A month has gone by since the last earnings report for Etsy (ETSY) . Shares have added about 24.7% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Etsy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.How Have Estimates Been Moving Since Then?It turns out, estimates ...

Etsy, Inc. (NASDAQ:ETSY) Bernstein's 41st Annual Strategic Decisions Conference May 28, 2025 3:30 PM ET Company Participants Josh Silverman - CEO Lanny Baker - CFO Conference Call Participants Nikhil Devnani - Bernstein Nikhil Devnani Good afternoon, everybody. Thank you for joining. My name is Nikhil Devnani. I'm Bernstein's U.S. Mid Cap Internet Analyst. And it's a pleasure today to have Etsy's CEO, Josh Silverman; and Etsy's CFO, Lanny Baker, on stage with us. Gentlemen, welcome to the SEC. Josh Silverma ...

Financial Data and Key Metrics Changes - Etsy reported over $11 billion in gross merchandise sales (GMS) and over $2.5 billion in revenue, with $750 million in free cash flow, showing significant growth from $2 billion in GMS and less than $400 million in revenue when the CEO joined in 2017 [5][6][11] - The company has retained nearly all of the buyers and GMS gained during the pandemic, with 88 million active buyers at the end of the previous year [11][12] Business Line Data and Key Metrics Changes - The core Etsy business has high operating margins, while the overall corporate average is diluted by lower margins from Depop and Reverb, which are being consolidated [77][82] - The company has maintained strong margin discipline despite GMS pressures, with gross margins expected to remain in the low 70% range [76][80] Market Data and Key Metrics Changes - Etsy's marketplace supports approximately 90 million active buyers and 5.5 million sellers, indicating a robust community [3] - The company has a significant opportunity to grow in its most penetrated markets, with one out of three women in the US and UK having purchased from Etsy in the last year [68][69] Company Strategy and Development Direction - Etsy aims to enhance personalization and browsing experience on its platform, focusing on making the site more app-based and improving product discovery [14][46] - The company is investing in local search and cross-border shipping to drive growth in international markets, particularly in Europe [73] Management's Comments on Operating Environment and Future Outlook - Management noted that while discretionary purchases have been under pressure, Etsy has not seen significant market diversion due to economic conditions [22] - The company is optimistic about improving year-over-year comparisons in GMS as the year progresses, citing easier comparisons in the second half of the year [16] Other Important Information - Etsy has a proactive approach to managing tariff impacts, with a focus on local sourcing and flexibility within its seller community [24][25] - The company has about $800 million remaining on its current share repurchase authorization, indicating strong free cash flow generation [85] Q&A Session Summary Question: How does Etsy plan to improve GMS growth? - Management discussed the importance of improving product experience and infrastructure, which is expected to drive GMS growth in the coming quarters [19][20] Question: What is the impact of tariffs on Etsy's business? - Management indicated that Etsy's seller community is resilient and that the company is actively informing sellers about tariff changes, while also highlighting that only about 1% of GMS comes from US buyers purchasing from sellers in China [27][28] Question: How does Etsy view its competition and market dynamics? - Management acknowledged the dynamic nature of the market and emphasized that Etsy's value proposition would strengthen if tariffs against China remain in place [36] Question: What are the expectations for margins in the upcoming year? - Management confirmed that gross margins are expected to remain in the low 70% range, with continued cost discipline being a priority [76][80] Question: How does Etsy plan to engage lapsed users? - Management highlighted the opportunity to re-engage the 100 million lapsed users who have previously shopped on Etsy, focusing on reminding them of the unique offerings available [69][70]

Core Insights - Etsy is a leading two-sided marketplace with approximately 95 million active buyers and over 100 million listings from more than 8 million active sellers, focusing on unique creative and handmade goods [1] - The company is projected to generate $12 billion in Gross Merchandise Sales (GMS) for the year, with adjusted EBITDA margins of 26% and free cash flow of $600 million [2] Company Overview - Josh Silverman has been the CEO of Etsy since May 2017, with a background that includes roles at American Express, Skype, shopping.com, and co-founding Evite [2] - Lanny Baker, the CFO, joined Etsy earlier this year and has held previous positions at Eventbrite, Yelp, ZipRealty, and Monster Worldwide [2] Market Outlook - The company is addressing macroeconomic volatility and uncertainty, with a focus on consumer confidence and expectations for stable to slightly improved GMS trends in Q2 compared to a negative 6% in Q1 [6]

Summary of Etsy (ETSY) FY Conference Call - May 13, 2025 Company Overview - Etsy is a leading two-sided marketplace with approximately 95 million active buyers and over 100 million listings from more than 8 million active sellers, primarily focused on unique, creative, and handmade goods [2][2] - Estimated to generate $12 billion in Gross Merchandise Sales (GMS) for the year, with 26% adjusted EBITDA margins and $600 million in free cash flow [2][2] Macro Environment and Consumer Trends - The macro environment remains volatile, but Etsy has not observed significant changes in consumer spending despite market fluctuations [6][6] - Etsy experienced substantial growth during the pandemic, with GMS increasing from $4.9 billion pre-pandemic to nearly $11 billion in 2024 [5][5] - The company has shown resilience against supply shocks and inflation, with sellers not passing on price increases as seen in other markets [7][8] Competitive Landscape - The e-commerce market is highly competitive, with major players like Amazon and Walmart actively participating [11][11] - Etsy is focusing on local sellers to mitigate tariff impacts, with over 90% of supplies sourced domestically [16][16][20][20] - The advertising market remains strong, and Etsy is enhancing its marketing technology to improve performance [12][12] Growth Strategies - Etsy is recalibrating its strategy to balance near-term conversions with long-term initiatives, particularly focusing on app development and personalized experiences [24][24][41][41] - The company has shifted resources to improve the app experience, with 44.5% of GMS now coming from app purchases [38][38] - Emphasis on quality and personalization through a new search engine architecture that prioritizes customer experience [30][30] Advertising and Revenue Growth - Etsy has seen growth in revenue despite GMS declines, primarily through Etsy Payments and Etsy Ads, which enhance seller profitability [57][57][58][58] - The company is exploring off-site ads as a cooperative advertising program to further drive sales for sellers [62][62] Financial Performance and Profitability - Etsy has maintained a strong take rate and gross margins, with expectations for continued profitability in 2025 [65][65][76][76] - The divestiture of Reverb is expected to improve overall profit margins for Etsy [71][71][73][73] Future Outlook - Etsy's unique marketplace model positions it as a valuable alternative in a consolidating e-commerce landscape [78][78] - The company is optimistic about its growth potential, leveraging its distinct offerings to attract consumers seeking alternatives to traditional e-commerce [78][78]

Core Viewpoint - Etsy is facing significant challenges in the e-commerce marketplace, with declining sales and a loss of investor confidence following disappointing earnings reports [1][2][4]. Group 1: Financial Performance - Etsy's gross merchandise sales (GMS) fell by 6.5% to $2.8 billion, continuing a trend of declining business [5]. - Active sellers decreased by 11.3% to 8.1 million, with a notable drop of 23% in active sellers on the Etsy marketplace [5]. - The company's take rate increased to 23.3% in Q1 2025 from 21.6% in Q1 2024 and 17.8% in 2022, marking a 31% rise over three years [12][13]. Group 2: Acquisition Strategy - Etsy's acquisition of Reverb in 2019 initiated a "House of Brands" strategy, but the company has since sold Reverb and taken significant impairment charges [6][9]. - The company incurred a $1 billion impairment on the value of Depop and Elo7 in 2022, indicating poor performance of acquired brands [9]. - Despite Depop's GMS growth of 32% in 2024, the overall acquisition strategy has been deemed a failure, distracting from the core business [10]. Group 3: Seller Dynamics - A significant exodus of sellers is evident, with a 23% decline over the past year, which poses a risk to the marketplace's viability [11]. - The increase in seller fees has contributed to the decline in sellers, as there has been no corresponding increase in sales [12][13]. - Concerns have been raised about brand dilution due to the introduction of non-handmade goods, which may compromise Etsy's core identity [14]. Group 4: Future Prospects - For Etsy to recover, it must return to GMS growth and increase active sellers, addressing structural problems in the business [15]. - The company is seen as a potential target for activist investors, with Elliott Management owning 13% of the company but struggling to effect change [16]. - A change in management or a strategic partnership may be necessary for a turnaround, as the brand's relevance continues to decline [18].

Core Insights - The secondhand industry is facing challenges due to President Trump's tariffs, but companies like eBay and Etsy show resilience [1][2] Company Performance - eBay and Etsy reported Q1 2025 earnings, addressing tariff impacts; eBay's CEO noted that only about 5% of their gross merchandise value (GMV) comes from China, while Etsy's CFO stated that just over 1% of gross merchandise sales (GMS) are from U.S. imports from China [2][3] - Etsy experienced a 3.4% year-over-year decline in active buyers, totaling 88.5 million, and an 8.9% decline in GMS to $2.3 billion [7][8] - eBay reported a GMV growth to $18.8 billion and a revenue increase of over 1% to $2.58 billion, benefiting from price-conscious shoppers opting for used and refurbished goods [10][11] Market Dynamics - Sellers on eBay and Etsy primarily source products locally, which provides a competitive advantage over import-reliant rivals like Temu and Shein [2][6] - Etsy's focus on handcrafted and vintage goods may make it more vulnerable to economic uncertainty, as consumer spending is hesitant [7] - eBay has seen increased spending from customers looking to avoid tariffs, indicating a positive trend in consumer behavior [10][11] Strategic Positioning - Etsy's ownership of Depop, a secondhand fashion platform, continues to perform well despite economic challenges, achieving record-high GMS since its acquisition in 2021 [8] - eBay's strategy of focusing on used and refurbished goods has positioned it favorably in the current market environment [10]

Core Viewpoint - Etsy's shares have declined 19.7% year to date, underperforming both the Zacks Retail and Wholesale sector and the Zacks Internet-Commerce industry, which saw declines of 3.6% and 7.1% respectively [1] Financial Performance - First-quarter 2025 earnings were reported at 46 cents per share, missing the Zacks Consensus Estimate by 8% and decreasing 4.2% year over year [1] - Revenues for the first quarter of 2025 increased by 0.8% year over year to $651.2 million, exceeding the Zacks Consensus Estimate by 1.33% [2] - Marketplace revenues were $458.5 million, accounting for 70.4% of total revenues, down 1.8% from the previous year [3] - Services revenues reached $192.7 million, representing 29.6% of total revenues, and increased by 7.7% year over year [4] User Metrics - The total number of active buyers decreased by 3.4% year over year to 88.5 million, while the active buyer base decreased by 1.7% to 94.8 million, surpassing the consensus mark of 94.4 million [5] - The active seller base was 8.1 million, down 11.3% year over year, missing the consensus mark of 8.9 million [5] Gross Merchandise Sales (GMS) - Consolidated GMS was $2.8 billion, down 6.5% on a reported basis and 5.7% on a currency-neutral basis from the prior year [6] - The Etsy marketplace's GMS was $2.3 billion, reflecting an 8.9% year-over-year decline on a reported basis [6] Operating Results - Total operating expenses for the first quarter were $481.4 million, up 23.2% year over year, with operating loss reported at $22.3 million compared to an operating income of $68.1 million in the prior year [7][9] - Adjusted EBITDA increased by 1.9% year over year to $171.1 million, with an adjusted EBITDA margin of 26.3% [9] Balance Sheet - As of March 31, 2025, cash and cash equivalents totaled $649.2 million, down from $811.2 million at the end of the previous quarter [10] - Long-term debt remained unchanged at $2.3 billion [10] Guidance - For the second quarter of 2025, Etsy anticipates a take rate of 23.3% and expects consolidated GMS to decline at a rate similar to or slightly better than the first quarter's year-over-year decline [11]

Core Insights - Etsy is facing a challenging macroeconomic environment, with a reported consolidated gross merchandise sales (GMS) of $2.8 billion, down 6.5% year-over-year and down 5.7% on a currency-neutral basis [1] - The number of active buyers on the platform decreased by 3.4% to 88.5 million [1][2] Sales Performance - GMS for the Etsy marketplace specifically fell by 8.9%, or 8.1% on a currency-neutral basis, totaling $2.3 billion [1] - The company anticipates no major changes in the macroeconomic backdrop, maintaining a consistent outlook [2] Strategic Focus - Etsy is prioritizing personalization efforts to enhance traffic, incorporating ad and recommendation data into search models [3] - The aim is to create a more personalized shopping experience, likening it to a personal boutique for users [3] Engagement Metrics - Personalized homepages are showing nearly double the engagement compared to non-personalized ones [4] - Machine learning has increased the share of personalized email and push notifications by over 10 percentage points, leading to higher engagement [4] Tariff Exposure - Etsy's exposure to tariffs appears low, with just over 1% of GMS coming from U.S. imports of products from Chinese sellers [4] - The current trade situation is fluid, making it difficult to predict the impact of tariffs on demand [5] Seller Impact - Tariffs on China could negatively affect Etsy's individual sellers, as broad policies may inadvertently harm them [6] - While most sellers source 90% of their supplies locally, rising raw material prices could lead to increased costs for sellers, potentially impacting consumer prices [6]

Core Insights - Etsy's fiscal Q1 2025 financial report shows a mixed performance with revenue and earnings exceeding expectations, but a notable decline in gross merchandise sales (GMS) and active buyers [2][3][4]. Financial Performance - Revenue for Q1 2025 was $651.2 million, a 0.8% increase from $646 million in Q1 2024, beating expectations [2]. - Adjusted earnings per share rose significantly by 115% from $0.48 to $1.03, also surpassing forecasts [2]. - Gross merchandise sales decreased by 6.5% year over year, dropping from $3 billion to $2.8 billion [2][4]. - The revenue take rate improved from 21.6% to 23.3%, an increase of 170 basis points [2]. Business Efficiency - Despite lower sales, Etsy's revenue growth was attributed to higher take rates, increased on-site advertising revenue, and the expansion of Etsy's Payments business [5]. - The number of active buyers fell by 3.4%, and spending per average active buyer declined by 3.5%, indicating consumer hesitance [4]. - The number of habitual buyers decreased by 11%, and active sellers dropped from 9.1 million to less than 8.1 million [4]. Future Outlook - Etsy's guidance for Q2 suggests GMS will decline at a rate similar to or slightly better than Q1, which is viewed positively given current economic uncertainties [6]. - The company remains active in stock buybacks, spending $189 million, approximately 2% of its total market cap, and ended the quarter with nearly $1 billion in cash and investments [7]. Market Reaction - Following the earnings release, Etsy's stock initially rose by about 1%, but concerns over tariff issues and declining sales metrics tempered further gains [8]. External Factors - The evolving tariff and trade war situation is a key area to monitor, as Etsy operates in an international marketplace with significant buyer and seller activity outside the U.S. [9].