1stdibs.com, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. 1stDibs operates an online marketplace for vintage, antique, and contemporary luxury design products. Figures below are unaudited; dollar amounts are in millions unless stated otherwise.
Financial performance and operating metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net revenue | $24.6 | $24.7 | $51.2 | $50.2 |
| Gross profit / margin | $16.6 / 67.6% | $17.4 / 70.4% | $35.5 / 69.5% | $35.9 / 71.4% |
| Operating loss | $(0.6) | $(4.6) | $(7.4) | $(7.1) |
| Net loss | $(0.3) | $(4.1) | $(6.6) | $(6.3) |
| Adjusted EBITDA (non-GAAP) | $(6.1) | $(3.0) | $(10.7) | $(4.4) |
| GMV | $104.8 | $107.4 | $222.3 | $221.1 |
| Orders | 35,484 | 38,375 | 74,876 | 80,303 |
| Active buyers | 69,273 | 68,959 | 69,273 | 68,959 |
Q2 revenue declined 0.5%, while GMV fell 2.4% and orders fell 7.5%; active buyers increased about 0.5%. For the first half, revenue grew 2%, but orders declined about 7%. Cost of revenue rose 9% in both periods, pressuring gross margin. Technology development and general and administrative expenses increased substantially, reflecting higher headcount, stock-based compensation, and public-company costs. The transaction-loss provision also increased, attributed primarily to more transaction and shipping accommodations.
Cash, liquidity, and balance sheet
- Cash and cash equivalents were $162.7 million at June 30, 2022, down from $168.2 million at December 31, 2021. Cash, cash equivalents, and restricted cash totaled $167.5 million.
- Operating cash flow was negative $18.3 million for the six months, versus positive $1.6 million in the prior-year period. Investing activities provided $13.4 million, largely from the Design Manager sale; financing provided $1.2 million.
- The company reported $55.7 million of total liabilities, including $25.8 million of operating lease liabilities. The filing does not show material borrowings or significant interest expense.
- Management said existing cash and cash equivalents should fund operations and capital expenditure requirements for at least the next 12 months, while noting potential longer-term need for debt or equity financing.
Material changes and unusual items
- On June 29, 2022, 1stDibs sold Design Manager for a purchase price of $14.8 million, receiving $14.6 million net cash proceeds. $1.5 million was placed in escrow for 12 months. The company recorded a $9.7 million gain, which materially improved reported Q2 and first-half operating and net losses.
- The reported Q2 net loss should be read alongside Adjusted EBITDA: the latter worsened to a $6.1 million loss from $3.0 million, and excludes the sale gain and related one-time costs.
- The company adopted lease-accounting standard ASC 842 on January 1, 2022, recognizing operating lease right-of-use assets and lease liabilities. The adoption did not materially affect the income statement.
- Stock-based compensation was $4.5 million for the first half, compared with $1.0 million in the prior-year period; $36.5 million of unrecognized compensation expense remained at June 30.
Outlook, commentary, and risks
The filing provides no specific revenue or earnings guidance. Management expects operating losses and negative operating cash flows could continue as the company invests in growth. It cited shipping disruptions and changing consumer behavior as factors that have negatively affected recent metrics; results are also exposed to discretionary luxury spending, competition, seller and buyer retention, and the uncertain effects of COVID-19 and macroeconomic conditions.
Other disclosed risks include marketplace authenticity and transaction losses, cybersecurity and privacy, international expansion, and regulatory uncertainty around the recently launched NFT platform. The risk discussion also says the company had potentially facilitated transactions involving U.S.-sanctioned parties or regions and submitted an initial voluntary self-disclosure to OFAC concerning potential violations. The company said it did not believe pending legal proceedings were likely to have a material effect. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- How marketplace demand and order trends develop, particularly given Q2 declines in GMV and orders despite slightly higher active buyers.
- Underlying operating performance excluding the $9.7 million Design Manager gain; review the company’s non-GAAP reconciliation and recurring stock-based compensation.
- Cash burn and the assumptions supporting management’s stated 12-month liquidity outlook, including the effect of seller-payable and accrued-expense timing.
- The outcome and potential financial or regulatory consequences of the OFAC voluntary self-disclosure.
- Whether Design Manager’s divestiture and the related loss of software-services revenue affect future revenue, and how lease obligations and equity-award dilution evolve.