Etsy(ETSY) - 2024 Q2 - Earnings Call Transcript

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]