Etsy, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Shift: Etsy shifted focus to enhance the holistic customer experience via the customer relationship flywheel, leveraging LLMs for personalized recommendations and improving the app experience.
• Etsy Marketplace: Showed improved GMS trends in the second half of the quarter, driven by app usage growth, personalized owned channels (e.g., push and email), and paid social investments.
• Depop Growth: Depop had strong GMS growth, especially in the U.S., and Peter Semple's appointment as permanent CEO was announced.
• Product Development: Focus on enhancing app navigation, buyer-seller conversations, browsing, and matching models using generative AI and LLMs.
• Marketing Efforts: Shifted brand media mix towards OTT, audio, digital video, and other streaming platforms; increased partnerships and influencers; and invested in performance marketing (e.g., search engine marketing, paid social).

Segment Performance

• Etsy Marketplace: Second quarter 2025 GMS was down 5.4% year-over-year, with a sequential improvement from the first quarter. FX provided a 90 basis point benefit to GMS. App GMS grew year-over-year, accounting for 44.8% of total GMS. Trailing 12-month active buyers were 87.3 million (down 4.6% year-over-year), and active seller count was flat at 5.4 million.
• Depop: Reported GMS growth accelerating to 35% year-over-year, reaching an annualized run rate of $1 billion in GMS. In the U.S., GMS grew 54% year-over-year, and Peter Semple was appointed permanent Depop CEO.

Guidance

• Consolidated GMS: Q3 2025 expected to be between $2.6 billion and $2.7 billion.
• Take Rate: Expected to be approximately 24.5%.
• Adjusted EBITDA Margin: Expected to be approximately 25%, with sequential expansion and strong profitability for the core Etsy business.

Risks

• Market and Competitive Risks: Fierce competition in paid search and changing consumer spending patterns could impact performance.
• Execution Risks: Challenges in implementing new technologies/models (e.g., retooling search ranking platforms, ensuring effective personalization) could affect results.

Question and Answer

• Q: Sequential improvement in Etsy's GMS trajectory and margin compression in core business A: Joshua Silverman cited factors like app usage growth, personalized owned channels, paid social investments, and external competitive dynamics as helpful. Lanny Baker discussed managing Etsy Marketplace to high 20s EBITDA margin with strategic investments.
• Q: App growth and user shift A: Joshua Silverman noted the app is a better experience, driving more users to adopt it, with monthly active users up 7% year-over-year and app GMS contributing more to total GMS.
• Q: Personalized communications and payments growth A: Joshua Silverman discussed progress in personalized email and push notifications using LLMs. Lanny Baker mentioned payments growth due to sellers adopting Etsy Payments for simplicity and value.
• Q: Marketing spend and ROAS A: Joshua Silverman and Lanny Baker talked about marketing spend allocation between Etsy Marketplace and Depop, with Depop at an earlier growth stage. Progress in paid social and ROI from marketing investments was noted.
• Q: Etsy Insider and app GMS A: Joshua Silverman discussed testing and iterating Etsy Insider for better loyalty. Lanny Baker talked about app growth driven by better experience and personalized surfaces, with new users having lower initial spend.
• Q: Agentic chatbot traffic and paid social with AI A: Joshua Silverman discussed Etsy's unique inventory making it a top recipient of agentic chatbot traffic. GenAI helps in personalizing paid social copy and landing experiences for better conversions.