Q2 2025 1stDibs Inc Earnings Call
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I would now like to turn the conference over to head of Investor Relations and corporate development, Kevin <unk> you may begin.
Good morning, and welcome to first Dibs earnings call for the quarter ended June 32025.
I'm, Kevin Labov head of Investor Relations and corporate development.
Joining me today are CEO, David Rosenblatt, and CFO Tom <unk>.
David will provide an update on our business, including our strategy and growth opportunities.
And Tom 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.
<unk> Dot com.
Before we begin.
Please keep in mind that our remarks include forward looking statements.
Including but not limited to <unk>.
Statements regarding guidance and future financial performance.
Market demand.
Growth prospects.
Business plans.
Strategic initiatives.
<unk> and economic trends.
<unk> e-commerce growth rates and.
And our potential responses to them.
And competitive position.
Our actual results may differ materially from those expressed or implied in these forward looking statements as a result of risks and uncertainties.
Including those described in our SEC filings.
Any forward looking statements that we make on this call are based on our beliefs and assumptions today.
And we disclaim any obligation to update them, except to the extent required by law.
Additionally.
During the call, we will present, GAAP and non-GAAP financial measures.
A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release.
Which you can find on our Investor Relations website, along with the replay of this call.
Lastly, please note that all growth comparisons are on a year over year basis, unless otherwise noted.
I will now turn the call over to our CEO David Rosenblatt.
David.
Thanks, Kevin Good morning, and thank you for joining us today the.
The second quarter demonstrated continued resilience amidst the dynamic market with G. M V and revenue are performing above the midpoint of guidance and adjusted EBITDA exceeding the high end our continued commitment to cost management resulted in a 4% year over year decline in operating expenses.
This performance reflects the continued focus on what we can control and an ability to navigate a difficult external landscape for consumer discretionary.
While G. M V modestly declined we continued to gain market share against the contracting luxury home goods market per syndicated credit card data.
This performance is a testament to prioritizing core products initiatives and expense discipline.
The team is committed to executing against a clear set of priorities to enhance the marketplace and reaccelerate growth.
From a funnel perspective, we are pleased to report another quarter of conversion growth a testament to our continuous optimization efforts our focus on product enhancements has now driven conversion gains for seven consecutive quarters.
Encouragingly, we saw conversion trends improve in the second half of the quarter. Following a slowdown after the April 2nd tariff announcements.
During the second quarter, we made sustained progress across our product roadmap, which is designed to enhance both the buyer and seller experience and drive market share gains. Our 2025 road map is centered on accelerating organic traffic growth ensuring competitive pricing for listings in <unk>.
<unk> and optimizing our multi stop conversion funnel.
We continue to execute on our organic traffic growth strategy, which is a critical driver of efficient buyer acquisition given that over 70% of traffic originates from organic sources.
This approach centers on improvements to site performance and structure.
A key project involved a targeted effort to reduce the number of low value pages across the platform, which improve the sites overall quality perception for search engines and enhanced crawl efficiency for the most relevant content.
Furthermore, we deployed infrastructure improvements that bolstered indexation rates, ensuring that our unique listings are more readily discoverable.
These efforts have boosted overall site reliability, creating a more robust and performance user experience.
We are also actively tracking the emergence of AI and chat box and the search ecosystem.
While we are keenly aware of the potential shifts this technology could bring to date the impact on our organic search traffic has been low.
This remains an area of ongoing surveillance, ensuring that we will be prepared for any potential future shifts.
We also continue to optimize our account registration and E mail opt in experiences to expand our email audience, which grew for the third consecutive quarter.
Competitive pricing remains a significant focus area. The objective here remains the same ensuring that the marketplace offers competitive and transparent item prices and shipping costs.
As we highlighted last quarter machine learning based pricing models are now live across all verticals. These proprietary models leverage our proprietary transactional database to bring transparency to what has historically been an opaque market reinforcing buyer trust and confidence.
The integration of the first dibs estimate directly into product display pages, which began in March continues to provide buyers with valuable pricing context, fostering trust and confidence and ultimately leading to higher conversion.
With the foundational work of Rolling out. These models complete we have shifted our attention do enhancement and adoption of our ml pricing recommendations. Specifically, we are now refining recommendation accuracy, incorporating a wider array of data attributes into the models for enhanced precision includes.
Using AI tools to better utilize unstructured data and driving higher seller adoption.
Early data from these initiatives are promising specifically, we are seeing increased sell through rates on items meeting our pricing recommendations compared to those that do not.
We have also observed a reduction in price negotiations on items, where pricing recommendations have been adopted.
Alongside recommending the market clearing price the second half of the year will see us prioritizing technology to strengthen seller adherence to our existing price parity policy.
This will ensure that items on first dibs or priced consistently with other sales channels.
Turning to funnel optimization, we maintained strong momentum in reducing friction and delivering a more compelling user experience.
Our aim remains to make it easier for discerning shoppers to discover and purchase the unique items available on first dibs.
Our multi step checkout process provides substantial headroom for ongoing optimization.
A key project in the middle of the funnel was enhancing the product detail page a critical touch point for buyer decision, making.
The price negotiation call to action was optimized by including clearer more action oriented language.
This update successfully increased engagement on PDP, and importantly lifted the percentage of users entering checkout.
This refinement underscores our commitment to making the buyer seller interactions more seamless and intuitive, especially given the highly considered nature of our listings where negotiations are common.
Building on momentum from the first quarter, we made additional progress at checkout.
We refined the user experience to provide an even smoother and more trustworthy transaction flow.
In particular, highlighting key elements of the first dibs promise raised checkout completion rates, especially on mobile web this directly reinforces buyer trust and confidence at the critical point of purchase.
These targeted enhancements and any others are directly driving vital trust and contributing to ongoing conversion growth.
We are also actively embedding artificial intelligence throughout our platform driving efficiencies and elevating capabilities.
Development and deployment of AI extent across every function from enhancing the ability to detect gray market order attempts the streamlining our trade application to building a client service chat agents to enhancing item and recommendations and user personalization.
These diverse applications all either in flight or in design underscore our commitment to leveraging AI to grow revenues and drive efficiencies.
Beyond core initiatives, we recently overhauled our sponsored listings pay for performance product. Additionally, we are beginning to explore non endemic advertising opportunities.
So we are optimistic about the long term potential here no significant revenue impact is expected in the near term.
We plan to share more details as these opportunities mature.
Moving to supply we continue to demonstrate our unique ability to aggregate the world's most beautiful items.
Consistent with prior periods, we saw a steady listings growth ending the quarter with nearly $1 9 million listings up 3%.
This sustained growth underscores first dibs growing relevance to sellers and reinforces our position as the premier destination for luxury design.
As we mentioned last quarter, we are becoming more important to our sellers. Our 2025 seller sentiment survey showed that <unk> is now the primary sales channel for our sellers, surpassing their own showrooms for the first time.
This marks a meaningful shift from the past four years when showrooms ranked first.
We ended the quarter with approximately 5900 unique sellers down 21% year over year, but flat sequentially.
As we've noted in recent quarters. This outcome was expected and is directly attributable to subscription pricing optimizations, including the retirement of our central solar program and other pricing adjustments from late 2024.
The impact of this elevated churn has been minimal in total the churn cohort accounted for less than 50 basis points of <unk> over the trailing 12 months and approximately 90 basis points of total listings as.
As we move forward, we expect continued listings growth throughout 2025.
Before we conclude I am excited to share a significant addition to our leadership team.
We are thrilled to welcome Bradford sell Hammer, who joined <unk> as Chief Marketing Officer, and Chief product Officer. This week.
<unk> brings a unique and highly relevant skill set with deep experience in scaling online marketplaces, and both startups and large public companies.
We are confident that his understanding of online marketplaces combined with his deep passion for design will be instrumental in shaping marketing strategies driving customer engagement and steering product development.
In summary, our second quarter results reflect disciplined execution and prudent expense management and sustained progress against strategic objectives.
We delivered strong results for adjusted EBITDA met our Gms and revenue guidance and grew conversion for the seventh consecutive quarter.
All while navigating a difficult landscape for both luxury design and discretionary consumer goods.
The foundational platform work, including the full rollout of ml pricing models and comprehensive funnel optimizations is steadily enhancing the user experience and marketplace value.
Our commitment to a leaner more efficient operation remains unwavering.
Positioning us for sustainable growth when market conditions inevitably improve.
Thank you for your continued support I will now turn it over to Tom to review, our second quarter financial results and third quarter outlook.
Thanks, David.
Second quarter results demonstrated solid performance meeting or exceeding guidance across all key metrics, our financial outcomes reflect the strength of our underlying strategy highlighted by our seventh consecutive quarter of conversion growth continued market share gains and operating expenses falling 4% underscoring our continued vigilance on.
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.
Cost and commitment to an efficient operating model.
On a sequential basis GMP growth rates decelerated due to softening traffic monitoring average order value growth, partially offset by continued conversion gains.
This marks a meaningful shift from the past 4 years. When showrooms ranked first
While the quarter began with some softness in April around tariff announcements, we were encouraged to see conversion trends improve in the second half of the quarter.
We ended the quarter with approximately 5,900 unique sellers, down 21% year-over-year but flat sequentially.
On platform average order value of nearly $2600 was flat year over year, while median order values of approximately $250 was up 10%.
As we've noted in recent quarters, this outcome is expected and is directly attributable to subscription pricing optimizations, including the retirement of our essential seller program and other pricing adjustments from late 2024.
This dynamic was driven by a slight mix shift away from higher value orders. This suggests macroeconomic uncertainties may have prompted consumers to defer or trade down on significant high value purchases.
The impact of this elevated churn has been minimal in total; the churn cohort accounted for less than 50 basis points of GMV over the trailing 12 months and approximately 90 basis points of total listings.
A defining characteristic of our chips is the trust we have built with our community enabling transactions at high average order values across multiple categories. This unique confidence allows us to deliver qualified buyers at prices ranging from under $100 to over $1 million.
As we move forward, we expect continued listings growth throughout 2025
Before we conclude, I'm excited to share a significant addition to our leadership team.
Returning to the funnel trends traffic growth softened driven by a slowdown in paid due in part to continued performance marketing optimizations, we ended the quarter with over 70% of traffic from organic sources conversion growth improved sequentially, partially offsetting softening traffic and <unk> growth conversion rates have now increased year over year for <unk>.
we are thrilled to welcome Bradford Shellhammer to join first dibs as Chief marketing officer, and chief product officer this week,
Bradford brings a unique and highly relevant skill set with deep experience. In scaling online, marketplaces in both startups and large public companies.
Straight quarters. Additionally, both new and returning conversion increased.
We are confident that his understanding of online marketplaces combined, with his deep passion for design will be instrumental in shaping marketing, strategies driving customer engagement and steering product development.
From a buyer perspective trade JMP was flat, while consumer JMP declined modestly.
Surely which accounted for approximately 20% of total <unk> increased high single digits, while all other verticals were flat or down the.
In summary our second quarter results, reflect disciplined execution, prudent expense management and sustained progress against strategic objectives.
The broader impact of the soft housing market continue to be felt across our home categories, specifically furniture and art.
We delivered strong results for adjusted. EBA, Matt our gmv and revenue guidance and grew conversion for the 7th consecutive quarter.
Active buyers totals approximately 64400 at the end of the quarter up 5%.
All while navigating a difficult landscape for both luxury design and discretionary consumer goods.
On the supply side of the marketplace. We experienced studied listings growth closing the quarter with nearly $1 9 million listings up 3%.
We ended the quarter with approximately 5900 unique sellers down 21% or flat sequentially.
The foundational platform work, including the full rollout of ml pricing models and comprehensive funnel optimizations is steadily. Enhancing the user experience and Marketplace value.
Seller churn remained elevated consistent with our expectations. Following recent subscription pricing optimizations importantly, this had a de minimis impact on both <unk> and overall listings.
Our commitment to a leaner more efficient operation remains unwavering.
Positioning us for sustainable growth. When market conditions, inevitably improve,
We expect to see listings growth throughout the year.
Thank you for your continued support. I will now turn it over to Tom to review our second quarter of financial results and third quarter Outlook.
Moving onto the income statement net revenue was $22 $1 million flat year over year.
Transaction revenue, which is tied directly to GMP was approximately 75% of total revenue with subscription is making up most of the remainder.
Take rates were up approximately 30 basis points year over year, due primarily to a mix shift to lower value orders.
Gross profit was $15 $9 million flat year over year.
Second quarter results, demonstrated solid performance meeting or exceeding guidance across all key metrics our financial outcomes reflect the strength of our underlying strategy highlighted by our seventh consecutive quarter of conversion growth continued market, share, gains and operating expenses. Falling 4% underscoring, our continued vigilance on costs and commitment to an efficient operating model.
Gross profit margins were 72% also flat year over year.
Sales and marketing expenses were $8 1 million down, 12% driven by performance marketing optimizations, and lower head count related expenses due to reduction enforced in January.
On a sequential basis GMB growth rates decelerated due to softening traffic and monitoring average order. Value growth partially offset by continued conversion gains.
Sales and marketing as a percentage of revenue was 37% down from 42% a year ago.
While the quarter began with some softness, in April, around tariff announcements, we were encouraged to see conversion Trends improve in the second half of the quarter.
Technology development expenses were $5 $9 million up 8% driven by higher head count related costs due to our annual merit increases awarded in March.
On platform, average order value of nearly 2,600 with flat year-over-year. While median order values of approximately. 1350 was up. 10%
As a percentage of revenue technology development was 27% up from 24% a year ago.
General administrative expenses were $6 6 million down 4% due to lower head count related costs.
this Dynamic was driven by slight mix shift away from higher value orders, this suggests macroeconomic, uncertainties may have prompted consumers, to defer, or trade down on significant high-value purchases
As a percentage of revenue general and administrative expenses were 30% down from 31% a year ago.
Lastly, provision for transaction losses were approximately $965000, 4% of revenue flat year over year.
A defining characteristic of first tips, is the trust we've built with our community, enabling transactions at high average order values across multiple categories. This unique confidence allows us to deliver qualified buyers at prices ranging from under $100 to over million dollars.
Total operating expenses of $21 $6 million, a 4% reduction this is a direct reflection of our diligent expense discipline and ongoing vigilance and maintaining an efficient operating model.
Adjusted EBITDA loss was $1 8 million compared to a loss of $1 6 million last year. Adjusted EBITDA margin was a loss of 8% compared to a loss of 7% a year ago.
Return your final Trends traffic growth. Soften driven by a Slowdown in paid due. In part to continue Performance, Marketing optimizations, we entered the court. With over 70% of traffic from organic sources of growth, improved sequentially, partially offsetting softening traffic and aob growth. Conversion rates, have now increased year-over-year for 7, straight quarters. Additionally, both new and returning conversion increased
We continue to prioritize driving operating leverage do we efficient scaling given that the majority of our operating expenses are head count related our asset light model allows us to increase revenue without a commensurate increase in hiring and.
From a buyer perspective, trade and V was flat while consumer gmv declined modestly.
In 2025, we expect to keep head count approximately flat.
Julie, we account for approximately 20% of total gmv increased High single digits while all other verticals were flat or down.
Moving onto the balance sheet, we ended the quarter with a strong cash cash equivalents and short term investments position of $94 million.
An art.
Of the approximately $6 $7 million sequential reduction $3 2 million was due to annual prepayments of various services and $1 $3 million was due to an increase in restricted cash held at a payment processor, which reversed itself in July.
Active buyers, totals approximately 64400 at the end of the quarter up 5%.
On the supply side of the marketplace, we experienced steady listings, closing the quarter with nearly 1.9 million listings, up 3%. We ended the quarter with approximately 5,900 unique sellers, down 21% or flat sequentially.
Turning to the outlook our guidance reflects quarter to date results and our forecast for the remainder of the period.
We forecast third quarter, <unk> of $83 million to $89 million down 2% to up 5%.
Seller turn remained elevated, consistent with our expectations following recent subscription and pricing optimizations. Importantly, this had a dominant impact on both GMV and overall listings.
Net revenue of $21 million to $22 1 million down one.
We expect to see listings grow throughout the year.
<unk> to up 4% and adjusted EBITA margin loss of 12% to 8%.
Moving on to the income statement, net revenue was 22.1 Million flat year-over-year.
Our <unk> guidance reflects continued conversion growth and a modest rebound in average order value growth.
We just tied directly to the GMB was approximately 75% of total revenue with subscriptions making up most of the remainder.
Adjusted EBITDA margin guidance reflects the impact of seasonally low revenue.
Gross margins towards the lower end of our 71% to 73% range and continued benefits from paid marketing optimizations to.
Take rates were up approximately 30 basis points. Year-over-year. Due primarily to a makeshift to lower value orders,
Of course, profit was 15.9 Million flat year-over-year.
To conclude our second quarter performance reflects our commitment to disciplined execution and vigilant expense management, despite a challenging demand backdrop, our ability to achieve guidance targets, coupled with a 4% year over year reduction in operating expenses underscores our dedication to efficiency, our consistent conversion growth remains a bright spot.
Growth profit. Margins were 72% also flat year-over-year.
Sales and marketing expenses, were 8.1 million down to 12%, driven by Performance Marketing, optimizations and lower headcount related expenses, due to reduction in force in January.
Sales and marketing is a percentage of Revenue was 37% down from 42% a year ago.
Directly reflecting ongoing improvements across our platform.
We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you.
Technology development expenses were $5.9 million, up 8%, driven by higher headcount-related costs due to our annual merit increases awarded in March.
I will now turn the call over to the operator to take your questions.
And with that our first question in queue is Ralph Shakur of William Blair. Please go ahead.
As a percentage of Revenue, technology development was 27% up from 24%. A year ago.
General administrative expenses. Were 6.6 million down 4%, due to lower headcount related costs.
Martin just this past month morale.
The question just one for you.
As a percentage of Revenue General administrative expenses were 30% down from 31% a year ago.
On the macro uncertainty and noted that the environment for luxury among Vince remains challenging but anything any changes in the overall environment for beginning of the year, even if just on the margin.
Lastly, for vision for transaction. Losses were approximately 965,000 4% of Revenue flat year-over-year.
Good morning. Thanks for the question, we haven't really seen major changes in the macro environment, both the U S housing market and the market for luxury home goods, which are our primary drivers.
Our operating expenses are $21.6 million, reflecting a 4% reduction. This is a direct result of our diligent expense discipline and ongoing vigilance in maintaining an efficient operating model.
<unk> remained soft as an example, the U S housing market has posted I think the slowest spring selling season in 13 years per redfin and to measure market share in luxury home goods, we mostly rely on syndicated credit card data and that data shows the demand in that market also softened in Q.
Adjusted the e but a loss was 1.8 million compared to a loss of 1.6 million last year.
Adjusted ebit on margin was a loss of 8% compared to a loss of 7% a year ago.
You too.
We continue to prioritize driving operating, leverage through efficient scaling. Given that the majority of our operating expenses are headcount related. Our asset light model allows us to increase Revenue without a commensurate increase in hiring.
On the other hand, while we're in a soft market. We do believe just comparing our GMB growth to that of the syndicated data.
In 2025, we expect to keep head count approximately flat.
We've been gaining market share over the past six quarters. So we're not satisfied or happy with our current GNP growth rate, but on other hand, we do believe that it represents a market share gain and we believe that we can continue to do that based on the strength of our product roadmap.
Moving on, to the balance sheet, we enter the quote, with a strong Cash, Cash, equivalents and short-term, Investments position of 94 million.
Other opportunities in front of us.
Of the approximately 6.7 million sequential reduction. 3.2 million was due to annual prepayments of various services and 1.3 million was due to an increase in restricted, cash held at a payment processor which reversed itself in July
Oh right.
Next up we have Austin Iridic Evercore.
According to the Outlook, our guys, reflects quarter to date results and our forecast for the remainder of the period.
Hey, guys. Thanks for taking the question.
I think I heard over 70% of traffic originates from organic sources and so I guess I just wanted to ask how vulnerable do you think that mix is to the growing share of AI driven search results and chat interfaces I know thats not exactly the most easy question to answer but curious to hear your thoughts.
We forecast third, quarter gmv of 83 million to 89 million down 2% to up 5%, that revenue of 21 million to 22.1 million down 1% to up 4% and the adjusted ebit on margin loss of 12% to 8%.
Our gmv guidance, reflects continued, conversion growth and a modest Rebound, in average order value growth.
Good question, we think about that quite a bit.
Something that we track very actively.
Our adjusted ebit of margin guidance, reflects the impact of seasonally low Revenue.
Obviously, AI and chat bots over time, we think are going to be a significant have a significant impact on our traffic on the other hand, while we're aware of those potential ships, we havent actually seen any material impact to our organic search traffic and the kind of key terms our key key keywords.
Gross margins. Towards the lower end of our 71 to 73% range and continued benefits from Paid marketing optimizations.
That we that we rely on to drive the most traffic yet however, we're very focused on it we're focused on AI and ml in general this is one of many areas.
To conclude a second quarter performance. Reflects a commitment to disciplined execution and Vigilant expense management. Despite a challenging demand backdrop. Our ability to achieve guidance targets, helped through the 4% year-over-year reduction in operating expenses. Underscores our dedication to efficiency our consistent conversion growth remains a bright spot directly reflecting ongoing improvements across our platform.
We will report back as and if things change.
We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you. I will now turn the call over to the operator. To take your questions.
Alright with that there are no further questions in queue. So this will conclude today's call ladies and gentlemen, thank you for joining US today you may now disconnect your line.
And with that uh our first question in queue is Ralph schacher of William Blair. Please go ahead
Good morning. This is Justin on Pharrell. Um, thanks for taking the question. Just one for you on the macro.
any changes in the overall environment since the beginning of the year, even if just on the margin,
Uh, good morning. Thanks for the question. We haven't really seen uh, major changes in the macro environment, both the US housing market and the market for luxury home goods which are our primary drivers um remain soft just as an example. The US housing market just posted. I think the slowest spring selling season in 13 years per red fin and um to measure market share in luxury home goods. We mostly rely on syndicated credit card data, and that data shows that demand in that market also softened in Q2. Um, you know, on the other hand, while we're in a soft Market, we do believe just comparing our gmv growth to to that of the syndicated data. Um that we've been gaining market, share over the past 6 quarters. So we're not satisfied or happy with our current gmv growth rate, but on the other hand, we do believe that it represents a market share gain and we believe that we can continue to do that based on the strength of our product roadmap.
Uh, and other opportunities in front of us.
All right.
Next up, we have Austin, Riddick of Evermore.
Hey guys, thanks for uh, taking the question. Um, I think I heard over 70% of traffic originates from uh, organic sources and so I guess I just wanted to ask how vulnerable do you think that mix is to the growing share of AI driven search results and and chat interfaces? I know that's not exactly the most easy question to answer but curious to hear your thoughts.
Good question. We think about that uh quite a bit. Um it's something that we track very actively. Uh obviously Ai and chat Bots over time. We think are going to be a significant have a significant impact on our traffic on the other hand while we're aware of those potential shifts. You know, we haven't actually seen any material impact to our organic search traffic and the kind of key terms, uh, or chi, chi chi, chi keywords, um, that we that we rely on to drive the most traffic yet. Uh however, you know, we're very focused on it. We're focused on AI and ml. In general, this is 1 of many areas. Um, and um, you know, we'll report back uh, as and if things change.
All right. And with that, there are no further questions in queue. So this will conclude today's call ladies and gentlemen. Thank you for joining us today. You may now disconnect your lines