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spk05: Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the Poshmark fourth quarter and full year 2021 earnings 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Christine Chen, Head of Investor Relations, you may begin your conference.
spk00: Welcome to Poshmark's fourth quarter and full year 2021 conference call. Joining me today are Manish Chandra, our Founder, Chairman, and CEO, and Rodrigo Brumana, 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 community's business and strategy, 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 and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. 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 this 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.
spk09: Thanks, Christine. Hello and welcome, everyone. Thank you for joining us for our fourth quarter and full year 2021 earnings call. I'm pleased to welcome Rodrigo Brumano, who joined us as our CFO in December. He will take you through our fourth quarter and full year performance in a moment. But first, I wanted to share some of the key highlights. We had a very strong finish to a historic year for Boschmark with record GMV and revenues. Despite a very unpredictable and volatile environment globally, I'm pleased to report that we delivered our second year of operating profitability during our first year as a public company. Full-year revenue grew 25% to $326 million, which on a two-year basis represents 59% growth. Full-year GMV grew 27% to $1.8 billion, which is 65% growth on a two-year basis. As we mentioned on our prior earnings call, we began adjusting our marketing spend in the middle of Q3 and started seeing the positive impact on October GMV growth, which continued throughout our fourth quarter, resulting in record TTM active buyers of 7.6 million. Throughout the year, consumers came to Poshmark to discover and shop the latest trends, and this culminated in our strongest ever holiday performance. Fourth quarter sales reflected Poshmark as a go-to destination for self-gifting and unique gift-giving items as consumers celebrated the holidays by attending events and seeing family. We saw a surge in demand for luxury items with giftable accessory brands like Van Cleef and Art Pal up 890% and Loewe up 385%. We also saw spikes in dressed-up styles with suits and blazers up 215% year-over-year and one-shoulder dresses up 92% year-over-year, while cold weather staples such as buffers, ski suits, and Uggs surged at the end of the quarter. and we saw demand for one-of-a-kind unique vintage items with searches for vintage up 42% in the fourth quarter. We continue to lead the three trends shaping the future of shopping, the shift to online, the shift to social, and the shift to secondhand. Our social marketplace is defining a new more human way to shop online by making the shopping and discovery experience more interactive and social. For the year 2021, social interactions were up 47% year over year to more than 44.6 billion. This social engagement drives community connection and conversion. One thing that distinguishes Washmark is that more than 80% of all purchases are preceded by social components such as a like, comment, or offer. Execution of our four long-term growth strategies contributed to our strong fiscal performance and are the foundation for driving GMV revenue and active buyer growth. Our strategies include category expansion, product innovation, new seller tools, and international growth. First, we continue to focus on growing GMV through category expansion to increase share of wallet with consumers and grow our overall market share. We think of our category growth in two ways. Core categories at all price points make up 93% of our GMV. Our marketplace is a leading fashion destination, which is why women's, men's, and kids' apparel make up 45% of GMV and is our largest category. Shoes are another 20%, bags are 18%, and accessories are the remaining 10%. We see opportunities to increase our wallet share with shoppers by focusing on our core segments, particularly in high growth categories such as affordable luxury like shoes and bags, as well as introducing new categories to make Poshmark a shopping destination for all style needs. The balance of our GMV 7% comes from our expansion categories, which include beauty, home, toys and games, and now pets and electronics, which we launched in 2021. GMV from premium-priced products, which we define as $200-plus items, has experienced more than 1.5 times the growth of overall GMV, driven by bags and shoes in particular. As a result, GMV contribution from these premium $200-plus items increased to the low 20s as a percentage of GMV in 2021. Higher contribution from premium-priced products was one of the factors that drove higher AOV to $40 in 2021, up from $35 in 2020. We are committed to growing our market share in premium price products, as evidenced by the strategic investment we made in SuedeOne in the fourth quarter to expand our authentication services. We're strategic about our approach to categories and evaluate new additions based on fit, community demand, and potential TAM, while staying focused on keeping our marketplace fresh, relevant, and engaging. Because we are an asset-like model, we can enter a new category with minimal investment. Ahead of the holiday season, we launched the electronics category, and we are encouraged by the uptake in new buyers and sellers who are attracted to Poshmark's social shopping experience. 35% of electronic buyers are new buyers, and 18% of electronic sellers are first-time sellers. Average AOV of electronic items is higher than our overall AOV. Initial demand has been strong, with video games plus consoles leading the pack, followed by media, cell phone and accessories, headphones, and cameras. While our expansion categories are still small, representing just 7% of GMV, they are growing faster than our core categories, and they are key to our long-term growth as we expand beyond apparel and accessories. Another expansion area is our work with brand closets. Since launching in October, we have delivered 6x monthly GMV growth and seen strong interest from large-scale brands and retailers. Signing on, several more new partners were excited to directly connect with and sell to Poshmark's community of more than 80 million registered users. These partners consistently share the Poshmark's rich and real-time insights, are valuable in helping them effectively address consumer preferences, and reach new millennial and Gen Z audiences. Second, we focus on product innovation to drive user engagement and buyer conversion, which is fundamental to the retention of our user cohorts and GMB growth. Boschmark is a style destination where shoppers come to discover, follow, and shop for fashion. In the fourth quarter, we began rolling out Shop by Trend, a new feature that strengthens searchability and engagement, contributing to the stickiness of our platform and user retention. We completed the full rollout in mid-January and are excited to see growth in daily page views, listing clicks, likes, and conversion. Gen Z shoppers on Poshmark are increasingly shopping by trend as evidenced by the growth in TikTok-driven trend searches. And we are excited to continue innovation in this area. We're working to integrate our acquisition of SuedeOne, a sneaker authentication platform that combines machine learning technologies, computer vision, human expertise to conduct virtual authentication. We anticipate launching this capability later in 2022 on our social marketplace. Ensuring authenticity and quality of supply will build more trust and loyalty with our shoppers, create a more efficient and sustainable approach to authentication, and accelerate growth in sneakers and other premium-priced categories. Since we expanded our partnership with a firm in the U.S. to provide buy-now-pay-later at the end of July to include the $50 to $200 price range, more of our listings are now eligible for pay-over-time solutions. We saw adoption of these options accelerate through the remainder of the year, helping drive faster GMV growth during the fourth quarter in the $50 to $200 price range and in the premium priced items than the rest of the business. Delivering innovative, easy-to-use, and effective services to help sellers market, merchandise, and sell their listings is core to our long-term growth. Our sellers are the heart of the Poshmark community. Casual sellers, which we define as those who generate less than $10,000 in GMV annually, represent the majority of our GMV. Casual sellers often evolve to become pro sellers over time, given the ease of monetizing their closets on our platform. While the growth and health of our casual seller cohorts continues to be important for Poshmark, we are focused on growing our pro seller base, those who contributed $10,000 or more. which experienced three times the growth in GMV in 2021 compared to casual sellers. At the end of October, we launched Closet Insights, providing our sellers with real-time data on their sales and inventory. We also launched MyShoppers, our CRM for pro sellers that has driven GMV lift for those who have adopted it. We also saw continued strong adoption of our bulk listing tools in the fourth quarter. Pro sellers had the highest adoption rate of 30%, And those who use bulk actions saw GMV lifts from increased orders. Investing in seller-focused product innovation will continue to drive long-term GMV growth and marketplace differentiation. Finally, we are focused on enhancing our enterprise selling services to bring more professional sellers, brands, and retailers to our marketplace. This includes providing them with innovative tools and technology to help them grow and scale. Expanding our international footprint is our fourth key strategic focus, and we continue to invest ahead of revenue for the long term. In 2021, international GMV grew 3x faster than the U.S., but from a much smaller base driven by Canada. While our newer markets, Australia and India, are important to our long-term growth, as we mentioned on our last call, we do not expect meaningful contribution from these markets in 2022. Our asset-like model enables us to seed new markets early to establish a presence in the rapidly growing resale space and nurture them over time with minimum initial investment. As we look to our three-year anniversary in Canada in 2022, the majority of our international investment will be focused on driving growth through advertising, community development, and shipping innovation. We're very excited to begin holding in-person events again across the country. to strengthen community connections and accelerate growth in this market. In conclusion, 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 focused on making strategic investments that drive long-term growth, give the best overall experience for sellers, and make our marketplace the most trusted destination for buyers. Our highly engaged community gives us confidence that we can navigate near-term headwinds, and we will continue to adjust our marketing to accelerate growth. Because our millions of sellers are constantly listing new products, our marketplace is highly adaptable and responsive to buyers changing demands, and we are not impacted by supply chain disruptions. We're optimistic that beginning in 2022, consumers will once again attend events and see friends and family, unlocking pent-up demand for apparel and accessory purchases. Our resale marketplace enables shoppers to rotate styles, mix trends, and give a second life to items, contributing to a more sustainable fashion ethos for consumers. Now, I'd like to turn it over to Rodrigo to dive deeper into the financials.
spk11: Thank you, Manish, and to Team Posh for the warm welcome. Having worked at four online marketplaces before Poshmark, including eBay and most recently Amazon, I am committed to bringing industry expertise and operating rigor to Poshmark. I joined the company for two reasons. First, the social element that drives engagement, buyer and seller cross-pollination, and retention levels that I have not seen before in my career. For instance, by year five, there is over 40% overlap between buyers and sellers. In 2021, stacked buyer cohort retention was 104%, two points higher than in 2020. Stacked seller cohort retention was 112%, up one point from the prior year. Second, I adamantly believe in Poshmark's mission and commitment to sustainable commerce. Poshmark is leading the way for a new model of sustainable commerce that resonates with today's consumers, especially Gen Z and millennials. I have spent my first 90 days doing deep dives into various aspects of our business, drawing upon my past experiences to increase the rigor of our financial planning process and strengthening our business operations. I am excited by the many potential opportunities for future growth ahead. That's why my key priorities for 2022 are focusing on execution, growing our core business, and ensuring that our initiatives are properly funded. We ended the year strong with both fourth quarter revenues and EBITDA coming in ahead of our guidance. GMV grew 27% to $490.8 million, up from $387.2 million in the fourth quarter of 2020, or 62% growth on a two-year basis, despite headwinds from Apple privacy changes. As we mentioned on our prior earnings calls, we began adjusting our marketing spend in the middle of Q3 and started seeing the positive impact on October GMV growth, which continued throughout the fourth quarter. Net revenues grew 22% to $84.2 million, up from $69.2 million in the fourth quarter of 2020, or 55% growth on a two-year basis, and was ahead of our guidance of $80 to $82 million. This was driven by 17.3% growth in training 12-month active buyers to a record $7.6 million, up from $6.5 million in the fourth quarter of 2020. On a two-year basis, trailing 12 months, active buyers grew 41 percent. Our take rate in the fourth quarter was 17.2 percent, down from last year's rate of 17.9 percent due to seasonal holiday cancellations and continued mixed shift to more orders greater than $15. This continues to be a take rate headwind as orders less than $15 have a higher take rate due to the flat fee of $2.95. Cost of revenues of $14.1 million in the fourth quarter was 16.7% of revenues, an increase of 21% on a year-over-year basis. Adjusted gross margin was 83.3% of revenues in the fourth quarter of 2021, flat from our fourth quarter of 2020. Marketing expenses excluding stock-based compensation, or SBC, of $37.4 million in the fourth quarter was 44.4% of revenues, up from 39.1% in the fourth quarter of 2020. That's lower than our guidance of high 40s. And marketing increased 38% from $27 million in the fourth quarter of 2020, though on a two-year basis, marketing only grew 4%. Similar to other companies that use digital marketing, we continue to see the impact of Apple privacy changes during the fourth quarter, as mobile represents about a third of our advertising spend and over 70% of our GMV. We continue to adapt our marketing investments to minimize the impact of IDFA changes. Since our marketing mix is highly nimble, we adjusted by focusing on strong ROI user acquisition channels, and invested in upper funder strategies such as TV and creator partnerships. We diversified our spend across platforms by increasing our penetration with Google Search, TikTok, and Snap. The increased investment in marketing accelerated training 12-month active buyers growth to 17.3% in the fourth quarter, which was up from 16.6% in the third quarter and 15.7% in the second quarter. Moving to other premium expenses, option support excluding SBC of $14.7 million in the fourth quarter was 17.4% of revenues, up from 16.9% in Q4 2020 due to higher costs from seasonal cancellations and higher shipping costs. R&D, excluding SBC of $11 million in the fourth quarter, was 13% of revenues, up from 10.5% of revenues in Q4 2020. This was due to the planned increasing hiring we have previously discussed, as we continue to invest additional resources across a number of key strategic initiatives. G&A, excluding SBC of $11.8 million in the fourth quarter, was 14% of revenues, up from 9.8% in Q4 2020, primarily due to ongoing costs of being a public company. Q4 2020 G&A includes a $0.6 million favorable adjustment as a result of revising G&A expense in order to correct an overstatement of chargeback losses from our payment processor. We have outlined this in today's earnings release. Stock-based compensation was $9.3 million in the fourth quarter, an increase from $1.9 million in Q4 2020 due to divesting of RSUs upon completion of our IPO in January 2021. Adjusted EBITDA excluding SBC was negative $4.7 million, down from $4.8 million in Q4 2020. Adjusted EBITDA margins were negative 5.5%. compared to a 7% margin in Q4 2020. However, it's important to note that these numbers were ahead of our guidance of negative $7 to $8 million. Compared to last year, the decrease in profitability was primarily driven by investments in marketing, which successfully accelerated top-line growth. We will continue to focus on balancing marketing efficiency and investing to accelerate growth in 2022. Operating loss excluding SBC was negative $5.7 million in the fourth quarter with operating margins of negative 6.7%. That compares to $4.1 million with margins of 5.9% in the fourth quarter of 2020. Fourth quarter 2021 net loss to common shareholders was negative $14.8 million compared to negative $3.2 million in Q4 2020. Cash, cash equivalents and marketable securities were $581.5 million at the end of fourth quarter of 2021, or about $7.52 in cash per share. As we 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 cash flow statement for the 12 months ended December 31st, 2021, free cash flow was $26.7 million compared to $84.6 billion in the 12 months ended December 31st, 2020. We continue to generate cash for the second year in a row. Before I jump into guidance, I wanted to share some observations from my first few months as CFO. I believe they help set the context for how to think about the business and how we will create long-term value for all stakeholders. First, we have a massive opportunity in our core U.S. fashion business, but as we have expanded into new categories and geographies, we have diluted our focus on the core. For that reason, we have appointed dedicated leadership to focus on driving and accelerating growth within our core U.S. business. including improving how we execute. Our community is obsessed about Poshmark, and we must be obsessed about executing flawlessly so that we deliver an amazing buyer and seller experience. Second, as we look beyond core, we see international expansion as a strategic, long-term growth opportunity. We will continue to invest ahead of revenue growth to build the foundation and will ensure our international expansion is set up for success and properly funded for strong execution. Third, we have a sticky platform and engaged community. As said earlier, we have historically seen and continue to see net positive GMV retention for old cohorts, and that is very unusual for any transaction e-commerce player. In 2021, our social activity reached an all-time high of almost 45 billion social interactions or 47% growth versus 2020. We believe this engagement shows there is a big opportunity to drive growth of our core business. Now on to guidance. While we are confident that focusing on growing our core business and continue to invest in marketing can positively impact GMB growth, The disruptions from Omicron at the beginning of the year, the lapping of stimulus, and the current geopolitical situation lead us to be cautious about our outlook for the first quarter. After a better than expected holiday season, similar to others in e-commerce and retail, we saw softer trends in January as consumers were impacted by Omicron and events were once again canceled or postponed. While trends improved in February, We have our most difficult comparison still ahead in the second half of March as we left stimulus. While we hope that COVID is becoming endemic, we expect that the normal seasonality of consumer spending could continue to be disrupted during 2022, especially in the near term as we monitor consumer response to inflation, wait for Omicron to fully retreat, and monitor how the geopolitical situation will impact consumer spending. We expect first quarter revenues of 86 to 88 million, resulting in a growth rate of 7 to 9% as we left difficult comparisons of 42% growth in Q1 last year. On a two-year basis, growth is expected to be 51 to 54%. Compared to Q1 last year, we expect to see slight pressure on Q1 take rate as the mixed shift to orders greater than $15 continuous. We expect negative adjusted EBITDA of $7 to $9 million in Q1 as we continue to invest in R&D to drive product innovation, G&A to build the infrastructure necessary to evolve as a publicly traded company, and marketing to grow our community of users. We expect adjusted gross margin to remain consistently high and similar to Q4 21 levels as we hold no inventory. Options support excluding SBC in the first quarter is expected to be 17% of revenues or slightly higher than Q4 21 as we continue to invest in customer support and authentication services. R&D excluding SBC in the first quarter is expected to be 14% of revenues or $1.5 million higher than Q4 21, as we continue to increase our investment in product innovation to accelerate growth. G&A excluding SBC in the first quarter is expected to be 16% to 17% of revenues, or $3 million higher than Q4 21, due to the higher cost of being a public company, and as we build out finance, accounting, and legal teams. We continue to expect marketing excluding SBC as a percentage of revenues to be in the high 40s in the first quarter and throughout 2022 as we invest in the brand and address higher costs in digital advertising. We will continue to be disciplined as we invest in marketing to accelerate GMB growth while continue to diversify our marketing channels to minimize the impact of IDFA changes. We have proved that our platform is sticky and cohorts deliver net positive GMV dollar retention over time. With high gross margins and a strong balance sheet, we have the ability and conviction to continue to invest in marketing. In the near term, these investments will enable us to build our user base and grow active buyers, which will put us in a stronger position in the long run. In closing, While we expect that macroeconomic and geopolitical factors could potentially impact consumer behavior in 2022, we are focused on controlling the things we can control. First, continuing to enhance our product experience. Second, continuing to build our brand with the global consumer. And third, investing marketing talent in a robust operating mechanism to drive execution. In 2022, our priorities are focusing on execution, ensuring that our initiatives are properly funded, and growing our core business. First and foremost, we are curators of style. We are well positioned to win as shoppers become more sustainably conscious and find a better value in inventory availability during a period of inflation and supply chain disruptions. We are well positioned to cater to a growing young population that embraces social and seeks self-expression through unique looks they can find only on Poshmark. Our sticky platform and asset-light model drives high gross margin, holds no inventory, and our supply is highly responsive to buyers' changing demands, positioning us well to thrive in the shifting fashion environment. By strengthening our business operations, improving our execution, and enhancing our financial planning process, I am confident that we have a long runway of growth ahead. We are making strategic investments in growth and focusing relentlessly on building a more seamless, more social, and more sustainable way to shop. Thank you, and I will now turn the call over to the operator so we can take your questions.
spk05: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. In the interest of time, we ask that you please limit yourself to one question per person. Your first question today comes from the line of Lauren Shank with Morgan Stanley. Your line is now open.
spk14: Hi, this is Nathan Sutherland for Lauren. Can you just give an update on how India is performing in the first, you know, call it six months after launch, along with, you know, international more broadly? And then how are you thinking about fiscal 22 international expansion? And then one more on that. You know, you saw kind of a material drop in the take rate in 4Q. Is that just due to the mixed shift to items $15 and higher? And should we expect that kind of lower take rate to continue? Thank you.
spk09: Yeah, this is Manish. I'm going to give the answer for the international. I'm going to have Rodrigo give you a color on the take rate. On the international side, we are continuing to invest in Australia and India. Australia is going through a period where we are really focused on our community building now that the world is open. We're actually doing a lot more physical events and a lot more sort of direct community building in Australia. And so we're excited about sort of where that is going. We are also... looking into new markets in terms of new countries and new areas to expand. And as we said, our focus has been primarily around English-speaking countries. So we're going to continue to follow that strategy into 2022.
spk11: All right. And for the take rate question, there are actually two factors. So first, we see higher cancellation rates during the holidays. And particularly in Q4 2021, we saw a higher holiday seasonality then compared to Q4 2020. However, just saying that in Q1 2022, we are seeing cancellation rates just normalizing, and they are back to the trending of where they were a year ago in Q1 2021. And the second point is the one that we pointed out. We continue to see a mixed shift away from the items under $15, which causes some pressure on take rate.
spk04: Okay, great. Thank you.
spk05: Your next question comes from the line of Mike Ng with Goldman Sachs. Your line is now open.
spk12: Hey, good afternoon. Thanks for all the detail around the marketing investments. I was just wondering if you could talk a little bit more about some of the marketing strategies and the outlook for 2022. Specifically, have you seen any changes to ROIs for channels like Facebook post IDFA? you know, the guidance implies a step up in marketing investments throughout 2022. Any specific areas or channels that you're particularly focused on? Thank you.
spk09: Yeah, so just broadly speaking, you know, our overall approach to marketing is in response to IDFA has been number one to focus on the upper funnel strategy. So we're looking at different ways to retool that. And that means, you know, tweaking channel mix, potentially moving to other channels that are more attractive. So for example, we've shifted in Q4 a little bit of spend to more to TV. We also are looking at more creator partnerships. And so in Q1, we launched a partnership with ATEEZ, which is a K-pop band, and we're doing more sort of micro and macro creator partnership. In terms of just sheer installed channels, we've definitely allocated more to TikTok and Snapchat as S2 channels. that are showing very attractive and a more attractive sort of value proposition. I would say Facebook and Instagram have been improving but are not quite at the pre-IDFA levels in terms of just their performance.
spk04: Great. Thank you for all the color, Manish.
spk05: Your next question comes from the line of Ross Sandler with Barclays. Your line is now open.
spk08: Hey, Mish, the comments about focusing on the pro sellers I think is pretty interesting. We've talked to some pros that can do really well on Poshmark and others that have kind of struggled. So I guess can you just give us a little overview on what tools are these pros asking for? What have you already delivered to them? And what are the most interesting things that you're going to provide to pros to make their life easier in terms of selling on Poshmark? Thanks a lot.
spk09: So over the course of 2021, we've invested quite a bit of our R&D investments in building out a suite of tools, starting with bulk sharing, which was sort of one of the first big, massive things we did, which was to really simplify sharing as a promotion engine and a curation engine and allows them to work with a lot of listings at the same time. We've launched Closet Insights, which gives them a lot of data and analytics on their own stores and closets on Pashmark. We also have the first version of My Shopper South, which is a unique customer relation management team tool that allows them to work through a lot of their past customers, prospective customers, interact with them, almost like a boutique kind of a CRM system that we've created. And there's a lot more that we'll be doing in the My Shopper's area in terms of the innovation. I think a lot of the work that the pro sellers and the enterprise sellers need is is in scaling up the use of tools, how they can sort of work with a lot more things at the same time, how they can manage bulk offers. We also launched bulk upload of listings where people can take a lot of inventory and upload that. For some of the larger enterprise sellers, we've also integrated with some of their warehouse management systems so they can process it from there as well. So we continue to invest in a variety of tools that can help more efficiently for sellers who are scaling up their business on Poshmark to manage their business and then continue to listen very closely to them. And now that the world is open, we hope to be able to have a lot more in-person gathering with some of our pro sellers and get their feedback, which has been obviously hard to do in the last two years. We're also excited about this year in terms of just opening up our live events that we are starting to host to engage more with our community and learn more in terms of the needs, which I'm sure many of them continue to evolve as people are readjusting to life in this sort of COVID transition back into more physical life. So that's sort of the high-level perspective on the tools. It's an area of constant innovation and constant sort of distribution for us. The other thing which is really powerful that we launched earlier this year is our trends engine, our trends merchandising engine. And that is extremely powerful because one of the things we've noticed about fashion and style is that going into pandemic, people sort of went in a different direction, but coming out of it over the last year, the trends in fashion has been changing very rapidly, driven by newer social media platforms like TikTok, but also driven by the fact that a lot of people are remixing stuff from their closets, vintage, secondhand, et cetera. So actually the importance of educating our seller and our shoppers through our trends engine has taken on a new meaning and that's an engine that we're investing a lot in in 22.
spk05: Your next question comes from the line of Oliver Chen with Cowen. Your line is now open.
spk13: Hi Manish. There's a lot of really exciting new business opportunities with 200 plus electronics and thinking about footwear as well. What are your thoughts in terms of how these evolve with new customer or existing customer acquisition and also the nature of competition and how that intersects with how you think about top of funnel and marketing. Just would love some thoughts there. And then Rodrigo, you mentioned in detail a focus on core and execution there and the product experience. If you could elaborate on what you mean and where you see the most opportunities there, that would be helpful. And then finally, just a near-term modeling question. Very helpful with March. and the nature of compares in March and the softer trends in January. Could you speak to which categories are most sensitive to that and what's within your control as you, you know, algebraically face tough compares? Thank you.
spk09: Thanks, Oliver. So just talking a little bit about electronics and category and sort of how we see top of the funnel. I think for us, we go back to who we are. We're ultimately a community platform. And so we see the world evolving around what we think of it as micro communities, which is, you know, when you think of electronics, we don't think of it just as products, but we think of communities that gather around that products. It could be the gaming community. It could be, you know, people who are sort of looking at specific kind of hobbyist around that. And so a lot of the work we do here is focused on style, focused on personal direction. And that is where we see the excitement. When you think of pets, it's not just as much about pets as a category. We think of it as a community of people who are part of the different kinds of pets communities. And so a lot of the innovation you'll see from us in 2020 is encouraging connecting these micro communities in a more direct way. And you can see some of that in our app today. where we gather up college communities together. We have city communities. And those things have been really powerful in connecting people and people discovering. So you may have a chapter out in Louisiana where Poshers are gathering together and connecting. And most recently, we actually brought back our Posh and Coffee, which we had suspended at the beginning of COVID almost two years back. And the first set of physical Posh and Coffee are starting to happen as well. So we're excited about encouraging and creating these micro communities on both style and other categories on the platform.
spk11: Yes, and Oliver Rodrigo here. So your question about some of our emphasis on business operations and especially our focus on core. As mentioned, our core, when you step back, core fashion categories, apparel, bags, shoes, and accessories, they are 90% of our GMV. So within this core, we are focused on growing our market share of premium price products. And that's one of the reasons that we acquired Suede One. And then we are integrating that as part of our product, and we are excited about it. So it's really focused heavily on users that are looking for those premium price products. And that's one of the capabilities that we built. We also have the Shock by Trend. which is an example of how we are using product innovation to drive growth for our core fashion categories. And when you think about the seller side, we are focused on growing the pro sellers as Manish talked about. We have some focus on enterprise and selling through the brand closets, but we are not alienating our casual sellers. So the good thing about Poshmark is we build the So everyone can thrive here. So that's kind of how to think about the categories. And you have a third question, if you can remind me, please.
spk13: Thanks, Rodrigo. Just as you left stimulus, which categories have been more volatile? And you spoke to the softer trends in January. So what's in your control in terms of facing this tough comparison and executing against it?
spk11: Yeah, it's a good question. We don't comment on the category specific, but as you mentioned March, March is where the tough lapping is happening because that's when we saw the stimulus checks kind of kicking in last year. So we are lapping that period as we speak. We're not guiding March, obviously, because we haven't closed March. But how to think about it, focus on things that we can control. I'll highlight marketing. So if you look at this platform, we see When you acquire a user over time, that user produces more GMV over time. That thickness I have not seen on my career so far, and this is my fifth marketplace that I'm working for. So focus on things that we can control, especially marketing, is where we have high conviction to focus as we let this stuff part of Q1.
spk13: Thank you. Best regards.
spk05: Thank you. Your next question comes from the line of Ralph Shackert with William Blair. Your line is now open.
spk02: Good afternoon. Thanks for taking the question. Our first question is just on cohort retention. Maybe you could provide some color, if you could, please, on both the buyer and seller side, sort of what's driving that increased retention engagement. I'm guessing it has something to do with new products such as new seller tools. But if you could elaborate on that, that would be great, and then I have a follow-up.
spk09: Yeah, it's really a continued focus on product innovation. I mean, if you think about what we've done all of last year is invested in our discovery engines, invested in our search, invested in seller tools, and certainly continue to sort of bring more demand to our sellers and more supply to our shoppers. So all of those core product innovation is really the key to long-term retention of our cohorts. And so we continue to invest in that. At various levels, you know, whether it's a casual seller who's going to benefit from some of the casual seller listings improvements we've done into the core listing flow, or you look at sort of more of a pro seller who benefits from my shoppers. We just continue to invest in these things. And that, I think, is ultimately how we've thrived in the platform with serving our community to the fullest.
spk02: Great. And maybe one for Rodrigo. Sounds like Rodrigo that you're going to be leaning into some marketing spend. Sounds like you're getting some efficiencies and some new channels. So just curious as you're thinking about sort of balancing growth and profitability for 2022, how are you thinking about that trade-off and sort of that, you know, growth phase, I guess, as we think about it for 2022. Hey, Ralph.
spk11: We're not guiding 2022. But I'll stick to what we said in the beginning of the call. So we are guiding to the high 40s of marketing. And how you're thinking about it, we are coming back and looking at how our retention has trended. So first, again, I highlight that by year five, 40% of the buyers become sellers and sellers become buyers. So I like that. And the fact that when you look at the stacked cohort retention from both buyers and sellers, they continue not only to return more than 100% retention, but they grow over time. And then we saw that we accelerated on both buyers and sellers. So with that in mind, we are sticking to the plan to lean in in marketing to the high 40s through 2022.
spk02: Okay. Thanks, Rodrigo. Thanks, Manish.
spk05: Your next question comes from the line of Andrew Boone with JMP Securities. Your line is now open.
spk10: Hi, guys. Thanks for taking my questions. As we think about apparel rebounding with the reopening of the economy, can you just remind us in terms of the trends that you've seen as we've now gone through multiple waves of COVID and we think about maybe getting through COVID? how demand is trended for apparel and help us think about that as we think about the puts and takes for 2022.
spk09: Apparel broadly defines bulk of our sales, as we pointed out. And within the apparel categories, what we continue to see is the distribution between the different groups, whether you look at bags or shoes and cord, seems to be very stable. And what we are really seeing is the shift in shift to sort of when we start to think about the shift to the different styles and silhouettes that are happening is apparent in Poshmark. So, for example, you know, we've talked about the shift to sort of more loser based, you know, sort of tight on top and broader at the bottom kind of a silhouette. And that sort of is apparent in our apparel mix. The core that you have to see, and you can see that in our AOV change, is a little bit of shift more towards the premium price points in both apparel and bags and handbags on Flashpoint.
spk10: And then stepping back, as I think about efficiency in 2022, has there been any change competitively against other secondhand platforms that are out there? Do you guys feel like that's changed since pre-COVID, during the pandemic, and then as we sit today?
spk04: Thanks so much.
spk09: Yeah. So I think, look, in general, I would say that there has been definitely an increase in competition. But if you look at sort of where we are, we have been growing our business at a pretty good rate. And what you see in the latest quarter we showed is that our active buyers have grown 17 percent, delivering a record active buyer of seven or more than seven million active buyers on our platform. And so we feel that in this landscape, we are faring pretty well. And again, it goes back to the strength of our community, strength of our cohorts, and this very unique experience that we've crafted, which is not just about buying and not just about selling, but it brings in curation and community into an integrated thing. And you see the proof in everything that happens on Poshmark, whether it is increased social interactions, It is how people buy and sell, or it is how our cohorts are trending. So we feel we're pretty well competitively positioned to play in this landscape. I think at the same time, the last two years, the opportunity has exploded massively. When we talk about the future of shopping as being secondhand, we talk about the future of shopping as being online, and we talk about the future of shopping as being social. Well, these trends are exploding in a massive way. with the younger generations, with the older generations, and COVID has just accelerated it. So we find ourselves in even a bigger market opportunity than we did when we were starting out with COVID. So while competition has increased, the opportunity has increased even bigger. So we see a really exciting future as we invest into it and grow into it.
spk05: Your next question comes from the line of Anna Adriva with Needham. Your line is now open.
spk06: Great. Thank you so much and good quarter guys. Congrats and thanks for all the color. We had two questions. We noticed there were some changes to search functionality in the last month. My understanding is a new iteration was launched just last week. Just curious, how is the community reacting to that? And I guess do you anticipate any additional changes down the road? And I know you're not providing annual guidance, but as we think about the year, should we expect the sales growth to accelerate after 1Q? And I had a quick follow-up as well.
spk09: I'm going to answer the first part and then have Rodrigo sort of answer the second part. So, you know, we want to continue to provide the best matching experience for buyers and sellers on our platform. And for that, we are constantly optimizing our discovery and search experiences. We did a shift in our just shared algorithm earlier this quarter. We got feedback from the community. We took a step back, redid it, and relaunched it fully just this week. It went 100% live this week. All of the testing from the first version and second version have actually shown growth across both buyers and sellers in the platform, and we will continue to optimize it. I think there's so much opportunity here as we are using a combination of algorithms machine learning and social curation the thing that we have our commitment to our community to our sellers and to our shoppers is that the focus is always on them so for example sharing which is very unique to Poshmark and that's sort of something that has been great for both the sellers and the shoppers in creating a highly curated fresh experience will always be front and center for us so we continue to invest in it but at the same time we also want to enhance it with algorithmic relevance and other pieces. So this is an idea of active innovation and active evolution for us, and we'll continue to sort of grow it overall. And ultimately, our goal is to help all of our sellers thrive, whether they're small or big, and all of our shoppers being able to quickly find what they're looking for. And that drives all of our true north for innovating in search and discovery on the platform.
spk11: Hi, Anna. Rodrigo here. So obviously, you're not guiding the year. But since we last reported the results in November, there has been unprecedented volatility in the macro environment. And thus, it feels premature to be giving any 2022 guidance. We all know that last two years have been anything but certain. And the current atmosphere just creates more volatility in the consumer behavior. And as you know, they're just coming out of COVID and into an inflationary environment right now. So it's just difficult to predict. But having said that, we are focusing on the things we can control. We plan to continue to invest in product innovation through R&D and acquire new users through marketing. And we do that because we continue to see the net positive GMV retention from both clients and sellers. And we believe this will pave the way for the long-term growth. And that's why we are focusing right now, long-term growth.
spk06: Okay. No, I appreciate that. That's helpful. And my follow-up was just on the take rate. Great to hear that the higher priced product is doing well. Just curious, with the acquisition of Suede, as you're increasingly pivoting into higher price, how do you guys think what's the right level structurally for take rates for Poshmark?
spk09: know for us we are very much focused on delivering an integrated simple transparent value in everything that we do whether you look at our shipping system you look at our fee structures you look at sort of our tooling infrastructure etc we have made everything universally available to all of our sellers across all of the pieces and that simplicity philosophy guides our decision and everything we make we feel ultimately Being simple, being sort of clear about these fee structures and being able to build a sustainable business which serves our sellers and our shoppers is the way we do. So we have, in fact, pretty much since day one had the same take rate. And today we certainly don't see any reason to make changes to the take rate as we look into the future. And ultimately, the key for us is to continue to deliver value to both our sellers and shoppers. And that's what we'll do.
spk07: All right. Well, I appreciate it. Thanks so much.
spk05: As a reminder, we ask that you please limit yourself to one question. Your next question comes from the line of Ashley Helgens with Jefferies. Your line is now open.
spk15: Hi, good afternoon. It's Blake. I'm for Ashley. Just wanted to ask a more high-level one on inflation. I know you mentioned lapping stimulus and the Omicron impacts. Obviously, you've talked about a higher mix of higher price point items doing well. So should we read that as you're not having much elasticity for some of the other categories? Or how do we think about the category impact by maybe higher prices? Are you seeing maybe some higher income consumers come to the platform? And then also, do you think inflation could actually be a positive for your platform at all given the affordability of resale? Thank you.
spk09: Yeah, so look, inflation is a challenging thing that the American consumer and the consumers probably around the world face. We believe our platform can really be a great partner for consumers faced with inflationary pressure. On one side, we provide a way that anybody can sell stuff from their closet and allows them to provide, get liquidity and really rotate that stuff, which is great for the planet and great for the wallet. On the flip side, We have, you know, amazing amount of value oriented, both new, but also more importantly, secondhand inventory available that people can come and shop. And we provide different kinds of pricing and negotiation tools to arrive at a good price. So we believe that that combined with our asset life model where the inventory can re-vector dynamically gives us tremendous flexibility as people deal with inflation going into 2022. I think your question is, why are we not seeing downward or upward pricing pressures? I think at the minute, it is fully, I would say, in the platform, it is fully hard to say exactly how the consumer will completely react to inflation. I think the inflation is not, in my opinion, is not fully factored into people's decisions across the board. It's starting to come more and more, as we've seen with recent gas prices, so that picture will unfold. What we do know is, being asset-light, giving the people the ability to sell and giving the people the ability to shop will allow us to be a great partner to the consumer in these very inflationary times.
spk05: Your next question comes from the line of Brian McNamara with Barenberg. Your line is now open.
spk01: All right, thanks for taking the question. I understand you're lapping your toughest comp in Q1, but it's also, I believe, your easiest comp for the year on a two-year basis. So how should we think about your growth relative to resale market growth in general? Are you gaining or losing share?
spk04: Thanks.
spk09: You know, from our perspective, it's hard to know exactly whether we're gaining or losing share because we're in the middle of a quarter. But I would say if you look at last year, our performance has been relatively quite strong compared to the other players in the market. Some are private, some are public, so it's hard to 100% compare across the board. When we think of in this quarter, particularly in Q4, it's a very strong growth in our TTM active buyers of 17% with a record of a little over $7 million buyers that we flocked in, which is the highest active buyers that we've had. We've also continued to see the huge retention, both in our sellers and buyers, and both of them accelerated. So we can see that we have a very strong business in this changing landscape. And I think the entire market is growing so fast that I think it also gives us a tremendous sort of opportunity I think one thing to just think about our active buyer number is that 7.6 million active buyers is bigger than most other players out in the market. So that can give you a little bit of a sense of how we rank with respect to other marketplaces.
spk04: Thank you. That concludes our Q&A for today.
spk05: I now turn the call back over to Manish.
spk09: Thank you all for joining us for our earnings call, and we look forward to speaking to you in a couple of months. Thank you, everyone.
spk05: That concludes today's conference call. Thank you for attending. You may now disconnect.
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