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spk07: Ladies and gentlemen, thank you for standing by and welcome to the Q4 2020 Poshmark Inc. 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 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Christine Chen, Head of Investor Relations. Thank you. Please go ahead.
spk02: Welcome to Poshmark's fourth quarter and full year 2020 conference call, our first call as a public company. Joining me today are Manish Chandra, our founder, chairman, and CEO, Anand Kashyap, our chief financial officer. Please keep in mind that our remarks today include forward-looking statements, such as statements related to our financial guidance and key drivers, the impact of COVID-19 on our communities, business, and strategy, the potential benefits of our marketing and product initiatives, and the anticipated return on our investments and their ability to drive growth. Our actual results may differ materially than those expressed or implied in our forward-looking statements. Forward-looking statements involve substantial risks and uncertainties, which are described in today's earnings release, the final prospectus for our IPO filed with the SEC on January 14, 2021, and subsequent reports that we filed with the SEC included in our annual report on 10-K for the year ended December 31, 2020. Any forward-looking statements we make on this call are based on our beliefs and assumptions as of today, and we don't have any obligation to update them. Also 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 release, which you can find on our IR website along with the replay of this call. And with that, I'll turn it over to Manish.
spk05: Thanks, Christine. Hello and welcome, everyone. Thank you for joining us for our first earnings call as a public company. I hope you're all doing well and staying safe and healthy in these challenging times. One year ago today, the World Health Organization declared COVID-19 a pandemic and our lives were forever changed. My heart goes out to those who have lost loved ones and to everyone affected by this unprecedented health and economic crisis. Looking back on the year, I'm incredibly proud of how our team came together to support our employees and community during a very unpredictable and volatile time. We not only navigated through a very challenging year, we also delivered profitability for the first time and accelerated momentum in the business. Before we discuss our fourth quarter and full year results, I want to take a step back to reflect on our mission and provide some historical context to help bring our performance into focus. Poshmark was born from a vision I had nearly a decade ago, where people are empowered by technology to make shopping human and social again, while pursuing their passions, supporting sustainability and ultimately thriving financially. Our mission is to put people at the heart of commerce, empowering everyone to thrive. By pairing technology with people's inherent desire to socialize, we built a vibrant social marketplace engineered to enable seamless e-commerce transactions and create hyper-engagement. Our social marketplace is designed to serve everyone. Whether you're looking to save money, make money, find unique items, or discover new brands, Users come to Poshmark to shop and sell everything from apparel accessories and beauty to home goods, luxury items, and now pets merchandise. We have an asset life model and hold no inventory and instead focus on making the buying and selling experience incredibly seamless, easy, and social through the power of technology. We're the leader at the intersection of three key trends shaping the future of shopping. The shift to online, the shift to social, and the shift to secondhand. Many of these trends are led by younger generations who continue to grow their spending power as they age. But the beauty of Poshmark is that we have a broad appeal across generations. We grow our marketplace by growing our overall community of users. These users activate as buyers and sellers, creating a virtual flywheel of growth and monetizations. When users join, they connect with each other through social interactions, which grew 48% to $30.4 billion in 2020. Sellers are at the heart of the Poshmark community, and we welcome sellers of all types, from resellers to retailers, side hustlers to professional sellers. Most of our sellers are what we call casual sellers, people who are selling items that they can easily source from their closet. The beauty of our social marketplace is that our users, who spend an average 27 minutes daily on our app, continue to engage and re-engage over time, both as buyers and as sellers. And this fuels a high-velocity flywheel of organic growth. Anand, our CFO, is going to take you through the numbers in more detail. But I want to walk you through some of the fourth quarter and 2020 full-year highlights. We reported a strong fourth quarter and grew our GMB and revenue by 28% and 27% respectively, as our community of buyers and sellers continued to embrace Poshmark's social model. For fiscal year 2020, GMB and revenues grew 29% and 28% respectively to $1.4 billion and $262.1 million. We delivered our third consecutive quarter of adjusted EBITDA profitability with $4.2 billion in adjusted EBITDA and 6.1% in adjusted EBITDA margin. For fiscal year 2020, our first year of profitability, adjusted EBITDA was $34.3 billion with 13.1% margin. We continue to focus on marketing efficiency while investing in growth. We're entering this new chapter as a public company with a business that is stronger than ever, and this was driven in large part by great execution of our four growth strategies. Our first strategy is to focus on innovation to drive user engagement, which is fundamental to the retention of our user cohorts and GMB growth. To make discovery and shopping even easier for buyers, we remain focused on optimizing search, which includes leveraging personalization and strengthening matching to drive conversions. We believe there is enormous potential here, and we are working hard to extend personalized merchandising to even more areas of our marketplace experience. In August, we completed the rollout of Boss Stories, our first video commerce feature that enables sellers to market their listings in short videos and photos, and allows buyers to discover and shop items directly from these videos. Just last month, we began testing a highly requested capability that allows sellers to add videos directly into their listings, providing new ways to market their products, drive traffic to their closets, and engage with potential buyers. These listing videos will automatically be added onto Posh Stories, continuing our goal to bring video into the heart of Poshmark's social marketplace. Growing our international footprint and capability is a second key strategic focus, and we plan to invest ahead of revenue. The success of our Canadian market, which launched in May 2019, provides a roadmap for continued international expansion. In February of 2021, we launched Boschmark in Australia, our second international market. We're excited to offer Australians a simple, social, and sustainable way to shop, sell, and connect. With this expansion, whether you are in US, Canada, or Australia, all users will be able to switch their app view between countries to see listings, get style inspiration, and engage with each other socially, fostering personal connections across the world. Our third strategy is to go through category expansion. And in 2020, we launched two new categories, beauty and wellness, and toys and games. And just a few weeks ago, we launched pets. As we think about category expansion, we want to address the style needs of the entire family. These new offerings demonstrate the scalability of our model. Our fourth strategy is to deliver robust, easy-to-use and effective seller services to help sellers market and sell their product offering. Our social marketplace makes it very easy for anyone to sell, and we provide incredible demand generation services to attract shoppers to sellers' listings. In September, we released Drop Soon feature, which allowed sellers to pre-market items that are not yet available for purchase. Buyers can like the items to be notified when it's available for sale, building demand prior to the product drop and facilitating quicker sell-through. This feature has been particularly well received by professional resellers, brands, and boutiques who are managing deep inventory. From day one, we have been committed to giving our sellers tools to simplify and scale their business. And we are excited to take this to the next level to ensure we're the social store for everyone. We're in the early stages of investing in new technology and services to help our sellers spend time doing what they love best, which is connecting with each other and serving their customers. And this includes building out capabilities for sellers who are scaling up their operations. In January, we started rolling out a new feature that gives sellers the ability to list items with discounted shipping to a small segment of sellers. Previously, shipping discounts were only available through private negotiations and offers. We are encouraged by the initial conversion rates and expect to roll this out to the entire community this month. This month, we reintroduced Posh Party Live, which is a flagship Poshmark event series that goes back to the early days of our founding and is a popular networking and social event for our community. Only this time, instead of physical events, Posh Party Live will be held in a new virtual format. Poshers across the US, Canada, and Australia will be able to join these virtual events to socialize and gain seller-focused educational programming. While the world remains socially distant, we are keeping the Poshmark community connected through live virtual events. And when it is safe to do so, we will plan to introduce in-person events, which I know everyone is eager to get back to. During these extraordinary times, consumers' craving for social interaction has only been intensified, and the Poshmark experience uniquely brings people and technology together to make shopping fun and social again. The simplicity of our business model makes it possible for any type of seller, small or large, to thrive by selling to buyers who seek a more social and sustainable way to shop. Guided by our mission and values, we have more confidence than ever that our strategies will continue to accelerate growth into 2021 and beyond. We remain focused on supporting our community, innovating for a fantastic user experience, and expanding the reach and offerings of our social marketplace as we continue to lead the future of shopping. In conclusion, we had a strong fourth quarter in 2020. where the Poshmark team really put their energy into executing for the benefits of our entire community. We believe that Poshmark has an incredible, compelling growth potential for years and decades to come. We have high conviction around making the investments that are going to allow us to achieve that full potential. Poshmark will continue to be a place where you can save money, make money, and find human connection. And with that, I will turn it over to Anand.
spk04: Thank you everyone for joining us for our first earnings call as a public company. Fourth quarter was another solid quarter as we delivered strong GMV revenue and our third consecutive quarter of operating profitability. We generated 387 million GMV for the fourth quarter, which was 28% growth from 302 million in the fourth quarter of 2019. The robustness of our cohorts and simplicity of our model helped us deliver this strong and consistent growth. Commensurately, net revenues were 69.3 million in the fourth quarter of 2020, which was 27% growth from 54.7 million in the fourth quarter of 2019. This was driven by an increase in GMB in the fourth quarter of 2020 and overall growth of our community, including 20% growth in active buyers to 6.5 million from $5.4 million in the fourth quarter of 2019. Our take rate was 17.9 percent, down slightly from last year's 18.1 percent as a result of higher than expected delayed or canceled orders resulting from USPS backlog during the holiday season. Cost of revenues was $11.6 million in the fourth quarter of 2020, an increase of 18.2 percent from the fourth quarter of 2019 and decreased to 16.7% of revenues due to some leverage in hosting expenses. Therefore, adjusted gross margin, which is net revenue less cost of net revenue, improved to 83.3% of revenues in the current period as compared to the fourth quarter of 2019. Marketing spend was $27.5 million in the fourth quarter of 2020, which was a decrease of 24.8% from the fourth quarter of 2019. Marketing was 39.6% of net revenue in the fourth quarter of 2020, down significantly from 66.8% of net revenue in the fourth quarter of 2019 due to intentionally lowering our spend levels and rationalizing our marketing spend to focus on strong ROI user acquisition channels. We increased marketing spend as compared to the second quarter of 2020 by leaning more heavily into upper funnel strategies, such as television and influencer marketing, to capitalize on the holiday seasonality. When COVID hit, we chose to cut marketing in the second quarter of 2020 to conserve cash. We'd always planned to reduce marketing over time, but this pulled it forward, and we operated with a different growth and profitability mindset. What this proved was that our core retention and organic growth engine is very strong, as our older cohorts are loyal and provide us with profits to invest for long-term growth. Moving to operating expenses, operations and support was $11.9 million in the fourth quarter of 2020, an increase of 17.2% of revenues, up from 15.7% last year. We experienced an increase in shipping charges related to USPS implementation of package weight and dimension scanners across the system, and we issued a higher level of redeemable credits as a result of severe USPS shipping delays, stemming from the holiday, weather, and COVID workforce complications. During these extraordinary times, We increased our hiring across the team to support customer needs during the fourth quarter to maintain our excellence in customer service. G&A was $8.3 million in the fourth quarter and decreased 11.9% of revenues from 14.5% last year, mainly due to decreased travel and entertainment expenses as a result of our remote work policy, as well as lower consulting and legal expenses. We expect this to increase over time as we return to office and we experience additional costs of being a public company. We delivered adjusted EBITDA, which excludes stock-based compensation, of $4.2 million, with adjusted EBITDA margins of 6.1% compared to a loss of $12.6 million and negative 23% margins in the fourth quarter of 2019. The majority of the profitability improvement was driven by strong revenue growth and our decision to lower our marketing investment as compared to prior years. We will prudently invest in sales and marketing in the future, as we did in the fourth quarter, but with a focus on growth and margins. Operating income was $1.6 million in the fourth quarter of 2020, with operating margins of 2.3%, which is a meaningful change as compared to the loss of $15.1 million, with negative 27.5% margins in the fourth quarter of 2019. Similar to the improvement in adjusted EBITDA, the increase in income from operations was driven primarily by strong revenue growth and decrease in marketing expense. Due to the transition from a private company to a public company, we incurred GAAP non-cash other expenses due to higher share price impact on changes in fair values of our convertible notes and warrants. Thus, we believe that excluding all non-cash one-time capital structure expenses resulting from our IPO on January 14th from our net income is a better indicator of our operating performance. Fourth quarter 2020 non-GAAP net income to common was $1 million and excludes $5.1 million in non-cash expenses related to convertible notes and warrants due to the increase in the fair market value of our common stock share price, resulting in non-GAAP EPS of $0.05 a share. For the full year 2020, non-GAAP net income to common was $22.9 million and excludes $18.9 million non-cash expense related to convertible notes and warrants due to the increase in the fair market value of our common stock share price and undistributed earnings to convertible preferred stock, resulting in non-GAAP EPS of $1.25 a share. Cash equivalents and marketable securities were $262.1 million as of December 31, 2020. During 2020, we issued 50 million of three-year convertible notes during the third quarter, which converted into 1.4 million shares of Class A common stock at the IPO. In addition, all 52.3 million of our convertible preferred stock was converted into Class B common shares at the IPO. As we look ahead and think about capital allocation and the use of cash, our number one priority is using our strong balance sheet to position us to invest in growth and strategic organic investments to drive long-term growth internationally. Moving to the cash flow statement, we had a record year for cash flow generation and turned cash flow positive. When the year ended December 31, 2020, free cash flow was $82.9 million. compared to a net outflow of $10.9 million in 2019. Our strong capital generation significantly strengthened our balance sheet and liquidity. Looking forward from a macro and long-term perspective, the megatrends that we have been leading are only increasing, specifically the consumer shift to online shopping, along with the shift to social commerce and secondhand. A year ago today, the World Health Organization declared COVID-19 a global pandemic. and our community suddenly faced unprecedented times that continue to this day. At the start of the pandemic here in the U.S., state-by-state performance varied as our community faced different localized concerns and lockdown environments, which began to converge as 2020 progressed. What we have seen thus far in the first quarter is state performance once again diverging. Specifically, we're seeing two types of state groupings. The first group is going to perform well, with growth rates above the average, such as California and Florida, The second group has seen more volatility, including states like New York and Texas, which in addition to COVID fluctuations, have been impacted by unseasonably cold weather patterns and or power outages. Our business model is built on the long-term retention of our cohorts, which as we demonstrated in 2020, even when faced with near-term disruptions, have remained resilient. We conclude that as the COVID-19 vaccine rolls out and the country begins to reopen, Trends impacting our community and business will continue to vary state by state as reopening timelines vary in the return to normalcy. Due to the uncertainty of the timeline of COVID-19 recovery and reopening, we are not providing annual guidance at this time, but will be providing quarterly guidance. We expect first quarter revenues of $75.5 to $77.5 million, resulting in a growth rate of 32% to 36%. First quarter started off with an unfeasibly strong January. However, as noted, we have seen certain states underperform relative to historic trends in February as our community manages through severe weather and COVID. We expect to remain profitable with first quarter EBITDA of $1 to $2 million. Adjusted gross margin performance during fourth quarter 2020 was ahead of our initial expectations, benefiting from leveraging of hosting costs. Moving to 2021, we expect gross margin to be similar to 2020 levels due to normalization of hosting expenses. We expect operation and support in the first quarter to be 100 basis points higher than last year, as we expect to see similar trends in the fourth quarter due to continued strains from the USPS. We now anticipate incremental costs due to an increase in credits issued to address USPS disruptions, as well as additional staffing to support the increase in number of customer inquiries. Some of these trends may continue in the near term. We expect G&A expenses to be 150 basis points higher during the first quarter. This is driven by higher than expected public company costs for the year, totaling $2.5 million. The vast majority of this was due to D&O insurance. We will remain disciplined with our ROI-based approach and expect marketing as a percentage of revenues to remain in the low to mid-40s in 2021 as a percentage of revenues to grow users and support the launch of categories and country expansions. We believe there is still a large opportunity before us, and so we plan to invest in building the brand, grow our user community, and international and category expansion. We see very strong GMB retention due to our social model, which drives engagement and repeat transactions. These cohorts have been both resilient and have high residual value after the initial year of acquisition. Thus, we're confident that the growing engagement of our user cohorts will enable us to deliver consistent growth over the long term. Overall, we believe we have executed very well during a challenging environment with the focus on the safety of our employees, supporting our community, and driving efficiency in our operations. Thank you, and I'll now turn the call over to operators so we can take your questions.
spk07: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. In order to allow everyone time for questions, we ask that you please limit yourselves to one question each. Please stand by while we compile the Q&A roster. Your first question comes from Lauren Shank from Morgan Stanley.
spk10: Great. Thanks so much. I guess starting with a bigger picture question, You know, the market's expecting a rebound in apparel spending as we progress through the year, which should benefit you guys. But how are you thinking about the supply environment in 2021, just given the boost that you saw in 2020? And do you feel like you have the right composition of supply on the platform to capture that demand through the course of the year? And then my second, I know I'm not allowed a second question, but my quick modeling question, the 4Q take rate slightly below 18%. I know it's seasonally higher in the fourth quarter due to the cancellations and packages being stolen. Was that just higher than expected? And any additional color there would be really helpful. Thanks so much.
spk05: Great. Thanks, Lauren. This is Manish. I'm going to just start with giving you a little bit of the bigger picture. So one of the things about our asset-like marketplace model that is pretty key to understand is that the Seller community can very quickly adapt to the changing profile of the demand characteristics. And that's sort of something we saw in Q2 as we went from a platform that was built on dresses and, you know, outdoor and everything else, and everyone started to move towards sweats and tie-dyed and sort of a very different model. And what we'll see very similarly as we adapt to the world opening up is this change in demand and sales across the board. I want to share a specific data point on the platform is between January and February, there has been a difference in customer demand where customers are searching for summer dresses 200% more. than they were in January. And the bathing suit demand in terms of searches has gone up by 150%. So what you're seeing is the customers are starting to prepare for the opening and the platform will quickly respond to that demand as it prepares for that opening.
spk04: And, Lauren, I'll take the second part of your question about the take rates. So traditionally, Q4 actually tends to have a higher cancellation rate. What we saw this year was obviously significantly different, primarily because of the USPS delays. As you know, some of our customers had their package delayed by a week, and some had their package arrive four weeks later. So we had a higher than usual cancellation rate because of that. As part of that, we actually had to issue more credits as well. So you'll see higher operations support expense in the fourth quarter. We expect there'll be a little bit more return to normalcy once USPS services are back up and running. There were some issues again in the middle of February, but since then, we've been returned to normal.
spk10: Great, thank you.
spk07: Your next question comes from Mikey from Goldman Sachs.
spk08: Hi, good afternoon and thank you for the question. Would you just talk a little bit about the progress you've made expanding into Australia to date and any learnings or challenges that will form your expansion plans for other international markets later this year? And then just as a quick follow up, do you have any color about how we should think about buyer net additions for 2021 or even the first quarter? Thank you very much.
spk05: Can you repeat the second part of your question again?
spk08: The second part of the question on buyers was just could you talk a little bit about your expectations for buyer growth in early 21?
spk05: So in terms of Australia, we're in the community building phase of that country, where when we launch a country, we spend the first phases just building out the community, getting the operations and systems going, and that phase is progressing really well. We, in fact, last week launched a partnership with our board member, Serena Williams, and created our first closet for charity in Australia, and that has worked really well. So we continue to be in that community formation phase and then we'll move into a marketing and sort of scaling up phase uh as we start to feel the communities coming together uh it's been honestly a very different experience than launching canada because it's been all done in covet however the community is coming together very well even though we're using more virtual events and sort of reaching out through video and zoom calls in terms of building that initial set of community There is a little bit more movement in Australia than what we see in the U.S., but it's still quite restrictive. So we're learning how to build communities in COVID times, and we're seeing that coming together is even more intense than what we saw in pre-COVID times as people's thirst for social continues to be very, very strong. We feel that you know, as we open up other countries, we're going to learn some of the lessons of pre- and post-COVID world and merge them depending upon the exact circumstances of opening up of each country. But the core of our marketplace and core foundation, core behaviors seem to mimic what we've seen in U.S. and Canada and Australia.
spk04: Yeah. Hey, thanks, Mike. As far as, you know, active buyer growth for the remainder of the year, obviously, we're not providing you know, guidance beyond just the first quarter. I think what we expect in terms of, you know, the first quarter is, you know, very similar dynamics as the fourth quarter, you know, with regards to, you know, active buyer growth, you know, probably more in the high teens than anything else. Hopefully that gives you enough color. Great.
spk08: Thank you, Manish, and thanks, Anand.
spk07: Your next question comes from Ross Sandler from Barclays.
spk00: Hey, guys. Question on the new non-apparel categories like toys and beauty that you mentioned. How big of an opportunity do you see these as? are these the same sellers or are you bringing in new sellers in new categories? If you kind of look out five years, you know, which do you rank higher in terms of the growth opportunity, some of these new non-apparel adjacencies, or is the international going to be a bigger growth driver over the next five years? Thanks a lot.
spk05: Yeah, so beauty and home were really the highest growing categories in Q4 for us. We see both of them as becoming fairly significant over time. A lot of the usage you see in the categories come from existing sellers, but they are both catalysts for drawing new sellers into the marketplace, but also new shoppers into the marketplace. Looking out five years, I think we expect categories to be a meaningful part of our growth. However, I still feel that international will turn out to be a much bigger opportunity for us, just given the universality of the paradigm we're seeing across the world. But we expect both to be pretty significant as we look into the next five years.
spk07: Your next question comes from Oliver Chen from Cowan.
spk09: Thank you. As we do look forward, do you expect that there will be this divergence in the regional trends, or do you think it will harmonize in the context of reopening? I would also love your take on longer-term tactics or strategies to try to weatherproof the business, and if weather may be a risk factor that's out of your control going forward. Thank you.
spk05: Great question, Oliver. I think a lot of the variability we are seeing is a combination of weather and COVID-related sort of divergence in the state cohorts. We see some, if you go back historically prior to COVID, we saw some level of divergence based on weather. But over a longer period, if you took multiple months, things would converge. So if you took a variance from sort of the mean revenue from different states or mean GME from different states, their variance in the growth rates would be very small. I mean, we're talking single digits, et cetera. The kind of divergence we are seeing right now is definitely COVID exacerbated with weather, but not completely weather related. So that's sort of the one thing to talk about. And that's why it's a little bit more complicated to model it. you know, as all states normalize, COVID normalizes, I think these very highly local sort of ordinances, vaccine distributions, et cetera, should start to normalize and we should start to see the states converge back. You know, hard to say whether it takes a quarter or two, but... I feel that the world is already opening up, and the differences we are seeing in states that are open and states that are more slowly opening is not as material as much as the very specific local ordinances that are shaping up these states.
spk04: Yeah, the only thing I would add about what we see in some of these scenarios with regards to weather is that it's essentially sort of twofold. One is you know, extreme weather, like, you know, states like Texas and with the power outage, right, impacting some of the scenarios. And the second is just how, you know, we see the dovetailing into the impact with USPS and their ability to essentially deliver packages. So it's, at the end of the day, we're an e-commerce business. It's about delivering the product, right? So I would say those extreme scenarios, we don't expect to happen consistently. So I would say it's not about weatherproofing the business. It's just unfortunate scenarios. Thank you very much. Best regards.
spk07: Your next question comes from Ralph Shackhart from William Blair.
spk06: Good afternoon. First question just on customer acquisition costs. I know you talked a little bit about moving more upper funnel and prepared remarks, but just curious the trends you saw in Q4 and perhaps more importantly, you know, how are you thinking about CAC or how should we think about CAC in 2021 as states and the world slowly reopen here? And then maybe shifting gears with the stimulus package that was just recently signed, can you remind us how the business performed last year when the stimulus checks rolled out? And then just any perspective thoughts on 2021 as those checks roll back out again would be helpful. Thanks so much.
spk04: Hey, Ralph, thank you. As far as CAC is concerned, we've maybe talked at a high level about marketing and our overall strategy, so maybe I'll pinpoint to that again a little bit here. The first is we're focused on driving as many active users on the platform and then converting them into buyers and sellers over time. So the way we've approached marketing is to take a very ROI-based approach. So we look at all of our different marketing channels. We're pretty rigorous about looking at payback periods. And so especially for the U.S. as a primary market, we're targeting approximately a two-year payback there And so when we look at kind of Q4, we basically manage the business around some of those thresholds. We obviously look at times where if it gets too expensive, then we pull back. And if it's cheap, there's opportunity. We basically press down the gas pedal. International is the only one where we obviously expect to be some investment ahead of revenue. But as far as 2021, I don't think we see any sort of fundamental change in the advertising markets compared to what it was in sort of back half the year. And to your second part of your question about stimulus, we're obviously extremely happy that the administration has done the right thing for a lot of our community. Many of them have been suffering, obviously, for a decent period of time. So this was much needed. As far as how it impacted the business, I would say it's obviously great for all retailers, both online and offline. However, we don't think about that as kind of the primary driver of our business. We're focused on building great cohorts that continue to retain over a period of time. If this is a short-term infusement into, call it the overall economy, we don't think of it as something long-term in terms of how we should plan and run the business.
spk06: Okay, that's helpful. Thank you, Anna.
spk04: Thank you.
spk07: Your next question comes from Ron Josie from GMP Securities.
spk01: Great. Thanks for taking the question. Maybe two or so. Manish, just bigger picture here. We've talked a lot about seller tools and just the opportunities here. And you talked about drop soon launching and shipping discounts and Posh Party live launch. Can you just talk about the roadmap for seller tools, how you see them as a driver for just overall greater supply, both on the seller side, but then how they could attract more demand? And then, Anand, I just want to make sure I understand, you know, you mentioned canceled orders due to shipping delays in 4Q. January, I think you said, was seasonally stronger. February was hit by weather. Wondering if we return to a normalized cadence here in March post-weather and if there were any issues with, like, sales that were missed in February. Do you think those get made up? Maybe that was a comment around, you know, some apparel issues. some apparel growth early on in the quarter. And maybe one last one, if I can sneak it in. Just any thoughts on shipping alternatives besides USPS? So maybe like if there's a local buyer and seller, maybe using a delivery service or something along those lines. Thank you, guys.
spk05: Great questions. Yeah, so when we sort of look at our entire seller roadmap, it is really designed to empower them to do three or four things one is how do they merchandise better so when you think of four stories and videos it is allowing them to do deeper merchandising uh on the platform and really take it into a a faster sell-through of the listings that they're creating The second piece is how do they market these listings, get them exposed to more eyeballs, both inside Poshmark and then outside Poshmark. And that is focused on things like drop soon. Posh stories and Posh videos also help them fan out their reach. So that's the second piece of the piece. And the third is to really offer the right economics to what the shoppers need. And that's where discount shipping, et cetera, helps in helping them fine tune the right value proposition to their customers. We have other tools that we've built in historically, like offer to likers, price drops that help them get to the right sort of pricing matching with the shopper. So, we continue to serve the sellers on that front. The second set of tools that we've talked about that we're working on is really helping them scale their businesses. As they go from managing small businesses to medium-sized business to large businesses, we want to be giving them the kind of tools that they need to scaling those businesses. So that is about really supporting the seller's journey from small to big to medium and attracts not just allows our current sellers to grow, but also attracts larger sellers as they have the more efficient tools available on the platform. And then the third thing is opening up our category funnel. So sellers have more things to sell, attracting different kinds of buyers and more buyers on the platform. Our platform is really designed to serve everyone, whether you are an everyday seller all the way to people who are large sellers and brands on the platform. And so we want to build the tool set to serve that entire community of sellers. I'm going to take your third question and then turn it over to Anand for the second question. The third question really is all about logistics and partnerships. And we have been really, we've seen a great partnership with USPS. 2020 was an exceptional year for everyone in terms of just the stress that has been put on the system and the level of pressure. Every logistics carrier went through, and USPS, of course, took a big brunt of it. We certainly see them rebounding and continue to get healthier as the year progresses. But we want to serve our customers, our sellers, and shoppers right. So we are going to look at what are the other things that we can offer them for different kinds of logistics over time. But we have a great partnership with USPS and remain committed to that partnership, at least here for now.
spk04: So I think just to answer your question on kind of the inter-quarter dynamics around apparel, I think the one thing I would say is rather than spending too much time talking about what could or may not happen, I think the guidance hopefully is is enough color there. We do see some real variability amongst the states. And so that's kind of, I guess, a key takeaway I would have here. States like California and Florida, and we've got a few more in that group, are just essentially outpacing the overall growth rate. And we've seen some lagging effect in certain states like New York and Texas. I think that the key in terms of apparel sales, we do believe that hopefully as the markets in general start to reopen, we do expect apparel to essentially come back in terms of all the different alternatives rather than just looking at sweats and more on traditional dresses and swimsuits, et cetera. As far as what's going to happen in the quarter, we really don't know. But that effect may actually continue on towards, you know, maybe the next quarter and the quarter after that. So that's just something that we really don't have any idea about at the moment. And we'll just have to wait and see. Great. Thank you, guys.
spk07: Your next question comes from Aaron Kessler from Raven James.
spk03: great thanks guys congrats on the quarter um there's a couple questions on the let's talk a little bit about the brands and vendor opportunities we're seeing kind of more marketplaces uh move towards that just made opportunities there and then maybe just um additionally on the kind of marketing um how should you think about the u.s investments versus international for 2021 as well thank you so i'll take the first question on and we'll take the second question on the first question
spk05: You know, we built a platform, as you know, it's a platform that really enables any kind of seller to participate in the marketplace. And we have seen engagement from not just casual sellers, but from professional sellers. We've also shared that independent brands have engaged with it, and we continue experimenting partnerships with the brands. Not quite ready to share specifics there, but we really believe that Our marketplace as a social marketplace provides a unique opportunity for the sellers and a unique opportunity for shoppers to create a new experience where they can come, talk to each other, engage, and bring sort of that offline interaction in an online world. So more to say there in the future, but for now, we can tell you that we've been experimenting with all of that across the board.
spk07: We have time for one more.
spk04: Sorry, one more. I think I didn't forget the marketing question. So on marketing, you know, the way we think about the U.S. is going to be extremely disciplined, as I was talking about earlier about the two-year payback dynamics. So I think we do expect that the investment in international markets will continue to increase as we launch more and more markets throughout the year. The core of the business, you should still see a decent amount of investment in the U.S. We're targeting approximately, call it low 40s to mid 40s of marketing as a percentage of revenue. And I think we're going to stay very close to those numbers throughout the year. Great. That's helpful. Thank you.
spk07: We have time for one last question. Your last question comes from Roxanne Meyer from MKM.
spk10: Great. Thank you, and congratulations on a great year in your IPO. My question is about the pet category. I mean, that's such an interesting market to go into, lots of white space. It feels like very little competition. Just wondering how you're thinking about the opportunity there.
spk05: Oxan, great to talk to you. We're excited. I think it is very much built for a social marketplace model. Some of the features we've introduced recently, post stories and videos, really allow people to express and tell a more compelling story around that category. We've certainly seen broadly a much wider adoption of pets just, you know, in 2020 as people were more isolated pets has been a growing part of the business and it's something that we've seen organically appear in the marketplace and i can tell you countless events where people came to me and said when are you going to enable pets as a category on the marketplace so so we're pretty excited i think there's a lot of unique things we can offer in that category it's the early stages so expect us to share more as we as we make progress in that category great thanks looking forward to it and best of luck thank you thanks so much
spk07: I will now turn the call over to Manish Chandra for closing remarks.
spk05: Thank you, everyone, for joining us for our first quarterly earnings call, and we look forward to seeing you next quarter. Thank you, everyone.
spk07: Ladies and gentlemen, this concludes today's conference call. Thank you for participating.
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