Etsy, Inc. Reports Third Quarter 2024 Results

Etsy's Board of Directors Approves a new $1B Stock Repurchase Program

BROOKLYN, N.Y., Oct. 30, 2024 /PRNewswire/ -- Etsy, Inc. (NASDAQ:ETSY), which operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world, today announced results for its third quarter ended September 30, 2024.

"Our third quarter consolidated results came in roughly as anticipated, with some incremental pressure on Etsy marketplace year-over-year GMS, healthy growth in revenue, and continued strength in our adjusted EBITDA profitability," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "We made excellent progress improving Etsy marketplace customer experiences - from Gifting, to Quality, a new loyalty program, investing in our app, and more - all of which we believe will drive engagement and frequency over time. While 2024 has been a challenging period for discretionary goods, we are investing with discipline and focus to make Etsy even more Etsy - which we believe will lift our boat when the tide comes back in again."

Third quarter 2024 performance highlights include:

• Consolidated GMS was $2.9 billion, down 4.1% year-over-year and down 4.4% on a currency-neutral basis. Consolidated GMS performance includes a small headwind from the divestiture of Elo7.
• Etsy marketplace GMS was $2.5 billion, down 6.0% year-over-year and down 6.3% on a currency-neutral basis.
  • We've continued to see year-over-year gifting GMS¹ trends outpace sitewide performance and represent a higher share of overall GMS than the same period last year.
  • Active buyers decreased 0.4% year-over-year to 91.2 million. 
  • We reactivated 6.4 million buyers, up 5.6% from the prior year period, and acquired 5.3 million new buyers. Our retention of active buyers remains above pre-pandemic levels on a trailing twelve month basis, as does our quarterly new buyer additions.
  • GMS per active buyer on a trailing twelve month basis for the Etsy marketplace declined 3.4% year-over-year to $123 in the third quarter.
  • Our number of habitual buyers was 6.8 million, down 4.8% year-over-year.
  • U.S. domestic GMS represented 51% of overall GMS and GMS ex-U.S. domestic was 49% of overall GMS.
• Consolidated revenue was $662.4 million, up 4.1% versus the third quarter of 2023, with a take rate (i.e., consolidated revenue divided by consolidated GMS) of 22.7%. Our positive revenue growth was driven by growth in both Marketplace and Services revenue, with payments revenue driving Marketplace revenue performance, and Etsy Ads the primary driver of Services revenue growth.
• Consolidated net income was $57.4 million, down $30.5 million year-over-year. Consolidated net income margin (i.e., net income divided by revenue) was approximately 8.7% and diluted net income per share was $0.45.
• Consolidated non-GAAP Adjusted EBITDA was $183.6 million, with consolidated non-GAAP Adjusted EBITDA margin (i.e., consolidated non-GAAP Adjusted EBITDA divided by consolidated revenue) of approximately 27.7%.
• Etsy ended the third quarter with $1.2 billion in cash and cash equivalents and short- and long-term investments. Under Etsy's stock repurchase program, during the third quarter of 2024 Etsy repurchased an aggregate of approximately $156 million, or 2.7 million shares, of its common stock. These shares were purchased pursuant to a 10b5-1 plan.

"We continue to balance long-term growth investments with delivering strong and sustainable profitability," said Rachel Glaser, Chief Financial Officer. "Third quarter adjusted EBITDA margin was about 28%, ahead of our guidance, with excellent revenue flow through - benefiting primarily from healthy growth in both our Marketplace and Services segments, and continued cost efficiencies. We continue to drive leverage in product development, offset somewhat by increased marketing spend in the quarter as Etsy expanded investments in paid social and newer performance marketing channels, and Depop leaned in to both performance and brand marketing aligned with its growth opportunity."

Earlier today, Etsy's Board of Directors approved a new stock repurchase program authorizing the repurchase of up to an additional $1 billion of our common stock.

Third Quarter 2024 Financial Summary

(in thousands, except percentages; unaudited)

The financial results of Elo7 have been included in our consolidated financial results ("Consolidated") until August 10, 2023 (date of sale). The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:

Third Quarter 2024 Operating Highlights 

Etsy

Our "Right to Win" is centered on key elements that we believe make the Etsy marketplace a better place to shop and sell and, which, in turn, will bring more buyers, lead to increased frequency and size of purchases, and build trust in the Etsy marketplace. In 2024, we are focused on building buyer consideration by making it easier to 'find the best stuff' on Etsy, driving association that Etsy sellers offer great value, and making shopping on Etsy more reliable and dependable. The below highlights some of our key initiatives:

Product Highlights:

In order to drive buyer Consideration, we are making progress in our efforts to position Etsy as an indispensable partner for Gifting, with broad based investments positively impacting our performance. We:

• Strengthened the relevance and tripled the number of Gift Ideas available to buyers within Gift Mode since launch. There are now approximately 5,000 suggestions to help inspire buyers and put them on the path to finding the perfect present.
• Increased buyer adoption of existing Gifting features: 1.3 million incremental visits from people who received Gift Teasers and came directly to Etsy, and approximately 1.1 million Gift Lists have been created.
• Launched physical Etsy gift cards at major U.S. pharmacies and retailers, creating new opportunities to increase consideration. Additionally, starting today, U.S. customers can purchase and ship physical gift cards directly from Etsy.com.
• U.S. buyer survey data we are tracking for Gifting indicates Etsy's unprompted association with Gifting hit a record high during the third quarter.

To help buyers 'find the best stuff on Etsy,' we invested in the following Quality initiatives:

• Worked to enhance the precision of the application of our new "Creativity Standards" and associated listing descriptors, which show buyers whether items are made, designed, handpicked, or sourced by Etsy sellers.
• Based upon experimentation during the quarter, our efforts to more deeply incorporate listing quality attributes into search appear to be leading to an increase in the number of 4 and 5 star buyer reviews, and a decrease in the rate at which buyers requested refunds – both of which indicate shoppers are becoming happier with their experiences on Etsy.
• Launched the Etsy Search Visibility Page with actionable insights to help sellers improve their positions in search, including insights on listing image quality and quantity, return policies, message response times, and shipping charges for certain listings. So far, we have seen more sellers acting on these insights than we anticipated. For example, providing sellers with information on buyer expectations has contributed to lower shipping charges on approximately 2.5 million items.
• Expanded the diversity of merchandise we are showing buyers, with a goal to reduce the cognitive load experienced when search results deliver too many similar items. Our latest efforts resulted in a 67% reduction in the number of searches with at least four identical listing images on the first page. We are now expanding our capabilities to incorporate items with similar listing images, not just those that feature 'exact matches.'

Aligned with our efforts to make shopping on Etsy more reliable and dependable, we began testing new ways for buyers to access support more easily through prominent support links in user profiles and conversational AI within the Help Center.

We deepened investments in the buy on Etsy app as part of efforts to make the app our marquee shopping experience. We introduced bolder prompts on mobile web, with a focus on driving buyers to download the app.

Due to significant strides made in optimizing how we bid on behalf of our sellers, which resulted in better balancing of seller ad value across seller segments, Etsy Ads revenue performance accelerated on a year-over-year and sequential basis. We also incorporated more features and multimodal embeddings into our ranking models (capturing listing image representations), which led to an improvement in ads conversion rates.

Marketing Highlights:

We invited highly targeted groups of occasional U.S. buyers to join our new Etsy Insider Loyalty program. Etsy Insider is buyer-fee based, offering free U.S. domestic shipping on millions of items, item discounts, first access merchandise and other benefits. The program, which currently offers seasonal and annual options, has been launched in beta form, and we will be testing and iterating to determine its impact on frequency and loyalty over time.

We ran full funnel marketing campaigns in the United States and United Kingdom, which featured real Etsy sellers and highlighted our unique positioning. Our buyer research shows that the campaign's top themes of 'supporting small,' 'originally made,' and 'handcrafted' resonated with buyers.

We continued to scale mid-funnel paid social channels to diversify our channel portfolio mix. In line with our Quality efforts, we leveraged machine learning models to adjust offsite marketing feeds, making more room for the very best of Etsy by suppressing or removing listings with patterns of poor service quality.

Reverb

• Reverb continues to lean into affordable used and like-new gear for budget-minded musicians:
  • Following the launch of the Reverb Outlet in late June, Outlet & Exclusive music gear continues to outperform other inventory categories, seeing double-digit percentage year-over-year growth during a challenging time for the musical instrument industry.
  • In August, Reverb and Fender, one of the world's leading guitar manufacturers, launched Fender's first Certified Pre-Owned program. Used gear U.S. sales on Reverb continue to outpace new music gear sales, and, this program offers musicians professionally inspected pre-owned gear with warranties and easy returns.
  • Reverb made it easier for sellers to access data on competitive pricing and insights about engagement with their listings, which led to a significant increase in listings sold, as well as price drops and listings published.

Depop

• Depop evolved its U.S. fee structure, mirroring changes made earlier in the year in the U.K., which resulted in accelerated momentum for the business in the quarter:
  • In July, Depop removed selling fees for U.S. users and introduced a small buyer marketplace fee. We believe this change has made Depop more attractive to sellers, driving a 26 percentage point acceleration in U.S. listings since launch, and offering buyers a wider selection of secondhand fashion.
  • Depop ran its largest-ever U.S. marketing campaign, aimed at sharing the refreshed brand message and no selling fees proposition with more than 70 million people.
• Depop also invested in making the listing experience easier through improving the effectiveness of its price guidance, pre-populating key listing attributes using image recognition and generative AI technology, and streamlining the "Repop" process which allows buyers to easily relist items they have previously purchased on Depop.

Consolidated Q4 24 Financial Guidance 

Please note that our guidance assumes currency exchange rates remain unchanged at current levels.

With respect to our expectations under "Consolidated Q4 24 Financial Guidance" and outlook for the remainder of 2024 above, reconciliation of Adjusted EBITDA margin guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity, and low visibility with respect to the charges excluded from Adjusted EBITDA; in particular, stock-based compensation expense, foreign exchange loss (gain), interest and other non-operating income, net, provision (benefit) for income taxes, acquisition, divestiture, and corporate structure-related expenses, and other non-recurring expenses.

Webcast and Conference Call Information 

Etsy will host a video webcast conference call to discuss these results at 5:00 p.m. Eastern Time today, which will be live-streamed via our Investor Relations website (investors.etsy.com) under the Events section. A copy of the earnings call presentation will also be posted to our website.

A replay of the video webcast will be available through the same link following the conference call starting at 8:00 p.m. Eastern Time this evening, for at least three months thereafter.

About Etsy

Etsy, Inc. operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. These marketplaces share a mission to "Keep Commerce Human," and we're committed to using the power of business and technology to strengthen communities and empower people. Our primary marketplace, Etsy.com, is the global destination for unique and creative goods. Buyers come to Etsy to be inspired and delighted by items that are crafted and curated by creative entrepreneurs. For sellers, we offer a range of tools and services that address key business needs.

Etsy, Inc.'s "House of Brands" portfolio also includes fashion resale marketplace Depop, and Reverb, the largest online marketplace dedicated to music gear. Each Etsy, Inc. marketplace operates independently, while benefiting from shared expertise in product, marketing, technology, and customer support.

Etsy was founded in 2005 and is headquartered in Brooklyn, New York.

Etsy has used, and intends to continue using, its Investor Relations website and the Etsy News Blog (etsy.com/news) to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website and the Etsy News Blog in addition to following our press releases, SEC filings, and public conference calls and webcasts.

Investor Relations Contact: 

Deb Wasser, Vice President, Investor Relations and ESG Engagement

Sarah Marx, Director, Investor Relations

[email protected] 

Media Relations Contact:

Kelly Clausen, Vice President, Communications & Community

[email protected] 

Cautionary Statement Regarding Forward-Looking Statements

This press release contains or references forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements relating to our financial guidance for the fourth quarter of 2024 and outlook for the full year of 2024 and underlying assumptions; our ability to improve customer engagement and frequency; our ability to invest in strategic growth while delivering on profitability; and the impact of our "Right to Win" strategy and our product development and marketing efforts. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as "aim," "anticipate," "believe," "could," "enable," "estimate," "expect," "goal," "intend," "may," "outlook," "plan," "potential," "target," "will," or similar expressions and derivative forms and/or the negatives of those words.

Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include: (1) the level of demand for our services or products sold in our marketplaces; (2) the importance to our success of the trustworthiness of our marketplaces and our ability to attract and retain active and engaged communities of buyers and sellers; (3) the fluctuation of our quarterly operating results; (4) our failure to meet our publicly announced guidance or other expectations; (5) any real or perceived inaccuracies in our operational metrics; (6) if we or our third-party providers are unable to protect against technology vulnerabilities, service interruptions, security breaches, or other cyber-related events; (7) our dependence on continued and unimpeded access to third-party services, platforms, and infrastructure; (8) macroeconomic events that are outside of our control; (9) operational and compliance risks related to our payments systems; (10) our ability to recruit and retain employees; (11) our ability to compete effectively; (12) enforcement of our marketplace policies; (13) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers; (14) risks related to our environmental, social, and governance activities and disclosures; (15) our efforts to expand our operations outside of the United States; (16) acquisitions that may prove unsuccessful or divert management attention; (17) failure to deal effectively with fraud; (18) compliance with evolving regulations, including in the area of privacy and data protection; and (19) litigation and regulatory matters, including intellectual property claims. These and other risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur.

Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

 

 

 

Currency-Neutral GMS Growth

We calculate currency-neutral GMS growth by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.

As reported and currency-neutral GMS decline for the periods presented below are as follows:

 

Non-GAAP Financial Measures

Reconciliation of Net Income to Adjusted EBITDA and the Calculation of Adjusted EBITDA Margin

(in thousands, except percentages; unaudited)

 

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SOURCE Etsy, Inc.