1stDibs.com, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. 1stDibs operates an asset-light online marketplace for vintage, antique, and contemporary design products, along with software and advertising services. The company does not take physical possession of marketplace items.
Financial and operating performance
- Q2 revenue: $24.7 million, up 29% from $19.1 million. Seller marketplace services contributed $23.8 million; marketplace transaction fees were the main growth driver.
- Q2 operating metrics: GMV was $107.4 million, up 34%; orders were 38,375, up 28%; and active buyers were 68,959, up 40% from 49,437. Management defines GMV to include seller-reported offline sales as well as marketplace transactions.
- Q2 profitability: Gross profit was $17.4 million and gross margin was 70.4%, versus $13.1 million and 68.2% a year earlier. Operating loss was $4.6 million, compared with $3.4 million; net loss was $4.1 million, compared with $3.3 million. Adjusted EBITDA, a non-GAAP measure, was a loss of $3.0 million versus a loss of $2.0 million.
- Six-month results: Revenue was $50.2 million, up 36%; GMV was $221.1 million, up 48%; and orders were 80,303, up 42%. Gross margin rose to 71.4% from 65.0%. Net loss narrowed to $6.3 million from $9.6 million, and Adjusted EBITDA loss narrowed to $4.4 million from $5.3 million.
- Cash flow and liquidity: For the six months, operating cash flow was positive $1.6 million versus negative $8.1 million. Investing cash outflow was $1.1 million. Cash and cash equivalents were $176.1 million at June 30, with restricted cash of $3.3 million. Management said existing cash was expected to fund operations and capital expenditures for at least 12 months.
- Capital structure: The June IPO generated $123.0 million of net proceeds after underwriting discounts and commissions, before offering costs. Preferred stock converted into common stock at IPO completion. The balance sheet reports no borrowing balance; the filing does not provide a separate debt discussion beyond the listed liabilities.
Changes versus the prior comparable period
- Revenue, GMV, and orders grew substantially year over year, while gross margin improved. Q2 operating and net losses nevertheless increased as operating expenses grew faster than gross profit.
- For the six-month period, lower net loss and higher operating cash flow were notable improvements. Management attributed part of the operating cash flow improvement to a March 2021 change in seller payment timing; the resulting increase in seller payables contributed $3.9 million.
- Sales and marketing costs increased 32% in Q2, primarily from performance marketing and buyer promotions. General and administrative expense increased 62%, reflecting public-company costs, compensation, and Design Manager acquisition-related remeasurement. Transaction-loss provision rose 67%, including increased chargeback losses.
Outlook, risks, and unusual items
- The filing gives no numerical revenue, earnings, or margin guidance. Management expects continued investment and potentially operating losses and negative operating cash flows; it believes cash on hand is sufficient for at least the next 12 months, but says longer-term objectives may require additional capital.
- Management said the pandemic had contributed to greater willingness to transact luxury purchases online, but warned that demand and growth could change as conditions and restrictions evolve. The company planned to reopen some offices as early as September 2021, potentially on a voluntary basis.
- The company recently launched an NFT platform using Ethereum. The filing highlights uncertainty around customer acceptance, cybersecurity, intellectual property, taxation, and evolving cryptocurrency and NFT regulation.
- Other material risks include ongoing operating losses, competition, seller and buyer acquisition and retention, product authenticity and transaction losses, international and foreign-exchange exposure, cybersecurity, privacy, and regulatory compliance. The company disclosed an initial voluntary self-disclosure to OFAC concerning potential past sanctions violations; the filing does not state a final outcome.
- Other items to note: the June IPO and preferred-stock conversion substantially changed the capital structure; a 1-for-3 reverse stock split was effected in May and historical share data was adjusted. A $2.2 million sales-and-use-tax contingency was recorded in other current liabilities. Management reported no pending legal proceeding likely to have a material effect. Disclosure controls were assessed as effective.
Important facts for investors to verify
- How much GMV and revenue growth reflects durable marketplace demand versus pandemic-related shifts, and how reported offline sales affect GMV.
- Whether higher marketing spending and transaction losses generate sustainable buyer growth and improve operating leverage.
- The quality and sustainability of positive operating cash flow, given the effect of seller payment timing and working-capital movements.
- The outcome of the OFAC voluntary disclosure and the status and potential exposure of the sales-and-use-tax contingency.
- Post-IPO share dilution, including equity awards and lock-up releases, and the company’s progress toward profitability and its stated cash runway.