Ladies and gentlemen, thank you for joining us and welcome to the First Dibs Q4 2025 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you have dialed in to today's call and would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now hand the call over to Kevin LeBuzz, Head of Investor Relations and Corporate Development. Kevin, please go ahead.

Good morning, and welcome to the first DIBS earnings call for the quarter and year ended December 31st, 2025. I'm Kevin LeBuzz, Head of Investor Relations and Corporate Development. Joining me today are Chief Executive Officer, David Rosenblatt, and Chief Financial Officer, Tom Edergino. David will provide an update on our business, including our strategy and growth opportunities, and Tom will review our fourth quarter financial results and first quarter outlook. This call will be available via webcast on our investor relations website at investors.firstdibs.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 risk 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 at our Investor Relation website, along with a replay of this call. Lastly, please note that all growth comparisons are made 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, everyone. 2025 was the year of accountability and focused execution. The hard work and operational rigor we applied across the organization throughout the year culminated in a landmark result. we exited 2025 as an adjusted EBITDA positive company. Looking ahead, our 2026 financial plan focuses on capitalizing on these gains while delivering sustained adjusted EBITDA profitability. In 2026, we expect to deliver a third consecutive year of positive year-over-year revenue growth alongside positive adjusted EBITDA and free cash flow. While we are not providing full-year GMV guidance, we anticipate a return to your rear GMV growth by the fourth quarter, driven by the compounding impact of our product roadmap. Our confidence in this trajectory is rooted in the defensibility of the first dibs model. Even in an era of AI-driven content and commerce, we believe the high-trust, high-complexity world of one-of-a-kind luxury thrives on curation, scarcity, and the human expertise of our dealers. By leveraging AI to enhance discovery while maintaining the strength of our vetted seller network, the trust of our buyers, and our complex transactional infrastructure, we see AI not as a competitor but as a catalyst that will help unlock the full potential of our unique catalog. In the fourth quarter, GMV was $90.2 million at the low end of our guidance range. However, adjusted EBITDA finished above the high end of our range. This performance marks a major inflection point, our first quarter of adjusted EBITDA profitability as a public company. It is important to be clear. In the second half of 2025, we made a conscious trade-off to moderate near-term GMV growth in exchange for a significantly improved adjusted EBITDA profile. This shift into positive adjusted EBITDA is definitive proof that we do what we say. Reaching this milestone is the direct result of three specific commitments we made to you at the start of the year. First, organizational discipline. We exceeded our goal to hold headcount flat while rebalancing our talent base toward product and engineering. Second, operating leverage. In our initial 2025 outlook, we targeted generating leverage at mid-single-digit revenue growth. Despite a housing market at a 30-year low, our expense management allowed us to exceed our own leverage targets, proving that our asset-light model is now capable of delivering positive adjusted EBITDA, even in a low-growth environment. Third, product velocity. By leaning into AI-assisted development, which now accounts for approximately 30% of our new code, we delivered our ninth consecutive quarter of conversion growth. With a profitable foundation now in place, we are turning our energy toward driving growth in 2026 while maintaining our rigorous expense discipline. Having continued to expand our market share in 2025 we enter 2026 from a position of strength our roadmap is designed to remove friction and modernize the platform across four pillars discovery pricing shipping and service first discovery our 2026 roadmap centers on transforming first dibs into a daily habit for design enthusiasts through a reimagined buyer experience. This plan includes deploying AI-powered semantic and image search to fundamentally change how buyers interact with our catalog. While many potential buyers have a deep appreciation for design, they often lack a collector's specialized nomenclature. We are bridging this gap. Instead of needing an exact match, for example, Hermes Birkin 25 bubblegum pink silver hardware, a buyer can use natural language, such as asking for a Valentine's Day gift for my wife. While that query traditionally would have yielded limited results, our new AI-driven engine will understand the intent behind the request and surface rich curated matches across categories, from jewelry to fine art we are effectively removing the expert requirement from our search bar making first dibs more intuitive for a broader audience we are also initiating a major evolution of our personalization engine centered on a reimagined home page and feeds that deliver curated recommendations across key buyer touch points by synthesizing brand maker and price propensity data we are creating a bespoke experience that anticipates intent, surfacing the right inventory at the right moment of inspiration, whether on our platform or through personalized emails. To amplify this work, we are launching First Dibs Tastemakers, our first-ever ambassador program and influencer network. This initiative anchors our transition toward a community-first content strategy by partnering with a scaled network of authentic voices from prominent collectors and designers to our own sellers we are creating the emotional connections that drive daily engagement and fuel discovery this program allows us to move at the speed of the zeitgeist we have already seen the potential of this approach in early testing this was the blueprint for our real-time response to Taylor Swift's engagement. Within hours, we mapped a global interest in her vintage watch and unique old-mine diamond ring to similar pieces in our inventory. By matching what the world is talking about with our one-of-a-kind supply, we are making First Dibs more accessible and culturally resonant. Additionally, we are significantly expanding our sponsored listings program, which serves as a high-margin lever for driving revenue growth. We believe there is headroom to scale coverage and increase ad density while maintaining our premium aesthetic. By providing sellers with more sophisticated tools to reach buyers, we are creating a more dynamic ecosystem while driving revenue growth that is independent of GMV fluctuations. In addition to expanding sponsored listings, we are exploring nascent advertising opportunities with external brand partners, both online and offline. Second is pricing. We are focusing our efforts on helping buyers and sellers reach a shared understanding of value. Our goal is to foster faster consensus by providing both sides of the transaction with the data required for confident decision making. Central to this effort is a fundamental investment in our negotiation and offer flows, our highest intent signal. We see significant opportunity to optimize the make-offer experience, which is often the primary path to purchase for our highest value items. Our 2026 roadmap focuses on demystifying the negotiation process through better product marketing and more intuitive UI, ensuring that both parties can reach a deal with less friction. By streamlining these interactions, we are increasing marketplace liquidity and creating a more accessible and dynamic platform. Complementing this work is an initiative centered on price contextualization. Because our catalog is defined by rare, one-of-a-kind items, buyers often lack a clear benchmark for value. To address this, we are introducing historical price comps and market data directly into the buyer journey. By making this information more visible, we are providing the transparency required to validate an item's value. Underpinning these initiatives is our expanded enforcement of price parity. In the fourth quarter, we made strides in increasing the volume of listings covered by our parity solutions, ensuring that our buyers find the most competitive prices on first dibs. Looking ahead, we will incorporate AI to further automate and expand this coverage across our catalog. By leveraging technology to scale these protections and promoting our price match guarantee, we are ensuring that First Dibs remains the definitive destination for value in luxury design. Third is shipping. We recognize that our current shipping program is too complex and costly, lacking the modern features such as flexibility, precise tracking, and reliable on-time delivery that our buyers expect. A primary source of friction is the lack of clarity around roles and responsibilities between first dibs, our sellers, and our buyers. This ambiguity can add hidden costs to the transaction. To solve this, we are revamping our shipping experience to provide a clear standardized framework for every participant in the value chain we expect this move will allow us to streamline operations and lower shipping prices for buyers this newfound efficiency will enable our move toward all-in pricing by presenting a single transparent fully landed cost earlier in the funnel we will remove the primary hurdle to conversion We are also leveraging our historical data to develop dynamic shipping rates, providing instant and more competitive quotes globally. This is about eliminating sticker shock and elevating our shipping experience to match the premium nature of our inventory. Fourth is service. In 2026, we are evolving our service model through technology. Our plan involves integrating AI support to resolve routine inquiries instantly. by offloading these high volume basic tasks we can reallocate our client services team to prioritize more nuanced high value resolutions and increase our service levels this shift ensures that our human expertise is focused where it adds the most value supporting our most loyal buyers and driving repeat purchases we are also working to introduce an ai item upload assistant for our sellers this tool will streamline the listing process and ensure that the most exceptional inventory hits our marketplace faster and with higher quality metadata allowing us to scale our operations through technology rather than headcount in summary the story of first dibs right now is one of focus transformation reaching positive adjusted ebda this quarter was the culmination of a multi-year journey that began in 2022. We have spent four years re-engineering our cost structure and refining our marketplace, and we have emerged with a financial foundation that allows us to focus entirely on driving GMV and revenue growth. As we look toward 2026, we are often asked about the risk of AI disintermediation. We believe that our position is uniquely protected. Our moat is built on a high-trust relationship and a physical collection of one-of-a-kind items, elements that cannot be replicated by an algorithm. We are leaning into AI to help our buyers discover the extraordinary rather than replacing the essential human expertise of our dealers. With a compelling roadmap in place, we are positioned for a GMV growth inflection point by the fourth quarter of 2026. We enter this next chapter as a more efficient, more resilient, and more ambitious company than at any time in our history. To discuss how this discipline is reflected in our fourth quarter performance and our expectations for the year ahead, I'll turn the call over to Tom. Thanks, David.

Good morning, everyone. Our fourth quarter results marked a landmark inflection point for First IBS, our first quarter positive adjusted EBITDA as a public company. This achievement validates the strategic realignment we executed in September and proves that our asset-light marketplace is capable of delivering adjusted EBITDA profitability, even in a constrained environment. A multi-year transformation is clear. We began re-engineering our cost structure in 2022, accelerated that focus through 2023, and demonstrated early operating leverage in 2024. Today, we are exiting 2025 with fourth quarter adjusted EBITDA of $1.3 million and a 6% margin, a 1,300 basis point expansion over prior year. We have not only delivered on our commitment to reach adjusted EBITDA profitability, we have established a leaner, more resilient baseline for our future. This outcome is a direct result of the accountability David mentioned. A 2025 plan centered on expanding operating leverage as we have executed against that goal we are exiting the year with a strong balance sheet and a business model optimized to generate positive adjusted EBITDA and free cash flow to appreciate this inflection point it is helpful to look at our P&L transformation since 2022 over the last four years we have reduced annual operating expenses by 18 percent or nearly 18 million dollars excluding one-time games from the sale of design manager and lowered headcount by more than 30% from our peak. In a business with high operating leverage, the 7% revenue decline we experienced over this four-year period would typically lead to margin compression. At first dibs, we have achieved a positive divergence. Comparing 2022 to 2025, gross margins have climbed from 69% to 73% and adjusted EBITDA margins improved by approximately 1900 basis points significantly expanding margins during a period of revenue contraction is a significant operational feat and we entered 2026 with most efficient financial profile in our history turning to our fourth quarter funnel performance gmv was 90.2 million dollars down five percent while traffic headwinds increased across organic and paid channels this was a direct result of our deliberate shift in marketing strategy starting in the third quarter we have aggressively tightened ROI thresholds, intentionally pruning lower intent traffic to prioritize unit economics. This discipline resulted in order volumes declining 9%. However, this was partially offset by our ninth consecutive quarter of conversion rate growth and strong average order value expansion. The fact that GMV outperformed order volume by 400 basis points demonstrates that we are successfully capturing high intent demand and higher value transactions, even with a significantly leaner marketing budget. Specifically, on-platform AOV reached nearly $2,600, up 5%, while median order value rose 4% to approximately $1,250. This performance was fueled first and foremost by returning buyers spending more per order than they did a year ago, along with a higher overall mix of orders from these repeat customers. We ended the quarter with over 80% of traffic from organic sources, up 8 percentage points year over year. This organic strength is a critical competitive advantage, reflecting the enduring power of the First Dibs brand. We saw balanced performance across our buyer segments this quarter as both trade and consumer GMV declined at similar rates. Vertical performance varied by category. Jewelry showed the most resilience, with GMV down just 1%. Active buyers totaled approximately $60,700 at quarter end, down 5%. Regarding supply, we ended the quarter with approximately 5,700 unique sellers, down 4%, as our seller base continues to normalize following our fourth quarter pricing adjustments. Importantly, while seller count consolidated, we saw listings grow 3% to nearly $1.9 million. Moving on to the income statement, net revenue was $23 million, up 1%. Transaction revenue, which is tied directly to GMV, was approximately 73% of total revenue, with subscriptions making up most of the remainder. TakeRate's increased approximately 140 basis points year-over-year, driven by October's pricing increases and continued growth in sponsored listings. Gross profit was $16.9 million, up 3%. Gross profit margins were approximately 74%, up one percentage point year-over-year. Sales and marketing expenses were $5.9 million, down 44%. This significant decrease is a direct result of the strategic realignment implemented in 2025, which fundamentally reset our marketing organization and rationalized our performance marketing. Sales and marketing as a percentage of revenue was 26%, down from 46% a year ago. Technology development expenses were $6 million, up 9%, reflecting higher headcount related costs as we rebalance our talent towards high impact product and engineering roles. Within our flat headcount framework, we are reallocating resources to expand our product and engineering capacity, a transition set to conclude in the second quarter. We view this as our highest ROI lever, enabling us to deliver on our 2026 roadmap and deliver long-term conversion gains while maintaining a disciplined cost base. As a percentage of revenue, technology development was 26%, up from 24% a year ago. General administrative expenses were $7 million, up 5%, due primarily to a one-time sales tax-related item. As a percentage of revenue, general administrative expenses were 30%, up from 29% a year ago. Lastly, provision for transaction losses were approximately $400,000, 2% of revenue, down from 4% a year ago, and at the low end of our historical 2% to 4% range. Total operating expenses were $19.2 million, an 18% decrease. This significant reduction is the direct result of the strategic realignment we completed in September and our previous cost-saving measures. We promised to fundamentally lower our cost base, and this quarter's results prove that we have executed on that commitment. More importantly, this discipline has fundamentally improved our potential for operating leverage. We have lowered our break-even threshold, allowing us to reach positive adjusted EBITDA despite the persistent macro headwinds in the luxury home category. Our ability to significantly reduce operating expenses while continuing to gain market share in 2025 demonstrates that we are not just running a leaner company, we are running a more productive one. This quarter represents a pivotal inflection point in our financial trajectory. Adjusted EBITDA was $1.3 million, a significant turnaround from a $1.6 million loss in the prior year. This resulted in an adjusted EBITDA margin of 6%, representing an approximately 1,300 basis point expansion over the last year. This is a direct outcome of the structural discipline we have embedded across the organization, allowing for any future top-line recovery to flow disproportionately to the bottom line. Moving on to the balance sheet, we ended the quarter with a strong cash, cash equivalents, and short-term investments position of $95 million, up from $93.4 million sequentially. We maintain a robust cash position, and our future focus is on free cash flow generation. During the quarter, we repurchased approximately $1.6 million of shares, with $10.4 million remaining under our current $12 million authorization as of December 31st. Our continued execution of this program reflects our confidence in our long-term growth trajectory and our commitment to delivering value to our shareholders. Turning to the outlook, our guidance reflects quarter-to-date results and our forecast for the remainder of the period. We forecast first quarter GMV between $86.5 million to $91.5 million, representing a year-over-year decline of 9% to 3%. Net revenue of $22.1 million to $23.1 million, or down 2% to up 2%, and adjusted EBITDA margin between break-even and positive 4%. Our GMB guidance is driven by two primary factors. A deliberate strategic trade-off. The intentional impact of our sales and marketing reductions as we prioritize a structurally higher margin profile over short-term volume. Quality-driven performance. While traffic remains a headwind, we expect continued growth in conversion and AOV. Our revenue guidance reflects the continued growth in sponsored listings and benefits of the seller subscription price increase, which took effect on October 1st. Our adjusted EBITDA margin guidance reflects structural efficiency, realized gains from operating expenses following our September relignment, Strategic reinvestment, a sequential increase in personnel expenses driven by the partial quarter impact of annual merit increases effective in March and targeted hiring in product and engineering as part of our strategic realignment. Gross margin expansion, we expect gross margins of 72 to 74 an increase from our recent 71 to 73 percent range. While we are not providing full year guidance at this time, our 2026 framework is centered on durable, profitable growth. We expect to deliver a third consecutive year of revenue growth, reflecting the resilience of our marketplace. We anticipate a return to positive year-over-year GMB growth by the fourth quarter, driven by the compounding impact of our product roadmap. We expect gross margins of 72% to 74% up from 71 to 73 percent in 2025. We expect revenue take rates of 25 to 26 percent up from 24 to 25 percent in 2025. We remain focused on high quality efficient growth with a full year 2026 outlook of positive adjusted EBITDA and positive free cash flow. Underpinning this plan is the assumption that macroeconomic conditions, particularly those impacting the housing market and consumer discretionary spending remain stable. In closing, reaching this adjusted EBITDA inflection point is a landmark moment for first dibs. This result marks the culmination of a four-year journey of rigorous expense management and strategic focus. We promise to re-engineer our cost structure, remain disciplined on headcount, and prioritize technical velocity, and we have delivered. We enter 2026 with a leaner, more resilient, and more profitable foundation than at any time in our history. We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you. I will now turn the call over to the operator to take your questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Ralph Shackert with William Blair. Your line is open. Please go ahead.

Good morning. Thanks for taking the question. First question, just maybe kind of touching on your comments about accelerating growth through 2026. David, maybe you can just kind of walk through maybe the primary drivers as you see it to continue to turn the business around and to return back to growth and what continues to be a tough macro for you. And then I'll follow up, please.

Sure. Hey, Ralph. So I think first, from September 26th onward, we'll be lapping what were pretty substantial reductions, almost 50% in performance marketing spend. And then secondly, at the same time last September that we cut sales and marketing overall, we also increased our product and engineering investment, which obviously will result in a much bigger roadmap. So as you think about moving through 2026, what we expect is that the compounding nature of that product roadmap will provide a pretty clear path to year-over-year GMV growth by the fourth quarter. So it's really the combination of those two things, lapping our performance marketing cuts and then also receiving the benefit of higher product and engineering investment. I think it's also important to note that for the full year, we are committed to delivering our third, what will be our third consecutive year of revenue growth alongside positive adjusted EBITDA and free cash flow as we did in the fourth quarter. And the last thing I would say, you know, you made a reference to the market. We do not believe that this is dependent on a broader market recovery. We feel like we have all the tools needed to accomplish this, even without that.

And just to touch on AI, it's been a big focus, obviously, this learning season for investors. I think you talked about you see it not as a competitor, but as a catalyst to unlock a catalog. Maybe if you could kind of double click on that a little bit, you know, just in terms of why you don't potentially see disruption. It's just because you handle a lot of complex tasks in between sort of the buyer and the seller and, you know, unique product categories, I guess, would be part of the reason there. But if you could just maybe touch on that a little bit more.

Yeah, I think in general the way we see AI and relative to our performance is that we view ourselves as a beneficiary of AI, really kind of from the top of the income statement to the bottom. In terms of disintermediation specifically, though, I think that's likely more of a threat for commodity products, but we're the exact opposite of that, right? We've got $2 million one-of-a-kind pieces of inventory. And particularly when those items transact at the high price that we sell at, seller expertise and the integrity of the transaction itself are the primary components of value that we provide. So AI agents certainly can help with discovery. They can help buyers find products. But they can't substitute for the buyer trust, for the seller reputation, and all of the relatively complex logistical and payment infrastructure that's required to transact at our price points and with our kind of inventory. Great. Thank you.

Your next question comes from the line of Bobby Brooks with Northland. Your line is open. Please go ahead.

Hey, good morning, team, and thank you for taking my question. As you think of returning to a kind of sort of consistent growth profile, I know this will be your third year of revenue growth, but across both GMV and revenue, and maybe in a little bit higher clip, call it maybe high single digits, what are some of the most exciting initiatives that you're pursuing?

So, you know, as I think you may be aware, we, first of all, you know, we have proven an ability to execute on our product roadmap and to drive conversion, which is the most important GMV lever as a result. We brought in a new head of product and marketing last August, and as part of that, you know, we recut our 26 roadmap. So the 26 plan is a combination of both evolutionary advancements relative to 24 and 25 and also new projects, and I'm super excited about each of them. Just to call out, I guess, probably the four highest impact ones, or ones we expect to be highest impact, in all particular order. AI search is something that we're very optimistic about. You know, currently, searching on first dibs requires knowing the exact match of the products that one is interested in, which is a pretty significant barrier for broader consumer demand, especially given the long-tail nature of the products that we sell. So to address this in 26, we're going to be introducing semantic search, which will make discovery much more intuitive and accessible to kind of the average person. The second area that I'm very excited about is shipping. So today we have relatively unclear roles and distribution of responsibilities between sellers and first dibs. That leads to higher costs and also sometimes just in terms of kind of the operational workflow in terms of getting an order converted, some confusion on the part of the buyer. And so we're reengineering our entire shipping framework to standardize those roles and responsibilities, which should have the impact of reducing complexity and also cost to the Pricing is number three. It's something we've talked about quite a bit in the past. We aren't today always the lowest cost sales channel for a given item. And the second problem is that, again, given the long tail nature of what we sell, it can be challenging for consumers to compare prices and sort of evaluate and interpret them. So to address this, you know, we, as I think you're probably aware, we introduced a price parity enforcement mechanism last year. To expand this in 26, we're going to be incorporating an LLM. So it has not been AI-based to date, which will allow us to scale price parity across a much higher percentage of our inventory, which will eliminate the problem of individual items being listed at a higher price on first zips than elsewhere. And then second, we're going to surface comps data much more broadly to both sellers and buyers to give them context. And then the fourth and the last piece is I think we're a little late to the party in terms of developing a robust social strategy. And I think, you know, social has an especially important role to play for us, you know, given our brand and just the visual nature of the products that we sell and so on. And so to address this in 26, we're in the process of implementing our first ever community-based approach, which really is just another way of saying we're launching an influencer network. And it's something we haven't done before. And, you know, we have high hopes for.

Thank you very much. That's a super helpful detail. For a follow-up on the pricing parity, definitely can see how helpful and beneficial that will be for the business. You mentioned incorporating the LLM to scale across a much higher percentage of inventory. We'll be curious to hear how much of the inventory today listed has this price parity incorporated into it, and what are you looking to scale that to in 26?

That's not data that we share primarily for competitive reasons, but it should roughly double the amount of product that's covered. And it's actually, I think, from a behavioral point of view, though, more important to think about it in terms of number of sellers who are impacted rather than the percentage of items. Because, you know, once a seller sort of understands that we have the ability and the intent to enforce this price parity feature of our contracts with them, you know, they're less likely, of course, to, you know, to be in transgression of that. And again, I think it's worth pointing out. I mean, this is in the interest of both the buyer and the seller and first dibs. Having a sort of clean, well-lit and regulated marketplace that's predictable and understandable to buyers is ultimately has the effect of increasing confidence in us and our sellers on the part of the buyer, which of course benefits them. So I do think it's important to note that we don't think of this as a, I don't know, as a sort of system of punishment, but more as part of the process of creating, as I said, a sort of clean, well-lit environment, which, of course, is to the benefit of all marketplace participants.

Got it. I appreciate it, David. And maybe one for Tom, you know, it's been really impressive the margin expansion you guys have driven over the past few years, as you mentioned the prepared remarks, despite some shrinking of the top line in GMV. As we think of divs returning to that kind a steady growth rate on GMB level. Is it fair to think margin expansion would accelerate in that scenario?

Yeah, this is Tom. So, yeah, I believe that, you know, what you've seen with our P&L, as you kind of talked about, is that our gross margins have expanded from 73% to 74%. The contribution margin in particular has gone up from the 50% to 55% level to the 60% to 65% level. So, yeah, what I expect is that as you start to see revenue, GMB and revenue expansion, you will see a large portion of that additional revenue going to the bottom line because of the increase in contribution margin that we put into the model at this point.

Very helpful. Exciting times. I'll return to the queue.

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