Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• 1stdibs.com Inc (NASDAQ:DIBS) achieved year-over-year revenue growth for the second consecutive quarter, with accelerating order growth and sequential active buyer growth.
• Conversion rates have increased year-over-year for four straight quarters, with double-digit improvements for both new and returning buyers.
• The company has implemented a machine learning-based pricing model for furniture, providing stronger, more precise recommendations to maximize conversion.
• 1stdibs.com Inc (NASDAQ:DIBS) has initiated a $10 million share repurchase program, indicating confidence in the company's intrinsic value.
• The company is focused on improving efficiency and positioning the business for sustainable growth, with plans to generate operating leverage at mid-single-digit revenue growth.

Negative Points

• Gross Merchandise Value (GMV) contracted due to weaker than expected average order values, which the company views as a temporary issue.
• Adjusted EBITDA margins came in toward the low end of guidance, with anticipated additional margin compression in the fourth quarter due to seasonal increases in performance marketing.
• The luxury housing market remains soft, impacting demand for high-end furnishings, which is a cyclical issue affecting the company's performance.
• The company experienced a decline in unique sellers, down 13%, due to policy changes and elevated churn, which is expected to continue in the fourth quarter.
• Operating expenses increased by 10% year-over-year, driven by higher technology development and sales and marketing expenses, impacting adjusted EBITDA margins.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with DIBS.

Q: Could you remind us about the AOV headwinds and the timeline for when they might stabilize? A: Our AOV headwinds in Q3 were due to two factors: lapping a record quarter for orders over $100,000 last year, and this year, such orders were below typical ranges. We expect these headwinds to subside in Q4, with more normalized average order values. - Tom Terino, CFO

Q: Given the correlation with the luxury housing market, do you have any updated thoughts on the timeline for more normalized transaction volumes? A: We aim to grow faster than the market and take share. While we don't anticipate a market recovery next year, our performance metrics indicate we're outperforming the market. If a recovery occurs, it will be a plus. - David Rosenblatt, CEO

Q: How material is the removal of the auctions format to the business? A: Auctions accounted for 5-6% of orders and 2% of revenue. We've redeployed resources to other pricing initiatives, like machine learning-based pricing, which should have a bigger impact on conversion and growth. - David Rosenblatt, CEO

Q: Can you clarify your comments on revenue growth and operating leverage for 2025? A: We are not providing forward-looking guidance for 2025. However, we are focused on lowering the revenue growth threshold required to generate operating leverage, targeting mid-single-digit revenue growth. - Tom Terino, CFO

Q: What factors will help churn normalize in the first half of 2025? A: We are transitioning remaining Essential Sellers to subscription fee-paying packages, which will be completed this quarter. This will stabilize churn, with minimal impact on GMV and listings. - David Rosenblatt, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.