POSHMARK, INC. The following discussion of our financial condition and results of operations
should be read together with our condensed financial statements and related
notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our
audited financial statements and related notes and our Annual Report on Form
10-K filed with the
Overview
We are a social marketplace that combines the human connection of a physical
shopping experience with the scale, reach, ease, and selection benefits of
eCommerce. In doing so, we bring the power of community to buying and selling
online. We created
We empower people to sell a few items or to become successful entrepreneurs by
providing them with end-to-end seller tools. We refer to this as "making selling
a superpower." Our comprehensive infrastructure makes it easy for sellers to
build their businesses with seamless listing, merchandising, promotion, pricing,
and shipping. Sellers use content, inventory selection, and social interactions
to monetize their listings and drive growth. Our transparent fee structure
aligns our success with the success of our sellers. Our fee is 20% of the final
price for sales
Our social features make the discovery and purchase process simple and enticing for buyers, fostering high engagement and retention. The engagement of our community has fueled strong growth in our business, supported by attractive unit economics and efficient user acquisition. We enable buyers to discover, connect, and curate their network and news feed with that of other users who share similar styles and personal preferences, creating a fun shopping experience. Our marketplace is vast, with sellers listing millions of secondhand and new items across multiple categories. We use data-driven personalization to customize each user's feed to feature the most relevant listings and make it easy to quickly search for and find products of interest. Furthermore, sellers list a variety of items across all price points, with the added benefit of being able to negotiate offers directly with buyers seeking to optimize their budget, allowing sellers to manage their listings to achieve their individual objectives. Because our marketplace features a massive selection of secondhand items, buyers are also able to support their personal style while minimizing their environmental impact.
As of
Key Operating and Non-GAAP Financial Metrics
We collect and analyze operating and financial data to evaluate the health of our community, allocate our resources (such as capital, time, and technology investments), and assess the performance of our business. In addition to revenue, net (loss) income, and other results under GAAP, the key operating and financial metrics we use are GMV, Active Buyers, and Adjusted EBITDA.
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Gross Merchandise Value. Our gross merchandise value, or GMV, is the total dollar value of transactions on our platform in a given period, prior to returns and cancellations, and excluding shipping and sales taxes. GMV is a measure of the total economic activity generated by our marketplace, and an indicator of the scale and growth of our marketplace and the health of our marketplace ecosystem.
GMV
($ in millions)
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Our GMV grew 12% from
Active Buyers. Active Buyers are unique users who have purchased at least one item on our platform in the trailing 12 months preceding the measurement date, regardless of returns and cancellations. An Active Buyer could have more than one account if they were to use a separate unique email address to set up each account. The number of Active Buyers is a key driver of GMV and revenue, as well as a measure of the scale and growth of our buyer community. We believe it is also an important indicator of our ability to convert user activity on our marketplace into transactions. The number of Active Buyers has increased steadily every quarter as we attract and retain users. Active Buyers can be new users to our marketplace who make a purchase, existing users who convert into buyers for the first time as our marketplace strengthens with more sellers and items, or repeat buyers.
Active Buyers
(in thousands)
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5,713 6,032 6,231 5,374 4,952 4,550 4,190 3,734 3,345 2,953 2,657 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 Active Buyers measured as of the last day of the quarter presented
Active Buyers measured as of the last day of the quarter presented
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Adjusted EBITDA. We define Adjusted EBITDA as net (loss) income attributable to common stockholders, excluding depreciation and amortization, stock-based compensation expense, interest income, other income (expense), net, change in accrued sales tax, provision (benefit) for income taxes, and undistributed earnings attributable to participating securities. Adjusted EBITDA is a key performance measure used by our management and board of directors to assess our operating performance and the operating leverage in our business. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the income and expenses that we exclude in Adjusted EBITDA. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making. See "-Reconciliation of Non-GAAP Financial Measures" for more information and for a reconciliation of net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
Adjusted EBITDA
($ in millions)
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Key Factors Affecting Our Performance
Growth and Retention of Users. We focus on attracting new users and retaining
existing users. New users and the social and transactional activities they
contribute help keep existing users more active, increasing their lifetime value
over time. Users engage in many ways on our social marketplace: they connect,
they browse, they buy, and they sell. The positive relationship between new
users and existing users illustrates the network effects of our marketplace. As
of
User Engagement. The engagement of our community has fueled strong growth in our business, supported by attractive unit economics and efficient user acquisition. We believe that cultivating a robust network of users over the longer-term is crucial to bolstering broader community engagement, growing social interactions, and increasing GMV. Users can engage on our marketplace in a variety of activities that range from shopping and social interactions to buying and selling. The continuous increase in users, social interactions, and listings has led to steady activations of buyers and sellers across cohorts, resulting in increasing GMV for these cohorts.
Investments in Growing Our
Investments in Platform Innovation. We invest in both the people and technology behind our platform. We also intend to continue to make significant investments in the technology and infrastructure of our platform to attract and retain buyers and sellers, expand the capabilities and scope of our platform, and enhance the user experience. We expect to continue to make significant investments to attract and retain employees, particularly engineers, data scientists, designers, product management, and operations personnel. All functions
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are important, and we intend to invest in our people to help us drive additional efficiencies across our marketplace. In addition, we may invest in new and existing businesses that may lower our margins temporarily but may enhance our platform capabilities, deliver revenue growth, and enable us to achieve and maintain long-term profitability.
International Expansion. We began operations in
Impact of the COVID-19 Pandemic. The COVID-19 pandemic has impacted our business
to date and may continue to impact our business in ways that remain
unpredictable. In early 2020, the COVID-19 pandemic impacted our business and
operations, in which we experienced lower year-over-year GMV growth for the
quarter ended
As of
Seasonality. Our business is seasonal in nature as it is affected by the cyclicality of the consumer as well as broader market conditions. Historically, we have often seen both stronger growth in the number of Active Users and Active Buyers and in engagement during the first quarter of the year. In addition, we have seen higher GMV in the fourth quarter of the year, followed by the third quarter, which we believe is due in part to the higher price points of seasonal apparel and footwear and the holiday season. We believe the recent growth in our business, as well as the recent effects of sales taxes and the COVID-19 pandemic, have partially masked these trends to date, and we expect the impact of seasonality to be more pronounced in our future quarterly results as our business matures.
Initial Public Offering
Our registration statement on Form S-1 related to our initial public offering
(IPO) was declared effective on
Components of Results of Operations
Net Revenue
We generate revenue from sellers for fees earned when they sell items they have
listed on our social marketplace to buyers (20% of the final price for sales
Costs and Expenses
Cost of Net Revenue. Cost of net revenue primarily consists of costs associated with credit card processing, transaction fees for order related payments, and hosting expenses associated with operating our platform. Cost of net revenue does not include depreciation and amortization.
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We expect cost of net revenue to increase in absolute dollars in future periods and to vary from period to period as a percentage of net revenue for the foreseeable future as we grow our platform by increasing Active Buyers and generating higher GMV.
Operations and Support. Operations and support expense primarily consists of personnel-related compensation costs, including stock-based compensation, incurred in providing support to users of our platform including authentication services that we provide. This expense also includes postage and shipping costs that we incur primarily from order losses and cancellations, and credits and incentives issued to buyers for customer satisfaction purposes in excess of shipping facilitation revenue.
We expect that operations and support expenses will increase in absolute dollars for the foreseeable future as we continue to grow our operations and hire additional employees to support the scaling of our business. To the extent we are successful in becoming more efficient in supporting our users, we would expect operations and support expenses as a percentage of revenue to decrease over the long term.
Research and Development. Research and development expense consist primarily of compensation expenses for engineering, product development, and design employees, including stock-based compensation, expenses associated with ongoing improvements to and maintenance and testing of our platform offerings including website, mobile apps, and other products, and other research and development programs. Research and development expenses are expensed as incurred. We capitalize certain costs associated with website development and software for internal use.
We expect that research and development expenses will increase in absolute dollars and vary from period to period as a percentage of revenue for the foreseeable future as we continue to invest in research and development activities relating to ongoing improvements to and maintenance and testing of our platform offerings including website, mobile apps, and other products, and other research and development programs, including the hiring of engineering, product development, and design employees to support these efforts.
Marketing. Marketing expense primarily consists of expenses associated with
personnel-related compensation costs, including stock-based compensation, and
costs related to user acquisition, public relations, marketing events such as
Posh Parties, and business development. User acquisition costs primarily consist
of costs associated with acquiring new users by spend on advertising channels
such as television, Google, Facebook, Instagram,
We expect that marketing expenses will increase in absolute dollars and vary from period to period as a percentage of revenue for the foreseeable future as we plan to continue to invest in marketing to grow the number of Active Users and Active Buyers and increase our brand awareness. The trend and timing of our brand marketing expenses will depend in part on the timing of marketing campaigns.
General and Administrative. General and administrative expense consists primarily of employee related costs including stock-based compensation for those employees associated with administrative services such as legal, human resources, information technology, accounting, and finance, and all related costs associated with our facilities, such as rent and office administration. These expenses also include certain third-party consulting services, facilities, IT services, meals and other corporate costs not allocated to other expense categories.
We expect that general and administrative expenses will increase in absolute
dollars and vary from period to period as a percentage of revenue for the
foreseeable future as we continue to invest in personnel, corporate
infrastructure, and systems required to support our strategic initiatives, the
growth of our business, and our compliance and reporting obligations, and
controls to enable our internal support functions to scale with the growth of
our business. We expect to incur additional expenses as a result of operating as
a public company, including expenses to comply with the rules and regulations
applicable to companies listed on a national securities exchange, expenses
related to compliance and reporting obligations pursuant to the rules and
regulations of the
Depreciation and Amortization. Depreciation and amortization expense primarily consists of depreciation of computer equipment and software, furniture and fixtures, leasehold improvements, website development and software for internal use and amortization of intangible assets.
We expect that depreciation and amortization expense will increase in absolute dollars as we continue to build out our network infrastructure, recognize amortization expense from acquired intangible assets resulting from acquisitions and establish new office locations to support our growth.
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Interest Income
Interest income primarily relates to amounts earned on our cash and cash equivalents.
Other Income (Expense), Net
Other income (expense), net mainly relates to changes in fair value of the Convertible Notes, redeemable convertible preferred stock warrants and contingent consideration relating to acquisition, and foreign exchange remeasurement gains and losses recorded from consolidating our foreign subsidiaries at each period end.
Provision for Income Taxes
Our provision for income taxes consists primarily of foreign taxes and state
minimum taxes in
We expect to maintain this valuation allowance until it becomes more likely than
not that the benefit of our federal and state deferred tax assets will be
realized by way of expected future taxable income in
Results of Operations
The following tables set forth our condensed consolidated results of operations data and such data as a percentage of net revenue for the periods presented:
Three Months Ended March 31,
2022 2021
(in thousands)
Net revenue $ 90,899 $ 80,727
Costs and expenses (1):
Cost of net revenue, exclusive of depreciation and
amortization 15,031 12,970
Operations and support 15,353 14,894
Research and development 16,056 18,800
Marketing 42,847 35,249
General and administrative 15,036 18,152
Depreciation and amortization 1,020 790
Total costs and expenses 105,343 100,855
Loss from operations (14,444 ) (20,128 )
Interest income 51 86
Other income, net
Change in fair value of redeemable convertible preferred
stock warrant liability - (2,816 )
Change in fair value of the convertible notes - (49,481 )
Loss on extinguishment of the convertible notes - (1,620 )
Change in fair value of contingent consideration 437 -
Other, net 66 (42 )
503 (53,959 )
Loss before provision for income taxes (13,890 ) (74,001 )
Provision for income taxes 132 140
Net loss attributable to common stockholders $ (14,022 ) $ (74,141 ) (1)
Costs and expenses include stock-based compensation expense as follows:
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Three Months Ended March 31,
2022 2021
(in thousands)
Operations and support $ 1,040 $ 2,218
Research and development 4,506 10,641
Marketing 1,378 3,289
General and administrative 1,811 7,993
Total $ 8,735 $ 24,141 Comparison of Three Months Ended
Net Revenue
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Net revenue $ 90,899 $ 80,727 $ 10,172 13 %
Net revenue increased
Cost of Net Revenue
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Cost of net revenue $ 15,031 $ 12,970 $ 2,061 16 %
Percentage of revenue 17 % 16 %
Cost of net revenue increased
Operations and Support
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Operations and support $ 15,353 $ 14,894 $ 459 3 %
Percentage of revenue 17 % 18 %
Operations and support expense increased $0.5 million for the three months ended
March 31, 2022 compared to the same period in 2021. The increase was primarily
driven by a $0.4 million increase in net shipping costs as a result of our
growth.
Research and Development
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Research and development $ 16,056 $ 18,800 $ (2,744 ) (15 )%
Percentage of revenue 18 % 23 %
Research and development expense decreased
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Marketing
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Marketing $ 42,847 $ 35,249 $ 7,598 22 %
Percentage of revenue 47 % 44 %
Marketing expense increased
General and Administrative
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
General and administrative
17 % 22 %
General and administrative expense decreased
Depreciation and Amortization
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Depreciation and amortization $ 1,020
1 % 1 %
Depreciation and amortization expense increased
Interest Income
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Interest income $ 51 $ 86 $ (35 ) (41 )%
Percentage of revenue 0 % 0 %
Interest income change was nominal for the three months ended
Other Income (Expense), Net
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Other income (expense), net $ 503 $ (53,959 ) $ 54,462 (101 )%
Percentage of revenue 1 % (67 )%
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Other income (expense), net increased
Provision for Income Taxes
Three Months Ended March 31, Change
2022 2021 $ %
(dollars in thousands, except percentages)
Provision for income taxes $ 132 $ 140 $ (8 ) (6 )%
Percentage of revenue 0 % 0 %
The change in our provision for income taxes was primarily attributable to pre-tax foreign earnings.
GAAP and Non-GAAP Financial Measures
We also review the following GAAP and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
Three Months Ended March 31,
2022 2021
(in thousands)
Net Loss $ (14,022 ) $ (74,141 )
Net Loss Margin(1) (15 )% (92 )%
Adjusted EBITDA $ (4,689 ) $ 4,803
Adjusted EBITDA Margin(2) (5 )% 6 %
(1)
Net Loss Margin is calculated by dividing Net Loss for a period by revenue for
the same period.
(2)
Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA for a period by
revenue for the same period.
Adjusted EBITDA
Adjusted EBITDA is a key performance measure that we use to assess our operating performance and the operating leverage in our business. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes.
We calculate Adjusted EBITDA as net loss attributable to common stockholders, adjusted to exclude:
•
depreciation and amortization;
•
stock-based compensation expense;
•
interest income;
•
other income (expense), net; and
•
provision for income taxes.
Reconciliation of Non-GAAP Financial Measures
We use Adjusted EBITDA and Adjusted EBITDA Margin in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, and to evaluate the effectiveness of our business strategies. Our definition may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish similar metrics. Furthermore, this metric has certain limitations in that it does not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations that are necessary to run our business. Thus, our Adjusted EBITDA and Adjusted EBITDA Margin should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.
We compensate for these limitations by providing a reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to the related GAAP financial measure, net loss attributable to common stockholders. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view Adjusted EBITDA and Adjusted EBITDA Margin in conjunction with their respective related GAAP financial measures.
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The following table provides a reconciliation of net loss to Adjusted EBITDA:
Three Months Ended March 31,
2022 2021
(in thousands)
Net loss attributable to common stockholders $ (14,022 ) $ (74,141 )
Adjusted to exclude the following:
Depreciation and amortization 1,020 790
Stock-based compensation 8,735 24,141
Interest income (51 ) (86 )
Other (income) expense, net (503 ) 53,959
Provision for income taxes 132 140
Adjusted EBITDA $ (4,689 ) $ 4,803 Liquidity and Capital Resources
As of
As of
Since our inception, we have most often generated negative cash flows from
operations and as of
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