ETSY INC

Previous wording

Second Quarter 2024 Key Metrics and Financial Highlights

Current wording

Third Quarter 2024 Key Metrics and Financial Highlights

Previous 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.

Current wording

As of September 30, 2024, our marketplaces connected 8.5 million active sellers and 96.7 million active buyers in nearly every country in the world. In the three and nine months ended September 30, 2024, sellers generated GMS of $2.9 billion and $8.9 billion, respectively. We are a global company and approximately 46% and 45%, respectively, of our GMS in the three and nine months ended September 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 $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.

Current wording

Total revenue was $662.4 million and $2.0 billion in the three and nine months ended September 30, 2024, respectively. In the three and nine months ended September 30, 2024, we recorded net income of $57.4 million and $173.4 million, respectively, and non-GAAP Adjusted EBITDA of $183.6 million and $530.9 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 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.

Current wording

Cash and cash equivalents and short-term investments were $1.0 billion as of September 30, 2024. As of September 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 nine months ended September 30, 2024, we had positive operating cash flows of $437.5 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 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:

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). The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:

Previous 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%.

Current wording

(1)Consolidated GMS for the three and nine months ended September 30, 2024 includes Etsy marketplace GMS of $2.5 billion and $7.6 billion, respectively. Percent GMS ex-U.S. domestic for the Etsy marketplace for the three and nine months ended September 30, 2024 was 49% and 48%, respectively.

Previous 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.

Current wording

(2)Consolidated active sellers and active buyers includes Etsy marketplace active sellers and active buyers of 6.2 million and 91.2 million, respectively, as of September 30, 2024. Consolidated active sellers and active buyers as of September 30, 2023 includes Elo7 marketplace active sellers and buyers of approximately 52 thousand and 1.5 million as Elo7 was included in our consolidated financial results until August 10, 2023 (the date of sale).

Previous 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.

Current wording

GMS decreased $124.7 million to $2.9 billion in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, and GMS decreased $302.8 million to $8.9 billion in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease in GMS between both the three and nine months ended September 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. We also believe that a number of discrete events created headwinds for our business during the quarter, including weather, domestic and global geopolitical uncertainties, and various cultural events. The Etsy marketplace GMS per active buyer on a trailing twelve month basis declined 3.4% year-over-year to $123, along with a year-over-year decline of 0.4% for active buyers on the Etsy marketplace to 91.2 million.

Previous wording

On a consolidated basis we experienced the following decline in new buyer and existing buyer GMS in the periods presented:

Current wording

On a consolidated basis we experienced the following (decline) / growth in new buyer and existing buyer GMS in the periods presented:

Previous wording

Our business may continue to be impacted by macroeconomic factors beyond our control such as inflation, interest rates, disruptions to the banking industry, potential recessionary factors, foreign exchange rate volatility, changing consumer shopping preferences, continued pressure on consumer discretionary product spending, global geopolitical uncertainties, supply-chain disruptions, an increasingly competitive retail environment, and employment levels, among others. See Part II, Item 1A, “Risk Factors” for further detail.

Current wording

Our business may continue to be impacted by factors beyond our control such as inflation, interest rates, disruptions to the banking industry, potential recessionary factors, foreign exchange rate volatility, changing consumer shopping preferences, continued pressure on consumer discretionary product spending, weather, domestic and global geopolitical uncertainties, various types of cultural events, supply-chain disruptions, an increasingly competitive retail environment, and employment levels, among others. See Part II, Item 1A, “Risk Factors” for further detail.

Previous 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.

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 loss (gain); acquisition, divestiture, and corporate structure-related expenses; asset impairment charges; loss on sale of business; restructuring and other exit 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

GMS ex-U.S. domestic is GMS from transactions in which (1) the billing address for the seller and/or (2) the shipping address for the buyer at the time of sale is outside of the United States. GMS ex-U.S. domestic represents all GMS other than GMS from transactions in which the billing address for the seller and the shipping address for the buyer are both in the United States, which we refer to as U.S. domestic GMS. We believe that GMS ex-U.S. domestic shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.

Current wording

GMS ex-U.S. domestic is GMS from transactions in which (1) the billing address for the seller and/or (2) the shipping address for the buyer at the time of sale is outside of the United States. GMS ex-U.S. domestic represents all GMS other than GMS from transactions in which the billing address for the seller and the shipping address for the buyer at the time of sale are both in the United States, which we refer to as U.S. domestic GMS. We believe that GMS ex-U.S. domestic shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.

Previous 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.

Current wording

For the three months ended September 30, 2024 and 2023, GMS ex-U.S. domestic as a percentage of total GMS was approximately 46% and 45%, respectively. For both the nine months ended September 30, 2024 and 2023, GMS ex-U.S. domestic as a percentage of total GMS was 45%. Additionally, GMS ex-U.S. domestic decreased 2% between both the three months ended September 30, 2024 and 2023 and the nine months ended September 30, 2024 and 2023.

Previous 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 98% for the three months ended June 30, 2024 compared to 93% for the three 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 and transaction fee revenue increased 7.9% and 2.1%, respectively, in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in Marketplace revenue was partially offset by a $63.3 million decrease in the volume of GMS for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, which included a decline in GMS for the Etsy marketplace.

Current wording

Marketplace revenue increased due to a mix of volume and pricing, primarily driven by payments expansion as well as higher payments revenue in locations in which we charge a higher payments fee for both the Etsy and Depop marketplaces. As part of the payments expansion, the share of Etsy marketplace GMS processed through our Etsy Payments platform increased to 99% for the three months ended September 30, 2024 compared to 93% for the three months ended September 30, 2023 resulting in an increase in payments revenue of 8.3% in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Additionally, marketplace revenue increased due to pricing, driven by the launch of a seller set-up fee for the Etsy marketplace in 2024, under which a seller pays a set-up fee when they open a shop. There was also an increase in transaction fee revenue from offsite advertising that generates a higher transaction fee and an increase in GMS for the Depop marketplace, partially offset by a decline in GMS for the Etsy marketplace, resulting in relatively flat transaction fee revenue year-over-year, driven by a mix of volume and pricing.

Previous 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.

Current wording

The decrease in cost of revenue was primarily driven by a decrease in cost of refunds, and, to a lesser extent, employee compensation-related expenses related to our workforce reductions in the fourth quarter of 2023 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

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. This increase is partially offset by a decrease in non-digital marketing costs, including a decrease in broadcasting costs. Paid GMS was 21% of overall GMS for the three months ended June 30, 2024 compared to 20% for the three months ended June 30, 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, primarily due to Depop U.S. brand marketing campaigns. Paid GMS was 21% of overall GMS for the three months ended September 30, 2024 compared to 19% for the three months ended September 30, 2023.

Previous wording

The primary drivers of our income tax benefit for the six months ended June 30, 2023 were a $54.0 million tax benefit related to Elo7 and the tax benefit of $15.0 million on the impairment charge of Elo7 assets, partially offset by tax expense on income before income taxes excluding the impairment charge.

Current wording

The primary drivers of our income tax provision for the three months ended September 30, 2023 were tax expense on income before income taxes and state and local income taxes, partially offset by a tax benefit related to research and development tax credits.

Previous 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.

Current wording

Marketplace revenue increased due to a mix of volume and pricing, primarily driven by payments expansion as well as higher payments revenue in locations in which we charge a higher payments fee for both the Etsy and Depop marketplaces. As part of the payments expansion, the share of Etsy marketplace GMS processed through our Etsy Payments platform increased to 97% for the nine months ended September 30, 2024 compared to 93% for the nine months ended September 30, 2023 resulting in an increase in payments revenue of 6.3% in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Additionally, an increase in transaction fee revenue from offsite advertising that generates a higher transaction fee and an increase in GMS for the Depop marketplace was partially offset by a decline in GMS for the Etsy marketplace, resulting in a slight increase in transaction fee revenue year-over-year, driven by a mix of volume and pricing. Marketplace revenue increased due to pricing, driven by the launch of a seller set-up fee for the Etsy marketplace in 2024, under which a seller pays a set-up fee when they open a shop.

Previous 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.

Current wording

The growth in Services revenue was primarily driven by an increase of 2.7% in on-site advertising revenue, primarily due to an increase in average price per click on Etsy Ads. Service revenue also increased due to an increase of 15.2% in shipping label revenue, primarily due to the Depop marketplace.

Previous 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.

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. Additionally, marketing expenses increased to a lesser extent due to non-digital marketing costs, primarily driven by Depop U.S. brand marketing campaigns and an increase in Etsy marketplace 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 nine months ended September 30, 2024 compared to 20% for the nine months ended September 30, 2023.

Previous wording

Product development expenses decreased, primarily due to decreased employee compensation-related expenses 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.

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

General and administrative expenses increased, primarily due to net favorable non-income tax items in the prior year which did not occur in the current year and retroactive non-income tax expense related to the digital services tax legislation in Canada, which was enacted on June 28, 2024 retroactive to January 1, 2022.

Current wording

General and administrative expenses increased, primarily due to retroactive non-income tax expense related to the digital services tax legislation in Canada, which was enacted on June 28, 2024 retroactive to January 1, 2022 as well as other net unfavorable non-income tax items, including net favorable items in the nine months ended September 30, 2023 which did not occur in the nine months ended September 30, 2024.

Previous wording

Asset impairment charges were $68.1 million in the three months ended June 30, 2023, related to the impairment of intangible assets and property and equipment of Elo7. See Part I, Item 1, “Note 5—Asset Impairment Charges” for more information. There were no asset impairment charges in the three months ended June 30, 2024.

Current wording

Asset impairment charges were $68.1 million in the nine months ended September 30, 2023, related to the impairment of intangible assets and property and equipment of Elo7. See Part I, Item 1, “Note 5—Asset Impairment Charges” for more information. There were no asset impairment charges in the nine months ended September 30, 2024.

Previous wording

The primary drivers of our income tax provision for the six months ended June 30, 2024 were tax expense on income before income taxes, tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant, and state and local income taxes.

Current wording

The primary drivers of our income tax provision for the nine months ended September 30, 2024 were tax expense on income before income taxes, tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant, and state and local income taxes.

Previous wording

The primary drivers of our income tax benefit for the three months ended June 30, 2023 were a $54.0 million tax benefit related to Elo7 and the tax benefit of $15.0 million on the impairment charge of Elo7 assets, partially offset by tax expense on income before income taxes excluding the impairment charge.

Current wording

The primary drivers of our income tax benefit for the nine months ended September 30, 2023 were a $56.1 million tax benefit related to Elo7 and the tax benefit of $15.0 million on the impairment charge of Elo7 assets, partially offset by tax expense on income before income taxes excluding the impairment charge.

Previous 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.

Current wording

Cash and cash equivalents and short-term investments were $1.0 billion as of September 30, 2024. Additionally, we have $107.0 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 September 30, 2024, we had net working capital of $767.7 million and in the nine months ended September 30, 2024, we had positive operating cash flows of $437.5 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

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.

Current wording

Net cash provided by operating activities was $437.5 million in the nine months ended September 30, 2024, primarily driven by cash net income of $464.1 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $26.6 million in cash, primarily driven by timing of payment of accrued expenses in the period and partially offset by the timing of payment of prepaid expenses and other current assets in the period.

Previous 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.

Current wording

Net cash provided by operating activities was $410.4 million in the nine months ended September 30, 2023, primarily driven by cash net income of $544.7 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $134.3 million in cash, primarily driven by timing of payment of accrued expenses and prepaid expenses and other current assets in the period.

Previous 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.

Current wording

Net cash used in investing activities was $36.8 million in the nine months ended September 30, 2024. This was primarily attributable to $33.0 million in capital expenditures, including $22.9 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 $3.7 million.

Previous 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.

Current wording

Net cash used in investing activities was $54.0 million in the nine months ended September 30, 2023. This was primarily attributable to $27.3 million in capital expenditures, including $19.6 million for website development and internal-use software, and to a lesser extent, net purchases of investments of $26.6 million.

Previous 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.

Current wording

Net cash used in financing activities was $504.8 million in the nine months ended September 30, 2024. This was primarily attributable to stock repurchases of $464.3 million, and to a lesser extent, payment of tax obligations on vested equity awards of $42.1 million.

Previous 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.

Current wording

Net cash used in financing activities was $540.8 million in the nine months ended September 30, 2023. This was primarily attributable to stock repurchases of $484.0 million, and to a lesser extent, payment of tax obligations on vested equity awards of $58.0 million.