ETSY - Earnings call transcript Q2 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day ladies and gentlemen and thank you for standing by. Welcome to the Q2 2019 Etsy, Inc. earnings conference call. At this time, all participants are in a listen-only mode.

Following management's prepared remarks, we will host a question-and-answer session and instructions will be given at that time. Instructions]. [Operator

this being reminder, purposes. for call conference a recorded is replay As

is hand President Wasser, to my of conference Relations. It pleasure Deb the now over to Investor Vice

begin. may You

Deb Wasser

conference afternoon to and Thank you. Etsy's Good QX call. welcome

Joining Financial Chief me Rachel Officer. today CEO Josh and are Glaser, Silverman,

statements our drivers and get forward-looking on thereof, impact anticipated financial spend other just results. current anticipated financial investments product impact today started, financial and launches impact our we our on on of reminder that marketing to Before remarks results, anticipated experiments, guidance planned future their anticipated our conversion future a include relating and key and and rates and including

actual may materially. Our results differ

the risks Forward-looking statements them. XXXX in today which X, call and we press we SEC and to beliefs and subsequent described have on reports with obligation make assumptions with we are are forward-looking on uncertainties update Any statements based the SEC. our any that May release, involve this our on file that filed our don't XX-Q and

Also GAAP financial of can both reconciliation on you A measures release, the link in there press A also Relations and find release via replay to replay Investor well. prefer call to press call, website. during our a GAAP earnings measures. included information be non-GAAP we is find non-GAAP which in this the today's as present and will the to of available access you can if phone, that you

along. We today's remarks have opening and recommend created a you follow presentation slide accompany to

call will With the turn Josh. to I that, over

Josh Silverman

take our and was in of growth GMS across XX.X%. quarter in everyone. revenue and product increases steady continued investments. and rate solid an with good and portfolio afternoon the marketing encouraging Deb another Thanks overall in revenue EBITDA of been GMS, resulting services driven by drove board It's

it's capabilities are our progress paying product great and improving experience We marketing making off. our and

how through to to we further. are we have new initiatives we growth which even you bold addition, walk fuel In our of detailing excited expect a number them

starting First, the let's in dive highlights progress our second with marketing. quarter of

a optimizing every marketing quarter, of channels the and attribution have our XXXX, and full investments to in test In the incrementality have first order their funnel. in model. in certain in to been spend We part approach we refine funnel we our paused our

As we a we these result of with the conviction tests, channels some an the entered portfolio of tested. quarter second around optimized new and

ROI First, our we on through and ramped maintaining Google improvements. marketing infrastructure increasing and performance spend while even efficiency

dynamic seeing progress by believe in lever Over channels. powerful Second, as positive unlocking where we growth. incremental we a such and are potential are are returns social become channels can making time, retargeting found drive encouraged social we strategies We to progress. our

TV called weeks aired you. we digital national and Belongings, seven Third, select matter launched cable campaign new for on which that through It to things from channels late-April buying a focuses on mid-June.

We with are the results. very pleased

Our visits and are research not. were the that ads to those for who indicates customers significantly who market exposed higher were versus purchase intent

likely who purchase. buyers were our to ads In the fact, viewing convert visited XX% after more to site a

as such channels spend Google our other make running. time to can TV was harder. early other in the our this campaign uplift TV correlated exciting channels that during a saw see we evidence ads expected, work As the It's

we these quarter for strengthen In belief potential the our initiatives capabilities. our also specific ads as growth short, for as and shorter weddings. furnishings will home marketing such to results drive produce and been of significant our validate it's our further We versions focused on great profitable categories marketing a in

and value belt, enthusiasm Etsy's to two growth. true company. of and Ryan is just the turbocharge strengthening of power And Scott, decades master with a speaking end the our Etsy. marketing Ryan experience e-commerce the that and towards a to of Marketing the Ryan are very of the marketing ton early quarter, Etsy's capabilities, we Officer, Chief new under his the of brings joined of shares days of over already unlocking my a month craft is in adding He

initiatives needle. product our continued have to turn move the which to let's Now

teams strong QX. delivered results product Our in also

our multiple product development is the know, GMS. all-time our customer and record significant to to Product set inventory, with We experience connections unique highlighting progress focuses aligned rights on velocity QX. which you an a improved incremental trusted As strategy in the brand. surpassing high, resulting fronts tightly experiment search improving strengthening made human discovery, on our in expanded building win, and

home dynamic For the up and discovery off the made buyers they search recent and page where example, more in second quarter, personalized mission. most to left pick meaningful on allowing strides by in shopping more their making we easily

our improving a what building I an core connected that will brand. app stream discuss we on progress even in work is be on effort a expect significant of as positive part to as will made also impacts moment, such We mobile focus have will as frequency. more metrics our shipping all trusted of multiyear And a

and I rapidly to product caliber am teams productivity. our our see the of and discipline pipeline, and we testament are development while encouraged engineering strength accelerating It's of to our methodology of our even maintaining product a the able that team. scale to the

in made of we marketing We half both by in and first XXXX. development are the encouraged the progress product

we also initiatives expect that second bold future catalyze includes half this a growth. year additional trio new The of will of

shipping free new Etsy's program. is First

Second, Reverb, called a category strong Etsy new we potential. a very are new to a fit third, marketplace Etsy unified strategic similar Ads. a we growth and two-sided with and acquiring launching are platform robust And ad

and item their be us of Etsy XX% unreasonably When is back shipping three most buyers First, a the buyers and top to of domestic of they these instances or shipping and year, an up. that buyers Etsy let's one shipping they changed Moreover, commonly buy, important perceive to Buyer number in cited reasons. on had don't that tell less like offered friends. prices to far cost significant additional have discuss likely of shipping expectations high. Last us fewer news to that to free items promote it's keep our Etsy regarding than recent listings shipping. are additional on come find

X, we rolled So need U.S. program to and shipping new support the sellers to give buyers free $XX tools, education orders on to or on a more. offer they July of out

broken buyers the that sellers message now free We shipping. likely to separately. central is to with compared as our to free same are Our shipping more that expect significantly item shipping buyers know that buy from an item fees out research has

be manage shipping incorporate portion all tool of gives their guarantee. a in a created to option buyers also bulk which tool smart allows free key To leads U.S. easily sellers edit prices their to a transition, cost the recover listings or for know to their The shipping to item help free our search, higher often prioritized sellers costs up we free factor shipping and sellers accordingly. a that deeply. order The U.S. a this guarantee to we values. will Internal set value suggests into pricing them shipping with data individual products

also is related to a for higher and believe regarding that buyer We potential better expectations conversion there meeting shipping. improved frequency

in Etsy shipping plan to buyers to enable free to our about part sellers better today's Seller to We September. our promising compete starting shipping begin e-commerce the date in been of opportunity core the has experience to landscape. adoption shopping marketing and a free is make and are to excited actively

that the But U.S., our established free for to plan the on largest we has market other focused the making is and launch most initial the to this expectation core markets Our explore in one available shipping. future.

consistent establishing approach a points to other related such We to to expectations friction also ensuring and as fulfillment, address date met. plan that delivery are returns

Google later sales. announce and products a designed drive offers which gain products, we be is Google. more to Shopping, new ad their on-site I Etsy drive launching that two advertising opportunities am to advertising will promoted this platform, prominence our excited also and to sellers product Etsy month our unified visits which to Today, which give shop, their advertises sellers listings, help on traffic paid to separate and Ads,

to to for be working up quarters. optimize receive for listings. extremely show primarily approximately to places on improved has which the ad by simply return algorithms, Let growth service. of right designed resulting past Robust deliver products. promoted strong in is that, a This Sellers with listings through inventory, that of or shopper Pro right the behalf in they eight has two is meaning on us site the and the and the explain easy-to-use. Starting on more expansion largest on a moment what a sellers our growth spend. been Etsy we their ensure me average, each to listings revenue more List service Promoted promoted these budget give ad sales. more daily budget now grown XX% driven take

quality to buying budget, Google to allows second are relatively launched we ad that traffic the sellers their to as as are their sellers visits, use Since give from we long product or the are they product they from as off us in shopping. indifferent Google whether know which to high driving listings. a XXXX, visits on PLAs directly behalf our buy on we Etsy come This

average on sellers' gross margin that much our than believe higher X% fee. our also We is transaction

and visit words, we from they on spend. ad more a would strong other are to than still In on spend Google return a able achieve

Our our the we leaving purchased. sellers there that potential visits on that have research happily indicates table would are many are

on invest we any ad Shopping. unused of However, a Google completely List buy do today the separate Google Pro Shopping budget is that not meaning

have Etsy. a on has invest a seller spend us found we as confusing result, sellers to budget, We it try separate on solution and manage want a and single to of sellers where ad behalf, Google Our adoption off been with limited. intimidating much they bit programs a tell that believe and their that how simple and to single two Shopping

XX, than sellers' budget. today, illustrated use we of less As our aggregated slide have on we XX%

to portion with List sellers' invest guidepost. of continue other more to budgets they as Google to on you a one see to month. but By offering, appetite this both slide. we creating Ads the the can ad can have our utilize have strong as of our across budgets ROAS we than PLAs hurdle will unutilized a In sellers' remain Etsy expect we aim sellers' over streamlined and right-hand time, later side as launch more this spend optimize offer. will Pro words, inventory We optimize that

Etsy. Over for our driver product this time, and growth sellers for to for is a our be goal

those from, well mobile and be their seller as Etsy no will own funnel reduce way traffic every consumers reallocate direct spend Etsy seller can as home performance consideration, this will mid to upper marketing but smarter page app, improve brand increase message and benefit investing. and drive a individual marketing. to We channels why on when believe to for to expect our Etsy, reminding our investments We and and a do more frequency, on us awareness

as take and a grows service uptake seller of and optional popular take services Etsy's another value and will be how rate. will budget fees. our it great deliver rate It's sellers excellent us a Ads Etsy fair can that help Etsy example to minimizing for while mandatory seller believe We so to optional

growth used and Our new, catalyst recently third held privately vintage music to announced a for is agreement acquire marketplace our Reverb, gear.

we strategic potential times, is of one. our keeping value musical a This differentiation mission and in Reverb and significant As heard business. Etsy me are of you the fit a in bottle. only instruments, are scale have aligns handful many see transaction vibrant is firmly that with a is human. lightning two-sided with Reverb them commerce at of great There competitive marketplaces the tremendous say and

with in Kalt been only space and incredible, will and David They who where special online. and musical it instruments years there to platform. I buy have outpacing out of team are place instrument his the has this a disruptive musicians founder bet you sell a created in new. the and sector familiar Reverb sales force essentially are and used have redefined Reverb's now six new grown are musical What is some

building its Why about so a We to community. selling and the between And Reverb, user this sorry, as levers the strategic search model infancy deal? the easier and for growth similar global and discovery, jazzed, of number great and brand a see am buying growth. I similarities making improving and Etsy company of Etsy. of fit business in a and It's is such

confident are successfully have similarly and impact Reverb's we business. implementing of Etsy can We these types at initiatives that

today. but more is and to you have customary the other once completed, pending will minimum keeping approval still business share we are our it's conditions, We transaction closing to about this regulatory commentary a since with

have what ahead I excited lies never been about Etsy. more for

and we product make to positive with well. core further business there ROI our that marketing us an good have development. growth that see been has channels, the have up have set We believe Overall, key and disciplined about we more we impact And something meaningful, including continue unlock to progress term for marketing stands on continue bets brighter a TV and near returns for in relevant scale our tremendous we potential continues the incremental in never different and and product financials investments future to that will teams and to on which as bold as we even long. a and our feel

I will that, the over turn with call to Rachel. And

Rachel Glaser

basis the in In quarter was XXX $XX optimize Josh. from GMS to on points $XXX and basis, and XX% growth. with with and fueled increased growth grew continued Thanks marketplace by XX% in to basis prior investment services. in margin as EBITDA second QX XX% an an And velocity to year, EBITDA and and both as million channels. expanding constant last adjusted currency we product grew million on both revenue a benefit quarter, robust marketing new year-over-year development acceleration Revenue reported mature versus XX%

a provide adjusted me color on Let our results. little revenue EBITDA and

First, and increase. the transaction marketplace benefited year's also growth GMS benefiting last revenue from revenue price related XX% from

growth of which has the take our revenue QX, been a significant the over year. in reminder, a of increase beginning anniversary in As driver past rate the we marketplace marketplace

revenue to in growing QX. revenue contributing promoted was growth services Next, largest in XX% factor listings the

recur As our had did Etsy last discussed last second a related XXXX. label $X.X benefit shipping the onetime of quarter million in year on we revenue not to that call, in of

impact work our shifted development have that on focus positive promoted new may some Ads Etsy delaying somewhat to squads a launches of listing product on addition, revenue. had In

markets the this class. of this revenue at the revenue, compared Despite eliminated product year-over-year we small effective shipping of last sellers. have the lower note label the approximately we to beginning four growth, the continued USPS year. adopted saw This where shipping a QX. sellers This increase sellers rate in label or XX,XXX to shift headwind to a an on as a And causing XX% margin approximately active decrease to of from classes of in one our the sellers and XXX,XXX offer is prior service the year was cause

Both pleased at consistent to efficiency robust our XX.X%, prior data incremental spend Overall, marketing remained insights our tests. take we rate see recent were as in with leveraged quarters. We and growth our drive to XX%. through to and our running points by of marketing and revenue is incremental basis margins offset partially improvement G&A. helped revenue cost expenses to efficiency XXX EBITDA QX EBITDA from

by Cost XX% of basis revenue increased year-over-year though gross points. increased XXX margin

In systems have positive recorded terms cloud product to expensed of driver GMS the expect expenses a year-over-year to Cloud, of our this we in of cost related costs our primary migration of Cloud migrated are revenue. a with Google initiatives majority leverage were to usage and benefit the Cloud the we spend to Google our and and for increase impact of growth. on

of in adopted now at the non-cash. primarily beginning by year, the in in impact resulting the forward is of that G&A incremental included in backed year G&A going driven lease out will This part depreciation our new acquisition the $X.X related expenses increases expense were be prior Reverb. primarily versus of this the out of is professional quarter large line of backed EBITDA. our to million P&L pending EBITDA of standard Also

operating increasing ever the to key buyer as accelerated trailing returns that It which continuing $XXX flywheel delivered our XX% over metrics. stronger we progress by XX-month consecutive grew quarters. in per improvements basis XX a demonstrated to continued impacted million. the get growth, on a Our frequency. to first improving positively has positive important term this and and for by in to the that TV future expect investments to five be time we of period as GMS seventh quarter, metric QX keep for deliver make buyers Active payback active our in quarters is such are to evidence marketing mind consecutive longer has in can

buyer buyers. six segment sellers part have spent period, to fastest purchases signs Habitual made in the a Our of active to or show of And and more over continued International XX% by international in currency driven again growing were international increased customers large $XXX of improvement. quarter buyers, constant categories buyer GMS routes. our by strong international on in driven in XX%, for was and seller sellers. and basis, another GMS to XX% a overall GMS growth growth quarter U.S. growth was international trade domestic XX-month the

coming GMS Paid our XX% in GMS as our as video. paid as XXXX. a was more a GMS is brand percentage and Etsy to upper impact to on efforts We traffic campaign digital Etsy of funnel excluding from most our awareness. attributable GMS TV investments positive of XX% a of performance define the quarter, in marketing contracting We directly having believe like organic that total result QX TV

metrics. second So the of quarter those financial the and highlights are operating

Let walk free financial to a initiative moving shipping the the to of Etsy accounting There my will best one. parts and are impact minutes me explain of do Ads. and take number few I a impact you through of each our

free with our start Let's shipping initiative.

Our higher then clear we set XX item into costs illustrates guarantee. price. believe shipping present to one to individually GMS to choose They as of it recover to or this smart Slide tool pricing and up buyers how prices sellers free costs a shipping and incorporate a initiative revenue. their portion can will their drive all allows

presented rate in saw shipping. tests First, items free that increases our are we for that with conversion

to We these that more in from drive will the observed value same to positive future increased average minimum that we reach $XX buy revenue. impact the to GMS buyers earn factors shipping. required believe two order the Second, shop as and free

price of this to item move into transfers and impact shipping of neutral will the price transaction result their shipping. a shipping seller rate. costs have less the if on will were than recover in XXX% amount sellers from to already to price, XXX% transfer shipping Sellers paying the A consider their shipping. whether price item to cost contraction Last, less revenue. on X% negative third Any item the could take modest fee factor to is into revenue than a

expect In significantly strength price marketing together, believe and we our item Net when from September, In growth. XX% tests, increased AOV saw of purposes. message shipping shipping contraction. transferred approximately in net, positive revenue benefit of buyers recovery and impact will free frequency free into we this for taken cost a that outweigh was conversion price the shipping will on we begin the this importantly GMS and availability small to of will have we the

let you walk purchase net financial Etsy Google Promoted Ads. promoted revenue listings listings with through Next, the of sellers impact Shopping Shopping. spend. recorded and/or me elect could sellers' as Google is recorded Currently to is and

cost So beginning platform, new dollar-for-dollar short Google of not expense Shopping the in of instead in QX, on are revenue gross Ads as in slight margin a the with revenue. amount results spent impacted. even dollars Etsy profit In be gross a in though will contraction under recorded term, this the offset gross

controls one single marketing optimize budget gross for stream across allocated of utilized, The of each And their dedicated seller products listing funds these Etsy. becomes Google now to as Shopping, With seller. Etsy the were not Etsy these to products, a budget channels. Ads, promoted it was the we budgets take to two will individual the and therefore and these were dollars revenue election allocation returned and

Shopping revenue, of to of be we Since revenue increase positive impacted GMS, this their pass-through impact with does will budget with expected expect Ads cost to budgets as utilization. zero portion straight Starting But our over also be a is there and our Etsy will utilization. So GMS impact our improve a Revenue how sellers neutral. impact gross increase initial to time, profit. Google the the larger ad we financials? is to

will to expect more something individual our their a benefit fundamental can Etsy to that funnel enabling easily greatly will our where to sellers that our This create brand Ads but do us Etsy own performance great marketing channels we Over spend spend extent. replace marketing build also expect enables repurpose own awareness, to margins Gradually, believe in can Etsy's a that not sellers' marketing spend while time, make improvement we on invest to they their from. investments to sellers to we growth. upper

following our pending lastly updates We on to discuss guidance financial Reverb. of acquisition transaction. any And specific the completion XXXX the to of plan

our XXXX impact business our how guidance. to these Turning initiatives overall and trends new

GMS to to which driven efforts we growth to initiatives revenue GMS fourth a laws marketing We has guidance growth, benefit The state XX% we could are XX% for product One have of among our of is coming and tax guarantee XX%. GMS shipping in been increase are free taking in which the which guidance managing in the and will environment EBITDA incremental our raising better-than-expected by to including XX% the XX% XX% primarily adjusted our the we guidance which by down are portfolio other of XXXX. efficiency sales GMS TV outlook point our online raising delivering macro of expect things to development expect been new growth headwind wins, impact in quarter. range to one some offset

Our our the core revenue primarily growth Google Etsy for both in and related business which near increased the service. is former Shopping continued additional guidance benefit to revenue revenue term reflects the in of Ads, our

our revenue that platform for run as the increase substantial year, enter the implies in ad rate grow Please of guidance the a revenue. quarter XXXX. generally half the second to is will we year fourth to note Our for high that XX%, our watermark XX% the

EBITDA. adjusted to Turning

investment. We we term investments comfortable return on have investing there have long to and a confidence when a disciplined is making for approach are growth positive

periods. payback in We of great of deal marketing confidence some have have but initiatives, longer current them our slate and a of term product

shifts marketing forward. of in our upper period a increased include investment channels, marketing as we funnel payback expect we As lengthen go the to mix spend to

this confidence We drive return will time. over in have investment positive the

XXXX. Etsy Secondly, associated with EBITDA in Ads incremental adjusted no of the revenue will majority have to impact

contract time, be a but we will expect term. EBITDA Over greater rate ad our budgets adjusted efficiency result, available platform the will utilization short the of take this margins margin of the and accretive. increase As in will

to including our forward. now learning development a we migrated lower capitalized of Last, our cloud, percentage more operations our machine of be to that systems and expect we have labor majority going the expensed will efforts, be product

reminder, for target margins long higher. a EBITDA our term As XX% is adjusted or

great We another are building on quarter. our momentum following

to leverage market to transform our strong and position opportunity capitalize continue on growth and the our large delivering expect We sustained financial margins. to by expanding business

Thank you all your for time today.

We questions. take will your now

Operator

[Operator Instructions].

Our first with Heath comes from question of Goldman Sachs. the Terry line

now Your open. line is

Heath Terry

Thank very Great. much. you

Just growth that obviously down of that on that can offset budget on we sellers? outperformance planned expect any to expectations shipping a this shouldn't be the be platform you the something second the guys in has reason upside And reinvest potentially the able to? with all for you Etsy the at half on demand give missing Or the lot in this. given horizon, sort sellers there as as what then to for the ad that? to Or we dealing a free to guided Ads, the some of us a quarter have guidance around GMS there further GMS, enough have part? across from over is are to well are spend relative relative we Should a this Etsy sense as you of expect is net potential to

Rachel Glaser

second will the take So the then Josh and one on Etsy take I ad the first will spend. question

the are some might number. and would given from that we what we we estimates best I say, first have So or around conservatism for with comfortable your so into questions. our GMS sales not Baked thank all, there of year for is see And might for tax. you

that on that be, or a estimate pointed headwind. thus the We a we factors seen macro be So headwind that could doing could far. of best based we be that have could our are out what

are doing we So our best there.

to we you yet yet then debut have we are Etsy that Ads, not also of giving kind launched come. are of just product a And we launching, that's

fairly So doesn't unknown us. until that even we launching guarantee. that's for start And just The a September. our are marketing shipping big for

are based that our doing best you guidance understand, out. as are and extensive we few speaking unknowns think pointed we testing to and I a but numbers on confident given that we give sellers So good there's we with we the pretty

Josh Silverman

great Ads, question, Etsy you I it's And on Heath. new think it's complicated, And program. this know,

So about with, will we it. start are really excited I

want opportunity sellers from own one If are to going they to you things ask my what drive they invest growth. Etsy, say more the the of top is to

going great so to we think is, going as time drive they and think, make is And own pie really really we is I it's well. sellers growth, the have invest going opportunity think their to are over which this more agency great give the think as bigger to more to is

way on In the to to a it's return in and term, way that learn them into work spend. ad we near incremental really for program. to that put And good their they money the important are drives able that growth are going test and

going are do to and and see the building the to in come program take that and be are sellers over time we more be it something more out wanted we is is know, are have we our so And works. term, they to you near testing to going capabilities getting to to testing. going up happen. optimistic And sellers going In their budget how to and we are

we are given in you think So I in optimistic term. program months that navigating we have we for to to the very said, year complicated it about appropriate. the are is that going guidance the All come. medium this It's that the be and

it's I a puts and there's and think takes number know of You appropriate.

Heath Terry

both. you Thank Great.

Josh Silverman

Thanks Heath.

Rachel Glaser

you. Thank

Operator

line from comes next our you. of KeyBanc. with And question Yruma Edward Thank the

line Your now open. is

Edward Yruma

afternoon. a shipping months marketing place? happy Good will your lot the XX margins of you Etsy of lot free do follow-up, leverage sense decline rate, between of of as their the supplier ad performance you maybe them for guess spend? in I to have with this take base, when a hit crossover allow guess you and Etsy in advertising your or question. and increase funded think Thanks vibrancy now point now potentially asking Hi. I then Thank kind Etsy hold they basically taking where to sellers be of asked your higher as that a will And you. how a follow-up the Ads, the you are changes through Ads. the will What's

Rachel Glaser

Hi question. your This Ed. Thanks for is Rachel.

of free But million we out rolling vibrancy to and as with speak went about testing roll sellers. will some growth XX% that we First pricing our them through up guarantee the robust. it more and shipping Josh we feedback this And to. all all, that of expected of the the can as very ways we carefully seller now. out, had active quarter, did lots X.X gauging to marketing in We did to it on of is

will they We the are that think listings. than more their them able lot able would shops to with whole know to We behalf. It to budgets we gives, utilize, same and from amount that own control the to have to appetite spend very growth Etsy and spend Ads thing create more Etsy give they this be put are is on And that a we excited going the we their able us Ads. to that are in about. something expect being

about. something that think very they So will is we pleased this be

Josh Silverman

Yes.

the can't. move a very it individual whole, think expect is each that's new way the do gives sellers This that I sellers. on because them reception will build the more agency from gives This to seller Etsy us and that. is a and positive up on a pretty in our that to I Just chance funnel be, marketing program to exciting. committed pioneering very

great app. the sellers. getting in them do some If things which it's them optional sellers, more to for to even So more it but results homepage, advertising, sales And further do of people they to Etsy like frequency, Etsy growth. for is our brand we opt-in their for fuel them TV can allows awareness download and people can further their driving Ads all growth, to the our organic fuel driving them of that give that, do of want to

gross spend is buy they script, click the willing Google seller be example, as many more a can in there and PLA And for we than we more which do do. have talked commission, ready, lot circumstances why would run much there's on math I Their about how that to able a to for I when might to, you the where we appetite on can. than think afford margin X% the that reasons of a

to where they opportunity sellers best in That use suited that allows interest. us So their an are area is invest. to reallocate an best to the statement income to this really to our for can invest we

The about timing, to and thing the question would fourth ourselves into your is they and heading sellers we invest. most That's get to will moving continue having going important continuing when and investing a we and return. quarter sure spend them that are program To good the good going very be that make reallocating get sellers to to our stay and to ad that we return are and what's this, on we invest. a really be liking our how we that close have

returns to sure are are make going to period continuing that we strong. really of for the time to be So them, least with a invest at

Edward Yruma

Great. Thanks guys. so much

Rachel Glaser

you. Thank

Josh Silverman

Thank you.

Operator

question comes next our And Kunal Bank. with from of Deutsche Madhukar line you. the Thank

Your line now is open.

Kunal Madhukar

quick Hi. on you long slides. to the on still It growth XX% Thanks. one have XX%. outlook the remains at A that of term like one

it? to buy, shipping XX% shipping the up whether kind of moves that or of it intent side free the equation of and have, I buy, charge more to then have is we GMS the propensity into that to that about And XX% target that. that increased XX% was would hoping impact that that the would the XX% not, much how the might Given and as think than given naturally inched to XX%

Josh Silverman

for and about enthusiasm Thanks the your that. optimism share long term question growth. thanks Yes. the We for and

in So updating not habit just the very, in a those we basis. targets and very frequent are of gave March on term long we those

those gave March. just we So in

We are we confident. We when were confident in those targets them. gave

are We in targets. confident very those

We not And this them targets are at today. continue very those to time. confident updating be in we

Kunal Madhukar

Thank you.

Josh Silverman

Thanks.

Operator

question Thank from you. comes of Jones Citi. Nick And the line our next with

open. now is line Your

Nick Jones

Hi. Thanks question. for the taking

compared kind have maybe year kind kind We bypass the a sellers have about sellers follow-up push are then whether so tedious you then looking of outsized that maybe on educating this Day moves over of heard seeing quick you an may and more time adopt of of Are kind you the some talk education? a right years? to Prime the behavior bit there other in some sellers we other for. direction to for little And impact had opportunities can of previous to be and

Josh Silverman

have individual appreciate than Yes. really more do not on we an a to consider us say, own. gather a after to platform be look to and chance I all. and education their data insight I want do the to running at it. any the it have at opportunity would question. job seller sometimes comments Thanks tedious data to have and our have for It's the more good we gives just more

we consider their partnership. and sellers, the that count a and absolutely it important day get have time job. really we really this We that on really really big be lives is our for that fact of It's take us. they It's the a empathy part and to

And hard so with communicate to them. we really worked

shipping, indicative about think I of is I So way the handled we this. think have hope, how we

shipping to free we a years have information. talking have been two and We of educational been for sellers lot about providing

We giving taking gone. direction lot to it's stronger them stronger our been the data of have that and we in a strides encourage been marketplace and

allow our e-commerce to when everywhere So it's you of players shipping the go. is designed playing free you made out sellers where level the all the with on we And almost other again, a strongest. there announcement compete see just look around field you to

and leadership do a make doing and sellers than that. We conviction whole has get courage just sure as level our that any seller we lead individual to we then of team and more sellers trying of need field. to to sometimes communicate have gets data a some sure are means and what that marketplace we educate so things help that and marketplace we role some to we our do and keep get kind will our to will a the make playing best as And because our to sellers serves

Rachel Glaser

Prime was question Amazon Day. Second

Josh Silverman

sorry. I again. am that Say

Rachel Glaser

question Day, second Prime on your Amazon was Nick, correct?

Nick Jones

Yes.

Just if it had an outsize impact this year compared to previous years?

Josh Silverman

we on year. for we the we of commenting are don't incorporates rest the year, I the have but the how individual think rest of days, see given we appropriately guidance think the

Nick Jones

Thank you. it. Got

Josh Silverman

Yes. you. Thank

Rachel Glaser

you. Thank

Operator

RBC our Khajuria you. Shweta of with comes Capital next Markets. line question from Thank And the

now is line open. Your

Shweta Khajuria

Thank from revenue impact you. Two and Ads. on please. questions the One on shipping Etsy

so million that between have bit, the little Rachel, mentioned at a guide $XX think two? year I of the by quantify you full I for think How about increased you $XX XX%. the gotten we can where the midpoint. second then million adoption shipping should seller the wrong. may So on it's And service, coming from that

think So be And what think you the sellers have now? using year do Thank you sellers, half you. of the exiting the back do free XX% percentage in of you launched? once be that think right XX% Do adopted how would it fully grows that would it's shipping?

Josh Silverman

Great.

I and Rachel will take the first take the So second.

and really, it. revenue the were On can down to we When do we the break me but guidance, to dimensionalize break directional down first, give specifics, the your question you are we increase, let try components? I is going we increasing And you our think? how not give

guidance and taking there as are that. from we our just guidance First, up the is GMS comes up we our naturally revenue pick flow-through some GMS

GMS we when a the taking talk we for we When giving that's second, entered sense were and entered we year just of you that revenue. up on So make are to about going guidance shipping. the progress had we a why a year, component free

progress will opportunity fact free year, make on this that said every In material we in shipping. I really

that and about and product We half that and us the guide teams of made done We year. those things to And year the our the of first even the in in the has some feel of thus GMS really some chance make impact. marketing. had confident well. have that. on a progress And And really which combination have we revenue ideas think have more second like shipping test we to good the of free simulations all do those increase of in half the

is our reclassification. But there to of increasing the And on revenue guidance larger Ads. is components are One piece two Etsy a Etsy Ads. simply

Shopping as did Google does. not So and to revenue now use it count

has margin. flow-through no with the But reclassification on all Google of that to not So gross impact Shopping from obviously revenue. revenue an of revenue straight a simple is our

increased value time revenue. that again And The seller second expect still over increased real for that Ads Etsy. To is, Shopping the over thing time. think budget, that side, Etsy which to is growth and implications extent Google real the a we we that's pass-through in accretive that has fact, adoption revenue revenue grow on true has will margin but

Rachel Glaser

from it take the the punctuate the seen first the guide rate the that take implies we jump up want that XX.X% Shweta, gave, the to that of I second the before So question, point just midpoint a into have XX.X% at year. rate, in I we half revenue

wanted rate. you that So guide increase I make up the to the revenue are rightly that significant run to you, was in point capturing fact our

On clear sellers the it. that. I four the we that shipping that say to XX% just markets grew make am to in for sure shipping, I want offer I adoption did

markets. So offered four it's in

seller have service. So as guarantee metric that just much we has a shipping but point. to we this That on pleased. been expected, out. are we about talking are a free labels we progress be and rolled really offer give adoption them where how is we we not that did at that is We The products adopted the shipping not of expected what exceeding XX%

Shweta Khajuria

you very Thank Josh much, Okay. Rachel. Got and it.

Josh Silverman

Thank you.

Rachel Glaser

you. Thank

Operator

Thank line you. And Needham our Patel Company. & next Rick the of with question comes from

line now open. Your is

Rick Patel

Hi color for guys. strong on Thanks hoping congrats and execution. per I question for taking the the am GMS active buyer. on some

the So optimizing and there. results where the are I pricing search am out just curious called you opportunities as granularity product are? progress well? what's just of that but Rachel are curious, your I good increases provide how great Can some continued sustainable growth? And think driving frequency,

Josh Silverman

while seeing Etsy, to people of you to remind of visits number helpful more per The sort know TV driver one back is relevant. think are moments is visitor we come in and to does are Yes. we well when which I

continues conversion see helpful. rate And that's progress. So to

many not out it the come back So to infrequently. on Etsy, that who turns Etsy shopped people of

got have just to them buy. We to up get online

really so two continue GMS the rate some in the as driving And those to per buyer. of that And conversion we see are combination progress well. it's

is mention didn't AOV. What I

order average on to-date progress value. less seen have we So

increase function buying is more in GMS per people the of So really a buyer often.

far they more expensive not are So so it's much that buying products.

real is about excited are over And us there move Although, I there. AOV as that opportunity well to think potential a for time. the we

Rachel Glaser

much after call so products on which had were give and that about tremendous we can products win or in about market. we a rate call an we that more on the that didn't product increases. working add talk on wins drove just the velocity a that increase much little color the to increases Josh in that making follow that laid share to this this various will out. did one-on-one putting the We conversion of talk I of search around up we as number on we at color rights into four we and as bit and other, And progress calls, we are visit conferences

Rick Patel

should perspective? think And can about versus behaved have going tested international curious from U.S. a am how various forward? how these have the you I differently marketing contextualize initiatives cohorts marketing you we just and to opportunity

Josh Silverman

question. great A Yes.

then marketing the into In let first, marketing, standard out around line. all much the So pretty me performance above break world. and we apply same the performance

marginal a we the margin dollar the has than everywhere. our cost do That about we next talked of our apply ROI capital. until we thresholds less return So to

have Above the only testing in been marketing, the line we really U.S.

line to change. marketing we But with the begun to U.S. the in expect But so line have time, above And yet. the we at about aren't outside of the above do that this talk really impact we able marketing U.S. the

Did that answer your question?

Rick Patel

Thanks It Yes. much. very does.

Josh Silverman

Thank you.

Rachel Glaser

Thank you.

Operator

comes Thank line you. Canaccord. Maria question Ripps And the from our of with next

is Your line now open.

Maria Ripps

question. Great. Thank taking for you my

you broader on that you? What what are average? you on see the And responsive habitual can that of to maybe across your they And some Just about could things share long you their Any frequency. incremental Etsy improving can on how have most color with us in terms frequency? leverage behavior in then talk with with user a follow-up progress buyers, you are base? been your

Rachel Glaser

our that metrics were the the buyers the call So was that consumer gave we fastest growing in habitual segment. again

in six that those or period. so more times purchases and or or or more buyers visit spend six more rather -- the us a $XXX And are XX-months

category are influencing we are pleased product that that we initiatives. through So our marketing and

grow. a the for see we an and the buyer $XXX GMS other fifth consecutive that ever over at basis you continues per acceleration. time grew look on to when number is in that first a quarter on again was stack, the The trailing growth. And It that active two-year to XX-month of it's quarter

proxy a on that's period. So us average for over saying, a month XX

have it seasonality more as out we So active smoothes buyers.

buyers are period, growing. number back only they that in that month is have come So to us a XX

metrics to give to that, so that And is of is us, an having that the one shows actually frequency impact.

Josh Silverman

of as buyers the some us or average to buyers in up show terms tenure day for habitual other of year. sort And tend habitual than of with characteristics, to been tend describing one. on not They first, they more a

not So what habitual to Etsy. treasure we Etsy, that what the more. steadily a that they understand stuff a figure length, And buyer of chest seems They people the differentiate could to you we as talked and want easier. at more see best us versus to which about out on find use make is how is

they that. to figure and these And how are folks their the tricks. who navigate tips out own And have

how are tricks everyone time the so core with and spending tips part we and do. can build those that figuring of into them to what out experience, what So those have experience is

people wedding other people behavior. a niche But that it's habitual And about or they to other describing like almost is two It cases lead all it's are or than out that small little buyer I baby turns only they take not those not that every a where heart home suggests it all use what It's is way. a I that one that in this tough. people. that furnishing or diverse in pretty are all

There use are many can different behavior. lead that to cases this

to find mass We And there. of temerity got it have can the for I that get the had value do. easier buyers to a make we sort the habitual just of lot have to think audience chest that treasure the

Maria Ripps

both. Great. you Thank

Rachel Glaser

Thank you.

Josh Silverman

you. Thank

Operator

of Moyock our Morgan next the And Brian from with line comes Stanley. Thank you. question

is line now Your open.

Brian Moyock

my taking for Thanks question.

if growth. that out. little Did have you payback, I might to the it. a was might you think to go marketing bit that spend about causing do extending going be signal for change? that and applying the payback to of question mention in us forward of happening, back what's last Just on And are ROI is about forward? going talk that incremental the heard cost Rachel, strategic next? My changing And the new buyers you kind you how just buyer

Rachel Glaser

Yes.

relying term spend upper about why and to talked periods causing which of frequency to to include television longer our that Etsy the we the understand we people video, of is we those impression mix because funnel the when and have shifted on tend payback have because Etsy. are digital So marketing overall

have it It's to But that we has legs So the period little of or to bit. ROI payback hurdle out for expectation we that same takes also. ROI. a our shifts the and more it longer haven't reduced just have

Brian Moyock

Got so few points watching to nail friction are repeat on then we to equation, the to it. ask And drive from are conversion? conversion of higher really visits? have key just from couple faster the of like we or conversion drive examples, the I of points. mentioned things And the really wanted overall the you to provider you about go of one the if GMS down what other have you I platform that per two better conversion I half know a could you wins. times specific guess sort still

Josh Silverman

a because someone brand core, of we to steady find confidence you coming find built the risk have feels more good we those that do the the being back people bold sometimes us hope easily? those and the it what We from so can really search And see but incremental, you is boring, never things. making So have and really the keep discovery at great have buy in you element. I you can sometimes met progress, buying boring in really safe. It's it so trust Can mind stuff don't I have to experience the same journeys.

free example direction. launch something weeks shipping is the in think doing I that an us the over bold few past of more

Brian Moyock

Thanks. Great.

Rachel Glaser

Thanks Brian.

Josh Silverman

Thank you.

Operator

with comes Jason from of Thank you. line And Helfstein question next Oppenheimer. the our

open. now Your is line

Jason Helfstein

in you around all the guess that right. it and we around the dig new over effectively put then initiatives, labels, place data, marketing of testing magnify you I in to more wanted have past done bit I shipping and Thanks. five a everything I quarters. call big how assume have

to you the do together? all confidence more Thanks. it and bring movement of and that all start behind that. the point the cloud to kind When see to leveraging Your marketing

Josh Silverman

When Can you am return spend the provide you a the sorry. our mean around do marketing I on you say confidence or little the shipping? context? of marketing, bit

Jason Helfstein

Yes. drive The increase in marketing spend to adoption.

on when that the marketing think I confident I been gas So what is to to the to trying you drive topline? have understand, step are

Josh Silverman

see. it. Great. I Got

we we really that that good get on. of think a lot look, spend what we can have of return we around are a So discipline. And and discipline we proud

have product got we initiatives a down us confidence what just So is are we the news tiny which marketing seeing right margins really bit, now and you lot of in our is it right good do think now. I take the initiatives because means a have

that going feel much so So we really are more little that. about a spend we and into good to them

So be more would little let a me give that. maybe you you color, in interested

feeds. think be in to strategies social think that So some we we We to and pages can of an are channels. better. And become our with segmented. can impact. for And better have we that's think feeds, our going landing We better to more nuanced effective and the having data have bidding more get like think marketing, performance can going we data folks example, be Google able that

expert few want Ryan not new fantastic going and really way to the really marketing are CMO. equipped CMO in of effective. attack And out in been spite team a these that in without more real those Ryan, job our of having that's to our they CMO, done for a that our I go team a marketing performance has shout the But technical is job with and a a areas kinds make channels a past to there, great are more even opportunities months by call to the and doing

TV, new to in are TV. then we pretty And

less been have this doing year. than We a for

you the actually, that have so been that are think and to relative that to year take if further to work working TV are of it budget folks to timid, we have being might I it companies up be are see budget we so don't for done less are us putting like that one for a been year. doing of in and have size a for excited. to optimistic only time And TV continues or we benchmarking is doing we not this I it That folks said, far, seems of come peer lot our

to of let them fund launch are well This the Etsy performance some the more uniquely the the above the marketing that pie more chance bigger to invest say will and even sellers I everyone. bigger. to channel, so pie of and gives equation Ads even us they the makes do for we funnel make And in the help positioned bring the which can

Rachel Glaser

that just as off and will in on late back into Josh that And will on the TV TV is the Jason, I enter add third mentioned we we quarter pulse prepared pulse this his Rachel. remarks fourth quarter. and

performance even And and give is. hurdle where hurdle healthy ROI upper think as amount give team up much spend don't they So We a funnel marketing, marketing. I the that budget. spending we on on we an as are then to a they can our them

like they more. to continue feel we optimize we there can that so So spend

and can open channels that of the less we ROI kind so have test them out to we that buy to like confidence to channel. the mature continue up and go spend We hurdle give in to

So a side of lever a to as growth. using be for us more aggressive marketing I think consider on I would

Josh Silverman

Profitable growth, right.

growth. Just on profitable we are super focused

Operator

question And Fong Thank with of our comes right. next from BTIG. line you. Marvin the All

is now line Your open.

Marvin Fong

you taking my Thank for Great. question.

Just into to bit a little the Ads. more Etsy drill

economics So sellers be. than I so understand about they saying otherwise better can more might are you have spend what Etsy

So than be not, in in be yourself paid work in will you they how the will mechanically just right paid search Etsy what Etsy's guys has still? spending that would than It probably And current that sounds like that, how going spending is work? ad if you if mechanically, is budget? that are see to long they more spending an it actually Or Thanks. run, now? you will multiples guys seller that aggregate budget? Ads purchase check that inconceivable to can And

Josh Silverman

great Yes, question.

start So then with go let to the me first. the and second

estimate responsible their to yes. And and therefore budget visit look out bid figure then at what we rate conversion behalf. visit a A we a return would seller a like work shop be the their Google on buy look So would of what mechanically, would ad gives us and what that in at to listings look with spend. we their the and on we

more well. in into And their on as ROS. landing will individual do an what behalf as maintaining seller's of individual is and be any we that average sophisticated do we really to is reasonably their real confidence to than think obviously what seller ROAS much on domain. on Etsy spend while a on be performance And has tools the better and are would There than can and value back as tying lot have good we we their landing much able own on have are domain, a which spend

works. the how that's So program

Etsy's And tell. performance early to too marketing be existing I it bigger time? would say over spend could it's than

going think value into about we this can that. we drive lot second are and learn come it really our sellers the excited We are in. and to in for test and the of half But year a way of

future the about optimistic program. are we so And this of

Marvin Fong

to are channels? give spend how of us as marketing were that relative TV maybe that's saying just an channel case, the idea ROI the expanding could in just sounded is that If planning social now mass it like you or follow-up, And And is retargeting that on a you you your of channel? big positive? some Great.

Josh Silverman

Yes.

within that we call how ROI with have some dynamic to did figured being social that we we are tactics get So now out out finding positive one. retargeting

dollar. And expect ROI the spend which the next is we still ROI same be should methodology, so dollar next positive. to you don't us use should that And positive, when dollar the isn't

we as unearth tactics, So use them. we

Etsy too. particular we are also opportunity Etsy, someone that Facebook might and been who means have the they retargeting has on if a has on Dynamic product on found

it's people only reach. a So certain of you can community that

it we of unlock But for invest in I that better target, Etsy's think think on is than the able that a So size continue to is social everyone early to mar-tech, to more we think I days I smaller as being channel. for example, marketing invest can opportunities and capabilities more in growth.

Marvin Fong

Josh. Thanks Rachel. Thanks Great.

Josh Silverman

you. Thank

Rachel Glaser

Marvin. Thanks

Operator

Thank line you. of with question our And comes next D.A. the Elliott from Davidson. Alper

Your open. is line now

Elliott Alper

Thank Great. you.

XXX price points sales increases should negatively touched little by Thank your has have impacted the you at all, you? lapped on about you, last call eBay taxes. how that secondly, if you price due indicated year, you. for growth your future all, increases? think if online before, on strategy regarding a earnings GMS this its but at to Now impact basis we, quantifying bit Are And

Josh Silverman

start will second I the go with Sure. and the then to first.

we qualifying are do that and real affect we we to taxes, some elasticity. extent is does baked not sales It to and collect is We see conversion rate it, have begin there think We but appropriately it affecting. GMS it state into price when guidance.

higher have tax. than more affects have So the sales it that states tax, lower states sales that

big state. we seeing coming online are That's a So California that. soon. is

are seeing that we given we it appropriately not baked it, will you. quantifying time have the into and we impact While have believe, that although we some believe are we tell, guidance we

Etsy great to service really optional lot and take offer value regard an I example we a bigger the delivers makes of think Ads price is that of rate, to for for pie sellers increases With everyone. and can that a them

effect goes So Etsy's opportunity may as is to fees rate that to our in the great while opt them, for us choose they value-added low to to is offering but take up. they choose an may not or keep opt that to in mandatory services this

use that take to to you of are if way as from Ads. from we of Ads have they second our it They And going like. goes excited But they really midpoint are Ads it. the adopting They more value that and by the And quite strategy. does if says don't get a Etsy implies to. are the that don't year, of in at about the year so a of like Ads XX.X% going today we half get future Etsy guidance platform, think that in don't rate the for look taking ton to use value second can and of Rachel to Etsy the if Etsy we half just want even this sellers and XX.X% Etsy they

Operator

you wonderful and conclude does conference. a and gentlemen, in thank the for Thank you. may you This disconnect. have Ladies program day. today's Everyone, participating all

Etsy (ETSY) 2 Aug 192019 Q2 Earnings call transcript