1stDibs' Q3 2025: Contradictions Emerge on Strategic Realignment, Organic Traffic, and Pricing Impact

Date of Call: November 7, 2025

Financials Results

• Revenue: $22.0M net revenue, up 4% YOY
• Gross Margin: 74%, up 3 percentage points YOY; included ~1 percentage point nonrecurring insurance recovery; adjusted gross margin at high end of 71%–73% guidance
• Operating Margin: Adjusted EBITDA margin of -1% (loss ≈ $0.24M), improved from -14% YOY

Guidance:

• Q4 GMV expected $90M–$96M (down 5% to up 2% YOY)
• Q4 net revenue expected $22.3M–$23.5M (down 2% to up 3% YOY)
• Q4 adjusted EBITDA margin expected +2% to +5%
• Guidance assumes continued conversion and AOV gains offset by lower paid traffic from higher efficiency thresholds and reflects full-quarter benefit of Oct 1 seller subscription price increase
• Company expects positive adjusted EBITDA in Q4 and positive free cash flow for full-year 2026 assuming low single-digit revenue growth

Business Commentary:

• Operational Efficiency and Financial Turnaround:
• 1stdibs reported revenue and GMV at the high end of guidance for Q3, with adjusted EBITDA margins improving to a negative 1%, a 13 percentage point improvement year-over-year.

• This was primarily driven by disciplined expense management, including a net headcount reduction, new performance marketing efficiencies, and other cost savings totaling $7 million annually.

  

• Strategic Realignment and Product Focus:

• The company executed a targeted reduction in overall headcount, reallocating capital into technology development, with approximately 50% of the headcount now in product and engineering.

• The strategic shift aims to meet core buyer and seller needs through technology, enhancing product development capacity and operational agility.

• Price Parity and Buyer Trust:

• 1stdibs introduced automated enforcement of price parity, leading to nearly 90% of identified issues being resolved by sellers.

• This initiative, designed to combat price inconsistencies between platforms, enhances buyer trust and drives higher GMV for compliant sellers.

• Supply Health and Quality:

• The number of unique sellers stabilized, with approximately 5,800 active sellers, and nearly 1.9 million total listings, up 1%.
• This stabilization reflects the platform's commitment to high-quality, high-performing inventory and the successful pruning of low-impact sellers post-pricing actions.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "delivered revenue and GMV at the high end of guidance"; adjusted EBITDA margin improved to -1% (13ppt YoY improvement) and CFO: "clear line of sight to generating positive adjusted EBITDA and free cash flow"; Board authorized $12M repurchase reflecting confidence in cash generation.

Q&A:

• Question from Ralph Schackart (William Blair & Company L.L.C., Research Division): Can you provide a bit more color on the rationale and the benefits you expect from your September strategic realignment — major benefits beyond just movement to positive EBITDA?
  Response: Realignment cut costs across headcount, performance marketing and vendors, reduced GMV breakeven by ~ $250M, reallocated spend/headcount to product and engineering (now ~50% of headcount) to drive durable growth, with goals of Q4 adjusted EBITDA profitability and full-year 2026 positive free cash flow.

• Question from Ralph Schackart (William Blair & Company L.L.C., Research Division): On the October 1 pricing increase — can you give a sense of the order of magnitude and how the platform has performed since the price increase?
  Response: The action combined a targeted subscription increase and selective commission increases; subscription change impacted ~20% of sellers at ~10% higher fees and produced no meaningful churn to date, consistent with aligning fees to platform value.

Contradiction Point 1

Strategic Realignment and Resource Allocation

It involves the strategic direction of the company, specifically regarding the allocation of resources and the shift in focus towards product engineering, which can impact operational efficiency and company performance.

Can you provide more details on the rationale and expected benefits of your September strategic realignment? - Ralph Schackart (William Blair & Company L.L.C., Research Division)

2025Q3: The realignment shifted resources from sales and marketing to high ROI product engineering. Currently, about 50% of headcount is in product engineering. - David Rosenblatt(CEO)

Can you discuss the realignment? Can you provide details on marketing spending? Can you share the total and sales/marketing headcount? How much of the realignment will impact the P&L in the upcoming quarters—both cost pressures and positive impacts? - Jason Helfstein (Morgan Stanley)

2025Q2: We believe that the realignment of resources from sales and marketing to product engineering is already producing results. - David Rosenblatt(CEO)

Contradiction Point 2

Market Share and Market Conditions

It involves the company's market position, specifically regarding market share and market conditions in the luxury home goods sector, which are crucial for assessing the company's competitive positioning and growth potential.

Have you noticed any changes in the overall environment since the beginning of the year? - Ralph Schackart (William Blair & Company L.L.C., Research Division)

2025Q3: We're in a soft market, but we do believe just comparing our GMV growth to that of the syndicated data that we've been gaining market share over the past 6 quarters. - David Rosenblatt(CEO)

Have you seen any changes in the environment since the start of the year, even minor ones? - Ralph Schackart (William Blair & Company L.L.C., Research Division)

2025Q2: Both the U.S. housing market and the market for luxury home goods, which are our primary drivers, remain soft. - David Rosenblatt(CEO)

Contradiction Point 3

Organic Traffic and Long-term Growth Drivers

It involves the company's strategy for driving organic traffic and maintaining long-term growth, which are key for investor confidence.

Can you explain the rationale and expected benefits of your September strategic realignment? - Ralph Schackart (William Blair)

2025Q3: Organic traffic has grown every quarter since Q1, reflecting the effectiveness of our product and engineering efforts. - David Rosenblatt(CEO)

Can you discuss the ability to drive conversion and the 70% organic traffic rate? - Ralph Schackart (William Blair)

2025Q1: Organic traffic declined for over a year but was restored to growth in Q1, driven by product and engineering efforts. - David Rosenblatt(CEO)

Contradiction Point 4

Churn and Conversion Normalization

It involves expectations about churn normalization and conversion trends, which are critical for understanding the company's operational stability and growth potential.

Did you implement a pricing increase on October 1? What was the magnitude, and how has the platform performed since the increase? - Ralph Schackart (William Blair)

2025Q3: Churn normalization is due to past subscription pricing optimizations, and the company expects to return to historical normalized levels of new sellers. - David Rosenblatt(CEO)

Will churn normalize in Q2 and what does that mean? - Ralph Schackart (William Blair)

2025Q1: Conversion experienced a drop-off in April, primarily in the consumer furniture segment, attributed to macroeconomic changes. - David Rosenblatt(CEO)

Contradiction Point 5

Impact of Pricing Increase

It involves differing perspectives on the impact of a pricing increase, which is crucial for understanding the company's pricing strategy and customer sensitivity.

Did you implement a pricing increase on October 1? - Ralph Schackart(William Blair & Company L.L.C., Research Division)

2025Q3: The pricing increase was a targeted move, impacting about 20% of sellers with a 10% average increase. No significant increase in churn was observed, indicating that the pricing aligns with value creation. - David Rosenblatt(CEO)

Can you provide an update on churn normalization progress? - Ralph Schackart(William Blair)

2024Q4: Our pricing models, while allowing for the inclusion of more sellers, continue to create sufficient value to be incrementally profitable, especially among our core customer base. - David Rosenblatt(CEO)