Etsy, Inc. · NYSE:ETSY
Etsy — FY2022 Earnings Presentation
40 slides from Etsy's earnings presentation, Feb 22, 2023
Slide 1: Q4/FY 2022 Financial Results
Q4/FY 2022 Financial Results February 22, 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 first quarter of 2023 and key factors impacting our guidance; the impact of our “Right to
Slide 3: 2022 ended on a high note
3 2022 ended on a high note Etsy and our sellers helped make the season bright Year-over-year growth during Cyber 5* Over 2K Double digit Gifting Paper & Party Apparel Checkouts per minute increase during peak periods Sellers participating in our Cyber sales events (Y/Y) All stats on this page reflec
Slide 4: We delivered a strong year despite the challenging macro environment
4 We delivered a strong year despite the challenging macro environment FY 22 Consolidated GMS FY 22 Consolidated Revenue FY 22 Consolidated Adj. EBITDA¹ $13.3B $2.6B $716.9M -1.3% Y/Y and +1.6% +10.2% Y/Y 27.9% Adj. EBITDA Margin currency neutral basis FY 22 Etsy marketplace GMS was $11.8 billion -
Slide 5: Our investments continue to pay off
5 Our investments continue to pay off Buyers are shopping Etsy more We have more buyers: frequently: 89.4M 48% Active Buyers*, +95% Y/3Y Repeat Buyers*, +680 bps Y/3Y Buyers are spending more with Etsy: We’ve become ‘more of a habit’: $132 7.4M TTM GMS per Active Buyer, +27% Y/3Y Habitual Buyers*, +
Slide 6: …and we grew in some very important ways!
6 …and we grew in We are broadening our appeal some very 22M Active buyers identify as men important ways! We reactivated the most buyers 24M ever in one year Germany GMS Up double-digits Y/Y International sellers selling to international buyers outside of their home country Up high-single-digits Y/
Slide 7: We cared for our people, communities and our planet
7 We cared for our people, communities and our planet
Slide 8: Our Right to Win continues to be robust and relevant - 2022 Highlights
8 Our Right to Win continues to be robust and relevant - 2022 Highlights Best-in-Class Search Human Connections A Trusted Brand and Discovery ● Enhanced personalization utilizing ● Continued improvement of ● Launched Etsy Purchase Protection multiple search engines messaging between buyers & ● Impro
Slide 9: Improving customer experiences and delivering financial results
9 Improving customer experiences and delivering financial results Right to Win Ads, Payments, core buyer & seller + Trust & Safety + Member Services + Brand + Martech + Tax, Fulfillment, experiences Enablement, Other Improve customer experiences + Deliver GMS, Revenue, Cost Savings or other financial m
Slide 10: This time last year we said: grow wallet share with buyers
10 This time last year we said: “To grow our wallet share with buyers, we’ll focus on being even more inspirational, efficient and reliable”
Slide 11: We made Etsy more inspirational
11 We made Etsy more inspirational 20% in items added to Collections 36% in number of shop follows 12% in number of favorites
Slide 12: We made Etsy more efficient
12 We made Etsy Search Relevance Improvements drove lifts in sitewide more efficient conversion rate and average buyer spend Buyer Experience Improving the type of information we present a buyer and how we present it Site Performance improvement wins drove nearly $100M in sitewide GMS
Slide 13: We made Etsy more reliable
13 We made Etsy more reliable Etsy Purchase Protection Impacting Customer Experience Improved delivery transparency for non-U.S. listings: 3.15 95% of non-U.S. listings had an Expected Delivery Date Decreasing issue resolution times vs. ~80% in 2021 1.25 0.82 Focused on improving the returns experie
Slide 14: We differentiated our brand, built awareness and captured the hearts of millions of global buyers
14 We differentiated our brand, built awareness and captured the hearts of millions of global buyers Select Etsy marketplace brand metrics Prompted awareness Prompted awareness Prompted awareness Up >10% vs Q4 18 Up >15% vs Q4 20 Up nearly 100% vs Q4 20 Purchase intent Purchase intent Purchase inten
Slide 15: Effective marketing strategies attract new buyers and keep existing buyers coming back
15 Effective marketing strategies - on Etsy and off - attract new buyers and keep existing buyers coming back Mid-Funnel/ CRM Social TV & Digital video Performance marketing Great deals galore! It’s official — our biggest Sales Event of the year is here! Get up to 60% off extra special items from ind
Slide 16: For 2023 our Right to Win strategy is centered around these Etsy marketplace objectives
16 For 2023 our Right to Win strategy is centered around these Etsy marketplace objectives 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 where
Slide 17: FY 2022 GMS and key investments by marketplace
17 Key 2022 investments: $943M ● Optimizing conversion rate ● Delivering a more customized experience FY 2022 GMS ● Driving international growth Key 2022 investments: $552M ● Improving product velocity & infrastructure ● Enhancing search capabilities ● Building new performance marketing channels FY
Slide 18: We successfully anniversaried the incredibly strong Q4 21 period
18 We successfully anniversaried the incredibly strong Q4 21 period Consolidated Results Q4 22 GMS Q4 22 Revenue Q4 22 Adjusted EBITDA¹ $4.0B $807M $227M -4.0% Y/Y, -0.7% currency neutral basis +12.6% Y/Y 28.1% Adj. EBITDA Margin +144% Y/3Y $4,201 $4,034 $3,252 $3,030 $3,002 17% 3% 0% -3% -4% ¹ Reco
Slide 19: Strong Q4 22 revenue was primarily driven by the Etsy marketplace
19 Strong Q4 22 Incremental Revenue Bridge revenue was Q4 22 vs Q4 21 primarily driven by the Etsy marketplace +13% transaction fee increase and Etsy Ads growth Q4 22 Consolidated Revenue $807M, up 13% Y/Y Consolidated take-rate was 20.0%, up ~300 bps Y/Y Lower Y/Y GMS Incremental Revenue partially
Slide 20: ROI-focused investment discipline continued to result in profitable growth
20 ROI-focused investment discipline continued to result in profitable growth Etsy Consolidated Quarterly Adjusted Etsy Consolidated Annual Adjusted EBITDA ($) and Adjusted EBITDA Margin (%)* EBITDA ($) and Adjusted EBITDA Margin (%)* >400 bps headwind from subsidiaries *Reconciliation of non-GAAP fin
Slide 21: We slowed our rate of hiring throughout 2022
21 We slowed our rate of hiring We dramatically increased And Product Development throughout 2022 revenue per headcount for Spend as a % of Revenue has our Etsy marketplace since returned to healthy, 2019 pre-pandemic range +65% $1.4 Y/3Y1 $0.8 0.1% 20192 20223 2019 GMS 2022 GMS of Percentage headco
Slide 22: Getting more efficient in the marketing dollars we put to work on behalf of our sellers
22 Getting more efficient in the marketing dollars we put to work on behalf of our sellers Annual Total Marketing Spend (Consolidated) ~$2.5B Annualized GMS1 benefit from Etsy marketplace performance marketing in 2022 GMS from Paid Channels1 Offsite Ads revenue2 20% ~35% of overall consolidated of Et
Slide 23: Etsy marketplace CAGR has far exceeded the 16-20% target we set in 2019
23 Etsy marketplace CAGR has far Etsy Marketplace GMS ($B) exceeded the 16-20% target we +35% CAGR2 set in 20191 3 Yr Etsy marketplace GMS growth3 accelerated in Q4 +145% vs. +134% in Q34 1 Represents 3-5 year GMS CAGR target set at Etsy March, 2019 Investor Day. 2 CAGR from fiscal year 2019-2022. 3
Slide 24: 45% of our Q4 22 GMS was generated outside of the U.S.
24 45% of our Q4 22 GMS was generated when a buyer or seller or both were located outside of the U.S. 34M Record high Non-U.S. Active Buyers as of 12/31/2022 ~70% of UK & ~80% of Germany FY22 GMS now from Domestic sales Etsy Germany TV Campaign Etsy Marketplace performance only.
Slide 25: Breadth of merchandise remains a competitive advantage
25 Breadth of merchandise remains a competitive advantage 2022 Etsy Marketplace top 6 categories approximate % GMS Top 6 categories represented ~86% of GMS in 2022 Y/Y down single Y/Y down slightly Y/Y up single digits Y/Y down double Y/Y up double digits Y/Y down digits Y/3Y up >110% Y/3Y up >140%
Slide 26: We have largely held onto our gains and active buyers increased a bit
26 We have largely held onto our …and active buyers increased a bit gains… in each of the last two quarters Active Buyers - Annual Active Buyers - Quarterly Metrics presented are for the Etsy marketplace and do not include Reverb, Depop, or Elo7. Active buyers are buyers who have made at least one p
Slide 27: We acquired 9.5M new buyers in Q4 22; up 51% sequentially
27 We acquired 9.5M New Buyers new buyers in Q4 22; up 51% sequentially… +34% Q/Q higher sequential growth than in +44% Q/Q +51% Q/Q comparable periods of 2020 and 2021 Metrics presented are for the Etsy marketplace and do not include Reverb, Depop, or Elo7. *Average new buyers pre-COVID is the aver
Slide 28: We reactivated a record number of lapsed buyers in 2022
28 We reactivated a Reactivated Buyers record number of +27% vs Q4 21 lapsed buyers in 2022… this remains an important focus area for 2023 Metrics presented are for the Etsy marketplace and do not include Reverb, Depop, or Elo7. The Etsy marketplace supports a community of approximately 90 million b
Slide 29: Capital light business model delivers strong cash flow
29 Capital light business model delivers strong cash flow Consolidated free cash flow ($M)² Cash Balance 12/31/221 $1.2B ¹Cash and Cash Equivalents, Short-term and Long-term Investments. ² Reconciliation of Non-GAAP financial measures is contained in the Appendix.
Slide 30: Q1 23 Guidance for Consolidated GMS, Revenue and Adj. EBITDA Margin
30 Q1 23 Guidance for Q1 23 Guidance Consolidated GMS, February 22, 2023 Revenue and Adj. EBITDA GMS $2.95B to $3.15B Margin Revenue $600M to $640M Adj. EBITDA 26-27% Margin Reconciliation of non-GAAP financial measures is contained in the Appendix. We are not able at this time to provide GAAP target
Slide 31: Q&A
Q&A
Slide 32: Appendix
Appendix
Slide 33: Key factors impacting our Q1 23 Guidance
33 Key factors impacting our Q1 23 Guidance* We anticipate that the key factors impacting Q1 GMS and revenue will be: ● Headwinds and tailwinds, including but not limited to the following macro factors: the shift between offline and online, duration and impact of reopening headwinds, economic factors
Slide 34: Condensed Consolidated Balance Sheets
As of December 31, As of December 31, 34 Q4 2022 Financial Results 2022 2021 (in thousands) Condensed Cash and cash equivalents $921,278 $780,196 Consolidated Short-term investments 250,413 204,416 Accounts receivable, net 27,888 27,266 Balance Sheets Funds receivable and seller accounts 233,961 220
Slide 35: Condensed Consolidated Statement of Operations (Q4)
35 Q4 2022 Financial Results Three months Three months Condensed ended 12/31/22 ended 12/31/21 (in thousands) Consolidated Revenue $807,241 $717,139 Statement of Cost of revenue 225,775 208,966 Gross profit Operations 581,466 508,173 Marketing 244,809 204,198 Product development 112,787 82,555 Genera
Slide 36: Condensed Consolidated Statement of Operations (Twelve Months)
36 Q4 2022 Financial Results Twelve months Twelve months Condensed ended 12/31/22 ended 12/31/21 (in thousands) Consolidated Revenue $2,566,111 $2,329,114 Statement of Cost of revenue 744,592 654,512 Gross profit Operations 1,821,519 1,674,602 Marketing 710,399 654,804 Product development 412,398 271
Slide 37: Condensed Consolidated Statement of Cash Flows
37 Q4 2022 Financial Results Condensed Twelve months ended 12/31/22 Twelve months ended 12/31/21 Consolidated (in thousands) Statement of Net (Loss) Income $(694,288) $493,507 Cash Flows Net cash provided by operating activities 683,612 651,551 Net cash used in investing activities (30,024) (1,557,9
Slide 38: Reconciliation of Operating Cash Flow to Free Cash Flow
38 Q4 2022 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 eva
Slide 39: Reconciliation of Quarterly Net Income to Adj. EBITDA
39 Historical Quarterly Financial Results Reconciliation of Quarterly Net Income to Adj. EBITDA 4Q22 3Q22 2Q22 1Q22 4Q21 Net income (loss) $109,548 $(963,068) $73,123 $86,109 $161,557 Excluding: Interest and other non-operating (income) (2,865) 230 2,557 3,290 3,323 expense, net Provision (benefit) f
Slide 40: Reconciliation of Annual Net Income to Adj. EBITDA
40 Historical Annual Financial Results Reconciliation of Annual Net Income to Adj. EBITDA 2022 2021 2020 2019 2018 (in thousands, except percentages) Net (loss) income $(694,288) $493,507 $349,246 $95,894 $77,491 Excluding: Interest and other non-operating expense, net 3,212 7,748 34,923 11,121 13,2