ETSY INC

Previous wording

In addition to our core Etsy marketplace, our “House of Brands” includes Reverb Holdings, Inc. (“Reverb”), our musical instrument marketplace, and Depop Limited (“Depop”), our fashion resale marketplace. Each of our marketplaces primarily operate independently, although some of our key operational functions such as finance, legal, and human resources, for example, support all of our marketplaces to some extent. Our goal is that our marketplaces benefit from shared expertise in product, marketing, technology, and customer support, and that the sum of the whole, over time, will equal more than its individual parts.

Current wording

In addition to our core Etsy marketplace, our “House of Brands” includes Reverb Holdings, Inc. (“Reverb”), the largest online marketplace dedicated to music gear, and Depop Limited (“Depop”), our fashion resale marketplace. Each of our marketplaces primarily operate independently, although some of our key operational functions such as finance, legal, and human resources, for example, support all of our marketplaces to some extent. Our goal is that our marketplaces benefit from shared expertise in product, marketing, technology, and customer support, and that the sum of the whole, over time, will equal more than its individual parts.

Previous wording

First Quarter 2024 Key Metrics and Financial Highlights

Current wording

Second Quarter 2024 Key Metrics and Financial Highlights

Previous wording

As of March 31, 2024, our marketplaces connected 9.1 million active sellers and 96.4 million active buyers in nearly every country in the world. In the three months ended March 31, 2024, sellers generated GMS of $3.0 billion. We are a global company and approximately 45% of our GMS in the three months ended March 31, 2024 came from transactions in which either a seller or a buyer, or both, were located outside of the United States.

Current wording

As of June 30, 2024, our marketplaces connected 8.8 million active sellers and 96.6 million active buyers in nearly every country in the world. In the three and six months ended June 30, 2024, sellers generated GMS of $2.9 billion and $5.9 billion, respectively. We are a global company and approximately 45% of our GMS in both the three and six months ended June 30, 2024 came from transactions where either a seller or a buyer, or both, were located outside of the United States.

Previous wording

Total revenue was $646.0 million in the three months ended March 31, 2024. In the three months ended March 31, 2024, we recorded net income of $63.0 million and non-GAAP Adjusted EBITDA of $167.9 million. See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP.

Current wording

Total revenue was $647.8 million and $1.3 billion in the three and six months ended June 30, 2024, respectively. In the three and six months ended June 30, 2024, we recorded net income of $53.0 million and $116.0 million, respectively, reflecting a $7.2 million retroactive non-income tax expense. In the three and six months ended June 30, 2024, we recorded non-GAAP Adjusted EBITDA of $179.4 million and $347.3 million, respectively. See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP.

Previous wording

Cash and cash equivalents and short-term investments were $1.0 billion as of March 31, 2024. As of March 31, 2024, we had three outstanding series of convertible notes, which collectively had a net carrying value of $2.3 billion. Additionally, we have the ability to draw down on our $400.0 million senior secured revolving credit facility. In the three months ended March 31, 2024, we had positive operating cash flows of $69.0 million.

Current wording

Cash and cash equivalents and short-term investments were $1.0 billion as of June 30, 2024. As of June 30, 2024, we had three outstanding series of convertible notes, which collectively had a net carrying value of $2.3 billion. Additionally, we have the ability to draw down on our $400.0 million senior secured revolving credit facility. In the six months ended June 30, 2024, we had positive operating cash flows of $220.1 million.

Previous wording

We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). We are providing Etsy marketplace standalone information in certain instances where particularly relevant. The financial results of Elo7 have been included in our condensed consolidated financial results (“Consolidated”) until August 10, 2023 (date of sale). Accordingly, our condensed consolidated financial results for the three months ended March 31, 2024 and related discussions of this period do not include the results of Elo7. The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:

Current wording

We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). We are providing Etsy marketplace standalone information in certain instances where particularly relevant. The financial results of Elo7 have been included in our condensed consolidated financial results (“Consolidated”) until August 10, 2023 (date of sale). Accordingly, our condensed consolidated financial results for the three and six months ended June 30, 2024 and related discussions of this period do not include the results of Elo7. The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:

Previous wording

(1)Consolidated GMS for the three months ended March 31, 2024 includes Etsy marketplace GMS of $2.6 billion. Percent GMS ex-U.S. domestic for the Etsy marketplace for the three months ended March 31, 2024 was 48%.

Current wording

(1)Consolidated GMS for the three and six months ended June 30, 2024 includes Etsy marketplace GMS of $2.5 billion and $5.1 billion, respectively. Percent GMS ex-U.S. domestic for the Etsy marketplace for both the three and six months ended June 30, 2024 was 48%.

Previous wording

(2)Consolidated active sellers and active buyers includes Etsy marketplace active sellers and active buyers of 7.0 million and 91.6 million, respectively, as of March 31, 2024.

Current wording

(2)Consolidated active sellers and active buyers includes Etsy marketplace active sellers and active buyers of 6.6 million and 91.5 million, respectively, as of June 30, 2024.

Previous wording

GMS decreased $114.9 million to $3.0 billion in the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The decrease in GMS between the three months ended March 31, 2024 and 2023 was primarily driven by a decrease in Etsy marketplace GMS, partially offset by an increase in GMS for the Depop marketplace. Etsy marketplace GMS reflected a still dynamic macroeconomic environment that impacted consumer discretionary product spending, particularly in our top three geographies, the U.S., U.K., and Germany. The Etsy marketplace GMS per active buyer on a trailing twelve month basis declined 3.5% year-over-year to $125. This decline was partially offset by year-over-year growth of 1.9% for active buyers on the Etsy marketplace to 91.6 million.

Current wording

GMS decreased $63.3 million to $2.9 billion in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, and GMS decreased $178.1 million to $5.9 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in GMS between both the three and six months ended June 30, 2024 and 2023 was primarily driven by a decrease in Etsy marketplace GMS, partially offset by an increase in GMS for the Depop marketplace. Etsy marketplace GMS reflected a still dynamic macroeconomic environment that impacted consumer discretionary product spending, particularly in our top three geographies, the U.S., U.K., and Germany. The Etsy marketplace GMS per active buyer on a trailing twelve month basis declined 3.2% year-over-year to $124. This decline was partially offset by year-over-year growth of 1.0% for active buyers on the Etsy marketplace to 91.5 million.

Previous wording

Adjusted EBITDA represents our net income adjusted to exclude: interest and other non-operating income, net; provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange (gain) loss; acquisition, divestiture, and corporate structure-related expenses; and restructuring and other exit costs. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue. See “Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

Current wording

Adjusted EBITDA represents our net income adjusted to exclude: interest and other non-operating income, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange (gain) loss; acquisition, divestiture, and corporate structure-related expenses; asset impairment charges; restructuring and other exit (income) costs; and retroactive non-income tax expense. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue. See “Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

Previous wording

For both the three months ended March 31, 2024 and the three months ended March 31, 2023, GMS ex-U.S. domestic as a percentage of total GMS was approximately 45%. Additionally, GMS ex-U.S. domestic decreased 3% from March 31, 2023 to March 31, 2024.

Current wording

For both the three and six months ended June 30, 2024 and 2023, GMS ex-U.S. domestic as a percentage of total GMS was approximately 45%. Additionally, GMS ex-U.S. domestic decreased 2% between both the three months ended June 30, 2024 and 2023 and the six months ended June 30, 2024 and 2023.

Previous wording

The decrease in cost of revenue was driven by a decrease in cost of refunds and cloud-related hosting and bandwidth costs. These decreases are partially offset by an increase in amortization, which is primarily due to an increase in capitalized website development costs and internal-use software.

Current wording

The decrease in cost of revenue was primarily driven by a decrease in cost of refunds and cloud-related hosting and bandwidth costs. These decreases are partially offset by an increase in amortization, which is primarily due to an increase in capitalized website development costs and internal-use software. We gained leverage as cost of revenue did not increase as fast as revenue.

Previous wording

The decrease in Marketplace revenue was primarily due to a $114.9 million decrease in the volume of GMS on our marketplaces for the three months ended March 31, 2023 compared to the three months ended March 31, 2024, which was primarily driven by a decline in GMS for the Etsy marketplace, partially offset by an increase in GMS for the Depop marketplace. Marketplace revenue decreased less than GMS primarily due to pricing mix, in which we had higher payments revenue in locations in which we charge a higher payments fee as well as less of a decline in transaction fee revenue due to offsite advertising which generates a higher transaction fee. The share of Etsy marketplace GMS processed through our Etsy Payments platform was 96% for the three months ended March 31, 2024 compared to 93% the three months ended March 31, 2023.

Current wording

Marketplace revenue increased primarily due to volume, driven by payments expansion and an increase in GMS for the Depop marketplace. As part of the payments expansion, the share of Etsy marketplace GMS processed through our Etsy Payments platform increased to 97% for the six months ended June 30, 2024 compared to 93% for the six months ended June 30, 2023. Marketplace revenue also increased due to pricing mix, driven by growth in transaction fee revenue due to offsite advertising that generates a higher transaction fee, as well as higher payments revenue in locations in which we charge a higher payments fee. Within these increases, payments revenue increased 5.4% in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in Marketplace revenue was partially offset by a $178.1 million decrease in the volume of GMS on our marketplaces for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, which included a decline in GMS for the Etsy marketplace.

Previous wording

The growth in Services revenue was primarily driven by an increase of 2.5% in on-site advertising revenue, which represented a significant majority of the overall Services revenue increase. The increase in on-site advertising revenue was due to an increase in average price per click on Etsy Ads.

Current wording

The growth in Services revenue was driven by an increase of 12.7% in shipping label revenue, primarily due to the Depop marketplace. Services revenue also increased due to an increase of 1.3% in on-site advertising revenue, primarily due to an increase in average price per click on Etsy Ads.

Previous wording

Marketing expenses increased, primarily driven by increased Etsy marketplace non-digital marketing costs, due to an increase in broadcasting costs across different media channels primarily in North America, including a prime time big game television advertisement, and the United Kingdom. Paid GMS was 20% of overall GMS for the three months ended March 31, 2024 compared to 21% for the three months ended March 31, 2023.

Current wording

Marketing expenses increased, primarily driven by increased digital marketing costs, as we continued to invest in efficient channels and regions with positive return on investment, and to a lesser extent, in non-digital marketing costs, due to an increase in broadcasting costs across different media channels primarily in North America, including a prime time big game television advertisement. These increases were partially offset by a decrease in employee compensation-related expenses, related to our workforce reductions in the fourth quarter of 2023. Paid GMS was 21% of overall GMS for the six months ended June 30, 2024 compared to 20% for the six months ended June 30, 2023.

Previous wording

Product development expenses decreased, primarily due to decreased employee compensation-related expenses, including stock-based compensation, related to our workforce reductions in the fourth quarter of 2023, partially offset by the issuance of equity awards as part of our compensation strategy.

Current wording

Product development expenses decreased, primarily due to decreased employee compensation-related expenses, including stock-based compensation, related to our workforce reductions in the fourth quarter of 2023. We gained leverage as product development expenses did not increase as fast as revenue.

Previous wording

Other income, net increased, primarily driven by favorable changes in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates in the current year versus the prior year which impact our intercompany and other non-functional currency cash balances.

Current wording

Other income, net increased, primarily driven by favorable changes in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates in the current year versus the prior year which impacted our intercompany and other non-functional currency cash balances. This increase was partially offset by a decrease in interest and other income due to lower balances.

Previous wording

Cash and cash equivalents and short-term investments were $1.0 billion as of March 31, 2024. Additionally, we have $84.4 million in long-term investments, a majority of which we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $400.0 million senior secured revolving credit facility. As of March 31, 2024, we had net working capital of $839.3 million and in the three months ended March 31, 2024, we had positive operating cash flows of $69.0 million. We believe that this capital structure, as well as the nature and framework of our business, will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.

Current wording

Cash and cash equivalents and short-term investments were $1.0 billion as of June 30, 2024. Additionally, we have $93.5 million in long-term investments, a majority of which we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $400.0 million senior secured revolving credit facility. As of June 30, 2024, we had net working capital of $794.5 million and in the six months ended June 30, 2024, we had positive operating cash flows of $220.1 million. We believe that this capital structure, as well as the nature and framework of our business, will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.

Previous wording

As of March 31, 2024, a majority of our cash and cash equivalents, which were primarily held in cash deposits and money market funds, were held in the United States for future investments, working capital funding, and general corporate purposes. We fund our non-U.S. operations from our funds held in the United States on an as-needed basis.

Current wording

As of June 30, 2024 a majority of our cash and cash equivalents, short-term, and long-term investments balance was held in the United States. Our cash and cash equivalents are held for future investments, working capital funding, and general corporate purposes. We fund our non-U.S. operations from our funds held in the United States on an as-needed basis.

Previous wording

Net cash provided by operating activities was $55.6 million in the three months ended March 31, 2023, primarily driven by cash net income of $165.9 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $110.3 million in cash, primarily driven by timing of payment of accrued expenses in the period.

Current wording

Net cash provided by operating activities was $220.1 million in the six months ended June 30, 2024, primarily driven by cash net income of $306.8 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $86.7 million in cash, primarily driven by timing of payment of accrued expenses in the period.

Previous wording

Net cash provided by operating activities was $69.0 million in the three months ended March 31, 2024, primarily driven by cash net income of $154.3 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $85.3 million in cash, primarily driven by timing of payment of accrued expenses and offset in part by timing of payment of prepaid expenses and other current assets in the period.

Current wording

Net cash provided by operating activities was $191.9 million in the six months ended June 30, 2023, primarily driven by cash net income of $340.2 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $148.3 million in cash, primarily driven by timing of payment of accrued expenses in the period.

Previous wording

Net cash used in investing activities was $25.1 million in the three months ended March 31, 2024. This was primarily attributable to net purchases of investments of $15.4 million, and to a lesser extent, $9.7 million in capital expenditures, including $7.5 million for website development and internal-use software as we continued to invest in projects adding new features and functionality to our platforms.

Current wording

Net cash used in investing activities was $27.7 million in the six months ended June 30, 2024. This was primarily attributable to $20.0 million in capital expenditures, including $14.1 million for website development and internal-use software as we continued to invest in projects adding new features and functionality to our platforms, and to a lesser extent, net purchases of investments of $7.7 million.

Previous wording

Net cash used in investing activities was $36.1 million in the three months ended March 31, 2023. This was primarily attributable to net purchases of investments of $27.9 million, and to a lesser extent, $8.2 million in capital expenditures, including $6.0 million for website development and internal-use software.

Current wording

Net cash used in investing activities was $42.7 million in the six months ended June 30, 2023. This was primarily attributable to net purchases of investments of $26.3 million, and to a lesser extent, $16.5 million in capital expenditures, including $12.6 million for website development and internal-use software.

Previous wording

Net cash used in financing activities was $163.0 million in the three months ended March 31, 2024. This was primarily attributable to stock repurchases of $158.3 million, and to a lesser extent, payment of tax obligations on vested equity awards of $5.9 million.

Current wording

Net cash used in financing activities was $338.3 million in the six months ended June 30, 2024. This was primarily attributable to stock repurchases of $308.7 million, and to a lesser extent, payment of tax obligations on vested equity awards of $33.0 million.

Previous wording

Net cash used in financing activities was $158.5 million in the three months ended March 31, 2023. This was primarily attributable to stock repurchases of $148.2 million, and to a lesser extent, payment of tax obligations on vested equity awards of $9.2 million.

Current wording

Net cash used in financing activities was $236.2 million in the six months ended June 30, 2023. This was primarily attributable to stock repurchases of $187.0 million, and to a lesser extent, payment of tax obligations on vested equity awards of $49.3 million.