.
<unk> is not a bad idea just shoot.
Stick to a similar levels as Q3.
Thank you very much.
Your next question comes from the line of Ashley <unk> with Jefferies.
Hi, Thanks for taking our question.
But you are seeing on the power side wondering if we're seeing more people come to the platform as they look for ways to monetize our closet and given the weaker macro backdrop.
And then also any update on the India market.
Thanks.
Sure, Yes, the seller.
Engagement is definitely higher as we've gone into Q3, we're starting to see the seller starting to come back I think it's driven by two things certainly the inflation and people's desire to make money.
But I think it is also.
When you think about what.
What people are facing is that they actually have to rotate their process they have to sort of.
Start to refresh that wardrobe and in so many ways people are realizing that when theyre thinking thinking about.
The various dimensions of how they engage with fashion the answer comes back to their closet and so in many ways I think we're excited because we believe the future of fashion is giving a closet and that's super exciting to think about both on the seller and our shopper perspective.
Going back to India, I think we continue to see very good engagement numbers and India, both India and Australia, I think as the pandemic has receded, we're able to engage more with the community and start to extent that community development.
It is going to still take a little time to get the revenue development building happening, but the community development is starting to happen and some of the core underlying engagement metrics, we see very encouraging in both of those markets.
Great. Thanks, so much.
Your next question comes from the line of Ana <unk> with Needham <unk> Company.
Great. Thanks, so much.
Questions from you.
You guys mentioned a couple of time, taking a look at the expense structure can you talk about what specific buckets of opportunity that could entail and then secondly, just a question on take rate looking out longer term. What do you think is the right level there.
Expect that mix shift to about $15 purchase to continue to be a factor or are there initiatives in the business to help offset that thank you so much.
Let me just make a comment and I'll turn it over to Rodrigo to give more color.
The mantra that we're using is quite simple internally and it's to do less with more impact and it's really all of our prioritization choosing fewer projects that are either back focusing on the core is the approach. We are taking to how we are not just thinking about costs, but they're investments can be the most effective.
In the business with that let me government, but look yes, we have the theory things with higher impact.
We have slowed down hiring we have routine.
Being very judicious about contractor spend.
There are things that are important but they may not be reagent and then over here.
Organization is actually helping quite a lot in making sure that we are spending on their highest priority.
Fewer and more impactful claims.
And your question on the take rate.
We do expect the secular trend that we're seeing our business off.
Consumers moving to more premium priced products.
Mike.
The other thing is even though we cannot specifically call out.
But the impact of inflation, even if you do not see the value off your closet will increase and the value off a new pair of jeans ctrip by new who go higher which means at some point the market in the sale as we act. So I won't say over time, you should expect a slightly pressure on take rates just because.
We should expect to see more orders are higher than $15 as opposed to the lower.
Lower than $15 and as a reminder, below $15. We have the 2095 <unk> flat fee, that's why the shift to or this higher than 15 borrowers who continue to be a.
Slightly pressured drug take rate over time.
All right very helpful. Thank you so much.
Thank you.
Again, if you wish to ask a question. Please press Star then the number one on your telephone keypad.
Please limit questions to one.
Your next question comes from the line of Tom <unk> with Wedbush Securities.
Hi, Good afternoon, guys. Thanks, Thanks for taking my question.
Rodrigo just at a high level what needs to happen to get this business profitable again, and I know you say that you can do it.
You can be profitable again anytime you want but like what is the scenario, where like you would be willing to manage the company to profitability again is it when the <unk>.
Our revenue base of the user base grows to a certain level is it dependent on.
Leverage of the marketing expense.
Trying to wrap my head around how.
The company becomes profitable again.
Yes.
As your question was high level I'm going to give you a high level answer.
<unk> is.
Our focus on the core.
Our focus on growing our user base, which translate to a higher seller base, which translates to a higher buyer base. When you do that at scale, that's kind of how we.
We're going against the best back to profitability obsolete, we couldnt anticipate it we could be influenced that sooner. It depends on again the large majority of our investment is variable, but it comes back to the focus on the core that we have started this year.
And the mantra that from initial talking about fewer things with high impact and number three like I said before some of the investments youre, making in infrastructure systems procedures and operating mechanisms should drive a high execution.
Got it thank you very much.
Your next question comes from the line of Nick Jones with JMP Securities.
Great. Thanks for taking my questions I guess, that's one on the expanding authentication below $500 by year end I mean, how low will you take authentication and I guess, what are the puts and takes as to kind of the incremental cost too.
What the value of the product is if it's a handbag that's extremely use does it still need to be authenticated I guess can you just expand a little bit on moving below that $500 price point.
So the strategy, we want to take is to really empower the buyers and sellers to participate in it and.
We haven't ruled out the possibility of maybe pricing it slightly but.
For lower price points. So so that's the strategy. We are looking at we'll have more to talk about but ultimately we feel that it is something that both buyers and sellers will feel empowered as we launched it so the big can use it based on their needs and not just sort of what we provide today, which is at $500 and higher that's a pre authenticate.
<unk>.
And the technology that we acquired it so it allows us to have that leverage overtime. So so thats sort of the high level thinking about details to be fine tune as we get to thinking about the go to market strategy there.
Thanks.
Your next question comes from the line of David Bellinger, with MK and partners.
Yes.
Hey, Thanks for taking my questions two quick ones just.
First following up on the cost controls.
Are those aimed more at call it longer term initiatives, then might not be significant revenue generators today or can we expect to see some type of slower near term revenue in <unk> just given these expense pullbacks in the related follow through and then secondly, just any comments you can make on the traction youre seeing in some of the new new.
Categories like patent electronics now that those have been on the platform for some time. Thank you.
Okay.
Look.
The cost rationalization there.
Right now.
It should not impact revenue because we are focusing on things that can be deeper.
And if there is an impact the impact should be demanded.
And then that has been baked in our Q3 revenue guidance. So again, we are being very judicious here and we can do that because again most of our spend is variable.
And number two we have access to a very strong balance sheet. So we can be very thoughtful about.
How and when we review our cost structure and again, we are going to foresee any.
And many issue I'll, let you think.
On the personal electronics, we're super encouraged by the contribution both are still new launched just last year.
And just remind our noncore categories represent only 7% of our GMB, but they continue to grow faster than our core fashion categories.
The business.
At this time there are no further questions.
I'll turn the call over to management for closing remarks.
Thank you everyone for joining us and we'll see you next quarter.
Have a wonderful rest of the summer.
Thank you for participating you may now disconnect Goodbye.
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