Etsy, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Leadership Transition: Josh Silverman is stepping down as CEO, becoming Executive Chair, and Kruti Patel Goyal is named CEO effective January 1.
• Strategic Priorities: 4 priorities include showing up where shoppers find inspiration, personalizing the shopping experience, deepening loyalty, and amplifying seller creativity.
• Etsy App: Improved with redesigned home screen, AI-powered discovery feed, and ML advancements in buyer and item understanding. App home GMS grew 20% year-over-year in Q3.
• Loyalty Program: Piloting targeted offers for top buyers and beta testing the Etsy Insider Loyalty program, with plans to evolve it to focus on frequent buyers.
• Depop: Accelerated growth, with 39.4% year-over-year GMS growth, and launched a large brand campaign in the U.S.

Segment Performance

• Etsy Marketplace: GMS was $2.43 billion, down 2.4% year-over-year but improved sequentially by 300 basis points. FX-neutral year-to-year GMS was down 3.2%. Etsy marketplace margin was just shy of 30% for the quarter.
• Depop: GMS was $292 million, up 39.4% year-over-year. U.S. GMS grew 59% year-over-year.
• Consolidated: Third quarter consolidated GMS was $2.72 billion, revenue was $678 million, adjusted EBITDA was $172 million with a margin of 25.4%. Excluding Reverb, consolidated GMS grew 0.9% year-over-year and revenue grew 6.1%.

Guidance

• Q4 consolidated GMS expected to be between $3.5 billion and $3.65 billion, midpoint showing quarter-over-quarter improvement.
• Q4 consolidated take rate expected to be ~24.5%.
• Consolidated adjusted EBITDA margin expected to be ~24% due to increased brand marketing investment at Depop.
• Depop's U.S. GMS growth continues, with opportunity to increase awareness across broader demographics.

Risks

• Tariffs and Trade Restrictions: Pressure on U.S. import trade route, though domestic trade route improvement offset some impact. Expiration of de minimis exemption weighed on performance briefly but business stabilized.
• Consumer Discretionary Spending: Uncertainty around consumer behavior into the holiday season.

Question and Answer

Q: About OpenAI partnership, availability to U.S. sellers and performance fees.

A: Joshua Silverman stated it's available to U.S. sellers, Etsy pays the fee, not considered offsite ads, and it's an extension of discovery.

Q: Engagement on app and product development plans.

A: Kruti Goyal mentioned app engagement up, ML advancements driving discovery, and plans to continue investing in strategic priorities.

Q: Fourth quarter GMS outlook and loyalty program.

A: Charles Baker said sequential improvement expected, Kruti Goyal noted loyalty program learnings inform iteration, focusing on frequent buyers.

Q: Balancing agentic commerce and direct/mobile.

A: Joshua Silverman said it's not zero-sum, both complementary, early adopter position helps shape the experience.

Q: Agentic commerce insights and exogenous factors.

A: Kruti Goyal and Joshua Silverman discussed deep buyer understanding helps in agentic context, Charles Baker mentioned exogenous factors like trade and tariffs had modest impact.