1stdibs.Com, Inc. Q4 FY2025 earnings call

• 2025 was a year of accountability and focused execution, exiting as an adjusted EBITDA positive company. 2026 plan focuses on capitalizing on gains and delivering sustained adjusted EBITDA profitability, expecting third consecutive year of positive year-over-year revenue growth alongside positive adjusted EBITDA and free cash flow, with return to year-over-year GMV growth by Q4 driven by product roadmap.
• Confidence in model rooted in defensibility of luxury curation, scarcity, and human expertise of dealers, with AI seen as a catalyst. In Q4, GMV at low end of guidance but adjusted EBITDA above high end, marking inflection point.
• Made trade-off in 2H 2025 to moderate near-term GMV growth for improved adjusted EBITDA profile, due to organizational discipline (headcount flat, talent base rebalanced), operating leverage (exceeded leverage targets), and product velocity (AI-assisted development, ninth consecutive quarter of conversion growth).
• 2026 roadmap focuses on four pillars:
  • Discovery: Transform into daily habit for design enthusiasts with AI-powered semantic and image search, reimagined personalization engine, First Dibs Tastemakers ambassador program, and expanded sponsored listings program.
  • Pricing: Help buyers and sellers reach shared understanding of value through optimized negotiation and offer flows, price contextualization with historical price comps and market data, and expanded price parity enforcement with AI.
  • Shipping: Revamp shipping experience to provide clear framework, streamline operations, lower prices, and introduce dynamic shipping rates.
  • Service: Evolve service model with AI support for routine inquiries, and AI item upload assistant for sellers.

In the fourth quarter, GMV was $90.2 million (low end of guidance range). Adjusted EBITDA finished above the high end of the range, marking the first quarter of adjusted EBITDA profitability as a public company. Net revenue was $23 million, up 1%. Transaction revenue was ~73% of total revenue. Sales and marketing expenses were $5.9 million, down 44%. Technology development expenses were $6 million, up 9%. General administrative expenses were $7 million, up 5%. Provision for transaction losses were ~$400,000, 2% of revenue. Gross profit was $16.9 million, up 3%, with gross profit margins ~74%, up 1 percentage point year over year. Vertical performance varied by category, with jewelry showing the most resilience (GMV down just 1%). Active buyers totaled ~60,700 at quarter end, down 5%. Seller base normalized with ~5,700 unique sellers down 4%, but listings grew 3% to nearly 1.9 million.

• Forecast first quarter GMV between $86.5 million to $91.5 million (year-over-year decline of 9% to 3%), net revenue of $22.1 million to $23.1 million (down 2% to up 2%), and adjusted EBITDA margin between break-even and positive 4%.
• 2026 framework centered on durable, profitable growth, expecting third consecutive year of revenue growth, return to positive year-over-year GMV growth by Q4, gross margins of 72% to 74% (up from 71% to 73% in 2025), revenue take rates of 25% to 26% (up from 24% to 25% in 2025), and positive adjusted EBITDA and free cash flow for full year, assuming stable macroeconomic conditions.

• Risk of AI disintermediation, but believe position is uniquely protected by high trust relationship and physical collection of one-of-a-kind items that can't be replicated by algorithm. AI is seen as a catalyst to help buyers discover rather than replace human expertise.

Q: Good morning. Thanks for taking the question. First question, just maybe kind of touching on your comments about accelerating growth through 2026. David, maybe you can just kind of walk through maybe the primary drivers as you see it to continue to turn the business around and to return back to growth and what continues to be a tough macro for you. And then I have a follow-up, please.

A: Sure. Hey, Ralph. So I think first, from September 26th onward, we'll be lapping what were pretty substantial reductions, almost 50% in performance marketing spend. And then secondly, at the same time last September that we cut sales and marketing overall, we also increased our product and engineering investment, which obviously will result in a much bigger roadmap. So as you think about moving through 2026, what we expect is that the compounding nature of that product roadmap will provide a pretty clear path to year-over-year GMV growth by the fourth quarter. So it's really the combination of those two things, lapping our performance marketing cuts and then also receiving the benefit of higher product and engineering investment. I think it's also important to note that for the full year, we are committed to delivering our third, what will be our third consecutive year of revenue growth alongside positive adjusted EBITDA and free cash flow as we did in the fourth quarter. And the last thing I would say, you know, you made a reference to the market. We do not believe that this is dependent on a broader market recovery. We feel like we have all the tools needed to accomplish this, even without that.

Q: And just to touch on AI, it's been a big focus, obviously, this earnings season for investors. I think you talked about you see it not as a competitor, but as a catalyst to unlock a catalog. Maybe if you could kind of double click on that a little bit, you know, just in terms of why you don't potentially see disruption. It's just because you handle a lot of complex tasks in between sort of the buyer and the seller and, you know, unique product categories, I guess, would be part of the reason there. But if you could just maybe touch on that a little bit more. I appreciate it. Thank you.

A: Yeah, I think, I mean, I think in general, the way we see AI in relative to our performance is that we view ourselves as a beneficiary of AI, really kind of from the top of the income statement to the bottom. In terms of disintermediation, specifically, though, you know, I think that's likely more of a threat for commodity products. But we're, you know, we're the exact opposite了 that, right? We've got 2 million one of a kind in pieces of inventory. and particularly when those items transact at the high price that we sell at, seller expertise and the integrity of the transaction itself are the primary components of value that we provide. So AI agents certainly can help with discovery. They can help buyers find products, but they can't substitute for the buyer trust, for the seller reputation, and all of the relatively complex logistical and payment infrastructure that's required to transact at our price points and with our kind of inventory.

Q: Hey, good morning, team, and thank you for taking my question. As you think of returning to a sort of consistent growth profile. I know this will be your third year of revenue growth, but across both GMB and revenue, and maybe at a little bit higher club call, maybe high single digits. What are some of the most exciting initiatives that you're pursuing?

A: So, as I think you may be aware, first of all, we have proven an ability to execute on our product roadmap. and to drive conversion, which is the most important GMV lever as a result. We brought in a new head of product and marketing last August. And as part of that, we recut our 26 roadmap. So the 26 plan is a combination of both evolutionary advancements relative to 24 and 25 and also new projects. And I'm super excited about each of them. I mean, just to call out, I guess, probably the four highest impact ones, or ones we expect to be highest impact in no particular order. AI search is something that we're very optimistic about. Currently, searching on first dibs requires knowing the exact match of the products that one is interested in, which is a pretty significant barrier for broader consumer demand, especially given the long-tail nature of the products that we sell. So to address this in 26, we're going to be introducing semantic search, which will make discovery much more intuitive and accessible to kind of the average person. The second area that I'm very excited about is shipping. So today we have relatively unclear roles and distribution of responsibilities between sellers and first dibs. That leads to higher costs and also sometimes just in terms of kind of the operational side workflow in terms of getting an order converted, some confusion on the part of the buyer. And so we're reengineering our entire shipping framework to standardize those roles and responsibilities, which should have the impact of reducing complexity and also cost to the buyer. Pricing is number three. It's something we've talked about quite a bit in the past. You know, we aren't today always the lowest cost sales channel for a given item. And, you know, the second problem is that, again, given the long-tail nature of what we sell, it can be challenging for consumers to compare prices and sort of evaluate and interpret them. So to address this, you know, we, as I think you're probably aware, we introduced a price parity enforcement mechanism last year. To expand this in 26, we're going to be incorporating in LLM, so it has not been AI-based to date, which will allow us to scale price parity across a much higher percentage of our inventory, which will eliminate the problem of individual items being listed at a higher price on First Dibs than elsewhere. And then second, we're going to surface comps data much more broadly to both sellers and buyers to give them context. And then the fourth and the last piece is You know, I think we're a little late to the party in terms of developing a robust social strategy. And I think, you know, social has an especially important role to play for us, you know, given our brand and just the visual nature of the products that we sell and so on. And so to address this, in 26, we're in the process of implementing our first ever community-based approach, which really is just another way of saying we're launching an influencer network. And it's something... We haven't done before and we have high hopes for it.

Q: For a follow up on the pricing parity, definitely can see how helpful and beneficial that'll be for the business. You mentioned incorporating the LLM to scale across a much higher percentage of inventory. We'd be curious to hear how much of the inventory today listed has this price parity incorporated into it, and what are you looking to scale that to in 26?

A: That's not data that we share primarily for competitive reasons, but it should roughly double the amount of product that's covered. It's actually, I think, from a behavioral point of view, though, more important to think about it in terms of number of sellers who are impacted rather than the percentage of items. Because once a seller sort of understands that we have the ability and the intent to enforce this price parity feature of our contracts with them, they're less likely, of course, to be in transgression of that. And again, I think it's worth pointing out, I mean, this is in the interest of both the buyer and the seller and first dibs, you know, having a sort of clean, well-lit and regulated marketplace that's predictable and understandable to buyers is ultimately, you know, has the effect of increasing confidence in us and our sellers on the part of the buyer, which of course benefits them. So I do think it's important to note that we don't think of this as a I don't know, as a sort of system of punishment, but more as a part of the process of creating, as I said, a sort of clean, well-lit environment, which, of course, is to the benefit of all marketplace participants.

Q: You know, it's been really impressive, the margin expansion you guys have driven over the past few years, as you mentioned in the prepared remarks, despite some shrinking of the top line in GMV. as we think of dibs returning to that kind of steady growth rate on GMV level, is it fair to think margin expansion would accelerate in that scenario?

A: Yeah, this is Tom. So, yeah, I believe that, you know, what you've seen with our P&L, as you kind of talked about, is that our gross margins have expanded from 73% to 74%. The contribution margin in particular has gone up from the 50% to 55% level to the 60% to 65% level. So, yeah, what I expect is that as you start to see revenue, GMB and revenue expansion, you will see a large portion of that additional revenue going to the bottom line because of the increase in contribution margin that we put into the model at this point.