In the fourth quarter and full year ended December 31, 2025, 1stDibs reached a landmark inflection point, delivering its first quarter of positive adjusted EBITDA as a public company ($1.3 million, a 6% margin and roughly 1,300 basis point year-over-year expansion) above the high end of guidance, and exiting the year adjusted EBITDA-positive. Q4 GMV was $90.2 million, down 5% at the low end of guidance, reflecting a deliberate trade-off to moderate near-term volume for margin: order volume fell 9% on tightened ROI thresholds, partially offset by a ninth consecutive quarter of conversion growth and AOV expansion (on-platform AOV up 5% to nearly $2,600). Net revenue edged up 1% to $23 million on take rates up ~140 basis points, gross margin reached ~74%, and total operating expenses fell 18% to $19.2 million; over four years the company cut operating expenses 18% and headcount over 30% while lifting gross margins from 69% to 73%. Management framed AI as a catalyst rather than a competitor for its one-of-a-kind luxury catalog and detailed a 2026 roadmap across discovery, pricing, shipping, and service, guiding to a third consecutive year of revenue growth with positive adjusted EBITDA and free cash flow and a return to year-over-year GMV growth by Q4 2026.
Good morning, and welcome to the 1stDibs earnings call for the quarter and year ended December 31st, 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, Thomas 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, 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 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 a 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 year-over-year 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 1stDibs 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. 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 in the 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 entered 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 1stDibs 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, in Hermès Birkin 25 bubblegum pink silver hardware, a buyer can use natural language, such as asking for a Valentine's Day gift for my wife. 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 1stDibs more intuitive for a broader audience. We are also initiating a major evolution of our personalization engine, centered on a reimagined homepage and feeds that deliver curated recommendations across key buyer touchpoints. 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 1stDibs 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 the 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 1stDibs 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 1stDibs. 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 1stDibs 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 1stDibs, 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 1stDibs right now is one of focused transformation. Reaching positive Adjusted EBITDA this quarter was the culmination of a multi-year journey that began in 2022.
We have spent four years reengineering 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.
Thanks, David. Good morning, everyone. Our fourth quarter results marked a landmark inflection point for 1stDibs, our first quarter of 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. Our multi-year transformation is clear. We began reengineering 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.
Our 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% or nearly $18 million, excluding one-time gains 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 1stDibs, 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 1,900 basis points. Significantly expanding margins during a period of revenue contraction is a significant operational feat. We enter 2026 with the most efficient financial profile in our history. Turning to our 4th quarter final performance, GMV was $90.2 million, down 5%. While traffic headwinds increased across organic and paid channels, this was a direct result of our deliberate shift in marketing strategy. Starting in the 3rd 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 9th 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 1stDibs brand. We saw a 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. Take rates 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 1 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%-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 breakeven 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 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 equivalents, and short-term investments position of $95 million, up from $93.4 million sequentially. We maintain a robust cash position. 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-$91.5 million, representing a year-over-year decline of 9%-3%. Net revenue of $22.1 million-$23.1 million, or down -2% to +2%, and Adjusted EBITDA margin between breakeven and +4%. Our GMV 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 realignment.
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%-74%, an increase from our recent 71%-73% 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 GMV growth by the fourth quarter, driven by the compounding impact of our product roadmap. We expect gross margins of 72%-74%, up from 71%-73% in 2025. We expect revenue take rates of 25%-26%, up from 24%-25% 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.