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spk06: Good afternoon. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2021 Poshmark Incorporated earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn today's call over to Christine Chen, head of investor relations.
spk11: Please go ahead.
spk00: Welcome to Poshmark's third quarter 2021 conference call. Joining me today are Manish Chandra, our founder, chairman, and CEO, and Kapil Agarwal, interim CFO. 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, our annual report on 10K for the year ended December 31st, 2020, and our 10Qs for the quarter ended March 31st and June 30th, 2021. and our subsequent filings with the SEC, including our 10Q for the quarter ended September 30th, 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.
spk10: Thanks, Christine. Hello and welcome, everyone. Thank you for joining us for our third quarter earnings call. Our vision for Poshmark is to become the world's leading social marketplace and the number one destination for sellers around the world. We're laser focused on making strategic investments that drive the continued growth of our business, give the best overall experience for sellers, and make our marketplace the number one most trusted destination for buyers. Our social marketplace was built to support sellers of all sizes, and we want to empower each and every one of them to be successful while fueling a more circular shopping engine. While we faced greater than expected headwinds during the third quarter due to IDFA and Apple privacy changes, we grew GMV and revenue year over year by 18% and 16% respectively to $442.5 million, and $79.7 million despite difficult comparisons. On a two-year basis, GMV and revenue grew 64% and 59% year-over-year respectively. We delivered our sixth consecutive quarter of adjusted EBITDA profitability with $0.3 million in adjusted EBITDA and 0.3% in adjusted EBITDA margin, while increasing our marketing spend to counter the impact of Apple privacy changes. Investing in marketing and product innovation in the quarter helped drive 17% growth in TTM active buyers, up from 16% in the second quarter. Our asset-like model holds no inventory, leading to consistent high gross margins of 85% in the third quarter, resulting in a scalable business with a highly engaged community of loyal cohorts. Third quarter sales reflected Poshmark as a go-to destination to source trends such as TikTok-inspired styles. Searches for TikTok increased 1500% over the last two years, and we have seen a surge in demand for brands that are trending with TikTok influencers. We grow the GMV of our marketplace by growing our overall community of users. These users activate as buyers and sellers, creating a virtual flywheel of growth and monetization. When users join, they connect with each other through social interactions, which grew 37% year-over-year during TTM Q3 2021 to $38.9 billion. Our marketplace makes shopping online fun and interactive, and we continue to add features to increase engagement. Accelerating growth while navigating the impact of Apple privacy changes is our top priority, and we will continue to adjust our marketing strategy accordingly to grow GMV. We began adjusting our marketing spend in the middle of Q3 and have seen an early positive impact on October GMV growth. Product innovation, category expansion, international growth, and new seller tools build the foundation for driving GMV revenue and active buyer growth. We remain confident in the opportunities for accelerating future growth driven by continued progress of these four growth strategies. First, we continue to focus on product innovation to drive user engagement, which is fundamental to the retention of our user cohorts and GMB growth. At the end of July, to enhance the buyer experience, we expanded our partnership with the firm to include their split pay products for items between $50 and $200. As a result of this new pricing tier, we have seen an increase in AOV and number of orders at these price points. Since we completed the full rollout of buyer alerts at the end of second quarter, we have seen an increase in listing views, engagement, order conversion, and incremental daily GMV. This enhancement creates an urgency to buy for items with competing offers and creates a more personalized and curated shopping experience by merchandising similar or identical items to the buyer if the item they like has been sold. We recognize the importance of premium price products in the resale market and have seen strong growth in this category with $200 plus items now representing in the low 20s as a percentage of GMV up from 17% in 2019. Last month, we completed our milestone first acquisition of SuedeOne, a New York City-based sneaker authentication platform that combines machine learning technologies computer vision, and human expertise to conduct virtual authentication. This will build more trust and loyalty with our shoppers, create a more efficient and sustainable approach to authentication, and help accelerate growth in sneaker and luxury categories. Expanding our international footprint is our second key strategic focus and we continue to invest ahead of revenue. In mid-September, we launched Poshmark India as our first marketplace in Asia. The Indian market has over 622 million active internet users and a rapidly growing base of sustainability and value conscious consumers who seek a more socially connected experience, particularly Gen Z and millennials. India is an ideal fit for our unique social commerce model, both from a cultural and business perspective. Though still very early, India is off to a strong start with higher than expected user growth as we begin building the community. Growing GMV through category expansion is our third strategy. With the launch of our Brand Closets program, we're opening our social marketplace to large-scale brands and retailers, allowing brands to directly connect, converse with, and sell to Poshmark's community of over 80 million users with a suite of social merchandising tools. Our social commerce platform allows us to bring rich insights about fashion trends and real-time data about consumer interests to our Brand Closet partners. helping them reach new audiences, including millennials and Gen Z. Some brands have a larger following on Poshmark than their own social media channels. And 79% of our buyers have purchased a brand for the first time on Poshmark. We already have 140 plus community brands using brand closets to reach our 80 million registered users. Some have built their entire brand using Poshmark. We have piloted brand closets with a few large scale brands since 2020. developing a full-scale program that offers the features a large brand needs to thrive on Poshmark. We're excited about this new program as more brands see the value of social commerce and circular models. And we see brand closets as an important inflection point as we work together to shape the future of shopping. Delivering innovative, easy-to-use and effective seller services to help sellers market merchandise and sell their listings is core to our strategy. Our co-founder, Tracy Sun, is now officially leading a new organization at Poshmark that is exclusively dedicated to empowering our sellers, anticipating their needs, and innovating to bring fresh ideas, solutions, and tools that will help them grow and scale their businesses. Sellers are the heart of Poshmark community, keeping our marketplace constantly refreshed with curated merchandise that reflects current and emerging trends and lifestyle preferences. The four powerful bulk listing tools that we launched at the end of June have helped sellers improve their sales productivity. During the third quarter, we saw a strong adoption of these tools with professional sellers having the highest adoption rate of 30%. Professional sellers who adopted bulk action show a higher increase in sales driven by an increase in orders than did listers who did not use bulk actions. We see continued opportunity for increased adoption of this feature to drive GMV growth. We also introduced a new slate of tools to help sellers replicate the best part of client service when shopping in a physical boutique. This includes MyShoppers, a social selling and clienteling tool that is unique to Poshmark, closet insights providing sellers with real-time data on their sales and inventory, direct messaging allowing sellers to communicate directly with their buyers, and a new gold badge in the Posh Ambassador program to recognize and reward outstanding members of our seller community. We announced these new product enhancements in October at our ninth annual PoshFest, our conference where our vibrant and passionate community members connect, network, and learn how to grow and succeed by selling on Poshmark. Attendees of the virtual event came from all 50 states, Guam, Puerto Rico, Canada, Australia, India, the Netherlands, UK, Mexico, Spain, and Colombia. Evidence of the global appeal and reach of our community. Our highly engaged community gives us the confidence that we will be able to navigate near-term headwinds, and we will continue to adjust our marketing to accelerate growth. As we celebrate Poshmark's 10th anniversary next month, we believe that our business model is tailor-made to thrive in the current environment. Because our millions of sellers are constantly listing new products, our marketplace is highly adaptable and incredibly responsive to buyers' changing demands, and we're not impacted by supply chain disruptions. We're optimistic that this holiday season, consumers will once again attend events and see friends and family, all reasons that drive demand for apparel and accessory purchases, with the potential for more self-gifting and gift-giving. Our resale marketplace enables shoppers to rotate styles, make strengths, and give a second life to items, contributing to a more sustainable fashion ethos for consumers. And with that, I will turn it over to Kapil.
spk09: Thank you, Manish. As Manish mentioned, despite difficult comparisons and the headwinds of Apple privacy changes, we delivered solid GMV and revenue growth year-over-year in our sixth consecutive quarter of adjusted EBITDA profitability. During the third quarter of 2021, our cohorts have remained resilient and helped us generate $42.5 million in GMV, which was 18% growth from $375.4 million in the third quarter of 2020, a 64% growth on a two-year basis. Net revenues were $79.7 million in the third quarter of 2021, which was 15% growth from $68.8 million in the third quarter of 2020, or 59% growth on a two-year basis. This was driven by 17% growth in TDM active buyers to $7.3 million from $6.2 million in the third quarter of 2020, up from 16% in the second quarter. Our take rate was 18%, which is down slightly from last year's 18.3% due to continued mixed shift to more orders greater than $15, as orders less than $15 have higher take rate due to the flat fee of $2.95. Cost of revenues was $12.1 million in the third quarter of 2021, an increase of 6% from the third quarter of 2020, but a decrease to 15.2% of revenues from 16.5% last year due to a non-recurring credit in payment processing fees. Adjusted growth margin improved by 1.3% to 84.8% of revenues in the current period as compared to the third quarter of 2020. Marketing, excluding stock-based compensation, or SBC, was $35.4 million in the third quarter of 2021, an 89% increase from $18.8 million in the third quarter of 2020 when we dramatically reduced marketing spend in response to the COVID crisis. On a two-year basis, marketing only grew 6% from Q3 2019 to Q3 2021. During the third quarter, similar to others who use digital marketing, we continue to see the impact of Apple privacy changes. Since our marketing mix is highly diversified and nimble, we adjusted by focusing on strong ROI user acquisition channels, as well as investing in upper funnel strategies, such as TV and creative partnerships to counter the effect of IDFA. Marketing was 44.5% of net revenue in the third quarter of 2021, as we increased spending during the later part of the quarter to navigate the impact of Apple price exchanges. The increased investment in marketing also accelerated the growth rate of TTM active buyers to 17% in the third quarter, up from 16% in the second quarter. Moving to other operating expenses, option support, excluding SBC, was $12.4 million in the third quarter of 2021, similar to the second quarter. Option support was slightly lower than expected and was 15.6% of revenues, up from 14.5% in the third quarter last year. R&D, excluding SBC, was $9.2 million in the third quarter, similar to the second quarter. R&D was 11.5% of revenues, up from 10.4% of revenues in the third quarter of 2020. This was due to the planned increase in hiring we have previously discussed as we continue to invest in additional resources across a number of key strategic initiatives. G&A, excluding SBC, of $10.3 million in the third quarter was similar to the second quarter and was slightly lower than expected due to fewer in-person events and lower travel costs. G&A was 12.9% of revenues, up from 9.5% in the third quarter last year due to the ongoing cost of being a public company. Stock-based compensation was $6.7 million in the third quarter of 2021, an increase from $2.6 million last year, mainly due to performance-based wasting of outstanding RSUs upon completion of our IPO in January 2021. We generated adjusted EBITDA, which excludes SBC, of $0.3 million, with adjusted EBITDA margins of 0.3% as compared to $15 million and 21.9% margins in the third quarter of 2020. The decrease in profitability was driven by an increase in marketing investment as compared to the last year, where we significantly lowered our marketing spend during the initial onset of COVID-19. As we have discussed before, for the remainder of 2021, we'll continue to invest in marketing to accelerate GMV growth. Operating loss, excluding SVC, was negative $0.6 million in the third quarter of 2021 with operating margins of negative 0.7% compared to $14.3 million with margins of 20.8% in the third quarter of 2020. Third quarter 2021 net loss to common was negative $7.2 million compared to $8.1 million in income last year. Cash, cash equivalents, and marketable securities were $589 million at the end of the third quarter 2021. As you think about capital allocation, our number one priority is using our strong balance sheet to make strategic investments to drive long-term growth. Moving to the cash flow statement, for the nine months ended September 30, 2021, free cash flow was $31.3 million compared to $67.1 million for the first nine months ended in 2020. Our strong cash flow generation significantly strengthened our balance sheet and liquidity. fourth quarter revenues of $80 to $82 million, resulting in a growth rate of 15% to 18%. We have seen early signs of the positive impact of increased marketing investment that we started in the third quarter, with accelerated J&V growth in October. Similar to third quarter, we expect to see a pressure on our fourth quarter take rate from last year, as we expect continuous makeshift to orders greater than $15. In addition, We anticipate that USPS will once again experience logistics disruption during the holidays as the shift to e-commerce outpaces capacity. We expect negative EBITDA of $7 to $8 million in the fourth quarter as we continue to invest in marketing to accelerate top-line growth while navigating the impact of Apple privacy changes. Adjusted growth margin during the third quarter of 2021 was ahead of our initial expectations. And for the remainder of 2021, we expect adjusted gross margin to be similar to 2020 levels due to the absence of non-recurring credit in payment processing fees. We expect option support excluding SBC in the fourth quarter as a percentage of revenue to be slightly higher than last year due to anticipated logistical challenges faced by USPS during the holiday season. Excluding SBC in the fourth quarter is expected to increase as a percentage of revenues from last year as we continue to increase our investment in product innovation to accelerate growth. For the remainder of the year, G&A excluding SBC as a percentage of revenue should be higher than last year due to the ongoing cost of being a public company. We expect marketing excluding SBC as a percentage of revenues to be in the high 40s due to higher cost in digital advertising as a result of Apple privacy changes. Our asset-light, high-growth margin business and consistent behavior of our cohorts gives us the confidence that we will be able to adapt to the changes in the digital advertising landscape by investing in marketing now to accelerate growth. We will be disciplined in our marketing investment, and our diversified marketing mix will enable us to build our user base to grow active buyers, which will put us in a stronger position in the long term. We expect that uncertainty due to COVID and its effect on reopening timelines across international markets launched in 2021 will result in a slower ramp-up than what we had initially expected for next year, impacting growth rates. But we would expect growth next year to accelerate from the current quarter as we begin to benefit from our investment in marketing, category expansion, and the launch of grand closets. Our social marketplace is nimble, as evidenced by the resilience of our cohorts. Our asset-flight model holds no inventory, so supply is highly responsive to buyer changing demand, positioning us well to thrive in the current environment. We have a long runway of growth ahead, fueled by the execution of our growth strategies and our relentless focus on building a more seamless, more social, and more circular way to shop. Thank you, and I will now turn the call over to the operator so we can take your questions.
spk06: At this time, I would like to remind everyone, in order to ask a question, Press star followed by the number one on your telephone keypad. As a courtesy, please limit yourself to one question and one follow-up question in the interest of time. Your first question comes from the line of Lauren Shank with Morgan Stanley. Your line is open.
spk01: Hi, I've got Nathan Feather on for Lauren. Just one on mine. I guess trying to figure out a little bit more on the impact of IDFA to some of the KPI hearers. I would have assumed that it had the most impact on active buyer growth, but that did accelerate in the quarter. So can you just talk about how IDFA was impacting kind of GMV and revenue growth, and was it really more kind of a new user getting in the door impact? Thank you.
spk10: Thanks. The thing with IDFA is it has really increased the cost of digital advertising. advertising and decrease the efficacy when running targeted marketing programs. And so for us, being a data-driven organization, we spent June and July really measuring the ROI and figuring out what the right level of spend is. And in fact, if you recall in the last call, we actually decreased our marketing spend at the end of second quarter to allow our marketing team time to assess how to navigate Apple privacy and efficiency. Once we sort of realized where the right level of spend was, we increased our marketing spend starting in the second half of the third quarter. And that's when we saw an acceleration in TTM active buy growth to 17%. And we've seen an early positive impact of October GMV because of this increased marketing spend. So really the dynamic started on the positive side a little bit later in the quarter.
spk01: Okay, great, that's helpful. And then can you just give an update on how things are progressing with the Poshmark Mini app integration into Snapchat?
spk10: Sure. Yeah, so Snap and Poshmark partnership continues to be a really great partnership which allows our seller's inventory to be distributed inside Snapchat and brings Snapchat users to Poshmark inventory natively in Snapchat As you know, Snapchat has a predominant community of Gen Zers, so this is obviously a very relevant and very fast-growing part of our community. Gen Z makes up 77% of daily active players using Poshmark Mini, and our goal is to really make Poshmark ubiquitously available. You see that on all the platforms, you see that in the browsers, and certainly Snap is an important platform for reaching young consumers who seek a more social and sustainable way to shop. So we continue to make good progress there in terms of just penetrating that and scaling that.
spk06: Great. Thank you. Your next question comes from the line of Ross Sandler with Barclays. Your line is open.
spk02: Hi, this is Tom Zahn for Ross. Any high-level comments on retention given the uptick in marketing as a percent of GMB? Is this going to remarketing previous cohorts or new customers? Any color here is pretty helpful. Thanks.
spk10: Yeah, when we think of marketing, we really think of it in two buckets, you know, new user acquisition to drive growth. And really that comes from organic growth, word of mouth sellers, and then direct response advertising. Direct response is both Google and Facebook and certainly other channels out there, but those are the most dominant ones. And then the third is brand awareness, which is TV and creators and influencer out there. Now, if you think of these channels, some of these channels drive both new growth as well as retained growth. When we think of purely marketing to retention, It comes predominantly through our own channels, email notification, blog, social events, posh parties, whether it's our social network. So when we think of our overall growth strategy, we think of that mix, that sort of impacts, that healthy mix between focusing on new user growth and the older user growth. The cost per user on the new user side was definitely the most impacted in terms of Apple.
spk11: Apple privacy changes and IDFA. Your next question comes from Ralph Sherkart with William Blair.
spk06: Your line is open.
spk05: Good afternoon. Thanks for taking the question. You know, there's been a lot sort of talked about on EFA and industry-wide. CACs have gone up pretty significantly. So just curious, you know, how your CAC has trended relative to what's, you know, going on in the industry with these recent changes. and then sort of your current thoughts on LTV to CAC as you look forward? Do you think you'll be able to sort of get back to where you were historically, or do you think this will take some time to sort of grind through? And I have a follow-up question.
spk10: Yeah. Look, I think, as it's no surprise, our costs have gone up. And when we think of how we invest in it, ultimately we rely on our long-term behavior of cohorts and a high-growth margin business, which allows us to recoup these costs Certainly, we've represented and we've talked about how we have talked in terms of payback period, which has been in that two-year timeframe. In order to accelerate the spend and growth, you have to give a little bit of leeway to our marketing team to do that. And it will impact our payback periods temporarily. But when we think of the long term, we have successfully navigated several different digital advertising landscape changes over the last few years. Going all the way back to 2018, Facebook had changed its algorithm, if you remember, in Q2 of 2018, and it took us about a year, year and a half to sort of digest that cost and normalize it and get back to normal pay period. Last year, Google went through a search changes, and that was also a pretty fast re-vectoring. IDFA is taking a little bit more time to digest both on our re-vectoring and our partners' re-vectoring, but we expect over time it'll get normalized and we'll be able to rebalance to our normal payback periods.
spk05: Great. Just, Paul, if I could, please, just in terms of the guide that calls for negative EBITDA, is that a reflection of what you're seeing in the current market environment with IDFA? And if so, how should we think about that sort of investment period going forward into 2022? And I guess a bolt out of that question is there's some commentary about slower growth in 2022. I apologize I missed it. If you could just sort of repeat some of that commentary, I'd really appreciate it. Thank you.
spk09: Thanks, Rahul. So there are two key assumptions which are driving our EVITA guidance for the fourth quarter. First is we are increasing our marketing investment from mid-40s in the third quarter to high 40s to counter the impact of IDFA and to accelerate GMV growth. And second, similar to what we saw last year, we expect potential disruptions at USPS due to the influx of online shopping over the holidays. And that could result in higher option support costs as we want to maintain our high level of customer service during the peak holiday season. And as far as 2022 is considered, Ralph, it's too early for us to give an outlook on 2022 as we are in the middle of our planning cycle. But given our strong balance sheet, we'll continue to invest in marketing next year to accelerate our top-line growth.
spk10: The only thing I think which we did talk a little bit about, Ralph, which I want to just re-emphasize, is the fact that we are counting on these non-US and Canada markets to have a a slower ramp to sort of becoming critical to our business. So that's the one thing we are asking you not to sort of include in your 2022 assumptions because of COVID, these markets have taken time. They're seeing early signs of good engagement, et cetera, but we want to be just much more cautious about backing them too much into 2022 growth.
spk05: Okay, thanks. Was that relative to the commentary about slower 2022 growth, as I think I understood during the prepared remarks?
spk10: Yeah, it's mostly around that. Yeah, yeah.
spk05: On the core side, we actually expected the growth to accelerate from Q3 levels. Okay, so it's just the COVID impacts from some of the international markets.
spk10: Yeah, in terms of, I mean, you're seeing different countries sort of behave differently. I mean, I was just reading, sadly, about Germany's condition right now. So each market is just sort of in a different trajectory overall.
spk06: Understood, thank you. Your next question comes from Oliver Chen with Cowen. Your line is open.
spk12: Hi there, this is Katie Hallberg on for Oliver Chen. Would just love a little bit more details on the learnings from your launch in India now that it's been several months and then I have a follow-up after that.
spk10: Sure, absolutely. We launched India in mid-September and really been thrilled by the vibrancy of the market. Tremendous potential there, 622 million active users and a rapidly growing base of sustainable and value conscious consumer. We're seeing strong user engagement and actually user growth is ahead of plan there. And we're seeing good listings growth, good sort of engagement overall. So for us, when we see a country which is slightly different than say Canada and Australia, has some very specific local dynamics and see the market sort of thrive, it's very encouraging about the universal appeal of our model. And I think India is still readjusting from COVID, so that impact is still there. But overall, the core social flywheel is very well in progress and showing very good traction in India.
spk12: That's great. Thank you so much. And then we'd just love to know a little bit more about the trends across categories. If you could just speak to home and pet or non-apparel versus apparel, and then specifically just a little bit more on women's apparel would be much appreciated.
spk11: Thank you. Did you repeat the last question again?
spk12: Just a little bit more detail on the trends across the categories, so non-apparel versus apparel, and specifically how did women's apparel look in Q3?
spk11: Thank you. Did you have the data?
spk10: Let me try to see what we can share on that front. But broadly, when we think of sort of the newer categories, they continue to take hold very well, particularly pets, which we launched in Q2. We've seen an acceleration in non-apparel categories for sure, including sneakers and handbags.
spk11: But on the apparel side, can we get that data?
spk10: So just to give you a sense that non-apparel categories were 6% of GMV in 2020 and have sort of scaled to 6% in the third quarter of 2021. So they're sort of at that same level.
spk12: Okay, great. Thank you so much.
spk06: Your next question comes from Aaron Kessler with Raymond James. Your line is open.
spk04: Great. Thank you. A couple of questions, maybe just first on the brand closets program. Can you talk a little bit about the rollout of this kind of the go to market strategy and maybe list how brands will do with logistics there as well? Thank you.
spk10: Yeah, thanks. I'm super excited about the growth opportunity with brand closets as brands can interact and sell to our community of over 80 million registered users, helping them reach new customers. One of the great things about brands selling new items on Poshmark are that they are participating in a very different shopping ecosystem. It's an ecosystem where items can have multiple lives, exchange hands many times over through features like Reposh, and continue to get resold. Many brands have a larger following on Poshmark than their own social media channels, and that's one of the interesting factors that they look at. The other thing is we bring brands to new buyers. 79% of our buyers have purchased a brand for the first time on Poshmark. We currently have a handful of large brands who are active on our platform. Free People, Lucky Brand, Doses of Color, and Hue. We've seen interest in Brand Closet rise significantly since our announcements, and we are in active discussion with several other large brands. We have about 140 plus smaller brands using our Brand Closet program. And ultimately, the Brand Closet program brings all of the social tools that we have, but adds to it enterprise integration, as well as giving them extra traffic with the Brand Closet button, official Brand Closet button on the brand pages, and allows them to leverage the fan base that they have on Poshmark for their brands to get new distribution, new buyers, but also reconnect with buyers that they have.
spk11: That's great. Thank you.
spk06: Your next question is from the line of Roxanne Meyer with MKM Partners. Your line is open.
spk15: Great. Thanks for taking my question. My question was on your other big initiative, Swade. One, I was wondering if you could elaborate on your strategy to go after a more luxury market, how you see the ramp there, and any, you know, what kind of time and further investment you might need
spk10: to um you know to communicate the authentication and to gain the trust of your customer base thanks a lot we're excited about the suede one acquisition which really uh gives us an extra tool to sort of expand our authentication uh from where it is which is at the 500 plus price point to lower price points but also bring special expertise to authenticating sneakers We recognize the importance of these premium price products, particularly in the resale market, and we've seen strong growth in this category of these $200-plus items. They now represent in low 20s as a percent of GMV, up from 17% in 2019. When we think of this milestone acquisition and its integration into our platform, it ultimately allows us to broaden that trust and safety to a much wider price point than we could do with physical authentication. We've just closed the acquisition in fourth quarter of 2021. We expect it to go live in 2022 in our platform. It's preliminary to give sort of the full impact, but we should have some more progress on it in 2022.
spk11: Great.
spk15: Thank you.
spk06: Your next question is from the line of Tom Nickage with Wedbush Security.
spk08: Hey, good afternoon. Thanks for taking my question. I want to ask about the marketing cost ratio. So it was mid-40s in Q3, high 40s for Q4. Do you think that high 40s rate for Q4 represents a high watermark? And as you start to maybe reap some of the benefits of the accelerated investment in the back half of 2021, maybe you can step off the gas pedal a little bit next year? Do you think you're going to have to keep accelerating the marketing investment beyond Q4?
spk10: I think the honest answer to that is simply that there's a little bit of uncertainty. We were hoping that IDF would balance by end of Q4. It's taken a little bit longer. So once we sort of see that rebalancing, yes, we should be able to take the foot off the pedal. But for now, just given our strong balance sheet, our asset-like model, strength of our cohort. We don't want to slow down on growth as we sort of navigate through this idea of a challenge. So that's sort of the answer. It's not something that we want to do. It's something we are doing to counteract the impact of just higher user cost in the short term.
spk11: Understood. Thank you.
spk06: Your next question comes from the line of Brian McNamara with Barenburg Capital. Your line is open.
spk03: Thank you for taking the question. I guess just a follow-up on the last question. I guess, can you just talk in layman's terms of how you expect the IDFA to balance, as you said, and what gives you confidence that growth will re-accelerate after you work through the marketing efficacy issues? Thanks.
spk10: Sure. A couple of things. I think whenever we have sort of looked at rebalancing out of marketing resistance, it boils down to, you know, what you're – Going to the customers of how you're marketing to it using the strength of our Community word of mouth and sort of leveraging the organic impact of all the paid marketing that we do. And third is rebalancing it across channel but it's top of the funnel channels like awareness channel or creator channels out there. So those are the ways in which we have traditionally sort of rebalanced out whenever one specific channel becomes exceptionally effective. The second thing is the platforms themselves, whether you look at sort of any of the social platforms or mobile platforms, are also actively rebalancing that. And we expect that to also have a benefit on our side. We're not counting on it. We're counting more on the work that we are doing on our side to counteract the impact of this change.
spk03: Thanks. So just a quick follow-up. I mean, the stock hasn't performed well on your kind of first three or four earnings reports out of the gate. I'm just curious. What should you leave long-term investors with in terms of something they should be confident with in the business moving forward? Thank you.
spk10: Great question. I think, look, it's been definitely not a great sort of three, four quarters from a stock performance perspective. I think the foundation of the business is very solid. When you think of the community we have, the users we have, the scale of the business and high gross margin, And for us, when we look into the future, we see a future that is all of the trends that we are investing in are actually shaping the future of shopping. Certainly, you know, as a marketplace, we have asset light so we can respond to trends and apparel and all these things, changes happening. Second is we continue to invest in innovation, which allows our sellers and shoppers to connect faster and our sellers to sell faster. And third is continue to diversify the people who can sell on the platform. Last two years for apparel, for accessories, for fashion have not been linear in any way. We've stopped going out. We've sort of just starting to reintegrate with society. We start and then have to stop again. So all of this volatility has not made for a great sort of apparel climate. But despite that, we've done pretty well in growing for the last few years. So as you look into the next year, as the world opens up and normal social activities resume, there should be a lot more excitement as we look into that. That's, I think, ultimately the foundation of an asset-like model, social model, secondhand reuse, and high gross margin should give investors the confidence that over the long term, this is a great company to own.
spk03: Thank you.
spk06: Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your next question comes from Anna Andreeva with Needham. Your line is open.
spk14: Hi, good afternoon. Thanks, guys, for taking my question. We wanted to follow up on the take rate. It was a little bit lower than what you had expected, and you talked about the mixed shift to the higher-priced items. Could you maybe talk about how we should think about the take rate as we look out for the next couple of quarters? And on that, maybe remind us, what's the percentage of a professional as opposed to more cash or seller, percent of your seller community? just trying to think about the potential to monetize some of the seller services that you guys have been pivoting into. Thank you so much.
spk09: Our take rate came in at 18% in the third quarter, and that was due to an increase in orders greater than $15, which shifted order mix away from orders below $15. And as a result, our blended take rate decreased slightly because our flat commission of $2.95 for orders below $15 generates a high take rate. We do continue to see strong momentum in premium price items going at a faster rate than non-luxury items. And that was for Q3. Now, if we talk about Q4, there are two factors which will die out take rate in Q4. One is continued mix shift to high price items, but also expected disruptions to USPS during the holiday as the shift to e-commerce outpaces shipping capacity. And that will potentially increase cancellations similar to the fourth quarter last year. While disruptions to USPS are more seasonal and specific to fourth quarter, it's hard to predict in 2022.
spk10: And just to go to your question about professionals, we haven't broken down the split there, but there is definitely, as time has gone on over the last eight to nine years, a very significant presence of people who are using Poshmark for selling in high volumes. And some of the initiatives we've launched over the last year really recognize that. So when you think of tools like MyShoppers, when you start to think of Closet Insights, et cetera, and certainly they've been asking for more and more tools and many of them pay for third party services. So there's definitely an opportunity there. We haven't announced anything concrete, but that's definitely an area that people have been asking us for more and more tooling and more and more services as they scale their business on Poshmark. the whole professional reseller community has become a pretty mighty force in the retail universe.
spk14: That's great. Thank you so much, guys. And just as a quick follow-up, you mentioned the October GMV inflected, and you're doing something differently with the marketing upper funnel type of initiatives. Can you just maybe dive into that a little more?
spk13: And are there specific categories that are also driving that inflection? Thank you so much.
spk10: Yeah, on the marketing side, I think we continue to balance out the various channels, but one of the channels that obviously is very, very active at the minute because trends are shifting constantly is the creator channel and the influencer channel. Just to give you a couple of sense of specific trends that are happening, we saw, for example, retailer LoungeFly as sort of having a huge momentum and just that brand at a 99% growth in YY sales on Poshmark. And a lot of it is driven by their focus on collectible backpacks, wallets, and purses driven by partnership with entertainment franchises like Marvel, Harry Potter, and Star Wars. So that's sort of some of the trends you're seeing on Poshmark in terms of what's driving the growth. And that's sort of part of that creator channel If you look at the categories, we haven't seen any significant shift in categories in October so far. It continues to go well in line in trends for the Q3.
spk13: Okay. All right. Got it. Well, thank you so much, and best of luck for the holiday.
spk06: Thank you. There are no further questions at this time. I will turn the call back over to Mr. Manish Chandra for closing remarks.
spk10: Thanks everyone for joining our call and for your questions. We look forward to speaking with you again next quarter.
spk06: Ladies and gentlemen, this concludes today's conference call. You may now
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