Etsy, Inc. · NYSE:ETSY
Etsy — Q2 2024 Earnings Presentation
42 slides from Etsy's earnings presentation, Jul 31, 2024
Slide 1: Q2 2024 Financial Results
Q2 2024 Financial Results July 31, 2024
Slide 2: Forward-looking Statements
2 This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include but Forward-looking are not limited to: statements relating to our financial guidance for the third quarter 2024 and full year 2024 and underlying assumptions;
Slide 3: Q2 24 consolidated results came in at high end of or ahead of guidance
3 Q2 24 consolidated results came in at high end of or ahead of guidance Q2 24 Consolidated GMS Q2 24 Consolidated Revenue Q2 24 Consolidated Adj. EBITDA Etsy Marketplace GMS accelerated from the Q1 performance (-5.3% Y/Y vs. -3.2% Y/Y), showing $2.9B $648M $179M -2.1% Y/Y and -1.9% +3.0% Y/Y 27.7%
Slide 4: Our 'Bold Moves' to drive Consideration and reignite GMS are moving the needle
4 Our ‘Bold Moves’ to drive Consideration and reignite GMS are moving the needle Consideration Get buyers to think of Etsy more often Gift ModeTM + Loyalty Program Quality Great Value Reliability Make it easier to find Drive association that there Make shopping on Etsy ‘the good stuff’ on Etsy are gr
Slide 5: Gifting is a winning theme: driving growth as a key source of differentiation
5 Gifting is a winning theme: driving growth as a key source of differentiation Q2 24 Etsy sitewide ‘Gifting’ GMS vs Peers1,2 Etsy Q2 24 actual Y/Y U.S. GMS compared to NRF forecasted performance for these events3,4 ‘Gifting’ GMS meaningfully outpaced overall Etsy marketplace performance - up 4% Y/Y
Slide 6: Prompted consideration of Etsy for Gifts
6 Launched significant improvements to the Gift Mode shopping experience, and we are building brand awareness and consideration Prompted consideration of Etsy for Gifts “Etsy makes it easy to find a great gift” Gift Lists Occasion Reminders Source: Etsy U.S. buyer surveys
Slide 7: Doing more than ever to highlight the very best of Etsy
7 Doing more than ever to ensure we highlight the very best of Etsy - differentiating us in a sea of commoditized merchandise Suppress & Elevate Curate Organize Remove better-quality the marketplace to …quality listings on listings in Search & show the newest and our marketplace listings that violat
Slide 8: Search team made excellent progress highlighting Quality and Diversity of inventory
8 Search team made excellent progress highlighting the Quality and Diversity of Etsy’s inventory - better buyer experiences Cut in half Over 70% reduction the percentage of searches in the percentage of where a high percentage of searches that have two or the listings seen on page one more listings
Slide 9: And better seller experiences
9 And better seller experiences ~70% of shops* had more visibility in search… …With the share of search impressions from small and medium shops increasing by nearly 30% Data on this slide represents recent search experimentation. *Share of all shops that had at least one impression during the respec
Slide 10: Introducing new 'Creativity Standards'
10 Doing more than ever to make it easier to find our sellers’ best merchandise - introducing new ‘Creativity Standards’ • Handcrafted items • Vintage • Hand-assembled items • Items from nature • Seller produced using • Collection of items that automated / the seller selected and computerized tools c
Slide 11: Seller feedback comments
!! Thank you Etsy! So wonderful to be a part of this! Handmade forever 57m 3likes Reply 2h 2likes Reply Almost 10 years selling on Etsy! | love it here thank you so much for including me 4A. th 4likes Reply Love the focus on the faces behind the shops. People buy from people! ih Glikes Reply Thank y
Slide 12: 'Made By' label comes to life in our creative
12 ‘Made By’ label comes to life in our creative: putting real Etsy sellers front and center to reinforce how we are Keeping Commerce Human
Slide 13: Authentic & Accessible, Actionable & Aspirational
13 Authentic & Accessible Actionable & Aspirational
Slide 14: Making the 'Buy on Etsy' app the center of our customer experience
14 Making the ‘Buy on Etsy’ app the center of our customer experience* A tailored Organized Human Relevant welcome pathways connection exploration Fresh Drive frequency and engagement with low-intent shoppers, while continuing to *Slide is illustrative convert buyers on clear shopping missions
Slide 15: 'Etsy Insider' beta will launch mid-September
15 ‘Etsy Insider’ beta will launch mid-September to highly targeted U.S. buyers - ‘North Star’ to drive frequency and GMS/ buyer Paid program with benefits: ● Free U.S. domestic shipping on millions of items ● Discounts and first-access Merch ● And More!
Slide 16: Gen AI & Advanced ML fueling efficiencies and future growth
16 Gen AI & Advanced ML fueling efficiencies and future growth ✨ Gen AI at Etsy Usage & experimentation across 20+ use cases…in Product Development alone! Strategy • Remove barriers to Improving user Search Optimizations Fraud detection experimentation. experience with including query including convo
Slide 17: Using Gen AI and Advanced ML to improve Search and Discovery
17 One example of the journey we are on to utilize Gen AI and Advanced ML to improve Search and Discovery… and positively impact GMS Demi-fine jewelry sub category: helping buyers refine what they are looking for, discover new items, narrow their search, and weed out irrelevant items…. Assisting buyer
Slide 18: Q2 consolidated results at high end or ahead of guidance
18 Q2 24 consolidated results at high end or ahead of guidance Consolidated Results Q2 24 GMS Q2 24 Revenue Q2 24 Adjusted EBITDA* $2.9B $648M $179M -2.1% Y/Y, -1.9% +3.0% Y/Y 27.7% Adj. EBITDA Margin currency neutral basis *Reconciliation of non-GAAP financial measures is contained in the Appendix.
Slide 19: Solid revenue performance driven by Payments and Offsite Ads
19 Solid revenue Incremental Revenue Bridge performance driven Q2 23 vs Q2 24 by Payments and Offsite Ads, complemented by Depop’s strong growth in shipping label and Ad revenue Q2 2024 consolidated take rate was 22.0%, ahead of guidance Q2 24 Consolidated Revenue $648M, up 3.0% Y/Y *Revenue items a
Slide 20: Leverage in product development spend, increasing revenue per headcount
20 We continue to drive leverage in product development spend, while also increasing revenue per headcount Consolidated Q2 24 Product Dev spend Continued growth in Revenue per reflects leverage gained as a % of revenue Headcount for the Etsy marketplace* -6.1% +5% Y/Y Y/Y Peer Group Average $0.5M * B
Slide 21: Diversifying the Etsy marketplace's paid marketing portfolio
21 Consolidated Marketing Spend as a % of Revenue We’ve been steadily diversifying the Etsy marketplace’s paid marketing portfolio Paid Social Share of Performance Marketing Spend* (Etsy marketplace) Consolidated Performance & Brand Marketing Spend +31% Y/Y -26% Y/Y * Paid social includes paid socia
Slide 22: Top 6 categories represented ~86% of GMS
22 Q2 24 Etsy marketplace top 6 categories Y/Y trends in top 6 categories approximate % GMS 3% Top 6 categories represented Y/Y trends improved in Q2 24 vs Q1 24 ~86% of GMS in 5 of 6 categories
Slide 23: Relative strength in active and reactivated buyers; growth in repeat buyers
23 23 Relative strength in active and reactivated Etsy marketplace buyers; growth in repeat buyers Q2 24 Active Buyers Q2 24 New Buyers Q2 24 Reactivated Buyers 91.5M 5.6M 6.4M +1.0% Y/Y -9.1% Y/Y +8.5% Y/Y Q2 24 Repeat Buyers Q2 24 Habitual Buyers Q2 24 GMS / Active Buyer1 37M 6.9M $124 +2.0% Y/Y -
Slide 24: Depop delivers strong Y/Y GMS growth; Reverb continues to gain share
24 Depop delivers strong Y/Y GMS growth; Reverb continues to gain share ● Very strong Y/Y GMS growth; particularly in the U.S. ● Continues to highlight affordable music gear; launched Reverb ‘Outlet’ in June ● Removed selling fees in U.K. to empower sellers to earn more from their wardrobes. Rolled
Slide 25: Capital light business model delivers healthy balance sheet and strong cash flow
25 Capital light business model delivers a healthy balance sheet and strong cash flow Trailing Twelve Month Consolidated Free Cash Flow ($M) Cash Balance 6/30/241 $1.1B Q2 24 Consolidated Free Cash Flow $141M In Q2 2024, we converted approx. 90% of our Adj. EBITDA to free cash flow on a trailing twelv
Slide 26: Returning a significant portion of free cash flow through share repurchases
26 Etsy continues to return a significant portion of our free cash flow to shareholders through share repurchases Etsy Share Repurchases ($M) & Share Repurchases as % of Free Cash Flow From 2017-2023, on average, we have used over 60% of our FCF for share repurchases
Slide 27: Q3 24 Consolidated Guidance as of July 31, 2024
27 Q3 24 Consolidated Guidance as of July 31, 2024 Q3 24 Guidance GMS We currently anticipate that Consolidated Q3 24 GMS will decline in the low single digit range on a year-over-year basis. Take Rate Similar to Q2 24 Adjusted EBITDA Margin ~27% Regarding our full-year 2024 outlook, we reiterate th
Slide 28: Q&A
Q&A
Slide 29: Appendix
Appendix
Slide 30: Etsy marketplace GMS Ex-U.S. Domestic
30 Etsy marketplace GMS Ex-U.S. Domestic Etsy Marketplace GMS Y/Y growth Q2 23 vs. Q2 24 (by Geography %) -0.4% GMS ex-U.S. Domestic saw >100 bps of sequential improvement Metrics presented represent the Etsy marketplace only. GMS Ex-U.S. Domestic = either buyer, seller, or both are located outside
Slide 31: Etsy Marketplace Active Buyers
31 Etsy Marketplace Active Buyers +1.0% Y/Y Modest growth in U.S. International growth remained strong 2.2% Y/Y increase in active buyers who identify as men Active buyers are buyers who have made at least one purchase in the last 12 months.
Slide 32: New Buyers and Reactivated Buyers
32 New Buyers Reactivated Buyers A buyer is considered new if they use a unique e-mail address that has never been used for a purchase on *Average reactivated buyers pre-COVID is average of quarterly data for the periods Q1 2017 through the Etsy marketplace. Metrics presented are for the Etsy market
Slide 33: Habitual Buyers and Repeat Buyers
33 Habitual Buyers Repeat Buyers1 (Buyers in M) (Buyers in M) 209% 145% Y/5Y Y/5Y 1 Metrics presented are for the Etsy marketplace on a Trailing Twelve Month basis. Y/5Y represents Q2 19 vs. Q2 Repeat Buyers exclude Habitual Buyers on this slide. 24.
Slide 34: Etsy Marketplace TTM GMS per Active Buyer
34 Etsy Marketplace TTM GMS per Active Buyer (Q/Q) $136 $135 $131 $129 $128 $127 $126 $125 $124
Slide 35: Condensed Consolidated Balance Sheets
35 Condensed As of June 30, 2024 As of December 31, 2023 Consolidated (in thousands) Cash and cash equivalents $ 759,211 $ 914,323 Balance Sheets Short-term investments 240,679 236,118 Accounts receivable, net 10,324 24,734 Funds receivable and seller accounts 239,481 265,387 Property and equipment,
Slide 36: Condensed Consolidated Statement of Operations (Three Months)
36 Condensed Three months Three months Consolidated ended 6/30/24 ended 6/30/23 (in thousands) Statement of Revenue $ 647,806 $ 628,876 Cost of revenue 184,090 188,638 Operations Gross profit Marketing 463,716 183,063 440,238 165,870 Product development 114,493 121,988 General and administrative 95,9
Slide 37: Condensed Consolidated Statement of Operations (Six Months)
37 Condensed Six months Six months Consolidated ended 6/30/24 ended 6/30/23 (in thousands) Statement of Revenue $ 1,293,760 $ 1,269,753 Cost of revenue 371,223 384,091 Operations Gross profit Marketing 922,537 374,874 885,662 337,184 Product development 224,339 237,912 General and administrative 185,
Slide 38: Condensed Consolidated Statement of Cash Flows
38 Condensed Six months ended 6/30/24 Six months ended 6/30/23 Consolidated (in thousands) Net income $ 116,009 $ 136,452 Statement of Net cash provided by operating activities 220,094 191,902 Net cash used in investing activities (27,744) (42,713) Cash Flows Net cash used in financing activities (33
Slide 39: Reconciliation of Quarterly Net Income to Adj. EBITDA
39 Reconciliation of Quarterly Net Income to Adj. EBITDA Q2’24 Q1’24 Q4’23 Q3’23 Q2’23 (in thousands) Net income $ 53,005 $ 63,004 $ 83,266 $ 87,850 $ 61,915 Excluding: Interest and other non-operating income, net (3,947) (5,310) (4,904) (5,430) (5,934) Provision (benefit) for income taxes 25,972 16,
Slide 40: Reconciliation of Operating Cash Flow to Free Cash Flow
40 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 evaluating the company's finan
Slide 41: Reconciliation of Operating Cash Flow to Free Cash Flow
41 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 evaluating the company's finan
Slide 42: Reconciliation of Operating Cash Flow to Free Cash Flow
42 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 evaluating the company's finan