1stdibs.com, Inc. Q3 FY2024 earnings call

Key Points

• Third quarter results showed continued improvements with year-over-year revenue growth, accelerating order growth, and sequential active buyer growth despite luxury housing market softness.
• GMV contracted due to weaker average order values, but anticipated return to GMV growth in Q4 driven by conversion gains and moderating AOV headwinds.
• Adjusted EBITDA margins were at the low end of guidance, with margin compression in Q4 due to seasonal performance marketing increases. Focus on improving efficiency and positioning for sustainable growth.
• Conversion rates increased, with broad-based gains in new and returning buyers. Product velocity improved with double-digit sequential and triple-digit year-over-year AB tests, focusing on conversion wins like urgency metrics in mobile app and pricing guidance in make offer flow.
• Discontinued Auctions feature as resources were better deployed elsewhere; retired Essential Seller Program to shift focus to more engaged sellers, expecting modest revenue increase and reduced complexity.
• Completed $25 million share repurchase in June and instituted a new $10 million repurchase program in August.

In the third quarter, GMV was $84.6 million, down 5%. Net revenue was $21.2 million, up 3%. Conversion rates increased year-over-year for four consecutive quarters. Listings closed the quarter at over 1.8 million, up 7%. Unique sellers ended the quarter at nearly 7,000, down 13%. Transaction revenue was approximately 75% of total revenue, with subscriptions making up the remainder. Gross profit was $15 million, down 1%, with gross profit margins at 71%, down ~2 percentage points primarily due to higher shipping and payment processing expenses.

Fourth Quarter Forecast

• GMV: $86 million to $93 million, flat to up 8%
• Net revenue: $21.4 million to $22.7 million, up 2% to up 8%
• Adjusted EBITDA margin loss: 17% to 13%

2025 Plan

• Targets generating operating leverage at mid-single-digit revenue growth, focusing on ensuring resources are best deployed to accelerate and sustain growth.

• Muted demand in luxury housing and high-end discretionary markets.
• One-off items like the U.S. election creating competition for attention and a shorter holiday shopping season.
• Continued AOV headwinds that were temporary in Q3 but could still impact performance.
• Elevated seller churn in the fourth quarter due to retiring the Essential Seller Program, though expected to normalize in the first half of 2025.

Q: Could you remind us about the AOV headwinds and timeline for when they will abate or stabilize?

A: Tom Etergino stated AOV headwinds in Q3 were due to lapping a record quarter for orders over $100,000 last year and lower high value orders this year. Saw normalization in October, expecting more normalized AOV in Q4.

Q: Mark Mahaney asked about the materiality of discontinuing Auctions and how mid-single-digit revenue growth relates to bottomline. David Rosenblatt said Auctions was relatively material, accounting for 5%-6% of orders and 2% of revenue, and reallocation of resources is positive. Tom Etergino clarified no forward-looking guidance past one quarter, but mid-single-digit revenue growth is focused on achieving operating leverage.

Q: Ralph Schackart asked about order growth trends and seller churn normalization. David Rosenblatt said Q3 had sequential accelerating order growth, and seller churn was due to phasing out the Essential Seller Program, with churn expected to stabilize in the first half of 2025 once transitions are complete