Etsy, Inc. · NYSE:ETSY
Etsy — Q1 2023 Earnings Presentation
33 slides from Etsy's earnings presentation, May 3, 2023
Slide 1: Q1 2023 Financial Results
Q1 2023 Financial Results May 3, 2023
Slide 2: Forward-looking Statements
2 This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include Forward-looking statements relating to our financial guidance for the second quarter of 2023 and underlying assumptions and key drivers; our “vital few” initia
Slide 3: Maintained most of our gains and saw some green shoots in Q1 23
3 Maintained most of our gains and saw some ‘green shoots’ in Q1 23 Q1 23 Consolidated GMS Q1 23 Consolidated Revenue Q1 23 Consolidated Adj. EBITDA $3.1B $641M $170M -5% Y/Y and -3% Y/Y on +11% Y/Y 26.6% Adj. EBITDA Margin a currency neutral basis Etsy marketplace GMS was $2.7 billion, down 3% Y/Y
Slide 4: Right-to-Win Strategy
4 Right-to-Win Strategy Best-in-Class Human A Trusted Search and ✕ ✕ Connections Brand Discovery Our Collection of Unique Items
Slide 5: Our ambition is for Etsy to become the starting point for e-commerce journeys
5 Additional work to do to knock down barriers and make Etsy more top of mind Our ambition is for “I only come to Etsy for Etsy to become the a specific need” starting point for “It takes a lot of work many more e-commerce journeys to find the best things” “I worry that something will go wrong on Etsy
Slide 6: Exciting product development roadmap to improve customer experiences and engagement in 2023
6 Exciting product development roadmap to improve customer experiences and engagement in 2023 Welcome new Deepen buyer curiosity Instill trust when Be the platform buyers to the joy and engagement transacting with us sellers love to of Etsy sell on Meet new buyers Etsy gets better the Manage shop wh
Slide 7: Search improvements are central to this roadmap
7 Search improvements are central to this roadmap - continuing to make Etsy feel more ‘made for you’ We intelligently blend results from multiple search engines that are good at solving different problems... Generative AI coupled with Dynamic Information Retrieval unlocks exciting potential Text-bas
Slide 8: What if…
8 What if… ● We could bring the human aspect of shopping malls to e-commerce? ● Buyers could tell us what they want in real time and adjust their search results that way? ● Buyers could show us images during the conversation? ● Buyers could visualize products that might be similar to, but not exactl
Slide 9: Search advancements could impact Etsy search and customer experience
9 While still early days, you can imagine how these search advancements could impact Etsy search and customer experience Offering you choices… …giving you more ideas and narrowing your options …and more
Slide 10: Working to unlock the Best of Etsy - Curation at Scale
10 Working to unlock the Best of Etsy - Curation at Scale Human Curation
Slide 11: Etsy brand awareness is high, but unprompted purchase association is low
11 Etsy overall brand awareness is quite high, but unprompted association with actual purchase occasions is low - even in our largest categories and most frequent shopping missions Etsy Brand Funnel (Q1 23) Etsy Brand Funnel (Q1 23) U.S. Aided Awareness U.S. Unprompted Category Association – Gifts 1
Slide 12: Making it easier to shop purchase occasions where our merchandise shines
Making it easier to shop purchase occasions where our merchandise 12 shines - best-in-class product experiences to drive buyer consideration Wayfinding High quality inventory Inspiration Nothing says “Happy Housewarming” like these personalized picks. Celebrate someone special’s When you think of wal
Slide 13: Working to instill even more trust to transact with us
13 Working to instill even more trust to transact with us Keeping Etsy ‘Handmade’ Protecting Transactions Improving Shipping Experiences, and Special Timeliness and Cost Utilizing even better technologies and Dialing up prominence of Etsy Working to meet buyers’ needs for practices to more quickly a
Slide 14: Find inspiration (and everything else you need to grow) at Etsy Up
Find inspiration (and everything else you need to grow) at Etsy Up MAY 18,2023 1:00PM EDT You're a Star Seller this month— cue the confett What to expect MAY 22, 2023 - VIRTUAL EVENT - Reel Talk: Leveling up your content for Instagram Reels
Slide 15: Creatively building buyer awareness, engagement and retention
15 Creatively building buyer awareness, engagement and retention
Slide 16: Reverb and Elo7: kicking off the year focused on driving long-term growth
16 Reverb and Elo7: kicking off the year focused on driving long-term growth Highlighting Affordability on the Marketplace Improving Search
Slide 17: Seeing significant progress at Depop
17 Seeing significant progress at Depop Improved customer experiences Dramatic increase in 1. through increased velocity and product development velocity: impact of product development In just the first quarter Better martech tooling and of 2023, we 2. ROI-focused marketing completed strategies nearly
Slide 18: Solid results despite the challenging macro environment
18 Solid results despite the challenging macro environment +36% 4 Year Consolidated Results CAGR1 Q1 23 GMS Q1 23 Revenue Q1 23 Adjusted EBITDA $3.1B $641M $170M -5% Y/Y, -3% currency neutral basis +11% Y/Y 26.6% Adj. EBITDA Margin +203% Y/4Y* * Y/4Y reflects Q1 2023 vs. Q1 2019. 1 CAGR from Q1 2023
Slide 19: Strong revenue growth results in healthy profit flow through
19 Strong revenue growth results in healthy profit flow through Consolidated Results Incremental Revenue Bridge Etsy Consolidated Adjusted Q1 23 vs Q1 22 EBITDA and Adjusted EBITDA Margin +11% 27.5% Incremental Revenue Q1 23 Consolidated Revenue $641M, up 11% Y/Y Consolidated take rate ~21%
Slide 20: Hiring pace aligned with revenue growth and the opportunities we see ahead
20 Hiring pace aligned with revenue growth and the opportunities we see ahead Quarterly Consolidated From 2019-2022, Etsy’s revenue growth Product Development Spend ($M) meaningfully outpaced our headcount growth, greatly outperforming peer trends Delta +89% Delta +36% Note: Peer average is comprise
Slide 21: Utilizing a full funnel, ROI focused marketing approach
21 Utilizing a full funnel, ROI focused marketing approach Marketing spend works to attract, retain, and reactivate buyers TV & Digital video PLA spending Performance Full-funnel marketing ROI marketing Home & Living Sales increased over 40% from Event On sale: Home & 2019-2022* Living Decorate your
Slide 22: The Etsy marketplace once again maintained the vast majority of our gains
22 The Etsy marketplace once again maintained Etsy Marketplace GMS ($B) the vast majority of +164% Y/4Y* our gains * Y/4Y reflects Q1 2023 vs. Q1 2019.
Slide 23: Continuing to see GMS growth outside of the U.S.
23 Continuing to see GMS growth when a buyer, seller or both are Etsy Marketplace GMS by Geography (%) located outside of the U.S. Etsy marketplace performance only Q1 22 vs. Q1 23 GMS Ex-U.S. Domestic Strong GMS growth in currency neutral, Y/Y growth Germany and France 46% 54% +3% Currency neutral
Slide 24: Active buyers grew Y/Y for the first time since Q4 2021
24 Active buyers grew Y/Y for the first time since Q4 2021 due to healthy new and reactivated buyer growth, and solid buyer retention Q1 23 Active Buyers Q1 23 New Buyers Q1 23 Reactivated Buyers Q1 23 GMS / Active Buyer1 89.9M 6.7M 6M $129 +1% Y/Y; +119% Y/4Y -6% Y/Y; +54% Y/4Y +21% Y/Y; +127% Y/4Y
Slide 25: Capital light business model delivers a healthy balance sheet and strong cash flow
25 Capital light business model delivers a healthy balance sheet and strong cash flow Trailing Twelve Month Consolidated Free Cash Flow2 ($M) Cash Balance 03/31/231 $1.1B Q1 23 Consolidated Free Cash Flow $47M In Q1 2023, we converted nearly 90% of our Adj. EBITDA to free cash flow ¹Cash and Cash Equi
Slide 26: Q2 23 Guidance
26 Q2 23 Guidance Q2 23 Guidance May 3, 2023 GMS $2.85B to $3.10B Revenue $590M to $640M Adj. EBITDA Approximately 26% Margin We are not able at this time to provide GAAP targets for net income or net income margin or to reconcile Adjusted EBITDA margin to those amounts because of the unreasonable e
Slide 27: Q&A
27 Q&A
Slide 28: Appendix
28 Appendix
Slide 29: Condensed Consolidated Balance Sheets
As of March 31, As of December 29 Q1 2023 Financial Results 2023 31, 2022 (in thousands) Condensed Cash and cash equivalents $786,796 $921,278 Consolidated Short-term investments 252,666 250,413 Accounts receivable, net 26,274 27,888 Balance Sheets Funds receivable and seller accounts 202,354 233,96
Slide 30: Condensed Consolidated Statement of Operations
30 Q1 2023 Financial Results Three months Three months Condensed ended 03/31/23 ended 03/31/22 (in thousands) Consolidated Revenue $640,877 $579,266 Statement of Cost of revenue 195,453 172,995 Gross profit Operations 445,424 406,271 Marketing 171,314 154,280 Product development 115,924 89,476 Genera
Slide 31: Condensed Consolidated Statement of Cash Flows
31 Q1 2023 Financial Results Condensed Three months ended 3/31/23 Three months ended 3/31/22 Consolidated (in thousands) Statement of Net Income $74,537 $86,109 Cash Flows Net cash provided by operating activities 55,631 59,544 Net cash used in investing activities (36,097) (10,155) Net cash used in
Slide 32: Reconciliation of Quarterly Net Income to Adj. EBITDA
32 Q1 2023 Financial Results Reconciliation of Quarterly Net Income to Adj. EBITDA 1Q23 4Q22 3Q22 2Q22 1Q22 (in thousands) Net income (loss) $74,537 $109,548 $(963,068) $73,123 $86,109 Excluding: Interest and other non-operating (income) (5,689) (2,865) 230 2,557 3,290 expense, net Provision (benefit
Slide 33: Reconciliation of Operating Cash Flow to Free Cash Flow
Q1 2023 Financial Results Reconciliation of Operating Cash Flow to Free Cash Flow Free cash flow is considered to be a non-GAAP financial measure. We believe that free cash flow, which measures our ability to generate cash from our business operations, is an important financial measure for use in evalua