ETSY - Earnings call transcript Q4 2019

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Operator

Good afternoon. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Etsy Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Deb Wasser, Vice President of Investor Relations.

conference. your begin may You

Debra Wasser

Thank you. and Etsy's Quarter welcome afternoon, Year XXXX and Full to Earnings Fourth Good Conference Call.

are our Investor Joining and today Josh Rachel CEO; me Glaser, Gabe Ratcliff, Senior Relations. of Manager Silverman, CFO;

Before key today marketing cloud, to forward-looking remarks initiatives that of the the include buyers financial investments anticipated thereof, anticipated marketplace, started, product we continued guidance ability benefit to statements strategy, Etsy migration our benefits seller anticipated our Reverb. the and back of our and to our just and and timing acquisition bring get of performance financial reminder our of a our our drivers relating in benefit benefits launches, anticipated strategic our impact to of on the

differ Our may actual results materially.

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

and call, website. you today's to find a if The in and GAAP length created of non-GAAP the release recommend prefer that to well. both on press replay there, access the you non-GAAP presentation Relations replay in as available Investor be release, this find slide and you our follow also earnings will accompany information via measures. the call we'll during which of phone, can along. remarks We've present press measures A reconciliation Also today's financial included GAAP to is you of can the

the call to With that, I'll Josh. turn over

Joshua Silverman

long-term huge map, sign technology good and us XXXX. our our March, opportunity. up to which targets Last and to powerful a rights underpinned by product described market confidence positioned Thanks, giving and capitalize road to Etsy marketing, ambitious address our to growth laid it, We that uniquely out through opportunity strategy win, on afternoon, we believe to is Deb, everyone. deepened the

We're of e-commerce off our our CAGR XX%, end year, targeted to March, Investor X-year XX% faster growth a above really start marketplace performance. And XX.X%, we XXXX our to high At targeted in GMS the the the delivered than Day growth with Etsy range. averages. a core GMS of first of last strong

We core XXXX, higher significantly we than that delivered to XX%, in expect also of said and growth slightly over GMS. revenue Etsy faster the GMS grow period, than marketplace X-year revenue

also marketplace, Reverb, growth. the we of very completed August, another special acquisition Last more driving even

be very XX% Our high with strong delivered basis. of one full year marketplace very in from GMS of a approximately line the simultaneously XX% to XX%. almost of We're year. and year. bar quarter Etsy consolidated strong GMS growth up XX.X%, growth strong prior reached to And on XX% revenue $X.X consolidated billion, core EBITDA $XXX to we to The quarter up XX%, nearly XX% and million finish up the grew revenue reported Etsy fourth had a adjusted consolidated grew set north up handful up all margins XX% companies our revenue and take year-over-year, top and the proud the of EBITDA XX%. GMS delivering rate fourth margins

of And of in heck, probably club. XX. You've It's elite the we heard Rule of an Rule XXXX, XX. were

set to team's make that now fewest up with strides urgency. also boldness really reflect I human. we've I'm keeping in XXXX efforts, and by the team on tackles complex When big challenges commerce year, made head-on I'm was greatest that hyper-focused our us hard our meaningful and inspired the things We dedication bringing can the to years success customers. for the a on proud experiences world-class do for We're impact. that come. our doing for things and

giving We For the stand search making powerful. connections, different. path on incredibly relevant for more trust experience something buying elevating mission personalized, capitalize and and growth. is example, unique human a enhanced defensible improving to and we by win sellers our to for right Etsy's

just billion-plus for available $XXX We leveraging frequency getting levers we've merchandise, strengths our AOV. in our more special started, active Etsy's of are higher the identified and buyers, pulling improved growth market

in the we done now the publish all progress pools, that jobs that and financial an marketplace in to report, billion largest and the integrated discipline in continuing XXXX, In same economic, as which in while created economic our impact aspects $X of million fifth city We metrics. resilient, ecological We've over metrics Etsy more strong worker of and deeply impact employ together, entire we stronger us and our integrated and the seller see do impact they why make U.S. is all our our make annual into report, And metrics. X.X to our drove the are of to including independent U.S. Arizona, this of which on output economy, both Phoenix, enough business. the social apply to you'll city financial focus

part year and shipping global attract XXX% great our world-class emissions in an past industry company citizen with in from our and We being we believe leading to balance minorities. the through the to We a underrepresented exceeding e-commerce front. of retain the strengthened corporate gender results being and goal XXXX, talent, continue hiring And Etsy double demonstrate our in to the offset a the that Etsy introduction carbon-neutral shipping became the diversity, for over leading is great from of integral is of marketplace. business, first

fourth of drivers had the great and sellers into season. quarter performance. deeper little our holiday a Etsy.com our strong a Digging

our leather on-site seller and sellers merchandise and jewelry holiday experiences, marketing to holidays topping we've including off. the best a experience, shopping items paid ready make with free was to And done targeted for of work Etsy great Etsy's home goods, an the search campaigns landing personalized decor destination Etsy gifting ready, shipping toys across seasonal improvements, improved product All with were more. and for lists. multichannel and from to

As Tuesday a and Etsy.com's second highest were GMS-driving Cyber ever. first and days Monday result,

days. fact, more Cyber we minute days compared In GMS approximately these up a played in Monday the and improve Marketing GMS last was of buyers through big enabling Also, X success, for to Etsy each frequency. our in Thanksgiving reach X delivered to role XX% $XX,XXX per from holiday year. during buyer

Our TV holiday attributable performing increased efficiency, campaign stronger expanded to creative drove strong reach. results, and

hardware worth capacity our by to Etsy's TV campaign In in advance GMS compared the years to required season. to measured X fact, it, a the really needed that It's just best-performing migration investments us This add servers site through when ago cloud noting from holiday get spin we before and enabled hours with dollar Etsy's availability just to QX in capacity holiday spend, per of ads also and date. us perspective. performance is when included cloud up heavy were important

holiday So our fair to unsung hero say, excellent performance. it's of really an

long-term to material XXXX, experience. made right In leading investments with in our valuable improvements customer the aligned win, Etsy to

we've buyer become marketplace. efficient transition search e-commerce of and Just functionality. more a a We few examples. in reviews of and our been build investments investments making more feel human we've We infrastructure. our even we made trust to and with in core with messaging as made in to platform search introduction agile the the better nonlinear experience and And result new models. our discovery Etsy And app leveraged

showing some as moment. challenges complex result, Ads. progress year-on-year. We other for velocity doubled of each are on tackled more fronts more shipping these and I'll As product development continued in and Etsy a talk free customers than many such about a

is in key the transition I has mentioned Etsy.com's we role complete. now week, last And a the cloud to migration our that played development efforts. As product reported

years importantly During experiment over the the of velocity moving petabytes by fivefold We've to of the we X.X we experimentation the and unplanned downtime. to any engineering migration this equivalent size for the team. the we while to investments are for extremely also we the the off are discovery. people so completed of and roughly further cloud complex improve congratulate our data leverage tech demonstrably to meaningful and the of data machine that task moved team X high. past Library and I'd productive, without successfully repurpose performance large to so time and in smoothly Having learning significant experience, advance Congress. most on time spent doubling on increased migration migration engineering search opportunities means while XX keep like feel there GCP, more can of customer times our pulling the and

a Etsy bearing fruit. investments funnel. XXXX our and was for a equipped resources, full We've year team, CMO them marketing strong a in also with marketing. big are built across investments We and hired the expanded better

own engine begun across to while confident we've progress and addition to In fueling strategy push great runway video, digital and with search buyer cycles. and work marketing. gain improving at channels channels, in profitable our paid optimizing we're to made out are unlock TV social continued hard and we've that We're investments also and e-mail life the And an integrated scale through in scale the notifications building our growth journey efficiency. buyer marketing CRM and

growth free on delivered end all and about perceptions marketplace, the U.S. we're nearly shipped views with to shipping. free with shipping only At the We the U.S. shipping items About of At by shipping time buyer Ads. great launched listing of the of were items to Etsy for available free costs marketplace, and drive making were GMS shipping. quarter, of update of orders ship conversion, an that by frequency we for and to XX% increase our on we XX% and July, buyers increase received last customer of initiative for free Etsy fourth the Turning were U.S. U.S. believe free XX% in changing will progress. free, the half

customer on it's focus shipping perceptions. there, free has commonplace on that evolving we become days. can marketplace, Etsy really And the early still Now

a Etsy conducted aware free offer January, only fact, buyers survey that in shipping. were in XX% of we In

pricing opportunity better much to free also into We do sellers Etsy shipping incorporating more their job help strategy. have a

sellers to turn for to ask than More drive our ability Etsy features, many growth. invest the to let's Ads. their Now other

a we shopping promoted and August, off-site So listings Google last Ads, combine product our that on-site Etsy launched services.

and months, delivered the for Over X for has returns sellers Etsy growth past revenue Etsy. Ads solid positive

we increased result, and and a QX. minimal And As throughout lot. listened we budgets churn saw a seller learned

While confident sellers many when from advertising interfaces risky. they're is perceive simple off-site of purchase a upfront traffic spending and intent. less viewed money ads use, appealing uncomfortable off-site advertising sellers buyer's the to buy to They're visually

As a take see program. anticipated was we going result, longer to that scale than the could to it

concern, we value to which So this we address mitigating while develop rapidly innovative an to strong risk. in iterated believe their deliver sellers will solution, order to

community earlier today, our advertising X to to we're introducing announced As our products. seller updates

drive to expertise Ads. including leverage sites, Google, sellers’ on advertising the Facebook, upfront costs shops. only sellers' make performance traffic off-Etsy an Pinterest on marketing budget the a featuring listings and purchases our pay seller's First, Etsy sale. and they advertising an a Bing. online when shopper promote will clicks their When ad pay that listing will Offsite to we're Instagram, from fee introducing We'll expanded called service a shop, an and order seller to on

to will for X sellers, our benefits For their means competitive really expertise this Xx, might off-site a budget lead of they risk utilizing sale be and it promoting the that that a listings without them. roll-offs getting the not marketing to of

For we Etsy, limitations, rapidly advertising budget can program means solution. without our scale win-win a that off-site any this

to Ads Second, advertising traffic Etsy can now be Etsy on-site to An Promoted all in capabilities will We'll you XXXX, know Etsy advertising our their optional use bring to Ads. shop. Listings program investing continuing and as that functionality. sellers be in add product, called

to Etsy we on can now We're to sellers' dollars. budgets forward, able excited marketing marketing our be advertising generate our listings growth only shoppers will more Going go investments, towards to Etsy. Ads on given leverage accelerate

the more to right on our and designed footing on set a We'll and deepen We new foundation We the buyers further frequency. XXXX. our and by strategic our as strategy: to of continue and differentiation strategy investments sellers' customers, term. to unique year entered drive our plan engagement increase items. in long-term our relationship to buyer competitive clear of with human medium focusing connections, the win our search discovery, serve attract a Turning of and the growth X to and with that collection strong trust focused imperatives near deepen and

We're Reverb. growth rolling playbook And brand, and drive team. to great success. community a It's additional really about we Etsy great the out and feel

experience. attribution side, the product in process marketing, models more Dave joined more faster returns. right to improving in focused campaigns. Mandelbrot a brought bringing experimentation Reverb than iterative we're developing we're leadership On integrated delivers weeks as And few decades marketplace A CEO, that enable X on ago, infrastructure of the and investing

made We're progress by extremely in encouraged Etsy the XXXX.

approach. our in balanced very been always has team Our

growth do are beyond. We in company XXXX highly sustainable to a confident on our that a way. focused and I'm in growing in ability

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

Rachel Glaser

results cover consolidated commentary Thanks, appropriate. performance, Josh. include as of which drivers today well as My will results marketplace where Etsy key

in further find be and details release can You filed on XX-K. to soon our Reverb's contributions press

lapping fourth had On accelerated basis, grew profitable been strong $XXX technology currency to a very a for adjusted XX% XX% marketplace grew to the year. constant investments CAGR finishing GMS especially consecutive leveraging GMS greater than delivered to GMS a in last And quarter basis fourth the we $XX last we XX.X%. nearly year points XXX consolidated season, growth X-year year in basis, to XX.X% Etsy Etsy delivered Revenue was products, for a XX% quarters. QX EBITDA holiday strong of growth quarter Etsy's in basis Etsy GMS while has marketplace nearly compared and we million, X On an billion. $X.X million, where full strong XXXX, marketing. and year. on the a

million Promoted X Ads, the in primarily Listings XX% margin quarters. approximately consecutive Google an both equal the has in and carries contributed advertising grew of basis particular, for Promoted reported to growth for Listings. year-over-year to driven revenue points in the sequentially expanded growth as in XX services quarter by marketplace driven offset XX.X%, by marketplace Revenue Etsy rate In $XX quarter, cost related revenue. or with our more Etsy to for but Shopping revenue take strong XX XX.X% we core revenue. and it advertising increased revenue fourth

Operating metrics signs marketplace the for of throughout year. continued the show to improvement Etsy

and buyer we the year metric delivering Etsy product purchase example, XX-month The increased stacked active and made GMS fundamentals. a we've million, XX% in trailing nearly Etsy's who XXXX, public significant from on of frequency XX% on shop ago. growth. that the X%, been basis, days ever progress grew company. platform. For more on driving which this highest year-over-year; X-year on over in by buyer improving grew grew in active investments a positive fourth on our a driven X per by X.X% quarter in and the since a basis international grew or marketplace Etsy grew XX a Buyers for buyers, Percent in increase Etsy in habitual to year approximately XX% for total active to active development In GMS GMS, was of sellers and million. buyers X.X XXXX, improvement are overall approximately sizable QX, the marketplace up XX% over XX% marketplace metrics indicates outpacing returns marketing these the

financial financials new There These of continue impact XXXX are our three product and shipping free are to want about I they integral minutes an in are on, extra of the XXXX. to of parts the as the will few performance performance initiative. on of our three our story profitability, off-site spend part ads our parts a be and

growth, we investing product drive our in in So GMS investments revenue. EBITDA In today. this Etsy on XXXX, margins about been made and investments. primarily in think people, material profitable to adjusted for profitability and and we engineering, our has how and growth evident is

evidence continued a provides was shipping platform process free search and metric stand-alone ad of the of XX% peer XXXX solid machine average This up are compared for initiative, our generates benchmarks. these in new $XXX,XXX Our that that is investments. the one a advancements Revenue Etsy investment of to disciplined above over XXXX, in learning headcount launch returns. per our results and and few

marketing marketing a strategies TV. stand-alone XX% these grew $XXX about in revenue to $XXX and from basis a paid we investments. to year-over-year like delivered for of by by marketing our marketing our efficiency upper Performance metrics more now, in spend as percentage Another channels We've our XXXX XX percent expense have as marketing investments revenue, and in on leaning new profitability improved is in to of also for million expanding efficiency. grew X.X Total of This at Overall, improve. million funnel our and expanded decreased a and margins social implies to contribution Etsy basis adjusted like been decreased heavily years XX%. points. EBITDA nearly frequency initiatives continue

if adjusted we it's the from Reverb sheet capitalized adjusted from P&L, have approximately for of as to the also in margins been to Google accounting overall fact, of higher EBITDA impact estimate points reduced the XXXX. labor moves which basis balance costs the shift our Etsy level not and EBITDA impact the And In our more XXXX Ads, impacted know, Cloud, has would XXX margins. you infrastructure

has free $XXX cash consolidated to for a in consecutive amount of the our free on to and free continued model. seen Etsy's million stock of strong been flow in, approximately flow million over We've All On quarter generated basis, shares. of We a flow. trailing or leveraged cash conversion repurchase XX-month business evidence flow, we our a million as discipline Slide EBITDA XX. into XXX% XXXX, fifth cash financial basis, high convert in cash X.X XXXX on $XXX in

is to it The late I of We second was live QX, topic of unpack purchased incarnation, year. the current this launched Offsite want cost in platform in is an and QX and active revenue QX in new product, the in revenue. ad and our with of platform. Shopping component of In the accounted equal its on offset ads as for Google all Ads the

advertising off-site a we risks we sellers, fees successful margin. making will the advertising are the marketing the to So This for and it a depending upper eliminating will QX, the sale. required is only and pricing. size, one XX% them will ad. without such have Ads an are they fee be In they to Certain also our purchased, advertising time, transactions pay revenue participate eligible evolving on off-site a for normal funnel pays to this program visit scale a the model. only of Etsy on fund allows transaction in attributed in for discounted ads. this their ads offsite to programs pay to cost-per-sale as TV program Sellers to means Josh if Offsite same from advertising our with the attributed the explained, At investments as addition X a seller

is expense, see Once investment, change. this accounted of some advertising portion the the expense and investment earn new a that our a a product to Etsy's when purchased. margins. had model, This Offsetting off-site you one new EBITDA the EBITDA marketing in and is transaction ad Previously, will to we as model seller our will we will beyond, transition revenue will of sale Ads ads the Google be Offsite neutral effect accounting in makes attributed dollars. EBITDA In and to marketing QX EBITDA for listing margin as line. you to recall, to accretive our an component incremental increase product of Shopping but Offsite for we Ads dilutive

in has Ads have all the revenue continue will along. been We to line services called revenue, as formerly product Etsy our it Promoted Listings,

of costs average take rate P&L. our smaller the shipping will strategies XX.X% educating Etsy's on the options shipping from first their awareness total impact both has X% revenue, into fourth this Despite in a the half take free XXXX. item shipping and into teams points from to pricing has improvements item and Etsy on transfer effect the make an had than continue earn of XX buyer in time, this on last, increase free rate to GMS on about price, XXX% some benefited take our we the will grew on value. sellers initiative of And of fronts. to growth the the of overall as the the transferred sellers reducing headwind transaction Expanding have basis of quarter, shipping our of price. Because less cost order

So a XXXX. great a capping off QX, strong really

growth XX% to forecasting of are XXXX million, $XXX revenue adjusted which we range XX%; approximately million to of the of the EBITDA $XXX range growth forward, in margin Looking GMS to to XX% XX% XX%. in implies of a and XX%;

target a We of line are faster XXXX to with growth rate. be for revenue our XX% targeting long-term to Etsy growing XX%, at GMS GMS with stand-alone in

free additional currently growth second the inform like will versus due the Etsy to provide help half lapping I'd to XXXX We of insights model. to year first of the some marketplace the GMS shipping initiative. in our expect be your higher half

In acquisition QX addition, guidance in lapping consolidated XXXX. that GMS keep Reverb our in for mind includes the

modest this we XXXX While GMS, to expect factor to be our a sales present a headwind do to did growth consolidated marketplace taxes significant XXXX. our not in

launch in the anniversary these will of we QX. reminder, tax a of many As laws

basis, rate take full Consolidated XXXX. the approximately XX.X% for full approximately stand-alone will year XX.X% in on the a will rate be marketplace a Etsy expect we year. take be On basis

certain year-over-year, XXXX, XXXX, we in did please channels. did a lower. a As run will that test you consolidated quarter. EBITDA on we not that think year. performance QX be Etsy significant marketing in higher about remember that TV margins of the we a marketing run This this number of portfolio advertising conducted We in decrease any experiments be in This expense of incrementality in means but modeling will our marketing profitability, QX adjusted our resulted campaign to in of expect January QX for X-week and expense of XXXX

on the we of On in improvements reflect The of product our labor experience modestly and lower G&A. capitalization a expect internal delever Reverb the marketplaces. development to will consolidated means expense forecasting and leverage customer in support are XXXX. both continued costs. gain impact of our development in to cost to Product investments engineering Etsy revenue in development XXXX, to and basis we to Moving product

lastly, with of investments to achieve the continue model expect we year, and exiting revenue revamp Reverb expect based new well percent as our We ads as marketing many XXXX. And to increase will the to increased during investment continued growth buyers as grow frequency. on at both breakeven the a

XXXX growth pleased really XXXX map. real road the with in have confidence the we We and in achieved are

margins. profit continue to expect line We drive delivering to top also while attractive growth

your Thank and will time for I you take your now Josh all questions. today.

Operator

[Operator Instructions].

KeyBanc of from Markets. Yruma first Edward Capital The comes question

Edward Yruma

to that's of Ads. the first know I here. know more behind Congratulations thought Etsy processes I that top you'd funnel. pull on I be and unpack Lots the SCM to on one a legacy was to back of on able quarter. guess product today Or part spend to great of Do fund still program? XX% using the all new you you'll the kick expecting some well? program, help think the us are with of SCM in the you're you in retool but objective the understand. that marketing as charging

Joshua Silverman

question. great Yes,

the So or the remains like overall That to philosophy the for sellers take primary Etsy Etsy advertising that advertising app will the more listing on homepage. overall, their will off-site, download allow things TV people that only to invest funding do, Etsy same. and individual or brand on getting in upper to funnel driving people the can

in of the the program program. be terms Etsy anticipate the some of structure we In that there off-site continue to advertising to of will particular, subsidy do

XX% And seller's will might better fee all, and buy, for things. in on doesn't example, the they XX% another they the much, a Those not Etsy seller. cost. So that, one and buying if absorb cost but And are on up page that. of cover if there's and from listing and clicks land somebody end

a has customer. appropriate if is it, customer to to. great that Etsy might an you about incremental that, the think think we a happy able gained be and they seller the sale, also But which that's case that makes because it's But resell gets

And so together we program, this to idea important. in chipping the make we with is sellers a are that think, great

sale. resources together stand-alone on that this to what if ROAS, think, I could can ROAS, get to a exactly sellers that kind of say the the a do might thing shop is they to money that's proud pool we the their want sellers the do, own. would that really the individually relative is something each risk program. they we deliver X% had they on invest take of and a convert strong platform get really a X% And And not their to that of we're own to never

about So be We it for to really deliver for we we're going good does value think excited Etsy. sellers, great it's and this. think

Edward Yruma

may. I if follow-up, one And Great.

think we've innovations some around you're some or You grown hinted at work as I then that you're And Listings, Etsy obviously impressed you guess, quarters. doing or XX past likely with an the now Promoted trajectory? you the strong XX%-type you've growth been that also over Ads. you as calling hit what do ceiling starting are from have innovations, it's the I you availability Or these continue to guess perspective?

Rachel Glaser

Ed. Thanks,

going - Promoted Listings so that we for the strong, to it, not a the to guidance for even how we're ads, relevant efficacy improve one think will a been terms Promoted query. to the It's the on and to workhorse grow. love search product. really they're very might Listings we've able making more continue of more sellers. give specific to though continue So And - much by call our They it them improve promoted they're relevant the product

more has referenced - would continuing of gets we have those higher higher And Josh investing machine And so and make to valuable team that they're their them because innovate because to and learning to to our a results better from placement the be continue we're ROI. - higher engineering ROI in getting and and that more ad. search clicks more

Operator

Kunal Your of Bank. Deutsche next Madhukar question comes from

Kunal Madhukar

just And you you also they Xx into a may what on the money to ROAS. that not X said that's Josh, sale, said, convert clarification, quick A the a risk. invest

to mean that there sale? the Or - is is does pay that will So have seller traffic, they the will the still they whether or there if pay sale? for not will click of no regardless pay and a

Joshua Silverman

Ads, we they think or they question. that's know is we if the sale that make pay they're seller Offsite intent heard who's Offsite Facebook sellers No, of that really really Ads, and on Google for clarification. for nervous from or only just a will It's really where to money a their What don't the important a important. for places. upfront put buyer other Thanks

will. taking of you and so them for pooling on Etsy if that And is that risk, risk sort

click only So the fee the pay XX% converts to when a sale. they will or XX%

Kunal Madhukar

actually Great. then you wanted as Promoted fourth - of like you mentioned new come And has go on modest in in growth hear Etsy there churn is trended modest the in up this their And from churn led them Ads or that I and Okay. Promoted sellers as Offsite - that Listing was with in no the of What kind only did Listing the experience in you to quarter. terms how with side, to Etsy concerned. far understand churn program? that Ads

Joshua Silverman

Great.

level start say increase month, let through We've any given a churn there would in and What natural. change, coming in did some up. in me so churn. coming that, budgets will program. There's churn It's dynamic a in the churn the sellers see So is we with very It's fourth quarter, sellers not case material market. just I out. got the went be that materially and and did of not

think we we that their grow to them fear responsive that will mean, what yet a continuing have spend converted them for way money and budget was And of was And we to that to they're and So and not invest reality it sale. that's fear, that to that I a to what not program limitation sellers. money the was a a some upfront convert successful, heard and going we this are sellers from have to sale. a just not it in enter hear program the

that's that said, And to we something and at a a that platform, scale limit is And us, so are have. concern take not very on. going pace sellers the that this positioned to when program, as want at to we, reasonable we looked this

a kind in of a meet real innovating of sellers think a is but to as well. an that's this it's win-win for Etsy program, we of innovative example the needs great So think we way

Kunal Madhukar

it and about quick potential has impact availability. of a could the product impact one, could supply impact if concern squeeze been coronavirus and or chain if There And Great. this. I - of increasing the

As is think on you original what are products GMV available what percentage there estimate China, you potentially that like raw do which that think a the Etsy, might the of the potentially material do the disruption? - if is emerged could disrupt disrupt of think you on have from could

Rachel Glaser

we think our there's point. on So sighted. a very, supply We this, China, impact of coronavirus the very of demand very at this close been watch has and small where percentage no and Etsy in our to all keep obviously both majority is a of

and about the world responses to think remotely In you sellers needed, of some in CDC we most the working from their workforces ability already you think homes. our is remote probably have being - talked which about, one if fact, that the have - of when - when largest remote the others about work

So they're continue to business uniquely set up usual. as

Of course, Etsy any trend the business. But haven't well. would far, think happens, subjected any our macro be we waves of seen impact as thus macro to - major to that I that

Operator

Capital comes Shweta next from of Your question Khajuria RBC Markets.

Shweta Khajuria

Great.

Let two, try please. me

for help understand you the contributions Rachel, direction thinking on how guidance, Could full some First, on much give Reverb us for the or XXXX. year? you're the is

onetime expenses, them greater that of moving margins and Ads, XXXX. then question - product. EBITDA leverage and XXXX for Reverb, and the quite some what Give likely the few with - puts deleverage? second in Help margin on expect you with potentially with where is modeling can things are us on There some the for and for you with cloud And around, with takes the and can Offsite beyond. expansion help the Etsy are understand allow are a

there are make a So moving few it's want to sure I pieces, clarified.

Rachel Glaser

Yes.

guidance XX% rate Day very of Investor with basis that will GMS. So on our much stand-alone for to sense - Etsy's you grow gave our how we we for long-term stand-alone in to of that give XXXX, we say some said believe XX% on - specific well. at were we that business starters, in take a did growing as is And line we Etsy

said take for rates Etsy year. XX.X% for basis average about on we a full the So for on - will be stand-alone

of revenue take and to back GMS and I the you've from figure enough into develop out Reverb's think you got the that And stand-alone basis. their for helps Etsy with Reverb's revenue. rate sort applied data GMS be that So can to

also exit breakeven to we be We've EBITDA going that said XXXX. Reverb's is as

Reverb. is there margins some on headwind EBITDA So from coming

which into and The in other would did to margin, headwinds we go XXXX would detail delever. some on leverage which things on things gain

would be But all actually in a expense of basically show for movement of up equal it's incremental would Ads, with marketing to dilutive and of revenue, in QX, accounting Etsy's so old Ads Etsy a QX amount going corresponding line. cost Etsy it marketing margins. the portion that be forward, have we the of would because which of revenue So treatment

amount we'll when think do the investing upper because accretive dollars. to and that, change did marketing as margins bit expect incremental we to marketing the from at also line, to Product capitalizing a pricing we deleverage our margins said our development, back fair We're of modestly ads, dilutive business And we continue EBITDA are EBITDA see did format also of development. because reinvesting last but little that and funnel taking and our in EBITDA we revenue might we the year to be in we're into product a and we there, the of less new labor. of our

product marketing to So the deleverage, of our cost development Etsy small Ads because we the a of and will and in - going have modest amount leverage line in we're a both to the think revenue but change of G&A line function. gain

Operator

of comes Citi. question Your from next Jones Nick

Nicholas Jones

the on One Offsite Ads.

seller into blog I opted any give for will roll-off think I we can of when read the handbook this kind to on think every would the around and think decide about opt year this. you you - circle Is should seller out be what a color be? that from the sellers throughout that would product? may to And how touch launch how there

Joshua Silverman

Yes.

lot at to and whom they great But that think we with size. time sellers. their well. dedicate saying grow we at us, try this of best that or generally, time start and we really for spend early know by tell relatively sometimes in of cycle when something them this look Sellers to don't counterintuitive, pretty want when is than be more we are small, be this to a to, I'd and life little they going is And So start a interest. what always a with for program - program, time the do we in is with sellers' think sellers spent we most large, certain a don't them ton a maybe might but

may incremental well some sort by and and they want And not sales, growing. so demonstrated be to about time they hit sellers. true desire that's they've of sales. scale a And of And $XX,XXX annualized of actually the

And $XX,XXX, that seen we've opt under the program ability you they're said ready growth not is so to that said something have the threshold because for. out who've of where we some actually necessarily the sellers

they've something for. we time all hit the they're in typically see wanting. works when $XX,XXX, it frankly, It's And By typically that program they're the growth is they're together. better ready something

and really data like partners and and with to scale together We ability that to Facebook Google work more program. more others have

So lifts of whole up the in the larger have it sellers program all to the program.

XX% allow for an opt we sellers for under have fee. So they out $XX,XXX, and a

sellers out the but have we they it $XX,XXX, fee, have XX% for opt think out. over sellers the be, ability for they manageable. they'll not $XX,XXX We're very but will be And a For opt to rates don't be that sure will manageable program. under what

Rachel Glaser

And add we have we a for where day forum. room the a team I'll cross-functional a set announcement monitoring just up very comment because have robust

time immediately. organization - spending the has and I've overall not Our extreme. the so say, than positive the there loves And e-mails been expected. and to as more there's, it, today, and just But with - take ready we've respond to dissention with I'd we everybody tone been tenor been, member support in pleased has positive very calls been and them

pleased going communication So far. with thus the very we're is how

Operator

question from next Heath Your Sachs. comes Terry of Goldman

Heath Terry

customer that to to the you're frequency. of some back wanted get on work Just maybe doing

are that, that working investments personalization, you look that us and look we specific opportunities? you've year, sense that be which you making, or give And watching that far? you really, As marketing, initiatives the the at so on, made marks pipeline And ones biggest you got feel you're that sort of the search technology for out? you're you the of would should see for of as you some this year a the road the - where can sort at you've progress ahead, where of if like call components of there

Joshua Silverman

saw again, start progress fourth Rachel again. XX% shared buyers quarter, per pleased that were habitual was mean I'd in yet like that with in year-over-year. active growing fastest-growing by and we're the yet the segment buyer we really up our I XXXX, saying GMS

people year was X%. up stack, again. two was it or up two year the The who percentage of days shopped in On the more

So with we're a show these we in driving that that very leading fact, frequency. are, lot pleased indicators of

and way both happy question, marketing I'm because And the product led speaking you've they're levers, about important. the in with both

gets the nonlinear to search, and better deliver cloud talked And We've making been data more that than come search we've the likely done, of to to back use someone We that better. purchase. some just bought with about models robust are more things and like drives and more leveraging models nothing having and conversion. happy more

rate often. turn visitors conversion So goes buyers as more come into buyers get and up, you back

Life marketing is opportunity cycle a us. big for

take to a like our and segmented new able and the XXXX. of in channels, cycle and to that technology e-mail life personalized through on communicate are excited allow things around we much So be we're us in bringing to own be more marketing going really to app, to more set level how that's in we much another

that paid all the the at seeing through with And the are that's doing, progress way look we the you if pleased marketing that we're we're then And there. funnel.

really anything what not don't look mind. explain our commercials, already television So They're designed Etsy generally very for with purchase in of who's heard familiar at you They're is. trigger occasions. Etsy never they someone example, Etsy to if for someone do really designed to with specific who's

of seeing work So that wedding and a have of, think example, with you're that. a as purchase merchandise occasions, doing Etsy seeing so and very people we're on also should channels and things video other mid-funnel that. seeing well, VX that process. Facebook yes, from course, and we're might are moment should like We're that oh, for The entering specific had for gosh, triggering us of ads just I benefits who target, advertising I

the work metric. we're that that to So and marketing it's the of work come and drive product a combination doing together

Operator

Ripps from Canaccord. question Maria comes next Your of

Maria Ripps

be guaranteed to that related I to initiative? a ask to all your Offsite the ROI to wanted around considered you'll are And own what's ROI ROI With ROI Etsy sort you Xx other revenue how this X In you willing about associated you'd consider - reasonable range for Ads. thinking with that fact, be about to sellers, here? I remain sort guess transaction? of of

Joshua Silverman

And So ability invest are always on spend and $X And this much back program, we decide $X, daily on in more to operate and the a we risk-adjusted very easier to the on, fact, it's replacing. than program it's getting if have a focused than basis. much weekly we're how basis? we operate to

is to are individual offsite day, advertising So - of had executing, a you on if and thousands hundred that. campaigns having its each hundreds any that seller of one the replacing, hitting own them manage program about budget, their sellers given that couple we think of And we're budget. the were of had we and

little marketing will we'll the is be do a a fact budget little on to bit invest in, that deleverage so because see and dollar that very And allows the more. to manage, in the This have paying careful And us will changed, when the of more Offsite of taking benefit getting be and little has can Ads And effective we that in us we allows we'll pulls more the that campaign excited drives Rachel that. they we're to seeing bit, we is, drive to from you spend. roll-offs so much and for bit. one new this and rate marketing. margins now what invest. one we'll we in better do, to easier our we're ROI therefore, always a sellers, so change With little growth, like also It's the data iteration sellers the performance overall to more It's run be It next return a we and as profitably attention that. about for bit us talked spend take us up ROI marketing. it a kicking invest curve allow and about

Rachel Glaser

an invest more change is larger increase. there. take it One ROI. higher at I to or that we creates LTV, effective same take when up rate X And is did summer, the so the just we a just like want pricing last And can the underscore points rate taking

thing. one So that's

only The goes accounting. reinvesting, second we're up, but because thing not the margin of is expense because the also

marketing So And the accounted line. was of for we expense the revenue. Shopping will was way is Google that hit of hitting for this cost now spend is formally, the the spend portion our

Joshua Silverman

actually, early Etsy. we Ads reinvesting believe we to And marketing this think draw are comparison platform, that and back the bit. Offsite changed the stages will of invest growth, the unpacking in this chasing be money want huge, we to more, Etsy money majority will told to the we're it, is be is idea years. years ago, is to on profitably for into couple use because But And sellers, going what are of Ads, We in A of and the of and commission we and drive we a little we substantial we're capturing an out for that that grow customer over money next the opportunities and that. make those. then sure growth We did to and product of traffic, see the - now business to it to we great make to the growth. to back, reinvest invest able TAM. over we great enormous And live the absolutely the reinvest we we to opportunity in business better. We've past growth most experience has and couple seen delivered

Operator

The next is of from Forte question Tom D.A. Davidson.

Thomas Forte

the efforts, advertising of higher election own we how during my is, your think an So question first should about advertising and cost year? digital and TV presumably,

Joshua Silverman

we're first, Well, what we seeing. let say, me like Yes.

have good, results been were in and quarter. strong the they the So fourth

we So investment always point having fourth and We're techniques, precisely, quarter. the to statistical little a good but a they that multiple different in use also to measure been is TV learning. harder

I effective. think our more becoming creative is

that's media in our efficient. happening think more are We're There's strategies a getting starting and prices. means which better we effective. get upfronts, more more buy now lot becoming I to TV us

uncertainty XXXX. into some us. You're that ways is some We do for upfronts the year right election the in throws did for several -

you. we'll some and as built plays already, see given the to we've So some about we've we're how have that thought have the capacity But in we And cycle out. guidance, did. glad for we election we've locked buffer in

Thomas Forte

sales law rolled noticeable out. changes items headwind. online then I I said was curious not you after for noticed a And higher-priced were on tax question, that online you taxes know was such if Great. any lower big rates trends my But conversion as sales follow-up

Rachel Glaser

do higher a Yes. bigger We impact definitely to AOV items. see

So It de more also consolidated than categories than that number did think impact higher where our said, completely Etsy did. Etsy's we that apply results. value. relative average because to overall With to order minimis Etsy's core size minimis average Reverb is - overall their that's Etsy is value a de would completely marketplace see Reverb order has of significantly to, and

in we sales to - forward, we any year that why is the to lapped so the October from by going XXXX. And we there's that's the material impact impact Etsy going X, get we time the out we past believe called said don't be and

Operator

Your next question comes BTIG. from Marvin Fong of

Marvin Fong

to call grew who apologize - people shop buyer bit twice on with line a about just I little little asked down a total the further I I looks population in think if the actually jumped the late, it somewhere like on repeat buyers, the drill a better. or these But have year. been already. or wanted It

total why and pool buyers continue just If seeing widen, rate think to there buyer you growth habitual on be you of would delta and you're the could that the what that - comment active the great. between

Rachel Glaser

Yes.

year this about X.X growing XX% habitual to So are we said, buyers million.

GMS some the buyer, for big X% in the in is XX-month we - the - in basis. we the slide active think metrics over a what it, is pretty per shows - the almost X% GMS chart over uptick one it's actually stack that - in which think quarter, quarter, frequency, of which trailing deck use I grew it's and we that X-year had in

I it were basis that, starting if quarter, it things, increased we're in than to smaller quarters, see - to at points have hasn't about the been think plot and XXX was quarters some previous whereas you growth all. So those of in

the material So really valuable Etsy buyers is for to some the habitual the we're see are fastest-growing I are starting most And think segment. that part buyers the inroads. who important

message care about. buyers resonating making that the So with - most is we're the we

Marvin Fong

noodling just my And of around forms then what about you follow-up, was guys on community kind I and Great. the Ads. Offsite published the

be of expect said it typical about to think seller's I XX% you you volume.

your of with other based you If to And besides kind elaborate possible? of know the GPLA? that expanding kind just Google. upside you to actually on I could are is is that - there experience this any platforms guys on

So if that comment that, could kind just you be of on great. would

Joshua Silverman

about and our with them Yes, to for their kind small experience it that, on very to dimensionalize based strategies sellers, we impact PLA And a reassure to be be because sellers so pricing programs, to sales. want existing we're is just going trying they've this got and this is of part things. most think other what might for of

is of of a they them so have we who conclusions think to give be chance that this experience want folks think before a they be for their to going to to where And of going free actually period, things it. will to experience trial also a And jump to sales, don't large of We're that typically reassuring. it. around them couple get I sort weeks will part

Operator

comes Darren question Partners. of Capital from next Roth Your Aftahi

Darren Aftahi

Nice quarter.

here. Just two

Josh, that just U.S. just have. of talked of then - in the of kind listings hedges XX% you comment of And in your subsidizing. inherent in Ads for made about to orders. this XX% the then make the a and move and about in are hand what kind you orders release, kind could commentary terms what in free some the I'm of Just does this of call out on between disparity you doesn't curious piece, with shipping, And place kind sure the Offsite risk get subsidizing? the

Joshua Silverman

Yes.

take first the maybe on [indiscernible]. the question, first I'll So

thanks - between a XX% XX% free. typically don't and first the items ship one, $XX and On the under catching that's catch, good for difference that. The for

conversion fairly high and and - because pretty high cheap. a so And velocity those they're kind rate of have

The items shipping but items, about delta that free there lower-priced difference of would only the really because shipping. are So of under is XX% listing orders $XX. free XX% offer between arriving explain eligible, particularly of views

Rachel Glaser

GMS I did is uptick designed And I'm sellers actually program that But needed quite that I'm the assign to new asking - PLA. basically to think to saw a ad ways. let and that unless in own then but On a before, footprint risk you but not a pay we minimal don't were this buying if get sale, actually we was that where much now take to and version budgets for saw for or to going in their Ads going Etsy - Because We the lot Ads our the driving not we sure Etsy. time what the also you we nice, expecting GMS for first take sellers way said, and and know the Offsite going it - needed we lower program what and are the of to market, make Etsy's program in bit for but a they over we churn. were sellers, were this we getting PLA way of Etsy we scale The adopt because to we buying our for they're of of for answer to right had me also sellers were - is really risk the lower version PLAs. Josh their own to as budgets make you at. because performance healthy PLAs and opt-in a

is this so it's a And instant. - much almost

program. continue PLA We our

are more we when - marketing we funnel can the it same sellers. intended divert dollars that upper had we to result money also are a with always in sale, and extent at cooperatively there's it brand able to. it some do our our achieves They make We where - of subsidizing to some the as successful

Operator

Securities. Wedbush Ygal question last comes Your of from Arounian

Ygal Arounian

going the are you by funnel So spending expand social? more that really Instagram been, of - I other spending could Ads, as So performance Facebook or that exclusively PLAs, overall your color the mostly you'll right some little little of you're bit. you give budget? what terms into you've Google guess this, and be just does Offsite maybe on how into in just I moving a you're marketing, is a more be to mean and sites, performance And and and you now mid stepping where on on, I think, fit bit now

there - paid to had you've Google? GMS going to of of you Is that dollars all this off And are - budget XX% lead by be you as expand So Google Can going had budgets? be your is - driven performance flat? just can being coming that expanding expand traffic. to in remains while social meaningfully

Joshua Silverman

Great questions. right. All

So let's start.

to at attack try me time. these a Let one

- expense So is, one don't of of this think to Google? so. your come asked And you we is at the going the questions no,

the as keep next profitable spending. we'll dollar Google a is long spend As dollar, we on

to sellers. an long put ROI. they're as right? at and money how to better, work can it's good Etsy not and as our more - providing looking for we more that We're a drive or, profitable for So the find ways growth And the

I how excited us that early about still question that potential And be would we've it's really the was, your social, that I'm of upside for on to are on say social? because us there's and means next So that we the real does doing working quarters unlocked to social, over on more. days, of past retargeting. for seem course tactic couple do is The that

people turning an out came and an effective found retargeting to incremental who Facebook, is ROI-positive buy in way. didn't be something finding to to helpful that purchases So then drive it's to Etsy and strategy like they

advertising of and program, third-party other are of site on specific offsite social We a a the the the program. love again, part be would or Facebook. on Google be funnel would to And of offsite strategies have listing of that that like sellers part working of individual be are sort to advertising listing to unlock more we in bottom

let's now This who But talking Etsy people So mid and to about doesn't advertising. move life have available off-site to it have funnel. different starting Or about them. events on that. what we about I'm make not showing would count videos and be as for that a static Life could be are That's cycle just learn we impact events, It big to Etsy. excited leverage, to content. an area more and have video.

which life If moments and moments you your engaged, Etsy are gotten for or moved had or home is important in these just a baby relevant.

in very it's in our But But make to And effective so and by. the this. starting use is of brand that to at those target Using are more mix. part content early we're then effective. to more. encouraged more influencers And we people just just days, beginning moments media specific we're promote even getting we are newbies more how that to is learning we for something learn that an to are something TV,

opportunity still and become part think I to things our of effective scale to cable. continue efficient And our and pretty DRTV there's a and which grow. more so of more is - light right DRTV Most more, TV budget. now budget we leverage like is And as

I opportunity excited and and channels about the funnel to to well. opportunity mid-funnel social equally scale Ads about grow So upper program, as excited to the the I'm am Offsite but continue with and Google

Ygal Arounian

quarter. late, just bit to ask, just want I And growth I one going picture. it's the little running know back and GMS more during rates to really a bigger in the but we're

can X are have into that and Was over was between you drove XX% you that rate a that - what holiday? to in whole And the XX% you it you full there the that gap? the normal have those closer whole so the course the growth of seasonality? kind higher? wondering, really for for I'm things drive drove growth quarter, the that then implement place of period just And XX% quarter the during that gap growth for things XX% quarter. Is put that Cyber

Joshua Silverman

exciting QX was an quarter.

which we've a Etsy, many heard the a had at large. quarter, behavior I consumer the about have Thanksgiving the peer, moving think in folks I of that is talk think on impact for very us pretty like most experience, common big shift had

of was feel same. was your it So Thanks, quarter. really year the And we spend strong. November than We this consumers year. But net-net, and it it we about we time. the very was slow, everyone, did And last did like pacing fourth and it. seems was for appreciate about different the great, December how in great

Operator

today's conference call. concludes This

now You may disconnect.

Etsy (ETSY) 26 Feb 202019 Q4 Earnings call transcript