Ladies and gentlemen, thank you for joining us, and welcome to the 1stDibs Q3 2025 Earnings Call. I will now hand the conference over to Kevin LaBuz, Head of Investor Relations and Corporate Development. Kevin, please go ahead.

Good morning, and welcome to 1stDibs earnings call for the quarter ended September 30, 2025. I'm Kevin LaBuz, Head of Investor Relations and Corporate Development. Joining me today are Chief Executive Officer, David Rosenblatt; and Chief Financial Officer, Tom Etergino. David will provide an update on our business, including our strategy and growth opportunities, and Tom will review our third quarter financial results and fourth 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, 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 will 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, and good morning, everyone. The third quarter was a breakthrough period for efficiency and execution, demonstrating our commitment to financial discipline. 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. We now expect to generate positive adjusted EBITDA in the fourth quarter and for the full year 2026. Reflecting this strong financial performance and our clear line of sight to free cash flow generation, our Board has authorized a new $12 million share repurchase program. Generating free cash flow creates an opportunity to return capital, particularly if we continue to trade at a discount to our assessment of intrinsic value. We are also proving that this efficiency doesn't come at the expense of market leadership. We continue to grow and gain market share even in a tough environment. This combination of operational execution and financial rigor is the story of the quarter. The core of our third quarter effort was to build a more efficient growth engine. We achieved this by realizing a net head count reduction, new performance marketing efficiencies, and other cost savings totaling $7 million annually, while growing our product development capacity. We believe that our growth potential is unlocked by investing in product and engineering. Historically, we disrupted this market via technology, and we are committed to maintaining that principle. In September, 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. The net effect is a strategic shift in our workforce composition. While overall head count is lower, we are actively increasing our product and engineering team. Our conviction is simple. The most scalable and highest ROI way to meet the core needs of our buyers and sellers is through technology. This strategic realignment was anchored by the arrival of Bradford Shellhammer in August as our new Chief Product Officer and Chief Marketing Officer. This isn't just an efficiency play. It's a growth strategy. We are now primed to modernize our marketing channels, shifting investment towards high engagement formats like social video and personalized communications. Driving growth via content and community. This marketing reorganization in combination with increasing our product development capacity significantly enhances our operational agility and allows us to deliver richer, more consistent value at every customer interaction. The focus in the third quarter was on architecture and foundation. We began a deep review of our highest leverage opportunities in four core business drivers: fueling new buyer growth, retaining and engaging existing buyers, improving monetization, and ensuring seller success. We are currently developing our 2026 product roadmap and are excited to share more details during our fourth quarter earnings call. Turning to the third quarter, funnel performance demonstrated clear evidence that our product-led strategy continues to produce results. Our ongoing optimization efforts drove our eighth consecutive quarter of conversion growth, proving the compounding impact of our continuous product iteration. We also saw AOV strength during the quarter. While we observed a slowdown in traffic, the combination of conversion growth and rising average order value drove GMV acceleration. That success in conversion was driven by specific product initiatives designed to increase buyer trust. Our most significant launch in the third quarter directly targeted a major point of buyer friction: pricing. Competitive pricing is a key pillar of our product strategy. The objective here is to ensure that the marketplace offers fair and transparent item prices and shipping costs. Over the past year, we have built the foundation for this through the full rollout of our machine learning-based pricing models across all verticals, which bring transparency to a historically opaque market and reinforce buyer trust. In the third quarter, we introduced the technology to enforce another component of the strategy, price parity. With tools like Google Lens and browser extensions making it easier than ever for buyers to comparison shop, price inconsistencies between platforms can undermine buyer trust and damage our brand reputation, potentially creating an incentive for buyers to circumvent our platform. To combat this, 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. So far, nearly 90% of identified violations have been remedied by sellers. This is a critical step in reinforcing trust as pilot data showed that items updated at parity saw conversion increases. This initiative moves our policy from soft guidance to consistent automated enforcement, ensuring a more confident and frictionless experience for buyers and driving higher GMV for compliant sellers. Price parity proves that our team can solve complex problems to make sure that we can tackle even more ambitious initiatives. Faster, we are making significant advancements in integrating AI into our product development process. We view AI as a powerful tool to drive both internal efficiency and customer value. This quarter, our focus was on maximizing employee productivity. Within engineering, we estimate that over 25% of all new code is being written by AI, accelerating our development process. By building AI into our workflows, we are ensuring that our new leaner cost structure maximizes output and product velocity. Beyond engineering efficiency, we are actively incorporating an AI component into every major initiative in our roadmap. We also continue to make progress in our advertising program by leveraging our high-quality, high-intent audience. For our core sponsored listings, the third quarter focused on efficiency, expanding inventory, and optimizing the ad load for better seller visibility. More strategically, we successfully launched our first non-endemic advertiser in late September. This validates the value of our audience, but the revenue opportunity is still nascent and will develop over time. Moving to the health of our supply, the third quarter underscored our commitment to high-quality, high-performing inventory. We ended the period with nearly 1.9 million total listings, marking continued growth, up 1%. As anticipated, the number of unique sellers continues to stabilize following our 2024 pricing actions. We ended the quarter with approximately 5,800 unique sellers indicating that the major headwind from the essential seller program is now largely behind us. This disciplined strategic focus resulted in a healthier, more valuable marketplace with the churned cohort having a minimal impact on GMV and listings. This strategic pruning allows us to reinforce our core value proposition. Our 2025 seller sentiment survey confirmed that 1stDibs is now the primary sales channel for our sellers, surpassing their own showrooms for the first time. This finding underscores the platform's growing relevance and reinforces our unique position as the premier essential destination for luxury design. Because we've successfully aggregated supply around the highest quality dealers, we expect to be in a strong competitive position when the luxury market rebounds. Given the significant product enhancements we have delivered to our dealers, we believe the platform now offers a dramatically higher ROI for our sellers. Our ability to deliver this high ROI is a direct result of sustained investments in marketplace technology. To ensure that we can continue to invest in the technology that powers their success, we executed a subscription pricing action on certain seller cohorts on October 1. This marks our first broad-based increase for this segment since 2019. This decision reinforces the status of the platform as an essential sales channel, underpins the platform's long-term sustainability, and provides a tangible tailwind to our recurring revenue. In closing, the third quarter was defined by focus and execution. We successfully executed a major strategic realignment, fundamentally redesigning our organization to prioritize high ROI technology investments and further reduce our cost structure. The results, we delivered our best adjusted EBITDA margin as a public company, confirming that this realignment represents a major step forward on our path to profitability. Our commitment to reaching adjusted EBITDA positive is absolute and we have maintained this rigor while successfully reallocating capital to technology that will serve as the engine for our future expansion. We continue to gain market share and we now have the durable financial model needed to capitalize on the next phase of e-commerce growth. We've built the foundation. Now we're ready to accelerate. Thank you for your continued support. I will now turn it over to Tom to review our third quarter financial results and fourth quarter outlook.

Thanks, David. Good morning, everyone. 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. Our commitment to efficiency is clear. Operating expenses were down 6% year-over-year and down 10% when excluding severance costs. This reduction is fundamentally changing the profitability curve of this business. Third quarter performance confirms we are making good progress on our path to profitability by structurally lowering our breakeven point. I will now walk you through the details that support these outcomes. From a funnel perspective, third quarter results validate the effectiveness of our product roadmap. Our ongoing optimization efforts drove our eighth consecutive quarter of conversion growth, which accelerated during the period. AOV also rebounded. While we observed a partial offset due to softening traffic growth driven in part by a reduction in performance marketing spending, the combination of conversion growth and AOV rebound drove the GMV acceleration. GMV was up 5% in the third quarter versus down 2% in the second quarter. On-platform average order value of nearly $2,700 and median order value of approximately $1,300 were both up 10%. This dynamic was driven by a slight mix shift towards higher-value orders. In addition, the year-ago period also included auction orders, which have below-average AOVs, creating an easier comparable base. Returning to funnel trends, traffic softened driven by lower paid traffic, where we tightened efficiency thresholds and reduced performance marketing spending. We ended the quarter with over 75% of traffic from organic sources, up 3 percentage points year-over-year. This organic strength is a key financial advantage, reflecting the power of our brand and a low dependence on performance marketing to drive traffic. Both our core buyer segments, trade and consumer, grew GMV. This broad-based growth confirms the platform's value proposition with the Trade segment driving slightly stronger growth year-over-year. Vertical performance highlights the diversification of our marketplace. Art, which accounts for a low teens percentage of total GMV, was the fastest-growing vertical, up double digits. We also saw strong GMV growth in jewelry and vintage and antique furniture. Active buyers totaled approximately 63,200 at quarter end, up 1%. Turning to supply, we ended the quarter with approximately 5,800 unique sellers, down 17%. As seller counts continue to normalize following our 2024 pricing actions, we closed the quarter with nearly 1.9 million listings, up 1%. This outcome shows that the elevated churn from our pricing optimizations were successfully isolated to low-impact sellers, resulting in minimal financial impact in both GMV and listings. Our focus remains on the quality of our supply base. Moving on to the income statement, net revenue was $22 million, up 4%. Transaction revenue, which is tied directly to GMV, was approximately 75% of total revenue with subscriptions making up most of the remainder. Take rates declined approximately 40 basis points year-over-year due primarily to a mix shift in order value. Gross profit was $16.3 million, up 9%. Gross profit margins were 74%, up 3 percentage points year-over-year. Gross profit margins included a nonrecurring insurance recovery related to a prior shipping matter, which contributed approximately 1 percentage point to our reported margins. On an adjusted basis, gross profit margins were at the high end of our 71% to 73% guidance range. Sales and marketing expenses were $8 million, down 13%. Excluding severance charges of approximately $800,000, sales and marketing expenses were down 22%. This outcome is a direct reflection of our continued expense discipline and the strategic realignment we executed in September. We realized savings from lower personnel costs and simultaneously tightened our performance marketing efficiency thresholds. Sales and marketing as a percentage of revenue was 36%, down from 44% a year ago. Technology development expenses were $5.9 million, up 8%, driven by higher headcount-related costs due to our annual merit increases awarded in March and additional bonus awards in the quarter. As a percentage of revenue, technology development was 27%, up from 26% a year ago. General and administrative expenses were $6.4 million, down 7%, due primarily to lower headcount-related costs. As a percentage of revenue, general administrative expenses were 29%, down from 32% a year ago. Lastly, provision for transaction losses were approximately $790,000, 4% of revenue, flat year-over-year. Total operating expenses were $21 million, a 6% decrease. Excluding severance costs of roughly $800,000, operating expenses were down 10%. The strategic realignment executed in September fundamentally changes our profitability equation. The estimated $7 million in annual savings structurally lowers the revenue level required for us to break even. A reduction in performance marketing spend is the largest component of these savings achieved by raising our efficiency thresholds for new consumer acquisition. While this deliberate decision will reduce our paid traffic volume, it confirms our commitment to self-sufficiency. We are leveraging this reduction to create a more efficient cost structure that can achieve profitability with minimal reliance on top-line growth. 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. Moving on to the balance sheet, we ended the quarter with a strong cash, cash equivalents and short-term investments position of $93 million. We maintain a robust cash position, but our future focus is on free cash flow generation. Following this quarter's success in cost reduction, we now have a clear line of sight to generating positive adjusted EBITDA and free cash flow. This confidence is why our Board has authorized a new $12 million share repurchase program. As we ramp free cash flow generation over time, our financial flexibility increases, allowing us to be opportunistic with capital deployment. Given our belief that our shares are currently trading at a discount to their intrinsic value, this represents an excellent opportunity for shareholder value creation. Turning to the outlook, our guidance reflects quarter-to-date results and our forecast for the remainder of the period. We forecast fourth quarter GMV of $90 million to $96 million, down 5% to up 2%. Net revenue of $22.3 million to $23.5 million, down 2% to up 3%, and adjusted EBITDA margin of positive 2% to positive 5%. 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. Our revenue guidance reflects the full quarterly benefit of the seller subscription price increase, which took effect on October 1. Our adjusted EBITDA margin guidance reflects structural efficiency gains from lower performance marketing and personnel costs following the September strategic realignment. Seasonally higher revenue and gross profit margins at the high end of our 71% to 73% range. In addition, our fourth quarter expense base reflects a temporary tailwind of approximately $300,000 from the strategic realignment. The immediate savings from the reduction of sales and marketing roles creates a short-term benefit to margins that will moderate as we onboard the product and engineering roles over the next few quarters. In summary, the third quarter was a pivotal period. We continue gaining market share while structurally reducing the revenue needed to break even. The cost reductions we implemented led directly to our best adjusted EBITDA margins as a public company. This gives us high confidence in our outlook. We are tracking to achieve positive adjusted EBITDA and free cash flow in the fourth quarter and for the full year of 2026, assuming low single-digit revenue growth—a major financial milestone that proves we are successfully building a capital efficient and resilient business model. We appreciate your continued support and look forward to updating you on our progress in the coming quarters.

Your first question comes from Ralph Schackart with William Blair.

Maybe just kind of kick things off. 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 movement to positive EBITDA? And then I have a follow-up.

Ralph, sure. So this September realignment was really the most recent stage of a process that began three years ago in order for us to get to breakeven. I think it's worth noting that in total, this process has reduced our GMV breakeven by almost $250 million. Throughout the process, we've really been focused on all parts of our cost structure: headcount, performance marketing, which you mentioned, as well as external vendor relationships. The goal for this one 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 headcount 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 headcount is in product engineering, which I think is a good place to be.

Great. 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 pushed through the price increase?

What was the second part of the question?

Just on the price increase, what the reaction has been from—as a result of pushing that through?

Yes. So I mean, in general, we try to make sure that our prices to sellers align with the value that we create. We've obviously made a lot of improvements and investments into the platform. Since 2019, we really haven't meaningfully changed rates over that time. And so this was a very targeted combined subscription increase and also, at certain price points, a commission increase. 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 proportionality between value creation and the costs that we charge our sellers.

There are no further questions at this time. This concludes today's call. Thank you for attending, and you may now disconnect.