1stDibs.com, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. 1stDibs operates an online marketplace for luxury design products. Financial statements are unaudited.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Net revenue | $22.2 million | $26.6 million | Down 17% |
| Gross profit / margin | $14.9 million / 67.1% | $18.9 million / 71.1% | Margin down 4.0 percentage points |
| Operating loss | $10.2 million | $6.7 million | Loss increased |
| Net loss | $8.1 million | $6.4 million | Loss increased |
| Adjusted EBITDA (non-GAAP) | $(5.3) million | $(4.7) million | Loss increased |
| Operating cash flow | $(2.8) million | $(6.2) million | Cash use decreased |
GMV was $97.1 million, down 17%; orders were 35,385, down 10%; and active buyers were 66,400, down 7%. Net loss per share was $0.21 versus $0.17.
At March 31, cash and cash equivalents were $87.8 million and short-term investments were $62.7 million, totaling $150.5 million of unrestricted cash and investments. Restricted cash was $4.8 million. Cash, cash equivalents, and restricted cash declined $65.4 million, primarily because the company invested $62.4 million in short-term securities; this was an investing outflow rather than operating cash burn. Total liabilities were $47.7 million, including $23.8 million of operating lease liabilities. The filing reports no conventional borrowings.
Management said existing cash, cash equivalents, and short-term investments should fund operations and capital expenditure needs for at least 12 months. It expects operating losses and negative operating cash flows to continue in the foreseeable future and noted that longer-term objectives could require borrowing or additional equity.
Changes and management commentary
- Marketplace services revenue fell $3.5 million, principally from lower transaction fees as GMV declined. The $4.4 million total revenue decline also reflected $0.7 million less software-services revenue following the June 2022 sale of Design Manager; Q1 2022 included that business.
- Sales and marketing expense decreased 17% to $9.8 million, mainly due to lower discretionary performance marketing and promotions. General and administrative expense rose 26% to $8.1 million, including higher legal and professional fees associated with strategic alternatives, stock-based compensation, and sales taxes.
- Interest income increased to $1.5 million from $0.1 million, reflecting cash repositioning into higher-yielding cash equivalents and short-term investments.
- Gross margin declined partly because of $0.5 million of accelerated software amortization after the decision to discontinue support for the NFT platform. In February 2023, the company ceased further investment in the platform; previously minted NFTs remained available for sale.
- Stock-based compensation expense was $3.1 million, versus $1.3 million; 5.0 million restricted stock units were outstanding at quarter-end.
Outlook, risks, and contingencies
The filing provides no numerical revenue, earnings, or Adjusted EBITDA guidance. Management attributed pressure on GMV and revenue to macroeconomic factors, including capital- and housing-market volatility, higher interest rates, inflation, geopolitical developments, and changing consumer behavior; it said these effects are difficult to isolate and quantify.
Key risks include continued operating losses, weaker discretionary demand, declining buyer and order metrics, competition, and the ability to attract sellers and buyers while maintaining product authenticity and service quality. The company also cites cybersecurity, privacy, international operations, foreign-exchange, regulatory, and sales-tax risks. It noted that cash at individual financial institutions can exceed insured limits, although it had no material funds at the failed Silicon Valley Bank or other institutions that had closed.
The company reported $31.5 million of non-cancelable contractual commitments, primarily leases and software/support obligations. It said it was not party to pending legal proceedings likely to have a material effect, while acknowledging ordinary-course claims. It disclosed an initial voluntary self-disclosure to OFAC concerning potential past sanctions violations; the filing does not state a quantified potential loss or resolution.
Most important facts for investors to verify
- Whether GMV, revenue, orders, and active buyers stabilize or continue to decline, and how marketplace take rate and subscription revenue develop.
- Whether operating expense reductions and investment levels can improve margins and reduce losses without impairing growth or marketplace quality.
- How management’s at-least-12-month liquidity assessment changes with ongoing losses, investment returns, and future capital needs.
- The status and potential financial or operational consequences of the OFAC self-disclosure and sales-tax contingencies.
- The effect of equity awards and potential dilution; outstanding RSUs rose to 5.0 million, and 9.1 million options and RSUs were excluded from diluted EPS as anti-dilutive.