Poshmark, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Poshmark First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's remarks, 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ms. Christine Chen, Head of Investor Relations. Thank you. Please go ahead.

Welcome to Poshmark's first quarter 2021 conference call. Joining me today are Manish Chandra, our founder, chairman, and CEO, and Anand Keshav, 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 uncertainty Our annual report on 10-K for the year ended December 31st, 2020, and our subsequent filings with the SEC, including our 10-Q for the quarter, ended March 31st, 2021. 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.

Thanks, Christine. Hello and welcome, everyone. Thank you for joining us for our second earnings call as a public company. Before I get into my main remarks, I want to take a moment to acknowledge the crisis in India as the second wave of COVID-19 continues to devastate communities across the country. Our hearts go out to everyone in India, especially our own Poshmark team, who's thankfully staying safe and whose health and safety remains our top priority. Now I'll transition to my main remarks. Our mission is to put people at the heart of commerce, empowering everyone to thrive. By pairing technology with people's inherent desires to socialize, we have built a vibrant social marketplace that makes the buying and selling experience incredibly seamless, easy, and social. We remain focused on supporting our community innovating for a fantastic user experience and expanding the reach and offerings of our social marketplace. Because our community of millions of sellers are constantly adding new products to the marketplace, our model is incredibly responsive to demand, and we are generally not impacted by supply chain disruptions. Our asset-light model holds no inventory, leading to consistent high gross margins, resulting in a scalable and profitable business. 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 second hand. We're unique from other marketplaces as we focus on growing our overall community of users to create hyper engagement and loyalty. These users activate as buyers and sellers, creating a virtual of growth, monetization, and strong cohort retention. The beauty of our social marketplace is that our users, who spend an average 27 minutes a day on our app, continue to engage and re-engage over time, both as buyers and as sellers, fueling a high-velocity flywheel of organic growth. We reported a strong first quarter and grew our GMV and revenue by 43% and 42% respectively to $441 million and $81 million, a testament to the strength of our cohorts, even when faced with near-term disruptions. We delivered our fourth consecutive quarter of adjusted EBITDA profitability with $4.2 million in adjusted EBITDA and 5.2% in adjusted EBITDA margin. Our business model is built on the long-term retention of our cohorts. Despite mid-quarter challenges due to weather and COVID, our cohorts remain resilient as growth rates across states began to normalize and converge once again in the second half of March, as our community expressed increased optimism about economic conditions and reopenings. In March, shoppers bought aspirational items that they looked forward to showing off once the weather improved and restrictions started to lift. Top performing secondhand categories by sales were crop tops up 101%, bikinis up 86%, jean shorts up 85%, and hats up 71% year over year. In March, we announced a TV and marketing campaign with Marie Kondo, the master of tidying up, decluttering, and organization. The campaign focused on the emotional connection we have with clothing and the value of resale and secondhand. It featured Marie Kondo encouraging consumers to give new life to items they've loved from their closet by listing them on Poshmark, allowing the items to spark joy for someone new. We're optimistic that as consumers begin to leave their homes and engage in social activities once again, there will be demand for a different wardrobe from the stay-at-home outfits that prevailed in 2020. pent-up demand for apparel could drive more frequent and a wider range of apparel and accessory purchases benefiting our marketplace. We entered 2021 as a public company with a business that is stronger than ever, driven in large part by great execution of our four growth strategies. Our first strategy is to focus on product innovation to continue driving user engagement, which is fundamental to the retention of our user cohorts and GMV growth. In March, we completed the full rollout of video listings, which allowed 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. we see video commerce as the next generation of e-commerce in our marketplace video drives increased engagement both views and likes and conversion particularly with younger customers who've been the first to adopt video as a form of self-expression in april we started highlighting listing videos in the user feed to help sellers increase the visibility of their listings our sellers are excited about this feature and they're starting to update their listings to include video So far, the most popular categories for videos are dresses, bags, jewelry, makeup, and toys. Though still early, we're excited about this feature and will share more details as we continue to evolve and grow adoption of video commerce. Growing our international footprint is a second key strategic focus, and we plan to invest ahead of revenue. We're excited about the opportunity ahead in Australia and have just begun investing in marketing to grow the user base. Our market research indicates that Australians have $5 billion worth of unused clothes, shoes, and accessories in their wardrobes. Our study found 79% of shoppers bought from online stores in 2020. However, nearly 60% of the items they bought went unworn. In fact, we found that there were at least $500 worth of unused fashion items in the average Australian's wardrobe. And 54% of those surveyed felt guilty throwing those pieces out. Poshmark provides Australians with a simple, social and sustainable way to keep those items circulating. Our top priority in Australia is building the Poshmark community. And one of our first major activations was launching a celebrity charity closet with Serena William in March. It proceeds going to Black Dog Institute to support mental health research and suicide prevention for Australia's First Nations people. While it is still too early to provide much detail, Australia has seen great user buyer and seller growth since our February launch. Our third strategy is to grow through category expansion. We launched Pets in February to address the style needs of the entire family. We have seen Pets attract new sellers and buyers to the platform, demonstrating the scalability of our model. As expected, supply and demand is dominated by dog and cat style items, from clothing to collars and leashes, and the majority of these are non-branded, some of which are even handmade. Though still early, we're excited for the growth potential of the Pets category and our excitement is shared by our community with positive feedback and high volumes of user-generated Pets content. Our fourth strategy is to deliver robust, easy-to-use, and effective seller services to help sellers market and sell their product offerings. 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 mid-March, we completed the rollout of seller shipping discounts, a new feature which gives sellers the ability to list items with discounted shipping that we began testing in January. Previously, shipping discounts were only available through private negotiations and offers. We now have four shipping tiers, No discount, a first level of discount, a second level of discount and free shipping. All tiers provide expedited priority USPS shipping one to three days. Currently about 7% of listings offer discounted shipping. Adoption rate has been highest for the highest price point items. Since the introduction of seller shipping discounts, we have seen increased engagement as repeat listers and Bosch ambassadors, both of whom have adopted this feature at a higher rate, revisit existing listings to add shipping discounts. In mid-April, we introduced icons in GridView and listing details to indicate items that have discounted or free shipping, which has begun to positively impact conversion and order rates. In April, we introduced two new seller tools, Style Tags and Price Suggester, in the listing process. Style Tags give sellers the option to use three relevant phases to describe the item's design, aesthetic, material, and more, enhancing the ability for buyers to search for relevant products. These include things like handmade, tie-dyed, cotton, boho products, We also launched Price Suggester to help sellers, especially new listers, list items more efficiently by providing a suggested price range for their listings. As these tools have just launched, we'll share more details on our next earnings call. Our community is the heart and soul of Poshmark. Together, we make buying and selling simple, social, and sustainable. We're committed to helping our sellers succeed and have begun accepting applications for our Heart & Hustle Community Fund. Everyday Poshmark sellers turn their passion into profit by creating new brands, sharing their style, and connecting with shoppers. To help them get closer to their goals, whether that's making extra money, scaling their business, supporting the circular economy, or turning a side hustle into something bigger, we want to recognize and empower them. Our new fund is one of the ways we'll do that. In conclusion, we had a strong first quarter and start to 2021, where the Poshmark team once again executed well for the benefit of our entire community. We believe that Poshmark has an incredibly 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'll turn it over to Anand. Thank you, everyone, for joining us.