Etsy, Inc (NASDAQ:ETSY) Citi's 2024 Global TMT Conference Call September 4, 2024 3:50 PM ET Company Participants Josh Silverman - Chief Executive Officer Conference Call Participants Ygal Arounian - Citi Ygal Arounian All right. Good afternoon, everyone. Thanks for joining, Ygal Arounian on the Citi Internet team close to wrapping up day one here at the TMT Conference. And so thanks for joining us. Really excited now to have Etsy's CEO, Josh Silverman, with us. Appreciate you being here and thanks for takin ...

Company and Industry Overview * **Company**: Etsy, Inc. (NASDAQ: ETSY) * **Industry**: E-commerce, Handmade and Vintage Goods Key Points 1. Shift in Focus to Engagement and Browsing * **Change**: Etsy is shifting its focus from driving Gross Merchandise Sales (GMS) conversion to improving overall platform health and engagement. * **Approach**: * Redesigning the search and discovery algorithm to prioritize quality over relevance. * Launching a loyalty program to increase frequency and loyalty. * Investing in the Etsy app to drive more traffic and improve the shopping experience. 2. Search and Discovery Algorithm Redesign * **Objective**: Improve the quality of search results and enhance the buyer experience. * **Changes**: * Incorporating quality metrics, such as seller and item quality scores, into the search algorithm. * Providing sellers with a dashboard to track their quality scores and make improvements. * Creating a virtuous cycle where sellers compete based on quality to earn higher search rankings. 3. Loyalty Program * **Purpose**: Increase frequency and loyalty among occasional buyers. * **Details**: * Invite-only beta program focusing on occasional buyers. * Members will receive exclusive deals, drops, and other benefits. * Aim to understand buyer behavior and test the economic sustainability of the program. 4. Etsy App * **Importance**: Drive more traffic and improve the shopping experience. * **Strategy**: * Introducing friction in the mobile web to encourage app downloads. * Prioritizing app experience in product development. * Leveraging mobile web to drive organic traffic and improve sales. 5. Marketing Strategy * **Focus**: Maximize the return on marketing spend. * **Approach**: * Investing in Google PLAs for measurable results. * Investing in brand advertising to increase awareness. * Targeting mid-funnel customers with generalized needs using Gen AI and social media platforms. 6. Market Opportunity * **TAM**: Etsy believes there is significant growth potential in various markets, including home furnishings, gifting, and other categories. * **Competitive Landscape**: Etsy views itself as a unique alternative to commoditized e-commerce and aims to capture a larger share of the market. 7. Macroeconomic Challenges * **Consumer Discretionary Spend**: Etsy acknowledges the challenges posed by the current economic environment but remains optimistic about its growth potential. * **Competitive Response**: Etsy focuses on differentiating itself through quality, unique products, and the value it offers to customers. 8. Regulatory Environment * **De Minimis Tax Regulations**: Etsy supports the de minimis exemption for cross-border shipping and advocates for targeted regulations to prevent abuse. 9. Gifting * **Growth**: Gifting GMV increased by 4% in the second quarter, driven by product improvements and marketing efforts. * **Opportunity**: Etsy sees significant growth potential in the gifting market, particularly in the US. 10. Leadership Transition * **CFO Retirement**: Etsy's CFO, Rachel Glaser, is retiring, and the company is actively searching for a replacement. 11. Seller Demographics * **Seller Composition**: Approximately 85% of Etsy sellers are women. * **Buyer Composition**: Approximately 80% of Etsy buyers are women. * **Strategy**: Etsy aims to attract more male buyers and sellers by leveraging male-centric media channels and showcasing products that appeal to men.

It has been about a month since the last earnings report for Etsy (ETSY) . Shares have lost about 7.8% in that time frame, underperforming the S&P 500. Will the recent negative trend continue leading up to its next earnings release, or is Etsy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. ETSY's Q2 Earnings Miss Estimates, Revenues Increase Y/Y ...

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Shares of this specialty e-commerce marketplace are well off their high. Investors looking to gain exposure to the e-commerce industry most likely have Amazon at the top of their lists. The massive tech juggernaut, worth more than $1.7 trillion, dominates online shopping. However, Etsy (ETSY 1.36%), a much tinier enterprise by comparison, might also have your attention. It has successfully carved out a niche in the large e-commerce space. If you're thinking of buying shares, know these three things first. 1 ...

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Earnings Performance - Etsy reported Q2 2024 earnings of 41 cents per share, missing the Zacks Consensus Estimate by 10.9% and reflecting an 8.9% year-over-year decrease [1] - Revenues increased 3% year-over-year to $647.81 million, beating the Zacks Consensus Estimate by 2.3% [1] Revenue Breakdown - Marketplace revenues were $470.38 million (72.6% of total revenues), up 3.8% year-over-year, driven by payments and transaction fee revenue from Offsite Ads [2] - Services revenues were $177.43 million (27.4% of total revenues), up 0.9% year-over-year [3] User Metrics - Etsy acquired 5.6 million new buyers, with total active buyers reaching 91.5 million, a 1% year-over-year increase [2] - Active buyer base grew 0.4% year-over-year to 96.6 million, missing the consensus mark of 97.2 million [4] - Active seller base stood at 8.8 million, up 5.9% year-over-year, but missed the consensus mark of 9.6 million [4] - Reactivated buyers reached 6.4 million, up 8.5% year-over-year [5] Gross Merchandise Sales (GMS) - GMS was $2.95 billion, down 2.1% on a reported basis and 1.9% on a currency-neutral basis year-over-year, beating the Zacks Consensus Estimate of $2.92 billion [5] - Etsy marketplace's GMS was $2.5 billion, down 3.2% on a reported basis year-over-year [5] Operating Performance - Gross margin expanded 160 basis points year-over-year to 71.6% [6] - Total operating expenses decreased 11.1% year-over-year to $393.55 million, representing 60.8% of revenues compared to 70.4% in the prior-year quarter [6] - Operating income was $70.2 million, compared to an operating loss of $2.4 million in the prior-year quarter [6] Balance Sheet - Cash and cash equivalents totaled $759.21 million as of Jun 30, 2024, down from $788.84 million as of Mar 31, 2024 [7] - Short-term investments were $240.68 million, down from $254.88 million in the previous quarter [7] - Long-term debt stood at $2.29 billion at the end of Q2 2024, up from $2.28 billion at the end of the prior quarter [8] Guidance - For Q3 2024, Etsy expects the take rate to be similar to Q2 2024's 22% [9] - GMS is anticipated to decline in the low single-digit range year-over-year [9] - Adjusted EBITDA margin is expected to be 27% [9]

As Etsy sees its sales slip, the eCommerce marketplace is gearing up to launch a loyalty program in an effort to drive greater spending and frequency among consumers who demand to be rewarded for their purchases. On a call with analysts Wednesday (July 31) discussing the company's second-quarter 2024 financial results, CEO Josh Silverman explained that an invitation-only beta test will launch to a "highly targeted group of occasional U.S. buyers" in September, following "many rounds" of research. "We've foc ...

| --- | --- | --- | |-------|-------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | Q2 2024 | | | | | | | | | | | | Financial Results | | | | | | | | | | | | | | | | | | | | | | | | | | Forward-looking Statements 2 This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include but are not limited to: statements relating to our financial guidance for the third quarter 2024 and full year 2024 and underlying ...

Financial Data and Key Metrics Changes - Etsy's consolidated Gross Merchandise Sales (GMS) for Q2 2024 was $2.9 billion, down approximately 2.1% year-over-year, with a 20 basis point foreign exchange headwind [18] - Revenue increased by 3% year-over-year to $648 million, with an adjusted EBITDA margin of approximately 28%, up 130 basis points year-over-year [18][21] - Etsy marketplace GMS was $2.5 billion, representing a 3.2% decline year-over-year, an improvement from the 5.3% decline in Q1 [18][19] Business Line Data and Key Metrics Changes - Etsy marketplace revenue grew by 3.8% year-over-year, primarily driven by payments and offsite ads [19] - Consolidated services revenue grew by 1%, led by higher Depop shipping label and ads revenue [20] - The adjusted EBITDA margin for the Etsy marketplace was approximately 27.7%, reflecting strong performance despite ongoing macroeconomic challenges [21] Market Data and Key Metrics Changes - Active buyers in the Etsy marketplace reached approximately 91.5 million, growing 1% year-over-year [26] - GMS per active buyer was down 3.2% to $124, indicating signs of stabilization [27] - Depop and Reverb showed strong year-over-year GMS growth, with Depop focusing on removing selling fees for US sellers [28][29] Company Strategy and Development Direction - The company aims to enhance buyer consideration and make Etsy a go-to shopping destination by improving customer experiences and launching bold initiatives [5][6] - A new loyalty program, Etsy Insider, is set to launch in mid-September, targeting occasional buyers to increase their shopping frequency [14][41] - The company is leveraging AI and machine learning to improve search and buyer engagement, focusing on quality and diversity in listings [15][8] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing macroeconomic headwinds but expressed optimism about improvements in customer experience and GMS growth [3][16] - The company anticipates a modest acceleration in consolidated GMS from Q1 to Q2, with guidance for Q3 indicating a low single-digit decline year-over-year [31] - Management emphasized the importance of maintaining a differentiated customer experience to navigate economic challenges [46] Other Important Information - Rachel Glaser, the CFO, announced plans to retire, highlighting her contributions to the company's success [4][33] - The company has $1.1 billion in cash and equivalents, with a commitment to return a significant portion of free cash flow to shareholders through stock repurchases [30] Q&A Session Summary Question: Timing for the new seller classification program and its impact on buyer conversion - Management indicated that the program aims to increase frequency rather than conversion, focusing on showcasing a broader variety of items to engage more buyers [36][37] Question: Shape of GMS growth recovery and macroeconomic conditions - Management noted that macro conditions remain volatile, with mixed signals, but expressed cautious optimism for Q4 based on product initiatives and quality investments [39][47] Question: Target customer for the new loyalty program and pricing strategy - The loyalty program targets occasional buyers, aiming to convert them into more frequent shoppers, with pricing expected to be affordable [41][43] Question: Confidence in performance marketing spend and its impact on GMS - Management explained that increased marketing spend is part of a strategy to test new channels and optimize for ROI, with confidence in maintaining margins [51][54]