1stdibs.Com, Inc. (DIBS) Earnings Call Transcript & Summary

Thank you. Hello everyone, thank you for joining us and welcome to the first DIBS Quarter 2 Earnings Call 2026. After today's prepared remarks, we will host a question and answer session If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Kevin LaBuzz, Head of Investor Relationships and Corporate Development. Please go ahead.

Good morning and welcome to the first dibs earnings call for the quarter ended June 30th, 2026. I'm Kevin LaBuzz, head of investor relations and corporate development. Joining me today are Chief Executive Officer David Rosenblatt and Chief Financial Officer Tom Medergino. David will provide an update on our business, including our strategy and growth opportunities, and Tom will review our second quarter financial results and third quarter outlook. This call will be available via webcast on our investor relations website. at investors.firstdibs.com. Before we begin, please keep in mind that our remarks include forward-looking statements, including, but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects, business plans, strategic initiatives, business and economic trends, and competitive position. Our actual results may differ materially from those expressed or implied in these forward-looking statements as a result of risk and uncertainties, including those described in our SEC filings. Any forward-looking statements that we make on this call are based on our beliefs and assumptions as of today. we disclaim any obligation to update them, except to the extent required by law. Additionally, during the call, we will present gap and non-gap financial measures. Reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which you can find on our investor relations website, along with the replay of this call. Lastly, please note that all growth comparisons are made on a year-over-year basis, unless otherwise noted. I will now turn the call over to our CEO, David Rosenblatt. David?.

Thanks Kevin. Good morning everyone. Our second quarter results confirm that we are on track to sustainable top line growth and positive adjusted EBITDA. GMV of $96 million, up 7%, came in above the high end of our guidance range and was our strongest growth since the fourth quarter of 2024. From our sales and marketing reductions, we believe that we gain market share in the second quarter based on credit card panel data we track. driving that result is a product that is measurably better than it was a year ago, Conversion grew for the 11th consecutive quarter, average order values expanded, and the number of sessions stabilized sequentially. The improvements we have been making in our platform in discovery, pricing, shipping, and service are showing up in the numbers. Based on Q2's performance, we now expect GMV to grow year-over-year for 2026 as a whole. We also continue to expect that GMV will grow in Q4. The demand environment remains challenging. The U.S. housing market continues to hover near a 30-year low, and the spring selling season ended on a weak note. High-end furniture demand, based on the credit card data we track, continues to decline year over year and has not shown material improvement. Our 2026 GMV growth expectation does not depend on a macro recovery. Q2 is evidence of that. When conditions do normalize, as they eventually will, we are well positioned to benefit. Turning to the financials, the second quarter demonstrated that our re-engineered cost structure is working as intended. GMV of $96 million and revenue of $23.3 million both came in above the high end of guidance and did so despite substantial sales and marketing reductions. Adjusted EBITDA margin of approximately 6% came in well above the high end of guidance, an improvement of over 13 percentage points versus a year ago. From 2022 through 2025, we re-engineered the business to be able to convert revenue recovery into outsized margin expansion. This dynamic was on full display in Q2, and our confidence in positive full-year adjusted EBITDA remains. With that context, let me walk you through the drivers of the quarter's performance. The funnel told an encouraging story on all three dimensions. Traffic declines moderated relative to the first quarter, and in absolute terms, sessions were flat sequentially, an encouraging sign. Conversion grew for the 11th consecutive quarter, a streak that reflects compounding product improvements. Average order value expanded as well, supported in part by two high-value art sales in the quarter, totaling over $2 million. That speaks to something important, the trust that buyers place in first dibs to facilitate transactions at the high end of the market is a genuine strategic asset, and it is reflected in our AOV trends over the past year. Together, these three dynamics, moderating traffic declines, expanding order values, and continued conversion growth, drove a return to GMB growth. All three give us confidence that our 2026 roadmap is working. That roadmap is organized around four pillars, discovery, pricing, shipping, and service. Each design to solve specific customer problems that exist independent of the macro environment. AI-assisted development now accounts for over 70% of our new code, up from over 50% last quarter, enabling our team to ship faster than ever. Let me walk you through our progress in the second quarter. Discovery is where we are making the most visible progress and search is at the center of it. Our goal is to make first dibs searchable in the way that buyers naturally think, rather than the way design experts talk. A buyer who spots a cocoon pendant in a hotel lobby shouldn't need to know what it's called to find something similar on our marketplace. Our catalog is full of one-of-a-kind items that can be difficult to describe. Yet many buyers can recognize exactly what they want when they see it. They simply lack the design vocabulary to search for it. In June, we launched image search on mobile web and desktop, allowing buyers to upload a photo and find visually similar items across our catalog of nearly 1.9 million listings. More broadly, we continued our progression towards semantic and natural language search. This is not a single feature launch, but a year-long build toward a search experience that understands buyer intent rather than just keywords. To date, we've made real progress by enriching our catalog with AI-powered metadata and by beginning to test semantic hybrid search. On personalization, we are building something meaningfully different from what existed a year ago. Historically, our recommendations worked by surfacing items similar to what a user had viewed, favorited, or searched. Today, we are developing genuine user-level understanding, matching each buyer's affinity to the user. and behaviors to inventory they may never have found on their own. The early data is compelling. Personalized homepage recommendations, which launched in Q2, generated our highest ever click-through rate on a homepage recommendation module. The homepage itself is now evolving to reflect this shift. Moving from the From an editorialized destination to a personalized feed, with improvements rolling out over the coming quarters. Favorites is also a critical enabler of this strategy. In Q2, we overhauled the Favorites experience to make saving, browsing, and organizing items easier, and we are driving broader adoption across the platform. This matters because Favorites provide powerful personalization signals. The more buyers engage with them, the more precisely we can tailor their experience. Since last quarter, our favorite rate has improved, a trend which has continued in Q3. Notably, favorites usage is one of our strongest predictors of repeat purchase on first dibs, creating a positive feedback loop between engagement and customer lifetime value. Our Tastemakers Ambassador Program completed its pilot in the second quarter with tangible results. Our Instagram following topped 1 million, our Reels production doubled year-over-year, and total video view time on Instagram tripled versus the first quarter. This content is doing double duty, building organic reach and brand affinity, while simultaneously improving the efficiency of our paid media program. By incorporating tastemaker video into our creative mix, we expanded reach and reduced the cost per ad impression, making new buyer acquisition more efficient, even as we maintain spending discipline. We plan to scale the tastemaker program significantly in the second half of 2026. Once a buyer finds what they are looking for, the next question is simple. Can they trust the price? That is what our pricing roadmap is designed to answer. In the second quarter, we doubled our price parity coverage, using AI to identify and flag items priced inconsistently across competitor sites. Initial results validate the approach. Items corrected for price parity are showing an increase in sell-through rates. This sends an important signal to buyers that they don't need to cross-reference pricing on first dibs. Price parity is one of many elements of consumer trust in our platform. Based on our progress this quarter, we are expanding our pricing pillar into a broader trust initiative, one that addresses the full range of signals buyers rely on when deciding whether to transact on first dibs, including authenticity seller quality, and platform integrity. Pricing gives buyers confidence in the value of an item, trust that gives them confidence in the platform itself. And given how central trust is to our brand and to buyer confidence, we believe that expanding this work will drive conversion. More to come on this evolution in the third quarter. Even a buyer who trusts the price can be stopped by shipping uncertainty. That is the friction our shipping roadmap is designed to eliminate. Three priorities guide that effort. Upfront competitive pricing, on-time delivery, and accurate tracking. In Q2, we made the most progress on the competitive pricing front. In May, we deployed ML-powered freight quoting. increasing freight pre-quote coverage from approximately 50% to 75% of listings, and growing overall pre-quote coverage to nearly 90%. More items now show an upfront shipping cost before a buyer reaches checkout, reducing a common source of purchase friction. We also optimized our parcel rates, making certain shipping categories up to 8% cheaper. for verticals like furniture and art, where shipping can represent a meaningful portion of the total purchase price, lower rates directly improve the economics of a transaction and reduce a barrier to completing a purchase. On tracking, we integrated with a third-party logistics platform that will significantly expand or carrier coverage over time, giving buyers greater visibility into their purchases from seller to doorstep. Together, these improvements are building blocks of our broader multi-year vision, a shipping experience that is fully transparent and cost competitive, anchored by all-in pricing so that every buyer knows their total cost before they commit. All-in pricing eliminates one of the most persistent sources of checkout abandonment in our category. the moment a buyer discovers the shipping cost. When the total price is visible up front, the path from intent to purchase becomes more direct. Exceptional service extends an order into a relationship. That is the animating idea behind our fourth pillar. In the quarter, we launched a pilot of an AI-powered customer service chatbot, built in partnership with a top provider in the space, available to both buyers and sellers. Early results are promising. The chatbot is resolving a meaningful share of inquiries without human intervention, allowing our service team to focus on the complex high touch interactions where human expertise matters the most. For sellers, we improve the item listing creation process in our seller app, reducing the friction involved in bringing inventory to market. The easier we make it for sellers to list, the faster high-quality supply reaches buyers. The through line across all four pillars is growing confidence. Confidence that our roadmap is the right one, that our team is executing against it, and that the results are showing up where it matters. Our roadmap is not the only place we are building new revenue streams. The first DIBS50, our annual celebration of the world's top interior designers, marked its ninth year in May. This year, for the first time, we introduced paid event sponsorships. Miele, House of Roll and Serac partnered with us to reach our audience of top interior designers and high net worth buyers, an audience they cannot easily access elsewhere. The core insight is straightforward. Over the years, we have aggregated a uniquely valuable audience and live events give us a new and differentiated way to monetize it. The timing is right as well. As AI generated content becomes ubiquitous, advertisers are placing a growing premium on authentic, curated experiences. exactly what First Stib's events deliver. It's early, but the initial sponsor interest validates the premise that our audience has real commercial value beyond the marketplace itself. plan to host one additional sponsored event in 2026 and to scale events in the future. The first DIBS50 is a reminder of what makes this platform distinctive. A community of influential designers, a catalog of one of a kind objects, and a level of trust that brands and buyers alike are willing to pay for. Q2 confirms that the roadmap is working, but we are early. The work of improving discovery, trust, shipping, and service across the marketplace as complex as ours is a multi-year endeavor. We have made a strong start and there is a great deal more to do. Thank you for your continued support. I will now turn it over to Tom. to review our second quarter financial results and third quarter outlook.

Thanks, David. Good morning, everyone. From 2022 through 2025, we systematically re-engineered our cost structure, reducing headcount, rationalizing expenses, and rebuilding the foundation of this business with one objective in mind, ensuring that when revenue growth resumed, it would flow disproportionately to the body of the company. bottom line. Q2 provides early evidence that this is working exactly as designed. Across all three metrics, GMV, revenue, and adjusted EBITDA margin, we beat the high end of our guidance. GMV grew 7%, revenue grew 5%, and adjusted EBITDA margin reached approximately 6%. Critically, that margin expansion is happening alongside a deliberate rebalancing of our team towards product and engineering, the highest ROI investment we can make. We are expanding margins while simultaneously concentrating more product our resources on the work that will drive our next phase of growth. Let me walk you through the numbers. GMV of $96 million was up 7% and above the high end of our guidance range. That growth reflected progress across all three dimensions of our funnel, easing traffic declines, expanding average order values, and continued conversion growth. Traffic declines moderated and relative to the first quarter and sessions were flat on a sequential basis. We ended the quarter with approximately 75% of traffic from organic sources, a continued reflection of the enduring strength of the First Hibs brand. Average order value reached approximately $2,850, up 10% year over year. Median order value, which excludes the impact of outlier transactions, also grew 10% to approximately $1,500. That trend tells us order value expansion is broad-based, a clear signal of that trust buyers place in our platform. Conversion grew for the 11th consecutive quarter, reflecting the compounding impact of our product investments and giving us continued confidence in our roadmap. While order volume declined year over year, orders grew sequentially. Consumer and trade GMB both grew year over year. Together, the two channels reinforced the same story. Our platform is gaining traction across buyer types independent of the macro environment. On a vertical basis, growth rates improved across all categories relative to the first quarter, with strength in vintage and antique furniture, art, and fashion. We ended the quarter with approximately 57,700 active buyers down 10%, reflecting the deliberate reduction in sales and marketing spend enacted in late 2025. Turning to supply, unique sellers held steady at approximately 5,700 flat sequentially, reflecting continued stabilization following our 2024 and 2025 pricing actions. Listings grew 1% year-over-year to nearly 1.9 million, providing buyers with a deep and expanding catalog of one-of-a-kind inventory. Turn to the income statement. Net revenue reached $23.3 million, up 5%, exceeding the high end of our guidance range. Transaction revenue, which is tied directly to GMV, represented approximately 74% of total revenue. The quarter also included approximately $270,000 of non-endemic advertising revenue related to the first of 50 sponsorships, an early but tangible contribution from this nascent revenue stream. Trade grades declined approximately 30 basis points year over year, largely driven by a mixed shift to higher value orders which carry a lower blended commission rate. Gross profit was $17.2 million, up 8%. Gross margin was 73.9%, up 210 basis points year over year, at the high end of our target range of 72 to 74%, helped by modest reductions in professional services, depreciation, and shipping costs. Total operating expenses were $19.3 million, down 11%. That decline did not come at the expense of product investment. Technology development continued to grow year over year, consistent with our decision to rebalance resources towards product and engineering, even as total OPEX declined. Sales and marketing expenses were $5.4 million, down 34%. This reduction reflects the strategic realignment implemented in late 2025, which fundamentally reset our marketing organization and rationalized performance marketing spend, as well as lower headcount-related expenses following our first quarter reorganization. Sales and marketing as a percentage of revenue was 23 percent down from 37 percent a year ago. Technology development expenses were $6.3 million, up 7%. This increase reflects continued investment in product and engineering in support of our 2026 roadmap, including the impact of our annual marriage cycle in March. Technology development as a percentage of revenue was approximately 27% flat year over year. General administrative expenses were $6.7M up 1%, reflecting the ongoing discipline in our overhead cost base. General administrative as a percentage of revenue was approximately 29% versus 30% a year ago. Lastly, provision for transaction losses were approximately $930,000 or 4% of revenue in line with our historical range of 2 to 4%. As I mentioned previously, total operating expenses were $19.3 million down 11%. In addition, operating expenses as a percentage of revenue were at the lowest level since we went public in 2021. Adjusted EBITDA was $1.3 million, representing a margin of approximately 6%, well above the high end of our guidance range. This result is a direct product of the cost structure we rebuilt starting in 2022, revenue upside flowing disproportionately to the bottom line, exactly as designed. Turning to the balance sheet, we enter the quarter with cash, cash equivalents, and short-term investments of $67.7 million, down $17.6 million sequentially. That decline primarily reflects two items, $11.1 million in share repurchases and approximately $5.9 million related to a change in our agreement. agreement with our payment processors that resulted in an accounting reclassification of cash and cash equivalents to receivables from payment processors and seller accounts. Industry classification has no economic impact. It is a presentation change only. Total assets remain unchanged. The offsetting liability to sellers is unchanged, and there is no impact to net income, working capital, or overall financial position. Cash balance appears smaller, but this cash was always offset by an equal payable to the sellers. The offset now simply sits against a different asset account. Excluding it, cash declined approximately $11.7 million, driven primarily by capital returns to shareholders. During the quarter, we repurchased approximately 2.4 million shares for $11.1 million under our 2026 stock repurchase program, exhausting the authorization. Since inception of our repurchase programs, we have repurchased approximately 11.4 million shares for approximately $55.3 million. Before moving to guidance, I want to address our full year free cash flow directly. Our 2026 financial framework includes a commitment to positive free cash flow and the operational performance of the business supports that. If anything, performance has exceeded our expectations year to date. However, the reclassification I just discussed affects our report free cash flow and means we are no longer likely to generate positive free cash flow in 2026. Excluding the reclassification, the underlying business is generating cash ahead of our original expectations. Turning to the outlook, our guidance reflects quarter-to-date results and our forecast for the remainder of the period. We forecast third-quarter GMV between $89 million and $94 million, or flat to up 6%. Net revenue of $22 million to $22.9 million, or flat to up 4%. And it does leave a margin between negative 1% and positive 2%. Our GMV guidance reflects three factors. First, product-driven growth. Continued year-over-year GMV growth at the midpoint, a reflection of compounding roadmap progress against a backdrop of significant sales and marketing reductions. Second, quality-driven performance. While While traffic remains a headwind, we expect continued growth in conversion and AOV. Third, seasonal dynamics. The third quarter is our seasonally softest period, and we are facing our toughest year over year GMB comparison of 2026. Our revenue guidance reflects take rate dynamics. Revenue is expected to grow year over year, though at a modestly slower rate than GMV at the midpoint, reflecting a continued mix shift towards higher value orders. These transactions carry a lower blended commission rate. Our adjusted EBITDA margin guidance reflects two factors. First, structural efficiency. Continued operating expense discipline from actions taken in late 2025. Second, seasonal dynamics. The third quarter is our seasonally softest period. A sequential step down in revenue is the primary driver of lower margin versus key. Q2. Turning to our 2026 financial framework, we are upgrading our expectations for GMV growth based on Q2 performance. Our Our revised financial framework is, we now expect GMB to grow year over year for 2026 as a whole. We also expect Q4 GMB to grow year over year, our original milestone. We expect revenue take rates of approximately 24 to 25% down from our prior outlook of 25 to 26% as higher order values, which carry a lower blended commission rate represent a growing share of our GMB. We expect to deliver a third consecutive year of revenue growth, reflecting the resilience of our marketplace in the face of a soft market for luxury home goods. We expect gross margins of 72 to 74% up from 71 to 73% in 2025. We remain focused on efficient growth with a full year outlook of positive adjusted EBITDA. free cash flow, as discussed, because of our accounting reclassification related to our payment processor agreements, we are no longer likely to generate positive free cash flow for 2026. Underpinning this plan is the assumption that macroeconomic conditions, particularly those impacting the housing market and the consumer discretionary spending, remain stable. In 2022, we began resetting our expense base with a specific goal in mind, ensuring that when revenue recovered, it would flow disproportionately to the bottom line. The Q2 is the clearest evidence yet that this design is working. GMB, revenue and adjusted EBITDA all came in above the high end of guidance. We've adjusted EBITDA margin reached approximately 6%. And we achieved all this while continuing to invest in product and engineering, the engine of our long-term growth. We are on plan, we are executing, and our conviction in the path ahead has never been stronger. We appreciate your continued support and look forward to updating you on the progress coming quarters. Thank you. I will now turn the call over to the operator to take your questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset closer to your mouth when asking the question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Bobby Brooks with Northland Capital Markets. Your line is now open. Please go ahead.

Hey, good morning guys and thank you for taking my questions. So it's clear that these strong 2Q results are beginning to reflect the growth and cost initiatives enacted over the last several quarters, but I know you guys aren't satisfied with the current success and want more. So I was curious to hear maybe what are what are some growth or cost initiatives you are maybe planning to implement in the coming quarters or took action on during the second quarter that could continue to bolster results in the coming quarters?.

Hi, Bobby. Good morning. So, I mean, we're really driving growth off our roadmap. That's our focus. And, you know, we got there a couple quarters earlier than we had expected. And I think that is attributable to the strength of our product roadmap. I guess the way we think about it is the first half has really been focused on building a foundation in our four primary areas of focus. And then the second half of the year is going to be focused on broadening the deployment of those across as many service areas as possible. So the four pillars of our roadmap are discovery, which used to be pricing only, but is now expanded to trust shipping and services. And we had wins in each area. So in terms of discovery, the biggest win is we rolled out a new machine learning model to drive personalization. We applied that initially on the home page and saw really good results. And so we're going to roll that out in the second half. alongside continuing to build towards a better semantic and natural language search capability. In the area of trust, we doubled our price parity coverage in Q2. And as I mentioned, we're going to expand that in the second half to include issues around item and seller quality, item authenticity, and overall platform integrity alongside our continued focus on pricing transparency. In terms of shipping, we had a nice win in the second quarter. We used, again, a new machine learning model to expand freight pre-quote coverage from roughly 50% to 75% of listings, which had the impact of growing our overall pre-quote coverage to 90%. And going forward, we've got other initiatives focused on incentives for faster handling time, better and broader tracking, and also a continued focus on reducing shipping costs to the buyer. And then lastly, in terms of service, we We've successfully tested an AI-powered customer service chatbot in Q2, and so the second half is going to be about rolling that out more broadly to our service infrastructure, which will have the impact also of freeing up our people to focus on more complex customer service issues. So overall, I'd say it's a good quarter. We're happy with where we are, but we have much, much more in front of us.

behind us. But like I said, I think we're off to a good start. For sure. And you touched on this a bit in the prepared remarks. So I might ask, I'll ask it in a different way than initially I was thinking of it, but it seemed like 2Q results were not bolstered by any trends in the luxury market. So first, is my assumption there correct? And second, how How big of a benefit might we see if a recovery in the luxury housing market plays out for your growth?.

So you are correct. I mean, the syndicated credit card data that we use to track the markets says that luxury home furnishings decline mid single digits in Q2. So that is correct. You know, relative to our own expectations, we attribute the outperformance versus guidance in Q2 to traffic, which stabilized. And then also average order value, which was up 10%. And I think significantly, it wasn't just average order value that increased, but the median order value increased by the same percentage, by 10 percentage points. Which indicates that the strength was relatively broad based. I mean, you know, if the market comes back, it's tough to quantify the impact on us. I mean, other than saying it'll certainly be positive, But I think it's actually part of the reason why we were pleased with our Q2 was not just because our performance came in spite of the continued market contraction, but also we're still comping our sales and marketing spend cutbacks at the end of last year. Overall, sales and marketing spend was down over 30%. year-over-year in the quarter. So plus 7% on GMV versus plus 30% declines in sales and marketing spend and negative mid-single-digit declines in market, again, I think we interpret as a proof point that that roadmap that I discussed is taking effect.