Item 7. Management’s Discussion and Analysis
Item 7. 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 Annual Report on Form 10-K. 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 I, Item 1A in this Annual Report on Form 10-K. 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 items based on the aggregate number of listings on our online marketplace and our Gross Merchandise Value (“GMV”). Our sellers, who undergo an evaluation by our in-house experts to vet the integrity of their listings, in-depth marketing content, and custom-built technology platform create trust in our brand and facilitate high-consideration purchases of luxury design items online. By disrupting the way these items are bought and sold, we are both expanding access to, and growing the market for, luxury design.
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. Since then, we have strengthened our brand as well as deepened and broadened our seller relationships. We launched our e-commerce platform in 2013 and transitioned to a full e-commerce marketplace model in 2016. As of December 31, 2024, we operate an e-commerce marketplace with approximately 5,900 unique sellers, compared to approximately 7,800 as of December 31, 2023. In 2024, we shifted our seller acquisition strategy and monetization approach to concentrate on fewer, but more highly engaged sellers. As of December 31, 2024, we had 7.0 million users compared to 6.3 million as of December 31, 2023, and approximately 1.8 million listings, compared to 1.7 million as of December 31, 2023. Users represent non-seller visitors who register on our website, including both buyers and prospective buyers, and are identified by a unique email address. Our online marketplace seller stock value, the sum of the listed stock value of all available products listed on our online marketplace, remained consistent year over year and exceeded $10.0 billion as of both December 31, 2024 and 2023. An individual listing’s stock value is calculated as the item’s current price multiplied by its quantity available for sale.
GMV remained flat year over year and was $362.3 million for each of the years ended December 31, 2024 and 2023. Our net revenue was $88.3 million for the year ended December 31, 2024, compared to $84.7 million for the year ended December 31, 2023, an increase of 4%. In the year ended December 31, 2024, we generated a net loss of $18.6 million and Adjusted EBITDA of $8.0 million, compared to a net loss of $22.7 million and Adjusted EBITDA of $13.3 million for the year ended December 31, 2023. See “Non-GAAP Financial Measures” for more information and for a reconciliation of net loss to Adjusted EBITDA, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Restructuring Charges
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. As a result of the reduction, we incurred approximately $0.7 million in restructuring charges in the year ended December 31, 2022, consisting primarily of employee severance and benefits costs.
In June 2023, we announced a workforce reduction designed to further reduce operating costs and further realign investment priorities involving the reduction of approximately 20% of our global workforce. As a result of the reduction, we incurred approximately $2.0 million in restructuring charges during the year ended December 31, 2023, consisting primarily of employee severance and benefits costs.
During the year ended December 31, 2024, the Company incurred $1.4 million of additional employee severance and benefits costs relating to a further workforce reduction. The majority of the accrued severance totaling $1.3 million as of December 31, 2024 is anticipated to be paid during the year ending December 31, 2025, while approximately $0.1 million is expected to be paid during the first quarter of 2026. See Note 2, “Summary of Significant Accounting Policies” for further discussion on restructuring charges.
Our Business Model
We generate revenue primarily from fees from our seller marketplace services as well as other services, including advertisements.
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Seller Marketplace Services
Seller marketplace services consist of marketplace transactions, subscriptions, and listings, and accounted for substantially all of our net revenue in the years ended December 31, 2024, 2023, and 2022, respectively.
Marketplace Transaction Fees
Our sellers pay us a commission and processing fee for the successful sale of an item listed on our online marketplace. We have a commission fee structure that is a function of the item’s category and price. Our commission fees range from 5% to 50% of GMV and we charge processing fees, which are approximately 3% of the buyer’s total payment, net of expected refunds. Our marketplace transaction fees represent the majority of our net revenue and accounted for 74%, 71%, and 71% of our net revenue in the years ended December 31, 2024, 2023, and 2022, respectively.
Subscription & Listing Fees
We offer our sellers various subscription pricing tiers which allows them to choose the plan that best fits their business, with choices of a higher monthly subscription fee and lower commission rates or a lower monthly subscription fee and higher commission rates. Subscription fees accounted for 22%, 24%, and 24% of our net revenue in the years ended December 31, 2024, 2023, and 2022, respectively. 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. We earn listing fees from sellers, on a per item basis, as directed by the seller to promote certain items at the seller’s discretion. 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. Listing fees accounted for 3%, 4%, and 2% of our net revenue in the years ended December 31, 2024, 2023, and 2022, respectively.
Other Services
Other services consist of other charges to our sellers including advertising revenues generated from displaying ads on our online marketplace and accounted for 1%, 1% and 3% of our net revenue in the years ended December 31, 2024, 2023, and 2022, respectively. Advertising revenue is generated when impression-based ads are displayed on our online marketplace on our sellers’ behalf.
Key Operating and Financial Metrics
We use the following key metrics and non-GAAP measures to evaluate 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, Number of Orders, and GMV 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.
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Year Ended December 31,
(dollars in thousands) 2024 2023 2022
GMV $ 362,274 $ 362,316 $ 425,375
Number of Orders 139,239 133,072 148,399
Active Buyers 64,306 60,716 67,598
Adjusted EBITDA (unaudited) $ (8,009) $ (13,340) $ (20,670)
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 U.S. 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 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 and have not in the current year. On-platform GMV accounted for $346.3 million, or 96% , $346.6 million, or 96%, and $409.4 million, or 96%, of GMV in the years ended December 31, 2024, 2023 and 2022, respectively. 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 performance for GMV may not be indicative of future performance 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 performance for Number of Orders may not be indicative of future performance 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 performance for Active Buyers may not be indicative of future performance in new Active Buyers.
Adjusted EBITDA
We define Adjusted EBITDA as net loss excluding depreciation and amortization, stock-based compensation expense, other income, net, provision for income taxes, gain on sale of business, 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.
Key Factors Affecting Our Performance
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. Our number of Active Buyers was 64,306 as of December 31, 2024 compared to 60,716 as of December 31, 2023. The total Number of Orders placed or reported through the 1stDibs online marketplace was 139,239 for the year ended December 31, 2024, compared to 133,072 for the year ended December 31, 2023. We had no Active Buyers who represented 5% or more of on-platform GMV for the years ended December 31, 2024 or 2023. 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.
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During the year ended December 31, 2024, we retained 23% of the 2023 on-platform GMV from buyers acquired in 2023; consistent with the year ended December 31, 2023, where we also retained 23% of the 2022 on-platform GMV from buyers acquired in 2022. We define new buyers as those who placed their first order on our online marketplace. We categorize buyers into cohorts based on the date of their first purchase on the 1stDibs platform. 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 U.S. sales taxes. 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. 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, 2024.
New buyers represented 38%, 35%, and 37% of GMV for the years ended December 31, 2024, 2023 and 2022, respectively while returning buyers represented 62%, 65%, and 63% of GMV for the years ended December 31, 2024, 2023 and 2022, respectively.
Components of Results of Operations
Net Revenue
Our net revenue consists principally of seller marketplace 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% of GMV, and processing fees, which are approximately 3% of the buyer’s total payment, 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. Subscriptions provide access to our online marketplace, allowing sellers, who are our customers, to execute successful purchase transactions with buyers. We offer our sellers various subscription pricing tiers which allows them to choose the plan that best fits their business, with choices of a higher monthly subscription fee and lower commission rates or lower monthly subscription fee and 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. Advertisements consist of impression-based ads displayed on our online marketplace on the seller’s behalf.
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
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 personnel supporting revenue-related operations and logistics, consulting costs, and amortization expense related to our capitalized internal-use software.
In certain transactions where our shipping services are elected by sellers, we facilitate 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 facilitate fulfillment and shipping, but do not take ownership of or manage inventory.
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Gross Profit and Gross Margin
Gross profit is net revenue less cost of revenue, and gross margin is gross profit as a percentage of net revenue. Gross profit has been, and will continue to be, affected by various factors, including leveraging economies of scale, the costs associated with hosting our platform, the level of amortization of our internal-use software, the fluctuations in shipping costs including our ability to pass these costs on to buyers, and the extent to which we expand our operations. We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors.
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, and other headcount-related expenses associated with finance, legal, facility and human resources related personnel, lease expense, net of sublease income, business liability insurance, accounting, professional fees, and depreciation 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.
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Results of Operations
The following table summarizes our results of operations for the periods indicated:
Year Ended December 31,
(in thousands) 2024 2023 2022
Net revenue $ 88,257 $ 84,684 $ 96,849
Cost of revenue 24,831 25,111 29,670
Gross profit 63,426 59,573 67,179
Operating expenses:
Sales and marketing 38,084 36,640 44,776
Technology development 21,165 21,644 24,437
General and administrative 27,372 28,587 27,594
Provision for transaction losses 3,020 3,729 5,933
Gain on sale of Design Manager — — (9,684)
Total operating expenses 89,641 90,600 93,056
Loss from operations (26,215) (31,027) (25,877)
Other income, net:
Interest income 5,942 6,639 1,606
Interest expense — — (11)
Other, net 1,684 1,703 1,781
Total other income, net 7,626 8,342 3,376
Net loss before income taxes (18,589) (22,685) (22,501)
Provision for income taxes (44) (14) (37)
Net loss $ (18,633) $ (22,699) $ (22,538)
The following table summarizes our results of operations as a percentage of net revenue for the periods indicated:
Year Ended December 31,
2024 2023 2022
Net revenue 100 % 100 % 100 %
Cost of revenue 28 30 31
Gross profit 72 70 69
Operating expenses:
Sales and marketing 43 43 46
Technology development 24 26 25
General and administrative 31 34 29
Provision for transaction losses 4 4 6
Gain on sale of Design Manager — — (10)
Total operating expenses 102 107 96
Loss from operations (30) (37) (27)
Other income, net:
Interest income 7 8 2
Interest expense — — —
Other, net 2 2 2
Total other income, net 9 10 4
Net loss before income taxes (21) (27) (23)
Provision for income taxes — — —
Net loss (21) % (27) % (23) %
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Comparison of the Years Ended December 31, 2024 and 2023
Net Revenue
Year Ended December 31,
(in thousands) 2024 2023 $ Change % Change
Net revenue $ 88,257 $ 84,684 $ 3,573 4 %
Net revenue was $88.3 million for the year ended December 31, 2024, as compared to $84.7 million for the year ended December 31, 2023. The increase of $3.6 million, or 4%, was primarily driven by various strategic initiatives we actioned to improve our take rates, including commission re-tiering.
Our marketplace transaction fees represent the majority of our net revenue and accounted for 74% and 71% of our net revenue for the years ended December 31, 2024 and 2023, respectively. Subscription fees accounted for 22% and 24% of our net revenue for the years ended December 31, 2024 and 2023, respectively.
Cost of Revenue
Year Ended December 31,
(in thousands) 2024 2023 $ Change % Change
Cost of revenue $ 24,831 $ 25,111 $ (280) (1) %
Cost of revenue was $24.8 million for the year ended December 31, 2024, as compared to $25.1 million for the year ended December 31, 2023. The decrease of $0.3 million, or 1%, was primarily driven by a $0.5 million decrease in salaries and benefits resulting from decreases in average headcount from the prior period, primarily related to our reduction in workforce in June 2023, partially offset by annual compensation increases in March.
Gross Profit and Gross Margin
Gross profit was $63.4 million and gross margin was 71.9% for the year ended December 31, 2024, as compared to gross profit of $59.6 million and gross margin of 70.3% for the year ended December 31, 2023. The increase in gross profit and gross margin for the year ended December 31, 2024 was primarily driven by our initiatives to improve our take rates, contributing to an increase in net revenue, as well as our cost savings initiatives in the second half of 2023 which contributed to a decrease in our cost of revenue, as outlined above.
Operating Expenses
Sales and Marketing
Year Ended December 31,
(in thousands) 2024 2023 $ Change % Change
Sales and marketing $ 38,084 $ 36,640 $ 1,444 4 %
Sales and marketing expense was $38.1 million for the year ended December 31, 2024, as compared to $36.6 million for the year ended December 31, 2023. The increase of $1.4 million, or 4%, was primarily driven by a $2.7 million increase in performance-based marketing spend which contributed to an increase in GMV and net revenues during the first half of 2024 and again in the fourth quarter. This increase was partially offset by a $1.0 million decrease in salaries and benefits resulting from decreases in headcount, primarily related to our reduction in workforce in June 2023, partially offset by annual compensation increases in March.
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Technology Development
Year Ended December 31,
(in thousands) 2024 2023 $ Change % Change
Technology development $ 21,165 $ 21,644 $ (479) (2) %
Technology development expense was $21.2 million for the year ended December 31, 2024, as compared to $21.6 million for the year ended December 31, 2023. The decrease of $0.5 million, or 2%, was primarily driven by a $1.0 million decrease in salaries and benefits resulting from decreases in headcount, primarily related to our reduction in workforce in June 2023, which were partially offset by annual compensation increases in March, including a $0.3 million increase in stock-based compensation expense.
General and Administrative
Year Ended December 31,
(in thousands) 2024 2023 $ Change % Change
General and administrative $ 27,372 $ 28,587 $ (1,215) (4) %
General and administrative expense was $27.4 million for the year ended December 31, 2024, as compared to $28.6 million for the year ended December 31, 2023. The decrease of $1.2 million, or 4%, was primarily driven by a $1.7 million decrease in lease expense, net, primarily due to sublease income related to our August 2023 sublease for our former New York City corporate headquarters, and a $1.1 million decrease related to lower rates negotiated with vendors, including lower insurance expense. These decreases were partially offset by a $1.4 million increase in stock-based compensation expense, primarily due to equity grants which occur annually in March.
Provision for Transaction Losses
Year Ended December 31,
(in thousands) 2024 2023 $ Change % Change
Provision for transaction losses $ 3,020 $ 3,729 $ (709) (19) %
Provision for transaction losses was $3.0 million for the year ended December 31, 2024, as compared to $3.7 million for the year ended December 31, 2023. The decrease of $0.7 million, or 19%, was primarily driven by a decrease in damage claims as a result of new policies implemented by us and in partnership with our carriers.
Other Income, Net
Year Ended December 31,
(in thousands) 2024 2023 $ Change % Change
Total other income, net $ 7,626 $ 8,342 $ (716) (9) %
Other income, net was $7.6 million for the year ended December 31, 2024, as compared to $8.3 million for the year ended December 31, 2023. The decrease of $0.7 million, or 9%, was due primarily to interest income on our cash, cash equivalents, and short-term investments which decreased in the current year due to less cash, cash equivalents, and short-term investments as well as lower interest rates.
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
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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 operating 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 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 and amortization of property and equipment. While these are non-cash charges, we may need to replace the assets being depreciated 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, net, which includes interest income related to our cash, cash equivalents and short-term investments, and realized and unrealized gains and losses on foreign currency exchange;
• The exclusion of gain on sale of Design Manager, which is a one-time sale of our wholly owned subsidiary; and
• The exclusion of strategic alternative expenses in connection with capital return strategies, buy- and sell-side mergers, acquisitions and partnerships which include integration costs, sale of a business or subsidiary, business optimization costs related to revisions of operational objectives and priorities which include restructuring charges, 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, net; (4) provision for income taxes; (5) gain on sale of business; and (6) strategic alternative expenses. The following table provides a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA:
Year Ended December 31,
(in thousands) 2024 2023 2022
Net loss $ (18,633) $ (22,699) $ (22,538)
Depreciation and amortization 1,986 2,278 2,710
Stock-based compensation expense 14,776 12,363 11,214
Other income, net (7,626) (8,342) (3,376)
Provision for income taxes 44 14 37
Gain on sale of Design Manager — — (9,684)
Strategic alternative expenses 1,444 3,046 967
Adjusted EBITDA (unaudited) $ (8,009) $ (13,340) $ (20,670)
Seasonality
We have historically experienced increased sales during the fourth quarter holiday shopping season compared to the other quarters which has generally resulted in increased GMV and net revenue during the fourth quarter of each fiscal year. However, in the years ended December 31, 2023 and 2022 we did not experience meaningful increases and had seen decreases in GMV and net revenue in the fourth quarter, as we believed they had been adversely impacted, both directly and indirectly, by macroeconomic factors. In the year ended December 31, 2024, we saw a return to an increase in GMV and net revenues during the fourth quarter. Our cost of revenue and sales and marketing expenses generally follow this trend, with our highest costs being incurred in the fourth quarter; but similar to GMV and net revenues, cost of revenue and sales and marketing expenses have not followed this trend in the prior years due to macroeconomic factors. However, similar to the GMV and net revenue trend we saw in 2024, our cost of revenue and sales and marketing expenses also increased in the fourth quarter of the year ended December 31, 2024. 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.
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We enable fulfillment and shipping, but do not own or manage inventory. If our growth rates change, 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.
We intend to continue strategically investing in our technology development efforts, inclusive of investments in machine learning and artificial intelligence, to improve and expand our platform. We expect the majority of our technology development expenses will result from consulting and/or headcount-related expenses. We also intend to continue making strategic investments in marketing to drive future net revenue growth. We expect provision for transaction losses to vary based on fluctuations in GMV.
Liquidity and Capital Resources
As of December 31, 2024, we had cash, cash equivalents and short-term investments of $103.9 million and an accumulated deficit of $332.4 million. Net cash used in operating activities was $2.9 million in the year ended December 31, 2024. 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 including platform development to support our strategic initiatives and anticipated share repurchases under the 2024 Stock Repurchase Program.
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, capital expenditure requirements and any anticipated share repurchases under the 2024 Stock Repurchase Program 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 market 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.
Stock Repurchase Program
As of December 31, 2024, 6,443,522 shares have been purchased for a total cost of $31.6 million since the commencement of both our 2023 and 2024 stock repurchase programs and approximately $3.8 million remains available for future purchases under the 2024 Stock Repurchase Program.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
(in thousands) 2024 2023
Net cash used in operating activities $ (2,910) $ (13,556)
Net cash provided by (used in) investing activities 22,291 (100,232)
Net cash used in financing activities (30,706) (3,629)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (29) 349
Net decrease in cash, cash equivalents, and restricted cash $ (11,354) $ (117,068)
Cash Flows from Operating Activities
Net cash used in operating activities was $2.9 million for the year ended December 31, 2024, and was driven primarily by a $3.3 million decrease in operating lease liabilities due to lease payments on our previous and current NYC headquarters, partially offset by our sublease income, a $1.7 million decrease in accounts payable and accrued expenses due to the timing of payments and invoices, and a $1.8 million decrease in other current liabilities and other liabilities related to payments for sales
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and other indirect tax contingencies. These decreases were partially offset by a $2.1 million increase in payables due to sellers due to timing of the payments we make to our sellers.
Net cash used in operating activities was $13.6 million for the year ended December 31, 2023, and was driven primarily by net revenue decreasing at a faster pace than operating expenses as described in the “Results of Operations” section. Our changes in operating assets and liabilities were impacted by a negative change in operating lease liabilities of $2.8 million due to the continued lease payments on our prior NYC headquarters, a $1.5 million negative change in prepaid and other current assets primarily related to timing of prepayments including the current portion of a significant payment in the fourth quarter of 2023 relating to our platform hosting expense, and a $2.1 million negative change in other assets, primarily related to the long-term portion of the prepayment referenced above and the broker fee paid in connection with our subleasing of our prior NYC headquarters.
Cash Flows from Investing Activities
Net cash provided by investing activities was $22.3 million for the year ended December 31, 2024, and was driven primarily by $110.3 million maturities and sales of short-term investments, partially offset by $86.4 million purchases of short-term investments.
Net cash used in investing activities was $100.2 million for the year ended December 31, 2023, and was primarily due to $191.1 million of purchases of short-term investments, offset by $92.7 million of maturities of short-term investments.
Cash Flows from Financing Activities
Net cash used in financing activities was $30.7 million for the year ended December 31, 2024, and was driven primarily by $27.7 million in purchases of our common stock as part of our 2023 and 2024 stock repurchase programs and $3.8 million of payments for taxes related to net share settlements of stock-based compensation awards, partially offset by $0.8 million in proceeds from the exercise of stock options.
Net cash used in financing activities was $3.6 million for the year ended December 31, 2023 due mainly to the purchase of $3.4 million of our common stock as part of our 2023 Stock Repurchase Program.
Off-Balance Sheet Arrangements
For the periods presented, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Recent Accounting Pronouncements
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
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
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.
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Revenue Recognition
We generate revenue from seller marketplace services and other services. Seller marketplace services primarily consist of marketplace transactions, subscriptions, and listing fees. Other services consist of other charges to our sellers including advertising revenues generated from displaying ads on our online marketplace. Revenue is recognized as we transfer control of promised goods or services to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Control is transferred when the buyer and seller have agreed to the sale. We do not obtain legal title to or control the goods being purchased. 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.
Property and Equipment, net
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives. The general range of useful lives of property and equipment is as follows:
Estimated Useful Life
Leasehold improvements Lesser of lease term or life of asset
Furniture and fixtures 3 years
Computer equipment and software 3 years
Internal-use software Lesser of contract term or 3 years
We capitalize costs related to internal-use software during the application development stage, including consulting costs and compensation expenses related to employees who devote time to the development projects. We record software development costs in property and equipment, net. Costs incurred in the preliminary stages of development activities and post implementation activities are expensed in the period incurred and are included in technology development in the consolidated statements of operations. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Once the project is available for general release, capitalization ceases, and asset amortization begins. Capitalized costs associated with internal-use software are amortized on a straight-line basis over 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. The fair value of restricted stock units is based on the closing price of our common stock on the grant date. We have not issued any stock options during the years ended December 31, 2024 or 2023; however, for stock options issued prior, 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 closing price of the Company's common stock on the grant date, 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. The expected option term was calculated based on the simplified method, which uses the midpoint between the vesting date and the contractual term, as we did not have sufficient historical data to develop an estimate based on participant behavior at the time of the latest stock option grant. The risk-free interest rate was based on the U.S. Treasury bond yield with an equivalent term. We have not paid dividends and have no foreseeable plans to pay dividends.