Etsy, Inc. · NYSE:ETSY
Etsy — Q1 2018 Earnings Presentation
20 slides from Etsy's earnings presentation, May 8, 2018
Slide 1: Q1 2018 Financial Results
Q1 2018 Financial Results May 8, 2018
Slide 2: Forward-looking Statements
Forward-looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward- looking statements include statements related to our business strategy, market size, financial guidance and key drivers thereof, the impact of our focus areas
Slide 3: Q1 Key Accomplishments and Highlights
Q1 Key Accomplishments and Highlights 1 Accelerated GMS and Revenue Growth with stable margins 2 Improved buyer experience driving conversion rate gains 3 Created efficiencies from key foundational investments 4 Executed a $345 Million Convertible Debt Offering 5 Repurchased approximately $70 Millio
Slide 4: Our Strategy Continues to Yield Strong Financial Results
Our Strategy Continues to Yield Strong Financial Results GMS Revenue Net Income Adjusted EBITDA* $861M $121M $13M $26M +19.8% Y/Y +24.8% Y/Y $0.10 EPS1 21.9% margin +17.6% Y/Y (FX adj.) GMS Growth Revenue Growth Adj. EBITDA Margin* 19.8% 24.8% 25.6% 17.8% 23.6% FX-Neutral 21.5% 21.4% 21.9% GMS 17.6%
Slide 5: Etsy’s Virtuous Marketing Cycle
Etsy’s Virtuous Marketing Cycle Improved experience Higher LTV enables more Leads to a higher conversion rate marketing spend for new and repeat buyers Leads to a higher LTV 5
Slide 6: 2018 Balanced Portfolio of Investments
2018 Balanced Portfolio of Investments Foundational Immediate Longer Term ~20% ~60% ~20% Examples: Examples: Examples: • Help Center • Search & Discovery • Discovery • Google Cloud • Trust & Reliability • Machine Learning • Technical Debt • Marketing Capabilities • Engagement • Seller Tools and Serv
Slide 7: Foundational Investments Support our Product Roadmap
Foundational Investments Support our Product Roadmap • More agile development infrastructure to maintain velocity • Streamlined code base to improve page load times • Focus on improved operational efficiency and use of resources • Enhanced experience for buyers and sellers • Faster processing speed
Slide 8: Delivering on our Four Key Initiatives
Delivering on our Four Key Initiatives Trust & Search & Reliability Discovery Seller Tools Marketing & Services Capabilities We estimate product enhancements launched in Q1 will generate over $75M in annualized GMS 8
Slide 9: Search & Discovery: Helps Buyers Find “Special”
Search & Discovery: Helps Buyers Find “Special” Context Specific Ranking Promoted Listings for a “wedding dress” search without CSR Promoted Listings for a “wedding dress” search with CSR 9
Slide 10: Trust & Reliability: Relieves Friction in the Buying Process
Trust & Reliability: Relieves Friction in the Buying Process Guest Checkout Scarcity Signals New Structured Return Policy Free Shipping Filters Scarcity Badges 10
Slide 11: Marketing Capabilities: Unique Inventory “Made With Love”
Marketing Capabilities: Unique Inventory “Made With Love” 11
Slide 12: Seller Tools & Services: Enable our Sellers to Drive Growth
Seller Tools & Services: Enable our Sellers to Drive Growth Targeted Offers Custom Orders 12
Slide 13: Q1 Results Highlight Improvements in the Product Experience
Q1 Results Highlight Improvements in the Product Experience GMS Growth (y/y) Revenue Growth (y/y) Adj. EBITDA Margin* Consecutive quarters of accelerated growth Consecutive quarters of accelerated growth Solid Adjusted EBITDA margin 24.8% 25.6% 19.8% 23.6% 17.8% FX-Neutral 21.5% 21.4% 21.9% 19.1% 14
Slide 14: New Revenue Categories: Marketplace & Services
New Revenue Categories: Marketplace & Services Marketplace Services $33M, up $88M, up 35.0% 24.7% Services Revenue 27% Marketplace Revenue (optional) (Required) • Listing Fee • $0.20 listing fee per item • Promoted Listings • Transaction Fee • 3.5% transaction fee on goods sold • Etsy Shipping Label
Slide 15: Condensed Consolidated Statement of Operations
Condensed Consolidated Statement of Operations 1Q18 1Q17 (in thousands) Revenue $120,912 $96,891 Cost of revenue 41,295 34,659 Gross profit 79,617 62,232 Marketing 26,194 23,454 Product development 20,721 18,116 General and administrative 18,904 22,763 Operating expenses 65,819 64,333 Income (loss)
Slide 16: Convertible Debt Transaction
Convertible Debt Transaction Launch Date: March 8, 2018 Issue: Convertible Senior Notes due 2023 Offering Size: $300 million Greenshoe: $45 million Ranking: Senior unsecured Maturity: 5 years Coupon: 0% Conversion Premium: 37.5% Concurrent Stock Repurchase: $42 million, 1.6 million shares Use of Pro
Slide 17: Full Year 2018 Guidance
Full Year 2018 Guidance 2018 Original Guidance1 2018 Revised Guidance1 GMS Growth 14 - 16% 16 - 18% ~$3.7B - $3.8B ~$3.8B - $3.84B Revenue Growth 21 - 23% 22 - 24% ~$534M - $543M ~$538M - $547M Adjusted EBITDA Margin* 20 - 22% 21 - 23% ~$108M - $118M** ~$114M - $125M** * Reconciliation of non-GAAP f
Slide 18: Appendix
Appendix 18
Slide 19: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets 1Q18 4Q17 (in thousands) Cash and cash equivalents $533,855 $315,442 Short-term investments 67,526 25,108 Property and equipment, net 116,385 117,617 Accounts receivable, net 31,292 33,677 Other assets 121,107 113,739 Total assets $870,165 $605,583 Accounts paya
Slide 20: Reconciliation of Quarterly Net Income (Loss) to Adj. EBITDA
Reconciliation of Quarterly Net Income (Loss) to Adj. EBITDA 1Q18 1Q17 (in thousands) Net income (loss) $12,967 ($421) Excluding: Interest and other non-operating expense, net 2,667 2,152 Provision (benefit) for income taxes 14 (1,052) Depreciation and amortization 6,320 6,938 Stock-based compensati