1stdibs.com, Inc.

Thank you for standing by, and welcome to First Dib's second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your touchtone telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star 0. I would now like to hand the conference over to your host, Head of Investor Relations, Kevin LaBuz.

Good evening, and welcome to First Ibs Earnings Call for the quarter ended June 30th, 2021. I'm Kevin LaBuz, Head of Investor Relations. Joining me today are CEO David Rosenblatt and CFO Tu Quyen. David will provide an update on our business, including our strategy and our growth opportunities. And two, we'll review our second quarter financial results and third quarter outlook. This call will be available via webcast on our investor relations website at investors.firstdibs.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, and business plans. Our actual results may differ materially. Forward-looking statements involve risk and uncertainties, which are 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. During the call, we'll present GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which you can find in our investor relations website, along with the replay of this call. I'll now turn the call over to our CEO, David Rosenblatt.

David? Thanks, Kevin. Good evening, and thank you for joining us for our first earnings call as a public company. Before we begin, I'd like to thank our wonderful sellers, buyers, and employees for helping to make First Dibs a leading marketplace for connecting design lovers with highly coveted sellers and makers of vintage, antique, and contemporary furniture, home decor, art, jewelry, watches, and fashion. I'd also like to thank our public and private investors for their support. Since many of you are new to our story, before discussing second quarter highlights, I'll touch briefly on our history and our strategy. First Dibs was founded in 2000 to bring the magic of the Paris flea market online. Today, we're a classic two-sided marketplace with over 4,200 highly vetted sellers globally. Our sellers are small businesses, makers, and artisans. Our buyers are both consumers and professional buyers, interior designers and architects. Our mission is to enrich lives with extraordinary design. Over the past 21 years, we've built a reputation for helping collectors, design lovers, and interior designers alike discover beautifully designed one-of-a-kind items. We operate in a $129 billion market, which is in the early stages of online adoption. We're excited about the opportunity ahead of us. In addition to the continued secular shift to digital, we have numerous growth levers we are investing in. Luxury design lovers are everywhere, but luxury design isn't. Before First Dibs, if you didn't live in a design center like New York, Paris, or Milan, much of our supply would be inaccessible. For buyers, First Dibs eliminates the constraints of geography, unlocking unique global supply and making luxury design more accessible. For example, Last year, the average distance between buyers and sellers on confirmed orders was nearly 2,500 miles. Similarly, we provide sellers with access to a global community of well-qualified buyers and a platform to facilitate e-commerce at scale. Trust is the foundation of our marketplace and our most valuable asset, enabling highly considered purchases. For example, in the second quarter, a seller based in Rome, sold a 7.2-carat diamond ring for over $250,000 through our platform to a private client buyer in the state of Georgia. While we have earned the trust to sell rare and valuable items at high price points online, the majority of our listings are within reach of the mass affluent buyer. In 2020, our average order value was $2,500,000, but our median order value was $1,200. This trust, backed by the first DIBS promise, our comprehensive buyer protection program, enables us to expand our marketplace and our TAM. There have been two important business model transitions since our founding. First, in 2016, we shifted from a listings-based model in which all communication between buyer and seller was up to and including the transaction itself, occurred off-platform to a full e-commerce model where both communication and orders occur on-platform. This aligned our incentives with our sellers and buyers and better matched our revenue growth to our GMV growth. Second, we expanded beyond vintage and antique furniture, our initial category, to art, jewelry, fashion, and new and custom furniture. In the second quarter, About 50% of our new buyer orders came from new categories. This morning, we added our latest vertical, NFTs, which I'll touch on below. In 2020, our focus shifted from business model transition and vertical expansion to managing through COVID and supporting our sellers in that difficult period. We enter the second half of 2021 as a well-capitalized public company focused on growth. We have more growth initiatives in process and on the roadmap than at any point in our history, and we believe that each major initiative represents a non-incremental GMV opportunity. For example, this morning we launched our NFT platform, which we launched as a blockchain-native auction. Initially, the platform will feature bi-monthly exhibitions. The debut collection, titled Portals, is a series of work featuring 11 recognized digital artists curated by the notable artist Metageist. We believe that the blockchain in general, and NFTs in particular, are a game-changing technology for the art world, that digital art will become a significant market in its own right, and that the trust we've gained with consumers and artists places NFTs squarely within our right to win. Our NFT launch illustrates the extensibility of the technology platform and capabilities that we have spent the last 10 years building. Our tech platform and associated commercial capabilities enable us to unlock potentially large GMV opportunities in a capital-efficient manner. In this case, we were able to conceptualize the NFT opportunity, build the capability, and launch within a short amount of time with an investment of less than $1 million to date. We're still in the early stages of realizing our market opportunity. The NFT platform is the first of several new initiatives we plan to launch over the next year. Another example is international expansion and product localization, a strategic priority of ours. While there is significant international demand for our listings, our product is currently only available in English. In 2020, 19% of our buyers and 33% of our traffic came from outside the US, despite the fact that we do no local language marketing. Additionally, our conversion rate from international buyers was about half that of US buyers. In addition to vertical expansion and international growth, we see opportunities to grow our buyer base by testing and scaling into new paid marketing channels, improving buyer engagement through product optimizations, introducing new purchase formats, encouraging cross-vertical buying and growing supply. Turning to second quarter initiatives, we continued to expand our marketing channels. For example, in early May, we launched a partnership with American Express for their Centurion Black Card members. We worked with American Express to develop a comprehensive integrated marketing campaign, and the partnership was successful in attracting new, potentially high lifetime value buyers. Additionally, we continue to ramp programmatic prospecting, which we began testing in December 2020 and started testing connected video in July. We also continue to enhance our product. For example, we launched an iPad app in May, improved our jewelry shopping experience by adding structured data like ring size, lab reports, and customization, and continue to add item videos to product pages. In the second quarter, About 20% of our new jewelry listings included a video. Alongside product, we are focused on scaling sales and service. For example, in April, we ramped up a chat customer support feature, allowing us to respond to inquiries from this channel in a matter of seconds, improving customer satisfaction. Today, over 20% of our inbound support volume is chat. Lastly, we continued scaling our facilitated shipping program and in May launched sea freight as a new shipping option. For orders between Europe and the U.S., the sea freight option is 38% cheaper on average versus air. Two, our CFO is going to walk through second quarter numbers in more detail, but I'll quickly share some context and highlights. Overall, Q2 was a very healthy quarter for demand. GMV grew 34% year-over-year and revenue grew 29% year-over-year. Additionally, our two-year stacked GMV growth rate, which normalizes the COVID impact, remained strong at 48%. We closed the second quarter with roughly 69,000 active buyers, 50% higher than where we ended 2019. 2020 was a record year for new buyer acquisition. we now have relationships with these buyers that we plan to grow over time. Last year, as we know, COVID-19 brought on a period of rapid behavior change, which we began to lap in the second quarter. The reopening of the economy has very different impacts on our two primary customer segments. Interior designers were negatively impacted by COVID-related restrictions last year. Now, as the economy reopens, they're busier than ever. Trade GMV growth in the second quarter benefited from continued strength in the real estate market and new and resuming projects. June trade GMV hit an all-time monthly record. While trade GMV grew throughout the quarter, consumer GMV growth slowed, particularly in June. We believe this consumer trend was largely macro-driven as vaccinations became readily available and the economy reopened. Nevertheless, our two-year stack for consumer GMV was a healthy 55%. As we lapped the pandemic-related lockdowns and the associated rapid change in consumer behavior, our fundamentals remained strong and our long-term thesis is unchanged. Looking at the entire business, gross margins expanded and AOV and conversion rates increased year over year. Cohort behavior was stable. Encouragingly, buyers who made their first purchase between May and July of 2020 continue to have higher engagement and purchase frequency than our pre-COVID cohorts. Post-pandemic, we expect consumer buyers to drive the majority of our growth due to the relative size of the consumer market as compared to the professional market, as well as the fact that all of our verticals are available to consumers, while naturally, trade buyers only buy in the furniture and art verticals. As we look to the future, it is important to remember that not only are we still early in the online adoption curve of our industry, but we are early in the development of our own company. Despite the fact that we have a 21-year-old brand, the First Dibs business model is just five years old. and I believe that we will see as much change over the next five years as we have seen in the prior five. I'll now turn it over to Tu to discuss second quarter financial results and outlook.