1stDibs.com, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The company operates an online marketplace for vintage, antique, and contemporary luxury design products. Amounts below are in U.S. dollars.
Financial and operating performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net revenue | $20.7M | $22.7M | $63.8M | $73.9M |
| Gross profit / margin | $15.2M / 73.3% | $15.5M / 68.0% | $44.6M / 70.0% | $51.0M / 69.0% |
| Operating loss | $5.2M | $9.9M | $25.9M | $17.2M |
| Net loss | $3.3M | $9.0M | $19.8M | $15.7M |
| Adjusted EBITDA (non-GAAP) | $(1.8)M | $(5.5)M | $(11.6)M | $(16.2)M |
| GMV | $89.0M | $99.2M | $275.9M | $321.5M |
| Orders | 31,202 | 35,235 | 98,988 | 110,111 |
| Active buyers | 63,227 | 68,011 | 63,227 | 68,011 |
- Q3 revenue declined 9% year over year; nine-month revenue declined 14%. Management attributed the decrease primarily to lower marketplace transaction fees as GMV fell. It cited macroeconomic pressures, including housing and capital market volatility, higher interest rates, inflation, geopolitical developments, and changing consumer behavior.
- Gross margin improved in both comparisons as cost of revenue declined faster than revenue. Q3 operating expenses fell 20% year over year, notably from lower sales and marketing and technology development costs. Nine-month operating expenses increased overall, in part because the prior-year period included a $9.7M gain on the sale of Design Manager.
- Net loss improved in Q3, while the nine-month net loss widened. Nine-month results also reflect the absence of the prior-year Design Manager sale gain. Adjusted EBITDA improved in both comparisons; it is a non-GAAP measure and excludes, among other items, stock-based compensation and other income.
- Operating cash flow was negative $11.5M for the first nine months, versus negative $22.4M a year earlier. Investing cash outflow was $109.6M, mainly reflecting purchases of short-term investments; this largely represents a shift in the composition of liquid assets, not operating cash burn.
Liquidity, debt, and capital allocation
- At September 30, 2023, cash, cash equivalents, and short-term investments totaled $143.0M; cash and cash equivalents alone were $32.4M. Restricted cash of $3.3M relates to a lease letter of credit.
- The balance sheet reports no borrowings; it does report operating lease liabilities of $22.4M. Current assets were $150.7M and current liabilities were $27.0M. Accumulated deficit was $310.8M.
- Management said available cash, cash equivalents, and short-term investments should fund operations and capital expenditure needs for at least the next 12 months. It expects operating losses and negative operating cash flows to continue in the foreseeable future and said longer-term objectives may require additional capital.
- An August 2023 authorization permits up to $20.0M of share repurchases. By quarter-end, the company had repurchased 334,959 shares for $1.4M, with approximately $18.6M remaining authorized.
Outlook, material developments, and risks
- The filing provides no numerical revenue or earnings guidance. Management expects continued near-term expenditures and operating losses while pursuing its strategy.
- A June 2023 workforce reduction targeted approximately 20% of global employees and generated $2.0M of non-recurring charges in the first nine months; no restructuring expense was recorded in Q3. $0.6M remained accrued at quarter-end.
- The company subleased its New York headquarters space, with the sublease beginning October 1, 2023 and expanding to all rentable space in January 2024. It expects monthly rent collections of $0.3M beginning April 2024, subject to the sublease terms. In November 2023, it signed a five-year lease for a new, smaller New York headquarters, expected to commence January 15, 2024.
- The company discontinued further investment in its NFT platform in February 2023; previously minted NFTs remain available for sale. Nine-month results included $0.5M of accelerated software amortization related to this strategy change.
- Key risks include continued marketplace and buyer demand weakness, dependence on seller and buyer retention, authenticity and transaction-loss exposure, competition, and macroeconomic conditions. The filing also discloses an OFAC voluntary self-disclosure concerning potential past sanctions violations; outcomes and potential exposure are not quantified in the provided text.
- Management reported effective disclosure controls as of September 30, 2023 and no material change in internal control over financial reporting during Q3. It said ordinary-course legal matters were not expected to have a material effect.
Important facts for investors to verify
- Whether GMV, order, and active-buyer trends stabilize, and how those trends translate into marketplace revenue.
- Whether cost reductions and improved gross margin can narrow operating losses without weakening marketplace growth or service quality.
- Cash consumption, investment maturities and yields, and the assumptions behind management’s stated 12-month liquidity outlook.
- Progress and realized savings from the headquarters sublease and new office lease, including any subtenant payment or occupancy risks.
- Developments in the OFAC self-disclosure, and the pace and terms of any further share repurchases.