Etsy(ETSY) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2024, consolidated Gross Merchandise Sales (GMS) decreased by 4% year over year to $12.6 billion, while revenue reached a record$2.8 billion, up about 2% year over year [10][85] - Adjusted EBITDA for the year was $782 million, with margins of 27.8$3.7 billion, down 6.8% year over year, with GMS in the core Etsy marketplace declining 8.6% year over year [51][127] - Consolidated revenue in Q4 increased by 1.2% year over year to $852 million, and adjusted EBITDA grew to an all-time quarterly high of$251 million, up 6% from the prior year [128][129] Business Line Data and Key Metrics Changes - Services revenue increased by 8.1% year over year, driven by improved ad relevancy and optimized bidding in Etsy ads [130] - Consolidated marketplace revenue declined by 1.4% due to lower GMS, but was partially offset by higher consolidated payments revenue and revenue from the new seller onboarding fee [129] - The take rate for Q4 was 22.8%, ahead of expectations, supported by solid take rate expansion in Etsy ads and payments [131] Market Data and Key Metrics Changes - US buyers represented 74% of full year GMS in 2024, while non-US buyers accounted for 26% [139][140] - Non-US buyer GMS underperformed compared to US buyer GMS, reflecting unfavorable macroeconomic conditions in many international markets [67] Company Strategy and Development Direction - The company aims to enhance its differentiation by focusing on creativity, self-expression, and artisanal items, rather than competing on low prices and fast delivery [14][89] - A strategic shift in 2024 prioritized long-term initiatives over short-term growth, with a focus on improving customer experiences and increasing purchase frequency [12][88] - The introduction of a quality score in search algorithms aims to improve listing visibility based on factors like positive reviews and on-time shipping [16][91] Management's Comments on Operating Environment and Future Outlook - Management acknowledged 2024 as a challenging year, expressing disappointment in performance relative to high standards [9][84] - The company anticipates that the first quarter of 2025 will see a decline in consolidated GMS similar to Q4 2024, but expects improvements in the second half of the year as product development investments yield results [72][75] - Management is optimistic about leveraging advancements in machine learning and AI to enhance the shopping experience and drive growth [50][126] Other Important Information - The company repurchased $260 million in stock during Q4, with an additional$1 billion available under board authorization [70] - The Etsy Insider loyalty program, still in beta, has shown promising results in increasing purchase frequency among members [100][101] - Depop experienced significant growth, with GMS up nearly 32% year over year to $789 million, while Reverb's GMS was down 2.6$918 million [113][115] Q&A Session Summary Question: What are the expectations for GMS growth in 2025? - Management expects GMS performance to improve in the second half of 2025 as the comparisons become easier and the benefits of product development investments materialize [75] Question: How is the company addressing the decline in active sellers? - The decline in active sellers is seen as a necessary step to create a healthier seller base, with a higher percentage of sellers making sales [112] Question: What are the plans for marketing strategies in 2025? - The company plans to focus on efficiency in marketing, reallocating spending towards connected TV and paid social while maintaining a constant marketing spend as a percentage of revenue [102][76]