Good day, and thank you for standing by, and welcome to the 1stdibs.Com, Inc. Fourth Quarter 2022 Earnings Conference Call. Also be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Kevin LaBuz, Head of Investor Relations and Corporate Development. Please go ahead..

Good morning, and welcome to 1stDibs earnings call for the quarter and year ended December 31, 2022. 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 fourth quarter financial results and first 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, evaluation of alternatives, business and economic trends dynamics, 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'll now turn the call over to our CEO, David Rosenblatt.

David?.

Thanks, Kevin. Good morning, and thank you for joining us today. Although 2022 was challenging, it was also a year of foundational progress. It began with pandemic-related e-commerce tailwinds and record high GMV in the first quarter.

Since then, these tailwinds have become headwinds as consumer behavior shifted from online to offline and spending shifted from goods to services. Additionally, macro factors like inflation and a slowing housing market, as well as industry-specific issues like IDFA created a more challenging operating environment.

Nevertheless, we ended the year with strong registration growth, healthy traffic growth in spite of lower paid marketing spend, record high supply acquisition and near record low seller churn. In contrast, AOV and conversion, particularly for new buyers remain headwinds to GMV growth. Like 2022, we expect 2023 to be a challenging year.

However, all cycles eventually reverse. Our goal is to be leaner and have more growth drivers when demand rebounds. You can't control the hand your dealt. What you can do, must do, is make the most of the hand you've got. As conditions change, we demonstrated our ability and willingness to cut costs and reallocate capital.

For example, over the year, we reduced headcount by 15%, cut the number of open rolls down to a handful of essential positions and increased efficiency thresholds for performance marketing. Additionally, we sold Design Manager for $14.8 million, streamlining our business and strengthening our balance sheet.

Furthermore, when we realize that our NFT platform was not performing to expectations due to the crypto downturn, we discontinued the business and reallocated headcount to areas with the potential for higher returns. In contrast, we continue to selectively invest in areas gaining traction, like auctions and international expansion.

Our goal is to stem GMV declines and reaccelerate GMV growth. The path forward requires improving conversion, particularly for new buyers. In 2023, we plan for the majority of our product and engineering employees to work on conversion-related projects.

Our conversion efforts are divided into two groups, enhancing the core buyer and seller experience and our strategic initiatives. Buyer and seller enhancements are a series of incremental improvements, for example, mobile web optimizations. We believe we have a clear understanding of high-impact areas and are focusing our efforts there.

Similarly, we're confident in our road map for auctions and international expansion. Although these are multiyear projects, we're happy with our progress to date. Turning to the fourth quarter. We delivered GMV revenue and EBITDA margins at or above the high end of guidance.

We exit the fourth quarter with a leaner cost structure with over 1.5 million listings, up 19%, provided by nearly 7,300 sellers, up over 50%. With auctions continuing to account for over 5% of orders and with strong traffic order and GMV growth in France and Germany.

As we experienced throughout 2022, solid traffic growth was offset by conversion softness, particularly for new buyers. Organic traffic mix improved 350 basis points, accounting for almost 75% of total traffic. This mix shift was driven by continued strength in SEO, coupled with higher efficiency targets on performance marketing.

Registration growth was also brisk. We ended the year with over 5.5 million registered users, up over 25%. We see continued registration growth as a positive leading indicator. Order growth rates improved sequentially but were more than offset by declining average order value. Two factors are at play here.

First, the percentage of orders under $1,000 increased to 47% of the total in the fourth quarter, up from 44% in the third quarter and 43% a year ago.

This is partially due to the success of auctions, which has a lower AOV and a shift in non-auction orders to lower price listings, which we believe reflects increased consumer caution amid macroeconomic uncertainty. While lower AOV weighs on near term GMV growth, in the long run it expands our potential audience of addressable buyers.

Indeed, one of the strategic rationales for auctions was creating a lower priced on-ramp to 1stDibs. We are seeing this play out. Over 50% of bidders in the fourth quarter had never purchased from 1stDibs before. Moving to operations.

We remain focused on improving conversion, realizing efficiencies, growing supply, scaling auctions and expanding internationally. Improving conversion, particularly for new buyers is our largest lever to reaccelerate GMV growth. There are no silver bullets here. Conversion is a ground game requiring incremental gains that compound over time.

We had a number of wins in the fourth quarter. First, based on a successful test, in early December we launched a new sort order methodology for search and browse pages, leveraging on-site activity and predictive data modeling. The objective is to improve conversion by boosting items with a high probability of sale.

During the test, which ran in November, users who saw the updated sort order had increased engagement, including an uplift to saves in orders. Second, because jewelry is lightweight and easy to ship, we launched seller funded free shipping on jewelry listings in October.

Third, to increase discovery, we incorporated collaborative filtering on our product pages, recommending items based on similarities in user behavior. This drove an uplift in click-through rates. In 2023, pricing will be an increased area of focus. We have multiple pricing related projects in flight and on the road map.

Our objectives are to give buyers more pricing contacts, highlight value and exceptional deals and provide sellers with database guidance when creating listings. For example, one ongoing project is giving buyers pricing contacts based on past sales data for similar items.

Collecting this data is giving us new capabilities like our design values collection which launched in early February and highlights competitively priced items from across the marketplace. Historically, collections have been effective pathways for buyers to discover the performance supply.

We plan to launch additional evergreen shopping experiences and more pricing-related tools and features throughout the year. Although demand softened in 2022, supply fundamentals remained strong, spurred by our new seller pricing test, which launched in January and includes a subscription free tier with higher commissions.

Seller acquisition was robust throughout the year. In the fourth quarter, we signed over 700 new sellers, ending December with nearly 7,300 seller accounts, up over 50%. Additionally, listings grew 19% to over 1.5 million items. Supply growth drives traffic, deepen search results and increases our ability to make a match between buyers and sellers.

Our goal for 2023 is making sure that this influx of new sellers is successful on 1stDibs, in part by growing their listing volumes and launching new data-driven seller tools. Relative to 2022, we'd expect to see slower growth in seller accounts but continued healthy listings growth in 2023.

Moving on, strategic initiatives continue gaining traction, whereas auctions order volume was down modestly quarter-over-quarter, bidders and bids grew double digits. Although it's too early to know auction seasonality, we believe that fourth quarter orders might have shifted towards fixed price and negotiations, which are more conducive to gifting.

Auctions AOV remain below $1,000 and declined sequentially. This more accessible price point is engaging and activating new buyers. For example, over 50% of bidders in the fourth quarter had never purchased from 1stDibs before. We've learned a number of valuable auction lessons over the past year. These lessons inform our 2023 road map.

First is the importance of optimizing pricing. In the first half of 2023, we'll be rolling out refined pricing recommendations based on internal supply and sell-through data. The second lesson is that some pockets of supply are more performance than others.

For example, landscape paintings, cocktail rings under $1,500 and abstract prints all performed well. Accordingly, we just launched a seller feature highlighting which of their listings are most likely to do well at auction. Last, is the importance of balancing supply, demand and sell-through.

As we look to bring on more performance supply in 2023, we are also implementing new demand generation tools, including broadening how we leverage e-mail, push and SMS. International expansion is progressing well. Our initial focus is driving traffic.

Similar to the third quarter, sessions from German and French IP addresses grew over 375%, albeit off a small base. Furthermore, SEO traffic grew over 220% in both markets. Orders from German and French IPs grew over 60%. As traffic grows, our opportunity grows with it.

In the fourth quarter, these two markets accounted for 10% of total sessions compared to under 3% of total orders. We continue to improve our international shopping experience. For example, we have seen that European customers convert at a rate about 80% higher for European listings versus U.S. listings.

As such, our international product team further localized our French, German and U.K. home pages during the fourth quarter. We are increasing the prevalence of local supply and search results and on the home page. Additionally, we added VAT support so that European buyers now see all-in pricing.

In addition to further refinements of our French and German sites in 2023, we are also localizing seller tools for Italian sellers. Italian supply is highly sought after, so we expect this project to unlock new valuable listings when it is completed in the second quarter.

We are starting to see the impact of these projects acting in concert, A recent transaction encapsulates our strategy and tactics in action.

In early November, we sold a beautiful Joaquim Tenreiro chair for over $100,000 to a new buyer in Germany on our localized marketplace from a new seller in Portugal onboarded as part of our new seller pricing test. This order illustrates many of our priorities in action. First, it shows that our strong brand and world-class supply has brought appeal.

Customers turn to us for our unique listings and trust us for their most meaningful purchases. Luxury is a global business, and the 1stDibs is resonating in more markets. Second, it shows that supply growth drives demand.

Our goal is to aggregate the world's most beautiful items regardless of where they're located, while maintaining high curatorial standards. Because we're a marketplace of one-of-a-kind items, breadth matters. Growing supply improves marketplace liquidity and creates new opportunities to transact.

If this Portuguese seller hadn't joined, this transaction would not have happened. Despite a challenging 2022, orders like this give us confidence in our road map. We enter 2023 facing conversion headwinds, but continued traffic, registration and supply growth give us confidence that we remain as relevant as ever to our buyers and sellers.

I'll now turn it over to Tom to review our fourth quarter financial results and first quarter outlook..

Thanks, David. We delivered fourth quarter GMV revenue and adjusted EBITDA margins at or above the high end of our guidance. Adjusted EBITDA margins improved sequentially for the consecutive second quarter, helped by cost reductions in the second half of the year. GMV was $103.9 million, down 11%.

Similar to the first 3 quarters of the year, traffic growth remained strong, while conversion remains a headwind, particularly for new buyers. Both trade and consumer GMV declined. Consistent with recent quarters, trade growth outpaced consumer. On a sequential basis, consumer GMV increased while trade GMV fell.

While all verticals decreased, jewelry showed the best relative performance with lower AOV offsetting 6% order growth. The jewelry vertical accounted for 25% of GMV, a record, up from 22% a year ago.

Similar to recent quarters, vintage and antique furniture accounted for under 50% of GMV and roughly 60% of our first time orders came from other categories, jewelry, new and custom furniture, art and fashion. Average order value declined in the fourth quarter. As David mentioned, two dynamics are driving this change.

First, we're seeing a higher mix of orders under $1,000. These orders accounted for 47% of the total in the fourth quarter, up from 44% sequentially and 43% a year ago. Second, this shift is impacted by the growth of auctions, which have a lower AOV, but this trend holds true even when excluding auctions.

Our median order value, which is insulated from fluctuations in high-value orders has declined on a monthly sequential basis since June. We believe this reflects a more cautious consumer amid macroeconomic uncertainty. While average order value and median order value declined, order growth rates improved modestly relative to the third quarter.

We ended the quarter with approximately 67,600 active buyers, down 7% year-over-year and 1% sequentially. We expect this metric to remain choppy near term as we managed through a period of softer demand and a difficult first quarter comp. On the supply side of the marketplace, we closed the quarter with nearly 7,300 seller accounts, up over 50%.

Additionally, there are now over 1.5 million listings on the marketplace, up 19%. Listing growth rates were consistent throughout 2022. Turning to operations. In 2022, we demonstrated ability and willingness to cut costs, and we will continue to focus on driving efficiency in 2023.

Looking back at the year, we took a number of actions to align expenses to lower demand. These include reducing head count, limiting hiring to critical roles, drastically reducing the number of open positions, lowering performance marketing spend by increasing efficiency targets and rationalizing non-headcount costs.

The cost savings actions that have been underway since the second quarter are manifesting in the income statement. For example, relative to a year ago, head count is down approximately 15% due to our September reductions, coupled with actively managing backfills and reduced hiring.

On a sequential basis, operating expenses declined 2% and EBITDA margins improved over 400 basis points. Compared to last year, GMV declined by approximately $13 million and revenue declined by $4 million.

Despite this, adjusted EBITDA improved by $2.3 million year-over-year due in part to expense management, including our September headcount reductions. Turning to the P&L, net revenue was $23 million, down 15%. Revenue decreased 12% in line with GMV when adjusted for the sale of Design Manager.

Transaction revenue, which is tied directly to GMV was approximately 70% of revenue with subscriptions making up the bulk of the remainder. Gross profit was $16.2 million, down 3%. Gross profit margins were 71%, up from 62% a year ago.

As a reminder, we are lapping elevated shipping charges which negatively impacted gross profit margin in the year ago period. Sales and marketing expenses were $10.6 million, down 10%, driven by lower performance marketing spend and lower headcount.

Consistent with the second and third quarters to align expenses with demand, we pulled back on performance marketing and increased our efficiency thresholds. Sales and marketing as a percentage of revenue was 46%, up from 44% a year ago. Technology development expenses were $5.7 million, down 2%, driven by lower headcount and lower translation costs.

As a percentage of revenue, technology development was 25%, up from 22%. General and administrative expenses were $7 million, up 15%, driven by higher stock-based compensation. As a percentage of revenue, general and administrative expenses were 30%, up from 23%. Lastly, provision for transaction losses were $1.5 million, 7% of revenue, up from 5%.

This was driven primarily by increased shipping accommodations. Adjusted EBITDA was a loss of $4.5 million compared to a loss of $6.7 million last year. Adjusted EBITDA margin was a loss of 19% versus a loss of 25% last year.

This year-over-year change was driven by lower shipping expenses as well as lower salaries and benefits due to our September headcount reduction and lower performance marketing spend. Moving on to the balance sheet. We ended the quarter with a strong cash and cash equivalent position of $153.2 million.

Turning to the outlook, our guidance reflects our quarter-to-date results and our forecast for the remainder of the period. We forecast first quarter GMV of $93 million to $100 million, down 21% to 15%.

Net revenue of $21.4 million to $22.5 million, down 20% to 15% and adjusted EBITDA margin loss of 29% to 24%, primarily driven by lower revenue resulting in negative operating leverage.

Our GMV guidance reflects a number of converging factors, including shifting consumer behavior, ongoing economic uncertainty, conversion headwinds, declining average order value and we're lapping our record GMV quarter. As we move throughout 2023, comps will ease. However, the macroeconomic environment remains challenging and volatile.

Turning to adjusted EBITDA margins.

Guidance reflects the fact that lower revenue is driving the substantial majority of the sequential decrease in EBITDA margins and that the savings from our September 2022 headcount reduction and ongoing expense management are partially offset by higher employee related expenses, driven by higher health insurance premiums and our annual merit cycle in March.

In closing, although 2022 was a challenging year for our business, we made foundational progress on key priorities like auctions, international expansion, supply growth and increased efficiency. We look to build on these in 2023. Thank you for your time. I'll now turn the call over to the operator to take your questions..

Thank you. One moment for our first question, and it comes from the line of Curtis Nagle with Bank of America. Please go ahead..

Thanks very much for taking the question and good morning. I guess the first one, just -- I guess, good to hear that the registration data going in the right direction. I guess, one, what's driving or driving the incremental interest? Maybe assuming part of it at least is international and auctions.

And then I guess just without being too obvious, what needs to happen to get that conversion up? Is it continued supply? Is it the macro? What are the pieces there? And then I have a follow-up after that..

Sure. So this is David. On traffic, the primary driver of our traffic growth is SEO organic traffic. We put a real effort into it starting a couple of years ago and that it's began to pay off about 1 year, 1.5 years ago and continues to do so. On the flip side, the large majority of that traffic growth has been on mobile web.

Mobile web for us, like many digital companies is the lowest converting of our channels, and so that's reflected in the declining conversion number. On conversion, just to kind of click one level deeper on that. The weakness is really concentrated on new buyer conversion. Returning buyer conversion remains resilient.

And so like I said, it's mostly on new buyer, driven primarily by this channel shift, and I think also, importantly, the macros. In terms of what we're doing and what we need to do, the large majority of our resources are focused on, in one way or another on improving conversion. It really falls into two buckets.

There are a whole slew of kind of incremental improvements we're making to the core product, things like enhanced personalization, on search results, we're using collaborative filtering to do more personalization. We're focused on lowering both the actual and the received prices of items, which is, I think, especially important in this environment.

And then, of course, our strategic areas of focus, primarily auctions and international are also squarely focused on conversion. And so while conversion has been negative and declined each of the last 4 quarters or so, we have seen an improvement in the so-called second derivative over the last couple of quarters. And so we're encouraged.

But that said, ultimately, we think the macros are probably the most important factor along with that shift in the sources of traffic..

Okay. That makes sense. And then just going quickly on the gross margin. So your shipping now is not a headwind, and that seems to be helping rates.

Anything else that's impacting in terms of mix or just any other factors that we should think about for gross margin for '23?.

Yes, this is Tom. I'll take that. So year-over-year, we saw an increase actually in gross margins, driven primarily by the lapping of our elevated shipping-related expenses from last year. So our gross margins actually improved year-over-year, but it was largely due to that. It was also impacted favorably by our September headcount reductions.

So that's why you're seeing a positive year-over-year trends on gross margins..

Okay.

Currently, fair for '23? Or how should we think about that?.

So we're not going to give guidance on margins or on full year guidance. But what I can say is that the view is -- we're seeing a positive impact right now on EBITDA margins from the past two quarters the steps that we've taken to align our costs to demand.

And we expect - what you're seeing in Q1, which I will speak to directly is that the declines in revenue are what's really going to be driving much of the sequential decline quarter-over-quarter on our EBITDA margins.

Secondarily, there are some - we will continue to see the positive impact of our cost savings reductions that we undertook in Q3 and Q4, in particular, but some of that will be offset by higher employee-related costs that we will see in Q1 and beyond.

So things like health care costs have gone up, annual merit increases, and like professional fees have increased to somewhat offset some of those cost savings that we enjoyed after Q3 and Q4's actions..

Okay. Thanks very much..

Thank you. And one moment for our next question, please. And it comes from the line of Trevor Young with Barclays. Please proceed..

Great. Thanks. First one for David. We're hearing a lot these days around AI, just kind of across our coverage universe.

Any thoughts on whether there are opportunities in that field for DIBS? Is it something that you're looking into, already working on it? I know you mentioned some of the efforts on the pricing front which may have some advanced modeling in there with historical sales data and that sort of thing.

And then second one on the strategic review with Allen & Co, realized the absence of any commentary may mean there's no updates to share.

But I'm just wondering if a potential or perhaps even a likely outcome of that would be just to kind of stay the current course rather than potential buy-side or sell-side transactions or even cash going back to shareholders..

Yes. In terms of AI, so that is something that we think about consciously. And I think there are a couple of potential areas of application. One is to improve conversion via kind of the application of AI to basically some of the stuff I talked about earlier, search results and the related, putting the right product in front of the right buyer.

And that is something that is an active work stream. And then there are other interesting areas as well potentially in the area of fraud and compliance with our terms of service among both buyers and sellers is another area where we're looking at applying AI. And then in terms of your second question, the Allen & Company process.

As you know, until there's something to announce, we can't talk about it at all, but what I can confirm is that it's an active process. And as soon we have something - if we have something to announce, we will. And in the meantime, we're looking at all options, including uses of capital and strategic changes to the business.

And the sort of driver of that, of course, is what we believe to be the disconnect between our current market value and the asset value of the company..

Great. Thanks, David..

Thank you. One moment for your next question, please. And it comes from the like of Mark Mahaney with Evercore ISI. Please proceed..

Okay. Thanks. I just want to ask about auctions.

And David, I just want to ask about from a customer perspective, what kind of traction you're seeing? What's the level of interest is both from sellers on the platform and from buyers? And does it look like the appetite is growing for? Where are the obvious wins where there's just dramatic interest in it, they're just waiting for you? Or where are the, of course, places where you're having to push the product out and sellers or buyers are somewhat reluctant to embrace it? Just talk about just from a customer perspective what the interest level is and how it's changed in auctions.

Thank you..

one, awareness on the demand side. We've been in the business for 20-plus years, or we were in the business for 20-plus years without having an auction platform. So it takes a lot to undo that. And then secondly, on the supply side it's getting sellers to and kind of educating them to price effectively for auctions.

And I would say on that, there's an embrace and a willingness to support the auction format itself. So just getting sellers to list items in auction has not been a particular challenge due in part to the efforts of the folks we have on our team who manage those relationships.

What I think, again, we need to do a better job on is educating our sellers to price as effectively as possible. And again, the reason for that is, in auctions, as we all know, the - you start low on the theory that the price will go up. The way our non-auction marketplace works is the opposite.

Sellers tend to start high because the large majority of confirmed orders are negotiated. So they price expecting that to come down, which is the opposite of the behavior that's required for a healthy auction marketplace. So it's a work in progress and - but that is our primary goal..

Thank you, David..

Thank you. And one moment for our next question, please. And it comes on the line of Nick Jones with JMP Securities. Please proceed..

Great. Thanks for taking the questions. I guess just kind of going back to AOV levels that are, I guess, coming down and that brought a number of people on the demand side who may be engaged with the platform.

And what level do you guys see AOV shaking out over time? And should that be kind of in perpetual pressure from here as we think about our models?.

What we're seeing - first of all, we have seen a worsening of AOV each of the last 4 quarters. And interestingly, if you look at our performance in Q4, order volume was down 5% year-over-year. So the balance was AOV, which gives you kind of a directional sense of the impact on our GMV performance. And again, we've seen that trend continue to soften.

On the other hand, we've actually seen the number of orders at the very high end, over $100,000 or rather the GMV from orders over $100,000 increasing. So that grew 10% in the quarter.

So we are seeing this barbell effect Overall, the percentage of orders in the marketplace that are $1,000 and below increased from, I think it was 44% to 47% in the fourth quarter. So again, that sort of gives you a sense of the dynamic in the business. Where does it bottom out? I don't know.

I mean, I think the - what I can tell you, though, is that declining AOV from our point of view is not a bad thing for the reason you said. Market size is somewhat inversely proportionate to AOV. And if we can bring AOV down without compromising on the quality of the products that we're selling, then that long run should be a good thing.

But where - how exactly those two dynamics play out relative to each other over the next several quarters is hard to tell other than to say that we expect a continuation of the current situation, which is a decline in AOV..

Got it. And then on just kind of localization in some of the international markets, it sounds like there's some great engagement trends. I mean, kind of to your efforts there to localize potentially kind of outweigh macro pressures in the given geographies. Is that the right way to kind of think about it near to medium term? Thanks..

Yes, exactly. We're really happy actually with our efforts in international. Just as an example, in the fourth quarter, organic traffic was up over 200% in both France and Germany and GMV from French and German domains increased over 60% year-over-year. So clearly, to your point, kind of outweighing the macros in the rest of the business.

So we're really happy with that, and we want to continue to put more wood behind it. I think sort of in the interest of managing our capital responsibly because launching new markets, and in particular, putting they paid behind those markets is capital or can be capital intensive.

Our primary focus is on kind of finishing out the playbook for new market launches in France and Germany and then expanding that in the later part of this year to other markets. We are also currently localizing seller tools in Italy specifically because Italy is a great source of supply.

Italian sellers, for the most part don't have the fluency with English that non-Italian European sellers have. And so we hope that, that will unlock more supply. But to the original question in terms of demand, we're happy with where we are. The goal is to finish out that playbook and then yes, over time, expand into new markets..

Great. Thanks for taking the questions..

Thank you. One moment for our next question, please. And it comes from the line of Ralph Schackartv with William Blair. Please proceed..

Good morning. Thanks for taking the questions. Two, if I could, please. Just on sellers, I think you've been growing about 50%, listings growth around 19%. You obviously want to make sure that they're coming on board and having successful experience.

Given the sort of tough macro, how do you balance adding supply growth with the macro headwinds to make sure that they are having a successful onboarding experience? And then just as a follow-up on OpEx, you obviously made some good strides in OpEx savings in 2022.

But if the macro persists as we sit here today and going forward, maybe talk about your willingness or your levers to perhaps find further OpEx savings? Thank you..

Sure. So I'll take the first question and then turn it over to Tom for the second one. There's another statistic by the way, just to add to the two that you mentioned on supply growth that we're pleased with, which is our retention rate, which was at an all-time high in the fourth quarter as well. And I think that really does speak to your question.

Look, in general, relative to other marketplaces, we have a kind of lower velocity and lower sell-through rate, right? This is a long sales cycle market. So sellers don't join with the expectation that they're going to sell a lot immediately. It's really a process of adding supply.

And what we've seen over the many years we've been in this business is that the more supply that's added by sellers, the more they sell. So our primary focus right now, especially with sellers who joined under our pricing test is to encourage them to sell - to list more.

The - currently, to date, they have not listed at the same rate as our pre-existing sellers. However, we're making a lot of concentrated efforts in that area, and we have seen improvements over the last couple of months. So we need to continue to do that. And if we're able to do that, the sellers will sell more..

On the OpEx side, this is Tom. So as you mentioned, in 2022, we did take a lot of actions in rightsizing our cost structure for demand. We reduced the number of open roles. We limited our hiring to critical positions. We increased our efficiency targets on our performance marketing spend.

And we also had the difficult decision of reducing headcount in Q3. And we are starting to see the impact of that in our results in Q4, as you can see. To your point, right now, we continue to be committed to kind of rationalizing our cost base to demand. And we're going to continue to take actions if the demand does not rebound.

But as I sit here today, we're comfortable with our 2023 plan. If we veer off of that plan, we will take corrective actions..

Okay, great. Thank you..

Thank you. And with that, ladies and gentlemen, I will conclude the Q&A session and today's conference. Thank you all for participating, and you may now disconnect. Good day.+.