Q1 2025 1stdibs.Com Inc Earnings Call
Speaker Change: Thank you for standing by and welcome to the 1st stibs 1st quarter, 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you will press star one and your touch don't phone, and to rebuild your question, please press star one again.
Speaker Change: Good morning and welcome to 1st stibs earnings call for the quarter ended March 31st, 2025.
I'm Kevin LaBuz, Head of Invest Relations and Corporate Development.
Speaker Change: Joining me today are Chief Executive Officer David Rosenblatt and Chief Financial Officer Tom Etergino.
David Rosenblatt: David will provide an update on our business including our strategy and growth opportunities and Tom will review the first quarter financial results and second quarter outlook.
David Rosenblatt: This call will be available via webcast on our investor relations website at investors.firstibs.com.
David Rosenblatt: Before we begin, please keep in mind that our remarks include four of the
Including, but not limited to.
State Missing Regarding Guidance and Future Financial Performance [inaudible]
Market Demand.
Growth Prospects.
Business plans.
Strategic initiative.
Business and economic trends, including e-commerce growth rates.
International opportunities and competitive position.
David Rosenblatt: Our actual results made different materially from those expressed or implied in these four looking statements as a result of risk-and-on-certainties.
including those described in our SEC filing.
David Rosenblatt: Any forward-looking statements that we make on this call are based on our beliefs and assumptions as of today. And we just claim any obligation to update them except to the extent required by law.
David Rosenblatt: Additionally, during the call, we'll present both GAP and non-GAAP financial measures.
David Rosenblatt: A reconciliation of gap to non-GAAP measures is included in today's earnings press release.
David Rosenblatt: Which you can find on our Invest Relations website, along with the replay of this call.
David Rosenblatt: Lastly, please note that all growth comparisons are on a year-of-year basis unless otherwise noted.
Speaker Change: I will now turn the call over to our CEO , David Rosenblatt.
David?
David Rosenblatt: Thanks, Kevin. Good morning, and thank you for joining us today.
Speaker Change: The first quarter was marked by solid execution and steady market share gains.
Speaker Change: GMV and Revenue exceeded the midpoint of guidance and adjusted EBDA margins exceeded the high end. Our product-led growth strategy is delivering a better buyer and seller experience, driving out performance against our end markets.
Speaker Change: While recent developments have made the landscape more dynamic and less predictable, our focus remains the same, executing on initiatives that are under our control to drive GMV and revenue, improve margins, and gain market share.
Speaker Change: Evolving trade policies and their broader macroeconomic effects have created a tougher demand backdrop for luxury home discretionary spending, impacting results.
We are relatively well positioned for the new tariff regime.
Speaker Change: In 2024, 50% of our GMV was from transactions between US sellers and US buyers, and roughly 30% of GMV was from EU or UK sellers to US buyers.
Speaker Change: In addition, U.S. buyer exposure to China, Canada, and Mexico is less than 1.5% of total GMV and supply exposure to other Asian markets is virtually mill.
Speaker Change: Additionally, we have a highly fragmented and diversified supply base with approximately 60% of our listings in the U.S. This means that there is often a local substitute on the marketplace for any imported product.
Speaker Change: Additionally, we don't manufacture or hold inventory, because most of our listings are secondary, they are shielded from potential increases in raw material costs.
Speaker Change: However, we expect secondary effects to impact our business. These include a negative wolf effect and dampened appetite for discretionary purchases in addition to protracted softness in the housing market. This macro uncertainty creates a range of potential outcomes.
Speaker Change: Turning the first quarter results, we kicked off 2025 by building on the progress of 2024, with tighter focus and accelerated product velocity driving ongoing conversion improvements, while maintaining expense discipline.
Speaker Change: In addition, we continue to gain market share, grow GMZ, and expand our active buyer base.
Speaker Change: This is happening against the backdrop of prolonged weakness in the housing market, per the national association of realtors, and a protracted downturn in our end markets, per syndicated credit card data.
Increasing conversion remains our operational priority and highest leverage activity.
Speaker Change: The first quarter was the sixth consecutive period of year-over-year conversion rate growth. Once again, conversion improved for both new and returning buyers.
Speaker Change: At the top of the funnel, we made product discovery more intuitive and efficient. These changes are helping users better navigate our categories and connect with relevant items faster, which in turn supports improved engagement and conversion.
Speaker Change: In the middle of the funnel, we amplified trust signals by more prominently displaying seller standing on product display pages, clearly distinguishing our top tier sellers.
Speaker Change: The results suggested that reinforcing seller standing helps build buyer confidence and trust earlier in the purchase process.
Speaker Change: Indeed platinum seller, our highest ranking saw the most significant conversion uplift.
Speaker Change: At the bottom of the funnel, we simplified checkout design, resulting in a smoother user experience and higher checkout completion rates.
Speaker Change: These wins and many others contributed to our ongoing conversion improvements our conversion rate in the first quarter. It was over 10% higher versus the first quarter of 2023.
Speaker Change: Turning to supply as we navigate through this period of uncertainty we are becoming more important to sellers.
Speaker Change: Our 2025 seller sentiment survey showed that first dibs is now the primary sales channel for our sellers, surpassing their own showrooms for the first time.
Speaker Change: This marks a meaningful shift from the past four years when showrooms consistently ranked first it also reflects the progress we've made and deepening seller engagement and delivering value.
Speaker Change: Consistent with recent quarters, we saw steady listings growth and ended the quarter with over $1 8 million listings.
Speaker Change: 5%.
Speaker Change: Unique seller count remains volatile due to subscription pricing optimizations, we ended the quarter with approximately 5900 unique sellers down 23% year over year, but flat sequentially.
Speaker Change: Similar to the past few quarters churn was elevated due to the retirement of our central solar program and pricing changes in the fourth quarter of 2024.
Speaker Change: In total the churn cohort accounted for less than 50 basis points of <unk> over the trailing 12 months and approximately 50 basis points of total listings.
Speaker Change: Looking ahead, we expect churn to normalize in the second quarter of 2025 and to see unique seller growth on a sequential basis in the second half of the year. Additionally, we expect continued listings growth through 2025.
Speaker Change: First quarter results demonstrate our ability to execute even amid rising uncertainty we delivered in line or better performance strengthened our market position and made progress on our product roadmap.
Speaker Change: Thank you for your continued support I will now turn it over to Tom to review, our first quarter financial results and second quarter outlook.
Tom Etergino: Thanks, David.
Speaker Change: Our first quarter results all met or exceeded guidance. This performance was fueled by ongoing conversion improvements higher average order value and disciplined expense management.
Speaker Change: <unk> was $94 $7 million up 3% outperforming our end markets, which continue to contract lapping a leap year was an approximately one percentage point headwind to <unk> growth.
Speaker Change: On a sequential basis GMP growth rates decelerated due to softening traffic and moderating conversion improvements, partially offset by higher average order value growth.
Speaker Change: On platform average order value of nearly $2600 and median order value of approximately $250 were both up 4%.
Speaker Change: <unk> growth strengthened sequentially driven by a mix shift away from orders under $1000. In total these accounted for approximately 44% of total orders in the first quarter down from 46% a year ago.
Speaker Change: Going deeper or just under $1000 decreased 5% year over year, while orders over $1000 grew 4%.
Speaker Change: There is no other digital marketplace, and our scale, which has the buyer and seller trust to transact at our price points across multiple verticals, we're able to deliver qualified buyers at prices ranging from under $100 to over $1 million.
Speaker Change: Returning to funnel trends traffic softened slightly with improvements to organic traffic being offset by slower paid traffic growth.
Speaker Change: We ended the quarter with over 70% of traffic from organic sources.
Speaker Change: Conversion gains moderated versus the fourth quarter, but remained healthy conversion rates have now increased year over year for six straight quarters. Additionally, both new and returning conversion increased.
Speaker Change: Returning to GMP consumer JMP grew mid single digits, while <unk> was flat.
Speaker Change: <unk> increased for all verticals, except for new <unk> custom furniture.
Speaker Change: Jewelry and fashion posted the strongest performance both growing double digits.
Speaker Change: We ended the quarter with approximately 64800 active buyers up 7% year over year and 1% sequentially. This was the fourth consecutive quarter of sequential growth on an absolute basis.
Speaker Change: On the supply side of the marketplace, we experienced steady listings growth ending the quarter with over $1 8 million listings up 5%.
We ended the quarter with approximately 5900 unique sellers down, 23%, but flat sequentially.
Speaker Change: As anticipated and seller churn was elevated due to subscription pricing optimizations. However, this had a de minimis impact on <unk> listings we.
Speaker Change: We expect churn to normalize in the second quarter, and just see listings growth throughout the year.
Speaker Change: Turning to the P&L net revenue was $22 $5 million up 2%.
Speaker Change: Transaction revenue, which is tied directly to <unk> was approximately 75% of total revenue with subscriptions, making up most of the remainder.
Speaker Change: Take rates were down approximately 30 basis points year over year, due primarily to a shift to higher value orders.
Speaker Change: Gross profit was $16 $2 million up 2%.
Speaker Change: Gross profit margins were 72% flat year over year.
Speaker Change: Sales and marketing expenses were $9 1 billion down 1% driven by lower head count related expenses due to reduction enforced in January partially offset by increases in performance marketing.
Speaker Change: Sales and marketing as a percentage of revenue was 40% down from 42% a year ago.
Speaker Change: Technology development expenses were $5 $6 million up 18% driven by higher head count related costs due to our annual merit increases awarded in March and some selective hiring.
Speaker Change: As a percentage of revenue technology development was 25% up from 21%.
General and administrative expenses were $7 million down 1% due to lower head count related costs lower tax expense and lower professional services spending partially offset by higher stock based compensation due to our annual merit increases awarded in March.
Speaker Change: As a percentage of revenue general and administrative expenses were 31% down from 32% a year ago.
Speaker Change: Lastly, provision for transaction losses were approximately $900000, 4% of revenue up from 2%.
Speaker Change: In the first quarter, we lapped a onetime benefit in a year ago period.
Speaker Change: Looking forward, we expect provision for transaction losses to remain approximately 4% of revenue.
Speaker Change: Total operating expenses were $22 $6 million up 6% year over year.
Speaker Change: Adjusted EBITDA loss was $1 $7 million compared to a loss of $1 $8 million last year adjusted.
Speaker Change: Adjusted EBITDA margin was a loss of 8% flat year over year.
Speaker Change: We remain committed to driving operational leverage by scaling efficiently with roughly 60% of our cost base tied to head count our asset light model enables us to grow revenue without proportional increases in hiring in 2025, we expect to keep head count approximately flat.
Speaker Change: Moving onto the balance sheet, we ended the quarter with a strong cash cash equivalents and short term investment position of $101 million down $2 $9 million sequentially, which includes repurchasing approximately $1 $8 million worth of shares.
Speaker Change: Since launching our first share buyback in August of 2023, we repurchased approximately $6 9 million shares for total of $33 $4 million.
Speaker Change: Turning to the outlook our guidance reflects quarter to date results and our forecast for the remainder of the period, we forecast second quarter GMP of $85 million to $92 million down 7% to up 1% net.
Speaker Change: Net revenue of $21 2 million to $22 $5 million down, 5% to up 1% and adjusted EBITDA margin loss of 14% to 10%.
Speaker Change: JMP guidance reflects steady traffic trends are softening of conversion in April versus March, which we expect to persist throughout the quarter and moderating <unk>.
Speaker Change: We believe these dynamics reflect increased consumer caution around highly discretionary purchases in the current environment.
Speaker Change: Our adjusted EBIT margin guidance reflects gross margins towards the lower end of our 71% to 73% range on a full quarter of higher head count related costs due to our annual merit increases in March and provision for transaction losses of approximately 4% of revenue in line with historical levels.
Speaker Change: In summary, first quarter results reflected balanced execution, we captured market share stayed disciplined on expenses and advanced our roadmap as.
Speaker Change: As we move through 2025, we remain committed to managing cost carefully and delivering on the key initiatives that position us for long term success.
Speaker Change: We remain mindful of the broader macroeconomic environment, we're confident in our strategy and our ability to deliver value to operational focus all the initiatives under our control.
Speaker Change: We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you.
Speaker Change: I will now turn the call over to the operator to take your questions.
Speaker Change: Thanks.
Ladies and gentlemen.
Speaker Change: We will conduct a question and answer with Samsung.
Speaker Change: The other question you May press Star Touchtone phone until a question. Please press star one again.
Speaker Change: Our first question comes from the line of Ralph <unk> from William Blair. Please go ahead.
Ralph: Good morning, Thanks for taking the question just on the organic traffic I think you call it around 70% or so Dave you talked about conversion gains.
Ralph: I think six straight quarters, but sort of moderating lately, maybe just talk about your ability to keep driving conversion.
Ralph: How should we think about that 70% of our organic traffic right. It's really.
Ralph: Obviously it was.
Ralph: What are the thoughts about that going forward.
Ralph: Thanks, Ralph so in order of the funnel starting with traffic we.
Ralph: Organic traffic declined for over a year.
Ralph: And so we were happy actually that in Q1, we were able to restore it to growth.
Ralph: Thats really all product and engineering, driven and we expect to continue that growth for the balance of the year.
Ralph: In terms of conversion.
Ralph: Think sort of stepping back more broadly Q1 was relatively stable quarter for the business in all respects, we saw a pretty significant drop off in conversion as we as we said.
Ralph: From an year over year terms from a from March to April.
Ralph: Traffic remains stable.
Ralph: And a little bit, but it was still a positive it really all came from conversion.
Ralph: And if you look at it on a vertical basis. It also all came from consumer furniture, so trade.
Ralph: It was healthy in the month.
Ralph: And the other vertical is mostly fashion and jewelry also grew in the month.
Ralph: So it really is isolated to a drop off in conversion and primarily from the consumer furniture business.
Ralph: We our approach to it is we feel like we're still focused on the right things that conversion change as a result of a change in the macros.
Ralph: And we're going to continue to them again stay focused on the long term value drivers in the business, which we've made as you noted very significant progress on.
Ralph: For the balance of the year.
Ralph: And then just one more from me I know you talked about churn.
Ralph: Normalizing in Q2 is that just from lapping some of the seller programs any more context, you can add there. Thank you.
Ralph: Yes, exactly so listings is what we really optimize the business for and that grew 5% in the first quarter and Thats on a course to continue to grow.
Ralph: In terms of churn we.
Ralph: We are now past our teams in the subscription pricing plan.
Ralph: And we've seen that returned to normalized levels.
Ralph: And we're also on pace.
Ralph: Continue to add new sellers on historical normalized levels as well.
Speaker Change: Great. Thanks, David.
Ralph: Okay.
Speaker Change: Thank you again should you have a question. Please press star followed by the number one.
Speaker Change: Our next question comes from the line of Mark Mahaney from Evercore ISI. Please go ahead.
Mark Mahaney: Hey, I just wanted to ask about active buyers you've had a couple of quarters now where you've had solid growth in <unk>.
Mark Mahaney: Active buyers it talked about it there are new sources of these buyers and how to think about continued growth proactive buyers through the.
Mark Mahaney: Through the rest of the year and going forward. Thank you.
Mark Mahaney: Thanks, Mark so in terms of sources of active buyers no I mean, we are improving organic as I said.
Mark Mahaney: But there hasn't been a massive change in the composition of our traffic.
Mark Mahaney: Pay did soften pay traffic soften in Q1.
Mark Mahaney: But again beyond that no real change in I'm, sorry, I missed the second question.
Speaker Change: But just how do we think about the growth in active buyers and then just because I look at the trends over the last two years, where there was the active buyer. The net ads were kind of flattish to even negative but that seems to have turned in the last three quarters and you've had three quarters in a row now.
Mark Mahaney: Nice trends in active buyer net ads.
Speaker Change: So I'm just.
Is that a trend thats reasonably sustainable going forwards.
Speaker Change: So active buyer of the change in active buyers as a direct result of changes in conversion, which of course is our number one focus so.
Speaker Change: It's our ability to continue to grow active buyers will be a function of what happens to that conversion conversion again, we saw a pretty significant change in April versus March.
Speaker Change: Completely macro driven I mean, you can you can trace it to changes in the macroeconomic environment.
Speaker Change: So I think we were going to continue to do the same things that we've done to get us to this point.
Speaker Change: But also remain vigilant and see how the macro environment changes.
Speaker Change: Okay. Thank you very much David.
Speaker Change: Thank you our last question comes from the line of Nick Jones from citizens. Please go ahead.
Speaker Change: Hi, This is Luke on for Nick Thanks for taking our questions.
Speaker Change: First you pointed to market share gains in the quarter I was wondering if you could just provide a bit more color there and how you sort of size that up thanks.
Speaker Change: Sure. So the way we measure market share as we look at our own <unk> changed versus syndicated syndicated credit card data for both online furniture and the luxury furniture market.
Speaker Change: And on both bases, we did grow market share.
Speaker Change: So and Thats been the case for I think now five quarters in a row.
Speaker Change: <unk> silver in the first quarter of 'twenty four.
Speaker Change: So again, it's a.
Speaker Change: Product, we believe of what has gotten us here and we're not changing our strategy in terms of product development.
Speaker Change: Great and then maybe just a follow up.
Speaker Change: For the ml pricing models can you just provide a bit more color there on what youre seeing so far in the progress there. Thank you.
Speaker Change: Sure. So we've now rolled out as of Q1, we've now rolled out our ml pricing models to all categories and general availability. So we're through with our first round of testing.
Speaker Change: What we've seen in terms of seller adoption, which is in the first instance, what we're measuring is that for items priced below $9000 adore.
Speaker Change: Adoption has been extremely high.
Speaker Change: Over 90%.
Speaker Change: Four items priced above $9000 adoption has been relatively low.
Speaker Change: And we think Thats a result of the fact that the higher the price point the fewer data points that are both in the market and just in terms of our own experience and so it's harder to build models for to predict pricing on items.
Speaker Change: That have less throughput that have less volume.
Speaker Change: <unk> to work on it like all models, they get a little better each month and each quarter and we're also applying machine learning to calculating shipping prices for items and routes, which historically, we have not been able to in advance to in order to pre quote in advance of an order.
Speaker Change: And the result of that should be in.
Speaker Change: Insignificant increase and our what we call pre quote coverage. So the percent of items that have a pre quote and that pre quote coverage is.
Speaker Change: Located with higher conversion. So that's sort of the next frontier in terms of ml and then the last priority that we're working on in terms of ml is developing a an MLR based customer service agent.
Speaker Change: I appreciate it thank you.
Speaker Change: Thank you this concludes our <unk>.
Speaker Change: And answer session. Thank you for joining today you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.