Poshmark, Inc.

Welcome to Poshmark's second quarter 2021 conference call. Joining me today are Manish Chandra, our founder, chairman, and CEO, and 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 of 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. Our annual report on 10-K for the year ended December 31, 2020, and our 10-Q for the quarter ended March 31, 2021, and other subsequent filings with the SEC, including our 10-Q for the quarter ended June 30, 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 quarter earnings call. Before I share a recap of our Q2 performance, I'd like to take a moment to welcome Poshmark's newest board member, Ebony Beckwith. whose appointment we announced yesterday. Ebony is chief philanthropy officer at Salesforce and CEO of the Salesforce Foundation. She's a powerhouse leader who brings deep experience across technology, operations, and philanthropy, and a deep connection to our brand as an avid Bosher who joined the Poshmark community in 2014. I'm absolutely delighted to welcome a member of our community to the board. and even more so, I'm excited about the impact she will have on our company, our community, our culture, and our mission as we empower consumers around the world and shape the future of shopping. Now, turning to our Q2 results. We remain focused on executing our long-term growth strategies and delivered another strong quarter. We grew GMB and revenue by 25% and 22% prospectively to $450 million and $82 million. Due to the reliability and strength of our cohorts, despite difficult comparisons, we delivered our fifth consecutive quarter of adjusted EBITDA profitability with $6.1 million in adjusted EBITDA and 7.4% in adjusted EBITDA margin. Our asset-light model holds no inventory high gross margins, resulting in a scalable and profitable business with a highly engaged community of loyal cohorts. Our community of sellers is both dynamic and flexible, keeping our marketplace constantly refreshed with curated merchandise that reflects current and emerging trends and lifestyle preferences. In the second quarter, our sellers were once again at the forefront of an ever-changing fashion landscape, staying ahead of emerging trends such as 90s and Y2K styles. Our marketplace is highly adaptable and incredibly responsive to buyers changing demands for either staying at home or for going out and supply adjusts almost instantaneously. Thus, we are confident that we can navigate any potential future impact from the Delta variant as evidenced by the resilience of our cohorts, which delivered strong financial performance during COVID last year and so far in 2021. One of the reasons we have such a loyal and engaged community is our commitment to making selling on Poshmark as simple as possible. We do this through robust tools that enable broad distribution of our sellers' listings to buyers everywhere. In May, we announced a partnership with Snapchat, which went live on July 8 to all U.S. Snapchat users. Through Poshmark Mini, Snapchat users can engage with the Poshmark community, attend virtual Posh parties, shop our entire catalog of merchandise, and easily search for top-trending brands and styles on Poshmark, all within Snapchat. The Poshmark Mini will introduce millions of new shoppers to Poshmark while deepening our relationship with Gen Z, who are an important fast-growing part of our community. Gen Z make up 77% of daily active players using Poshmark Mini on Snapchat. Our business remains stronger than ever, driven by continued progress 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 to enhance the buyer experience we introduce buyer alerts a new feature that sends a notification when a listing you have liked receives an offer from another buyer and the item you like was purchased by someone else we will direct you to similar listings or identical items We've seen an increase in listing views, engagement, and order conversion rates as a result of this new enhancement, which puts power in the buyer's hands and creates a more personalized and curated shopping experience. Expanding our international footprint is our second key strategic focus, and we continue to invest ahead of revenue. I'm happy to announce we recently hired a new Vice President of International, Sylvie de Weaver, who will lead our international growth and expansion plans as we bring Poshmark's social shopping experience to consumers around the world. Prior to Poshmark, Sylvie served as eBay's General Manager of Latin America, where she helped launch and scale the business, and was also instrumental in expanding the footprint in emerging markets. I look forward to partnering with Sylvie and our international team to accelerate Poshmark's expansion into new markets. In the second quarter, we celebrated Poshmark Canada's two-year anniversary. Our thriving community has grown to more than 2.5 million Canadians who have engaged in more than 1 billion social interactions and listed nearly half a billion dollars worth of inventory since launch. Our success in Canada provided a playbook for launching Poshmark in Australia, which has seen great user-buyer and seller growth since our Feb launch. We are focused on aggressively growing our Australian community and continue to invest in marketing to grow the user base. As you may have seen last week, we announced that India will be the next stop in our global expansion strategy. India is one of the fastest growing e-commerce markets in the world and has a vibrant culture of resale, thrifting and pre-loved shopping. We have hired a country general manager and continue to build out our team on the ground. We have begun the process of building community and supply through the data phase of development. And on behalf of myself, my co-founders, and Team Posh, we're overwhelmed with joy to bring Poshmark to India. Our third strategy is to go through category expansion. We launched art and design as two new subcategories under the home department and as a natural extension to address the style needs of our communities. We have seen art and design attract new buyers and sellers to the platform, demonstrating the scalability of our model, and view these new categories as the foundation for building our handmade artisan business for Poshmark sellers. Our fourth strategy is to deliver innovative, easy-to-use, and effective seller services to help sellers market, merchandise, and sell their listings. In April, we introduced Style Tags, a powerful new search and discovery tool that allows sellers to merchandise and market their listings by style and trends and provides buyers with a new way to shop beyond their usual brand preferences. If, for example, a buyer is shopping for Y2K looks, they can simply follow Y2K as a trend which greatly expands their ability to find and track relevant listing stats with that. Similar to how buyers can follow brands such as Gucci or Lululemon, they can now follow emerging trends such as 90s or Bohemian. In June, 28% of sellers used style tags, and a result we saw increased in daily listing views and buyer engagement with these listings. Though early, we believe shopping by style and trends is the way consumers want to shop, and Poshmark style tags will help drive conversion over time. We also launched Price Suggester to help sellers, especially new sellers, list items more effectively by providing a suggested price range for their listing. This new feature not only helps to drive new supply, it also positively impacts sell-through rates as it increases the percentage of product price to sell in our marketplace. As early pioneers of social commerce, we're always innovating core marketplace functionalities to make it easy for sellers to engage with shoppers and grow their sales. At the end of June, we launched four powerful bulk listing tools that take social selling to a whole new level for Poshmark sellers with large closets. The new features allow sellers to share multiple listings at once, make closet-wide price adjustment, and execute multiple offers to like us all at once, driving productivity, engagement, and sales. Our seller community is responding enthusiastically to this new time-saving functionality. Since day one, our sellers have been the heart of the Pashmar community, and our Heart and Hustle Community Fund is an important step in recognizing, rewarding, and empowering our diverse seller community. In June, we awarded 142 sellers with $125,000 in grants to help support their business goals. From a daughter balancing full-time business while caring for her sick mother to a college student paying for tuition, this is just one of the ways we support our seller community so that everyone can thrive. To experience the vibrancy of the Poshmark community, I invite you all to join us in October at PoshFest, our annual two-day conference where community members connect, network, and learn how to grow and succeed by selling on Poshmark. As many consumers return to work and school in fall and engage in more social activities, we expect apparel purchase to accelerate and demand for a different type of wardrobe to emerge from the quarantine outputs that prevailed in 2020. In addition, the seismic shift in fashion currently underway is expected to unleash pent-up demand for apparel that we believe will last for several years, driving more frequent and wide range of lifestyle purchases benefiting our marketplace. Now I want to take a moment to thank Anand for being my friend and partner for the last five years, helping us scale the business more than 10 times from $160 million in GMV in 2015 to over $1.6 billion in trailing 12 months GMV as of the second quarter and taking us public. His numerous contributions have helped lay the foundation for consistent revenue growth and continued margin expansion in the years to come. I'm confident in the strong finance team that Anand has built, and we truly appreciate the role he has played in positioning Poshmark for long-term success. With support from a leading executive search firm, the board and I have initiated a search for a new CFO. In the meantime, I'm pleased to announce that our VP of Finance, Kapil Agarwal, will become interim CFO. Kapil has been with Poshmark for the last five years, leading finance, strategy, and corporate development, Kapil brings a decade of leadership experience spanning strategy, financial planning, and business analysis at Fortune 500 companies, including Uber and Capital One. On behalf of the entire board, management team, and Poshmark, Anand, you will be greatly missed, and we wish you the best of luck in your future endeavors. We appreciate that you're staying on as an advisor until the end of the year to help ensure a smooth transition with the next CFO. And with that, I'll turn it over to Anand.

Thank you, Manish. I appreciate the kind words. I'm incredibly thankful to have been part of such an exceptional team over the last five years, a time in which Poshmark has executed a number of transformative steps in its growth strategy. The next stage of Poshmark's development is now solidly underway, and I have complete confidence that Poshmark has the strategy and team in place to capture the enormous opportunities ahead of it. I'm excited to hand the baton to Kuppel, who was my first hire and has been my partner for the last five years, helping us drive growth, reach profitability, and build a finance team. As Manish mentioned, our second quarter was another great quarter as we delivered strong GMB and revenue, building upon the continued demand trends we saw in the first quarter as consumers remained focused on buying apparel for different events in their lives, and we delivered our fifth consecutive quarter of operating profitability. During the second quarter of 2021, our cohorts have remained resilient and helped us generate $450 million in GMB in the second quarter of 2021, which was 25% growth from $360 million in the second quarter of 2020, or 67% growth on a two-year stack basis and acceleration from the two-year stack growth of 52% in the first quarter. Commensurately, net revenues were $82 million in the second quarter of 2021, which was 22% growth from $67 million in the second quarter of 2020, or 63% growth on a two-year stack basis, an acceleration from the two-year stack growth of 50% in the first quarter. This was driven by an increase in GMV in the second quarter of 2021 and strong growth in our community, including a 16% growth in trailing 12-month active buyers to $7 million from $6 million in the second quarter of 2020, and a 15% increase in trailing 2%, which is down slightly from last year's 18.6% due to a mixed shift to more orders greater than $15.