ETSY INC Q4 FY2024 earnings call

• In 2024, Etsy made strategic pivots to focus on long-term customer experience improvements over short-term GMS growth, including enhancing quality score, focusing on gifting and personalized items as growth levers. - Depop was a strong growth tailwind in 2024 with significant GMS growth. - Reverb continued to perform better than the musical instrument industry despite GMS decline. - Leadership changes include new CFO Lanny Baker, new president and chief growth officer Kruthi Patel, and elevated chief marketing officer Brad Miner. - Investments in product development, marketing, and app improvements to enhance discovery and customer experience.

Consolidated GMS was down 4% from 2023 to $12.6 billion. Core Etsy marketplace GMS declined 8.6% year over year. Depop had GMS up nearly 32% year over year to $789 million, with US GMS up about 60% year over year. Reverb's GMS was down 2.6% year over year to about $918 million. Revenue was a record $2.8 billion, up ~2% year over year. Adjusted EBITDA was $782 million with margins of 27.8%. Fourth quarter consolidated GMS was $3.7 billion, down 6.8% year over year. Consolidated revenue increased 1.2% to $852 million, adjusted EBITDA grew to $251 million, a quarterly high.

• First quarter 2025 consolidated GMS expected to decline at a rate similar to Q4 2024. - Q1 2025 take rate expected to be approximately 23% due to ad product improvements, payments expansion, and seller onboarding fee. - First quarter 2025 consolidated adjusted EBITDA margin expected to be approximately 25 to 26%. - Expect improved GMS performance in second half of 2025 due to easier comps, rebalanced product development, and benefits from 2024 investments like gifting.

• Macro environment affecting non-US markets led to underperformance of non-US buyer GMS. - Competition from cheap and fast ecommerce poses a challenge. - Uncertainties around tariffs and de minimis thresholds, with Etsy having less dependence on products from China compared to competitors.

Q: Follow-up on marketing initiatives in 2024 and shifts in marketing spend in 2025 and return profile of spend A: Josh discussed shifting from linear TV to connected TV and YouTube TV in upper funnel, investing in mid-funnel for planning occasions, and using better ML for lower funnel PLA. Lanny mentioned marketing spend planned to be in same proportion of revenue as last year and focused on ROI.

Q: Factors for improved GMS performance beyond first quarter and return to GMS growth by year end A: Josh mentioned rebalanced product development with some squads focusing on near-term conversion driving, easier comps in second half, and benefits from 2024 investments like gifting. Lanny added return and rebalancing of development efforts to conversion driving and foundation work from 2024.

Q: Competitive backdrop, tariffs, and impact on platform A: Josh said Etsy has less dependence on products from China, so may be a net beneficiary of tariffs on China. Discussed uncertainty around de minimis thresholds and focus on platform resilience.

Q: Etsy ads driving take rates and impact on GMS A: Josh said Etsy ads are neutral or better to GMS, with team making foundational investments in Etsy ads that will be sustainable. Focus on infusing quality work from search into ads for better buyer experience.

Q: Habitual buyer base shrinkage and loyalty program A: Josh discussed life events like weddings and new babies affecting habitual buyers, and focus on creating browsable experiences to help non-expert buyers discover Etsy, with loyalty program testing showing positive early results.