Poshmark, Inc. (NASDAQ:POSH) Q2 2022 Earnings Conference Call August 11, 2022 4:45 PM ET
Company Participants
Christine Chen – Head, IR
Manish Chandra – Founder, Chairman and CEO
Rodrigo Brumana – CFO
Conference Call Participants
Lauren Schenk – Morgan Stanley
Alexandra Steiger – Goldman Sachs
Oliver Chen – Cowen and Company
Trevor Young – Barclays
Ralph Schackart – William Blair
Rick Patel – Raymond James
Ashley Helgans – Jeffries
Anna Andreeva – Needham
Tom Nikic – Wedbush Securities
Nick Jones – JMP securities
David Bellinger – MKM Partners
Operator
Good afternoon and welcome to the Poshmark Second Quarter 2022 Earnings Conference Call.
Please note, today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator instructions] Thank you.
At this time, I’ll turn the conference over to Christine Chen, Head of Investor Relations for Poshmark.
Christine Chen
Welcome to Poshmark’s second quarter 2022 conference call. Joining me today are Manish Chandra, our Founder, Chairman and CEO; and Rodrigo Brumana, Chief Financial Officer. Please keep in mind that our remarks today include forward-looking statements such as statements related to our financial guidance and key drivers; the impact of COVID-19 on our communities, business, and strategy; the potential benefits of our marketing and product initiatives; and the anticipated return on our investments and their ability to drive growth. Our actual results may differ materially than those expressed or implied in our forward-looking statements. Forward-looking statements involve substantial risks and uncertainties, which are described in today’s earnings release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. Any forward-looking statements we make on this call are based on our beliefs and assumptions as of today, and we don’t have any obligation to update them. Also, during this call, we’ll present GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today’s earnings release, which you can find on our IR Website, along with the replay of this call.
And with that, I will turn it over to Manish.
Manish Chandra
Thanks, Christine. Hello, and welcome everyone. Thank you for joining us for our second quarter 2022 earnings call. Before we discuss our second quarter results, I want to take a step back to reflect on our mission. When we started Poshmark in 2011, we focused on making selling a super power, by making, selling, and buying fashion, simple, social and fun by building the world’s largest network of shoppable closets and creating a new more human way to shop online.
Our social marketplace is designed to serve everyone. Whether you’re looking to make money, save money, experiment with new styles or discover new people and brands, we built every aspect of Poshmark to make selling so easy that anyone with a closet and a smartphone could do it.
By empowering everyone to sell fashion directly from their closets, we’re transforming shopping online. This has driven our growth for more than a decade. The unique dynamic of Poshmark is that over time, sellers become buyers and buyers become sellers and by the fifth year, there is over 40% overlap between buyers and sellers.
Our community of highly engaged and loyal users is our competitive advantage and by serving and supporting them, we drove profitability even as we cut down marketing in the first half of 2020.
As you mentioned on our last earnings call, we’re focused on making Poshmark the number one destination for sellers by empowering them with the tools and support to grow their businesses and making our marketplace the most trusted destination for buyers.
Now let’s discuss our second quarter results. We’re pleased to report that our second quarter performance exceeded our initial expectations due to our strong focus on execution. We reported a strong quarter, despite a tough consumer environment, growing revenues 9% to $89.1 million beating our expectations for the quarter.
Second quarter, GMV grew 8% to $483.5 million. While on a two-year basis, GMV grew by 34% and revenues grew by 33%. Our growth is driven by Poshmark’s approach to making buying and selling fashion, simple, fun and sustainable. Our users continue to choose Poshmark as a top destination for selling items from their closets and shopping the closets of others.
This combined with our boutique sellers continues to make Poshmark a top destination for fashion as demonstrated by 14% TTM active buyer growth to a record eight million in the second quarter. We continue to evolve our marketing strategy to navigate the impact of Apple privacy changes in a volatile macro environment. We’re drawing attention to Poshmark as a sustainable fashion destination, particularly for style and value conscious shoppers who are feeling more constrained due to inflation and as a place to make money from your closet.
Our April marketing campaign focused on earth month and storytelling highlighting second-hand styles and vintage trends. This resonated particularly well with our Gen Z and millennial customers who are shopping vintage and second-hand for eco-friendly purposes and nostalgia.
During the second quarter, shoppers came to Poshmark for their fashion needs and to discover the latest trends while saving money. Our marketplace continues to reflect the lives interest in changing needs of consumers. During the second quarter, luggage and travel bags were up 50% YOY as shoppers embrace vacation and business travel again. As people return to work, shoppers are turning to resale in their hunt for formal work wear to make their budget stretch further.
During the second quarter, blazers and suit jackets grew 61% and sales of ties were up 45% year-over-year. The evolution of business casual into business comfort is driving a huge spike in sales for comfort sneaker brands like on running and Hoka.
While orders for BIRKENSTOCK sandals and flip flops were up 30% YOY during the quarter. Zara genes and Abercrombie straight leg genes were up 97% and 64% YOY in May demonstrating that we continue to be part of the seismic shift in fashion as silhouette changes to elastic waste, relax, switch and fared bottoms. The power of Poshmark’s community makes selling and shopping simple. Social interactions combined with our marketplace platform, which provide all the tools for seller needs, make selling and shopping simple and fun.
Sellers and shoppers and their engagement with our marketplace drove 70% year-over-year growth in social interactions to a record $57.5 billion during TTM Q2 ’22. Social interactions range from curation to likes, comments or offers on the platform. This social engagement drives community connection and ultimately conversion as more than 80% of all purchases are preceded by a social interaction such as a like, comment or offer.
Poshmark’s social experience and inclusive communities are key differentiator as experienced sellers who are often Posh ambassadors voluntarily reach out to help new sellers and provide mentorship. Poshmark sellers continue to not only share their own inventory, but curate inventory from the closets of other sellers.
After two years of lockdowns and virtual events, we have been overjoyed to return to in-person community events, which are an important part of helping our sellers grow their businesses. This important growth activation engine introduces the Poshmark community to new sellers, fosters loyalty and connection at the micro community level and grows our highly engaged user base. These events create one of a kind opportunity for our community to come together, to socialize and share success stories and advice on how to build their businesses on Poshmark.
We held 87 of these events in the second quarter, up from 35 in the first quarter attracting community members from across the US. We’re excited to host Bosch Fest, our Fashion and Entrepreneurship Conference and the biggest event of the year at the end of September. This two-day event focuses on educating attendees about merchandising, business planning, branding, and data to help sellers grow their businesses on Poshmark.
As our first Posh Fest back in-person in three years, our community is ecstatic to once again, have the opportunity to connect with one another and gain valuable expertise to increase their sales and have an immersive Posh experience. Looking at the second half of the year, we continue to focus on growing our core fashion categories by continuing our product innovation, to enhance both the seller and buyer experience.
Fashion-related categories, apparel, shoes, backs and accessories, which is the core of Poshmark drives more than 90% of our GMV and we remain focused on strengthening this score in 2022 to increase our wallet share gains with consumers and drive market share gains and GMV growth. Higher contribution from premium price product continues to be one of the factors that drove year-over-year AOV growth during the second quarter of 2022.
We remain committed to growing our market share in premium price products and have started testing various applications of the technology from our sway one acquisition to drive innovation in our current authentication processes, we intend to expand our authentication services to price points below 500. By the end of the year, we are a very seller centric, marketplace and seller success and liquidities where everything starts at Poshmark.
Thus, we remain focused on product innovation to give sellers better ways to market merchandise and sell their listings and new ways for buyers to discover trends and engage with our marketplace to drive conversion. We continue to deliver innovative and easy to use solutions that contribute to the long term growth of our sellers by helping sellers of all sizes easily manage their posh smart closets and connect with customers in new ways to drive sales.
In May, we updated my shoppers, our CRM that we launch in October, 2021, which enables sellers to communicate with shoppers who have engaged with their closets and make offers to group of potential buyers. We continue to make these powerful tools available to all our sellers, with the focus on making, selling simple and accessible to everyone from a seller, with a few items in their closet to large resellers with thousands of items.
This new version has seen higher adoption by sellers and resulted in an increase in seller offers. In June. We introduced closet QR codes making is easy to scan, share view, and engage with sellers closets with a quick scan of your phone, which will be particularly useful with a return of in-person events, making it simple for sellers to market their closet, to buyers and increase their number of followers. Personal closet QR codes can be used as an identifier on sellers, social media accounts printed on flyer and business cards or included in the packages.
They ship to buyers. We continue to be excited by the opportunity for brand closets to contribute to the growth of our core fashion categories. Those still small brand laws at CME during the second quarter of 2022 grew one and a half X compared to the first quarter of 2022.
We continue to have a strong pipeline of entrusted brands and retailers. During the second quarter, we launch our integration with channel advisor, another milestone in making it easy for high volume sellers to sell at Poshmark, providing them with the ability to integrate our marketplace, to synchronize product inventory and order information with other e-commerce platforms.
As a style destination, where shoppers come to discover, follow and shop product novation enables us to guide the treasure hunt for fashion. We continue to innovate or shop by trends, feature and introduce trends guidelines. In April. This feature allows sellers and buyers to see more details about trending products down to color brand and keywords.
It provides sellers with more waste to strengthen their trend related listings and drive conversion.
At the end of June, we added a new buyer protection banner to help drive trust and confidence with the new buyers offers an amazing protection policy to all buyers, but not all buyers know about this policy, which includes refunding orders that do not match the listing description. Initial test of this new feature have shown an increase in buy now orders. First time buyers, new use orders and new user GMV.
Looking beyond the core, we view international expansion as a strategic long term growth opportunity in May. We celebrated Bosch mark Canada’s three year anniversary. Over the last three years, we have built and grown a community of over four million users across all provinces and territories in Canada. These second-hand lovers and entrepreneurial sellers have listed close to a billion worth of inventory and over 2.6 billion total search social interactions have been made on BOMA Canada since launch and our Canadian community has attended over hundred virtual and in person events.
During the second quarter, we rolled out a as a new payment service provider in Canada, which enabled us to process payments locally in Canada, instead of cross border to the us, which saves in card network, cross border costs for the second half of 2022, the majority of our international investment continues to be focused on driving growth through advertising community development and shipping innovation to grow our seller base. In conclusion, our focus remains becoming the world’s leading social marketplace and the number one destination for sellers around the world.
We’re focused on what we can control and continue to innovate for the future. So our sellers can succeed by tapping into our sellers entrepreneurial spirit. We are positioning ourselves to emerge from any potential economic downturn, stronger than ever. We empower millions of sellers to easily turn their profits into shop and connect with customers resulting in a flexible frictionless marketplace. That’s ready to meet the ever-changing needs of shoppers.
We help Poshmark sellers control their destiny through good and challenging economic times by providing them a reliable and supportive lifeline to help them pay their bills, build emergency funds, cover college costs and go after their dreams. Our competitive advantage is a loyal community of fashion lovers who believe in our new way of shopping. One that is simple, social, fun and sustainable.
Now I’d like to turn it over to Rodrigo, to dive deeper into the financials.
Rodrigo Brumana
Thank you, Manish. As we mention on our list, we overcame tough coms in April and had the strongest start to the quarter. In the latter half of the quarter, we experienced anticipated seasonality as consumers shifted their attention from cleaning out closets to preparing for spring.
In summer vacations, we were more pronounced in June. Despite this seasonality, headwinds for inflation and a slowdown in consumer spending, we still beat our revenue guidance range of $86 million to $88 million. In Q2 2022 GMV grew 8% to $483.5 million up from $449.6 million in the second quarter of 2021 or 34% growth on a two-year basis despite a tough comparison.
Net revenues grew 9% to $89.1 million up from $81.6 billion in the second quarter of 2021 or 33% growth on a two-year basis. This result was ahead of our guidance of $86 million to $88 million driven in part by a better than expected take rate and a 14% growth in trading 12-month active buyers to a record $8 million up from $7 million in the second quarter of 2021
On a two-year basis, trading 12-month active buyers grew 32%, thanks to our continued marketing investments and product innovation. Our take rate in the second quarter was 18.4% up slightly from 18.2% from last year ahead of our expectations for flat year-over-year due to a better than expected cancellation rates. That more than offset the pressure from continued makeshift towards orders greater than $15.
Mix shift continues to be a take rate headwind as orders less than $15, have a higher take rate due to the flat fee of $2.95. Cost of revenues of $15 million in the second quarter was 16.8% of revenues, an increased of 17% from the second quarter of 2021. Adjusted gross margin was 83.2% of revenues in the second quarter down from 84.4% from the second quarter of 2021, due to higher hosting costs and their lapping off a non-recurring credit in transaction payment processing fees, which was a 40 basis points benefit during the second quarter of 2021.
Marketing expenses, excluding stock-based compensation or SBC of $42.6 million in the second quarter was 47.8% of revenues up from 38.6% in the second quarter of 2021. This result is in line with our guidance of high 40s. Market increased 35% from $31.5 million in the second quarter of 2021, due to higher CPU, more in-person events in community building initiatives though CPUs have improved slightly from their peak in January. We remain supportive of our continued investments in marketing to introduce more users to our social experience, which promotes a strong cohort retention and loyalty over time.
Moving to other operating expenses and support excluding SBC of $14.6 million in the second quarter was 16.4% of revenues, which is up from 14.9% in the second quarter of 2021, and is slightly better than expected due to lower cancellation rates and is low down hiring in certain areas.
R&D excluding SBC of $12.8 million in the second quarter was 14.3% of revenues up from 11.5% of revenues in the second quarter of 2021. This was due to planned increasing hiring as we have previously discussed, as we continue to invest additional resources across a number of office strategic initiatives. R&D was slightly better than expected due to delays in vendor spending and a slowdown in hiring pace.
G&A excluding SBC of $14 million in the second quarter was 15.7% of revenues up from 11.4% in the second quarter of 2021, primarily due to the ongoing cost of being a public company. Stock-based compensation was $12.1 million in the second quarter up from $8.1 million in the second quarter of 2021. Adjusted EBITDA, which excludes SBC was negative $9.8 million down from $6.5 million in the second quarter of 2021. Adjusted EBITDA margins were negative 11% compared to an 8% margin in the second quarter of 2021.
Compared to last year, the decrease in profitability was primarily driven by investments in marketing R&D and G&A. However, it’s important to note that these numbers were at the midpoint of our guidance of negative $9 million to $11 million. We will continue to focus on balancing marketing efficiency and investing for future growth.
Operating loss excluding SBC was negative $10.8 million in the second quarter with operating margins of negative 12.2%, That compares to $5.7 million with margins of 7% in the second quarter of 2021. Net loss shareholders was negative $22.9 million in the second quarter compared to negative $2.5 million in the second quarter of 2021. Cash and cash equivalents were $581.2 million at the end of the second quarter or about $7.41 in cash per share.
Moving to the cash flow statement for the six months ended in June 30, 2022, free cash flow was negative $3.5 million compared to $25 million for the six months ended June 30, 2021. We are focused on driving growth and continue to optimize our investments in product innovation, in marketing to drive GMV growth for the future. We remain confident that our asset light and high gross margin business model positions us to grow market share.
We help our community get more value for their money, while meeting their wardrobe leads as they attend more in-person events and travel and we are a relied-upon destination for consumers who want to supplement their income by unlocking the value in their closets.
However, the current macro environment and the unpredictability of consumer spending behavior in the face of inflation leads us to be cautious in our outlook for the third quarter. We also continue to navigate changes in the digital advertising landscape and expect IDFA to maintain pressure on superior rates in the second half of 2022. Given the microenvironment that could impact our top line, we have begun evaluating our cost structure in the third quarter and expect to begin rationalizing our spending, which is reflected in our outlook.
Now on to guidance; looking to the third quarter, we saw typical seasonality return in July as consumers focused on summer vacations, we remain cautious that inflation may continue to pressure consumer spending. As such, we expect third quarter revenues of $85 million to $87 million, resulting in a growth of 7% to 9%. On a two-year basis, growth is expected to be 24% to 27%. We expect our third quarter take rate to be slightly higher year over year due to lower cancellation rates.
We are focused on driving growth while managing our cost structured and expect negative adjusted EBITDA of $9 million to $11 million in the third quarter, as we continue to invest in R&D to drive product innovation G&A, to build the infrastructure necessary, to evolve as a publicly-traded company in marketing to grow our community of users. We expect adjusted gross margin to be down slightly from Q2 2022 due to higher hosting costs and as we lap 120 basis points of a non-recurring credit in transaction payment processing fees during the third quarter of 2021.
Option support excluding SBC in the third quarter is expected to be 18% of revenues as we continue to invest in customer support and authentication services. R&D excluding SBC in the third quarter is expected to be 16% of revenues. As we continue to increase our investment in product innovation, to give sellers better ways to market merchandise and sell their listings in new ways for buyers to discover trends and engaging in our marketplace to drive a conversion.
G&A, excluding SBC in the third quarter is expected to be 19% of revenues due to the higher cost of being public company. And as we build out finance, accounting and legal teams, we continue to expect marketing, excluding SBC as a percentage of revenues to be in the high forties in the third quarter, in fourth quarter, as we invest in our brand diverse firewall marketing channels and address higher costs in digital advertising, we have proved that our platform is a sticky, our cohorts deliver net positive GMV dollar retention over time with high gross margins in the strong balance sheet, we have the ability in conviction to continue to invest in marketing, to accelerate GMV growth for the future.
In the near term, these investments will enable us to build our community of sellers and grow active buyers, which will put us in a stronger position in the long run, in closing, consistent to what we have shared in our last learning call. While we expect that macroeconomic factors could continue to impact consumer behaviour.
In 2022, we are focused on our core business and execution. This includes first continuing to enhance our product experience, to help our seller grow their businesses. Second, continuing to build our brand with the global consumer and third investing in marketing talent and robust operating mechanisms to improve execution and optimize long-term growth. I’d like to leave you with two final thoughts.
First, we have started the year putting more focus on our core business in improving our execution mechanisms. As we plan for the second half, we have identified ways to, to deliver more with less and during the third quarter, we have begun the focus on cost savings, where appropriate.
As we previously mentioned, we will continue to explore this cost savings opportunities through the second half of 2022. Second. I’d like to remind you of the strength uniqueness and the stability of our business. Unlike some of our peers that have seen recent transaction volume retracting to pre pandemic levels, our business remains strong growing, and we continue to add users to our sticky platform.
We are not seeing big swings or volatility in users in GMV, as some of the pure eCommerce peers are seeing. We believe our stability stems from as social aspects of our business that continue to attract and retain users, buyers, and sellers, which in turn drives high engagement in thickness of our cohorts. That fact coupled with our asset light model in the strong balance sheet, we firms our conviction to continue to invest in product innovation in marketing because our business model is resilient for the current environment and well positioned to benefit from secular trends in resale, sustainable commerce and consumers looking for value and unique looks.
Thank you. And I will now turn the call over to the operators so we can take our questions
Question-and-Answer Session
Operator
[Operator instructions] Your first question comes on from the line of Lauren Schenk with Morgan Stanley.
Lauren Schenk
Great. Thank you. I guess the 70% increase in engagement year-over-year is obviously an encouraging number, I guess. What can you do to better convert that engagement to GMV or what levers do you think are potentially the most powerful? And then just one quick follow up, just in terms of the macro backdrop assumed in the third quarter guide, are you sort of assuming a stable macro backdrop relative to 2Q or perhaps slightly worse? Thanks.
Manish Chandra
I’ll take the first question, Lauren. This is Manish in terms of the conversion pieces, some of the core investments we are making on better search, better feed are sort of the core pieces to convert this engagement, but also better suit tools. So some of the work we are doing with my shoppers lead sellers to be able to engage with these shoppers and convert them and activate them into final buyers. So that’s sort of the key piece is better sell, better search, better feed, and ultimately more empowering seller tools that they can use to connect with their shoppers directly. Let me have Rodrigo give a little bit of our color on the quarter.
Rodrigo Brumana
Yeah, look the question about market environment, whether that we saw getting worse or not, let me kind of step back and give you the thoughts on the Q3 guidance here. So you see a GMV deceleration from Q3 as it relates to Q2. And number one is because we have seen a seasonal year over year growth deceleration from Q2 into Q3 over the past three years. And that started in 2019.
Number two, June GMV growth is low down from May, and we saw a typical seasonality returning in July, as consumers focused on summer vacations. Number three, we remain cautious that inflation may continue to pressure consumer spending. And number four, we also continue to navigate changes in the digital advertising landscape, as we expect DFH to maintain pressure on our revenue growth rates for the third and the fourth quarter, like I said, on the call, and finally, when providing guidance as usual, we are more conservative than historical performance given the current microeconomic environment in circumstances.
And while our business offers great value proposition for the fashion, we believe the consumers are buying fashion as life returns to normalcy. But we are mindful that microeconomic challenges faced by the community can affect the community and we have a conservative view in our outlook.
Operator
Your next question comes from the line of Alexandra Steiger with Goldman Sachs.
Alexandra Steiger
Thanks for taking my question. Maybe one follow up on your macro commentary here. Could you share, maybe share like what you’re seeing across the different markets and geos you’re operating in over the past few weeks and month in terms of like how your customers, but also your sellers engaging with the platform.
And then maybe second, just on your pros sellers. I was wondering if you can give us an update on your push to grow your pros seller base and what type of tools and services you’re focused on to, to improve that selling experiences for pro sellers. Thank you.
Manish Chandra
Sure. We are seeing in United States is and Canada as well is sort of a return back to, I would say the coms are closer to 2019 pre COVID day. So we’re seeing seasonality and make shift more to pre pandemic levels. And we’ve shared a little bit of that color in, in the commentary. People are buying more back to school flows, people are buying more luggage for travel.
So what we feel is that the world is slowly but surely returning back to normal and fashion cycles are generally, caused for more turns of your closet. So that’s sort of a high level picture that we are seeing, but inflation and other things, make us cautious as we look into the future. When we think a little bit about how do we grow our pro sellers a lot of the investment we are doing is in scaling and connection.
So if you think of push market as a social setting platform, a lot of ways our sellers sell is by curation and connection. So we’ve invested in our bulk sharing tools to make it very easy to share. We also continue to invest in our CRM, our customer relationship tool called my shoppers, which allows one-on-one connection between the seller, but at scale, and we’ve added and enhanced these tools by adding pre-packaged list of customers, giving them easier way to connect with more people at the same time and allowing them to also create some programmatic tools that they can use to program into these tools.
And finally, we continue to look at new ways in which sellers can reach their shoppers and continue to innovate on that front again, making that connection process that merchandising bosses both faster, but also very efficient. And overall, I think the tools have been received very well.
The last piece I would emphasize is that the world is getting back to physical. So we have also invested in our physical connections back with our sellers. We’ve started to host not just smaller events, but larger events. We had one of our larger posh party lives a couple of weeks back in LA. This is the first large scale event since the pandemic started actually really since 2019. And we have another one coming up in New York next week.
And, we’re sending key pieces of our key members of our team to kind of be part of that. And we’re seeing a lot of our professional sellers and largest sellers come to these events. And then lastly, our main conference called posh Fest is also going to be in person this year in Houston towards the end of this quarter. So very excited about all of those formats to also help our pro seller community.
Actually, I just had one thing since the question was also related to micro the same way that Manish is emphasizing the back to normalcy. And I was addressing the seasonality in June and July. We also seeing a stronger start of August, which means back to school and people in the vacation is also reflecting in our initial numbers as we kind of look through the quarter.
Operator
Your next question comes from the line of Oliver Chen with Cowen
Oliver Chen
One question I regarding the trends that you’re seeing in July. I would love to hear if there’s continued volatility and how inflation is interplaying there and also on marketing efficiency trends.
Rodrigo Brumana
Yeah, look let’s talk about the inflation here. First, higher food prices higher food and gas prices, could be a negative impact on apparel spend overall. However inflationary environment could benefit our marketplace, particularly for the more price sensitive consumer as they search for value. And on the seller side, we offer consumers an easy and empowerment way to when it ties their closets and make for cash potentially offset that next think of guess.
So we help mark sales control their own destiny in tough economic times and as always so, but we have also a pretty big portfolio here. So it’s hard to specifically identify the impact of inflation in terms of whether our assortment is increasing the prices or seeing the price increases. Because also over time we see the increase in the average order value as customers look for premium price products.
So it’s hard to dissect the impact in call it specifically, but you see trends in higher a impacting our platform. And then you continue to see buyers and sales kind of talking to Poshmark. So that’s one in terms of marketing efficiency like I said, we remain cautious just because the IDSA was a step change to the entire industry. Not specifically to us here PO mark.
So we’ll take through at least Q4 to kind of fully lap it, but there is a positive sign stemming from when we see CPUs right now compared to their January, we peak it shows that we have been starting to kind of circumvent some of the headwinds not fully. And there is always a question whether we are ever going to come back to the prior levels from IDFA, but we are seeing improvements on the efficiency as we try different channels such as TV creator content.
And also, as Manish said, we also by diverting some of the marketing spend to support the in-person events, such as the Posh fest. And we think that there is a lot of value on the community to see each other back again, in person, we always measure the activity before and after, and there was always higher user engagement, more sales that come out of it. So from a marketing efficiency standpoint, we all grow improving slightly, but to improve the overtime.
Operator
Your next question comes from the line of Trevor young with Barclays.
Trevor Young
Great, thanks. Rodrigo back to your commentary about the incremental investment and balancing that versus trying to find cost savings is some of that savings just funding some of these new investments, or should we expect that to flow through to EBITDA at some point, maybe in the next year, and then bigger picture given where you stand with cash on hand, how important is it for you to get back to positive EBIDA sometime next year versus leaning in, on spend as maybe some peers are, are pulling back?
Rodrigo Brumana
Yeah, look in terms of, in terms of the so first in terms of the cost structure, as we look at, savings here and there right now we are using that to do two things, to continue our path and investing in marketing, especially because we’re running the business firm the long run standpoint, and we continue to support the marketing investments as long as our lifetime value continues to be very, very positive and which is the issue that we had with the increasing marketing as a percentage of revenue was essentially on the C side because of our position increased because of IDSA, but our cohorts continue to behave well.
They continue to return, the net positive gym, good dollar retention over time. So with that, we are balanced on containing, let’s say the decreasing profitability, but also competed to continue to invest in marketing. And like I said, we are committed to the high forties, at least through the end of the year as we guided marketing Q3 and Q4. Remind me your second part of your question
Just overall, given where you stand with cash on hand, how important is it to you to get back to positive EBI on maybe sometime next year versus continuing to lean and not spend, like you said, on marketing in other areas?
Yeah. Let’s not talk about next year, but let’s talk about long term. We are committed to run this business for profitability. There is no question about it. But we are also an emerging company and we see a tremendous opportunity in the market to acquire users because we know our platform is sticky.
We know that when users come, they transact, they engage, we solve 57 billion, social interactions there. So we want to bring users here because we know that long term we will return that on that investment. So look, we proved that we can be profitable. Couple of quarters ago we show that more than half of our expand is variable. We can be pre be profitable by any point.
Right now we can count on the power of our balance sheet and it can continue to see the positive metrics from the marketing acquisition. So we think that in, at this moment, building this company for the long run is more important. And then we know that we can count with our balance sheet in any case, and we know that we can be profitable at any time you want.
Operator
Your next question comes from the line of Ralph Schackart with William Blair.
Ralph Schackart
First, just on retention, I know it’s something that you’ve talked about historically as a growing focus, maybe just sort of an update where you are in that process. How are those efforts been trending and how are you thinking about this opportunity then I have a follow up.
Ralph Schackart
Okay. So we talk about retention. We don’t talk specifically on the quarter in terms of what, what is happening on the quarter. So we don’t disclose cohort performance on quality, the basis on free your basis. But that said this is the unique thing about cost. Once we acquire cohort, it delivers that consistent net positive GV dollar retention. And we continue to see that as re reported a full year. So we will be reported a full year in a couple of quarters, and we expect that to continue.
Our cohorts continue to remain stable, and we see a strong engagement from our users, which is another evidence when we see the 70% growth in social interactions to record 57 billion interactions there. So we continue to see it. That’s why we are continue to invest in marketing because the lifetime value from our users is still we return on, on what we invest there.
Ralph Schackart
Great. And you kind referenced the large buyer base on, on the call. Obviously 8 million TTM active buyers is a large base. Maybe talk about the opportunity to reengage this customer base more specifically to grow wallet, share with them, especially given the diversity of products and categories that you offer. Thanks.
Ralph Schackart
Yeah. Actually even stepping back a little bit if you look at, we have $80 million, more than 80 million reds to users in a couple of million, active users. So in the 8 million active buyers that we talked about, so the way we think about it is we target the inactive users as well. And we believe that the cost to reactivate the user or to retain a user is cheaper than acquiring a new user.
As I said, we still consider ourselves as an emerging company, but now we also starting to divert some of the marketing spend from a new user acquisition to re and there are three areas that we kind of use for this reactivation. Number one is promotions. We have incentives and giveaways for both buyers and sellers.
Number two is awareness. We have broad base campaigns through TV, celebrities, and influencer that generate traffics and, and engagement for new and existing users. That’s interesting because the warn actually go for both for a new year’s position, but we see pretty good in terms of retention. And finally is search. We have remarketing campaigns through Google shopping SEO and paid search there.
Operator
Your next question comes from the line of Rick Patel with Raymond James.
Rick Patel
Thank you. Good afternoon. Thanks for taking the question. My questions on the outlook for EBITDA your new guidance for the third quarter implies roughly the same amount of, of loss as the second quarter, despite the revenue growth being a touch lower at the midpoint.
I guess as we think beyond the third quarter, and I, I know you’re not guiding a fourth quarter specifically, but I’m hoping we can have color on the right way to think about things because your comparisons do get a bit tougher. But you’re also getting more aggressive with cost control. So should we expect even that pressure to be relatively contained as you exit the year or is it reasonable to expect different outcomes?
Manish Chandra
Well like I said, you’re not guiding beyond Q3 but let me kind of, let me kind of, share how to think about it. In Q3 we have just begun our expand rationalization and as mentioned on the call, the Q3 guidance reflects those cost savings that we are contemplating, but those are not impacting the full quarter, given it takes time to implement.
But, given the microeconomic environment, we are taking the cost shows lenses on the revenue guidance and that flows through the
Operator
Your next question comes from the line of Ashley Helgans with Jeffries.
Ashley Helgans
Hey, thanks for taking our question. We are curious what you’re seeing on the seller side. We’re wondering if you’re seeing more people come to the platform as they look for ways to monetize their closet, given the weekend of macro backdrop, and then also any update you can give us on the India market. Thanks.
Manish Chandra
Sure. Yeah, the, the seller engagement is definitely higher as we’ve gone into Q3. We’re starting to see the seller starting to come back. I think it’s driven by two things, certainly the inflation and people’s desire to make money. But I think it is also when you think about what, what people are facing is that they actually have to rotate their faucets. They have to sort of start to refresh that wardrobe. And in so many ways, people are realizing that when they’re thinking, thinking about the various dimensions
They engage with fashion, the answer comes back to their closet. And so in many ways, I think we’re excited because we believe the future of fashion is in your closet, and that’s super exciting to, to think about both from a seller and a shopper perspective going back to India. I think we continue to see very good engagement numbers in India, both India and Australia. I think as the pandemic has receded, we’re able to engage more with the community and start to extend that community development.
I think it’s going to still take a little bit of time to get the revenue development fully happening, but the community development is starting to happen. And some of the core underlying engagement metrics we see are very encouraging in both of those markets.
Operator
Your next question comes from the line of Anna Andreeva with Needham.
Anna Andreeva
Great. Thanks so much. A couple of questions from us. You guys mentioned a couple of times taking a look at the expense structure. Can you talk about what specific buckets of opportunity that could entail? And then secondly, just the question on say rate looking out longer term, what do you think is the right level there? Do you guys expect that mix shift to above $15 purchase to continue to be a factor or are there initiatives in the business to help upset that? Thank you so much.
Manish Chandra
Let me just make a comment, I’ll turn it over to Rodriguez to give more color. The, the, the mantra that we’re using is quite simple internally, and it’s to do less with more impact, and it’s really all about prioritization choosing pure projects that have had, in fact, focusing on the core is the approach we are taking to how we are not just thinking about cost, but where investments can be the most effective in the business; let me turn that forward?
Rodrigo Brumana
Yeah. With a fewer things with hiring impact and we have slow down hiring. We are looking as being very judicious about, contractor spend there are things that are important, but they may not be. And then over here, the organization is actually helping quite a lot in making sure that we are spending on the highest priority.
We only do fewer and more impactful things. And your question on the take rate, we do expect the secular trend that we see in our business of consumers moving to more premium priced products might continue. The other thing is even though we cannot specifically call out, but the impact of inflation, even if you do nothing, the value of your closet will increase. And the value of a new pair of jeans, if you buy new who go higher, which means at point the market in the sales react.
So I’m going to say over time, you should expect a lighted pressure on take rate, just because of, we should expect to see more orders higher than $15 as opposed to the lower than $15. And, as a reminder, below $15, we have the 2090 5 cents flat fee. That’s why this shift to orders higher than $15 will continue to be a highly pressure to our take rate over time.
Anna Andreeva
All right. Very helpful. Thank you so much. Thank you
Operator
[Operator instructions] Your next question comes from the line of Tom Nikic with Wedbush Securities.
Tom Nikic
Hey good afternoon guys. Thanks. Thanks for taking my question. R just at a high level, what needs to happen to get this business know profitable again? And I know you say that, you can do it. you could be profitable again, any time you want, but like what, what is the scenario where like you would be willing to manage the company to profitability again?
Is it when revenue base or the user base grows to a certain level? Is it dependent on leverage of the marketing expense and just trying to wrap my head around, how the company becomes profitable again?
Manish Chandra
Yeah. well, as your question was high level, I’m going to give you a high level answer which is our focus on the core on focus on growing our user base, which translates to a higher seller base, which translates to a higher buyer base. When you do that, that skill, that’s kind of how we are. We are going to get the best back to profitability.
Obviously we could anticipate it. We could influence that sooner. It depends on, again, the large majority of our investment is variable, but it comes back to the focus on the core that we started this year. And the mantra that mania was talking about fewer things with higher impact. And number three, like I said before, some of the investments you’re making in infrastructure systems, procedures and operating mechanisms should drive a higher execution.
Operator
Your next question comes from the line of Nick Jones with JMP securities.
Nick Jones
Great. Thanks for taking the questions. I guess that’s one on the expanding authentication below $500 by year end. I mean, how, how low will you take authentication? And I guess what are the puts and takes is to kind of the incremental cost to what the value of the product is? If it’s a handbag that’s extremely used, does it still need to be authenticated, I guess, can you, can you just expand a little bit on moving below that 500 price point? Thanks.
Manish Chandra
Yeah, the strategy we want to take is to really empower the buyers and sellers to participate in it. And we haven’t ruled out the possibility of maybe pricing it slightly, but for lower price points. So, so that’s the strategy we are looking at will, will have more to talk about.
But ultimately we feel that it is something that both buyers and sellers will feel empowered as we launched it so that they can use it based on their needs and not just what we provide today, which is at $500 and higher, it’s a free authentication. And the technology that we provided at weight one allows us to have that leverage over time. So that’s sort of the high level thinking, but details to be fine-tuned as we get through thinking about the go to market strategy there.
Operator
Your next question comes from the line of David Bellinger with MKM Partners.
David Bellinger
Hey, thanks for taking my questions. Two quick ones. First following up on the cause controls are those aimed more at call it longer term initiatives than might not be significant revenue generators today, or can we expect to see, some type of slower near term revenue in GMV, just given these expense pullbacks and the related follow through. And then secondly, just any comments you can make on the traction you’re seeing in some of the new, newer categories like pet and electronics. Now that those have been on the platform for some time. Thank you.
Manish Chandra
Okay. Look, the cost rationalization that we are doing right now, it should not impact revenue because we are focusing on things that can be prioritized. And if there is an impact, the impact should be the minimum. And then that has been baked in our Q3 revenue guidance. So again, we are being very judicious here and we can do that because again, most of our expand is variable.
And number two, we have access to a very strong balance sheet. So we can be very thoughtful about how and when we review our cost structure and again, we are in the first year. And I’ll let you Rodrigo take this second.
Rodrigo Brumana
Yeah. On the pets and electronics, we’re super encouraged by the contribution. Both are still new launched us last year. And just as a reminder, our non-core categories represent only 7% of our GMV, but they continue grow faster than our core fashion categories in the business.
Operator
At this time. There no further questions. I’ll turn the call over to management for closing remarks.
Manish Chandra
Thank you, everyone for joining us and we’ll see you next quarter. Have a wonderful rest of the summer.
Operator
Thank you for participating. You may now disconnect. Good bye.
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