Financial Data and Key Metrics Changes - Consolidated GMS for the third quarter was $2.72 billion, exceeding guidance, with a year-over-year decline of 2.4% for Etsy Marketplace GMS [22][23] - Consolidated revenue grew 6.1% year-over-year to $678 million, with adjusted EBITDA at $172 million, representing a margin of 25.4% [23][30] - Active buyer count was 86.6 million, down 5% year-over-year, but new and reactivated buyers totaled 11.4 million for the quarter [25][26] Business Line Data and Key Metrics Changes - Etsy Marketplace GMS was down 2.4% year-over-year, while Depop's GMS grew 39.4% year-over-year to $292 million [10][23] - Depop's third quarter growth accelerated by 400 basis points sequentially, driven by new user growth and improved buyer conversion [10][11] - Services revenue grew 12.7% year-over-year, primarily from on-site ad revenue at both Etsy and Depop [29] Market Data and Key Metrics Changes - GMS per active buyer was stable at $121, with encouraging month-by-month improvements in purchase frequency and average item values [25][26] - The app's contribution to total GMS increased to 46%, with app users visiting five times more often than non-app users [28][27] - Strong performance was noted in vintage home and living, jewelry above $100, and wedding rings, with GMS comparisons improving across most top categories [26] Company Strategy and Development Direction - The company is focusing on four strategic priorities: enhancing shopper discovery, deepening loyalty, amplifying seller creativity, and improving the overall shopping experience [12][18] - A partnership with OpenAI aims to leverage AI for personalized shopping experiences, integrating Etsy listings into ChatGPT for seamless transactions [13][40] - The company is reallocating marketing spend towards upper funnel channels like social video and streaming to enhance engagement [15][32] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about consumer spending, anticipating a stable macro environment for the holiday season [33][55] - The leadership transition is seen as timely, with new CEO Kruti Patel Goyal expected to drive growth through a focus on creativity and human connection [5][12] - The company expects Q4 consolidated GMS to be between $3.5 billion and $3.65 billion, indicating further sequential improvement [33] Other Important Information - The company completed the sale of Reverb, which impacted year-over-year comparisons [22] - Free cash flow exceeded $200 million in the quarter, with $1.6 billion in cash and investments at the end of the quarter [33] - The company repurchased 2.1 million shares at a cost of approximately $120 million, reducing share count by 17% since December 2023 [33] Q&A Session Summary Question: About the OpenAI partnership and its integration - Management highlighted the excitement around the OpenAI partnership, emphasizing the unique opportunity it presents for Etsy in agentic commerce [38][39] - The integration allows users to purchase items directly through ChatGPT, with Etsy covering the transaction fee for now [40][41] Question: Engagement improvements on the app - Management discussed meaningful investments in reshaping the app's home screen to enhance discovery and engagement, leading to higher user interaction [44][46] Question: Fourth quarter guidance and holiday opportunities - Management indicated uncertainty in consumer health but expects continued progress in initiatives, with a strong holiday campaign planned [53][55][56] Question: Balancing traffic from GenAI platforms versus direct mobile - Management believes that both channels can coexist and benefit Etsy, enhancing brand consideration and app usage [78][81] Question: Investments planned for Depop and margin compression - Management confirmed that the brand campaign for Depop is a long-term investment aimed at expanding awareness, which may compress margins in the near term [79][83]

Core Insights - Etsy is utilizing artificial intelligence to drive growth, which has led to significant fluctuations in its stock price [1] Group 1: Partnership and Innovations - OpenAI announced a partnership with Etsy, allowing U.S. ChatGPT users to shop directly with Etsy sellers through the chat interface [2] - The integration connects millions of ChatGPT users to 5.4 million active Etsy sellers, positioning Etsy within the emerging concept of "agentic commerce" [3] Group 2: Stock Performance and Analyst Sentiment - Following the AI announcement, Etsy's stock surged 12% to a 52-week high, but subsequently fell 10.7% after analysts expressed concerns about the sustainability of AI-driven commerce [3][4] - Morgan Stanley reiterated an Equal Weight rating with a price target of $54, suggesting that the initial enthusiasm may be overblown [4] - Conversely, BTIG raised its price target on Etsy to $81 from $72, maintaining a Buy rating, indicating a more optimistic outlook on the potential of ChatGPT and agentic innovation [5] Group 3: Financial Performance - Etsy's Gross Merchandise Sales (GMS) decreased by 4.8% year-over-year to $2.8 billion, while net income dropped 46% to $28.8 million, largely due to foreign exchange losses [6] - Revenue increased by 3.8% to $672.7 million, primarily driven by Etsy Ads and payment services [6] - Depop, acquired for $1.6 billion, showed strong performance with GMS rising 35% year-over-year to $250 million, and U.S. growth accelerating by 54% [7]

Core Insights - Etsy reported second-quarter 2025 earnings of 25 cents per share, missing the Zacks Consensus Estimate by 53.7% and decreasing 39% year over year [1][8] - Revenues for the second quarter of 2025 increased 3.8% year over year to $672.7 million, exceeding the Zacks Consensus Estimate by 3.8%, driven by strong on-site advertising performance and contributions from Depop [1][8] Financial Performance - Marketplace revenues were $468.2 million, accounting for 69.6% of total revenues, down 0.5% year over year, primarily due to a 5.2% decline in transaction fee revenues [3] - Services revenues reached $204.5 million, up 15.3% year over year, driven by a 12.7% increase in on-site advertising revenues [4] - Consolidated Gross Merchandise Sales (GMS) totaled $2.8 billion, down 4.8% year over year, but surpassed the Zacks Consensus Estimate by 1.23% [6][8] User Metrics - The total number of active buyers decreased 4.6% year over year to 87.3 million, while the active seller base fell 7.8% to 8.1 million [5] - Etsy acquired 4.8 million new buyers in the quarter, with a record 6.5 million reactivated buyers, reflecting solid momentum in buyer reactivation [4][5][8] Operating Expenses - Total operating expenses were $402.7 million, up 2.3% year over year, but as a percentage of revenues, it contracted 90 basis points to 59.9% [7] - Marketing expenses increased 15.9% year over year to $212.1 million, while product development expenses decreased 2.3% to $111.9 million [9] Balance Sheet - As of June 30, 2025, cash and cash equivalents totaled $1.2 billion, up from $649.2 million at the end of the previous quarter [11] - Long-term debt increased to $3 billion from $2.3 billion in the prior quarter [11] Future Guidance - For the third quarter of 2025, Etsy anticipates a take rate of 24.5% and projects consolidated GMS to be between $2.6 billion and $2.7 billion [12]

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]