1stdibs signals positive adjusted EBITDA and new $12M share repurchase while shifting to tech-led growth

Earnings Call Insights: 1stdibs.Com, Inc. (DIBS) Q3 2025

MANAGEMENT VIEW

* CEO David Rosenblatt described the third quarter as a breakthrough for efficiency and execution, noting, “We delivered revenue and GMV at the high end of guidance and critically, disciplined expense management drove adjusted EBITDA margins to negative 1%, a 13 percentage point improvement year-over-year, well above the high end of guidance and our best as a public company.”
* Rosenblatt announced, “We now expect to generate positive adjusted EBITDA in the fourth quarter and for the full year 2026,” and highlighted the Board's authorization of a new $12 million share repurchase program.
* Rosenblatt detailed a strategic shift in workforce composition, stating, “We executed a targeted reduction in overall headcount, not only to save cost, but to reallocate capital, shifting head count away from sales and marketing roles and into technology development.” He added, “This strategic realignment was anchored by the arrival of Bradford Shellhammer in August as our new Chief Product Officer and Chief Marketing Officer.”
* Rosenblatt discussed the launch of an automated price parity enforcement mechanism, saying, “We launched the first phase of an automated enforcement mechanism that ensures that items listed in our marketplace are priced at or below their price on competing sites in accordance with our terms of service.”
* CFO Thomas Etergino stated, “Our record third quarter margin performance validates the comprehensive effort to improve efficiency that we began in 2022 by protecting and growing our technology investments, we have structurally lowered our operating expenses, while enhancing our long-term growth trajectory, setting the stage for sustainable margin expansion in the years ahead.”

OUTLOOK

* Management forecasts fourth quarter GMV of $90 million to $96 million, down 5% to up 2%.
* Net revenue is projected at $22.3 million to $23.5 million, down 2% to up 3%, and adjusted EBITDA margin guidance is positive 2% to positive 5%.
* Rosenblatt explained, “Our GMV guidance reflects continued conversion and AOV growth, a slowdown in traffic due in part to our higher efficiency thresholds in performance marketing. This trade-off is strategic we are accepting lower traffic and lower near-term order volume in exchange for significantly higher margins and better unit economics.”
* Etergino added, “Our revenue guidance reflects the full quarter benefit of the seller subscription price increase, which took effect on October 1.”

FINANCIAL RESULTS

* Net revenue was $22 million, up 4%.
* Gross profit reached $16.3 million, up 9%, with gross profit margins at 74%, up 3 percentage points year-over-year. Management noted a nonrecurring insurance recovery related to a prior shipping matter contributed approximately 1 percentage point to margins.
* Sales and marketing expenses were $8 million, down 13%, with sales and marketing as a percentage of revenue at 36%, down from 44% a year ago.
* Technology development expenses were $5.9 million, up 8%.
* General and administrative expenses were $6.4 million, down 7%.
* Adjusted EBITDA loss was approximately $240,000, compared to a loss of $3 million last year. Adjusted EBITDA margin was a loss of 1% compared to a loss of 14% a year ago.
* Cash, cash equivalents, and short-term investments totaled $93 million at quarter end.

Q&A

* Ralph Schackart, William Blair: “Can you provide a bit more color on the rationale and the benefits you expect from your September strategic realignment. It sounds like you've made some fairly significant changes here, particularly in performance marketing, strategy. But if you sort of outlined the major benefits you expect beyond just the important sort of movement to positive EBITDA?” David Rosenblatt: “This September realignment was really the most recent stage of a process that began 3 years ago in order for us to get to breakeven. ... The goal for this 1 was really twofold. First, to achieve adjusted EBITDA profitability in the fourth quarter of this year and then also to maintain that profitability and also reach positive free cash flow for the full year '26. And then second, importantly, to reallocate head count and non-headcount investment from sales and marketing to higher ROI engineering and product development. And so we're now at a point, where roughly 50% of our head count is in product engineering, which I think is a good place to be.”
* Schackart: “And it sounds like you had a pricing increase, I think you said on October 1. Can you give us a sense of the order of magnitude there and how the platform has performed, since you push through the price increase?” Rosenblatt: “The subscription part of it only impacted about 20% of our sellers and amounted to roughly a 10% increase on those 20%, and we saw no meaningful increase in churn. As a result, I think because of the sort of proportionality between value creation and the costs that we charge our sellers.”

SENTIMENT ANALYSIS

* Analysts focused on the rationale and outcomes of cost reductions, the September realignment, and the effect of pricing increases, displaying a neutral to slightly positive tone.
* Management maintained a confident and constructive tone throughout, emphasizing operational discipline and strategic investment shifts. Rosenblatt repeatedly referenced the company’s “commitment to reaching adjusted EBITDA positive” and stated, “Our commitment to efficiency is clear.”
* Compared to last quarter, management’s tone is more optimistic and forward-looking, highlighting a clear path to profitability, while analysts’ sentiment is slightly more engaged but not adversarial.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw the announcement of a $12 million share repurchase program and a strategic realignment with a significant shift toward product and engineering roles, compared to a more general focus on cost discipline and product optimization in Q2.
* Operating expenses decreased further, and adjusted EBITDA margin improved from a loss of 8% in Q2 to a loss of 1% in Q3.
* Guidance language is more explicit regarding the expectation of positive adjusted EBITDA in the coming quarter and for the full year 2026.
* Analysts’ questions shifted from general market conditions and traffic sources to details of internal restructuring and pricing actions.
* Management's confidence level increased, with a greater focus on free cash flow generation and capital return strategies.

RISKS AND CONCERNS

* Management cited traffic slowdown due to reduced paid marketing spend as a deliberate trade-off to improve margins.
* The company noted the need for ongoing investment in technology as critical to sustaining growth and market share gains.
* No meaningful increase in churn was observed following the targeted seller price increase.
* There is continued vigilance on cost structure and the balance between traffic volume and profitability.

FINAL TAKEAWAY

The third quarter marked a pivotal shift for 1stdibs, with the company achieving record adjusted EBITDA margin performance, launching a $12 million share repurchase program, and signaling a clear path to profitability through continued operational discipline and a strategic pivot toward technology investment. Management emphasized that recent cost reductions, product enhancements, and a successful seller price increase have positioned the company to generate positive adjusted EBITDA and free cash flow in the coming periods, reinforcing confidence in sustainable growth and shareholder value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/dibs/earnings/transcripts]

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