ETSY - Earnings call transcript Q3 2020

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Deb Wasser

Hi, everyone, and welcome to Etsy's Third Quarter 2020 Earnings Conference Call. I'm Deb Wasser, VP of Investor Relations. And joining me today are Josh Silverman, CEO; Rachel Glaser, CFO; and Gabe Ratcliff, our Director of Investor Relations. Today’s prepared remarks have been pre-recorded. The slide deck has also been posted on our website for your reference. with live Rachel’s video finished transition we are a to webcast we Josh presentations, and will Once Q&A session. submitted be on can by window Q&A Question chat your screen. the displayed as use at the to conference call. remain free Feel entire any time, open it it throughout will as reading to as be to and your will questions help I'll we try can. me Gabe get many COVID-XX business key today to to our related strategy, keep Please drivers, the benefits marketing forward-looking thereof, include of in communities, their return mind and and that statements our on impact potential the product ability of guidance investments growth. and and the our and our on remarks our drive financial anticipated initiatives,

differ actual may Our results materially.

XX-Q and which on today’s and involve SEC on described assumptions today forward-looking subsequent statements August on X, risks we looking are XXXX make we beliefs Forward Any that this the uncertainties, SEC. with call with filed based don't we and statements file the and are any of our reports in with earnings on and release this during turn and you A With earnings find to which measures. call website measures IR over financial it non-GAAP we'll of Josh. present reconciliation GAAP release, have them. to included to the in update can is the today's I'll GAAP replay our along non-GAAP Also, call. obligation our that,

Josh Silverman

and hello Deb, everyone. lot welcome, a and Thanks

speaks to up as quarter. of model. the proud was quarter business again anything, team momentum think quarter Etsy, of we third the showed incredibly another which and sustained how I'm The much of this the really strength as And the yet dynamism for

time together at employee to a strong so at proud forces time is when for and something other and Etsy coming engagement a In our to buyers trying division much survey, fact in granted employee don't that incredibly support a each there's we we which take the Etsy us, are are showed many employees for when being focus that mission, on divide is our work at our to society. took engagement recent sellers, serving and really so Etsy

through very the for the leveraging didn't but strength are was really future. is focused macro in far foundation had and to the to continued numbers you we the So is it headline going very third the more that see this of to we a that quarter the quarter in And detail, strength all the momentum headwinds strong lay the board. Rachel into take the across in in business we've expected quarter on materialize.

revenue that and own were were of ahead which significantly GMS result, of expectations, a meant expectations. also our As ahead EBITDA our margins

unpack what's driving that let's So growth.

X. to Turning slide

cohorts. very, on our well. are focused existing I'm are sure our all and And very activity cohorts We of the as new you

So together. let's those unpack

astonishing at reactivated buyers First, an grew new and rate.

buyers and In months added fact, reactivated XX XX we in quarter. new ending over the million the third

Etsy. that, buyers XXX the In buyers of to buyers million on total a ever who've year-over-year quarter. XX by grew third XX% XX And out active base unique ending in for of million addition that's the bought months to active

why Etsy it one ability Etsy's good interpret terms in to reawaken bought way still ever who's who've existing had much people before last lapsed to reawaken the experience. that as everyone we've success is many months. ton part in a we so buyers. is that means and to on of lapsed Etsy both there reason on go seeing has of So opportunity very buyers, that great we're And have That's think of a there's of bought the but generally said half XX bought also

tell mean? you to answer them you The I the we get what why most say, actually gosh we it. when and said, not Etsy. and haven't last just of I months. in I the in have been no, think oh is you more so common months? XX do And thought, didn't they bought bought often last love out reach we them, And I XX

in of and the show the terms well that reactivation seeing moment, number very thinking people buyers substantial new as of buyers. it now lot of of in up are more we're this So as of a a addition

Let's take slide a look cohorts X and those how performing. in are

people about of the the quarter real third XX% increase made from And you'll in versus in of purchased of first or quarter is First, our who purchase They purchase Etsy on purchases XX% more who prior purchase masks. more activity third they XXXX their activity slide purchases non-masks in made are we're cohorts XXXX XXXX XXXX. XX% as from XXXX. of show about on quarter was Taking and of as the purchase what we the joined a XX% Etsy one people example of about here prior. was about see of you cohort in These X step third XX% the function that for GMS. XXXX, was to prior and And all cohorts. the from seeing

on Turning slide X. new to buyers

first are face quarter But aside were a got similar bit face new XX% new putting cohort’s existing new and to tale did buyers that XXXX. in of purchase buyers look not of was more purchase buyers than new it's new buyers accounted a even active than a year GMS for purchase was mask year active whose a a be And that about a see of second or two We've a ago and to third the You'll new ago. of more mask. buyers those the more cities. first buyers third

new often purchases mask, third often more you expect, was were For as face face and purchase second masks. a whose their buyers first

than new what indication lower mask, be our take it purchase because more that was lifetime been. cohorts. is that face was We're new whose their good not likely be face or we'll going cohorts previous first whose we first that a mask from than purchased is value value what buyers So have traditional buyers good a watching to may lifetime a an as have

seeing of express place It's relevant agile products you identity. small And more kinds way to there works, go that things go and that the to places to are for why a is place So you your you dynamic marketplace Etsy it's online exactly believe find that go the incredibly with bring can the can community. sense we because We and a more At actually serving connect place can it's of time right a stands people and your same a other you the are It's coming to in different. Etsy strength? such something now. thing, people are when together. sell support you businesses

the XX% have business Etsy Etsy been Well this have have quarter, occasion? of that in important been that And to think the fundamental grew strength look growth number sustained. at to quarter the And year we how astonishing and very see sellers the of you'll unthinkable was an if year-over-year. to you'll as would we grew rising That e-commerce overall fast. the occasion. they So ago. twice Etsy second a But Etsy been again rise model Etsy's allowing in third see XXXX, more than at

Etsy that the versus market we So e-commerce gained again benchmark. overall expect share yet significant

the the and specific similar there's know products growth see always story quarter Turning XX. you'll to we of seeing specific are slide story third categories in I a is rapid that and of same what substantially to stand-alone the in at extremely what already interest lot categories I top and very point at these XXXX. as scale growing and are of six quarter second growing is rapid The massive, massive very, out would at rates. industries and that rates each categories the Etsy

or faster but changing. are in In peel leaders are fact, we many selling faster items that little than as the believe similar, the always be growing bit, may And these dynamic back categories the and categories. Etsy of is a market to

supplies. So for this In back-to-school, desks a a example accessories, and of different seeing year. we're home year lot looks jewelry of than necklaces. and lot custom in vote last It's learning

more the XX decline as October. And $XXX sequential every outlet Europe, may decline responding million ubiquitous product masks course, across times. similar, into masks of themselves So to available quarter. continuing to is more constantly sold. be in the everywhere and the And States continue third sequentially. be very But million but and a in in we that masks the become sales seeing substantial the United GMS and retail categories items in are are

a However, if masks X category they be the were in top third their quarter. still would own category,

Moving on our results. from

compelling human and conviction commerce durable. have We around is to more right and than ever built Etsy's is our incredibly that our win to strategy that mission keep powerful

discovery. to collectively up make And right deepen search areas four are to with Starting each aggressively that win. investing so these our of in we Etsy's and strength

for see you'll to XX data and We investing here search we the for in call query over the past make just consume better been has gap. to months, many a gap we It's doubled. the each semantic to And have when years close what actually the search that the we past what about just sense closing the dramatically mean algorithms that semantic the talk they And need. you we translating are way is we using. someone what types sophistication one of what giving of

search gown that same for dress can with dress the continue milestone the understanding a way great there's deliver to query. gown ring" Etsy quarter word in Or sustained they example, We it but we word rings make significant major gap, "emerald buyer improvements first-ever search. our emerald. semantic the has can think in someone's third road personalized to means map the that and if closing contain the For results improvements the experience type long we a made stone word use that hit still better. and launching substantially to that go a are

the your was use third the of for repeat in We X rate, get different You've and it's longer who hearing rate. we that not is but same results. at results people keyword an buyers just promising now, so of in your those now look your inform purchases the X that clicks, for This favorites, will And time also in same that first say will true. showing get same results, search and no search. your terms the launch to in conversion purchase and results carts been the add some me exciting quarter to terms type

Ads more now very as often come on and So search initiatives to been Plus to we're and to more these have years to personalized driving we marketing of but bring Etsy to laser-focused refine just and both beginning buy will frequency we're We've back get excited product and well. incredibly work often. encouraged, improve it's models. people launching the

new have and giving couldn't a one lifetime lower our Just a off of offer quarter, and because it's we a that XX both now propensity a automated in launch we've investments year on many launched the new just third high select it's at and of to $X able made ago first and frequency. done CRM purchase in thing driving of And set value the a kind we're we're in days. back in your And to that launching to something an next they buyer systems buyers one to of is example examples we that to have -- try drive example of learning. machine the of come

Turning around for we're all-important holiday so a even you need know the Etsy even And it. to going to pulling but looking many people, at are forward in many building season theme: season doing our people can things role different little This season. We're ones feel when you connect we holiday shop more it different, to loved to the and helping larger because campaign time that Gift to feel like is special earlier. you play think making mean distant. an a your the we bit be

the In seeing becoming really they're States terms in be improvements the brand where seeing excited about to strong channel United continue we're a of campaigns. and awareness. performance we're television really top-of-the-funnel of advertising We ROI mature strong our

course to quarter, deeper storytelling campaign, using has look fourth an direct at a that narrative create the of to even with campaign time shop. to of going that's So you the different and Presentation] to products you campaign to of that brand-focused television and marketing more this been running purchase week. a of can Etsy, at ad that's And television yielding those campaign they've XX. of marketing the to so our much that an an and television. one one time more as in launching same doing October connection, start designed buy our I'm campaign. We've on all kinds designed drive that going here's the a investing making new, the And so speaks differentiation great to than mechanism, we you running be investments brand They been the in occasions ads as tech capabilities Presentation] a can example pause directly seeing ads. spots have of now response at launch significant [Video more investments we're example these [Video something But we're same in and about on a speaking are Starting running just the more emotional You'll results. of Etsy concurrently. come

an marketing the becomes performance efficient in up terms Etsy results of performance and that the marketing would even even investments we're in platform. tremendous if associate European the really with very able podcasts influencers about. created collaborations weren't many despite really has of they quarter which our function influencers they've And And Our spread and course leading of like And Etsy. them with then combining influencers a our to important to with increase new in serve great word of exciting investing required which to growth brands in also individual co-market really where it's power have more than strong have Etsy. markets meaningful to third the excited in in example in we together we're Zeitgeist, possible curate Etsy way. investment. go part making of our we've We've been quarters, more driven with want as and prior of brand in great example have on And been addition an really some of been that a love some been leading they Etsy for none in an even this items our infrastructure game bigger step that, collections to areas core the

our happen For new our tremendous much in example, been informing sticky to loads That's be in we you our grow and a We've to meaningfully we're engineer showed relevant. more required investing minutes serve site are in page effective team, investments search increase ago to loads investing our that developer platform data buyer page faster been in so make faster make engineering our algorithms I just create to because can we very we've data growth. order the that know each to important meaningful really experiences. consuming performance that And and in efficient. infrastructure as have continue few

minutes push on As code just one fun fact, Etsy. we XX average every at

The third work to musical sources that take quarter grew So Reverb. we how with benefits. make Reverb rate were when pleased dealer invest been in to allowed product it's grow. the sales has marketing importantly, of to development the in to continued Reverb business we've innovative our rate. Reverb in industry We're a Reverb also the believe a to time really code third growth seller announced easy very indicate And compelling product and and easy really the has and at deploy, to in the investing base and In team fact great long-term very about a enhancements programs, great quarter the at healthy received second we're very to in excited by And market. quarter. turning that continues the seen actually for launch and marketing instrument stable the contracted the while have industry changes Reverb And had and future. been more growth exciting even grow platform. potential

where years quarter going the that quarter, team and the lot proud that, around their the soul but what to we heart allow potential. just and for So Etsy a And launched whole because We're executing that team Rachel. for decades full to the has quarter achieve to growth potential conviction over are of Etsy of incredibly to the that it with compelling for a making come. conclude, in community. of has not this into great and put third executed was benefit investments have we the turn I'll months, an believe us the quarter, really And incredibly to

Rachel Glaser

basis. thank appropriate. commentary where our and than as QX quarter grew another of to XXX% $XXX million, XXX%; introduction was last deceleration progressed. call. lapping acquisition and on results august primarily and Etsy's margins decrease expected see July contracted XX% today cover in Though The to and Etsy's steady of we decelerate consolidated to us joining results to we standalone sequential and from as up was deceleration drivers GMS XX% On Etsy's the Revenue growth in XXX%; of a for million deceleration GMS XX%. Thanks EBITDA. partly free GMS QX for growth. The was of was a in performance shipping consolidated standalone EBITDA September QX our we a a of up third Josh buyer and grew quarter QX better sequentially did across higher-than-expected mask forecast, results, of $X.X quarter percentage basis, delivered was On Masks consolidated the everyone and earnings QX. came we strong the GMS earnings My call, board, XXX% Etsy's XXXX was growth our year. due Reverb QX, as XX% of GMS revenue you key up billion. new of will with sales in driven that $XXX adjusted in QX GMS the our in initiative last from indicated month by to adjusted

month-over-month in In fact, XX% masks September. declined

still masks to expect meaningful, we While deceleration this are continue.

for in of XX% QX the buyers. from growth and growth, QX Ads growth GMS, and by in rate overall conversion Also driven by as in Transaction QX in trends QX returned Consolidated deceleration rate. in growth non-mask underlying notable GMS both half the higher buyers Payments XXX% New mask the expansion four quarter. Offsite GMS Despite Ads. last which with was and of Etsy a driven for visit revenue non-mask we purchase. the Key drivers in XXX% to growth healthy by revenue were in grew Etsy mask-only from in QX million the decelerated saw volume, same about QX, buyers sequentially was XXX% revenue. services driven XX% GMS an in and also expansion, marketplace quarter year-over-year deceleration

year-over-year. the XX% revenue XX Payments processing currencies, quarter Payments expansion. GMS Etsy driver XX% offer up We for QX, in Another Etsy our countries XX from across in our now of was

products Etsy XXX% made to continue advertising grew by and the relevance improvements versus strides algorithms that velocity We Ads sequentially search our incorporating sellers queries. year-over-year XX% QX. marketplace. units to bolstering in in make ad drive help initiatives the and to significant to We've more match listings accurately of

optimizing and bidding These drive rate addition, true seller the and rate improving also return. ad experience, strategies simultaneously Etsy buyer incremental changes revenue led our both in to the In click-through we're seller spend, return to improvements have win-win-win. a on conversion

as increasing As we for remained opt which QX. result, outpace continue sellers' expanded quarter compared saw to budgets expanded to basis efforts basis in load. of points and to benefit rate and are our them. growth focused the Gross revenue. to platform Offsite Offsite out and Etsy the QX, up XXX Ads, and XXX and incremental for return cost offset our a delivers than demand of revenue from ads Ads a less rate all last Overall, fueled had year advertising an XX.X%. our without during benefit full in margin shift Ads, Offsite mix a further on-site to sequentially our to seller Etsy rates equal X% current Payments strong points Consolidated XX%, continues was take take on we optimizing ad as listings. channel quarter

in years CRM into was Upper an future ads of we been for work segments. year-over-year. across buyer QX to rapidly leaning was the in the the TV across continue return two strategy our funnel and improving for own is marketing QX, million the funnel We're consolidated channels, be marketing paid up optimizing our notifications our XX% marketing push quarters. while optimize integrated journey, more investments of spend more marketing spend video now, social. marketplace, spend will XXX% million, heavily We've or approximately consolidated and buyer hard This upper through about the standalone building digital marketing our quarter. including Etsy up through and $XXX important, $XX out also in funnel We e-mail initiatives strategies many expanding realized television at as because spend channels. shift

ended of increase Another increase factor employees, momentum margins as and versus QX the picked increase We hiring our in prior are investments X,XXX impacting product second year, versus up engineering X.X% in quarter. a and XX% with QX. an

us quickly is bench allow workforce as that augmenting of as to our we're frequency than talent more we for of look nearshore us well product addition, rapidly development to continually engineering spend which revenue deliver The by a the leveraging platform GMS We initiatives, our initiatives higher at as significantly adding ROI. metric which product up including are and allow resources focus efficiently. In to product on dollar our contractors, per well scale and search, as needed. foundation per headcount, as will peers, fire proxy and

noted ramp take time for to As plans some quarter, impact our it last will fully P&L. hiring

per to today than head growth. revenue our we given it many want to invest opportunities where therefore higher for Our be is count

great XX-month grew quarter, buyers over XX this per see active in grew It's X% in This to operating which active our million. by $XX the third buyer second of in trailing buyers, part XX% year-over-year, XX% for habitual metrics. our million approximately grew the most on marketplace. QX. to grew the driven repeat loyal growth quarter. XX% a buyers to to from XXX% In performance buyers GMS Moving is Etsy up basis

in Digging on as Etsy. both bit buyer GMS on two-year buyers reactivated are you frequency masks, buyer Excluding more for and new important and know active X% segments up a X% a basis. per was

buyer buyers Etsy million over third for In buyers is that of existing and defined are purchased acquired the who the regardless five made XX platform not buyers a as reactivated purchase a haven't a on million has are quarter, new the new reactivated total New and of especially buyers those XX someone and made in nearly to time-bound, unique last we the time reactivated months. million. buyers and buyers, nearly reflected acquired the XX of it more this near metric across million or purchases of of behavior was reactivated only We XX% and two purchase more the partially four end categories. many or the of outlined that quarter. them QX second period, quarter XX new Since in

a helping on for teams to pie XX-month to Recently, including to to was can initiatives, million operations recommendations million So expect to in increases here also and get listings one the XX-month grew optimize for increases. we to and adjusted up and and focused reactivated metric period. XX%. improved Marketplace, member have streamline the per our new in since buyers to to investing sellers their Trailing to shop QX, to resolution. as window for to support quickly, in buyer the our active we're items. expect grew issue growing XX-day new sale $X.X sellers time nearly new have continue XX buyers the scale only XX% all sellers. would sellers Etsy for reactivate seller developed first GMS Note all decelerate that, over buyers a more demand reactivated and We'd we Active in marketplace masks our and decelerate XX%,

points buyers the and excluding basis was in strong was sustained with a sales U.K. part XX% driven basis constant XXX% of one the the Another between trend international International the currency on performance trends and and strongest expanded QX in sales up sellers being domestic Germany, GMS, XXX within by GMS. same sequentially masks overall was country. in percent internationally. robust to factors Etsy's of growth GMS stand-alone fueling

we've online ago. Etsy of retail in disproportionately the of significant number seen top taking approximately momentum, are in we've was from year this which XX U.K. you marketing in also spend. ComScore, market the Within up now the decision TV advertising market, to share. benefiting in in the in acceleration this from holiday we U.K. XX marketing investment. growth launch is believe growth Domestic U.K. According U.K. a international XXX% for e-commerce QX share the see overall, core made a all we which to up an the for our With reflected will site season, thereby

sheet. now Moving the to balance

in currently of $X.X cash, equivalents X/XX, a $XXX to undrawn. As had in billion that's addition short-term we million cash and investments revolver

$XXX senior anything XXXX used notes. seven-year million our During A the our buy back for to were of portion predictable. notes we the proceeds QX. This I'll cash convertible outlook a quarter, of been now and has issued million but $XXX review of year call.

and the to to million implies So billion, the to XX% to slide full XX%. in range $XXX and past QX of for We headwinds margin XX% remember XX% the $XXX currently the $X.X range $X.X This XX% of out the XX% called you in versus we on consolidated potential GMS billion appear midpoint. we caution adjusted the to EBITDA our of Revenue that for which impacting EBITDA with XX% $XXX margins million, presentation is estimate factors year at of the last to business. up million a in to $XXX to QX of last million up in year. adjusted up year

account of model a significant our We wide continue for to range guidance outcomes uncertainty. in to

from This quarter focused factors. shopping election, pandemic, primarily which the health is spending, the on many U.S. holiday the continued of by consumer influenced being impacts around period and uncertainty

few our in of terms a mind. GMS things guidance In keep to

GMS so what have we experienced to far September. both Etsy similar for trends and in been October Reverb First,

decline million QX. a an GMS, $XXX million about in added versus masks QX, in sales $XXX the Second, sold in incremental XX%

impact in and into deceleration they incorporate were we factor to the of Looking we large We have steady QX substantially will see models in models. as QX. QX your update sales you monthly, the and your be can we currently XXXX than expect to encourage you mask lower deceleration rollover masks

quarter, is slowly more marketing Etsy. will from than the fourth that incremental our to expected QX of the In note spend. currently Reverb and margins grow context year-over-year to continue come in guidance, Third the sequential to impact margin largest

return associated and its the thinking Let on me spend additional of unpack how some about we are investment.

a as QX, a ad First, to earlier, prominent creative drive brand-focused This television campaign we have campaigns, launching be to investment emotional existing showed designed you which immediate connection our sales. with are in to specifically addition in design Etsy. we response to intended more drive new will direct

we is build positive real Although will brand in-period year opportunity to that be to next return lower, this and likely have a see as affinity beyond. return

investing to these for marketing the experimental are ROI still This Germany. in in markets be is both channels nature more U.K. Second, proven is we upper and in spend funnel out. and

achieve below the currently levels So, to we we are U.S. in return forecasting

associated in brand basis will spend QX. margin also creative plays few campaign, the quarter hundred about contraction. Third the creative of Europe sequential role a expense with and U.S. in new for margin fourth be for media a Fourth, we a seasonality in points with ads TV the new contraction. the increase The together account expensing costs

We continuing expect margins. while we spend marketing, ROI basis headwinds may growth impression expect volume. Though hiring thresholds similarly hundred macro margin in quarter performance ROI may to And QX still of our few the also which ramp impact a last, higher CPCs points fourth our in drive target in-quarter our achieving also our contraction. lower on and

proved our us approach business our seen be value model. investment XXXX marketplace scalability tremendous and You've disciplined of extremely and out in the

short-term that cannot a see a our outlook. TAM. our in particularly them While expect long-term on last XXXX over these we uncertainty in as One and drive a strong areas comment margins we our amount the control. enormous significant investments have lean We of into impact we basis, about ahead growth conviction to

the view if a business is We worsens. or have not fully consumer what had to like would economy yet look spending our when reopen

your being week. therefore Meanwhile same the are pay in huge encourage to volunteer. rates. there's cautious attention has year. to and do to the election next register, and a been very our models particular planning in over you growth for active to and to quarterly employees vote, We We our Etsy next encouraging

are meeting-free election We a our on team providing day. day

turn Masks the have media vote. your the you workers get donated millions we so hope and have out that to been to using We provides I our organization PPE questions. for can over of to all will call We and channels same. we now followers to social an do Deb, to take full our Mission will remind

Deb Wasser

to everyone Thank everyone. and Thanks it thanks kick you I'm Okay. for off. joining. Rachel going

We in, one I'm going if have do -- you chat start use Deutsche haven't Madhukar please from already queue a in of put from Kunal to one the questions already lot Bank. with please quite function. our do

Kunal Madhukar

the of has is shipping far I just has the GMS forward but you of let's be how one to off we kick anticipate How a gone? that holiday much Josh, that, one I good quarter as in pull that growth again. could for it spend How consumers go think know trends to-date? over with. covered So delays? that

Josh Silverman

been for of thanks our has a consistent spending the Kunal, October Hi of seen Yes, great deal well with Hey forward question. October the may with Kunal Sure. through we in prepared sustained And remarks, as everyone. largely some holiday momentum in said be which for fair that we've a time Thanks us. spending. that means to-date. September pull point

that. tracking been have We

seeing that than shopping last year. October things were are at little they this October look like are we earlier, keywords bit happening fact keywords tree we example, purchases to and related in So, a for ornaments, holiday

expense see I'd that certainly we What through we So sustained encouraged it's the early is momentum at to than but shift by that seen we've the say going a October to happening do in December holiday are or and not? way come is the earlier don't tell all of know November October. too we before.

Deb Wasser

Okay. Great. Thanks, Josh.

from Jefferies. John Colantuoni Next one is from

John Colantuoni

And Etsy you the any observations you on a parse intent in versus habits? coming made portion is help generally of recent can confidence improvements those a consumption what the Discovery? Can higher out Etsy about in in and improvements represents the has Search conversion shift increase talk to detail surge behavior give help and shopper you purchase you permanent that Also spending and resulting pandemic? from from

Josh Silverman

for Thanks question. the

in the with that steady sustained models hard new elevated And search been discovery. for So and that arriving time. through Etsy I And is for and one world we would intent. versus is last outside some part are and fewer experience better progress is is exactly has higher that fact we've models. launched parse and improvements customer in how options on on Etsy get in we of Month-after-month quarter-after-quarter seen out Part no are us better people say are no the other. things doubt, conversion the that the sustained much to our What seeing like that that that doubt search. it's rates of continues and to than

neural network So we've They're doing a launched sophisticated. models that substantially are more better job.

will personalization As two on purchase search, that search impact different launch actually the meaning prepared for based already people the some see the in launched history. quarter time very model. two on results rate keyword of in that's remarks, we And that different we even talked about of having the for their conversion the in same the third first first

haven't browse. yet and rolled -- and to out way even by we the that So recommendations

we but more are and point with a same, in understanding we might we're So like. us of talk search we often that gives the think we of about is. of search infer a what lot similar out intent benefit keyword, just not those discovery. what the someone typing I Recommendations, their about will And two search which given talk but need to you

related it's but technology. actually So separate

Etsy haven't personalization apply Etsy Ads think apply be we to to will to able we make or begun yet powerful. discovery Ads, We'll soon. will even which to browse also We more it but

discovery. So we -- just continue that's search and and

feel We every make marketplace buyer the We're are interface the better the make and human the to things the seller to doing doing in every trust better month. every month month. things between

impact on pandemic doubt the So on and of the some certainly no the is having customer rate as and impact experience conversion then well. that's

Deb Wasser

question. This is from terms Truist. one I'll on macro of last Naved from a one Khan Okay. pick in that up

Naved Khan

from the impact the of benefits? stores of on thoughts unemployment reopening extended for expiration physical federal Any

Josh Silverman

data countries in have And be you second seen we the states noisy. trends the say our on in third how site. about been we've some with quarter, talked how reopenings has We that and and quarter. And the the necessarily I'd true to continued some are showed not that correlated

have states like impact we're of impact that like reopen stores what a -- undoubtedly things part some reopening it's in have not may but of one-to-one some And technically correlation. on city may there's be So a retail terms might seeing but that in Etsy, city, around how there's people in what the are like to around it that feel those I stores? of a of the stores be going often those world impacted. culture country terms quite that's in how and the think into is difference lot of and what

for seen So pretty stand doubt, it the over correlated do but over the day-to-day a site. store see the it's we've tie short what medium you consistent now. to I'd term, trends reopenings is traffic of would that that difficult if been those say are that reason us No like harder on things to directly patterns to to things the look week-to-week, and sort term little it's right

Rachel Glaser

some of the what kind though reopening, XX% the XX% -- QX we stores data gave, even just are business that, in of that add showed grew grew I'd are there also consistently it QX. business our and grew core in that core

it's remained the that is So This business stable. masks. is excluding

seems it far had Etsy's impact on thus haven't So store huge reopening business. a

Deb Wasser

you Thank both. Okay.

one is Next from Goldman Sachs. Terry at Heath

Heath Terry

And holiday for sellers? delivery had of your to from this the in times for quarter? you during quantify are these terms can and seeing messaging issues you partners and season? their shipping your expectations impact on buyers costs your has guidance the are the What you How

Josh Silverman

maybe then to will Rachel and start want I'll add.

the We different to we with like even daily, times are are providers shipping that level. what and able track can shipping city track down to

progress. mention for but date or we've way, the we from-to and focus And particular is, the we're shipping results, actually that been in present times didn't a based on that very delivery we terms seeing delivery of prepared in date region quarter big our date what as ours able to third in the expected we're expected pairing. to real their expected by in what has so in update nearly And buyers of time made significant delivery

only mid-XX% So beginning at an views in the in in of date. have delivery date. October And now listing XX% an the views of expected would listing the XXXX have about expected low of delivery

in incorporate there's can item when times been better We're job to fairly a of dramatic do expected date. coverage expect into shipping and a increase the for they delivery we So arrive telling doing buyers that.

flat on rate tracking also pricing are very for in course of tier lowest parcel some rates. Etsy shipped shipping cheapest items of mail a We the large of percentage and

we in as they're to other while a be think total don't meaningful in that total be as headwind in you're sites. of a seeing much think there so on of increases And maybe cost we basis item, percentage terms the going the pricing of some may e-commerce

lot particularly buyers with sellers. We actively I'll of very anticipate a this time that, think material for at don't communicating say e-commerce being Etsy. sites and headwind And a are we I ability about So think that's really is And shine nervous to their fulfill because the of where model short in of pretty time quantities a are Week the constrained. I benefits large Cyber amount through. Etsy it

in supply fulfillment through largely have their factories or of and dependent centers. Our shipped few everything sellers, two chain working our a from home constrained one not having businesses won they're as terms or a having on

strength of leading And be the I Week. highlights we're so that also this is going into time the And think Etsy Cyber a to model there.

Rachel Glaser

longer customized for that And just things for on item that Etsy you add you're and a buying that known only the is get it to little to is the I thing takes would are because spec. personalized

has it of this early customers season conditioned In order our and ended retailers. if for our levels speed for traditionally so the case to field the sort somewhat is are than holiday shipping earlier traditional And all playing maybe all. slower

have by I holiday want we're in all order in sort not that So Etsy the this to to board get it time December e-commerce the across and same XXth, by just for December case. order think XXth, if of going the you

Deb Wasser

both. you Thank Okay.

question RBC. lot Shweta obviously from from here cohort gave Khajuria we there's a of a multipart data So and good

Shweta Khajuria

QX it Rachel in What may driving buyers it then increase you your greater in point new direct most to Is cohorts levels? can QX XXXX first a Is is XX% add fair I'll last among XXXX the and in categories? also initiatives? questions, spend increased? XX basket versus to QX free want of What marketing Is but size is some Lots is it in You your Is selling Josh, spend driving you the products say greater to XX% levels? across I versus things. for think cohort it increase a over start turn spend that XXXX days in it year. shipping? bundling of and spend

Josh Silverman

start catch will and Rachel I missed. I'll sure Great. I'm what

in increase to would cohort driving that you the an AOV try I'm moved beginning, I not. in has not purchases? part question say, AOV thing So take appreciably. for that's is the At it order. the most to going it's And no, first said

In fact, a mask item. low AOV is

AOV cohort throughout of saw we masks, out masks driving this consistent actually if The sales that drove surge is in think relatively a biggest that's factor proportion reactivation recovered you been as And down behavior has of period. have increase pandemic the lapsed site-wide. mask the AOV I shrunk But has the AOVs take So as somewhat. buyers.

did number Meaning in GMS third rate. buy was bought it of the very one we talked back So or lapsed in prior our more increase XXXX for and least A for in XX-day joined in buyer thing that higher substantial and people people they or the of quarter of each bought of item quarter. a come in a and that that even a second cohorts the XXXX quarter, that's who about than XXXX. in cohorts. repurchase or come who is often third the And third period that have still frequency thing that factor all second at fourth the the when cohort base percentage across driving that of normal reawakening back one

a are both bit play. those of factors to of And at did impact we relative So the those. quantify

terms able when there accounted and active GMS. buyers to look how reactivated many of buyers see it in were be increased at you You'll much for how that and

Rachel Glaser

on give data And gave of -- a lot call. did we we this

So the the specifically. of talk that frequency some would metrics, out about be I point metrics would other

Those valuable And that XXX% third six cohort $XXX. us buyers. are cohort spend or what and more buyers more to a than year grew habitual they come -- our in are call So our most in times quarter. that fastest-growing we the or

grew quarter low-XX% prior range. has in cohort think, I the And been think said, last growing we I that XX%. that, to

XX%. repeat category times that which nice two frequently what that we people call, us. come had The the year are a we really are to the next more in or a most So buyers, down that spike coming and is, grew people

uptick so the more a XX categories. the last picture we've buyers sort So was four in for our the triangulate that came frequency. two the of is that that reactivated buyers quarter. million And of or nice new frequency got to then, across in more XX% helps times and metric them or

frequently just more across category. they so, categories, not are and they're multiple And coming coming single a

-- And so we've to the encourage repeat and year the marketing really laid those -- put beginning product initiatives lot helping a I since think frequency. that we've of down of are the

Deb Wasser

Rachel. you, Thank Okay.

Moving Offsite Wedbush. question to a from on Ads Ygal Arounian from

Ygal Arounian

of funnel, it then share How -- the traction top Offsite with How far? so biggest has Is of biggest funnel one. reacting been the contributing the the can your anything Ads? on spend the understanding that top number take sellers ROI are me, top is driving are to you early How number Anything it's it's two, your how and on days? can to sales? spending, funnel rate? with what on on it you seeing And excuse you share the And there? of conversion

Rachel Glaser

in And answers also the we to Ads, specific specifically -- the Payments talk movers the -- points, one of about we we that numeric gave expansion don't that but on which new can want those questions rate and went numbers think Offsite was quarter Offsite but have of into full countries. and rate up increase, of because Etsy of we Ads now I really were Ads contributors XXX performed inclusive then it. nine strongly basis to take Etsy take break did I largest I say or it rate maybe, On impact. didn't Josh, to said and with the of to think then and start some top value you just we funnel the take quarter

And so, mean. that was -- I

to see I for it. continued sellers think, gave Ads from that is than that we to of X% out out rate opt the able are other metric less Offsite opt the we've

was about said performing is with million So we that QX. was ad of product which consolidated Top it's we our on marketing for return XXX%. spend our is consolidated sellers. -- said in in initiatives, that very and of very a marketing on a basis attractive $XX overall think we funnel that strong spend XX% funnel, upper And we up

So we big are that of a upper is more and on spending chunk on marketing funnel. significantly

internal incrementally very dollar a methodology, our We out little is marketing, marginal have with of it all get we only over us pretty that trickier we where ROI of for statistical buyers, from always, think, our that that's that external models not and we have. I stringently, from spend nine for dollar marketing thresholds to panel strict but marketing. use we every models, well. above-the-line of above-the-line data a some spend performing? internal it is media It's tells iSpot use, performance achieving the prove ROI that ROI some As how this positive is as analyze we as well our data And then just different

yield brand-focused curve is yield of And does. a and that little one quarter going more comfortable have of lot marketing so, we marketing caveat pretty a talked has return. positive to funnel with upper bit that to feel our performance a that particularly is about come longer out marketing that that spend a campaign the The nice -- than some tends we yield

Josh Silverman

surprising been to company relative if years in. that size, have people, look or that to at right our even two And the and And now. add I would Target. and in would only zeitgeist you're same Amazon, pretty those something it's would be a hearing to companies, as Etsy have you good breath the has becoming relative eBay mentioned Etsy suddenly And Suddenly powerfully been three four that ago. so

be this a so, moment marketing. is And believe, we to in, really to leading

They think the at of didn't to again, Etsy use when of occasions of as shoppers. themselves great the lapsed. you as know on buyers, Etsy. they purchase think look love could don't There loyal us. so you themselves and Etsy just they of many They think us. think They If lapsed reawakening didn't just of are

and a front-of-mind shopped time million million and our think with huge still go out reawaken. really and XX XX Etsy the reinforce to on in haven't out in past And form and this buyers XX months. Etsy so, powerful. opportunity on shopped That's people the And differentiation and And people lapsed have the lot who we or past addition use in ability is habits and are there demographic of there really to there's Steve be of favorite is a thought our deepen just on to there falls differentiation, to of is never throwing posted Etsy who's might comedian short maybe. and if our feed who then things Twitter have who as on many that, up finding we you shopped go have time check Martin his Etsy. so not into now he's Etsy. of all people he still just discovered ago sorts great Goodbye." one a the suddenly core "I my he And people Etsy, vortex

to I of more more think, we're and appeal and so, more And our broadening and love types demographics more and people we it.

Deb Wasser

the or Company. comes one from in hole. Patel lost getting vortex of This at Speaking & Etsy Needham rabbit Rick

Rick Patel

And most GMS boost? the getting are that confidence categories on think. pandemic? your That's the can what's of Josh, for which QX, in year-over-year XX% up buyer the per other I this continue GMS side

Josh Silverman

mean, data. very category I shared Yes. so QX. consistent some with we say I'd it's And

Fire gave the different XXX% year-over-year, pits. home a but to So seeing that everywhere pits be but things made-just-for-you fire else a but in you even kinds we're or is supply up on out little I remarks, sell really now, over color continues items. for bit Etsy. are can of cool go, to furnishings October blankets fire of we're be pits gatherings, there's what in good seeing going outdoor steady of prepared

be modern quarterly XXXX even likely the I items one the the pretty accessories would economies. in We're go and these our of And of term is choosing consistent. difficult individual to great. not in War When explode. weak. guidance. giving in of it's XXXX since to certainly, categories, in future, Jewelry also most say, to continues think the an II the looked history. We're I year are the XXXX so, to has these near -- categories But that annual unusual years And unusual is days. each giving predict. going we guidance very Craft western supplies doing largely World really it's most been only

gives and though very So relationship us And visit time a every a of trying but good them, I every to using that say And chance with predict frankly our we signals to difficult. difference to habits, purchase very a have we have us we that from every are customers, having our with customers to additional Etsy would have interaction deepen additional and that. time gives chance investment reinforce that this form of point -- suggest them is and experience we a our us right gives capacity chance now. are on all additional to signs with

We sustainable now are expanding to into things doing so TV just can. that possibly we but that moment build and to like quarter as really fourth try right this not U.K. in We're into the much investing and the in lean future can we as momentum Germany now. the

Deb Wasser

so to going with go it's I'm Great. going Khajuria probably for you from some be RBC, into Rachel. Shweta Okay. to questions margin

Shweta Khajuria

structure you upside your are you about most takes QX account Could lastly some on of partially marketing factors QX impact margin to important and highly and spend the also and please cost Reverb's in guide the the there? margin EBITDA due guide? margins? your for talk your about product QX QX on have expectations into revenue. What taken you Could were talk has puts EBITDA a healthy, and and margins and Etsy variable

Rachel Glaser

Thanks for the Yes. question Shweta.

to So, for with start masks. I want starters,

deceleration versus talked August. even masks we decelerated a gave amount we've and that the masks about steady in So in September

we So to XX% is that the believe that gave. number I down month-over-month went

we in as And your QX. about models And so, decelerate in masks guidance XXXX expect about to thinking we would cautionary fact to gave some continue well.

about In play of XXXX the in come year XXXX. full QX. will out to that is you but we much when of think could $XXX number, to fact; need gave think pretty And year-to-date of you upwards something about when taken be going to the million think you mask

you ask decelerate. not QX you specifically So masks assume would

best for from marketing our product to did initiatives impact guidance bottom to thing better-than-expected marketing lower-than-expected I we for when from line want out second And in we QX is on The headwinds and and that give QX. point in our impact spend had QX. and we top

unknowns have we a in lot So of QX.

unpredictable doing give through to line. if you an we're top are if marketing, the see headwinds are our coming if spend. particularly with specifically, elections and talked to when QX again this our QX our in the things out impacts. of you very our different impact higher, about thing the I guidance impacting And those we saw increase manage is in The But lower QX to up best so the bottom would we're marketing to will four margins environment, our and we And margins I margins. hit thing flow-through continued broke additional biggest expect out as headwinds headwinds last giving product think, best is pandemic. marketing line laid the the of we

which that's to is another then we two campaign campaign direct that we're of those television that's the brand on of that going expect And immediate spend expect more meaning that showed addition we starters media For is there's that examples from in on so very we quarter And would quarter. spending the And not outside call. new yield above-the-line campaign campaign. where focused. is we in response-oriented sales some that achieved is and direct the to -- media the more more spend

Secondly, QX. new campaign, will be expensed the brand all creative costs in campaign the from that

in the targeted targeted U.K. on performance but our spending through fourth then marketing media the work it's the competitive performance in lot not marketing and buy social. more on piece marketing the also more in technology only we're spending performance paid is internationally, above marketing really we're using Germany, And specifically last -- of on line, a and quarter. to this to more putting Thirdly, and better

but same So volume. we to want higher, CPCs will impression get be the

spending have yield we'll be probably previous just will would we So achieved because still quarter but CPCs in than our be deeper curve into the thresholds, lower the hitting ROI higher. ROI our

Deb Wasser

Great. Okay.

here. going We more are in squeeze one I'm X:XX to so at

end from D.A. Tom will one this for This think you be Josh. of with is to Davidson. I Forte

Tom Forte

structural the platforms, back-to-school making gifts having are demand e-commerce to provide when it during time versus products comes you advantages, for as sellers discuss keeping masks, upcoming Can when the at manufacturers your desks, please competitive you with times such a large-scale other hard up holiday?

Josh Silverman

Got it. I'll answer the question I it. Tom. appreciate

Deb Wasser

Okay.

Josh Silverman

made there you to exact find can that for you the of different to that to them. And place you are millions online the faster. say and more the and it's coming can who I'd you everywhere same going it than it sell they are Etsy same way or and more you're just And or the XXX thing. cheaper exact where finding only and go, And on can first So to else you're compete if can sell you what millions other you. one truly by are find unique places, is places there product in millions XX ship and things

So you and you. But job it to of that able for that are our strengths surfacing helping just bring it for some some that. better person, customize And that's find you. for and able form of to sellers the each They're personalize they're for to of beautiful there better a a is you. that we're doing

the dimensions So need going to of if it for your you desk a make room. they're

they clothing, or designed be the just length you. some fit to change the the need actually you for or color can If

a also days. are respond constraints. dynamism certainly gift trends keywords of is sellers days chain gifting at factories the fulfillment in trends that to fulfilled search literally but a are last, be the what traction, you're centers. of can able look to you tremendous meeting making where on start buyers and hours around from product marketplace that And supply the reliant you they that But getting not for If to have few allows very agility. lot seeing. and are our the where not like when meet concentrated of they're few very And or They volume They the they're demonstrated it. within and can within mean really least, other do people one to happening times

So when we we but and humanity and and connections, we We something opportunity are to that think decades future. create think that the and want to kind with the time a is for from connect that enduring people individualization, think years personalization believe Etsy fall this it's super time continue to pulled the distant into connections being now, in to of marketplace going discover meaningful you're I frankly in people love the at the too. apart think important thing of is the and

Deb Wasser

Josh Thank Well I know we to didn't thank all you everyone. right. Rachel. your All you questions. and for get

you where know us. So to find

quarter. We out much will go you Thank and care. during you roll. talk Take so the to all

Etsy (ETSY) 29 Oct 202020 Q3 Earnings call transcript