1stdibs.com, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the FirstDibs.com Incorporated fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, then 1 on your telephone keypad. If you require any further assistance, please press star, then 0. At this time, I would like to turn the conference over to Mr. Kevin LaButz. Sir, please begin.

Good evening, and welcome to First Dibs Earnings Call for the quarter and full year ended December 31, 2021. I'm Kevin LaButz, Head of Investor Relations. Joining me today are CEO David Rosenblatt and CFO Tu Nguyen. David will provide an update on our business, including our strategy and growth opportunities. And Tu will review our fourth quarter and full year 2021 financial results and first quarter 2022 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. Additionally, 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 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? Before we begin, I'd like to take a moment to thank our wonderful sellers, buyers, and employees for making First Dibs a leading marketplace for the world's most beautiful design. I'd also like to thank our investors for their support. 2021 was a strong year for First Dibs. We became a public company, launched two new offerings, which represent meaningful long-term growth opportunities, and delivered strong financial results. For the full year, GMV grew 31% and revenue grew 25%. We ended 2021 with nearly 72,500 active buyers, up 25%, and grew our registered user base from $3.5 million to $4.3 million, up over 20%. We regard buyer and seller trust as our most valuable asset. There is no other digital marketplace at our scale which has the buyer and seller trust to transact at our price points in multiple verticals. Average order value grew throughout 2021 in spite of higher volumes, reflecting the trust we've earned over the past 21 years. This was driven by broad strength at the heart of the marketplace. In the fourth quarter, GMV from listings priced between $2,000 and $20,000 outpaced overall GMV growth. However, luxury is available at a variety of price points. With a median order value of $1,300, we are able to deliver qualified buyers at price points ranging from $100 to $1 million. There are large opportunities ahead of us as luxury shopping migrates online. While the First Dibs brand is 21 years old, we didn't fully convert the business model to e-commerce until April 2016. Our primary focus since then has been to grow the liquidity of the First Dibs marketplace, which in turn fuels GMV growth. Scaling both sides of the marketplace, in addition to our great brand, strong network effects, unparalleled trust, and the secular shift of consumer and seller behavior online have driven our growth to date. Our strategy for 2022 and beyond is to enhance the growth rate of the marketplace by focusing on four new growth levers, auctions, product localization and international expansion, supply growth, and NFTs. Auctions, which launched on November 10th, provide buyers a new way to discover and purchase the world's most beautiful things on first dibs. Our development philosophy is to prioritize speed to market and then test and iterate as we gather data and feedback. Auctions are an example of this philosophy in action. We seamlessly brought a sophisticated product to market in 90 days. Since launch, we've added functionality and improved the buyer and seller experience through weekly product releases. Our thesis was that auctions would gain adoption because they're an effective form of price discovery for one-of-a-kind items and because we're already at scale in terms of the number of buyers, sellers, and items on the platform. Early results have validated our thesis, showing buyer and seller appetite as well as low barriers to adoption. Only three months in, over 15% of sellers have listed an item to auction. We achieved our first $1 million in auction GMV in under 10 weeks. Our primary lesson so far is the importance of proper pricing to successful auction outcomes. Items whose pricing has been optimized for the auction format have higher bidding activity and higher sell-through rates. These listings typically have a low starting bid price, a competitive reserve price, and a buy it now price, which is at a discount to the previous list price. While today only a small percentage of auction listings meet all three pricing criteria, sellers are very receptive to guidance on how to make auctions successful, and we have a number of efforts underway to help them. For example, our product and engineering teams are currently building pricing guidance tools for sellers directly into the product. Additionally, Our supply team and partner managers are driving adoption of optimal auction behavior by educating sellers on auction and pricing best practices. We're excited about both the early traction and the long-term auction opportunity. Over time, we expect that auctions will generate urgency, increase sell-through rates, aid price discovery, create new marketing hooks, and help convert more of our $4.3 million into registered users into buyers. The first step to accomplishing this is to optimize pricing, a major focus for the first half of 2022. Product localization is another 2022 priority. We plan to launch our first local language sites in the second quarter, starting with France and Germany. We're starting here because these are our largest non-English speaking markets in terms of order volume. Building localized products is a cross-functional effort. In addition to translation, our teams are working to integrate local payment methods, add local language support, build out local carrier networks, and create localized content and merchandising. Launching local language products will allow us to invest in paid and organic marketing. We'll start with SEO investment, followed by paid marketing as conversion improves. Product localization strengthens the first DIBS marketplace, bringing sellers more qualified demand and providing buyers with more unique inventory. We have a multi-year roadmap for international expansion, starting in Western Europe. In 2021, without any local language sites, over 40% of our sellers and one-third of our traffic were located outside the United States. However, international conversion rates are about half of U.S. conversion rates. Our expectation is that localization will improve conversion rates for non-U.S. traffic. Building our brand and our business in international markets will take time, but the opportunity is large and justifies the effort. Growing supply is another growth lever. We ended 2021 with more than 4,700 seller accounts, up over 20%. and over $14 billion worth of merchandise listed on the marketplace, up from $10.9 billion on March 31, 2021. Our goal is to aggregate the world's best items, regardless of where they're located. Our current merchandise value is just scratching the surface of potential qualified items. Given the heterogeneous and long-tail nature of our listings, growing supply increases discoverability and, hence, traffic. expands engagement, and improves conversion by providing buyers more options. To accelerate supply growth, in January 2022, we began testing new pricing tiers for prospective sellers. Our goal is to significantly increase supply while maintaining take rates long-term. These test plans expand seller choice, offering different combinations of subscription fees commission rates and service levels, including a subscription-free tier with a higher commission rate. This test allows sellers to select the plan that best supports their business. We know from seller surveys and cohort data that sellers add more listings and generate more GMV over time. This pricing test offers options to reduce the fixed costs of joining the marketplace. Early results have been encouraging. The number of new sellers signed so far in January and February 2022 is double the average monthly number from 2021. We've also seen an uptick in new European sellers, an encouraging sign that revised pricing supports international expansion. Scaling supply is the primary objective for our NFT platform as well. While we have a long wait list of highly qualified artists, to date, there's been a bottleneck in onboarding them. Our development team is shortly releasing the functionality to enable self-minting along with other artist-facing features, which will allow approved artists to create and sell NFTs themselves. We anticipate that the addition of unique digital art supply will drive buyer engagement. Our confidence in these initiatives is driven by the strength of our marketplace where the fundamentals remain healthy. In the fourth quarter, seller churn decreased compared to last year. The percentage of sellers with a sale increased, and we ended the year with over 4,700 seller accounts. On the buyer side, AOV and returning buyer conversion rates grew. On a two-year stack basis, GMV grew 52%. The holiday shopping season got off to a fast start with October and November GMV ahead of plan. However, We saw a slowdown in December, likely due to consumers pulling forward holiday shopping. Our marketing team ran another great holiday campaign, which, like many others, was brought up in anticipation of customers looking to avoid shipping delays. Consistent with recent quarters, interior designer, or what we call trade GMV growth, outpaced consumer GMV growth. Digging into trade, our team had another outstanding quarter, capping off an outstanding year. Design is a very hands-on process. Lockdowns and pandemic-related restrictions hamstrung designers in 2020, but they rebounded in 2021. In the fourth quarter, we grew both the number of spending trade firms and the average spend per firm. The business has great momentum entering 2022. Turning to supply, we're proud to announce that Matt Rubinger joined First Dibs as Chief Commercial Officer in November. Matt will oversee seller and supply acquisition, management, and growth. He has deep expertise in luxury, a tenured background at Christie's, and firsthand experience selling through digital marketplaces. We are in an excellent position to welcome more sellers and increase the number of beautiful, one-of-a-kind listings in 2022. Lastly, SEO had another strong quarter, with average rank improving and organic traffic growth accelerating. We prioritized cross-functional SEO investment in 2019, and this is now paying dividends. SEO is a good case study for our 2022 growth initiatives. The right mental model for how we think about our growth opportunities is building the critical mass rather than turning on a light switch. Building awareness and commercializing products takes time. Throughout this process, we closely monitor progress, updating our hypothesis, iterating on products as we gather feedback, and improving where needed. I'm proud of how the team executed in 2021. We increased product velocity, delivered strong GMV growth, became a public company, and continued building a diverse and inclusive workforce. Strong marketplace fundamentals and progress with past initiatives like SEO have give us the confidence to invest in auctions, product localization, supply growth, and NFTs. There is no other online marketplace with our breadth of unique, one-of-a-kind luxury design. Looking forward, we're well-positioned to benefit from the continued shift to digital, the extensibility of our platform, and the buyer and seller trust we've built over the past two decades. As we announced earlier today, our CFO to win is has decided to leave the company to pursue a new opportunity. Before I conclude, I want to take a moment to thank Tu for her counsel, dedication, and leadership over the past nine years. Tu has been instrumental in helping First Dibs raise capital, scale our business, hone our strategy, and go public. She will be missed, but I'm confident in the strong finance team that she has built, and truly appreciate the role she has played in setting up First Dibs for long-term success. On behalf of the entire board, management team, and company, a heartfelt thank you. Two will be succeeded by Thomas Etergino. Tom has extensive experience as a CFO of public companies. His proven track record in leading organizations through rapid business expansion makes him a perfect person to help us with our next stage of growth. On a personal note, I had the pleasure of working with him at DoubleClick, and I'm thrilled that we will be working together again. He will join the company at the end of March when Tu leaves. I'll now turn it over to Tu, who will discuss our financial results and outlook.