1stdibs.com, Inc. [DIBS] Filings

10-Q 1 dibs-20230331.htm 10-Q dibs-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from _________ to __________

Commission file number 333-256188

1STDIBS.COM, INC.

(Exact name of registrant as specified in its charter)


Delaware						94-3389618
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

51 Astor Place, 3rd Floor New York, New York						10003
(Address of Principal Executive Offices)						(Zip Code)

(212) 627-3927

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	DIBS	The Nasdaq Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

As of April 28, 2023, the registrant had 39,509,346 shares of common stock, $0.01 par value per share outstanding.

TABLE OF CONTENTS


		Pages
Part I - Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited):	7
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Operations	8
	Condensed Consolidated Statements of Comprehensive Loss	9
	Condensed Consolidated Statements of Stockholders’ Equity	10
	Condensed Consolidated Statements of Cash Flows	11
	Notes to Unaudited Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

Part II - Other Information
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 6.	Exhibits Index	62
Signatures		63

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “can,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “target,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•our future financial performance, including our expectations regarding our net revenue, cost of revenue, operating expenses, and our ability to achieve and maintain future profitability;

•our ability to effectively manage or sustain our growth and to effectively expand our operations, including internationally;

•our strategies, plans, objectives and goals;

•the market demand for the products offered on our online marketplace, including vintage, antique, and contemporary furniture, home décor, jewelry, watches, art, and fashion, new and authenticated luxury design products in general, and the online market for these products;

•our ability to compete with existing and new competitors in existing and new markets;

•our ability to attract and retain sellers and buyers;

•our ability to increase the supply of luxury design products offered through our online marketplace;

•our ability to timely and effectively scale our operations;

•our ability to enter international markets;

•our ability to successfully implement, launch, and achieve market acceptance of our 1stDibs Auctions offering and to anticipate and manage the risks associated therewith

•our ability to develop and protect our brand;

•our ability to comply with laws and regulations;

•our expectations regarding outstanding litigation;

•our expectations and management of future growth;

•our expectations concerning relationships with third parties;

•economic and industry trends, projected growth, or trend analysis;

•our estimated market opportunity;

•our ability to add capacity, capabilities, and automation to our operations;

•the increased expenses associated with being a public company;

•the effect of the COVID-19 pandemic on our business and operations;

•our ability to maintain, protect, and enhance our intellectual property rights and successfully defend against claims of infringement, misappropriation, or other violations of third-party intellectual property;

•the availability of capital to grow our business;

•our ability to successfully defend any future litigation brought against us;

•our ability to implement, maintain, and improve effective internal controls;

•potential changes in laws and regulations applicable to us or our sellers, or our sellers’ ability to comply therewith; and

•the amount of time for which we expect our cash balances and other available financial resources to be sufficient to fund our operations.

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report on Form 10-Q and are subject to risks and uncertainties. You should refer to the section titled “Risk Factors” included under Part II, Item 1A below and elsewhere in this Quarterly Report on Form 10-Q, as well as in our other filings with the Securities and Exchange Commission (the “SEC”), for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on them.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Such forward-looking statements relate only to events as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference and have filed as exhibits with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.

RISK FACTOR SUMMARY

The following risk factor summary should be read together with the more detailed discussion of risks and uncertainties set forth in the “Risk Factors” section of this report.

•Our history of operating losses and ability to achieve or maintain profitability in the future, which could negatively impact our financial condition and our stock price;

•Fluctuations in our quarterly and annual net revenue and results of operations, which could cause our stock price to fluctuate and the value of your investment to decline;

•Our historical growth, which may not be indicative of our future growth;

•Our ability to generate a sufficient volume of listings of luxury design products on our online marketplace or to accurately vet the authenticity of these products, which could impact our business, brand, and reputation;

•Our ability to maintain the authenticity of the items listed and sold through our online marketplace, which could cause our business, brand, and reputation to suffer;

•Risks associated with claims that items listed on our online marketplace are counterfeit, infringing, hazardous, or illegal, or otherwise subject to regulation or cultural patrimony considerations;

•Risks associated with liability for fraudulent or unlawful activities of sellers who list items on our online marketplace, which could cause our business, brand, and reputation to suffer;

•Our ability to attract and maintain an active community of sellers and buyers, which could impact our growth;

•Our reliance, in part, on sellers to provide a positive experience to buyers;

•Our ability to compete effectively;

•Real or perceived inaccuracies in our metrics and market estimates used to evaluate our performance, which may harm our reputation and negatively affect our business;

•Our ability to successfully expand our business model to encompass additional categories of luxury design products in a timely and cost-effective manner;

•The COVID-19 pandemic, which has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways;

•Our ability to maintain and promote our brand and reputation, which could impact our business, market position, and future growth;

•Risks related to acquisitions, which may divert management’s attention and/or prove to be unsuccessful;

•Risks related to further expansion into markets outside of the United States;

•Our ability to successfully protect our intellectual property;

•Risks associated with the disclosure of sensitive information about our sellers and buyers or other third parties with whom we transact business, or cyber-attacks against us or our third-party providers, which could result in curtailed use of our online marketplace, exposure to liability, and reputational damage;

•Risks related to regulatory matters and litigation;

•Risks related to the impact of and focus on Environmental, Social, and Governance (“ESG”) matters;

•Risks related to our operations as a public company;

•Risks related to our internal control over financial reporting and our disclosure controls and procedures; and

•Risks related to our common stock, including that an active trading market for our common stock may not develop or be sustained and that the price of our common stock may be volatile.

Part I - Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited)

1STDIBS.COM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

(Unaudited)


	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	87,791	$	153,209
Short-term investments	62,688		—
Restricted cash, current	1,500		1,500
Accounts receivable, net of allowance for doubtful accounts of $115 and $113 at March 31, 2023 and December 31, 2022, respectively	869		972
Prepaid expenses	1,945		3,506
Receivables from payment processors	2,726		2,476
Other current assets	1,017		800
Total current assets	158,536		162,463
Restricted cash, non-current	3,335		3,334
Property and equipment, net	3,177		3,685
Operating lease right-of-use assets	21,361		21,990
Goodwill	4,093		4,075
Other assets	249		249
Total assets	$	190,751	$	195,796
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,810	$	2,905
Payables due to sellers	7,050		7,185
Accrued expenses	10,889		10,761
Operating lease liabilities, current	2,810		2,770
Other current liabilities	3,162		2,429
Total current liabilities	26,721		26,050
Operating lease liabilities, non-current	20,960		21,678
Other liabilities	30		46
Total liabilities	47,711		47,774
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized as of March 31, 2023 and December 31, 2022; zero shares issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value; 400,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 39,509,346 and 39,260,193 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	395		393
Additional paid-in capital	442,170		439,005
Accumulated deficit	(299,153)		(291,020)
Accumulated other comprehensive loss	(372)		(356)
Total stockholders’ equity	143,040		148,022
Total liabilities and stockholders’ equity	$	190,751	$	195,796

See accompanying notes to the condensed consolidated financial statements.

1STDIBS.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Net revenue	$	22,178	$	26,587
Cost of revenue	7,307		7,677
Gross profit	14,871		18,910
Operating expenses:
Sales and marketing	9,805		11,799
Technology development	5,795		5,761
General and administrative	8,088		6,407
Provision for transaction losses	1,364		1,674

Total operating expenses	25,052		25,641
Loss from operations	(10,181)		(6,731)
Other income (expense), net:
Interest income	1,531		54
Interest expense	—		(4)
Other, net	517		321
Total other income (expense), net	2,048		371
Net loss before income taxes	(8,133)		(6,360)
Provision for income taxes	—		—
Net loss	$	(8,133)	$	(6,360)


Net loss per share—basic and diluted	$	(0.21)	$	(0.17)
Weighted average common shares outstanding—basic and diluted	39,330,542		38,030,293

See accompanying notes to the condensed consolidated financial statements.

1STDIBS.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Net loss	$	(8,133)	$	(6,360)
Other comprehensive loss:
Foreign currency translation adjustment, net of tax of $0 for each of the three months ended March 31, 2023 and 2022	19		(49)
Unrealized (losses) gains on short-term investments, net of tax of $0 for each of the three months ended March 31, 2023 and 2022	(35)		—
Comprehensive loss	$	(8,149)	$	(6,409)

See accompanying notes to the condensed consolidated financial statements.

1STDIBS.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)


	Three Months Ended March 31, 2023
	Common Stock			Additional Paid - In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balances as of December 31, 2022	39,260,193	$	393	$	439,005	$	(291,020)	$	(356)	$	148,022




Issuance of common stock for exercise of stock options	7,978	—		31		—		—		31
Vested restricted stock units converted to common shares	241,175	2		(2)		—		—		—
Stock-based compensation	—	—		3,136		—		—		3,136
Other comprehensive loss	—	—		—		—		(16)		(16)
Net loss	—	—		—		(8,133)		—		(8,133)
Balances as of March 31, 2023	39,509,346	$	395	$	442,170	$	(299,153)	$	(372)	$	143,040


		Three Months Ended March 31, 2022
	Common Stock		Additional Paid - In Capital			Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
		Shares			Amount
Balances as of December 31, 2021		37,991,529	$	380		$	425,769	$	(268,482)	$	(229)	$	157,438




Issuance of common stock for exercise of stock options		49,224	—			220		—		—		220

Vested restricted stock units converted to common shares		776	—			—		—		—		—
Stock-based compensation		—	—			1,345		—		—		1,345
Other comprehensive loss		—	—			—		—		(49)		(49)
Net loss		—	—			—		(6,360)		—		(6,360)
Balances as of March 31, 2022		38,041,529	$	380		$	427,334	$	(274,842)	$	(278)	$	152,594

See accompanying notes to the condensed consolidated financial statements.

1STDIBS.COM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(8,133)	$	(6,360)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	939		718
Stock-based compensation expense	3,106		1,345

Provision for transaction losses, returns and refunds	346		278
Amortization of costs to obtain revenue contracts	79		78
Amortization of operating lease right-of-use assets	629		623


Amortization of (discounts) premiums, net on short-term investments	(354)		—
Other, net	(112)		76
Changes in operating assets and liabilities:
Accounts receivable	29		59
Prepaid expenses and other current assets	1,269		905
Receivables from payment processors	(250)		(1,114)
Other assets	(181)		(235)
Accounts payable and accrued expenses	(71)		(691)
Payables due to sellers	(134)		(1,316)
Operating lease liabilities	(678)		(672)
Other current liabilities and other liabilities	715		81
Net cash used in operating activities	(2,801)		(6,225)
Cash flows from investing activities:
Purchases of short-term investments	(62,370)		—

Development of internal-use software	(370)		(741)
Purchases of property and equipment	(20)		(19)

Other, net	—		(14)
Net cash used in investing activities	(62,760)		(774)
Cash flows from financing activities:

Proceeds from exercise of stock options	31		220


Net cash provided by financing activities	31		220
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	113		(89)
Net decrease in cash, cash equivalents, and restricted cash	(65,417)		(6,868)
Cash, cash equivalents, and restricted cash at beginning of the period	158,043		171,559
Cash, cash equivalents, and restricted cash at end of the period	$	92,626	$	164,691
Supplemental disclosure of cash flow information:
Cash paid for interest	$	—	$	16

See accompanying notes to the condensed consolidated financial statements.

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

1stdibs.com, Inc. (“1stDibs” or the “Company”) is one of the world’s leading online marketplaces for connecting design lovers with many of the best sellers and makers of vintage & antique furniture, contemporary furniture, home décor, jewelry, watches, art, and fashion. The Company’s thoroughly vetted seller base, in-depth editorial content, and custom-built technology platform create trust in the Company’s brand and facilitate high-consideration purchases of luxury design products online. By disrupting the way these items are bought and sold, 1stDibs is both expanding access to, and growing the market for, luxury design products.

The Company was incorporated in the state of Delaware on March 10, 2000 and is headquartered in New York, NY.

Basis of Presentation

The accompanying condensed consolidated financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries, 1stdibs.com, Ltd. and 1stdibs Design Manager, Inc. (“Design Manager”). The Company sold its equity interest in Design Manager on June 29, 2022, therefore, the condensed consolidated statement of operations for the three months ended March 31, 2022 includes activity relating to Design Manager. The condensed consolidated balance sheet as of March 31, 2023 no longer includes the assets, liabilities, and equity amounts associated with Design Manager. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 3, 2023.

The condensed consolidated balance sheet as of December 31, 2022, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in stockholders’ equity, and cash flows for the interim periods. The results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2023.

There have been no material changes to the Company's significant accounting policies as described in the Form 10-K except for the short-term investments discussed below. Certain immaterial amounts in the financial statements of the prior years have been reclassified to conform to the current year presentation for comparative purposes.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, provision for transaction losses, determination of useful lives of property and equipment, impairment assessment of goodwill, capitalization of internal-use software and determination of useful lives, stock option valuations, the incremental borrowing rate associated with lease liabilities, and income taxes. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements.

Cash, Cash Equivalents, and Restricted Cash

The following represents the Company’s cash, cash equivalents, and restricted cash as of the periods presented:

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


(in thousands)	March 31, 2023		March 31, 2022
Cash and cash equivalents	$	87,791	$	161,357
Restricted cash, current	1,500		—
Restricted cash, non-current	3,335		3,334
Total cash, cash equivalents, and restricted cash	$	92,626	$	164,691

The Company considers all short-term, highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Certain cash equivalents consist of investments in debt securities that are classified as available-for-sale. During the three months ended March 31, 2023, the Company purchased $11.9 million of available-for-sale securities classified as cash equivalents. The Company’s restricted cash relates to a $3.3 million Letter of Credit for its office lease in New York, New York which is included in other assets, as well as $1.5 million which is held in a joint escrow account for 12 months from June 29, 2022, the date of the sale of Design Manager and is recorded in other current assets. The carrying value of the restricted cash approximates fair value.

Short-term Investments

Short-term investments designated as available-for-sale securities are carried at fair value, which is based on quoted market prices for such securities, if available, or is estimated on the basis of quoted market prices of financial instruments with similar characteristics. Investments with original maturities greater than 90 days and less than one year are classified within short-term investments on the Company’s condensed consolidated balance sheets. Investments with original maturities greater than one year would be classified within long-term investments.

Unrealized gains and losses of available-for-sale securities are excluded from earnings and are reported as a component of Other comprehensive income (loss) until the security is sold, has matured, or the Company determines that the fair value of the security has declined below its adjusted cost basis and the decline is not due to a credit loss. Realized gains and losses on short-term investments are calculated based on the specific identification method and would be reclassified from accumulated other comprehensive loss to other, net in the Company’s condensed consolidated statement of operations.

Short-term investments are evaluated for impairment quarterly. The Company considers various factors in determining whether it should recognize an impairment charge, including the credit quality of the issuer, the duration that the fair value has been less than the adjusted cost basis, the severity and reason for the decline in value, and the Company’s intent to sell and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. If the Company concluded that an investment is impaired or a portion of the unrealized loss is a result of a credit loss, it recognizes the charge at that time in the condensed consolidated statements of operations. Determining whether the decline in fair value is due to a credit loss requires management judgment based on the specific facts and circumstances of each security. The ultimate value realized on these securities is subject to market price volatility until they are sold.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which sets forth a "current expected credit loss" ("CECL") model. This model replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. For most financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the earlier recognition of credit losses on financial instruments.

The Company adopted this standard effective January 1, 2023 under a modified retrospective basis and considers forward-looking information to estimate expected credit losses for accounts receivable in addition to its previous policy of determining the allowance by a number of factors, including age of the receivable, current economic conditions, historical losses, and management’s assessment and judgement of the seller. The Company’s portfolio of available-for-sale debt securities is also required to incorporate forward-looking information to determine any credit losses. This risk is mitigated by the high quality nature of the investments. The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors including their credit rating, and current economic conditions. As of March 31, 2023, the Company did not recognize any credit losses related

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

to available-for-sale debt securities. No adjustment to accumulated deficit was recorded as the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

2. Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1—Quoted prices in active markets for identical assets or liabilities.

•Level 2—Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies, and similar techniques.

Short-term investments and certain cash equivalents consist of investments in debt securities that are available-for-sale. The table below segregates all assets that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date:


	March 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market fund	$	59,163	$	—	$	—	$	59,163
Commercial paper	—		1,992		—		1,992


U.S. Government agency securities	—		6,980		—		6,980
Total cash equivalents	$	59,163	$	8,972	$	—	$	68,135
Short-term investments:
Commercial paper	$	—	$	9,838	$	—	$	9,838
Corporate notes	—		11,475		—		11,475
U.S. Treasury securities	—		15,253		—		15,253
U.S. Government agency securities	—		26,122		—		26,122
Total short-term investments	$	—	$	62,688	$	—	$	62,688

As of December 31, 2022, the carrying values of the Company’s assets and liabilities approximate their fair values due to the short-term nature of these assets and liabilities and therefore were all classified as Level 1. There were no transfers between Level 1, Level 2, or Level 3 for the periods ended March 31, 2023 and December 31, 2022.

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Revenue Recognition

The following table summarizes the Company’s net revenue by type of service for the periods presented:


	Three Months Ended March 31,
(in thousands)	2023		2022
Seller marketplace services	$	22,011	$	25,527
Other services	167		1,060
Total net revenue	$	22,178	$	26,587

The Company generates revenue from seller marketplace services and other services. Seller marketplace services primarily consist of marketplace transactions, subscriptions, and listing fees. Other services primarily consist of advertising revenues generated from displaying ads on the Company’s online marketplace and software services revenue related to Design Manager, typically used by interior designers. Design Manager was sold on June 29, 2022; therefore, no related net revenue for software services was recognized during the three months ended March 31, 2023.

As of each March 31, 2023 and December 31, 2022, the Company recorded, $0.5 million of costs to obtain revenue contracts, of which $0.3 million was included in other current assets, and $0.2 million was included in other assets. Amortization of costs to obtain revenue contracts totaled $0.1 million for each of the three months ended March 31, 2023 and 2022, respectively. The Company periodically reviews the costs to obtain revenue contracts to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these costs to obtain revenue contracts.

4. Short-Term Investments

The following table summarizes the estimated value of the Company’s short-term investments as of March 31, 2023:


	March 31, 2023
(in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value







Commercial paper	$	9,850	$	—	$	(12)	$	9,838
Corporate notes	11,502		—		(27)		11,475
U.S. Treasury securities	15,249		5		(1)		15,253
U.S. Government agency securities	26,122		7		(7)		26,122
Total short-term investments	$	62,723	$	12	$	(47)	$	62,688

As of March 31, 2023, all short-term investments have an original maturity date and remaining maturity date due within one year or less. As of December 31, 2022, the Company had no short-term investments.

5. Property and Equipment, net

As of March 31, 2023 and December 31, 2022, property and equipment, net consisted of the following:


(in thousands)	March 31, 2023		December 31, 2022
Internal-use software	$	18,290	$	18,418
Leasehold improvements	3,594		3,594
Furniture and fixtures	1,114		1,114
Computer equipment and software	881		851
Software in progress	342		562
Total property and equipment, gross	24,221		24,539
Less: Accumulated depreciation and amortization	(21,044)		(20,854)
Total property and equipment, net	$	3,177	$	3,685

As of March 31, 2023 and December 31, 2022, the net book value of internal-use software was $2.7 million and $3.0 million, respectively. Depreciation and amortization expense related to the Company’s property and equipment totaled $0.9 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively, which included amortization expense for internal-use software of $0.9 million and $0.6 million, respectively. Included in amortization expense for the three

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

months ended March 31, 2023, was $0.5 million of accelerated amortization related to the shift in strategy to discontinue supporting the Company’s NFT platform.

6. Accrued Expenses

As of March 31, 2023 and December 31, 2022, accrued expenses consisted of the following:


(in thousands)	March 31, 2023		December 31, 2022
Shipping	$	3,454	$	3,597
Salaries & benefits	2,090		1,862
Sales & use taxes payable	1,247		1,378
Allowance for transaction losses	1,268		1,327
Payment processor fees	680		970
Allowance for e-commerce returns	424		438

Other	1,726		1,189
Total accrued expenses	$	10,889	$	10,761

7. Leases

The Company enters into contracts in the normal course of business and assesses whether any such contracts contain a lease. The Company determines if an arrangement is a lease at inception if it conveys the right to control the identified asset for a period of time in exchange for consideration. The Company classifies leases as operating or financing in nature, and records the associated right-of-use asset and lease liability on its consolidated balance sheet. The lease liability represents the present value of future lease payments, net of lease incentives, discounted using an incremental borrowing rate, which is a management estimate based on the information available at the commencement date of a lease arrangement.

The Company accounts for lease and non-lease components related to operating leases as a single lease component. The Company has elected that costs associated with leases having an initial term of 12 months or less ("short-term leases") are recognized in the consolidated statement of operations on a straight-line basis over the lease term and are not recorded on the balance sheet. Lease expense is recognized as a single lease cost on a straight-line basis over the lease term. The lease term consists of non-cancelable periods and may include options, including those to extend or terminate, if it is reasonably certain they will be exercised.

As of March 31, 2023, the Company had $21.4 million of operating lease right-of-use assets, $2.8 million and $21.0 million of current and non-current operating lease liabilities, respectively, and no finance leases on its condensed consolidated balance sheet. These operating lease arrangements included in the measurement of lease liabilities had a weighted-average remaining lease term of 6.75 years, a weighted-average discount rate of 5.9%, and do not reflect options to extend or terminate, as management does not consider the exercise of these options to be reasonably certain. As of December 31, 2022, the Company had $22.0 million of operating lease right-of-use assets, $2.8 million and $21.7 million of current and non-current operating lease liabilities, respectively, and no finance leases on its condensed consolidated balance sheet.

During the three months ended March 31, 2023 and 2022, the Company paid $1.0 million and $1.1 million for amounts included in the measurement of lease liabilities, respectively. The Company did not enter into any new lease arrangements during the three months ended March 31, 2023 or 2022.

During each of the three months ended March 31, 2023 and 2022, the Company recognized $1.3 million of lease expense.


	Three Months Ended March 31,
(in thousands)		2023		2022
Operating lease expense		$	1,022	$	1,003
Short-term lease expense		21		37
Variable lease expense		255		240
Total lease expense		$	1,298	$	1,280

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of March 31, 2023, the total remaining operating lease payments included in the measurement of lease liabilities was as follows (in thousands):


Fiscal Year Ending December 31,	Operating Lease Payments
2023 (remaining)	$	3,059
2024	4,114
2025	4,292
2026	4,292
2027	4,292
Thereafter	8,583
Total operating lease payments	28,632
Less: imputed interest	(4,862)
Total lease liabilities	$	23,770

8. Other Current Liabilities

As of March 31, 2023 and December 31, 2022, other current liabilities consisted of the following:


(in thousands)	March 31, 2023		December 31, 2022

Sales and use tax contingencies	$	2,251	$	1,863
Buyer deposits	740		318
Deferred revenue	114		140
Other	57		108
Total other current liabilities	$	3,162	$	2,429

9. Equity

As of March 31, 2023 and December 31, 2022, the Company had reserved shares of common stock for issuance in connection with the following:


	March 31, 2023	December 31, 2022
Options to purchase common stock	4,023,038	4,034,287
Restricted stock units	5,043,828	2,807,981
Shares available for future grant under the 2021 Plan	2,641,083	3,151,824
Shares available for future grant under the ESPP	1,572,504	1,179,902
Total	13,280,453	11,173,994

Preferred Stock

Effective June 14, 2021, in connection with the closing of the Company’s IPO, the Company’s board of directors (“Board”) is authorized to issue up to 10,000,000 shares of preferred stock, $0.01 par value per share, in one or more series. The Company's Board has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. As of March 31, 2023 and December 31, 2022, no shares of preferred stock were issued or outstanding.

Common Stock

As of March 31, 2023 and December 31, 2022, the Company had authorized 400,000,000 shares of voting common stock, $0.01 par value per share. Each holder of the Company's common stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative rights. Subject to any preferential rights of any outstanding preferred stock, holders of the Company's common stock are entitled to receive ratably the dividends, if any, as may be declared from time to time by the Board out of legally available funds. If there is a liquidation, dissolution, or winding up of the Company, holders of the Company's common stock would be entitled to share in the Company's assets remaining after the payment of liabilities and any preferential rights of any outstanding preferred stock. The rights, preferences, and privileges of

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

the holders of the Company's common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which the Company may designate and issue in the future.

10. Stock-based compensation

2011 Option Plan

The Company adopted the 2011 Stock Option and Grant Plan (the “2011 Plan”) on September 2, 2011 and amended and restated the plan on December 14, 2011. The 2011 Plan provided for the Company to grant incentive stock options or nonqualified stock options, restricted stock awards, and other stock-based awards to its employees, directors, officers, outside advisors, and non-employee consultants. At the time of grant, the options issued to new employees pursuant to the 2011 Plan expire ten years from the date of grant and generally vest over four years, with 25% vesting on the first anniversary and the balance vesting ratably over the remaining 36 months. Options issued pursuant to the 2011 Plan expire ten years from the date of grant and generally vest ratably over 48 months.

Following the completion of the Company’s IPO in June 2021, no additional awards and no shares of the Company’s common stock remain available for future issuance under the 2011 Plan. However, the 2011 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.

2021 Stock Incentive Plan

In May 2021, the Company's Board adopted, and its stockholders approved, the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective upon the SEC declaring the Company’s IPO registration statement effective. The 2021 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options, restricted share awards, stock unit awards, stock appreciation rights, cash-based awards, and performance-based stock awards, or collectively, stock awards. ISOs may be granted only to the Company’s employees, including officers, and the employees of its parent or subsidiaries. All other stock awards may be granted to the Company’s employees, officers, non-employee directors, and consultants and the employees and consultants of its parent, subsidiaries, and affiliates.

The aggregate number of shares of the Company’s common stock that may be issued pursuant to stock awards under the 2021 Plan will not exceed the sum of (x) 4,333,333 shares (as adjusted for stock splits, stock dividends, combinations, and the like), plus (y) the sum of (1) the number of reserved shares not issued or subject to outstanding awards under the 2011 Plan on the effective date of the 2021 Plan and (2) the number of shares subject to outstanding stock awards granted under the 2011 Plan and that, following the effective date of the 2021 Plan, (A) are subsequently forfeited or terminated for any reason before being exercised or settled, (B) are not issued because such stock award is settled in cash, (C) are subject to vesting restrictions and are subsequently forfeited, (D) are withheld or reacquired to satisfy the applicable exercise, strike, or purchase price, or (E) are withheld or reacquired to satisfy a tax withholding obligation, plus (z) an annual increase on the first day of each fiscal year, for a period of not more than 10 years, beginning on January 1, 2022 and ending on, and including, January 1, 2031, in an amount equal to the lesser of (i) 5% of the outstanding shares on the last day of the immediately preceding fiscal year or (ii) such lesser amount that the Compensation Committee of the Board determines for purposes of the annual increase for that fiscal year. On January 1, 2023, the number of shares of common stock available for issuance under the 2021 Plan was automatically increased according to its terms by 1,963,010 shares.

As of March 31, 2023, 2,641,083 shares were available for future grants of the Company’s common stock.

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2022:


	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2022	4,034,287	$	6.90	6.9	$	1,625
Granted	—	$	—
Exercised	(7,978)	$	3.92
Cancelled/Forfeited	(3,271)	$	7.89
Outstanding as of March 31, 2023	4,023,038	$	6.90	6.6	$	91
Options exercisable as of March 31, 2023	2,506,800	$	5.86	5.5	$	91
Options vested and expected to vest as of March 31, 2023	4,023,038	$	6.90	6.6	$	91

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for all stock options that had exercise prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of stock options exercised was less than $0.1 million and $0.3 million during the three months ended March 31, 2023 and 2022, respectively. No stock options were granted during the three months ended March 31, 2023 and 2022. The total fair value of stock options vested was $0.7 million and $1.3 million during the three months ended March 31, 2023 and 2022, respectively.

The stock options granted during the fiscal year ended December 31, 2021 included 615,997 stock options granted to executive officers that include a performance condition related to a sale event or initial public offering occurring before December 31, 2021 in addition to the standard service condition. These options will vest over four years, with approximately 21% vested on January 1, 2022, and the balance vesting ratably over the remaining 38 months. Stock-based compensation expense of $0.2 million was recognized for options having a performance condition during each of the three months ended March 31, 2023 and 2022.

Restricted Stock Units

The following table summarizes the activity related to the Company's restricted stock units:


	Outstanding Restricted Stock Units	Weighted- Average Grant Date Fair Value
Outstanding as of December 31, 2022	2,807,981	$	7.85
Granted	2,487,455	4.00
Vested	(241,175)	8.39
Cancelled	(10,433)	8.36
Outstanding as of March 31, 2023	5,043,828	$	5.92

The estimated weighted-average grant date fair value of restricted stock units granted was $4.00 and $7.99 per share for the three months ended March 31, 2023 and 2022, respectively. The total grant date fair value of restricted stock units vested was $2.0 million and less than $0.1 million for the three months ended March 31, 2023 and 2022, respectively.

Employee Stock Purchase Plan

In May 2021, the Company's Board adopted, and its stockholders approved, the Company's 2021 Employee Stock Purchase Plan (the "ESPP"). A total of 1,572,504 shares of the Company's authorized but unissued or reacquired shares of its common stock (as adjusted for stock splits, stock dividends, combinations, and the like) are available for issuance under the ESPP. The number of shares of the Company's common stock that will be available for issuance under the ESPP also includes an annual increase on the first day of each fiscal year, for a period of not more than 10 years, beginning on January 1, 2022, equal to the least of: (i) 1% of the outstanding shares of the Company’s common stock on such date, (ii) 400,000 shares (as adjusted for

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

stock splits, stock dividends, combinations, and the like) or (iii) a lesser amount determined by the Compensation Committee or the Company’s board of directors.

During regularly scheduled “offerings” under the ESPP, participants may purchase the Company’s common stock through payroll deductions, up to a maximum of 15% of their eligible compensation, or such lower limit as may be determined by the Compensation Committee from time to time. Participants will be able to withdraw their accumulated payroll deductions prior to the end of the offering period in accordance with the terms of the offering. Participation in the ESPP will end automatically on termination of employment. The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than 85% of the fair market value per share of the Company’s common stock on either the offering date or on the purchase date, whichever is less. The fair market value of the Company’s common stock for this purpose will generally be the closing price on Nasdaq (or such other exchange as the Company’s common stock may be traded at the relevant time) for the date in question, or if such date is not a trading day, for the last trading day before the date in question. As of March 31, 2023, an initial offering period has not commenced, and for the three months ended March 31, 2023, no shares of common stock were purchased under the ESPP.

Stock-Based Compensation Expense

The following table summarizes the classification of the Company’s stock-based compensation expense in the condensed consolidated statements of operations:


(in thousands)	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	149	$	83
Sales and marketing	707		301
Technology development	1,051		432
General and administrative	1,199		529
Total stock-based compensation expense	$	3,106	$	1,345

Stock-based compensation capitalized in connection with the Company’s internal-use software was less than $0.1 million for each of the three months ended March 31, 2023 and 2022. As of March 31, 2023, total unrecognized compensation expense related to unvested stock-based awards was $35.7 million, which is expected to be recognized over a weighted-average period of 2.9 years.

11. Income Taxes

The income tax provision was immaterial for the three months ended March 31, 2023 and 2022 due to the net loss before income taxes incurred for the fiscal year ended December 31, 2022 and expected to be incurred for the fiscal year ending December 31, 2023, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets. There were no material liabilities for interest and penalties accrued as of March 31, 2023.

12. Net Loss Per Share

The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
(in thousands, except share and per share amounts)	2023		2022
Numerator:
Net loss	$	(8,133)	$	(6,360)


Denominator:
Weighted average common shares outstanding—basic and diluted	39,330,542		38,030,293
Net loss per share—basic and diluted	$	(0.21)	$	(0.17)

The Company’s potentially dilutive securities, which include outstanding stock options and restricted stock units have been excluded from the computation of diluted net loss per share from each period as including them would have had an anti-dilutive

1STDIBS.COM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

effect. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares for each period presented:


	March 31,
	2023	2022
Options to purchase common stock	4,023,038	3,650,807
Restricted stock units	5,043,828	2,518,412
Total	9,066,866	6,169,219

13. Commitments and Contingencies

Contractual Obligations

The Company has $31.5 million of non-cancelable contractual commitments as of March 31, 2023, primarily related to it operating lease agreement for its corporate headquarters in New York, NY, as well as other software and support services. For those agreements with variable terms, the Company does not estimate what the total obligation may be beyond any minimum obligations. The following table represents the Company’s commitments under its purchase obligations as of March 31, 2023 (in thousands):


Fiscal Year Ending December 31,	Lease Obligations		Other Obligations		Total Obligations
2023 (remaining)	$	3,059	$	1,086	$	4,145
2024	4,114		1,291		5,405
2025	4,292		506		4,798
2026	4,292		33		4,325
2027	4,292		—		4,292
Thereafter	8,583		—		8,583
Total	$	28,632	$	2,916	$	31,548

Legal Proceedings

The Company is subject to various claims and contingencies which are in the scope of ordinary and routine litigation incidental to its business, including those related to regulation, litigation, business transactions, employee-related matters, and taxes, among others. When the Company becomes aware of a claim or potential claim, the likelihood of any loss or exposure is assessed. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company records a liability for the loss. The liability recorded includes probable and estimable legal costs incurred to date and future legal costs to the point in the legal matter where the Company believes a conclusion to the matter will be reached. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably possible. The Company does not believe that it is party to any pending legal proceedings that are likely to have a material effect on its business, financial condition, or results of operations for the three months ended March 31, 2023 and 2022.

Indemnification

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board and officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Company Overview

We are one of the world’s leading online marketplaces for connecting design lovers with many of the best sellers and makers of vintage, antique, and contemporary furniture, home décor, jewelry, watches, art, and fashion. We believe we are a leading online marketplace for these luxury design products based on the aggregate number of such listings on our online marketplace and our Gross Merchandise Value (“GMV”).Our thoroughly vetted seller base, in-depth editorial content, and custom-built technology platform create trust in our brand and facilitate high-consideration purchases. By disrupting the way these items are bought and sold, we are both expanding access to, and growing the market for, luxury design products.

1stDibs began in 2000 with the vision of bringing the magic of the Paris flea market online by creating a listings site for top vintage and antique furniture sellers. Soon thereafter, we moved our headquarters to New York City and focused primarily on adding U.S.-based sellers to our site. The quality of our initial seller base enabled us to build a reputation in the design industry as a trusted source for unique luxury design products. In over two decades of operating history, we have strengthened our brand and deepened our seller relationships. We launched our e-commerce platform in 2013 and transitioned to a full e-commerce marketplace model in 2016. We provide our sellers, the vast majority of which are small businesses, access to a global community of buyers and a platform to facilitate e-commerce at scale. Our sellers use our platform to manage their inventory, build their digital marketing presence, and communicate and negotiate orders directly with buyers. We provide our buyers a trusted purchase experience with our user-friendly interface, dedicated specialist support, and 1stDibs Promise, our comprehensive buyer protection program. We operate an asset-light business model which allows us to scale in a capital efficient manner. While we facilitate shipping and fulfillment logistics, we do not take physical possession of the items sold on our online marketplace.

Key Operating and Financial Metrics

We use the following key metrics and non-GAAP measures to measure our performance, identify trends affecting our business, and make strategic decisions:

•GMV;

•Number of Orders;

•Active Buyers; and

•Adjusted EBITDA (see “Non-GAAP Financial Measures” for a discussion of Adjusted EBITDA and a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA).

For GMV, Number of Orders, and Active Buyers, these metrics are based on internal company data, assumptions, and estimates and are used in managing our business. We believe that these figures are reasonable estimates, and we actively take measures to improve their accuracy, such as eliminating known fictitious or duplicate accounts. There are, however, inherent challenges in gathering accurate data across large online and mobile populations. For example, individuals may have multiple email accounts in violation of our terms of service, which would result in an Active Buyer being counted more than once, thus impacting the accuracy of our number of Active Buyers. In addition, certain metrics, such as the number of Active Buyers and Number of Orders, are measured based on such numbers as reported in a given month, minus cancellations within that month. As we do not retroactively adjust such numbers for cancellations occurring after the month, the metrics presented do not reflect subsequent order cancellations. We regularly review and may adjust our processes for calculating these metrics to improve their

accuracy. These key operating and financial metrics may vary from period to period and should not be viewed as indicative of other metrics.


	Three Months Ended March 31,
(dollars in thousands)		2023		2022
GMV		$	97,058	$	117,498
Number of Orders		35,385		39,392
Active Buyers		66,400		71,311
Adjusted EBITDA (unaudited)		$	(5,254)	$	(4,668)

Gross Merchandise Value

We define GMV as the total dollar value from items sold by our sellers through 1stDibs in a given month, minus cancellations within that month, and excluding shipping and sales taxes. GMV includes all sales reported to us by our sellers, whether transacted through the 1stDibs online marketplace or reported as an offline sale. We view GMV as a measure of the total economic activity generated by our online marketplace and as an indicator of the scale, growth, and health of our online marketplace. Our historical growth rates for GMV may not be indicative of future growth rates in GMV.

Number of Orders

We define Number of Orders as the total number of orders placed or reported through the 1stDibs online marketplace in a given month, minus cancellations within that month. Our historical growth rates for Number of Orders may not be indicative of future growth rates in Number of Orders.

Active Buyers

We define Active Buyers as buyers who have made at least one purchase through our online marketplace during the 12 months ended on the last day of the period presented, net of cancellations. A buyer is identified by a unique email address; thus an Active Buyer could have more than one account if they were to use a separate unique email address to set up each account. We believe this metric reflects scale, engagement and brand awareness, and our ability to convert user activity on our online marketplace into transactions. Our historical growth rates for Active Buyers may not be indicative of future growth rates in new Active Buyers.

Adjusted EBITDA

We define Adjusted EBITDA as net loss excluding depreciation and amortization, stock-based compensation expense, other income (expense), net, provision for income taxes, and strategic alternative expenses. Adjusted EBITDA is a key performance measure used by our management and board of directors to assess our operating performance and the operating leverage of our business. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the income and expenses that we exclude from Adjusted EBITDA. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making. See “Non-GAAP Financial Measures” for more information and for a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.

Components of Results of Operations

Net Revenue

Our net revenue consists principally of seller marketplace services, advertisements, and, prior to the sale of Design Manager, software services. Seller marketplace services primarily consist of marketplace transactions, subscriptions, and listing fees. Marketplace transaction fees are collected when sellers pay us commissions ranging from 5% to 50%, and processing fees of 3%, for successful purchase transactions, net of expected refunds. If a seller accepts a return or refund of an on-platform purchase, the related commission and processing fees are refunded. Revenue from subscriptions consist of access to our online marketplace, allowing sellers, who are our customers, to execute successful purchase transactions with buyers. In January 2022, we launched new seller pricing tiers which allow new sellers to choose the plan that best fits their business and includes choices of a higher monthly subscription fee and lower commission rates, as well as a subscription-free tier with higher commission rates. Listing fee revenue is collected when sellers pay us for promoting certain products on their behalf and at their discretion through our online marketplace. Prior to the sale of Design Manager, software services revenue consisted of monthly and annual subscriptions allowing customers to access our Design Manager software, typically used by interior designers. Due to the sale of Design Manager on June 29, 2022, there was no net revenue related to software services after the sale and we

anticipate that net revenue will no longer include software services in future periods. Advertisements consist of impression-based ads displayed on our online marketplace on the seller’s behalf.

Cost of Revenue

Cost of revenue includes payment processor fees and hosting expenses. Cost of revenue also includes expenses associated with payroll, employee benefits, stock-based compensation, other headcount-related expenses associated with operations personnel supporting revenue-related operations, consulting costs, and amortization expense related to our capitalized internal-use software.

In certain transactions where our shipping services are elected by sellers, we enable shipping of items purchased from the seller to the buyer. The difference between the amount collected for shipping and the amount charged by the shipping carrier is included in cost of revenue in our consolidated statements of operations. We enable fulfillment and shipping, but do not own or manage inventory.

Operating Expenses

Operating expenses consist of sales and marketing, technology development, general and administrative, and provision for transaction loss expenses. We include stock-based compensation expense in connection with the grant of the stock awards in the applicable operating expense category based on the respective equity award recipient’s function.

Sales and Marketing

Sales and marketing expenses include payroll, employee benefits, stock-based compensation, other headcount-related expenses associated with sales and marketing personnel, advertising expense, consulting costs, and promotional discounts offered to new and existing buyers. Advertising expenses consist primarily of costs incurred promoting and marketing our services, such as costs associated with acquiring new users through performance-based marketing, social media programs, email, and events. Promotional discounts and incentives represent incentives solely to end buyers and, therefore, are not considered payments made to our customers. Buyers are not our customers because access to the 1stDibs online marketplace is free for buyers, and we have no performance obligations with respect to buyers.

Technology Development

Technology development expenses include payroll, employee benefits, stock-based compensation, and other headcount-related expenses associated with engineering and product development personnel and consulting costs related to technology development. We expense all technology development expenses as incurred, except for those expenses that meet the criteria for capitalization as internal-use software.

General and Administrative

General and administrative expenses include payroll, employee benefits, stock-based compensation, other headcount-related expenses associated with finance, legal, facility and human resources related personnel, lease expense, business liability insurance, accounting, professional fees, and depreciation and amortization of property and equipment. We expense all general and administrative expenses as incurred.

Provision for Transaction Losses

Provision for transaction losses primarily consists of transaction loss expense associated with our buyer protection program, including damages to products caused by shipping and transit, items that were not received or not as represented by the seller, and reimbursements to buyers at our discretion if they are dissatisfied with their experience. The provision for transaction losses also includes bad debt expense associated with our accounts receivable balance.

Results of Operations

The following table summarizes our results of operations for the periods indicated:


(in thousands)	Three Months Ended March 31,
		2023		2022
Net revenue		$	22,178	$	26,587
Cost of revenue		7,307		7,677
Gross profit		14,871		18,910
Operating expenses:
Sales and marketing		9,805		11,799
Technology development		5,795		5,761
General and administrative		8,088		6,407
Provision for transaction losses		1,364		1,674

Total operating expenses		25,052		25,641
Loss from operations		(10,181)		(6,731)
Other income (expense), net:
Interest income		1,531		54
Interest expense		—		(4)
Other, net		517		321
Total other income (expense), net		2,048		371
Net loss before income taxes		(8,133)		(6,360)
Provision for income taxes		—		—
Net loss		$	(8,133)	$	(6,360)

The following table summarizes our results of operations as a percentage of net revenue for the periods indicated:


	Three Months Ended March 31,
		2023		2022
Net revenue		100	%	100	%
Cost of revenue		33		29
Gross profit		67		71
Operating expenses:
Sales and marketing		44		44
Technology development		26		22
General and administrative		37		24
Provision for transaction losses		6		6

Total operating expenses		113		96
Loss from operations		(46)		(25)
Other income (expense), net:
Interest income		7		—
Interest expense		—		—
Other, net		2		1
Total other income (expense), net		9		1
Net loss before income taxes		(37)		(24)
Provision for income taxes		—		—
Net loss		(37)	%	(24)	%

Comparison of the Three Months Ended March 31, 2023 and 2022

Net Revenue


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change		% Change
Net revenue	$	22,178	$	26,587	$	(4,409)	(17)	%

Net revenue was $22.2 million for the three months ended March 31, 2023, as compared to $26.6 million for the three months ended March 31, 2022. The decrease of $4.4 million, or 17%, was primarily due to a decrease in seller marketplace services revenue of $3.5 million, which was due to a decrease in marketplace transaction fees as a result of the decrease in our GMV. We believe our GMV and net revenue have been impacted negatively, both directly and indirectly, by macroeconomic factors, including significant capital market volatility, significant housing market volatility, rising interest rates, inflation, global economic and geopolitical developments and the changing consumer behaviors as a result of the COVID-19 pandemic; however, these impacts are difficult to isolate and quantify. Additionally, there was a $0.7 million decrease in software services as a result of the sale of Design Manager in June 2022.

Our marketplace transaction fees represent the majority of our net revenue and accounted for 72% and 70% of our net revenue for the three months ended March 31, 2023 and 2022, respectively. Subscription fees accounted for 24% and 23% of our net revenue for the three months ended March 31, 2023 and 2022, respectively.

Cost of Revenue


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change		% Change
Cost of revenue	$	7,307	$	7,677	$	(370)	(5)	%

Cost of revenue was $7.3 million for the three months ended March 31, 2023, as compared to $7.7 million for the three months ended March 31, 2022. The decrease of $0.4 million, or 5%, was primarily driven by a $0.5 million decrease in credit card processing fees due to the decrease in GMV and orders, and a $0.2 million decrease in salaries and benefits, partially due to the reduction in force in September 2022. These decreases were partially offset by a $0.3 million increase in depreciation and amortization expense due to the acceleration of internal use software amortization expense of $0.5 million due to our decision to discontinue supporting our NFT platform.

Gross Profit and Gross Margin

Gross profit was $14.9 million and gross margin was 67.1% for the three months ended March 31, 2023, as compared to gross profit of $18.9 million and gross margin of 71.1% for the three months ended March 31, 2022. The decreases in gross profit and gross margin for the three months ended March 31, 2023 were primarily driven by the acceleration of internal use software amortization expense of $0.5 million related to our decision to discontinue supporting our NFT platform as well as the decrease in net revenue which was greater than the decreases in cost of revenue as outlined above.

Operating Expenses

Sales and Marketing


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change		% Change
Sales and marketing	$	9,805	$	11,799	$	(1,994)	(17)	%

Sales and marketing expense was $9.8 million for the three months ended March 31, 2023, as compared to $11.8 million for the three months ended March 31, 2022. The decrease of $2.0 million or 17% was primarily driven by decreases in discretionary expenses, including the use of performance-based marketing and promotional campaigns.

Technology Development


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change		% Change
Technology development	$	5,795	$	5,761	$	34	1	%

Technology development expense was $5.8 million for each of the three months ended March 31, 2023 and 2022, respectively. There was a $0.6 million increase in stock-based compensation expense which was partially offset by a $0.5 million decrease in consulting costs and salaries and benefits.

General and Administrative


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change		% Change
General and administrative	$	8,088	$	6,407	$	1,681	26	%

General and administrative expense was $8.1 million for the three months ended March 31, 2023, as compared to $6.4 million for the three months ended March 31, 2022. The increase of $1.7 million, or 26%, was primarily driven by increases of $0.8 million in legal and professional fees related to strategic alternative expenses, $0.7 million in stock based compensation expense, and $0.4 million in sales taxes in March 2023..

Provision for Transaction Losses


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change		% Change
Provision for transaction losses	$	1,364	$	1,674	$	(310)	(19)	%

Provision for transaction losses was $1.4 million for the three months ended March 31, 2023, as compared to $1.7 million for the three months ended March 31, 2022. The decrease of $0.3 million, or 19%, was primarily driven by the decrease in GMV.

Other Income (Expense), Net


	Three Months Ended March 31,
(in thousands)	2023		2022		$ Change		% Change
Total other income (expense), net	$	2,048	$	371	$	1,677	452	%

Other income (expense), net was $2.0 million for the three months ended March 31, 2023, as compared to $0.4 million for the three months ended March 31, 2022. The increase of $1.7 million, or 452%, was primarily driven by an increase in interest income due to our strategic shift of cash to cash equivalents and short-term investments with higher rates of return.

Non-GAAP Financial Measures

We have included Adjusted EBITDA, which is a non-GAAP financial measure, because it is a key measure used by our management team to help us to assess our operating performance and the operating leverage in our business. We also use this measure to analyze our financial results, establish budgets and operational goals for managing our business, and make strategic decisions. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the income and expenses that we exclude from Adjusted EBITDA. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making. We also believe that the presentation of this non-GAAP financial measure provides an additional tool for investors to use in comparing our core business and results of operations over multiple periods with other companies in our industry, many of which present similar non-GAAP financial measures to investors, and to analyze our cash performance.

The non-GAAP financial measures presented may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated. The non-GAAP financial measures presented should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, comparable financial measures calculated in accordance with GAAP. Further, these non-GAAP financial measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations. Accordingly, these non-GAAP financial measures should be considered as supplemental in nature, and are not intended, and should not be construed, as a substitute for the related financial information calculated in accordance with GAAP. These limitations of Adjusted EBITDA include the following:

•The exclusion of certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets. While these are non-cash charges, we may need to replace the assets being depreciated and amortized in the future and Adjusted EBITDA does not reflect cash requirements for these replacements or new capital expenditure requirements;

•The exclusion of stock-based compensation expense, which has been a significant recurring expense and will continue to constitute a significant recurring expense for the foreseeable future, as equity awards are expected to continue to be an important component of our compensation strategy;

•The exclusion of other income (expense), net, which includes interest income related to our cash, cash equivalents and short-term investments, interest expense, and realized and unrealized gains and losses on foreign currency exchange; and

•The exclusion of strategic alternative expenses in connection with capital return strategies, buy- and sell-side mergers and acquisitions and partnerships, sale of a business or subsidiary, business optimization costs related to revisions of operational objectives and priorities, cost saving initiatives, restructuring charges, and integration costs, in all cases outside the ordinary course.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

We define Adjusted EBITDA as our net loss, excluding: (1) depreciation and amortization; (2) stock-based compensation expense; (3) other income (expense), net; (4) provision for income taxes; and (5) strategic alternative expenses. The following table provides a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA:


	Three Months Ended March 31,
(in thousands)		2023		2022
Net loss		$	(8,133)	$	(6,360)
Depreciation and amortization		939		718
Stock-based compensation expense		3,106		1,345
Other income, net		(2,048)		(371)
Provision for income taxes		—		—



Strategic alternative expenses		882		—
Adjusted EBITDA		$	(5,254)	$	(4,668)

Liquidity and Capital Resources

As of March 31, 2023, we had cash, cash equivalents and short-term investments of $150.5 million and an accumulated deficit of $299.2 million. Net cash used in operating activities was $2.8 million in the three months ended March 31, 2023. We expect operating losses and negative cash flows from operations to continue in the foreseeable future as we continue to strategically invest in growth activities. Our principal use of cash is to fund our operations and platform development to support our strategic initiatives.

Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will be sufficient to fund our operations and capital expenditure requirements through at least the next 12 months. We expect to continue to incur substantial expenditures in the near term to support our ongoing activities. While management believes that our current cash, cash equivalents and short-term investments are sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months, we may need to borrow funds or raise additional equity to achieve our longer-term business objectives.

Our future capital requirements will depend on many factors, including:

•the emergence of competing online marketplaces and other adverse marketing developments;

•the timing and extent of our sales and marketing and technology development expenditures; and

•any investments, acquisitions or other similar strategic endeavors we may choose to pursue in the future.

A change in the outcome of any of these or other variables could significantly impact our operating plans, and we may need additional funds to meet operational needs and capital requirements associated with such plans. In addition, any future borrowings may result in additional restrictions on our business and any issuance of additional equity would result in dilution to investors. If we are unable to raise additional capital when we need it, it could harm our business, results of operations, and financial condition.

Cash Flows

1stdibs.com, Inc. [DIBS] Filings
10-Q	[2023-05-11]
10-K	[2023-03-03]
10-Q	[2022-11-10]
10-Q	[2022-08-11]
10-Q	[2022-05-12]
10-K	[2022-03-03]
10-Q	[2021-11-12]
10-Q	[2021-08-12]
S-1	[2021-05-17]