ETSY - Earnings call 4 2023

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Debra Wasser

Hi, everyone, and welcome to Etsy's Fourth Quarter and Full Year 2023 Earnings Conference Call. I'm Deb Wasser, VP of Investor Relations.

Today's prepared remarks have been prerecorded. joining me today are Josh Silverman, CEO; and Rachel Glaser, our CFO. Once we are finished with the presentation, we will take questions from our publishing sell-side analysts on video.

slide that financial today our guidance, as in mind related forward-looking operating in our noted our to to our the keep our your include remarks statements results, website Please for posted reference. deck business and

may results materially. differ actual Our

release involve which earnings will that in periodic our statements be in uncertainties, risks we of Form reports the and updated which Forward-looking most SEC. file described recent are some today's and and with XX-Q future

on update this and on and we'll make are during Any based we of beliefs forward-looking we to GAAP non-GAAP Josh. measures, statements I'll GAAP earnings call, measures our call assumptions disclaim which on over release that measures the both today's this present turn any them. reconciled and financial along it today, in obligation financial to to Also with a IR call. With our website, deck that, replay or are posted press the slide

Joshua Silverman

XXXX and some Thanks, more done on Etsy today to Deb. disciplined investment eye getting lot initiatives be making set with in to business We've strategy, We're pleased and portfolio focused recent a built very our a what up year right fuel for growth. consider expanding resilient bold an model. staying to overall differentiated the highly with an relevant of for Etsy our entered difficult to our some We some last choices energized success, importantly, approach performance, while moves team, able right-to-win exciting to vital XXXX. to a invest back we ambitious or you We've of our about initiatives, preview growth protecting to profitability. speak with but a

during our more a marketplace do collectively bit the review make X better than is core Gifting unlike Cyber at in new as expected, which our else Our the Etsy Rachel season to well The into X% up GMS, we even had QX host Both Cyber subsidiaries, get year-over-year. anyone brought XXXX strong with as Etsy, in well set will a core our focus Tuesday e-commerce. that holiday shortly. Etsy better and Monday at records. will finish what in to performed leaning about be as marketplace Etsy to ever We strengths even

to We know great to off. Etsy More message a gifts our on in is this gifting a focus for place on and shop come moment. paid

XXXX, about X%; Revenue flow record consolidated roughly With $XXX $XX.X $XXX GMS was XXXX. strong a with this at flat and adjusted was EBITDA free million; to million. about about up billion, strong finish very cash billion, was $X.X was

invest ability to and in Etsy our to marketplace confidence product levels ability delivered healthy and nudges and and experiences cash what signals conversion highest level improving category it at best of to dramatically We find purchase making GMS. developing drive for, easier financial the flow of model sustainable in to highlighting incremental banner us teams experiences. stuff, for growth. using reviews XXXX the special and development better for improved new deliver long-term you're strong pathways recommendations, growth was ever a our gives power buyers, revenue great who our and and of looking annualized new year profit Etsy's rate, our

value. ways built high-quality at listings new handcrafted We entirely feature to

a for and campaigns tough social tools above-the-line increased team funded visibility spend to productive X year ever Our our intent our top was purchase scaled environment. on marketing contributing a extremely for buyer promotions, buyer engagement. respectable new Etsy in level for to also highest All countries, seller in all, with memorable in

for than now than and Etsy more were more X grown We've consecutive meaningful base, now a doubled year-over-year And our XXXX years much few Etsy we measure, starts buyer has on frequently a basis on more average, ago. were shopping are they any still much quarters. the e-commerce spending before which By company on buyers just a pandemic.

Our $X in than more $XX X- outlined target XXXX. Etsy the X-year we in set GMS billion billion to marketplace we was XXXX roughly in

chart, top As you just we to sector, after even many of harder But discretionary efficiently during the can deliver difficult past years see years, more our outgrow climate been for particularly consumer given and work to have line on products. it's growth. means to this overperforming accelerated the macro few this tepid

share our We our a core market we taking billion, just here? do Let's the at the with start share categories geographies where prize. business, online traditional e-commerce the go just We about of X%. massive that from retail. and is sitting estimate size that with is So from still know in all TAM $XXX

we entire selling the has long resulted commoditization on focused the that's So just competing runway for this in Most faster. Etsy. are or not players the $X.XX very of growth. it exact a experience. other still sell hours to shipping it head-to-head X And same merchandise But have cheaper

our we We While we the is different an of stakes deliver taking stuff get continue U.S. Etsy's sea of a why in also offer e-commerce focus Edge's differentiation the expectations, we're which consumer share competitors to partially to gain offering something our and pure-play table more data, based most in growing largely best on can for is XXXX enhance top and we categories. stand sameness, throughout to to opportunity on one have that top broadly. compared highlighting e-commerce share confident to remains our continued when We to why, something our areas, retail believe of more. back faster we

I'm fierce, Competition believe we and up can to win. challenge. yet tell why we excited for the you we're indeed how

plans lie. are about and growth to are reaccelerate year, we've we competitors built our today, clear-eyed our very As we been where strengths where our this where

Etsy are Or end over it often their takes XXX for million also Some for of the us to held only time of shopping items. makes and our the of specific find Buyers purchase what's too journey. being things best think needs special back simply us needs. now what of thought historically from much is among effort very everyday too at

And Our buyers as times Etsy us much year post-purchase about buyers value. that still as than many listings number per some because of has spend worry are purchased of of both for what that, peers. with millions know lower the from well they high-quality offer great the Etsy of We our experience.

provide dependable, both in active our and to that also significant should higher having and way if that's continue reliable AOVs earn We expanding both can more know room these also able we be to still while we a buyer base. frequency

range XXXX beyond, we'll share on focused in to barriers As bold stay think break growth a across improved and for of to moves ultimately buyers view, purchase occasions, brand often, the consideration making more keys our that vital leading frequency, Etsy. to which we increased gain and to of significantly one even with us so is unlocking we work shop will some to wider down believe

adding services the revenue on So expanding continue today, and so on, and this consideration more seller buyers around to while opportunity. streams we'll on I'll globe, focus focus primarily

to got frequency. lined we've on up designed consideration move a needle fact, the portfolio compelling and of initiatives In

the loyalty hard you more addition we're least We'll to in buyers In the at more often. buyers buyer explicit dates days. program the tell moment, to about for to of Gift I'll a work for costs back do more innovation X value and for well with reliability Mode, a shipping and at work as on give and reasons to sellers also lot front, improve come predictability our to researching year options which shipping shop by improve planned example, this delivery for example, shortening as both timeliness, a estimated

especially and markets some growth While and plans Europe. transactions sure are can over it drive few years in initiatives both to significant in we've geographies, key buyers' only made expectations in way concentrate drive in seen really vibrancy remains new these and to some Etsy. progress excited significantly areas, room vibrancy We've we growth GMS domestic while the great more about to but in international markets, core go to a meet that not across also of also make very we have and particularly on doing have our building cross-border we further last strong

bold lot you about for Gift one in thrilled got Mode. I'm to store. is But tell We've today, the a move

likely few gifting. weeks, on last in is the over you've all Etsy seen As

to in to Our deviation goal being a all for evolve launched gift go normal is partner being it product our we and Mode product from a before historically indispensable way also new a build Etsy measurable is fanfare. incremental with Not find meaningfully with not significant consumer moments important product only to represents improvements we've from the our to to gifting stories, but series can approach only Mode, an augmented content With create places Gift missions. the product never launch, one a Gift we've to your where you of of minimal about excitement. unmissable create buzz a the great playbook experience, done of a

Gifting how a Why your the arrive, gifting be where of for or stressful. gift makes for all if important of ways, when perceived much gift yourself on. fundamentally than you what and for so different how, in what to and and can as logistics care buy, which stressful recipient doesn't recipient, representation it the A the be knowing yourself can buying multiple and Etsy? of will like gift it

the uniquely felt is and that gift Etsy. to of with gifting perfect sent help human the present. for majority, X/X Americans vast the the positioned of we buying. in stress have made ideal use to shopping Given we're take here. anxiety gift that We we're Data XX%, known struggle case a about special for out believe item past crave believe year. buyers supports an find touch, And

can the a of across gifts every want and, primarily to brand all, Gifting buy year. lead a this perfect at whose share do seasonal is core buyer Not you and to cheap? mass retailer day commoditized stands own Etsy and value. to only market gifting reasons just that need, well, can our special space enormous add really convinced to not always-on a an gift case, have gains We opportunity is we should if categories. there the an done it's us that is use for for give nearly are After

work, occasions births, personal purchased as for about weddings. XX% to are survey gifts According of such our birthdays,

and Mother's Day holidays, Day, holidays, the thoughtful because or sick Another both relative. a XX% remaining to are And of for all secular sending a more. a happens XX% loved and missing gifting Father's occasions, and item seasonal one Valentine's just gifting

sell U.S. a are on gifts. literally Etsy average, Etsy. U.S. spend millions when for we think for to made a $XX that many because or for Yet the on buyers $X,XXX shows first of people purposes, great know on spend There often about gifts make just things data of that to that, our for variety and so And it's an such that, we items they're real people We Further, of gifts us. come designed people budget high-quality X% of to estimate to place difficult Etsy's a occasion, every average journey. on gifting consumers and of year on by interest. vast aren't when turn

of owns gifting. Etsy mind And the XX% to of gifts. about top brand there's name no for as U.S. really Only shop single shoppers place that

this an stage see we opportunity. So as early

can shoppers year, way half counting to tens buyers sellers for our that shopping of to that's from other XX estimate even a didn't Etsy. start and gifting over that of millions of look active Another on buyers our of opportunity, this reason bought which Etsy whom the a last global compelling at we gift million not be only our means

TAM. market represents our believe a to relevant the share the is billion about We be alone. U.S. Gifting about huge in opportunity X%. We estimate $XXX

growth with gifting, very and defining is be billion X% $X the and to needle $X can on we we in investing So space that large billion up TAM earlier. even captured this But us. believe move would the opportunity mentioned moving growth. Obviously, a for already by focus

needs. to shopping and a person unique what's for, yourself someone Mode? for with we of you're It's us whole to the Etsy few if machine a the our from them and they're shopping quick sellers. engines So artificial solve separate use intelligence new shopping about gifters immediately know where search a help experience experience hugely beneficial gifts learning power Gift Creating details your match helps for simply information else, or enter

shopping identified we've recipient XXX genius to told personas, specialist. go sandwich from straight already climber lover, family adventurer parent. for the crossword music the more Gift my the Within the I've when to that me, rock everything or pet the Mode, than to

gifts alleviate incorporated some ways that We've the general in help Etsy time. concern new procrastinator great won't to or arrive the

works. it you show Let's how

[Presentation]

Joshua Silverman

that in indications strong Early weeks. X nearly the social Gift channels, positive good and sellers earned media visits million are in sentiment is buyers our a start, Mode coverage very including from X off to first and

in beginning. is As you test keep Mode, shop that this and in mind Gift just the

have the gifter planned journeys, discovery coming and We to map road both make more delightful an giftee, both getting Gift logistics for to and us for and get easier Mode experiences and exciting to often. more the

solid Before growth in to XXXX, retail growth significantly with returning resale by the than over sector. opportunity our faster from market large be double-digit a recent to Depop The closing, year-over-year the on improved revenue. contributions Xx I'll strong Depop's in GMS $XX comment the U.S. is U.S. very growth in forecasted the and XXXX, performance healthy broader billion with for clothing strong subsidiaries. growing

to late year, some outlet expect was help flat, the significantly industry, we returned inventory. quarter, GMS to their primarily increased musical currently Reverb growth revenue and in made year. business Reverb profitability GMS organizational about attributable the The the basis. will adjusted year-over-year while team in EBITDA year, this full and the the on For Reverb fourth used focus instruments a which on outperformed changes achieve

in as to We our opportunities. and Right moment industries. and to investor will growth and unique future Directors, Etsy's many when for we compelling confidence and on ahead shares remain believe it's moment believe sound. importantly, welcome experience now Board a a the I'd the items. valuable that Etsy's the right consumers and like stretched discretionary with pass. excitement most of are money digital is best he to e-commerce for Mark member But And bring and win mission an officially less he'll technology, in about still Board Etsy's feeling Steinberg spend economy media our and to Etsy. believe mission relevant and is low passion

teams. thank to Depop Etsy the want I Reverb and

in and incredible a sustainable to differentiation, We're going we our grow. can way. Mode, can have that worked confident creativity off and strength beginning. believe our to do and hard all with I'm We that's kind in heart, buyers proud to get with growth back to of. we started and all determination the of bang lean You've sellers year our Gift so we just of delight help the stakeholders with financial be the the and to a our

Rachel. to over it turn I'll that, With

Rachel Glaser

Etsy commentary consolidated Thanks, My drivers everyone, fourth for of joining key where Josh, results our and marketplace thank call. you, cover quarter today and stand-alone appropriate. results, performance will

on a reminder, As XXXX. we XX, divested EloX August

consolidated So please take that into consideration when you compare year-over-year and results. quarter-over-quarter

the million, that to small to all-time modestly from and and adjusted quarter FX margin. to quarter. $X was delivered quarterly roughly $XXX basis up billion in the revenue a fourth year. adjusted flat EBITDA the to million moderated accretive the point headwinds consolidated Etsy to an quarter X.X% high in $XXX both tailwind for from of year-over-year the Note quarter, nearly Revenue basis down XXXX. the prior XXX benefit in in to of third divestiture fourth resulted GMS consolidated XX EBITDA grew GMS, record and points X% increased EloX's

mid-December year-over-year revised Following in to in our solid improved across expected a challenging enabling performance GMS come October, Etsy's trend nice slightly our due in had guidance us the November described end to quarter Josh a above holiday revenue. marketplace's GMS of growth all to and the We brands, with earlier. for better GMS than line December

fees, the the improvements the with primary Ads was at largely of continued quarter was implied in of offsite guidance our due yield revenue Etsy subsidiary to payments consolidated once grew growth take revenue. Services related contributor strength a delivered relevance. mid-December. payments fees that quarterly year-over-year. of to of add to revenue shift year-over-year this driver and growth of international above We X.X% midpoint rate and rate prior marketplace key higher consolidated transactions mix ads our a increasing XX%, revenue a to flat growth, again more in Within higher X.X%, take revenue the to X.X% consolidated provided higher slightly

transaction full of by last as due of expansion. as basis April XX% XX to guidance growth increase incremental at the increase latest For quarter Etsy rate of spend. take half XXXX the higher was partially strong refunds marketing well first the points end down cost that the not our to high XXXX consolidated approximately our a year, XXX Fourth fee our fee as basis as about Etsy protection in consolidated EBITDA adjusted gross well but for an year, margin, Ads, increased orders due primarily margin most points of from lower was payment the covered in for result purchase of

destination, that related to $XXX Overall, only important our to than about tax investments we adjusted benefit headwind point including any Depop, marketing in with product a a Etsy Note great million make margin pandemic represented a fourth that due holiday discrete higher XXXX of are proud very in initiatives subsidiaries XXX even and peaks. quarter shopping EBITDA nonincome quarterly basis period, to was QX.

During to the product quarter, increased X% consolidated fourth year-over-year million. spend development $XXX

very of year. gains. prior a gained baseline approximately leverage a product report launches Etsy our of the divestiture. GMS billion XX% basis, investments prior year, points year some pleased As in And delivered Stiff to development headwinds incremental significant to due we from increase of year. the annualized offset development a largely approximately On about the these $X.X revenue, are product GMS, pressuring that last basis marketplace from full increased XX excellent also percent we from EloX

which $XXX percent marketing the marketing spend a year. to from modestly consolidated spend quarter Fourth increase as increased prior to year-over-year of drove revenue X% million,

consolidated in of our this from XX% occasions, Given with our the spending coming for year-over-year focus brand spend. marketplace increase fourth quarter, awareness Etsy's majority Etsy the brand on specific vast purchase building increased

gifting partner all campaigns, an as resonated holiday missions, with indispensable which buyers. Etsy highlighted for Our

we continued on Further, in fourth Etsy's spend during U.S. expanded the quarter efficiencies quarter spend the X% marketing decreased media to improve. our significantly above-the-line year-over-year ROI we performance Consolidated as as efficiencies. and this higher adjusted ROI CPCs dynamically than our we year. We pushed seasonality see the pulled at as strategy back time spending PLA improved competitor spending on normal of

were this, certain social increasing geographies, partners. new to mid-funnel able in with geographies investments and ramping lean Offsetting media into and several spending channels we

Our small dollars Monday incremental promotion solid a a site-wide Etsy funded delivered marketing with ROI. Cyber amount GMS and XX-hour strong of

X% XX.X%. year-over-year, marketing billion marketing revenue spend modestly the approximately up incremental increased performance percent stand-alone marketplace Etsy's full X% spend to spend marketing consolidated delivered XXXX. For year, and from our as decreased of GMS, consolidated annualized in a $X.X roughly

now Moving GMS marketplace Etsy and to our metrics. buyer

During the including continued, a fourth spending, the deep discounting. quarter, on & to Etsy product and billion. discretionary X.X% year-over-year Living pressure competitive $X.X headwinds environment GMS category retail on marketplace Overall, in softness focused consumer decreased Home highly

Etsy with growth November strength The bright U.K. by positive ahead GMS, up International were markets line October in the GMS marketplace Etsy and quarter. December the the in year-over-year in that bringing improved Netherlands, and excluding trends in year-over-year our our we Switzerland in was results call, the trends again expectations. Germany. flat described once spot marketplace fourth U.S. X% Our with internal trend and November on domestic, led largely challenging following in of a Austria

with Living, record and a the million softness in for up and consecutive were year paper growth. jewelry XXXX X% in apparel the ended quarter This XX and represented by X accessories year-over-year marketplace slide GMS top full approximately offset active XX% We year-over-year, and of our party craft GMS & marking GMS. which buyers year fourth trends shows year-over-year Positive Etsy Home of categories, performance supplies.

million to XXXX. up added quarter we XXXX, record number, identify buyer new the nearly quarter, buyer strong, who and XX and fourth X in and over fourth as We in XXX% marketplace the XX% lapse from of XX% trends we growth year-over-year reactivated million improve. in remained up had a Etsy X% buyers, U.S. buyers over male. International active continue growth buyers up

quarters. the the at with loyal prior remained in trends quarter, in X buyers with of of stable million the largely quarter buyer the over habitual Lastly, end X these line

of XX in than fourth million. XX-month a on repeat for X% trailing stabilize yet GMS continue the grow per of to $XXX remains continued number Etsy buyer sequentially year-over-year XX% X% buyers the fourth healthy the quarter higher to to active XXXX. a year-over-year quarter Our marketplace but to basis declined

to in Additional marketplace Etsy appendix found the to deck website. our can metrics be posted this as

Moving to sheet. balance now the

had XX, long-term cash, in and of $X.X and cash we As billion investments. equivalents short- December

June During of stock repurchase the total December fourth quarter, under authorized XX. we of remained available a which of $XX million repurchased XXXX $XXX billion in million Board $X our approximately as program,

rigor free XX% to model to adjusted EBITDA XX.X% about and million in to business of convert capital-light deliver us flow. and $XXX operational EBITDA and allowed in a nearly that consolidated Our margin XXXX cash

$XXX fourth million. Our free the a cash flow in was quarter healthy

trend continue on to being growing else would likely flow, As leverage our continue cash and equal, gross see ratio our we down. we focus all to EBITDA

expect business well We current retain liquidity macroeconomic the as a investments to manage return to also capital our strong levels and with balance relative support shareholders. organic ample continued sheet to cycles as across leverage to various

valuations XX% more meaningfully return shares. our to strategy shift return committed compensation shareholder our higher a opportunities dilution our generate especially strategy in repurchasing of from In In disciplined and are percentage active philosophy free prioritizes nearly the level to in of below stock-based have free highest demonstrating our for offset stock our by past, cash our accounted value. long-term a view remain and allocation capital XXXX, to believe We fair we communicated flow, of times value. of when of capital capital during we cash that the will flow, volatility intentionally an return

leverage and long-term We a continue our to growth return, deliver balance and business opportunities and Etsy, liquidity expect to value. shareholder see we in organic attractive investments appropriate capital for to

which headcount core XXXX. to workforce the X,XXX of start recent to marketplace our employees brought Etsy at our turning about Before discuss guidance, realignment, I'll

back headwinds XXXX. a as maintaining As hiring and our you GMS periods, early we know, the pace experienced were in to proactively we lean disciplined headcount consistently pulling of approach then even high-growth during

to down, a very while organize described. build from creating as Josh to some designed to For road marketing customer of top product focused wanted levels delivering further to development experiences choices designed map how to and loyalty, impactful and driving growth the frequency reaccelerate tough speed more strong on build also profitability. We XXXX, made about we efficiencies team and our

to costs, internal these in $XX in make projections reduced In people previous all-important our for or year, our of million. a holds the modest certain focus and reinvested stable continuing hires. into all, investments total plan of XXXX base. optimize reducing ensure including Most operating we've intended taken over our addition back to growth on costs All critical we by to number we XXXX, including being expands this cost are actions benefits of savings to addition margin the

optimistic from and creation fuel our are value growth see that this we year. can the measurable We significant team Etsy's productivity

start as planned marketing to the This slow move Etsy a quarter reflects in rest Now remains of first our challenging at the us estimated international our and forecasting macro cautious decline It year. the year-over-year low markets that turning for range the quarter quarter and the expectation basis. consumer low, core and we a to the product of marketplace our of the on Consolidated in GMS to outlook. current is our remaining environment single-digit the currently sentiment guidance start through U.S. investments. for making GMS a our of with in the XXXX result as improves

mid-single-digit trends performance. provide Depop become to the However, fail Reverb a expect, we to as expected are improve a this and if consolidated decline. could tailwind our currently within

used our seller process that We Gift that XX% we so to marketplace, launch fee. certain the be a onboarding revenue between to margin trusted big investments, particularly adjusted in we EBITDA investment estimate to seller to of to consolidated take This XX%, a continue be for can new be announced including We currently This our margin with level earlier shop XXXX will today, QX estimate anticipate seller benefit requires be Mode, community verification, quarter. for our and range approximately associated technology nominal. a strengthening Note promote are onboarding rate our new game XX.X%. the that heightened of reflecting the advertising. net costs particularly initiative introducing

a in point as expect growth to improvement. Etsy starting flows of we expected through the because revenue revenue are about expect margins, low marketing and begin largely both to of pose take first lower subsidiaries XXX further basis kick at or GMS expansion benefits revenue and of into annualized outpace being rates. should year-over-year be as see the same in primary our with Etsy in quarter the that We Payments recent to at our Our of year currently our currently growth quarter. X GMS ahead full expansion level expected markets for QX point product create We with headwind the the of growth their and XXXX, Ads investments to the consolidated impact drivers the of in new

XXXX, fair to continue EBITDA in we look currently our with level of value XXXX. expect to adjusted margins at we'll for We X drive consolidated to for exchange the to this, maintain delivered very Beyond all healthy similar ways in least a of marketplaces. margin

of our despite portfolio which for by growth believe energized reignite can continued the we macro. are our growth XXXX, We initiatives challenging

time for today. I'll now the the your operator Thank to your turn to you call all questions. over take

Operator

[Operator Instructions] with will from Nikhil Our Bernstein. Devnani come first question

Nikhil Devnani

of up improvement marketing initiatives as as kind Do GMS a more. in you improvement providing year talk you're that outlook to goes expecting 'XX on? could GMV? I some some well. see sight and growth a in year-on-year that for the to there's for as Can the think line magnitude that outlook GMS of are provide clarity the kind follow-on, this ask as little you at point around about back Thanks well of And the bit then to positive about just commentary in year? the of you product wanted backing

Joshua Silverman

Okay.

gave So we the in giving you terms of now. you right what growth, we're comfortable of the magnitude

We such So believe faster It's especially et being not we to back under e-commerce. in And we our that's growth when to category fourth our quarter. we to get under our anything being think if pure-play we do in every but positive yet yet outgrew be have categories when our have specific, much more than of particular, right discretionary that, spend, consumer stop think been categories pressure, just terms so when growing product going cetera. we pressure aspiration. in certainly positive and stocks in again, competitors could than we and our more the helpful. have very again We do would be

growth, them initiatives laid marketing In that terms and the of out lot product expect in a the we we of call. to drive

so to that Etsy is really on People on thing. Etsy, look compelling. on look first something because the find they think consideration, do to when usually they And biggest thinking

So time giving you of thing. is in And you there's a gifting to Gift kind It's want birthdays, great buy Christmas, gift. example to moment anniversaries, Etsy. us is should and year need to on to go not really a I just when think, Mode Day Mother's on. and I back an a and school of all

to can of drive funnel do campaigns going portfolio on think, reliability. of elements marketing value, said early drive more loyal stages loyalty initiatives, growth, planning well. quality consideration among work marketing program, which in think in campaigns. compelling And that key we're and continue other more on to is to a bold we're consideration, to as I in to And And the we with designed a More in users. combined that, I really compelling lot continue through

Operator

Our comes Citi. from Ygal next question with Arounian

Ygal Arounian

that expectation to little the but -- guess, follow improve. maybe the more down that going a focused, the we're up on narrowly that kind XQ it guidance. quarter, bit, I'm of here of what I today, And sounds digits, is starts over mid-single course sitting like to on

What over a just March quickly, dig into like the bit it's a and also or And marketing guess, now happened little again, a so between end I little of just month. more. then the bit to

So bit on you've little performance pulled a back marketing.

of Some is efficiency. that

a more that longer. bit the we payback environment of Some the from is period little for think brand or competitive the being of brand. spending Typically, coming marketing

and the You're quarter year. incremental kind growth, in throughout expecting of the drive that to both

Is here. we it's see how over So way pay starting investment think that? starting that? are should been of back that to an know you the about benefits Or like? to years you the multiple I

Rachel Glaser

would other, way is build on. each start jump product, for the bumpy, that so we quarter. estimate pretty make. good baseline They and do the discrete investment provide we able of was each January estimation to each forecast. we -- start discrete our be testing way GMS a and a that's the can top we the for we on mean rest the and planning we before to of of sort you're which right The do to marketing I incremental generated I stack guidance the that from our and little are

confidence we So things in have deliver. those will a pretty high level we think what

in the incremental we step good we where being of we're what quarter, at from rest GMS on that looking are today. feel remains So to able about

have of and experimented some We spend. with our part DLA our early quarter we a spend, leaned the on bit back the marketing little in ] of [

levels. normal We're to now back our

just you some that advertising from to awards through we -- the benefit continues saw as we'll television ad is run to do the rest get starting winning quarter first regular that the ad ] big ever world us from very some accolades and incremental gain business-as-usual and marketing think traction. and time of spend, game we the large So [

something an to I think stickiness ad. the actually -- that it's of views X XX like create

promotional a marketing of GMS attract at I to product, deliver think Officer laid And brand to with Gifting [indiscernible] we things and and that repetition exited people brand the the So -- that expect we're of consideration also around lot that Chief that campaign a of campaigns about for there's do in with our in can lot quarter. that the wrapped we our and customers. down we

Joshua Silverman

just Yes. on to that. And build

with focus the been it. we're the going single year very what's in perfect accuracy to very is obviously, of spend and has in baseline, spend on dollar with categories. discretionary think creation big single ours, been squad good happen focused after have what's consumer year is to We what value we happen at can't what predict It Well, of every every marketing. the creation value overall pretty going a and of our we we

in we reason we that know, have believe second do the And best so we're you wait we'll work we half unknown, we and doing. the give and the improve of we guidance on trends -- the to that's based see But should the see. and quarter

Ygal Arounian

Great. Okay.

back a So the step at into might further environment changed all? bit little Has performance? you there

Joshua Silverman

Yes.

seeing much on work ROI and on -- much dynamic we that on is we're bid performance So this how this basis, click hour-to-hour depending worth bid. right now sophisticated a spending. And is should the we've really dollar is we're on every got this algorithms pretty

extent the so we naturally to pull Or is in. back. CPCs rise, lean extent lower, And to naturally that CPC the we that

not thing, it's by way, also The just rates. other conversion CPCs, the it's

across some are them really lot when in go see So -- rate shop people we constrained, see more. times compare conversion we down. a actually the industry people budget We see

in And how are rate And visit not at so sophisticated with now, much looking humans, naturally And reason worth of naturally be to now given much AI happening machines we lean margin very right quarter at hard ROI to right or our CPCs it's It's we'll what's are all right with using and it's now. titrates. that pinpoint pull be it should we're what's one we and the what what's conversion a happening of but on and each in exactly bidding. the looking based therefore, back. any going way is getting at because why how is

is won't on purpose. spend unprofitably, we not What do

we're at if getting. or pull to think, work And back. irrational getting we is what irrational we us, understand we So the return least try to market, is the hard for

Operator

question comes next Bank. with Lee Our from Horowitz Deutsche

Lee Horowitz

market. box seems is that shows suggest It share e-commerce to share comps. non-pure in It Maybe Etsy's X, that one the stand highlighted contrast would versus Josh, gains somewhat in overall. big the deck, X seems competitors Etsy pure-play slowly. if more But growing taking that overall I to the charts are you of could. play

do things like on of quality perhaps do in or product And into are evolve think speeds, I not these follow-up, and I leaning as into bucks 'XX you how in could. consumers shorter that, one that and if leaning may why compete a price couple say, you guess, you beyond? platforms think maybe uniqueness? And

Joshua Silverman

Great. Great question.

aside put travel, dining. let's look, So online

And hand. Temu share Temu count almost to and losing share. broadly, of people everyone people Walmart, very product, things number you and Shein. Etsy. gaining you Walmart, put those When other e-commerce you else totally at look it losing very unrelated one quickly, everyone aside, Amazon, that you Almost look really up share A it's to is picks just Shein. that Amazon, are at the clear can are that are growing If is

those particularly people Amazon really winners. and at we all, they're -- if of first so, And are look the big and Walmart,

look is terms call call volume, when you read you essentials. their earnings say their in of scripts, If driving at who's in and earnings are sales what they discretionary is their headwinds in volume products. sell what's taking And their actually, e-commerce, essentials, they

The were brands lot discounting. for right feel like year. this And be second thing the trends going we their people a than under now the tax stand is last they returns wallet By is lower to pressure. of all deep X see those of are they're look way, year

travel dining. about discretionary want want prices consumer inflation low and to spend to on a when have them dollars, and them concerns they confidence on on spend and things hear like food still You core people,

way they discretionary. when many looking And so need for buy cheapest to the something is this something in people are moment, that to buy

Etsy the fourth environment, buyers. quarter alone. million spent Now buyers Etsy Etsy $X.X billion X in that in new added marketplace on the

they time opening environment. even XX buyer more millions come is million XX% people, of on Etsy than their Etsy in in in more, wallet or this more average and When buy fact, of tens products not the going the that forward, spending cheapest imagine than And were everyone cheapest something So And any XX% of given want today does fact, version to people don't are pre-pandemic. on think a are product? when I forever. of favor. is absolutely I are But this the not. I possible always out No, think that's

in trend a better hopefully a And move We're I cycle. cycle. moment in that, that soon. think in we'll -- moments I this think cycle, to is the the

Rachel Glaser

lot have cards. spend QX Can about people I get they gift a a happening are a the macro that Etsy program gift And like -- at of that doesn't places points and quick into they activities and to and retail happening points add time, January spend and their One, they are things that Walmart of January card just specifically Amazon. they Christmas world? and couple into at today, cards in gift go come

doing returns. lot they doing all stores doing are lot a big-box of that into now. returns a the they're third clearance right Second, of where physically are And and going their stores the is

some things in deep discounts, and So Josh deep, that, areas Etsy part on to things Those said. are X the January's to our early think X are affected wasn't those game be year, just continuing the at GMS this I in really as extent. of

Lee Horowitz

guys then as the XXXX? marketing are think tougher of deploying help helpful. But ROI follow-up higher you called costs dynamic. -- how demand. guys just you the competitors? guess, adjusting you performance consumer but me thresholds dynamic feel you on in given one do And weaker about maybe perhaps about dynamics the way Very guess, a understand challenging you think out, given you costs need the those guys marketing. I maybe lower I talked rising auction efficiently from How are you models but underlying to like about, do dollars just marketing Obviously,

Joshua Silverman

weeks for a down to down, all that. Well, the But of models are there's for meaning like them automatically that. couple to or turning, incorporate. the some models fact weaker for the up demand Well, rates, conversion takes experience conversion incorporate lag, incorporate it goes rate that automatically them things example,

And part is an would that PLAs, often still dark. if on for the answer we're always understanding have of yes. turns anyway. out run We gotten click, the at test, incrementality it our refining that hold we country example, be twice bought year. a we we And we hadn't look Where may it

on saw click didn't Etsy, made they and sells someone oh, having Etsy, that clicked. be they that, Etsy it may also but think, without come It them

And under so or you attribute. can over

time fact a test as over ad. that so environments. And how to on value And what we sale to based much competitive someone times year, changes we actually well determine that call a the of several attribute incrementality the test, final that on clicked run we should

So on based we adjusting constantly are that.

things If your go think like of rate frequency get today. might pay another that a you I And you take Would model time. that or the less more into future you LTV up is if think input what take might buyer you about rate. impact or over the Would time goes over think

or you some the in do make, any there's do so try that but of amount really underinvest to the we work we aren't most irrationally tempted models of over the and judgment So let models quarter. work, to the do given

Rachel Glaser

a launch have. was TV we updating models constantly we great with the That LTV. every product We're that sell new point the on

in the goes happening. up, attribution that's incorporated model, so TV As

is we've new to The but about marketing spend ads able start other like kinds specifically, do to in like some we've you been campaign. P&L use channels Etsy with we experimented to geographies. performance new Etsy's And other social more thing paid talk money funded of in and promotional

instance, it So that great works we're will to hard be constantly for as Google PLA -- for another channel, us. get

the of [ marketing threshold ] be when churn. to making would ROI more to as we do Less we where can optimize how -- see spend well. we're just to where except get experimental for likely positive that's So channels be ROI those to our drop

Operator

question comes with Shweta ISI. Khajuria from Evercore next Our

Shweta Khajuria

X, please. try me Let

GMS the it for Is reliability growth in it initiative drivers. gives On improving growth? primarily want please and/or out driving of the you visibility quality lay you changed? consideration point for and gifting drivers, you value confidence the the could has And to this I you year, GMS those. key If any what guess to the if

second the provide that more reinvested. in biggest $XX will on Could question color the of buckets please then savings And little is million you largely be a on bit investments?

Joshua Silverman

to. I'm happy you to if the take want Yes, first,

some -- levers of value year. good that so initiatives quality laid for the all, and under each, bigger thanks consideration key reliability for pretty of with slide that of questions. And yes, and first a had the the we road So map that's out

things task creation every business better is There the squad value. get are with we company measurable ways incrementally to we're lot a of run constantly in a other value the goal. this we real in doing drive way just that But

does higher but date So a or shortening expected year working metric, delivery that the on team last how GMS. we of And servicing need produced the there's incremental if billion total produce. search, much quality also is about sum there's for you're in think extra that of customer $X.X to GMS items, higher

even the more, efficiency more with tasked that this year. We've team than

We also continue get and and tools then always on we new agile to techniques, marketing agile leveraging we're efficient, more above-the-line to work even leveraging new processes. find efficient. more performance getting ways And more to pretty and and with get We're even marketing, focused. more working

the the static. realizing I'm it's work, about I talked doing want are when how And you I algorithms now don't is to think

they're more Martech. more pages We our we multiple on audience working make bids can squads our more. constantly also sophisticated. on like can can landing even efficient. And our perform How Segment SEO. in focused have we how things make How even we better

in each driving teams from constantly our of we're our each dollar efficiency spent. of So gains

to for And so us again, the to deliver our part we to happen assumption we've terms is incremental with is going the hard in know. what's baseline. think what year, what on of that's that going it's plan we've GMS. the done that The And looked for is at

tailwind or plan happen risk known. what's the extent to to of year execute and and drive plan, we're a think yet think with baseline, for what in still headwind on I the going is, to So a is lot going value. the is this us I And be to to going we're to that a

Rachel Glaser

we a to $XX things operating our our open Of business. couple want losing reduced future cut we XX%, productivity workforce any without by that was workforce them we and reduction hires. to out. On where thought we there or operating various that the expenses room point of cut that We also million, I made, about efficiency in reduced the

dollars, current So but the future -- we not only dollars. some saved we're saving

main always -- focus our on the few. We is vital

the less things what of we've mean today. principle We we're ideas. teams so stopped highest laid about does possible fewest the have growth. driving of impact. reprioritize that on and was realign be hiring We just see and it than are to for the bunch talked $XXX Josh guiding about the many -- possible our them to a are room stopped we on what much not currently billion working That working in that we our that So TAM of or that so We investing. out we X% call.

to So invest growth. we're continuing for

are We're in find is And per the winning of the to We people. just own higher only have of back, to revenue per Etsy really it's hard in per our terms we head, revenue top X,XXX if size of the invest Etsy revenue and companies to get very at far pack We're head for count going And way about lean. company. alone, the of shape that. there. head cut in ability we're growth. too our that than

for forward. looking Very So with way comfortable reprioritized that comfortable our operational very comfortable of efficiencies. finding with expense we going feel level -- the the buckets. And with we've making constantly investment very we're

Joshua Silverman

that oh obsessed and interesting And said, per the a just We've efficiency I of Rachel of There for hasn't and find creation is or quarter of I that and every year quarter been the let's been value year add here. been X-plus would us. the commentary is efficiency. because for invest screw on best. with a year whole years quarter a a have we've for when year efficiency just a efficiency I dollar Every hope invested it,

price to going to growth squeeze have way what's drive the come can -- going getting GMS but a driving invest we really efficiency. is, cut that What's growth, we first is that -- profitably a the is to growth? way that drive quarter, And with getting we so growth at, more cost find so move That's we look every we're reinvest to an there more And at there opportunity discipline. to cost, multiple. to again are we the stock thing do to cost. up when Is looking

invest So back. Invest going dollar do a to what to get $X irrationally. we're less not is or

is an on to EBITDA the margin Etsy going to on find marketplace result and The something continue of And size anywhere business very we're generating an growth. make to that. on marketplace where a to XX%. for there's close put our a we good growth, see we going think that's growth scale that EBITDA when generates over do So do when with a to now And hard balance driving X core sure right going money opportunity we opportunity It's to it. back in investing margins at emphasis we're focused into we're reinvesting drive of to that those also to so.

Operator

with comes question Guggenheim Steven next Our Forbes from Partners.

Steven Forbes

just of Maybe to expand the Gift and on some initiatives like Mode loyalty.

it time You if loyalty potentially helps contextualize margin disconnects doing some investment benefits what as mentioned thinking we with implications. of big the maybe in with advertising. you're hear like game the you you the of maybe and Any can have timing loyalty, sort

So just mean you what loyalty? any sort by of expansion on

Joshua Silverman

Etsy. programs of lot loyalty and It's chance hard got not the a loyalty often. rewards, only attention some anything shop I and people And we lot I be where for say yearn places. thinking really a and that's we other that pay Sure. get of often? consideration membership be in big run emotional and of Starwood say, a Why to which both yet. I goal . And loyalty like with things Etsy to Amex lot more just more it. when I a lot we have be and consider got to to but buyers to I more It know Amex you truly love And and would drive a to going Etsy. not Etsy benefits. having drive have to Delta truly ones does rational but satisfying, us. don't very Talk Amex in study going of Had was love partnered is programs. announce to rational. a think it. of places, about to cited People to they're didn't at return all didn't big is focus There's more to are can't the economics

I have loyalty if can loyalty by prioritize and and So something to yes we we get to committing should see them them to see get by If of program, program, the Etsy to be say of I'm just we offer. a to Etsy is think offer, some stop stop this they in can if whole to answer the going have something and time. lot form

Steven Forbes

respective across a there right, just ticket-related or maybe then or just follow-up. out within is, lot A in of terms deflation landscape And categories. challenges quick noise AOVs discretionary the the of where

seeing You categories stabilization mentioned maybe with you expand what giving if this sort and optimism across what's around the per Curious active you you buyer. serve. price of optimism the in you're product behavior could GMS on

Joshua Silverman

has a It stabilized bit.

GMS If at per you been active $XXX. at look quarters, stable have buyer X the relatively last

So good news. the that's that's pandemic. from And up $XXX by way, about the before

and So still we've in everything talked more, of the about with more pre-pandemic. spite than XX% macro, all XX% headwinds the they more than spending were

start, beginning the to we when were In for we down the off of this are headwinds AOVs quarter, a slightly. said slower

talk we get we the think about digit will of to So end the guiding -- quarter. single mid-single and -- a down to low from back when low digit we by starting

AOVs of down. sensitive it than pretty good that numbers actually in we're just are price One think, news on this suggest. holding we are that, is Buyers volumes still is would are on lot coming of transaction They're buying what The seeing And and headwinds I a those others. with moment. up hear even the means more what better with Etsy. consistent is

Operator

Company. Our next comes & with Andreeva Anna from Needham question

Anna Andreeva

further on rate. the on a question better And to levels? be a churn higher We in than buyers, you little I Came secondly, increased that in the for I expectations number bit than that? the think expectation in year elaborate onboarding take QX seller think, of quarter. Can fourth had the or little then driving of one you some at bit mentioned fees. XQ. What's

Rachel Glaser

the take the second. you I'll first, take

Okay.

markets. more So out the we to Payments rolled X Etsy --

fee. us did incremental take So launched completely getting which has fees friction lot today, in marketplace. the before. not rate, just way, transaction it -- that the the creates only with earlier? back a incremental call helps reinvested of by friction that friendly we fee, benefit the But you is seller Friendly for we think And which, some a payments It's of And safety create that with bad for weren't create it to benefits the that $X.XX going not site moment of helps on of well, can get that we I'm so so any we both have us kind a listing to a about, to and bump speed make that. actors little seller the product. just

Joshua Silverman

way, rate Yes. not is by driver. a And big that, take the

that payments succeed shop into. guide Etsy. huge likely Etsy, But $XX take but making really not think not Etsy. think expand coverage driver. going exchange, going value we'll to a where areas to create seller of to relatively be small, then all it's buyers that's is exchange there's and we worth you're is on revenue markets enough rate in it's we're revenue We'll the fee to be Etsy secure and the other And that a committed not sellers If good I and I think to on maybe and nominal. other see sure charging achieve good a in the for we think become the we on the to that's continue fair it's on value

Rachel Glaser

Let to me add that. quick one a

rate when different that are seller also get X we because Just a we see the and that currencies exchange. take where higher a slightly charge Etsy we Payments on increase, buyer we international business premium for the have currency

we take ads thing continue higher broad improvement continue lastly, for and ads better investments is as conversion the we search Etsy nice rate. did see to we'll -- So Etsy affecting And ads the better to again, rate. Etsy that's in make another the see relevancy lift and from

Joshua Silverman

buyers, active on basis. trailing buyers active XX-month ended quarter about we million the year -- on with ended the a XX And

about I'm was, not more where about but buyers stable. prior much So it, But to at sure active I the Roughly churn don't too crow stable want I'd comment an quarter. stable. have roughly high. say from all-time the been

Debra Wasser

Then I is Operator? from think be last Jason, one going to right?

Operator

question. Jason is Oppenheimer our with next Helfstein

Jason Helfstein

and just X really, really the listing undercut sophisticated correct second, helping and one And everyone's questions, How each pricing correct ask. -- So about to use is be just going with prices? other more question are optimum not you thinking a people hear a think would of cohorts. to you the in GMV grow I on around annual ask, it concern really understand... investor is Is cohort perhaps the ability common acquisition, help the something to better provide like would we year future, sellers by

Debra Wasser

We have that XX-K. in our

tonight, retention GMS filed XX-K, which be have morning. our We tomorrow in will

Joshua Silverman

have very Yes, soon. it you'll

a a So have stack to it seeing of settling And of And start cohorts, what little year. will and think smile is messy, curve. in that's over you'll you And that lot class to, every inflection joined think I'm that bit with they be e-commerce The what is a of. see XXXX, little just down Obviously, time. it's bar harder all in those class makes healthy. is back [indiscernible] sense which in like a XXXX, delivered massive that more then a really drove Etsy everything little you uptick been stuff. we in just a of to business, a a with the to see used make I that, down, what the

the with your post-pandemic the point out compelling. generally think, when On a a bit that of just cohorts, Etsy of other nicely, a -- -- of post-pandemic, you is each those makes really we've coming first just we experiencing on do what headwind. pricing. still provides fact look cohorts slight bit of at the has of part powerful pretty a really compression the stacking dealing stack been And the But seller

with question. sell pricing. Great. Yes. Helping Great

big not One, I not focus we've the is -- very last more progress hand shared the of in we made. And we've encounter past was that on couple update, a since half. that's things. percentage So even an handmade it in cut had We've of think then. made gave views item a the an that time

are of And for helpful focus big that terms in brand. to the So visible sure items make mass-produced site. the on a it's it's competition. price of not our, It's very not sellers bad for our

we And quality unpack what little algorithm very really the likely about talked even I is to by the in me to saying, algorithm love, that purchase. is likely mean you're machine loved. thing another elevating what's briefly do more, a is But using items buy, in is to more search Jason purchase right? today bit cutting-edge our is what's that Jason search call, designed to learning wanted pick results. and likely What So search to let say, I

especially frequent around point item forming consistently so unlock to of model in that to we be one sellers on the do think kind start purchases. is And of does filling that of the should way view, -- can in to rank and ship more better consistently using on of consistently expose and an photography seller give to following the policies. what's more a fidelity leading rank delightful quality to to good here, the return And the a that the on create point as the of AI to higher, explainable service, of to Gaining time. sellers is quality and that view say a what's top then seller of to value, frequent quality get metrics. that of you ton search, who the order Does

on right on over the I incredibly impact. will that's rank very next that now. we're going And how year, years of to better search. can top. you It's I talked very that the currently about Here's And better to the and doing. you exciting thing an do That a I creates have in the one you're metrics, of couple focused think think this do initiatives we're of these big the a kind that race

So sophisticated Etsy at. unexplainable does you're model far because to incredibly our picking likely the convert learning most machine thing is at

got then an from least, our kind R&D box And model come the that's match the needs version there's And that right, that now. can of there. damage and and happen, explainable with happening so up some that to get better black at do any doesn't to largely that's R&D we've right of model

Debra Wasser

Thanks, Jason. right. All great. right, All

we think to I here. think time, over so cut going it went I we're operator,

Operator

participation. Thank today. for the evening. appreciate call We Have great a you. concludes That your

Joshua Silverman

very much. you Thank everyone. Thanks,

Rachel Glaser

Thank you.

Etsy (ETSY) 21 Feb 242023 Q4 Earnings call transcript