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leading online marketplace for these luxury design products based on the aggregate number of such listings on our online
−Removed: marketplace and our GMV.
−Removed: Our thoroughly vetted seller base, in-depth editorial content, and custom-built technology platform create trust in our brand and facilitate high-consideration purchases.
+Added: marketplace and our Gross Merchandise Value (“GMV”).
+Added: Our thoroughly vetted seller base, in-depth marketing 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.
−Removed: 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.
−Removed: Soon thereafter, we moved our headquarters to New York City and focused primarily on adding U.S.-based sellers to our site.
+Added: 1stDibs began over two decades ago 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.
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.
−Removed: Over the past two-plus decades, we have strengthened our brand and deepened our seller relationships.
+Added: Since then, 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.
−Removed: 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.
−Removed: Our sellers use our platform to manage their inventory,
−Removed: build their digital marketing presence, and communicate and negotiate orders directly with buyers.
−Removed: We provide our buyers a trusted purchase experience with our user-friendly interface, dedicated specialist support, and 1stDibs Promise, our comprehensive buyer protection program.
−Removed: We operate an asset-light business model which allows us to scale in a capital efficient manner.
−Removed: While we facilitate shipping and fulfillment logistics, we do not take physical possession of the items sold on our online marketplace.
−Removed: As of December 31, 2021, we operate an e-commerce marketplace with over 4,700 seller accounts, compared to approximately 4,200 as of December 31, 2020, 4.3 million users compared to 3.5 million as of December 31, 2020, approximately 1.3 million listings, compared to 1.1 million as of December 31, 2020, and a seller stock value in excess of $14.0 billion as of December 31, 2021.
+Added: As of December 31, 2022, we operate an e-commerce marketplace with approximately 7,300 seller accounts, compared to approximately 4,700 as of December 31, 2021.
+Added: The increase in sellers reflects our launch of new seller pricing tiers in January 2022, including a subscription-free tier with higher commission rates.
+Added: As of December 31, 2022, we had 5.5 million users compared to 4.3 million as of December 31, 2021, and approximately 1.5 million listings, compared to 1.3 million as of December 31, 2021.
Users represent non-seller visitors who register on our website and include both buyers and prospective buyers.
+Added: As of December 31, 2022, we had a seller stock value in excess of $16.0 billion compared to a seller stock value in excess of $14.0 billion as of December 31, 2021.
Our seller stock value is the sum of the stock value of all available products listed on our online marketplace.
An individual listing’s stock value is calculated as the item’s current price multiplied by its quantity available for sale.
−Removed: Products with the quantity available for sale listed as “unlimited” are counted as “1” in our calculations.
−Removed: We have experienced substantial growth in recent periods.
−Removed: We grew our GMV to $447.5 million for the year ended December 31, 2021 from $342.6 million for the year ended December 31, 2020, a growth rate of 31%.
−Removed: We grew our net revenue to $102.7 million for the year ended December 31, 2021 from $81.9 million for the year ended December 31, 2020, a growth rate of 25%.
+Added: GMV was $425.4 million for the year ended December 31, 2022 compared to $447.5 million for the year ended December 31, 2021, a decrease of 5%.
+Added: Our net revenue was $96.8 million for the year ended December 31, 2022 compared to $102.7 million for the year ended December 31, 2021, a decrease of 6%.
+Added: We believe our GMV and net revenue have been negatively impacted, both directly and indirectly, by macroeconomic factors, including significant capital market volatility, the prolonged COVID-19 pandemic and the changing consumer behaviors as a result, significant housing market volatility, rising interest rates, global economic and geopolitical developments, and inflation;
+Added: however, these impacts are difficult to isolate and quantify.
In the year ended December 31, 2022, we generated a net loss of $(22.5) million and Adjusted EBITDA of $(20.7) million, compared to a net loss of $(21.0) million and Adjusted EBITDA of $(16.5) million for the year ended December 31, 2021.
See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.
−Removed: Initial Public Offering
−Removed: Our registration statement on Form S-1 related to our IPO was declared effective by the SEC on June 9, 2021, and our common stock began trading on the Nasdaq Global Select Market on June 10, 2021.
−Removed: On June 14, 2021, we completed our initial public offering of 6,612,500 shares of our common stock at a price to the public of $20.00 per share, which includes the exercise in full by the underwriters of their option to purchase from us an additional 862,500 shares of our common stock.
−Removed: We received net proceeds of $123.0 million after deducting underwriters’ discounts and commissions, before deducting offering costs.
−Removed: Upon the closing of the IPO, all shares of our outstanding redeemable convertible preferred stock automatically converted into 19,243,795 shares of common stock.
−Removed: Prior to the IPO, deferred offering costs, which consist of direct incremental legal, accounting, and other third-party fees relating to the IPO, were capitalized in other current assets on the consolidated balance sheets.
−Removed: Upon completion of the IPO, the
−Removed: $5.5 million of deferred offering costs were reclassified into additional paid-in capital and accounted for as a reduction of the IPO proceeds in the consolidated balance sheets.
−Removed: On May 25, 2021, our Board of Directors approved an amended and restated certificate of incorporation effecting a 1-for-3 reverse stock split of our issued and outstanding shares of redeemable convertible preferred stock and common stock.
−Removed: This was approved by the stockholders on May 28, 2021, and the split was effected on May 28, 2021 without any change in the par value per share.
−Removed: All information related to our redeemable convertible preferred stock, common stock, common stock warrants, and stock options, as well as the per share amounts, have been retroactively adjusted to give effect to the 1-for-3 reverse stock split for all periods presented.
−Removed: Impact of COVID-19 Pandemic
−Removed: On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic.
−Removed: The full extent of the impact of the pandemic on our business, key metrics, and results of operations depends on future developments that are uncertain and unpredictable, including the duration, severity, and spread of the pandemic, its impact on capital and financial markets and on the U.S.
−Removed: and global economies, and any new information that may emerge concerning the virus or vaccines or other efforts to control the virus.
−Removed: As a result of the COVID-19 pandemic, we transitioned to an almost fully remote work environment.
−Removed: More recently, we have re-opened certain offices on a voluntary basis, and have implemented a flexible work model that we anticipate may have us continue to operate on a significantly remote and geographically dispersed basis for the foreseeable future.
−Removed: Although we believe our business has been positively impacted to some extent by several trends related to the COVID-19 pandemic, including the increased willingness of sellers and buyers to engage in online transactions for luxury purchases, we cannot predict whether these trends will continue if and when the pandemic begins to subside, restrictions ease, and the risk and barriers associated with in-person transactions dissipate.
−Removed: Any actions we take to mitigate the effects of the COVID-19 pandemic and uncertainties related to the COVID-19 pandemic could harm our business, financial condition, and results of operations.
−Removed: While we have not yet seen a material adverse impact on our operating results as a result of the pandemic, we cannot predict the duration, magnitude, or full impact that COVID-19 may have on our financial condition, operations, and workforce.
−Removed: See “Risk Factors—The COVID-19 pandemic has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways” for further discussion of the possible impact of the COVID-19 pandemic on our business.
+Added: Restructuring Charges
+Added: In September 2022, we announced and implemented a restructuring plan to reduce operational costs and realign investment priorities involving the reduction of approximately 10% of our workforce.
+Added: As a result of the reduction, we incurred approximately $0.7 million in non-recurring restructuring charges in the year ended December 31, 2022, consisting primarily of employee severance and benefits costs.
+Added: We do not expect to incur any significant additional charges related to restructuring in the fiscal year ended December 31, 2022.
+Added: See Note 2, “Summary of Significant Accounting Policies” for further discussion of our accounting for the restructuring charges.
+Added: Sale of Design Manager
+Added: On June 29, 2022, we sold 100% of our equity interest in Design Manager for $14.8 million.
+Added: We recognized a net gain on the sale of $9.7 million during the year ended December 31, 2022.
+Added: See Note 3, “Acquisitions & Disposals” for further discussion of our accounting for the sale of Design Manager.
Our Business Model
−Removed: We generate revenue primarily from fees from our seller marketplace services as well as other services, including advertisements and software services.
+Added: We generate revenue primarily from fees from our seller marketplace services as well as other services, including advertisements and, prior to the sale of Design Manager, software services.
Seller Marketplace Services
−Removed: Seller marketplace services consist of subscriptions, listings, and marketplace transactions and accounted for 96% of our net revenue in each of the years ended December 31, 2021, 2020, and 2019.
−Removed: Subscription & Listing Fees
−Removed: Our sellers pay annual subscription fees to access our online marketplace, which allows them to promote and list their items and execute successful purchase transactions with buyers.
−Removed: Our subscription revenue grows as we bring new sellers to our online marketplace.
−Removed: We earn listing fees from sellers who are subscribed to our online marketplace, on a per item basis, as directed by the seller to promote certain items at the seller’s discretion.
−Removed: Sellers do not pay a listing fee for a basic listing on our online marketplace, but can choose to pay for other listing fees, which provide promotional advantages over the basic listing.
−Removed: Subscription fees accounted for 23%, 27%, and 28% of our net revenue in the years ended December 31, 2021, 2020, and 2019, respectively.
−Removed: Our ability to maintain the level of our annual subscription fee rates depends on our ability to continue to generate sales for our sellers, which in turn depends on our ability to drive GMV growth, as GMV increases the network effect on our online marketplace.
+Added: Seller marketplace services consist of marketplace transactions, subscriptions, and listings, and accounted for 97%, 96% and 96% of our net revenue in the years ended December 31, 2022, 2021, and 2020, respectively.
Marketplace Transaction Fees
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Our marketplace transaction fees represent the majority of our net revenue and accounted for 71%, 71% and 67% of our net revenue in the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: Subscription & Listing Fees
+Added: In January 2022, we launched new seller pricing tiers which allow 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.
+Added: Depending on the tier chosen, sellers may pay annual subscription fees to access our online marketplace.
+Added: Our subscription revenue grows as we bring new sellers to our online marketplace who choose to pay the subscription fee to access lower commission rates.
+Added: Additionally, sellers may choose our no subscription fee and higher commission rate model, which in turn, could decrease our subscription fee revenue.
+Added: Subscription fees accounted for 24%, 23%, and 27% of our net revenue in the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: Our ability to maintain the level of our annual subscription fee rates depends on our ability to continue to generate sales for our sellers, which in turn depends on our ability to drive GMV growth, as GMV increases the network effect on our online marketplace.
+Added: We earn listing fees from sellers who are subscribed to our online marketplace, on a per item basis, as directed by the seller to promote certain items at the seller’s discretion.
+Added: Sellers do not pay a listing fee for a basic listing on our online marketplace, but can choose to pay for other listing fees, which provide promotional advantages over the basic listing.
Other Services
−Removed: Other services consist of advertisements and software services and accounted for 4% of our net revenue in each of the years ended December 31, 2021, 2020, and 2019.
+Added: Other services consist of advertisements and, prior to the sale of Design Manager, software services and accounted for 3%, 4% and 4% of our net revenue in the years ended December 31, 2022, 2021, and 2020, respectively.
Advertising revenue is generated when impression-based ads are displayed on our online marketplace on our sellers’ behalf.
−Removed: Software services revenue consists of monthly and annual subscriptions sold through our Design Manager subsidiary allowing users, typically interior designers, to access our project management and accounting software.
+Added: Software services revenue consists of monthly and annual subscriptions previously sold through our Design Manager subsidiary allowing users, typically interior designers, to access our project management and accounting software.
+Added: On June 29, 2022, we sold Design Manager and no revenue related to software services has been recognized since.
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:
−Removed: • Gross Merchandise Value;
• Number of Orders;
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As we do not retroactively adjust such numbers for cancellations occurring after the month, the metrics presented do not reflect subsequent order cancellations.
−Removed: We regularly review and may adjust our processes for calculating these metrics to improve their accuracy.
+Added: 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.
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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.
−Removed: GMV includes all sales reported to us by our sellers, whether transacted through the 1stDibs marketplace or reported as an offline sale.
−Removed: We define “on-platform GMV” as GMV based only on sales placed or reported through the 1stDibs marketplace, thus on-platform GMV is a subset of GMV.
+Added: GMV includes all sales reported to us by our sellers, whether transacted through the 1stDibs online marketplace or reported as an offline sale.
+Added: We define “on-platform GMV” as GMV based only on sales placed or reported through the 1stDibs online marketplace, thus on-platform GMV is a subset of GMV.
Offline sales consist of sales completed by a small number of sellers outside of our online marketplace and reported to us by these sellers in exchange for increased marketing exposure and/or slightly lower commission rates on both their on-platform and offline sales.
We do not intend to add new sellers to this program.
−Removed: On-platform GMV accounted for $432.6 million, or 97% and $328.8 million, or 96% of GMV in the years ended December 31, 2021 and 2020, respectively.
−Removed: We view GMV as a measure of the total economic activity generated by our online marketplace and as an indicator of the scale and growth of our online marketplace and the health of our ecosystem.
+Added: On-platform GMV accounted for $409.4 million, or 96%, $432.6 million, or 97%, and $328.8 million, or 96% of GMV in the years ended December 31, 2022, 2021 and 2020, respectively.
+Added: 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
−Removed: We define Number of Orders as the total number of orders placed or reported through the 1stDibs marketplace in a given month, minus cancellations within that month.
+Added: 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.
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A buyer is identified by a unique email address;
−Removed: an Active Buyer could have more than one account if they were to use a separate unique email address to set up each account.
+Added: 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.
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Adjusted EBITDA
−Removed: We define Adjusted EBITDA as net loss excluding depreciation and amortization, stock-based compensation expense, other income (expense), net, and provision for income taxes.
+Added: We define Adjusted EBITDA as net loss excluding depreciation and amortization, stock-based compensation expense, other income (expense), net, provision for income taxes, gain on sale of Design Manager, one-time expenses related to the sale of Design Manager, and non-recurring restructuring charges.
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.
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Key Factors Affecting Our Performance
−Removed: We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below, in the section titled “Risk Factors,” and elsewhere in this Annual Report on Form 10-K.
−Removed: Sourcing and Quality of Our Highly-Curated Luxury Supply
−Removed: Our success depends in part on our ability to source luxury design products for our online marketplace through attracting and retaining leading and vetted sellers.
−Removed: Our revenue, brand, and network effect depend on the quality, authenticity, and exclusivity of the luxury design products available through our online marketplace.
−Removed: The total seller stock value on our online marketplace is in excess of $14.0 billion as of December 31, 2021.
−Removed: We have a diverse, non-concentrated base of over 4,700 seller accounts.
−Removed: As a leading at-scale online marketplace for luxury design products, we believe we are able to attract and onboard sellers seamlessly with very little marginal seller acquisition cost.
−Removed: A key driver of the increase in our seller stock value has been our over two decades, time-tested relationships with our seller base.
+Added: We believe that our performance and future success depend on a number of factors that present significant opportunities for us, including those discussed in Part I, Item 1, “Business,” but also pose risks and challenges, including those discussed in the section titled “Risk Factors,” and elsewhere in this Annual Report on Form 10-K.
Growth and Retention of our Active Buyers
Our success depends in part on our ability to grow and retain our Active Buyer base.
−Removed: Our number of Active Buyers increased to 72,420 as of December 31, 2021 from 58,159 as of December 31, 2020.
−Removed: The total Number of Orders placed or reported through the 1stDibs marketplace for the year ended December 31, 2021 was 158,061, up from 127,911 for the year ended December 31, 2020.
−Removed: We had no Active Buyers who represented 1% or more of on-platform GMV for the year ended December 31, 2021.
−Removed: With an AOV of above $2,700 in the year ended December 31, 2021, Active Buyers drive our on-platform GMV and net revenue and contribute to the network effects that allow us to attract new sellers and exclusive inventory.
−Removed: We have been able to grow our on-platform GMV from both new and existing buyers.
−Removed: While we continue to acquire new buyers, the share of on-platform GMV from existing buyers has remained stable, indicating our ability to retain a high-quality, stable buyer base.
+Added: Our number of Active Buyers was 67,598 as of December 31, 2022 compared to 72,420 as of December 31, 2021.
+Added: The total Number of Orders placed or reported through the 1stDibs online marketplace for the year ended December 31, 2022 was 148,399 compared to 158,061 for the year ended December 31, 2021.
+Added: Similar to GMV and net revenue, we believe these metrics have been negatively impacted, directly and indirectly, by macroeconomic factors.
+Added: We had no Active Buyers who represented 5% or more of on-platform GMV for the years ended December 31, 2022 or 2021.
+Added: Active Buyers drive our on-platform GMV and net revenue and contribute to the network effects that allow us to attract new sellers and exclusive inventory.
+Added: During the year ended December 31, 2022, we retained 27% of the 2021 on-platform GMV from buyers acquired in 2021;
+Added: this is a decrease from the year ended December 31, 2021, where we retained 39% of the 2020 on-platform GMV from buyers acquired in 2020.
We define new buyers as those who placed their first order on our online marketplace.
+Added: We categorize buyers into cohorts based on the date of their first purchase on the 1stDibs platform.
+Added: GMV attributed to a buyer cohort represents the total dollar value from items purchased by that buyer cohort in a given period, minus cancellations within that period and excluding shipping and sales taxes.
+Added: To calculate the percentage of buyers retained, we divide total GMV in a specific period for a given cohort by the GMV of that cohort in the prior period.
+Added: Similar to GMV and net revenue, we believe these metrics have been negatively impacted, directly and indirectly, by macroeconomic factors.
The figures below represent our on-platform GMV from our online marketplace by buyer cohort for the year ended December 31, 2022.
−Removed: We expect growth in new buyers to be driven by further penetration of the luxury consumer market, including growing our business in non-U.S.
−Removed: In addition, we expect GMV to be driven by an increase in Active Buyers and continued strength in existing buyers.
+Added: We expect the current macroeconomic factors to continue to negatively impact our operations into 2023.
+Added: We plan to invest in strategic initiatives to drive supply growth through more sellers and listings.
+Added: If and when macroeconomic conditions improve, we will look to increase retention in existing buyers and grow new buyers by further penetration of the luxury consumer market, including growing our business in non-U.S.
+Added: markets and the growth of our supply.
Other Factors Affecting Our Performance
Our results of operations are impacted by a number of other factors, including, but not limited to, those discussed below.
−Removed: The extent to which these factors may positively or negatively impact our GMV and our results of operations, including our net revenue and gross profit, will depend in large part on the degree to which we are able to successfully achieve the following growth strategies, as well as the impact the ongoing COVID-19 pandemic may have on our business and on our seller and buyer base.
+Added: The extent to which these factors may positively or negatively impact our GMV and our results of operations, including our net revenue and gross profit, will depend in large part on the degree to which we are able to successfully achieve the following growth strategies.
International Growth
Our growth will depend in part on international sellers and buyers, both of which constitute an increasing portion of our online marketplace transactions.
−Removed: On-platform GMV from buyers in non-U.S.
−Removed: markets constituted 19% in year ended December 31, 2021, representing a large untapped international opportunity.
Currently, our sellers and buyers are based in over 150 countries.
Our long-term strategy is to localize the user experience by providing technology solutions such as translation and payment capabilities, focus on local marketing efforts through organic search, email, performance-based marketing, and optimized public relations, and customize content and collections to suit regional tastes.
−Removed: As of December 31, 2021, we had over 4,700 seller accounts and 40% of the supply on our online marketplace came from outside the United States.
+Added: We had over 51% and 47% of seller accounts and 41% and 40% of the supply on our online marketplace come from outside the United States in the years ended December 31, 2022, and 2021, respectively.
+Added: On-platform GMV from buyers in non-U.S.
+Added: markets constituted 17% in the year ended December 31, 2022, a slight decrease from 19% in the year ended December 31, 2021.
+Added: We believe there is an opportunity to grow our GMV from non-U.S.
Diversify Product Verticals
Historically, our largest vertical by GMV has been antique and vintage furniture.
−Removed: Our unique product offerings in this vertical have inspired brand loyalty and increased demand for other luxury design products on the 1stDibs marketplace allowing us to expand into adjacent verticals, including new and custom furniture, jewelry, and art.
−Removed: Antique and vintage furniture comprised less than 50% of our on-platform GMV in the years ended December 31, 2021 and 2020.
−Removed: We expect antique and vintage furniture to account for less than 50% of on-platform GMV for the foreseeable future as we are investing in our new and custom furniture, jewelry, art, fashion, and NFT verticals.
+Added: Our unique product offerings in this vertical have inspired brand loyalty and increased demand for other luxury design products on the 1stDibs online marketplace allowing us to expand into adjacent verticals, including new and custom furniture, jewelry, and art.
+Added: Antique and vintage furniture comprised less than 50% of our on-platform GMV in the years ended December 31, 2022 and 2021, respectively.
+Added: We expect antique and vintage furniture to account for less than 50% of on-platform GMV for the foreseeable future as we are investing in our new and custom furniture, jewelry, art, and fashion verticals.
We anticipate these verticals will account for an increasing percentage of our on-platform GMV for the foreseeable future.
−Removed: Our new and custom furniture, jewelry and watches, art, and NFT verticals together comprised 46% of each of our years ended December 31, 2021 and 2020 on-platform GMV.
−Removed: Our brand and operating track record in existing verticals allow us to unlock valuable supply across adjacent and new verticals, increasing the exclusive products available on our online marketplace, thereby increasing the LTV of our new and existing buyer cohorts.
+Added: Our new and custom furniture, jewelry, watches, and art verticals together comprised 48% and 46% of our on-platform GMV in the years ended December 31, 2022 and 2021, respectively.
+Added: We believe our brand and operating track record in existing verticals allow us to unlock valuable supply across adjacent and new verticals, increasing the exclusive products available on our online marketplace, thereby increasing the Long Term Value (“ LTV”) of our new and existing buyer cohorts.
We aim to continue to diversify into new verticals so that we can grow our future revenue streams.
Growth in Brand Awareness
−Removed: While we have grown to-date largely due to strong brand awareness from direct and organic channels such as word of mouth referrals, we have ample opportunity to drive further engagement with new and existing buyers.
−Removed: As we continue to build and maintain our buyer base, we plan to launch additional marketing campaigns with leading design industry organizations, interior designers, and influencers, host events and enter into partnerships with leading luxury brands and develop new and compelling editorial content.
−Removed: While a large portion of our advertising spend is dedicated to performance-based marketing, we
−Removed: have opportunities to explore relatively untapped channels, such as television, radio, podcasts, and online display, to bolster engagement on our online marketplace.
+Added: While we rely on strong brand awareness from direct and organic channels such as word of mouth referrals, we have ample opportunity to drive further engagement with new and existing buyers.
+Added: While a large portion of our advertising spend is dedicated to performance-based marketing, we have opportunities to explore relatively untapped channels, such as television, radio, podcasts, and online display, to bolster engagement on our online marketplace.
As many users may continue to view 1stDibs primarily as a vintage and antique furniture marketplace, we have a substantial opportunity to educate our buyers on the breadth of our offerings and drive cross-vertical transactions.
Investment in Technology and Innovation
−Removed: We have made, and will continue to make, significant investments in our platform to drive seller success through new tools, convert users to buyers, grow our long-term revenue and operating results, drive technological innovation, and enhance the overall experience of our online marketplace.
−Removed: As we continue to scale, we plan to invest in innovation to address the needs of our sellers and buyers and drive efficiencies in our business, localize our platform, and enter new verticals and geographies.
+Added: We have made, and will continue to make, strategic investments in our platform to drive seller success through new tools, convert users to buyers, grow our long-term revenue and operating results, drive technological innovation, and enhance the overall experience of our online marketplace.
+Added: As we continue to scale, we plan to strategically invest in innovation to address the needs of our sellers and buyers and drive efficiencies in our business, localize our platform, and enter new verticals and geographies.
Overall, investments in our platform are focused on maximizing traffic, increasing conversion rate, and improving the overall efficiency of our operations.
Components of Results of Operations
−Removed: Our net revenue consists principally of seller marketplace services, software services, and advertisements.
−Removed: Seller marketplace services consist of subscriptions, listings, and marketplace transactions.
+Added: Our net revenue consists principally of seller marketplace services, advertisements, and, prior to the sale of Design Manager, software services.
+Added: Seller marketplace services primarily consist of marketplace transactions, subscriptions, and listing fees.
+Added: 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.
+Added: 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.
−Removed: Sellers pay us for promoting certain products on their behalf and at their discretion through our online marketplace.
−Removed: For successful purchase transactions, sellers also pay us commissions ranging from 5% to 50%, and processing fees of 3%, net of expected refunds.
−Removed: If a seller accepts a return or refund of an on-platform purchase, the related commission and processing fees are refunded to the seller.
−Removed: Software services revenue consists of monthly and annual subscriptions allowing customers to access our Design Manager software, typically used by interior designers.
+Added: 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
+Added: Listing fee revenue is collected when sellers pay us for promoting certain products on their behalf and at their discretion through our online marketplace.
+Added: 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.
+Added: 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.
−Removed: Our revenue recognition policies are discussed under “Critical Accounting Policies” and Note 2, “Summary of Significant of Accounting Policies,” to our consolidated financial statements.
+Added: Our revenue recognition policies are discussed under “Critical Accounting Policies” and Note 2, “Summary of Significant Accounting Policies,” to our consolidated financial statements.
Cost of Revenue
−Removed: Cost of revenue includes payment processor fees, hosting expenses, and resold software usage and services.
−Removed: Cost of revenue also includes expenses associated with payroll, employee benefits, stock-based compensation, consulting costs, amortization of internal-use software, and other headcount-related expenses associated with operations personnel supporting revenue-related operations.
−Removed: A portion of rent, related facilities and maintenance costs, and depreciation of property and equipment related to a gallery space used by us is also allocated to cost of revenue.
−Removed: A Surrender Agreement for the gallery lease was entered into in December 2019.
−Removed: In certain transactions where our shipping services are elected by sellers, we facilitate shipping of items purchased from the seller to the buyer.
−Removed: The difference between the amount collected for shipping and the amount charged by the shipping carrier is included in cost of revenue in the consolidated statements of operations.
−Removed: We do not own or manage inventory or directly manage fulfillment and shipping.
+Added: Cost of revenue includes payment processor fees and hosting expenses.
+Added: 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.
+Added: In certain transactions where our shipping services are elected by sellers, we enable shipping of items purchased from the seller to the buyer.
+Added: 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.
+Added: We enable fulfillment and shipping, but do not own or manage inventory.
Gross Profit and Gross Margin
2 unchanged sentences
We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors.
−Removed: Operating Expenses
−Removed: Operating expenses consist of sales and marketing, technology development, general and administrative, and provision for transaction loss expenses.
−Removed: We include stock-based compensation expense in connection with the grant of the stock options in the applicable operating expense category based on the respective equity award recipient’s function.
Sales and Marketing
−Removed: Sales and marketing expenses include advertising expense, payroll, employee benefits, stock-based compensation, rent and related facilities and maintenance costs related to our gallery space, depreciation of property and equipment related to the gallery, promotional discounts offered to new and existing buyers, incentives offered to select buyers who reach a certain purchase amount threshold, and other headcount-related expenses associated with the sales and marketing personnel.
−Removed: Advertising expenses consist primarily of costs incurred promoting and marketing our services, such as costs associated with acquiring new users through performance-based marketing, print advertising, email, and events.
−Removed: Promotional discounts and
−Removed: incentives represent incentives solely to end buyers and, therefore, are not considered payments made to our customers.
−Removed: Buyers are not our customers because access to the 1stDibs marketplace is free for buyers, and we have no performance obligations with respect to buyers.
+Added: 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.
+Added: 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.
+Added: Promotional discounts and incentives represent incentives solely to end buyers and, therefore, are not considered payments made to our customers.
+Added: 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
2 unchanged sentences
General and Administrative
−Removed: General and administrative expenses include payroll, employee benefits, stock-based compensation, rent and related facilities and maintenance costs, other headcount-related expenses associated with finance, facility and human resources related personnel, depreciation and amortization of property and equipment, business liability insurance, and legal, accounting, and professional fees.
+Added: 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.
14 unchanged sentences
Provision for transaction losses 5,933 5,191 3,820
+Added: Gain on sale of Design Manager (9,684) — —
Total operating expenses 93,056 93,008 69,421
6 unchanged sentences
Net loss before income taxes (22,501) (20,942) (12,517)
−Removed: (Provision for) benefit from income taxes (21) (11) 409
+Added: Provision for income taxes (37) (21) (11)
Net loss $ (22,538) $ (20,963) $ (12,528)
10 unchanged sentences
Provision for transaction losses 6 5 5
+Added: Gain on sale of Design Manager (10) — —
Total operating expenses 96 91 84
6 unchanged sentences
Net loss before income taxes (23) (20) (15)
−Removed: (Provision for) benefit from income taxes — — 1
+Added: Provision for income taxes — — —
Net loss (23) % (20) % (15) %
4 unchanged sentences
Net revenue was $96.8 million for the year ended December 31, 2022, as compared to $102.7 million for the year ended December 31, 2021.
−Removed: The increase of $20.9 million, or 25%, was primarily driven by an increase in seller marketplace services revenue of $20.2 million.
−Removed: The increase in seller marketplace services revenue was primarily due to the $18.0 million increase in commission and processing fees as a result of the growth in our GMV.
−Removed: The growth in GMV is mainly due to an increase in order volume driven by growth in Active Buyers.
+Added: The decrease of $5.9 million, or 6%, was primarily due to a $4.7 million decrease in seller marketplace services revenue, which was primarily due to a decrease in marketplace transaction fees as a result of the decrease in our GMV.
+Added: We believe our GMV and net revenue have been impacted negatively, both directly and indirectly, by macroeconomic factors, including significant capital market volatility, the prolonged COVID-19 pandemic and the changing consumer behaviors as a result, significant housing market volatility, raising interest rates, global economic and geopolitical developments, and inflation;
+Added: however, these impacts are difficult to isolate and quantify.
+Added: Additionally, there was a $0.9 million decrease in software services as a result of the sale of Design Manager in June 2022.
+Added: Our marketplace transaction fees represent the majority of our net revenue and accounted for 71% of our net revenue for both years ended December 31, 2022 and 2021, respectively.
+Added: Subscription fees accounted for 24% and 23% of our net revenue for the years ended December 31, 2022 and 2021, respectively.
Cost of Revenue
3 unchanged sentences
Cost of revenue was $29.7 million for the year ended December 31, 2022, as compared to $32.2 million for the year ended December 31, 2021.
−Removed: The increase of $6.2 million, or 24%, was primarily driven by increases in payment processing fees of $3.3 million and hosting fees of $0.7 million, consistent with our GMV growth.
−Removed: There were also increases of $2.8 million in shipping costs driven by an increase in shipping activities and shipping prices associated with our marketplace services, and $1.1 million in salaries and benefits due to higher headcount to support increased order volume.
−Removed: These increases were partially offset by a decrease in depreciation expense of $1.5 million as internal-use software capitalized projects were more substantial in fiscal years prior to 2020, and many of those assets are now fully amortized.
+Added: The decrease of $2.5 million, or 8%, was primarily due to a $3.9 million decrease in shipping expense, resulting from increases in buyer paid shipping charges compared to the prior year, a $0.6 million decrease in credit card fees due to the decrease in GMV, and a $0.2 million decrease in costs associated with Design Manager due to the sale in June 2022.
+Added: These decreases were partially offset by a $1.1 million increase in hosting and co-location costs due to increased traffic on-platform, and an increase of $1.1 million in salaries and benefits resulting from increases in headcount throughout the prior year and one-time restructuring charges recorded in September 2022 related to reductions in workforce.
+Added: The cost savings as a result of the restructuring were not fully realized in the year ended December 31, 2022, as the headcount reductions were not in effect until the end of September 2022.
Gross Profit and Gross Margin
Gross profit was $67.2 million and gross margin was 69.4% for the year ended December 31, 2022, as compared to gross profit of $70.6 million and gross margin of 68.7% for the year ended December 31, 2021.
−Removed: The increase of gross profit and gross margin for the year ended December 31, 2021 were primarily driven by the increase in seller marketplace services revenue and
−Removed: decreases in amortization expense for capitalized internal-use software as a percentage of net revenue due to improved leverage of our technology platform as GMV grows partially offset by the increases in cost of revenue discussed above .
+Added: The decrease in gross profit was primarily driven by the decrease in net revenue.
+Added: The increase in gross margin percentage was primarily driven by a decrease in our cost of revenue, as explained above, decreasing at a faster pace than the decrease in net revenue, due mainly to the decreases in shipping expense.
Operating Expenses
4 unchanged sentences
Sales and marketing expense was $44.8 million for the year ended December 31, 2022, as compared to $47.4 million for the year ended December 31, 2021.
−Removed: The increase of $10.9 million, or 30%, was primarily driven by an increase in performance-based marketing of $5.7 million in an effort to continue to drive our growth and an increase in promotional discounts and incentives of $3.0 million, partially due to the increase in GMV as well as the increased use of testing of promotional campaigns which are focused on buyer acquisition.
−Removed: There was also an increase in facility rent due to negative rent of $2.6 million recognized in the first quarter of the fiscal year ended December 31, 2020 related to the Surrender Agreement for our gallery space.
−Removed: These increases were partially offset by a decrease in depreciation expense of $1.3 million due to accelerated depreciation of our gallery leasehold improvements recognized in the first quarter of the year ended December 31, 2020 in connection with the Surrender Agreement for our gallery space.
+Added: The decrease of $2.6 million, or 6%, was primarily due to decreases in discretionary expenses, including a $4.1 million decrease in performance-based marketing and a $1.7 million decrease in promotional marketing campaigns.
+Added: These decreases were partially offset by a $2.0 million increase in stock-based compensation expense, and a $1.1 million increase in salaries and benefits resulting from increases in headcount throughout the prior year and one-time restructuring charges recorded in September 2022 related to reductions in workforce.
+Added: The cost savings as a result of the restructuring were not fully realized in the year ended December 31, 2022, as the headcount reductions were not in effect until the end of September 2022.
Technology Development
3 unchanged sentences
Technology development expense was $24.4 million for the year ended December 31, 2022, as compared to $19.1 million for the year ended December 31, 2021.
−Removed: The increase of $2.6 million, or 16%, was primarily driven by an increase of $1.6 million in consulting fees for technology development, including costs to translate our website into new languages to help our international expansion, as well as an increase of $1.0 million in salaries and benefits due to higher headcount.
+Added: The increase of $5.3 million, or 28%, was primarily due to a $3.5 million increase in stock-based compensation and a $1.6 million increase in salaries and benefits resulting from increases in headcount throughout the prior year and one-time restructuring charges recorded in September 2022 related to reductions in workforce.
+Added: The cost savings as a result of the restructuring were not fully realized in the year ended December 31, 2022, as the headcount reductions were not in effect until the end of September 2022.
General and Administrative
3 unchanged sentences
General and administrative expense was $27.6 million for the year ended December 31, 2022, as compared to $21.3 million for the year ended December 31, 2021.
−Removed: The increase of $8.7 million, or 69%, was primaril y driven by a $2.5 million increase in liability insurance, a $1.9 million increase in salaries and benefits due to higher headcount, a $1.5 million increase in professional services fees related to legal, audit, and accounting services, and a $1.2 million increase in stock-based compensation expense due to additional awards granted in the year ended December 31, 2021 and the higher valuation of our common stock.
−Removed: These expense increases were primarily related to our operations as a public company.
+Added: The increase of $6.3 million, or 30%, was primarily due to a $2.5 million increase in stock-based compensation expense, a $1.4 million increase in liability insurance, a $1.4 million increase in salaries and benefits due to a higher average headcount.
+Added: These increases were primarily related to our operations as a public company.
+Added: There was also a $0.6 million increase in legal and professional fees partially associated with the sale of Design Manager.
Provision for Transaction Losses
3 unchanged sentences
Provision for transaction losses was $5.9 million for the year ended December 31, 2022, as compared to $5.2 million for the year ended December 31, 2021.
−Removed: The increase of $1.4 million, or 36%, was primarily driven by the growth in our GMV.
+Added: The increase of $0.7 million, or 14%, was primarily driven by a higher volume of transactional and shipping accommodations.
Other Income (Expense), Net
3 unchanged sentences
Other income (expense), net was $3.4 million for the year ended December 31, 2022, as compared to $1.5 million for the year ended December 31, 2021.
−Removed: The increase of $0.5 million, or 52%, was primarily driven by an increase in foreign exchange gains.
+Added: The increase of $1.9 million, or 125%, was primarily driven by an increase in interest income due to increased cash and cash equivalents from our IPO in the year ended December 31, 2021, as well as increasing interest rates on our money market accounts, particularly in the second half of the year ended December 31, 2022.
Non-GAAP Financial Measures
3 unchanged sentences
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.
−Removed: 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.
+Added: We also believe that the presentation of this non-GAAP financial measure provides an additional tool for investors to use in comparing our core
+Added: 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.
5 unchanged sentences
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;
−Removed: • The exclusion of other income (expense), net, which includes interest income related to our cash equivalents and our notes receivable from related party, which were paid in full in December 2020, interest expense, and realized and unrealized gains and losses on foreign currency exchange;
• 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;
+Added: • The exclusion of other income (expense), net, which includes interest income related to our cash equivalents, interest expense, and realized and unrealized gains and losses on foreign currency exchange;
+Added: • The exclusion of gain on sale of Design Manager, which is a one-time sale of our wholly owned subsidiary, as well as the related one-time expenses to sell the subsidiary which include primarily legal fees;
+Added: • The exclusion of restructuring charges, which are expenses from non-recurring employee severance and benefits costs.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.
3 unchanged sentences
(3) other income (expense), net;
−Removed: and (4) provision for income taxes.
+Added: (4) provision for income taxes;
+Added: (5) gain on sale of Design Manager;
+Added: (6) one-time expenses related to the sale of Design Manager;
+Added: and (7) restructuring charges.
The following table provides a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA:
4 unchanged sentences
Stock-based compensation expense 11,214 2,839 846
−Removed: Other (income) expense, net (1,502) (989) (920)
−Removed: Provision for (benefit from) income taxes 21 11 (409)
+Added: Other income, net (3,376) (1,502) (989)
+Added: Provision for income taxes 37 21 11
+Added: Gain on sale of Design Manager (9,684) — —
+Added: One-time expenses related to sale of Design Manger 307 — —
+Added: Restructuring charges 660 — —
Adjusted EBITDA (unaudited) $ (20,670) $ (16,493) $ (6,637)
1 unchanged sentence
This has generally resulted in increased GMV and net revenue during the fourth quarter of each fiscal year.
−Removed: We expect this seasonality to continue in future years.
−Removed: Our cost of revenue and marketing expenses also follow this trend, with the highest costs corresponding with the fourth quarter.
−Removed: We do not own or manage inventory or directly manage fulfillment and shipping.
−Removed: our growth rates moderate, the impact of these seasonality trends on our results of operations may become more pronounced.
+Added: We expect this seasonality to continue in future years, unless there are unforeseen factors, for example, in the year ended December 31, 2022, we believe that macroeconomic factors negatively impacted us both directly and indirectly resulting in lower net revenue and GMV in the fourth quarter of 2022 vs the first quarter of 2022.
+Added: As our growth rates fluctuate or other unforeseen factors arise, the impact of these seasonality trends on our results of operations may become more or less pronounced.
+Added: Our cost of revenue and marketing expenses generally follow this trend, with the highest costs corresponding with the fourth quarter;
+Added: however, similar to net revenue and GMV, cost of revenue and marketing were lower during the fourth quarter of 2022 vs other quarters due to macroeconomic factors, as well as our reduction in workforce in September 2022, which decreased salaries and benefits for the fourth quarter of 2022.
+Added: We enable fulfillment and shipping, but do not own or manage inventory.
+Added: If our growth rates moderate, the impact of these seasonality trends on our results of operations may become more pronounced.
We anticipate that gross margin may fluctuate from quarter to quarter based on variability in the costs associated with hosting our online marketplace and supporting order processing.
−Removed: We intend to continue making investments in marketing to drive future net revenue growth.
−Removed: We also intend to continue investing in our technology development efforts to improve and expand our platform.
−Removed: We expect the majority of our technology development expenses will result from consulting or headcount-related expenses.
−Removed: General and administrative expenses are expected to increase in the future due to the additional costs to operate as a public company.
−Removed: We expect to continue to see an increase in provision for transaction losses as the volume of our on-platform GMV continues to grow.
+Added: We intend to continue making strategic investments in marketing to drive future net revenue growth.
+Added: We also intend to continue strategically investing in our technology development efforts to improve and expand our platform.
+Added: We expect the majority of our technology development expenses will result from consulting and/or headcount-related expenses.
+Added: We expect provision for transaction losses to vary based on fluctuations in GMV.
Liquidity and Capital Resources
1 unchanged sentence
Net cash used in operating activities was $27.9 million in the year ended December 31, 2022.
−Removed: We expect that operating losses and negative cash flows from operations could continue in the foreseeable future as we continue to invest in expansion activities.
−Removed: Our principal use of cash is to fund our operations and platform development to support our growth.
+Added: 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.
+Added: 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 and cash equivalents will be sufficient to fund our operations and capital expenditure requirements through at least the next 12 months.
−Removed: Over the longer term, our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, the continuing market acceptance of our solutions and any investments or acquisitions we may choose to pursue in the future.
−Removed: We expect to incur substantial additional expenditures in the near term to support our ongoing activities.
−Removed: Additionally, we expect to incur additional costs as a result of operating as a public company.
+Added: We expect to continue to incur substantial expenditures in the near term to support our ongoing activities.
While management believes that our current cash and cash equivalents 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.
10 unchanged sentences
Net cash used in operating activities $ (27,914) $ (4,401) $ (3,443)
−Removed: Net cash (used in) provided by investing activities (2,269) 1,286 (8,410)
+Added: Net cash provided by (used in) investing activities 12,641 (2,269) 1,286
Net cash provided by financing activities 2,035 120,050 1,562
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (278) (16) (14)
−Removed: Net increase (decrease) in cash, cash equivalents, and restricted cash $ 113,364 $ (609) $ 34,194
+Added: Net (decrease) increase in cash, cash equivalents, and restricted cash $ (13,516) $ 113,364 $ (609)
Cash Flows from Operating Activities
Net cash used in operating activities was $27.9 million for the year ended December 31, 2022, as compared to net cash used in operating activities of $4.4 million for the year ended December 31, 2021.
−Removed: The increase in net cash used of $1.0 million was primarily driven by a $8.4 million increase in net loss and a $1.8 million increase from the change in prepaid expenses primarily due to the significant increase in the premium associated with our directors and officers insurance related to our IPO, partially offset by a $4.1 million decrease from the increase in payables due to sellers due to a change in our seller payment policies in March 2021 that more closely aligns seller payments to the timing of the seller’s shipment of a confirmed order and a $3.1 million decrease from the increase in accrued expenses, primarily related to higher accruals for shipping expenses due to longer timelines for the completion and invoicing of shipments.
+Added: The increase in net cash used of $23.5 million was primarily driven by the decrease in net revenue and increase in operating expenses, including salaries and benefits, public company expenses, and one-time restructuring charges as described in the “Results of Operations” section.
+Added: There were also negative changes in our operating assets and liabilities, including an $8.8 million change in payables due to sellers and a $10.3 million change in accounts payable and accrued expenses primarily due to the timing of payments.
Cash Flows from Investing Activities
−Removed: Net cash used in investing activities was $2.3 million for the year ended December 31, 2021, as compared to net cash provided by investing activities of $1.3 million for the year ended December 31, 2020.
−Removed: The increase in cash used of $3.6 million was primarily due to proceeds of $3.1 million from the repayment of notes receivable from related party during the year ended December 31, 2020.
+Added: Net cash provided by investing activities was $12.6 million for the year ended December 31, 2022, as compared to net cash used in investing activities of $2.3 million for the year ended December 31, 2021.
+Added: The increase in cash provided by investing activities of $14.9 million was primarily due to the $14.6 million of proceeds from the sale of Design Manager.
Cash Flows from Financing Activities
Net cash provided by financing activities was $2.0 million for the year ended December 31, 2022, as compared to $120.1 million for the year ended December 31, 2021.
−Removed: The increase of $118.5 million primarily consists of the $123.0 million proceeds, net of underwriting discounts and commissions, from our IPO, offset by increased payments of deferred offering costs of $4.6 million.
−Removed: Additionally, proceeds from the exercise of stock options increased by $0.7 million.
+Added: The decrease in cash flows of $118.0 million is primarily due to the proceeds from issuance of common stock in our IPO in the year ended December 31, 2021, as well as a $0.7 million decrease in proceeds from the exercise of stock options.
Off-Balance Sheet Arrangements
1 unchanged sentence
Recent Accounting Pronouncements
−Removed: See Note 2 “Summary of Significant of Accounting Policies” to our consolidated financial statements, for a description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows.
+Added: See Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements, for a description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows.
Emerging Growth Company
11 unchanged sentences
To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
−Removed: While our significant accounting policies are described in greater detail in Note 2, “Summary of Significant Accounting Policies,” to our consolidated financial statements, we believe that the following policies are those most critical to the judgements and estimates used in the preparation of our consolidated financial statements.
+Added: While our significant accounting policies are described in greater detail in Note 2, “Summary of Significant Accounting Policies,” to our consolidated financial statements, we believe that the following policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
−Removed: We generate revenue primarily from our seller marketplace services as well as other optional services including advertisements and software services sold to interior designers.
+Added: We generate revenue from seller marketplace services and other services.
+Added: Seller marketplace services primarily consist of marketplace transactions, subscriptions, and listing fees.
+Added: Other services primarily consist of advertising revenues generated from displaying ads on our online marketplace and software services revenue related to Design Manager, typically used by interior designers.
+Added: Design Manager was sold on June 29, 2022;
+Added: therefore, no related net revenue for software services was recognized after the sale date.
Revenue is recognized as we transfer control of promised goods or services transfers to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk, or have latitude in establishing pricing and selecting suppliers, among other factors.
−Removed: Seller Marketplace Services (Subscriptions, Listings, and Marketplace Transactions)
−Removed: We sell subscriptions to access the 1stDibs.com marketplace, which allow sellers to promote and list items to be sold to buyers and execute successful purchase transactions with buyers.
−Removed: Through the subscription the sellers receive the benefit of marketplace activities, including listing items for sale, completing sales transactions, and payments processing, which represents a single stand-ready performance obligation.
−Removed: We have determined that our customers are sellers on our online marketplace since sellers pay for the use of our online marketplace to sell their inventory.
−Removed: We offer sellers annual subscriptions
−Removed: that are payable on a monthly basis.
−Removed: If during the annual subscription period a seller ceases to make its monthly payment, we are no longer obligated to provide the subscribed services and the seller can be terminated at our sole discretion.
−Removed: We earn listing fees from sellers who are subscribed to our online marketplace on a per item basis as directed by the seller to promote certain items at the seller’s discretion.
−Removed: We charge sellers commission and processing fees, for successful purchases through our online marketplace.
−Removed: The commission fees range from 5% to 50% and processing fees are 3%, net of expected refunds.
−Removed: If a seller accepts a return or refund of an on-platform purchase, the related commission and processing fees are refunded to the seller.
−Removed: We record discounts provided to the end buyer, to whom we have no performance obligation, such as promotional discounts, in selling and marketing expense, since the discounts are not related directly to the revenue source but rather used as a marketing tool and the seller is not made aware of the discounts provided to the end buyer.
−Removed: For the items purchased through the 1stDibs marketplace, we collect the gross merchandise value from the buyer, but recognize the associated revenue on a net basis, which equates to the commissions and processing fees earned in exchange for the seller marketplace facilitation services.
−Removed: We do not take title to inventory sold or assume risk of loss at any point in time during the transaction, and we are authorized to collect consideration from the buyer and remit net consideration to the seller to facilitate the processing of the confirmed purchase transaction.
−Removed: The subscription fee is recognized monthly, the commission and processing fees are recognized net of estimated refunds when the corresponding transaction is confirmed by the seller and buyer, and the listing fee is recognized ratably over time when the listing is publicly posted.
−Removed: Advertisements
−Removed: Advertising revenue is generated by displaying ads on the 1stDibs marketplace.
−Removed: For advertising services, we enter into agreements with advertisers, or sellers, in the form of signed insertion orders, which specify the terms of services and fees, prior to advertising campaigns being run.
−Removed: We recognize revenue from the display of impression-based ads in the period in which the impressions are delivered in accordance with the contractual terms of the seller insertion orders.
−Removed: Impressions are considered delivered when an ad is displayed to users.
−Removed: Software Services
−Removed: Through our subsidiary, Design Manager, we offer subscriptions to access software used by interior designers.
−Removed: Subscriptions do not provide customers with the right to take possession of the software supporting the applications and, as a result, are accounted for as service contracts.
−Removed: We offer both monthly and annual subscriptions.
−Removed: For software services, we offer subscriptions to customers that are tailored to design firms as an end-to-end business solution for project management and accounting and enter into agreements with the customers through their acceptance of online terms of service, which specifies the terms of services and fees, prior to the customers receiving access to the software platform.
Property and Equipment, net
5 unchanged sentences
We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality.
−Removed: Once the project is available for general release, capitalization ceases, and the asset can begin being amortized.
−Removed: Capitalized costs associated with internal-use software are amortized on a straight-line basis over their estimated useful life, which is generally three years.
−Removed: When assets are sold or retired, the cost and related accumulated depreciation or amortization of assets disposed of are removed from the accounts, with any resulting gain or loss recorded in income from operations.
−Removed: Costs of repairs and maintenance are expensed as incurred.
+Added: Once the project is available for general release, capitalization ceases, and asset amortization begins.
+Added: Capitalized costs associated with internal-use software are amortized on a straight-line basis over
+Added: their estimated useful life, which is generally three years , and are included in cost of revenue in the consolidated statements of operations.
Stock-Based Compensation
We measure all stock-based awards granted to employees, directors, and non-employees based on the fair value on the date of the grant and recognize compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award.
−Removed: The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the fair value of
−Removed: our common stock, expected stock price volatility, the expected term of the award, and the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.
+Added: The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the fair value of our common stock, expected stock price volatility, the expected term of the award, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.
Expected volatility was calculated based on the implied volatilities from market comparisons of certain publicly traded companies and other factors.
4 unchanged sentences
The fair value of restricted stock units are estimated on the date of grant based on the fair value of our common stock.
−Removed: The fair value of common stock underlying options has historically been determined by our board of directors, with input from management, and considering third-party valuations of our common stock.
−Removed: Because there has been no public market for our common stock, the board of directors has determined its fair value at the time of grant of the option by considering a number of objective and subjective factors, including financing investment rounds, operating and financial performance, the lack of liquidity of share capital, and general and industry specific economic outlook, among other factors.
−Removed: Subsequent to our IPO, the fair value of the underlying common stock is our closing stock price as reported on the Nasdaq.
Qualitative and Quantitative Disclosures About Market Risk
2 unchanged sentences
Interest Rate Sensitivity
−Removed: Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S.
−Removed: interest rates.
+Added: Interest rate risk relates to the loss we could incur in our cash portfolios due to a change in interest rates.
We held cash and cash equivalents of $153.2 million as of December 31, 2022.
−Removed: We generally hold our cash in non-interest-bearing checking accounts.
−Removed: Cash equivalents consist of amounts held in money market accounts.
−Removed: Due to the nature of our cash and cash equivalents, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our cash and cash equivalents.
−Removed: Our cash and cash equivalents are held for working capital purposes.
+Added: We generally hold our cash for immediate operating needs in non-interest bearing checking accounts and the majority of the remaining cash and cash equivalents are held in interest bearing money market accounts.
+Added: Due to the nature of our cash and cash equivalents, we would expect a hypothetical 100 basis point change in interest rates may result in an approximate $1.5 million change in our cash and cash equivalents.
+Added: While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those projected.
+Added: The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve.
+Added: In reality, interest rate changes of this magnitude are rarely instantaneous or parallel.
+Added: Our principal use of cash and cash equivalents is to fund our operations and platform development to support our strategic initiatives and the remainder are held for working capital purposes.
We do not enter into investments for trading or speculative purposes.
3 unchanged sentences
Our cost of revenue and operating expenses are primarily denominated in U.S.
−Removed: dollars, except for our U.K.
−Removed: operations, which are denominated in British pounds.
As our online marketplace continues to grow globally, our results of operations and cash flows may be subject to fluctuations due to the change in foreign exchange rates.
To date, fluctuations due to changes in the Euro and British pound have not been significant, but we may experience material foreign exchange gains and losses in our statement of operations in the future.
−Removed: As of December 31, 2021, a 10% increase or decrease in current exchange rates would not have a material impact on our consolidated financial statements.
+Added: As of December 31, 2022, we would expect that a 10% increase or decrease in current exchange rates would not result in more than a $3.5 million change in revenue, a $1.5 million change in operating expenses, and a $0.5 million change in assets and liabilities.
We are exposed to credit risk on accounts receivable balances.
5 unchanged sentences
Our results of operations and financial condition are presented based on historical cost.
−Removed: While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial.
+Added: While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe certain metrics, including our GMV and net revenue, have been negatively impacted, both directly and indirectly, by macroeconomic factors, including inflation and as a result significant capital market and housing market volatility.
+Added: Additionally, if our costs were to become subject to inflationary pressures, we might not be able to fully offset such higher costs through net revenue and GMV increases.
+Added: Our inability or failure to do so could harm our business, financial condition, and results of operations.
We cannot assure you our business will not be affected in the future by inflation.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.