NASDAQ:DIBS 1stdibs.Com Q3 2023 Earnings Report $2.50 +0.02 (+0.60%) As of 01:32 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast 1stdibs.Com EPS ResultsActual EPS-$0.08Consensus EPS -$0.18Beat/MissBeat by +$0.10One Year Ago EPS-$0.231stdibs.Com Revenue ResultsActual Revenue$20.70 millionExpected Revenue$20.58 millionBeat/MissBeat by +$120.00 thousandYoY Revenue Growth-8.80%1stdibs.Com Announcement DetailsQuarterQ3 2023Date11/8/2023TimeBefore Market OpensConference Call DateWednesday, November 8, 2023Conference Call Time8:00AM ETUpcoming Earnings1stdibs.Com's Q1 2025 earnings is scheduled for Wednesday, May 14, 2025, with a conference call scheduled on Friday, May 9, 2025 at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfilePowered by 1stdibs.Com Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 8, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Morning, ladies and gentlemen. Welcome to Firstips.com, Inc. Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Operator00:00:18You will then hear an automatic message advised in your hand its way. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Melanie Goins, General Counsel at firstdibs.com. Melanie, you may begin. Speaker 100:00:36Good morning, and welcome to FirstDib's Earnings Call for the Quarter Ended September 30, 2023. I'm Melanie Gowens, General Counsel. Joining me today are Chief Executive Officer, David Rosenblatt And Chief Financial Officer, Tom Edeorgino. David will provide an update on our business, including our strategy and growth opportunities and Tom will review our Q3 financial results and Q4 outlook. This call will be available via webcast on our Investor Relations website at investors. Speaker 100:01:11Firstdibs.com. Before we begin, please keep in mind that our remarks include forward looking statements, including, but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects, Business plans, strategic initiatives, business and economic trends, including e commerce growth rates and our potential responses to them, international opportunities 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 as of 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. Speaker 100:02:14A 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'll now turn the call over to our CEO, David Rosenblatt. David? Speaker 200:02:39We delivered 3rd quarter GMV and revenue at the midpoint of Guidance and adjusted EBITDA margins above the high end. Over the past 6 quarters, we took decisive action to reengineer our expense base, including actively managing headcount, increasing our performance marketing efficiency thresholds, divesting Design Manager, and most recently, Reducing our real estate footprint in New York City. These measures substantially lowered our cash burn, accelerating our path to profitability. The benefits of our leaner cost structure were on display this quarter. Operating expenses were down 20%. Speaker 200:03:20Gross margins increased from the high 60s to the low 70s. Adjusted EBITDA loss of $1,800,000 improved by $3,700,000 Lastly, adjusted EBITDA margins of negative 9%, Our best yet as a public company improved by 15 percentage points despite lower revenue. Reengineering our cost structure was an important step towards being able to achieve our financial goals. Over time, our objective is to deliver sustainable revenue growth, expand margins, become profitable and ultimately grow free cash With our cost structure now aligned to the soft demand environment, we expect future margin expansion We are committed to reaccelerating growth and doing so in a capital efficient manner. Following our restructuring, we are focused on a narrower set of priorities that we believe represent our highest ROI opportunities. Speaker 200:04:27This has meant shifting some resources from auction and international, projects where returns are farther off, to areas like checkout and seller experience, where the expected payback is more immediate. Our product roadmap is We're really focused on capital efficient growth. We made progress on key product initiatives during the Q3, And we saw the benefit of that in terms of a 5th consecutive quarter of improved conversion rates. While those gains have been outweighed by Countervailing negative macros, we are nonetheless encouraged by this positive trend. There is no doubt that we are working through a period of soft demand And low visibility for luxury home goods and consumer discretionary spend. Speaker 200:05:14Although growth rates are far from where we'd like them to be, Three factors give us confidence in our direction of travel. The first of these is increasing e commerce penetration. According to the Census Bureau, U. S. E commerce penetration has steadily increased from approximately 1% of retail sales in 2,000 to just over 15% in the Q2 of 2023. Speaker 200:05:39Following volatility during COVID-nineteen, E commerce penetration has now reverted to pre pandemic trends. Our expectation is that there is a long runway ahead for e commerce. Historically, U. S. E Commerce sales have grown mid teens annually. Speaker 200:05:57While this will naturally slow as the industry matures, We believe that high single digits or low teens growth rates are a reasonable ballpark for U. S. E Commerce. 2nd, the concept of luxury is as old as humanity. Globally, luxury sales have outpaced GDP growth over the past 2 decades according to Bain and Company and Alta Gamma. Speaker 200:06:22Between 1996 2019, global luxury sales compounded at 6% per year compared to global GDP growth of roughly 3% per the World Bank. 3rd, the world is getting wealthier. According to the UBS Global Wealth Report, there were nearly 60,000,000 millionaires globally at the end of Our 7 largest markets, the U. S, the U. K, France, Canada, Switzerland, Australia, Germany and Italy Are home to over 36,000,000 millionaires. Speaker 200:06:56This compares to our active buyer base of approximately 63,200 at the end of the Q3. Furthermore, UBS forecasts that the number of millionaires globally will exceed 85,000,000 by 2027. Of course, you don't need to be a millionaire to shop on 1st dibs, but growing wealth is a tailwind for luxury demand. These 3 secular drivers underpin our confidence in our market opportunity. However, at present, We're operating through a period where cyclical factors like a slowdown in the luxury housing market and subdued demand for high end discretionary items are overwhelming these secular trends. Speaker 200:07:37Large purchases like housing and furniture can easily be deferred, but not indefinitely. Eventually, the cycle will turn as it always does. We believe that we're currently tracking in line or better to industry trends for high end furniture and are setting ourselves up to benefit disproportionately when this cycle shifts. As we navigate this challenging period, our competitive advantages also give us confidence in the future. Over the past 2 decades, We have developed attributes that are valuable and difficult to replicate, including aggregating a fragmented offline supply base, The ability to reach a global audience of high net worth individuals, building a trusted brand that instills buyers with the confidence required to transact online at high AOVs, deep relationships with the trade and cultivating a deep well of unique expert content, resulting in strong SEO domain authority and high organic traffic mix. Speaker 200:08:37These are durable and hard to replicate advantages. Turning to the quarter, the supply side of the marketplace remains healthy. We once again saw mid teens listings growth and strong seller acquisition. On the demand side, traffic growth slowed as we intentionally pulled back on our least efficient performance marketing channels, making overall traffic growth negative. Organic traffic continued to grow, albeit at a lower rate. Speaker 200:09:05During the quarter, organic traffic accounted for nearly 80% of the total, up from roughly 70% a year ago. We were pleased that our prioritization on growing our conversion rate continues to bear fruit. For the 5th quarter in a row, Our year over year decline in conversion rates improved and are approaching flat. The 3rd quarter improvement was driven by returning buyer conversion, which was the highest since late 2021. We're benefiting from our new AB test framework with the number of tests up over 100% year over year. Speaker 200:09:42While not every test succeeds, overall, the higher test velocity resulted in a higher number of features being put into market, which we believe is contributing to the improvement in conversion rates. In addition to ramping up our testing cadence, We're also working on a number of multi quarter technology projects. The first is changing our payment processor, which we expect to benefit conversion By increasing the number of payment methods, we're able to accept, especially internationally. The second is improving our shipping services for sellers. The third is leveraging machine learning to enhance personalization and pricing recommendations. Speaker 200:10:22We expect these projects Begin going live by the end of the Q1 of 2024, and we look forward to providing updates in future quarters. Moving on, we continue to see solid organic traffic growth in France and Germany. SEO sessions from German and French IP addresses grew 60%. Paid traffic growth in these markets declined as we intentionally pulled back on performance marketing, which was a headwind to order growth. However, conversion rates improved. Speaker 200:10:52We also saw organic traffic growth accelerate for Italian and Spanish IP addresses as our sites are starting to be indexed by search engines, but it remains very early days in these markets. Auction orders grew 7%, accounting for 7% of total orders. During the quarter, our product development effort focused on As part of our June restructuring, we shifted dedicated resources from international and auction To areas like checkout and seller experience where we see more immediate payoffs. This is an example of the hard trade offs we've had to make As we focus on achieving profitability, our logic here is that the highest return to product and engineering investment are to platform wide projects. For example, we expect changing our payment processor to benefit U. Speaker 200:11:46S. And international buyers, auction and marketplace buyers, Turning to supply, seller and listing growth remained robust. We ended the quarter with over 9,100 seller accounts, up over 30%. Additionally, listings grew 16% to over 1,700,000 items, continuing the trend of healthy listings growth we've seen for the past several years. After a year and a half of very strong growth, We're shifting our acquisition focus to prioritize sellers who have the ability to list and sell at scale. Speaker 200:12:24As a result, We expect to see continued healthy listings growth, but a lower number of new sellers added per quarter. In summary, while we continue to face headwinds from the luxury housing market and diminished consumer appetite for discretionary purchases, We believe we're performing in line with high end furniture sales. Facing these headwinds, we made the difficult decisions required To calibrate our expenses to soft demand, we saw the benefits of our leaner cost structure and expanded gross margins, Meaningfully lower operating expenses, reduced cash burn and delivering our best EBITDA margins yet as a public company. While our cash balance and lower cash burn rate give us a strong liquidity position, we are not complacent about the need to reaccelerate GMV and revenue. Our focus is on shepherding our existing resources to accomplish this, working on a smaller set of projects that offer the highest potential returns. Speaker 200:13:25The team is nimbler and moving faster. We believe that significantly increasing the pace of our new feature testing Contributed to continued improvement in conversion rates. Although visibility is low and growth isn't where we would like it to be, Rising e commerce penetration, increasing luxury demand and growing global wealth portend a long runway. I'll now turn it over to Tom to review our Q3 financial results and Q4 outlook. Thanks, David. Speaker 300:13:56Since mid-twenty 22, we've taken decisive action to reengineer our cost structure, Reduce our cash burn and accelerate our path to profitability. This continued in the Q3. In late August, we subleased our New York City headquarters Starting on October 1, we expect this to reduce net rent expense by approximately $750,000 per quarter Starting in the Q4 of 2023. In the Q1 of 2024, we plan to exit this space entirely And move to a smaller floor plan in New York as we maintain our hybrid work approach. As a result of our cost savings actions, We've expanded gross margins from the high 60% range to the low 70s and reduced total operating expenses from 20% From $25,300,000 a year ago to $20,400,000 in the 3rd quarter. Speaker 300:14:49With the successful sublease, We have completed the major restructuring actions we identified earlier this year. While these have been executed, we will remain vigilant around expense management. For example, renegotiating contracts as they expire, tightly managing our performance marketing efficiencies and remaining disciplined on headcount. Given the operating margin leverage in our 2 sided marketplace business model, we expect revenue growth to be the primary driver of margin expansion from here. As such, our focus is on shepherding our existing resources to reaccelerate growth. Speaker 300:15:25When luxury home good demand rebounds, We expect to be able to layer on meaningful incremental GMV and revenue without proportionally increasing operating expenses. Turning to the Q3 results. We delivered GMV and revenue at the midpoint of guidance and adjusted EBITDA margins above the high end. GMV was $89,000,000 down 10% due to soft demand for luxury home goods and discretionary items. On a sequential basis, GMV growth rates improved 4 percentage points. Speaker 300:15:59During the quarter, we saw a change in conversion funnel dynamics. Traffic was the primary driver of order softness in contrast to recent quarters where conversion was the main headwind. While traffic growth slowed as we pulled back on Performance marketing spending. The conversion headwind moderated for the 5th consecutive quarter helped by gains in returning buyer conversion, which is the highest since late 2021. Average order value of approximately $2,850 was up modestly, Help by strength in orders over $100,000 As a reminder, we don't manage the business to the specific average order value number, And this metric is sensitive to fluctuations in high value orders. Speaker 300:16:42Median order value, which is less sensitive to high value orders, Was down a modest 3% to approximately $1200 Additionally, orders under $1,000 accounted for 45% of total orders in the quarter, up from 44% a year ago. We believe these trends signify consumer hesitancy around discretionary categories And big ticket purchases in the current economic environment. Consumer and Trade GMV growth rates both improved sequentially. We heard similar feedback in the Q3 as in the Q2 from the trade. That is, while clients are pulling back slightly due to the economic uncertainty and rising costs, designers Are still actively working on projects with more in the pipeline. Speaker 300:17:26Turning to verticals, out of home categories, fashion and jewelry We're the top performers. In contrast, Vintage and Antique and New and Custom Furniture, the verticals most levered to the luxury real estate market, Declined more than the company average. These two verticals account for approximately 60% of GMV in the quarter. We ended the quarter with approximately 63,200 active buyers, down 7%. We expect this metric to remain choppy near term as we manage On the supply side of the marketplace, we closed the quarter with over 9,100 seller accounts, up over 30%. Speaker 300:18:06Additionally, there are now over 1,700,000 listings on the marketplace, up 16%. Turning to the P and L. Net revenue was $20,700,000 down 9%. Transaction revenue, which Directly to GMV was roughly 70% of revenue with subscriptions making up most of the remainder. Take rates improved modestly due in part To growing GMV contribution from essential sellers, which carry a higher commission rate. Speaker 300:18:35Gross profit was $15,200,000 down 2%. Gross profit margins were 73%, up from 68% a year ago, primarily driven by lower operational headcount related expenses as a result of our restructuring initiatives and lower shipping expenses. Sales and marketing expenses were $8,400,000 down 24%, driven by lower headcount related expenses as a result of our restructuring initiatives and lower performance marketing spend. Sales and marketing as a percentage of revenue was 41%, down from 49% a year ago. Technology development expenses were $4,500,000 down 29 percent, driven by lower headcount related costs as a result of our restructuring initiatives. Speaker 300:19:20As a percentage of revenue, Technology Development was 22%, down from 28%. General and administrative expenses were $6,800,000 up 1% with higher headcount related costs being offset by lower insurance costs. As a percentage of revenue, general and administrative expenses were 33%, up from 30%. Lastly, Provision for transaction losses were $700,000 3 percent of revenue, down from 5% due to a decrease in GMV and a decrease in damage claims. In summary, total operating expenses were $20,400,000 down 20%, reflecting the benefits of our restructuring actions. Speaker 300:20:02Adjusted EBITDA loss was $1,800,000 compared to a loss of $5,500,000 last year. Adjusted EBITDA margin was a loss of 9% versus a loss of 24% last year due to savings from restructuring, partially offset by lower revenue. These results reflect the actions we've taken over past year to reengineer our cost base. Moving on to the balance sheet. We ended the quarter with a strong cash, cash equivalents and short term investment position of $143,000,000 Additionally, interest income increased to approximately $1,800,000 up from approximately $520,000 a year During the quarter, we repurchased $1,400,000 of shares under our $20,000,000 board authorized repurchase program. Speaker 300:20:49Turning to the outlook. Our guidance reflects our quarter to date results and our forecast for the remainder of the period. We forecast 4th quarter GMV of $83,000,000 to $90,000,000 down 20% to 13%. Net revenue of $19,700,000 to $20,800,000 down 14% to 9% And adjusted EBITDA margin loss of minus 13% to minus 8%. Our GMV guidance reflects continued macroeconomic headwinds, Including shifting consumer behavior, ongoing economic and geopolitical uncertainty and softness in the luxury housing market. Speaker 300:21:29Going deeper, we typically expect to see month over month GMV improvements in October versus September. However, we did not see the sequential growth in October 2020 This has moderated our expectations for 4th quarter growth. Turning to adjusted EBITDA margins. Guidance reflects negative operating leverage from lower revenue, Gross margins in the range of 71% to 72% and that on a sequential basis, we expect operating expenses will be down slightly With savings from our New York City office sublease being partially offset by a sequential increase in performance marketing due to typical holiday marketing campaigns And a sequential increase in product and engineering headcount due to selective hiring around machine learning. In summary, since mid-twenty 22, we have undertaken significant efforts to reengineer our cost structure and streamline operations. Speaker 300:22:21These actions included significantly decreasing employee headcount through reductions in September 2022 June 2023, Coupled with limiting backfills for attrition, restricting hiring to critical roles and drastically reducing the number of open positions, revamping our operations team to improve gross margins pulling back on performance marketing by increasing our efficiency thresholds Streamlining our business and strengthening our balance sheet by divesting Design Manager, renegotiating vendor and software contracts and rationalizing our New York City Real Estate footprint. The results of these efforts were on display in the 3rd quarter with operating expenses down 20% year over year, Gross margins expanding and our best quarter to date for adjusted EBITDA margins as a public company. Our challenge remains clear. We are managing through a period of soft demand and limited visibility. Balance sheet strength and durable competitive advantages like unique supply, a trusted brand, Strong SEO domain authority and high organic traffic mix will help us to navigate these headwinds. Speaker 300:23:30Thank you for your time. And now I will turn the call over to the operator to take your questions. Operator00:23:35Thank you. Please stand by while we compile the queue on a roster. And our first question coming from the line of Trevor Young with Barclays, your line is open. Speaker 400:24:00Great. Thanks. First one for David. You mentioned in the release The increasing testing velocity and I think you made comments to that effect also in your prepared remarks. Can you give us a couple of examples of that, both where you're finding some early wins That's the first question. Speaker 400:24:21And then the second one for, I guess, either of you. You both mentioned that the cost base is now readjusted lower And margin expansion from here is going to be more top line driven. Meanwhile, you're pulling back on marketing a bit. Just as we look out to 24, Like what signals are you on the lookout for that would indicate we're through the choppy macro and demand is starting to come back? Is it an improvement in organic traffic? Speaker 400:24:44Is it Growth in luxury home transactions. And then should we assume that you layer back in some of that marketing spend against that demand once it seems like it's coming back? Speaker 200:24:55Sure. Hey, Trevor. So in terms of the testing velocity, I mean, I think the significance of that is that It allows us to put many more features in the market. Not all of them succeed as you alluded Where we have been focused over the last quarter couple of quarters has been the lower funnel. So, the part of the funnel related to checkout specifically, we have a complex multi step funnel Relative to most other e commerce companies, so there we think there are significant opportunities at each stage of the funnel. Speaker 200:25:36The focus on checkout, I think initially we prioritize because it has the fastest returns. But overall, it's something we've been focused on for over a year. And I think we've been heartened that Our year over year decline in conversion has moderated in each of the last 5 quarters and last quarter was low Single digits, so approaching flat year over year and it's something we've seen carry over into the Q4. In terms of kind of what we would look for, in terms of a market rebound, I think when you look at our performance All over the last 2 years, we've indexed very tightly with the luxury real estate market. That market improved Last quarter, we improved with it in terms of moderating year over year GMP decline. Speaker 200:26:30As you can see from our guidance, we expect to See that soften in this quarter, along with kind of the activity that we've seen quarter to date. Alongside that, of course, we're focused on things that over time we believe will allow us to grow faster than the market, Specifically conversion. And again, like I said before, we've seen positive results of that. It's been offset So far by traffic, but overall, the more we can convert the visitors who come to First Dibs, The better the experience for them, the better the experience for sellers and the more the better the platform we have to be able to reaccelerate paid. But I think, again, the sort of short answer to your question is, we're pretty we've been pretty tethered to the market change. Speaker 200:27:19And while I think we can grow faster than the market, ultimately, I think we're going to need to see that market come back for us to be able to resume Our targeted long run GMV growth rates. Speaker 400:27:31That makes sense. Thanks for all that detail. Operator00:27:36Thank you. One moment for our next question. And our next question coming from the line of Rob Shuckart with William Blair. Your line is open. Speaker 500:27:47Good morning. Thanks for taking the question. On the Q4 guide, you talked about the macro As well as pulling back in SCN spend, just curious sort of the weighting Factors there because obviously typically in Q4 you see a little bit of a bump, but just kind of curious what was the more kind of pronounced driver of sort of The Q4 guide, then I have a follow-up. Speaker 600:28:12So I mean, Speaker 200:28:12I think specifically, as we look at our numbers independent for 2nd of the macros. Typically, we see a month over month increase in GMV from September to October. We did not see that this October. Going deeper, the pattern that we saw was similar to what many other consumer e commerce companies have reported, which is A slowdown in the second half of September would carry through into October. And we saw actually a very kind of specific and pronounced Declined right after the October 7 attacks in the Middle East. Speaker 200:28:51Since then, the GMV trends have stabilized. But at the same time, they're not sort of capturing or not reflecting our typical 4th quarter seasonality. So on that basis, we moderated our 4th quarter GMV forecast. And I think, look, what's driving it? I mean, again, I don't we're in the same market as everyone else. Speaker 200:29:12And I would point to similar dynamics like weak demand for consumer discretionary in general geopolitical instability as I mentioned. And on top of that, we're very levered to the luxury real estate market. That market was down 25% in the second quarter. It was down 10 ish percent plus in the Q3. Our year over year GMV performance reflected that change. Speaker 200:29:38We don't know what that is yet in the Q4, but we're feeling softness in that market as well. Speaker 500:29:47Great. And then on the call, you had mentioned shifting resources from auctions international, which have the longer payback periods Some of the seller and checkout initiatives, just curious any metrics behind that or any other color you could share in terms of some of the improvements that you're seeing on that front? Thank you. Speaker 200:30:05You mean in terms of conversion improvements? Speaker 500:30:08That's correct. Speaker 200:30:09Yes. So again, as I mentioned, our year over year Line and conversion has moderated each of the last 5 quarters, meaning our second derivative, which is something we look at pretty closely, has improved To the extent that last quarter and quarter to date, this quarter, we're approaching 0, so very low single digits. So again, we're very heartened by that because that's a kind of intentional the result of an intentional strategy that's helped By the pullback in paid, but the pullback in paid doesn't explain all of it. We think that we all of these improvements that we make are Pretty rigorously tested and the only ones that we graduate to making available to all users are ones that have a kind of measurable lift. Not all of them do, some of them don't. Speaker 200:30:58Those fail, we don't put them into production. So I think it's really a combination of those two things. What would it take? I think one of the questions I didn't answer was what would it take for us to increase paid again. Again, it's paid for us It's all about very disciplined, the very the math of a very disciplined customer acquisition program. Speaker 200:31:20So we have a breakeven. We spend up to that breakeven. As conversion continues to increase, we'll be able to spend more. But at the same time, right now, we think it's prudent to pull back on that which we have pretty substantially And reallocate resources into features that benefit the whole user base, and that improve the experience not just for buyers, but for sellers. The most important of which is conversion. Speaker 200:31:48Conversion in turn is driven by reducing purchase friction and also another focus of ours, Which is inducing our sellers to price items as competitively as possible. Speaker 500:32:03Okay, great. Thank you. Operator00:32:07Thank you. And our next question coming from the line of Nick Jones with JMP Securities. Your line is open. Speaker 600:32:23Hey, this is Luke on for Nick. So you mentioned that the active buyer growth may be Choppy near term. Could you just add any additional color on what needs to happen to reaccelerate the active buyer base heading into next year, particularly if soft demand Yes. This is Tom. So on active buyer growth, So from the macro perspective On active buyers, what we're seeing is that it's definitely pulled back. Speaker 600:33:17We're seeing The implications of the macros, the lower luxury housing market, the decline in the housing market, The decline in consumer discretionary spend is impacting the total buyer growth. So we are that's where we're seeing the declines is it's mostly driven by those macros. The As David said, what we're starting to see on conversion is that it's been improving over the last 5 quarters From the second derivative, as well, the active buyers, it's obviously been Lower because of our lower paid spend that we've been actively Managing our page spend down to reflect what we're seeing in the macros and what we're seeing in lifetime value relative to what we can So that has been an ongoing focus of ours is to bring paid spend down Operator00:34:40Thank you. And at this time, I see we have no further questions in the queue. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference Call1stdibs.Com Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) 1stdibs.Com Earnings Headlines1stDibs Announces the 1stDibs 50 for 2025April 28, 2025 | businesswire.comIs 1stdibs.com, Inc. (DIBS) the Best Internet Retail Stock to Buy According to Analysts?April 18, 2025 | msn.comBuffett’s favorite chart just hit 209% – here’s what that means for goldA Historic Gold Announcement Is About to Rock Wall Street For months, sharp-eyed analysts have watched the quiet buildup behind the scenes. Now, in just days, the floodgates are set to open. The greatest investor of all time is about to validate what Garrett Goggin has been saying for months: Gold is entering a once-in-a-generation mania. Front-running Buffett has never been more urgent — and four tiny miners could be your ticket to 100X gains.May 2, 2025 | Golden Portfolio (Ad)We Think 1stdibs.Com (NASDAQ:DIBS) Can Afford To Drive Business GrowthMarch 11, 2025 | finance.yahoo.comEvercore ISI Remains a Buy on 1stdibs.com (DIBS)March 7, 2025 | markets.businessinsider.com1stdibs.Com, Inc. (NASDAQ:DIBS) Q4 2024 Earnings Call TranscriptMarch 3, 2025 | msn.comSee More 1stdibs.Com Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like 1stdibs.Com? Sign up for Earnings360's daily newsletter to receive timely earnings updates on 1stdibs.Com and other key companies, straight to your email. Email Address About 1stdibs.Com1stdibs.Com (NASDAQ:DIBS) operates an online marketplace for luxury design products worldwide. 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There are 7 speakers on the call. Operator00:00:00Morning, ladies and gentlemen. Welcome to Firstips.com, Inc. Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Operator00:00:18You will then hear an automatic message advised in your hand its way. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Melanie Goins, General Counsel at firstdibs.com. Melanie, you may begin. Speaker 100:00:36Good morning, and welcome to FirstDib's Earnings Call for the Quarter Ended September 30, 2023. I'm Melanie Gowens, General Counsel. Joining me today are Chief Executive Officer, David Rosenblatt And Chief Financial Officer, Tom Edeorgino. David will provide an update on our business, including our strategy and growth opportunities and Tom will review our Q3 financial results and Q4 outlook. This call will be available via webcast on our Investor Relations website at investors. Speaker 100:01:11Firstdibs.com. Before we begin, please keep in mind that our remarks include forward looking statements, including, but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects, Business plans, strategic initiatives, business and economic trends, including e commerce growth rates and our potential responses to them, international opportunities 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 as of 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. Speaker 100:02:14A 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'll now turn the call over to our CEO, David Rosenblatt. David? Speaker 200:02:39We delivered 3rd quarter GMV and revenue at the midpoint of Guidance and adjusted EBITDA margins above the high end. Over the past 6 quarters, we took decisive action to reengineer our expense base, including actively managing headcount, increasing our performance marketing efficiency thresholds, divesting Design Manager, and most recently, Reducing our real estate footprint in New York City. These measures substantially lowered our cash burn, accelerating our path to profitability. The benefits of our leaner cost structure were on display this quarter. Operating expenses were down 20%. Speaker 200:03:20Gross margins increased from the high 60s to the low 70s. Adjusted EBITDA loss of $1,800,000 improved by $3,700,000 Lastly, adjusted EBITDA margins of negative 9%, Our best yet as a public company improved by 15 percentage points despite lower revenue. Reengineering our cost structure was an important step towards being able to achieve our financial goals. Over time, our objective is to deliver sustainable revenue growth, expand margins, become profitable and ultimately grow free cash With our cost structure now aligned to the soft demand environment, we expect future margin expansion We are committed to reaccelerating growth and doing so in a capital efficient manner. Following our restructuring, we are focused on a narrower set of priorities that we believe represent our highest ROI opportunities. Speaker 200:04:27This has meant shifting some resources from auction and international, projects where returns are farther off, to areas like checkout and seller experience, where the expected payback is more immediate. Our product roadmap is We're really focused on capital efficient growth. We made progress on key product initiatives during the Q3, And we saw the benefit of that in terms of a 5th consecutive quarter of improved conversion rates. While those gains have been outweighed by Countervailing negative macros, we are nonetheless encouraged by this positive trend. There is no doubt that we are working through a period of soft demand And low visibility for luxury home goods and consumer discretionary spend. Speaker 200:05:14Although growth rates are far from where we'd like them to be, Three factors give us confidence in our direction of travel. The first of these is increasing e commerce penetration. According to the Census Bureau, U. S. E commerce penetration has steadily increased from approximately 1% of retail sales in 2,000 to just over 15% in the Q2 of 2023. Speaker 200:05:39Following volatility during COVID-nineteen, E commerce penetration has now reverted to pre pandemic trends. Our expectation is that there is a long runway ahead for e commerce. Historically, U. S. E Commerce sales have grown mid teens annually. Speaker 200:05:57While this will naturally slow as the industry matures, We believe that high single digits or low teens growth rates are a reasonable ballpark for U. S. E Commerce. 2nd, the concept of luxury is as old as humanity. Globally, luxury sales have outpaced GDP growth over the past 2 decades according to Bain and Company and Alta Gamma. Speaker 200:06:22Between 1996 2019, global luxury sales compounded at 6% per year compared to global GDP growth of roughly 3% per the World Bank. 3rd, the world is getting wealthier. According to the UBS Global Wealth Report, there were nearly 60,000,000 millionaires globally at the end of Our 7 largest markets, the U. S, the U. K, France, Canada, Switzerland, Australia, Germany and Italy Are home to over 36,000,000 millionaires. Speaker 200:06:56This compares to our active buyer base of approximately 63,200 at the end of the Q3. Furthermore, UBS forecasts that the number of millionaires globally will exceed 85,000,000 by 2027. Of course, you don't need to be a millionaire to shop on 1st dibs, but growing wealth is a tailwind for luxury demand. These 3 secular drivers underpin our confidence in our market opportunity. However, at present, We're operating through a period where cyclical factors like a slowdown in the luxury housing market and subdued demand for high end discretionary items are overwhelming these secular trends. Speaker 200:07:37Large purchases like housing and furniture can easily be deferred, but not indefinitely. Eventually, the cycle will turn as it always does. We believe that we're currently tracking in line or better to industry trends for high end furniture and are setting ourselves up to benefit disproportionately when this cycle shifts. As we navigate this challenging period, our competitive advantages also give us confidence in the future. Over the past 2 decades, We have developed attributes that are valuable and difficult to replicate, including aggregating a fragmented offline supply base, The ability to reach a global audience of high net worth individuals, building a trusted brand that instills buyers with the confidence required to transact online at high AOVs, deep relationships with the trade and cultivating a deep well of unique expert content, resulting in strong SEO domain authority and high organic traffic mix. Speaker 200:08:37These are durable and hard to replicate advantages. Turning to the quarter, the supply side of the marketplace remains healthy. We once again saw mid teens listings growth and strong seller acquisition. On the demand side, traffic growth slowed as we intentionally pulled back on our least efficient performance marketing channels, making overall traffic growth negative. Organic traffic continued to grow, albeit at a lower rate. Speaker 200:09:05During the quarter, organic traffic accounted for nearly 80% of the total, up from roughly 70% a year ago. We were pleased that our prioritization on growing our conversion rate continues to bear fruit. For the 5th quarter in a row, Our year over year decline in conversion rates improved and are approaching flat. The 3rd quarter improvement was driven by returning buyer conversion, which was the highest since late 2021. We're benefiting from our new AB test framework with the number of tests up over 100% year over year. Speaker 200:09:42While not every test succeeds, overall, the higher test velocity resulted in a higher number of features being put into market, which we believe is contributing to the improvement in conversion rates. In addition to ramping up our testing cadence, We're also working on a number of multi quarter technology projects. The first is changing our payment processor, which we expect to benefit conversion By increasing the number of payment methods, we're able to accept, especially internationally. The second is improving our shipping services for sellers. The third is leveraging machine learning to enhance personalization and pricing recommendations. Speaker 200:10:22We expect these projects Begin going live by the end of the Q1 of 2024, and we look forward to providing updates in future quarters. Moving on, we continue to see solid organic traffic growth in France and Germany. SEO sessions from German and French IP addresses grew 60%. Paid traffic growth in these markets declined as we intentionally pulled back on performance marketing, which was a headwind to order growth. However, conversion rates improved. Speaker 200:10:52We also saw organic traffic growth accelerate for Italian and Spanish IP addresses as our sites are starting to be indexed by search engines, but it remains very early days in these markets. Auction orders grew 7%, accounting for 7% of total orders. During the quarter, our product development effort focused on As part of our June restructuring, we shifted dedicated resources from international and auction To areas like checkout and seller experience where we see more immediate payoffs. This is an example of the hard trade offs we've had to make As we focus on achieving profitability, our logic here is that the highest return to product and engineering investment are to platform wide projects. For example, we expect changing our payment processor to benefit U. Speaker 200:11:46S. And international buyers, auction and marketplace buyers, Turning to supply, seller and listing growth remained robust. We ended the quarter with over 9,100 seller accounts, up over 30%. Additionally, listings grew 16% to over 1,700,000 items, continuing the trend of healthy listings growth we've seen for the past several years. After a year and a half of very strong growth, We're shifting our acquisition focus to prioritize sellers who have the ability to list and sell at scale. Speaker 200:12:24As a result, We expect to see continued healthy listings growth, but a lower number of new sellers added per quarter. In summary, while we continue to face headwinds from the luxury housing market and diminished consumer appetite for discretionary purchases, We believe we're performing in line with high end furniture sales. Facing these headwinds, we made the difficult decisions required To calibrate our expenses to soft demand, we saw the benefits of our leaner cost structure and expanded gross margins, Meaningfully lower operating expenses, reduced cash burn and delivering our best EBITDA margins yet as a public company. While our cash balance and lower cash burn rate give us a strong liquidity position, we are not complacent about the need to reaccelerate GMV and revenue. Our focus is on shepherding our existing resources to accomplish this, working on a smaller set of projects that offer the highest potential returns. Speaker 200:13:25The team is nimbler and moving faster. We believe that significantly increasing the pace of our new feature testing Contributed to continued improvement in conversion rates. Although visibility is low and growth isn't where we would like it to be, Rising e commerce penetration, increasing luxury demand and growing global wealth portend a long runway. I'll now turn it over to Tom to review our Q3 financial results and Q4 outlook. Thanks, David. Speaker 300:13:56Since mid-twenty 22, we've taken decisive action to reengineer our cost structure, Reduce our cash burn and accelerate our path to profitability. This continued in the Q3. In late August, we subleased our New York City headquarters Starting on October 1, we expect this to reduce net rent expense by approximately $750,000 per quarter Starting in the Q4 of 2023. In the Q1 of 2024, we plan to exit this space entirely And move to a smaller floor plan in New York as we maintain our hybrid work approach. As a result of our cost savings actions, We've expanded gross margins from the high 60% range to the low 70s and reduced total operating expenses from 20% From $25,300,000 a year ago to $20,400,000 in the 3rd quarter. Speaker 300:14:49With the successful sublease, We have completed the major restructuring actions we identified earlier this year. While these have been executed, we will remain vigilant around expense management. For example, renegotiating contracts as they expire, tightly managing our performance marketing efficiencies and remaining disciplined on headcount. Given the operating margin leverage in our 2 sided marketplace business model, we expect revenue growth to be the primary driver of margin expansion from here. As such, our focus is on shepherding our existing resources to reaccelerate growth. Speaker 300:15:25When luxury home good demand rebounds, We expect to be able to layer on meaningful incremental GMV and revenue without proportionally increasing operating expenses. Turning to the Q3 results. We delivered GMV and revenue at the midpoint of guidance and adjusted EBITDA margins above the high end. GMV was $89,000,000 down 10% due to soft demand for luxury home goods and discretionary items. On a sequential basis, GMV growth rates improved 4 percentage points. Speaker 300:15:59During the quarter, we saw a change in conversion funnel dynamics. Traffic was the primary driver of order softness in contrast to recent quarters where conversion was the main headwind. While traffic growth slowed as we pulled back on Performance marketing spending. The conversion headwind moderated for the 5th consecutive quarter helped by gains in returning buyer conversion, which is the highest since late 2021. Average order value of approximately $2,850 was up modestly, Help by strength in orders over $100,000 As a reminder, we don't manage the business to the specific average order value number, And this metric is sensitive to fluctuations in high value orders. Speaker 300:16:42Median order value, which is less sensitive to high value orders, Was down a modest 3% to approximately $1200 Additionally, orders under $1,000 accounted for 45% of total orders in the quarter, up from 44% a year ago. We believe these trends signify consumer hesitancy around discretionary categories And big ticket purchases in the current economic environment. Consumer and Trade GMV growth rates both improved sequentially. We heard similar feedback in the Q3 as in the Q2 from the trade. That is, while clients are pulling back slightly due to the economic uncertainty and rising costs, designers Are still actively working on projects with more in the pipeline. Speaker 300:17:26Turning to verticals, out of home categories, fashion and jewelry We're the top performers. In contrast, Vintage and Antique and New and Custom Furniture, the verticals most levered to the luxury real estate market, Declined more than the company average. These two verticals account for approximately 60% of GMV in the quarter. We ended the quarter with approximately 63,200 active buyers, down 7%. We expect this metric to remain choppy near term as we manage On the supply side of the marketplace, we closed the quarter with over 9,100 seller accounts, up over 30%. Speaker 300:18:06Additionally, there are now over 1,700,000 listings on the marketplace, up 16%. Turning to the P and L. Net revenue was $20,700,000 down 9%. Transaction revenue, which Directly to GMV was roughly 70% of revenue with subscriptions making up most of the remainder. Take rates improved modestly due in part To growing GMV contribution from essential sellers, which carry a higher commission rate. Speaker 300:18:35Gross profit was $15,200,000 down 2%. Gross profit margins were 73%, up from 68% a year ago, primarily driven by lower operational headcount related expenses as a result of our restructuring initiatives and lower shipping expenses. Sales and marketing expenses were $8,400,000 down 24%, driven by lower headcount related expenses as a result of our restructuring initiatives and lower performance marketing spend. Sales and marketing as a percentage of revenue was 41%, down from 49% a year ago. Technology development expenses were $4,500,000 down 29 percent, driven by lower headcount related costs as a result of our restructuring initiatives. Speaker 300:19:20As a percentage of revenue, Technology Development was 22%, down from 28%. General and administrative expenses were $6,800,000 up 1% with higher headcount related costs being offset by lower insurance costs. As a percentage of revenue, general and administrative expenses were 33%, up from 30%. Lastly, Provision for transaction losses were $700,000 3 percent of revenue, down from 5% due to a decrease in GMV and a decrease in damage claims. In summary, total operating expenses were $20,400,000 down 20%, reflecting the benefits of our restructuring actions. Speaker 300:20:02Adjusted EBITDA loss was $1,800,000 compared to a loss of $5,500,000 last year. Adjusted EBITDA margin was a loss of 9% versus a loss of 24% last year due to savings from restructuring, partially offset by lower revenue. These results reflect the actions we've taken over past year to reengineer our cost base. Moving on to the balance sheet. We ended the quarter with a strong cash, cash equivalents and short term investment position of $143,000,000 Additionally, interest income increased to approximately $1,800,000 up from approximately $520,000 a year During the quarter, we repurchased $1,400,000 of shares under our $20,000,000 board authorized repurchase program. Speaker 300:20:49Turning to the outlook. Our guidance reflects our quarter to date results and our forecast for the remainder of the period. We forecast 4th quarter GMV of $83,000,000 to $90,000,000 down 20% to 13%. Net revenue of $19,700,000 to $20,800,000 down 14% to 9% And adjusted EBITDA margin loss of minus 13% to minus 8%. Our GMV guidance reflects continued macroeconomic headwinds, Including shifting consumer behavior, ongoing economic and geopolitical uncertainty and softness in the luxury housing market. Speaker 300:21:29Going deeper, we typically expect to see month over month GMV improvements in October versus September. However, we did not see the sequential growth in October 2020 This has moderated our expectations for 4th quarter growth. Turning to adjusted EBITDA margins. Guidance reflects negative operating leverage from lower revenue, Gross margins in the range of 71% to 72% and that on a sequential basis, we expect operating expenses will be down slightly With savings from our New York City office sublease being partially offset by a sequential increase in performance marketing due to typical holiday marketing campaigns And a sequential increase in product and engineering headcount due to selective hiring around machine learning. In summary, since mid-twenty 22, we have undertaken significant efforts to reengineer our cost structure and streamline operations. Speaker 300:22:21These actions included significantly decreasing employee headcount through reductions in September 2022 June 2023, Coupled with limiting backfills for attrition, restricting hiring to critical roles and drastically reducing the number of open positions, revamping our operations team to improve gross margins pulling back on performance marketing by increasing our efficiency thresholds Streamlining our business and strengthening our balance sheet by divesting Design Manager, renegotiating vendor and software contracts and rationalizing our New York City Real Estate footprint. The results of these efforts were on display in the 3rd quarter with operating expenses down 20% year over year, Gross margins expanding and our best quarter to date for adjusted EBITDA margins as a public company. Our challenge remains clear. We are managing through a period of soft demand and limited visibility. Balance sheet strength and durable competitive advantages like unique supply, a trusted brand, Strong SEO domain authority and high organic traffic mix will help us to navigate these headwinds. Speaker 300:23:30Thank you for your time. And now I will turn the call over to the operator to take your questions. Operator00:23:35Thank you. Please stand by while we compile the queue on a roster. And our first question coming from the line of Trevor Young with Barclays, your line is open. Speaker 400:24:00Great. Thanks. First one for David. You mentioned in the release The increasing testing velocity and I think you made comments to that effect also in your prepared remarks. Can you give us a couple of examples of that, both where you're finding some early wins That's the first question. Speaker 400:24:21And then the second one for, I guess, either of you. You both mentioned that the cost base is now readjusted lower And margin expansion from here is going to be more top line driven. Meanwhile, you're pulling back on marketing a bit. Just as we look out to 24, Like what signals are you on the lookout for that would indicate we're through the choppy macro and demand is starting to come back? Is it an improvement in organic traffic? Speaker 400:24:44Is it Growth in luxury home transactions. And then should we assume that you layer back in some of that marketing spend against that demand once it seems like it's coming back? Speaker 200:24:55Sure. Hey, Trevor. So in terms of the testing velocity, I mean, I think the significance of that is that It allows us to put many more features in the market. Not all of them succeed as you alluded Where we have been focused over the last quarter couple of quarters has been the lower funnel. So, the part of the funnel related to checkout specifically, we have a complex multi step funnel Relative to most other e commerce companies, so there we think there are significant opportunities at each stage of the funnel. Speaker 200:25:36The focus on checkout, I think initially we prioritize because it has the fastest returns. But overall, it's something we've been focused on for over a year. And I think we've been heartened that Our year over year decline in conversion has moderated in each of the last 5 quarters and last quarter was low Single digits, so approaching flat year over year and it's something we've seen carry over into the Q4. In terms of kind of what we would look for, in terms of a market rebound, I think when you look at our performance All over the last 2 years, we've indexed very tightly with the luxury real estate market. That market improved Last quarter, we improved with it in terms of moderating year over year GMP decline. Speaker 200:26:30As you can see from our guidance, we expect to See that soften in this quarter, along with kind of the activity that we've seen quarter to date. Alongside that, of course, we're focused on things that over time we believe will allow us to grow faster than the market, Specifically conversion. And again, like I said before, we've seen positive results of that. It's been offset So far by traffic, but overall, the more we can convert the visitors who come to First Dibs, The better the experience for them, the better the experience for sellers and the more the better the platform we have to be able to reaccelerate paid. But I think, again, the sort of short answer to your question is, we're pretty we've been pretty tethered to the market change. Speaker 200:27:19And while I think we can grow faster than the market, ultimately, I think we're going to need to see that market come back for us to be able to resume Our targeted long run GMV growth rates. Speaker 400:27:31That makes sense. Thanks for all that detail. Operator00:27:36Thank you. One moment for our next question. And our next question coming from the line of Rob Shuckart with William Blair. Your line is open. Speaker 500:27:47Good morning. Thanks for taking the question. On the Q4 guide, you talked about the macro As well as pulling back in SCN spend, just curious sort of the weighting Factors there because obviously typically in Q4 you see a little bit of a bump, but just kind of curious what was the more kind of pronounced driver of sort of The Q4 guide, then I have a follow-up. Speaker 600:28:12So I mean, Speaker 200:28:12I think specifically, as we look at our numbers independent for 2nd of the macros. Typically, we see a month over month increase in GMV from September to October. We did not see that this October. Going deeper, the pattern that we saw was similar to what many other consumer e commerce companies have reported, which is A slowdown in the second half of September would carry through into October. And we saw actually a very kind of specific and pronounced Declined right after the October 7 attacks in the Middle East. Speaker 200:28:51Since then, the GMV trends have stabilized. But at the same time, they're not sort of capturing or not reflecting our typical 4th quarter seasonality. So on that basis, we moderated our 4th quarter GMV forecast. And I think, look, what's driving it? I mean, again, I don't we're in the same market as everyone else. Speaker 200:29:12And I would point to similar dynamics like weak demand for consumer discretionary in general geopolitical instability as I mentioned. And on top of that, we're very levered to the luxury real estate market. That market was down 25% in the second quarter. It was down 10 ish percent plus in the Q3. Our year over year GMV performance reflected that change. Speaker 200:29:38We don't know what that is yet in the Q4, but we're feeling softness in that market as well. Speaker 500:29:47Great. And then on the call, you had mentioned shifting resources from auctions international, which have the longer payback periods Some of the seller and checkout initiatives, just curious any metrics behind that or any other color you could share in terms of some of the improvements that you're seeing on that front? Thank you. Speaker 200:30:05You mean in terms of conversion improvements? Speaker 500:30:08That's correct. Speaker 200:30:09Yes. So again, as I mentioned, our year over year Line and conversion has moderated each of the last 5 quarters, meaning our second derivative, which is something we look at pretty closely, has improved To the extent that last quarter and quarter to date, this quarter, we're approaching 0, so very low single digits. So again, we're very heartened by that because that's a kind of intentional the result of an intentional strategy that's helped By the pullback in paid, but the pullback in paid doesn't explain all of it. We think that we all of these improvements that we make are Pretty rigorously tested and the only ones that we graduate to making available to all users are ones that have a kind of measurable lift. Not all of them do, some of them don't. Speaker 200:30:58Those fail, we don't put them into production. So I think it's really a combination of those two things. What would it take? I think one of the questions I didn't answer was what would it take for us to increase paid again. Again, it's paid for us It's all about very disciplined, the very the math of a very disciplined customer acquisition program. Speaker 200:31:20So we have a breakeven. We spend up to that breakeven. As conversion continues to increase, we'll be able to spend more. But at the same time, right now, we think it's prudent to pull back on that which we have pretty substantially And reallocate resources into features that benefit the whole user base, and that improve the experience not just for buyers, but for sellers. The most important of which is conversion. Speaker 200:31:48Conversion in turn is driven by reducing purchase friction and also another focus of ours, Which is inducing our sellers to price items as competitively as possible. Speaker 500:32:03Okay, great. Thank you. Operator00:32:07Thank you. And our next question coming from the line of Nick Jones with JMP Securities. Your line is open. Speaker 600:32:23Hey, this is Luke on for Nick. So you mentioned that the active buyer growth may be Choppy near term. Could you just add any additional color on what needs to happen to reaccelerate the active buyer base heading into next year, particularly if soft demand Yes. This is Tom. So on active buyer growth, So from the macro perspective On active buyers, what we're seeing is that it's definitely pulled back. Speaker 600:33:17We're seeing The implications of the macros, the lower luxury housing market, the decline in the housing market, The decline in consumer discretionary spend is impacting the total buyer growth. So we are that's where we're seeing the declines is it's mostly driven by those macros. The As David said, what we're starting to see on conversion is that it's been improving over the last 5 quarters From the second derivative, as well, the active buyers, it's obviously been Lower because of our lower paid spend that we've been actively Managing our page spend down to reflect what we're seeing in the macros and what we're seeing in lifetime value relative to what we can So that has been an ongoing focus of ours is to bring paid spend down Operator00:34:40Thank you. And at this time, I see we have no further questions in the queue. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by