1stdibs.com, Inc.

Good day, and thank you for standing by. Welcome to the FirstDibs.com first quarter 2023 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 this session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin LaBuzz, Head of Investor Relations and Corporate Development. Please go ahead.

Good morning, and welcome to First Dibs Earnings Call for the quarter ended March 31st, 2023. I'm Kevin LaBuzz, Head of Investor Relations and Corporate Development. Joining me today are Chief Executive Officer David Rosenblatt and Chief Financial Officer Tom Edergina. David will provide an update on our business, including our strategy and growth opportunities, and Tom will review our first quarter financial results and second 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, business plans, strategic initiatives, evaluation of alternatives, 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 risk 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'll present GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which you can find on our Investor Relations website, along with the replay of this call. Lastly, please note that all growth comparisons are on a year-over-year basis. unless otherwise noted. I'll now turn the call over to our CEO, David Rosenblatt. David?

Thanks, Kevin. Good morning, and thank you for joining us today. We delivered first quarter GMV and revenue at the midpoint of guidance and EBITDA margins at the high end of guidance while continuing to make progress against our long-term objectives. Headwinds in the luxury home goods market exacerbated by comping against a record GMV quarter, resulted in a disappointing first quarter growth rate. We are working to re-accelerate growth, but we believe it will likely take some time before we see significant improvements. Despite these headwinds, supply growth and traffic growth continued, and we made progress on our strategic initiatives. Over the past few quarters, we've taken actions to reduce our expenses and improve our efficiency. Our work here isn't finished. Because our growth outlook today is below what we anticipated at the start of the year, we are evaluating additional steps to align our expenses with current demand. We're managing through this challenging period to emerge with more growth vectors and improve cost structure in a stronger competitive position. Digging into the quarter, continued conversion headwinds and lower AOV drove GMV declines. Although luxury home goods demand was subdued, marketplace supply remains robust with record seller acquisition, double digit listings growth, and near record low churn. Our annual seller survey indicates the first dibs is the top sales channel for our sellers after their showrooms. Additionally, We're seeing a larger GMV contribution from our influx of essential sellers in 2022, modestly boosting take rates. We're also pleased with continued traffic growth. Our organic traffic mix increased to nearly 75% of total. up several percentage points due to continued SEO strength and pulling back on performance marketing. This is encouraging because more supply and more organic traffic are barometers of marketplace health. We are also pleased to see jewelry continue to perform well, with double-digit order growth highlighting the benefits of operating across multiple verticals. Though not yet large enough to offset macro softness, Our strategic initiatives continue gaining traction. In the first quarter, we saw a record number of auction orders and record GMV from our French and German marketplaces. Given our strong international supply position, scalable tech platform, and encouraging international results to date, we plan to enter Italy and Spain later in 2023. Moving to operations, our goal is to stabilize and then re-accelerate GMB growth. Improving conversion, particularly for new buyers, is our largest lever and top priority. To accomplish this, we are focused on four distinct tracks, pricing, personalization, narrowing the conversion gap between US and European customers, and increasing app usage. Of these, we see the largest opportunity in pricing. Unlike an automobile or a smartphone, there is not always a clear market price for rare and unique items. Indeed, our user research suggests that the primary obstacles for new buyers to convert are their perception of price and a lack of pricing context. For example, is paying $3,700 for a vintage Van Cleef and Arpels Alhambra ring a good deal or not? Furthermore, in this market, buyer sensitivity to price is elevated. Our strategy is to leverage our decade-plus of proprietary transactional data to provide buyers and sellers more pricing transparency and advice. We are doing this in three ways. First, by giving buyers richer pricing insights. Second, by offering sellers more guidance on competitive pricing strategies. And lastly, by boosting the visibility of listings representing compelling value. For buyers, we launched new discovery experiences called shops. Shops are dynamically generated pages that algorithmically aggregate our most performance supply. Historically, listings and collections have seen higher engagement in sell-through versus non-collection items. While it's early, we are seeing positive results. For example, in December, we introduced the Design Value Shop, which highlights well-priced items. This collection generated over $3 million of GMV in March, despite representing less than 2% of overall listings. Data points like this increase our confidence in our pricing hypothesis. Shops reward sellers who price their items competitively and regularly add items to the marketplace. These behaviors drive seller success, and will continue to encourage them. They also make it easier for buyers to discover great products. In addition to design values, we launched most saved items in February and new arrivals in April, with more planned in the coming months. We also introduced several pricing-related features for sellers. For example, we added pricing guidance to item upload in early March. This leverages historical sales data to provide pricing recommendations when sellers create a new listing. Throughout 2023, we'll increase coverage and proactively share insights with sellers. Additionally, pricing guidance has been incorporated into auctions listings. While it's still early, we are also exploring a number of different AI applications that could help to increase conversion and drive savings. These areas include pricing guidance, search and browse personalization, SEO content creation, and reducing manual workloads. We are also making progress on our strategic initiatives. Localized marketplaces in France and Germany posted strong traffic growth, translating into record GMV. Sessions from German and French IP addresses grew over 300%. Furthermore, SEO traffic continued growing over 220% in both markets. Orders from German and French IPs grew 20% year over year, while orders on our localized marketplace grew over 10% sequentially. To foster the growth of our international business, our product team continues working on features to drive supply and demand. In the second quarter, we will roll out localized seller tools in Italian. A pilot of the program is already underway. Our objective is to accelerate the growth of highly sought after Italian supply. Additionally, based on the encouraging results of our French and German sites, we plan to launch localized marketplaces in Italian and Spanish by the end of the third quarter. Relative to our initial launches, these markets will be faster and cheaper. as we apply our learnings and leverage upfront infrastructure work from 2022. For example, it took about seven months to launch French and German sites. We expect that it will take about three months for Italian and Spanish, despite having a smaller team. We're also anticipating meaningfully lower translation costs compared to France and Germany, due to more efficient machine translation models and renegotiated rates. Auctions continues to deliver on our priorities of buyer activation, order growth, and higher sell-through. Orders hit a record in the quarter, growing approximately 10% sequentially and accounting for over 6% of the total. During the quarter, our product development efforts focused on demand generation and refining item level pricing recommendations. We expect these to help drive page views and bids. On the supply side, our strategy is evolving to focus on a narrower set of the most performant supply, like specific categories of art and jewelry. Additionally, in January, we also ran our first no-reserve auction, which had the highest sell-through of any of our monthly curations. Turning to supply, seller and listings growth remained robust. We ended the quarter with over 8,100 seller accounts. up nearly 50%, while seller churn remains near record lows. Additionally, listings grew 20% to over 1.6 million items. While demand remains soft, we believe our supply growth signals growing relevance to our end markets. Indeed, our recent seller survey indicated that First Dibs is the top sales channel for our sellers after their showrooms. Furthermore, For legacy sellers, defined here as those joining the marketplace before 2022, first dibs is typically the primary sales channel. Our goal is to aggregate the world's most beautiful items, regardless of where they're located, while maintaining our high curatorial standards. Because we're a marketplace of one-of-a-kind items, breadth and selection matters. Growing supply improves marketplace liquidity, drives traffic, and deepens search results, creating new opportunities to transact. In 2022, we introduced our Essential Seller Plan, A subscription-free tier with higher commissions, spurring a strong year of seller acquisition and helping to reduce churn. In 2023, we are focused on making this influx of new sellers successful, in part by growing listing volumes and launching new data-driven seller tools, like pricing recommendations. To this end, In early March, we launched the next evolution of this program, introducing minimum inventory posting requirements for new essential sellers. We know that sellers who post more sell more, and our goal with inventory minimums is to encourage engagement and drive sales. Before I conclude, I'd like to take a minute to welcome Ryan Beauchamp, our new Chief Product Officer. Ryan joined First Dibs in March following a decade at Google, where he most recently led the product management organization for Google Ads core experiences. Prior to that, Ryan oversaw business development and strategy for Google Shopping, and before that, launched Groupon Goods. He brings a strong understanding of online business models and monetization strategies. We enter 2023 facing headwinds from subdued demand for luxury home goods. But continued gains in traffic, seller acquisition, and supply growth, as well as performance in out-of-home categories like jewelry, give us confidence that we remain as important as ever to our buyers and sellers. Our goal remains to be leaner and have more growth drivers when demand recovers. I will now turn it over to Tom to review our first quarter financial results and second quarter outlook.