Etsy(ETSY) - 2025 Q4 - Annual Report

Financial Performance - Total consolidated Gross Merchandise Sales (GMS) in 2025 was $11,916.9 million, with Etsy marketplace GMS at $10,460.7 million (87.8% of total) and Depop generating $1,074.9 million (9.0% of total) GMS[31] - In 2025, the company generated $693.4 million in cash from operating activities and $638.8 million in consolidated free cash flow, indicating strong financial health[40] - Etsy repurchased 14.4 million shares at a total cost of $777.1 million in 2025, with a new $750 million stock repurchase program approved by the Board of Directors[41] - The company plans to utilize proceeds from the sale of Depop, expected to close in Q2 2026 for $1.2 billion, for general corporate purposes and continued share repurchases[32] - As of December 31, 2025, Etsy had 86.5 million active buyers and 5.6 million active sellers, with GMS declining 4% to $10.5 billion[44] Strategic Initiatives - Etsy's leadership transition includes Kruti Patel Goyal as the new CEO effective January 1, 2026, following Josh Silverman's departure[42] - The company emphasizes investment in technology to enhance search, discovery, and overall platform performance, which is critical for marketplace growth[34] - Marketing strategies focus on engaging customers through performance and brand marketing, with an emphasis on personalized communication[35] - Etsy's strategic initiatives focus on increasing buyer engagement, with 21.2 million new buyers added in 2025, despite a 10% year-over-year decline[59] - The company aims to deepen retention and engagement among existing buyers while attracting new ones through its four strategic initiatives[62] Market and Competition - The company faces risks related to competition, technology disruptions, and regulatory compliance that could impact future performance[25][28] - The estimated online market size for Etsy's relevant retail categories is approximately $600 billion, with Etsy's GMS representing about 2% of this opportunity[64] - Depop's active sellers grew 60% year-over-year in the U.S., highlighting strong market momentum in the resale apparel sector[66] User Engagement - Etsy Ads improvements led to year-over-year revenue growth, enhancing ad relevancy and efficiency, contributing to overall performance despite GMS pressure[46] - In 2025, Etsy reactivated 30.0 million lapsed buyers, a 4% increase year-over-year, indicating effective personalized marketing strategies[59] - Approximately 59% of Depop sellers who made a sale in 2025 also made at least one purchase in the same year, indicating strong user engagement[68] - 93% of Depop's Gross Merchandise Sales (GMS) was in the apparel category, with 74% coming from U.S. buyers and 26% from non-U.S. buyers[68] - 92% of GMS was transacted on the app, and 87% of buyers over the past year were under the age of 34[68] Environmental Sustainability - In 2025, Etsy's Scope 1 and 2 emissions were 1,248 metric tonnes, with Scope 3 emissions totaling 416,665 metric tonnes, reflecting a decrease in emissions intensity to 202 tCO2e per million dollars of gross profit[99] - The company aims for a 50% reduction in absolute Scope 1 and 2 greenhouse gas emissions by 2030 from a 2020 baseline, achieving a 21% reduction so far[85] - In 2025, Etsy established terms with suppliers representing over $39 million in annual spend to support emissions reduction initiatives[91] - The company provided a $3 million loan to the nonprofit New York Energy Efficiency Corporation to finance energy-efficiency improvements in 2025[96] - Etsy's Net Zero goal was approved by the Science Based Targets Initiative (SBTi) in 2022, aligning with its commitment to reduce emissions[89] Operational Efficiency - The total operational energy footprint in 2025 was 7,797 MWh, with 54% derived from electricity, meeting a 25% reduction target from a 2016 baseline[106] - Etsy achieved 100% renewable energy sourcing for its quantified electricity usage, including offices and employees working from home[105] - Etsy's Brooklyn office received "Zero Waste" certification for the seventh consecutive year, while the Dublin office diverted over 90% of waste from landfills[109] - The company aims for 100% of its offices to achieve "Zero Waste" certification by the end of 2025, currently at 88%[105] - Etsy's sustainable compute energy target was met with a 25% reduction (kWh/visit) from a 2016 baseline[107] Social Responsibility - Etsy's Impact Investment Fund made approximately $3.4 million in philanthropic donations to community-based organizations in 2025[79] - The Uplift Fund supported nearly 7,690 entrepreneurs in 2025, with U.S. buyers donating $1.9 million to the creative community through checkout contributions[137] - In 2025, the company spent $39 million with diverse-owned suppliers, including women, disability, and LGBTQ-owned globally, as well as various minority-owned businesses in the U.S.[134] - The company is committed to ensuring contractors receive a living wage and access to quality medical care[141] - The company implemented a process for key suppliers to complete third-party assessments to strengthen understanding of human rights and ethical practices[136] Risk Management - The company has a significant amount of convertible debt and may incur additional debt in the future, which poses financial risks[27] - A 10% adverse change in foreign currency exchange rates could decrease revenue by $117.1 million, approximately 4.1% of total revenue for 2025[396] - The company has not entered into any derivatives or hedging transactions to manage foreign currency exchange risk but may consider it in the future[395] - A 10% adverse change in foreign currency exchange rates would result in a currency exchange loss of $9.1 million based on balance sheet balances as of December 31, 2025[396] - The company updated its Modern Slavery Statement and published AI principles to guide innovation while maintaining human connection[136]