Hello everyone, and welcome to the 1stdibs Second Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions]. I'd like to hand over the call over to, Kevin LaBuz, Head of Investor Relations. You may begin.

Good morning, and welcome to 1stdibs Earnings Call for the Quarter Ended June 30, 2024. I am Kevin LaBuz, Head of Investor Relations and Corporate Development. Joining me today are Chief Executive Officer, David Rosenblatt, and Chief Financial Officer, Thomas Etergino. David will provide an update on our business, including our strategy and growth opportunities, and Tom will review our second quarter results and third quarter outlook. This call will be available via webcast on our Investor Relations website at investors.1stdibs.com. Before we begin, please keep in mind that our remarks include forward-looking statements, including but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects business plans, strategic initiatives, business and economic trends, including e-commerce growth rates and our potential responses to them, international opportunities and competitive position. Our actual results may differ materially from those expressed or implied in these forward-looking statements as a result of risks and uncertainties, including those described in our SEC filings. Any forward-looking statements that we make on this call are based on our beliefs and assumptions as of today, and we disclaim any obligation to update them except to the extent required by law. Additionally, during the call, we'll present GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which you can find on our Investor Relations website, along with the replay of this call. Lastly, please note that all growth comparisons are on a year-over-year basis, unless otherwise noted. I will now turn the call over to our CEO, David Rosenblatt. David?

Thanks, Kevin. Good morning and thank you for joining us today. In the Q2, we delivered GMV and revenue at the high end of guidance and adjusted EBITDA margins above the high end. Moreover, we are pleased to report a return to growth after eight challenging quarters, marking a significant turning point for the business. In addition, we recorded a number of positive developments over the past quarter, a sequential increase in the number of active buyers for the first time since late 2021, improving conversion for both new and returning buyers, accelerating order growth and ongoing adjusted EBITDA margin improvements. Growing GMV and revenue at a time when syndicated credit card data shows that the broader online furniture and premium furnishings markets are contracting is validation that our strategy is working. It also shows that cost reductions have not come at the expense of growth. The actions we took in 2022 and 2023 to lay the groundwork for future financial success, streamlining operations, reengineering costs and narrowing our focus to the highest ROI opportunities continue to pay off. Increasing conversion is our highest leverage activity, and we are pleased to report the third consecutive quarter of conversion rate growth. Returning buyer conversion hit a record high, and new buyer conversion grew double digits. Even with this progress, there is significant headroom to increase conversion, grow orders and expand our active buyer base. We are optimistic for three reasons. First, conversion rates in the second quarter were approximately 20% below their peak at the height of the pandemic e-commerce boom. Over time, we believe that conversion can exceed this high watermark. Achieving record returning buyer conversion rates in the second quarter offers an early proof point. Second, U.S. Luxury home sales are still more than 10% below pre pandemic levels…

Thanks, David. We delivered GMV and revenue at the high end of guidance and adjusted EBITDA margins above the high end. We also returned to top line growth for the first time in two years. GMV was $91.5 million up 2% with growth rates increasing seven percentage points sequentially. While we continue to see soft demand for luxury home goods and syndicated data suggests that the broader online furniture and premium furnishings markets are contracting, we believe that the worst of the down cycle is now behind us. GMV growth was propelled by double-digit conversion gains offset by continued traffic and average order value headwinds. Encouragingly, this was our second consecutive quarter where conversion increased for both new and returning buyers and the third consecutive quarter of overall conversion growth. Going deeper, returning buyer conversion hit a record high and new buyer conversion grew double digit year-over-year. We are confident in our roadmap and see ample headroom to increase conversion rates over time. This confidence is bolstered by the recent success of our AB tests and newly launched product enhancements. Average order value of approximately $2,700 was down 3%. Median order value of approximately $1200 was down 2%. Similar to the first quarter, we saw a slight mix shift to orders under $2,000 Lastly, orders over $100,000 accounted for approximately 4% of GMV, in line with our historical range of 3% to 5%. Consumer GMV and Trade GMV grew at similar rates, with Trade returning to growth for the first time since mid-twenty 22. Turning to verticals, art, fashion and vintage and antique furniture all posted GMV growth. We ended the quarter with approximately 61,200 active buyers, down 6% year-over-year, but up 1% sequentially. Because active buyers are a trailing 12-month metric, they are a lagging indicator. However, we see…

Thank you. [Operator Instructions]. Our first question comes from Nick Jones from Citizens JMP Group. Your line is now open.

Hi. This is, Luke on for Nick. Thanks for taking our questions. I guess, first, it was a really solid quarter. You returned to GMV growth and saw what seems to be positive trends across various business metrics. I know you mentioned some seasonality in AOV headwinds, but could you just provide some additional color on what went into the 3Q guide, particularly given such a solid 2Q you just had? Thanks.

Hey, it's David. Thank you for that. We were happy with the second quarter, and we're actually happy with our prognosis for the third quarter as well. What's going on in the third quarter in GMV is that we're comping a quarter last year with an unusually high cluster of high average order value orders. So we typically average around 3% to 5% of our orders at $100,000 plus, and this quarter last year, roughly or GMV, roughly 8% of our GMV was $100,000 plus We don't expect that to continue past the third quarter and outside of that, at the midpoint of guidance, we're still projecting that orders will grow, active buyers will grow and revenue will grow.

Makes sense. And then active buyers stabilized a bit in 2Q. It grew sequentially. Is that a trend we can kind of expect to continue going forward or should we still expect some choppiness near term?

Yes, this is Tom. I'll take that. So, yes, active buyers did grow sequentially 1%. Kind of reminding you that's a trailing 12-month metric. So it is a lagging indicator. Order growth, which is a leading indicator of active buyer growth, we saw 5% year over year and yes, to answer your question, we do expect to see continued order growth in third quarter, which would convert into active buyer growth.

Okay. And maybe if I can just fit one more in on macro. I understand that there are still some pressures, but you mentioned last call that demand metrics were recovering across the board. Is that still the case? And what are your expectations for the back half of this year, particularly given the increased likelihood of rate cuts? Thanks.

Yes, I mean, I think the macros based on the syndicated data that we saw for last quarter said that our core market for luxury furnishings was down mid to high single digits and compared to that, on an order basis, we were up 5% and, of course, we were up also on a GMV basis. So, we do feel pretty good that we're outperforming a weak market right now. As we look forward, again, I'm not a macro economist. I mean, if interest rates go down that should be a positive driver for us, right, because it should stimulate more activity in the real estate market. Tom, I don't know if you have anything to add on that?

No, I think you covered it.

Great. Thank you.

As of right now, we don't have any raised questions on the screen. We are now closing the Q&A. [Operator Closing Remarks].