Etsy(ETSY) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - Etsy reported over $11 billion in gross merchandise sales (GMS) and over$ 2.5 billion in revenue, with $750 million in free cash flow, showing significant growth from$ 2 billion in GMS and less than $400 million in revenue when the CEO joined in 2017 [5][6][11] - The company has retained nearly all of the buyers and GMS gained during the pandemic, with 88 million active buyers at the end of the previous year [11][12] Business Line Data and Key Metrics Changes - The core Etsy business has high operating margins, while the overall corporate average is diluted by lower margins from Depop and Reverb, which are being consolidated [77][82] - The company has maintained strong margin discipline despite GMS pressures, with gross margins expected to remain in the low 70% range [76][80] Market Data and Key Metrics Changes - Etsy's marketplace supports approximately 90 million active buyers and 5.5 million sellers, indicating a robust community [3] - The company has a significant opportunity to grow in its most penetrated markets, with one out of three women in the US and UK having purchased from Etsy in the last year [68][69] Company Strategy and Development Direction - Etsy aims to enhance personalization and browsing experience on its platform, focusing on making the site more app-based and improving product discovery [14][46] - The company is investing in local search and cross-border shipping to drive growth in international markets, particularly in Europe [73] Management's Comments on Operating Environment and Future Outlook - Management noted that while discretionary purchases have been under pressure, Etsy has not seen significant market diversion due to economic conditions [22] - The company is optimistic about improving year-over-year comparisons in GMS as the year progresses, citing easier comparisons in the second half of the year [16] Other Important Information - Etsy has a proactive approach to managing tariff impacts, with a focus on local sourcing and flexibility within its seller community [24][25] - The company has about$ 800 million remaining on its current share repurchase authorization, indicating strong free cash flow generation [85] Q&A Session Summary Question: How does Etsy plan to improve GMS growth? - Management discussed the importance of improving product experience and infrastructure, which is expected to drive GMS growth in the coming quarters [19][20] Question: What is the impact of tariffs on Etsy's business? - Management indicated that Etsy's seller community is resilient and that the company is actively informing sellers about tariff changes, while also highlighting that only about 1% of GMS comes from US buyers purchasing from sellers in China [27][28] Question: How does Etsy view its competition and market dynamics? - Management acknowledged the dynamic nature of the market and emphasized that Etsy's value proposition would strengthen if tariffs against China remain in place [36] Question: What are the expectations for margins in the upcoming year? - Management confirmed that gross margins are expected to remain in the low 70% range, with continued cost discipline being a priority [76][80] Question: How does Etsy plan to engage lapsed users? - Management highlighted the opportunity to re-engage the 100 million lapsed users who have previously shopped on Etsy, focusing on reminding them of the unique offerings available [69][70]