10-Q 1 etsy-20240331.htm 10-Q etsy-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
__________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period endedMarch 31, 2024
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to                                    
Commission File Number 001-36911
__________________________________
etsy_logo_lg_rgb copy.jpg
ETSY, INC.
(Exact name of registrant as specified in its charter)
__________________________________
Delaware20-4898921
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
117 Adams StreetBrooklyn,NY11201
(Address of principal executive offices)(Zip code)
(718) 880-3660
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareETSYThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated Filer Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  
The number of shares of common stock outstanding as of April 26, 2024 was 116,932,568.



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Table of Contents
Part I - Financial Information
Item 1.Condensed Consolidated Financial Statements (Unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II - Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
Signatures


Unless the context otherwise requires, we use the terms “Etsy,” the “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q (“Quarterly Report”) to refer to Etsy, Inc. and, where appropriate, our consolidated subsidiaries.
See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating and Financial Metrics” for the definitions of the following terms used in this Quarterly Report: “active buyer,” “active seller,” “Adjusted EBITDA,” “Adjusted EBITDA margin,” “currency-neutral GMS growth,” “GMS,” “GMS ex-U.S. domestic,” “new buyer GMS,” and “U.S. domestic GMS.”
Etsy has used, and intends to continue using, its investor relations website and the Etsy News Blog (blog.etsy.com/news) to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website and the Etsy News Blog in addition to following our press releases, SEC filings, and public conference calls and webcasts.



Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements relating to our opportunity; the impact of our “Right to Win” and other growth strategies, including marketing and product initiatives, investments, and other levers for growth, on our business and operating results, including future gross merchandise sales (“GMS”) and revenue growth; our ability to attract, engage, and retain buyers and sellers; strategic investments or acquisitions, product and marketing investments, and the potential benefits thereof; our impact goals, strategy, and intended progress; the impact that global macroeconomic and geopolitical uncertainty and volatility may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows; and uncertainty regarding and changes in overall levels of consumer spending and e-commerce generally. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as “aim,” “anticipate,” “believe,” “could,” “enable,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and derivative forms and/or negatives of those terms.
Forward-looking statements are not guarantees of performance and involve known and unknown risks and uncertainties. Other factors may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Those risks include those described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. Given these uncertainties, you should read this Quarterly Report in its entirety and not place undue reliance on any forward-looking statements in this Quarterly Report.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and, although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Moreover, we operate in a competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements made in this Quarterly Report. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In addition, the global economic climate and general market, political, economic, and business conditions may amplify many of these risks.
Forward-looking statements represent our beliefs and assumptions only as of the date of this Quarterly Report. We disclaim any obligation to update forward-looking statements.

3


Summary Risk Factors
Our business is subject to numerous risks. The following summary highlights some of the risks we are exposed to in the normal course of our business activities. This summary is not complete and the risks summarized below are not the only risks we face. You should review and consider carefully the risks and uncertainties described in more detail in Part II, Item 1A, “Risk Factors,” which includes a more complete discussion of the risks summarized below as well as a discussion of other risks related to our business and an investment in our common stock.
Financial Performance and Operational Risks Related to Our Business
While we have experienced rapid growth in our business in the past, our revenue growth rate and financial performance have fluctuated, which makes it difficult to predict the extent of demand for our services or the products sold in our marketplaces.
The trustworthiness of our marketplaces and the connections within our communities are important to our success. Our business, financial performance, and growth depend on our ability to attract and retain active and engaged communities of buyers and sellers. If we are unable to retain our existing buyers and sellers and activate new ones, our financial performance could decline.
Our quarterly operating results may fluctuate, which could cause significant stock price fluctuations.
We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.
We track certain operational metrics with internal systems and tools or manual processes, and do not independently verify such metrics. Certain of these metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies may adversely affect our business and reputation.
If we experience a technology disruption that results in a loss of information, if personal data or sensitive information about members of our communities or employees is misused or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber-related events, ransomware, security incidents, or other security breaches, then members of our communities may curtail use of our platforms, we may be exposed to liability or incur additional expenses, and our reputation might suffer.
Our business depends on continued and unimpeded access to third-party services, platforms, and infrastructure that we rely upon to maintain and scale our platform. If the widely adopted mobile, social, search, and/or advertising solutions that we, our sellers, and our buyers rely on as part of our key offering are no longer available or effective, or if access to these major platforms is limited, the use of our marketplaces could decline.
Our payments systems have both operational and compliance risks, including in-house execution risk, dependency on third-party providers, and a complex landscape of evolving laws, regulations, rules, and standards.
Our business could be adversely affected by economic downturns, inflation, natural disasters, public health crises, political crises, geopolitical events or other Macroeconomic Conditions, which have in the past and may in the future negatively impact our business and financial performance.
Our ability to recruit and retain a diverse group of employees and retain key employees is important to our success. Significant attrition or turnover could impact our ability to grow our business.
Strategic Risks Related to Our Business and Industry
We face intense competition and may not be able to compete effectively.
Enforcement of our marketplace policies may negatively impact our brands, reputation, and/or our financial performance.
If we are not able to keep pace with technological changes, and enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers, our business, financial performance, and growth may be harmed.
Continuing to expand our operations outside of the United States is part of our strategy, and the growth of our business could be harmed if our expansion efforts do not succeed.

4


We have incurred impairment charges for our goodwill and other long-lived tangible and intangible assets, and may incur further impairment charges in the future, which would negatively impact our operating results.
We may expand our business through additional acquisitions of other businesses or assets or strategic partnerships and investments, which may divert management’s attention and/or prove to be unsuccessful.
We are subject to risks related to our environmental, social, and governance activities and disclosures.
We have a significant amount of convertible debt and may incur additional debt in the future.
Regulatory, Compliance, and Legal Risks
Failure to deal effectively with fraud or other illegal activity could harm our business.
Compliance with evolving global legal and regulatory requirements and/or available safe harbors, including privacy and data protection laws, tax laws, product liability laws, laws regulating speech and platform monitoring or moderation, antitrust laws, intellectual property and counterfeiting regulations, may materially impact our time, resources, and ability to grow our business.
We are regularly involved in litigation, arbitration, and regulatory matters that are expensive and time consuming and that may require changes to our strategy, the features of our marketplaces and/or how our business operates.
We may be subject to intellectual property or other claims, which, even if meritless, could be extremely costly to defend, damage our brands, require us to pay significant damages, and limit our ability to use certain technologies or business strategies in the future.
Other Risks
Future sales and issuances of our common stock or rights to purchase common stock, including upon conversion of our convertible notes, could result in additional dilution to our stockholders and could cause the price of our common stock to decline.

5

Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited).
Etsy, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share amounts)
As of March 31,
2024
As of December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents$788,837 $914,323 
Short-term investments254,875 236,118 
Accounts receivable, net of expected credit losses of $10,102 and $10,149 as of March 31, 2024 and December 31, 2023, respectively
16,542 24,734 
Prepaid and other current assets104,633 129,884 
Funds receivable and seller accounts239,532 265,387 
Total current assets1,404,419 1,570,446 
Property and equipment, net of accumulated depreciation and amortization of $257,251 and $244,052 as of March 31, 2024 and December 31, 2023, respectively
241,875 249,794 
Goodwill137,894 138,377 
Intangible assets, net of accumulated amortization of $134,525 and $125,932 as of March 31, 2024 and December 31, 2023, respectively
444,829 457,140 
Deferred tax assets141,012 137,776 
Long-term investments84,424 86,676 
Other assets43,218 45,191 
Total assets$2,497,671 $2,685,400 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable$10,132 $29,920 
Accrued expenses262,518 353,553 
Finance lease obligations—current6,045 6,079 
Funds payable and amounts due to sellers239,532 265,387 
Deferred revenue13,869 14,635 
Other current liabilities33,025 41,207 
Total current liabilities565,121 710,781 
Finance lease obligations—net of current portion98,112 99,620 
Deferred tax liabilities11,023 13,192 
Long-term debt, net2,284,883 2,283,817 
Other liabilities122,293 121,705 
Total liabilities3,081,432 3,229,115 
Commitments and contingencies (Note 8)
Stockholders’ deficit:
Common stock ($0.001 par value, 1,400,000 shares authorized as of March 31, 2024 and December 31, 2023; 117,064 and 119,069 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)
117 119 
Preferred stock ($0.001 par value, 25,000 shares authorized as of March 31, 2024 and December 31, 2023)
  
Additional paid-in capital1,151,846 1,081,026 
Accumulated deficit(1,454,137)(1,357,390)
Accumulated other comprehensive loss(281,587)(267,470)
Total stockholders' deficit(583,761)(543,715)
Total liabilities and stockholders' deficit$2,497,671 $2,685,400 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
 Three Months Ended 
 March 31,
 20242023
Revenue$645,954 $640,877 
Cost of revenue187,133 195,453 
Gross profit458,821 445,424 
Operating expenses:
Marketing191,811 171,314 
Product development109,846 115,924 
General and administrative89,074 79,987 
Total operating expenses390,731 367,225 
Income from operations68,090 78,199 
Other income, net11,565 3,072 
Income before income taxes79,655 81,271 
Provision for income taxes(16,651)(6,734)
Net income$63,004 $74,537 
Net income per share attributable to common stockholders:
Basic$0.53 $0.60 
Diluted$0.48 $0.53 
Weighted-average common shares outstanding:
Basic118,440 124,337 
Diluted135,338 142,966 
The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
 Three Months Ended 
 March 31,
 20242023
Net income$63,004 $74,537 
Other comprehensive (loss) income:
Cumulative translation adjustment(13,847)15,627 
Unrealized (losses) gains on investments, net of tax (benefit) expense of $(87) and $233, respectively
(270)741 
Total other comprehensive (loss) income(14,117)16,368 
Comprehensive income$48,887 $90,905 
The accompanying notes are an integral part of these condensed consolidated financial statements.

8

Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)
(In thousands)
Three Months Ended March 31, 2024
 Common StockAdditional
Paid-in Capital
Accumulated DeficitAccumulated Other Comprehensive LossTotal
 
 SharesAmount
Balance as of December 31, 2023119,069 $119 $1,081,026 $(1,357,390)$(267,470)$(543,715)
Stock-based compensation (1)9 — 74,338 — — 74,338 
Exercise of vested options102 — 2,252 — — 2,252 
Vesting of restricted stock units, net of shares withheld106 — (5,770)— — (5,770)
Stock repurchase(2,222)(2)— (159,751)— (159,753)
Other comprehensive loss— — — — (14,117)(14,117)
Net income— — — 63,004 — 63,004 
Balance as of March 31, 2024117,064 $117 $1,151,846 $(1,454,137)$(281,587)$(583,761)
Three Months Ended March 31, 2023
Common StockAdditional
Paid-in Capital
Accumulated Deficit
Accumulated Other
Comprehensive Loss
Total
SharesAmount
Balance as of December 31, 2022125,054 $125 $815,085 $(1,048,267)$(314,217)$(547,274)
Stock-based compensation (1)12 — 70,987 — — 70,987 
Exercise of vested options186 — 3,005 — — 3,005 
Settlement of capped call(1,194)(1)34,224 (34,223)—  
Settlement of convertible senior notes, net of taxes — (1)— — (1)
Vesting of restricted stock units, net of shares withheld100 — (9,628)— — (9,628)
Stock repurchase(1,205)(1)— (148,181)— (148,182)
Other comprehensive income— — — — 16,368 16,368 
Net income— — — 74,537 — 74,537 
Balance as of March 31, 2023122,953 $123 $913,672 $(1,156,134)$(297,849)$(540,188)
(1) Includes the partial payments of Depop deferred consideration.
The accompanying notes are an integral part of these condensed consolidated financial statements.

9

Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 Three Months Ended 
 March 31,
 20242023
Cash flows from operating activities
Net income$63,004 $74,537 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense70,683 68,683 
Depreciation and amortization expense26,846 23,172 
Provision for expected credit losses4,078 4,969 
Deferred benefit for income taxes(5,230)(8,968)
Other non-cash (income) expense, net(5,066)3,512 
Changes in operating assets and liabilities:
Current assets52,456 34,726 
Non-current assets1,652 1,050 
Current liabilities(140,027)(137,660)
Non-current liabilities637 (8,390)
Net cash provided by operating activities69,033 55,631 
Cash flows from investing activities
Purchases of property and equipment(2,257)(2,249)
Development of internal-use software(7,456)(5,957)
Purchases of investments(142,359)(116,896)
Sales and maturities of investments126,966 89,005 
Net cash used in investing activities(25,106)(36,097)
Cash flows from financing activities
Payment of tax obligations on vested equity awards(5,936)(9,194)
Repurchase of stock(158,344)(148,182)
Proceeds from exercise of stock options2,252 3,005 
Payment of debt issuance costs  (2,045)
Settlement of convertible senior notes (45)
Payments on finance lease obligations(1,548)(1,575)
Other financing, net562 (512)
Net cash used in financing activities(163,014)(158,548)
Effect of exchange rate changes on cash(6,399)4,532 
Net decrease in cash, cash equivalents, and restricted cash(125,486)(134,482)
Cash, cash equivalents, and restricted cash at beginning of period914,323 926,619 
Cash, cash equivalents, and restricted cash at end of period$788,837 $792,137 


10

Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Three Months Ended 
 March 31,
20242023
Supplemental non-cash disclosures:
Stock-based compensation capitalized in development of capitalized software and asset additions in exchange for liabilities$4,490 $3,592 
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown above:
Three Months Ended 
 March 31,
20242023
Beginning balance:
Cash and cash equivalents$914,323 $921,278 
Restricted cash 5,341 
Total cash, cash equivalents, and restricted cash$914,323 $926,619 
Ending balance:
Cash and cash equivalents$788,837 $786,796 
Restricted cash 5,341 
Total cash, cash equivalents, and restricted cash$788,837 $792,137 
The accompanying notes are an integral part of these condensed consolidated financial statements.

11

Etsy, Inc.
Notes to Condensed Consolidated Financial Statements

Note 1—Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. These marketplaces - which collectively create a “House of Brands” - share the Company’s mission, common levers for growth, similar business models, and a strong commitment to use business and technology to strengthen communities and empower people. The Company’s primary marketplace, Etsy.com, is the global destination for unique and creative goods made by independent sellers. The Company generates revenue primarily from marketplace activities, including transaction (inclusive of offsite advertising), payments processing, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. On August 10, 2023, Etsy closed the previously announced sale of the parent holding company of Elo7 Serviços de Informática (“Elo7”), the Company’s Brazil-based marketplace for handmade and unique items, to Enjoei S.A., a corporation in Brazil. The financial results of Elo7 have been included in Etsy’s Consolidated Financial Statements from July 2, 2021 (the date of acquisition) until August 10, 2023.
Reclassifications
Certain items in the prior years’ condensed consolidated financial statements have been reclassified to conform to the current year presentation reflected in the condensed consolidated financial statements.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The Company has condensed or omitted certain information and notes normally included in complete annual financial statements prepared in accordance with GAAP. These unaudited interim condensed consolidated financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 21, 2024 (the “Annual Report”). In the opinion of management, all material adjustments, which are of a normal and recurring nature, necessary for a fair statement of the results for the periods presented have been reflected in the condensed consolidated financial statements. The results of operations of any interim period are not necessarily indicative of the results of operations for the full annual period or any future period due to seasonal and other factors.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates and judgments. The accounting estimates that require management’s most subjective judgments include: income taxes, including the estimate of the annual effective tax rate at interim periods and evaluation of uncertain tax positions; valuation of goodwill; and leases. As of March 31, 2024, there continues to be significant global macroeconomic and geopolitical uncertainty which may impact the Company’s business, results of operations, and financial condition. As a result, many of the Company’s estimates and judgments require increased judgment and carry a higher degree of variability and volatility. As additional information becomes available, the Company’s estimates may change materially in future periods.

12

Etsy, Inc.
Notes to Consolidated Financial Statements
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. Additionally, it requires that a public entity (1) disclose an amount for “other segment items” by reportable segment, (2) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, and (3) requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this proposed ASU and all existing segment disclosures in Topic 280. The new guidance is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments in this proposed ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The Company is currently evaluating the impact that this new guidance will have on its disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The ASU requires that public business entities on an annual basis (1) disclose specific categories in the effective tax rate reconciliation and (2) provide additional information for reconciling items that meet or exceed a quantitative threshold. Additionally, it requires all entities disclose the following information about income taxes paid on an annual basis: (1) the year-to-date amounts of income taxes paid disaggregated by federal (national), state, and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid. The amendments are effective for annual periods beginning after December 15, 2024. The amendments in this proposed ASU should be applied on a prospective basis, although retrospective application to all periods presented is permitted. Early adoption is permitted. The Company is currently evaluating the impact that this new guidance will have on its disclosures.
Note 2—Revenue
The following table summarizes revenue disaggregated by Marketplace revenue and optional Services revenue for the periods presented (in thousands):
Three Months Ended 
 March 31,
20242023
Marketplace revenue$466,982 $467,516 
Services revenue178,972 173,361 
Revenue$645,954 $640,877 
Contract balances
Deferred revenues
The amount of revenue recognized in the three months ended March 31, 2024 that was included in the deferred balance at January 1, 2024 was $14.0 million.


13

Etsy, Inc.
Notes to Consolidated Financial Statements
Note 3—Income Taxes
The Company’s provision or benefit from income taxes in interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment. The estimate of the annual effective income tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year.
The Company’s quarterly tax provision, and its quarterly estimate of the annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting its income or loss before tax and the mix of jurisdictions to which they relate, taxable income or loss in each jurisdiction, changes in its stock price, audit-related developments, acquisitions, divestitures, changes in its deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, the effective tax rate can be more or less volatile based on the amount of income or loss before tax. For example, the impact of discrete items and non-deductible expenses on the effective tax rate is greater when income before income taxes is lower.
For the three months ended March 31, 2024, the Company’s effective income tax rate was 20.9% representing an income tax provision recorded on net income before tax.
Although management believes its tax positions and related provisions reflected in the condensed consolidated financial statements are fully supportable, it recognizes that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law and closing of statute of limitations. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in the provision for income taxes.
The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination may result in additional taxes or penalties against the Company. If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on the Company’s tax provision.
The amount of unrecognized tax benefits included in the Consolidated Balance Sheets increased $1.4 million in the three months ended March 31, 2024, from $51.7 million as of December 31, 2023 to $53.1 million as of March 31, 2024. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $51.2 million as of March 31, 2024. Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. The Company’s reasonable estimate of its gross unrecognized tax benefits, excluding interest and penalties, that could potentially be reduced during the next 12 months is $7.8 million.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense.
Over the last several years, the Organization for Economic Cooperation and Development (“OECD”) has been developing its “two pillar” project to address the tax challenges arising from digitalization. The OECD project, if broadly implemented by participating countries, will result in significant changes to the international taxation system under which the Company’s current tax obligations are determined. Pillar Two of the project calls for a minimum tax rate on corporations of 15% and is enacted by a significant number of countries starting in 2024. The OECD and implementing countries are expected to continue to make further revisions to the rules. The FASB indicated that they believe the minimum tax imposed under Pillar Two is an alternative minimum tax, and, accordingly, deferred tax assets and liabilities associated with the minimum tax would not be recognized or adjusted for the estimated future effects of the minimum tax but would be recognized in the period incurred. The Company’s quarterly tax provision includes the impact of Pillar Two, however, the impact is not material. Management will continue to monitor developments to determine any potential impact of Pillar Two in the countries in which the Company operates.

14

Etsy, Inc.
Notes to Consolidated Financial Statements
Note 4—Net Income Per Share
The following table presents the calculation of basic and diluted net income per share for the periods presented (in thousands, except per share amounts):
 Three Months Ended 
 March 31,
 20242023
Numerator:
Net income$63,004 $74,537 
Add back interest expense, net of tax attributable to assumed conversion of convertible senior notes1,585 1,595 
Net income attributable to common stockholders—diluted$64,589 $76,132 
Denominator:
Weighted-average common shares outstanding—basic118,440 124,337 
Dilutive effect of outstanding stock-based compensation awards2,184 3,914 
Dilutive effect of assumed conversion of convertible senior notes (1)14,714 14,715 
Weighted-average common shares outstanding—diluted135,338 142,966 
Net income per share attributable to common stockholders—basic$0.53 $0.60 
Net income per share attributable to common stockholders—diluted$0.48 $0.53 
Outstanding stock-based compensation awards excluded from net income per diluted share because their effect would have been anti-dilutive5,528 1,684 
(1)The $1.0 billion aggregate principal amount of 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), the $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), and the $649.9 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026 (the “2019 Notes” and together with the 2021 Notes and 2020 Notes, the “Notes”) were dilutive for the three months ended March 31, 2024 and March 31, 2023.

Note 5—Fair Value Measurements
As of March 31, 2024 and December 31, 2023 the Company’s cash equivalents, short-term investments, and long-term investments primarily consisted of available-for-sale debt securities. These debt securities are measured at fair value and classified within Level 1 or Level 2 in the fair value hierarchy as the Company uses unadjusted quoted prices for identical assets in an active market that the Company has the ability to access (Level 1) or quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets (Level 2).
As of March 31, 2024 and December 31, 2023 the Company’s long-term investments also consisted of investments in loan receivables and in third-party managed funds. The investments in loan receivables are measured on an amortized cost basis and classified in Level 3 of the fair value hierarchy as the fair value is derived from techniques in which one or more significant inputs are unobservable. The investments in third-party managed funds are measured on the net assets value (“NAV”) basis as a practical expedient. NAV is primarily determined based on the information provided by external fund administrators for which the most recent financial information is typically received on a lag within the quarter following the Company’s balance sheet date. These investments further the Company’s impact strategy as part of the Company’s Impact Investment Fund.

15

Etsy, Inc.
Notes to Consolidated Financial Statements
The following table sets forth the cost, gross unrealized losses, gross unrealized gains, and fair value of the Company’s investments as of the dates indicated (in thousands):
 CostGross
Unrealized
Holding
Loss
Gross
Unrealized
Holding
Gain
Fair ValueCash and Cash EquivalentsShort-term InvestmentsLong-term Investments
March 31, 2024
Level 1
Money market funds$62,483 $ $ $62,483 $62,403 $80 $ 
U.S. Government securities68,563 (303) 68,260  48,579 19,681 
131,046 (303) 130,743 62,403 48,659 19,681 
Level 2
U.S. agency securities5,036 (3) 5,033  5,033  
Certificate of deposit52,114 (5)35 52,144  50,629 1,515 
Commercial paper80,551 (59)17 80,509  80,509  
Corporate bonds112,393 (213)117 112,297  70,045 42,252 
250,094 (280)169 249,983  206,216 43,767 
Level 3
Loans receivable - held for investment7,000   7,000   7,000 
7,000   7,000   7,000 
$388,140 $(583)$169 $387,726 $62,403 $254,875 $70,448 
Measured at NAV (1)
Third-party managed funds13,976 
$84,424 
December 31, 2023
Level 1
Money market funds$377,021 $ $ $377,021 $376,941 $80 $ 
U.S. Government securities95,298 (164)39 95,173  60,153 35,020 
472,319 (164)39 472,194 376,941 60,233 35,020 
Level 2
U.S. agency securities15,635 (14)3 15,624  15,624  
Certificate of deposit35,365 (1)55 35,419  35,419  
Commercial paper62,463 (12)54 62,505 4,449 58,056  
Corporate bonds100,386 (145)128 100,369 1,566 66,786 32,017 
213,849 (172)240 213,917 6,015 175,885 32,017 
Level 3
Loans receivable - held for investment6,000   6,000   6,000 
6,000   6,000   6,000 
$692,168 $(336)$279 $692,111 $382,956 $236,118 $73,037 
Measured at NAV (1)
Third-party managed funds13,639 
$86,676 
(1)Third-party managed funds measured on the NAV basis have not been categorized in the fair value hierarchy. The amount presented in the table is intended to permit reconciliation of the long-term investments in the fair value hierarchy to the amount presented in the Consolidated Balance Sheets.


16

Etsy, Inc.
Notes to Consolidated Financial Statements
The tables below show the fair value and gross unrealized loss related to available-for-sale debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of the dates indicated (in thousands):
As of March 31, 2024
Less than 12 Months
12 Months or Greater
 
Fair Value
Gross Unrealized Holding Loss
Fair Value
Gross Unrealized Holding Loss
U.S. Government securities$68,260 $(303)$ $ 
U.S. agency securities
5,033 (3)  
Certificate of deposit
24,043 (5)  
Commercial paper
64,039 (59)  
Corporate bonds70,375 (143)3,255 (70)
Total
$231,750 $(513)$3,255 $(70)
As of December 31, 2023
Less than 12 Months
12 Months or Greater
 Fair Value
Gross Unrealized Holding Loss
Fair Value
Gross Unrealized Holding Loss
U.S. Government securities$71,536 $(164)$ $ 
U.S. agency securities
12,569 (14)  
Certificate of deposit
7,178 (1)  
Commercial paper
34,066 (12)  
Corporate bonds28,401 (73)20,808 (72)
Total
$153,750 $(264)$20,808 $(72)
The Company evaluates fair value for each individual security in the investment portfolio. When assessing the risk of credit loss, the Company considers factors such as the extent to which the fair value is less than the amortized cost basis, the credit rating, including whether there has been any changes to the rating of the security by a rating agency, available information relevant to the collectability of the security, and management’s intended holding period and time horizon for selling the security.
Outside of the Company’s Impact Investment Fund, the Company typically invests in short- and long-term instruments, including fixed-income funds and U.S. Government securities aligned with the Company’s investment strategy. In accordance with the Company’s investment policy, all investments, other than investments made through its Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
Disclosure of Fair Values
The Company’s financial instruments that are not remeasured at fair value in the Consolidated Balance Sheets include the Notes. See “Note 7—Debt” for additional information. The Company estimates the fair value of the Notes through inputs that are observable in the market, classified as Level 2 as described above. The following table presents the carrying value and estimated fair value of the Notes as of the dates indicated (in thousands):
As of March 31, 2024As of December 31, 2023
Carrying ValueFair ValueCarrying ValueFair Value
2021 Notes$992,003 $791,600 $991,529 $799,000 
2020 Notes645,923 545,480 645,624 556,790 
2019 Notes646,957 688,750 646,664 747,630 
$2,284,883 $2,025,830 $2,283,817 $2,103,420 
The carrying value of other financial instruments, including accounts receivable, funds receivable and seller accounts, accounts payable, and funds payable and amounts due to sellers approximate fair value due to the immediate or short-term maturity associated with these instruments.

17

Etsy, Inc.
Notes to Consolidated Financial Statements
Note 6—Accrued Expenses
Accrued expenses consisted of the following as of the dates indicated (in thousands):
As of March 31,
2024
As of December 31,
2023
Vendor accruals$111,296 $120,804 
Pass-through marketplace tax collection obligation 92,756 126,284 
Employee compensation-related liabilities (1)41,455 95,842 
Taxes payable17,011 10,623 
Total accrued expenses$262,518 $353,553 
(1) Includes severance and employee-related benefits associated with restructuring and other exit costs. See “Note 11—Restructuring and Other Exit Costs” for more information.
Note 7—Debt
The following table presents the outstanding principal amount and carrying value of the Notes as of the dates indicated (in thousands):
As of March 31, 2024
2021 Notes2020 Notes2019 NotesTotal
Principal$1,000,000 $650,000 $649,887 $2,299,887 
Unamortized debt issuance costs7,997 4,077 2,930 15,004 
Net carrying value$992,003 $645,923 $646,957 $2,284,883 
As of December 31, 2023
2021 Notes2020 Notes2019 NotesTotal
Principal$1,000,000 $650,000 $649,887 $2,299,887 
Unamortized debt issuance costs8,471 4,376 3,223 16,070 
Net carrying value$991,529 $645,624 $646,664 $2,283,817 
Terms of the Notes
The Notes will mature at their maturity date unless earlier converted or repurchased. The terms of the Notes are summarized below:
Convertible NotesMaturity DateContractual Convertibility Date (1)Initial Conversion Rate per $1,000 PrincipalInitial Conversion PriceAnnual Effective Interest Rate
2021 Notes
June 15, 2028February 15, 20284.0518 $246.80 0.4 %
2020 Notes
September 1, 2027May 1, 20275.0007 199.97 0.3 %
2019 Notes
October 1, 2026June 1, 202611.4040 87.69 0.3 %
(1)During any calendar quarter preceding the respective convertibility date of each series of Notes, in which the closing price of the Company’s common stock exceeds 130% of the applicable conversion price of the Notes on at least 20 of the last 30 consecutive trading days of the quarter, holders may, in the immediate quarter following, convert all or a portion of their Notes. Based on the daily closing prices of the Company’s stock during the quarter ended March 31, 2024, holders of the 2021 Notes, 2020 Notes, and 2019 Notes are not eligible to convert their 2021 Notes, 2020 Notes, and remaining 2019 Notes, respectively, during the second quarter of 2024.
Based on the terms of each series of Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the Notes in cash and, therefore, the Notes are classified as long-term debt as of March 31, 2024.

18

Etsy, Inc.
Notes to Consolidated Financial Statements
The Company may redeem all or any portion of the 2021 Notes, at the Company’s option, subject to partial redemption limitations, on or after June 20, 2025, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2021 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The Notes are general unsecured obligations of the Company. The Notes rank senior in right of payment to all of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment with all of the Company’s liabilities that are not so subordinated; are effectively junior to any of the Company’s secured indebtedness; and are structurally junior to all indebtedness and liabilities (including trade payables) of the Company’s subsidiaries.
Interest Expense
Interest expense, which consists of coupon interest and amortization of debt issuance costs, related to the Notes was $2.1 million in both the three months ended March 31, 2024 and March 31, 2023.
Fair Value of Notes
The estimated fair value of each of the Notes was determined through inputs that are observable in the market, and are classified as Level 2. See “Note 5—Fair Value Measurements” for more information regarding the fair value of the Notes.
Capped Call Transactions
The Company used a portion of the net proceeds from each of the Note offerings to enter into separate privately negotiated capped call instruments (the 2019, 2020, and 2021 capped call instruments collectively referred to as the “Capped Call Transactions”) with certain financial institutions, initial purchasers, and/or their respective affiliates. The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the Notes upon conversion of the Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the respective Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Notes.
The initial terms of the Company’s outstanding Capped Call Transactions are presented below:
Capped Call TransactionsMaturity DateInitial Cap Price per ShareCap Price Premium
2021 Capped Call TransactionsJune 15, 2028$340.42 100 %
2020 Capped Call TransactionsSeptember 1, 2027327.83150 %
2019 Capped Call TransactionsOctober 1, 2026148.63150 %
2023 Credit Agreement
On March 24, 2023, the Company entered into a $400.0 million senior secured revolving credit facility pursuant to an Amended and Restated Credit Agreement (the “2023 Credit Agreement”) among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders, and JPMorgan Chase Bank N.A., as administrative Agent. The 2023 Credit Agreement will mature in March 2028 and includes a letter of credit sublimit of $60.0 million and a swingline loan sublimit of $20.0 million.
The 2023 Credit Agreement amends and restates in its entirety the Credit Agreement dated as of February 25, 2019 between the Company, as borrower, the lenders party thereto from time to time, and Citibank N.A., as administrative Agent.
Borrowings under the 2023 Credit Agreement (other than swingline loans) bear interest, at the Company’s option, at (i) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, and (c) an adjusted Term SOFR rate for a one-month interest period plus 1.00%, in each case plus a margin ranging from 0.50% to 1.25% or (ii) an adjusted Term SOFR rate plus a margin ranging from 1.50% to 2.25%. Swingline loans under the 2023 Credit Agreement bear interest at the same base rate (plus the margin applicable to borrowings bearing interest at the base rate). These margins are determined based on the senior secured net leverage ratio (defined as secured funded debt, net of unrestricted cash up to $100.0 million, to EBITDA (as defined in the 2023 Credit Agreement)) for the preceding four fiscal quarter periods. The Company is also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee, ranging from 0.20% to 0.35% depending on the Company’s senior secured net leverage ratio, and fees associated with letters of credit. The 2023 Credit

19

Etsy, Inc.
Notes to Consolidated Financial Statements
Agreement also permits the Company, in certain circumstances, to request an increase in the facility by an amount of up to $200.0 million at the same maturity, pricing and other terms and to request an extension of the maturity date for the facility. In connection with the 2023 Credit Agreement, the Company also paid the lenders certain upfront fees.
The Company had no outstanding borrowings under the 2023 Credit Agreement and was in compliance with all financial covenants as of March 31, 2024.
Note 8—Commitments and Contingencies
Purchase Obligations
The Company’s purchase obligations are primarily related to cloud computing. During the three months ended March 31, 2024, there were no material changes outside the ordinary course of business to the Company’s non-cancelable purchase obligations disclosed in the Company’s Annual Report.
Legal Proceedings
From time to time in the normal course of business, various claims and litigation have been asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability for damages. Any claims or litigation could have an adverse effect on the Company’s results of operations, cash flows, or business and financial condition in the period the claims or litigation are resolved. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters will not have a material adverse effect on its business.
Note 9—Stockholders’ Deficit
On June 14, 2023, the Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $1 billion of its common stock (the “June 2023 Stock Repurchase Program”).
The June 2023 Stock Repurchase Program does not have a time limit and may be modified, suspended, or terminated at any time by the Board of Directors. The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, stock price, trading volume, and general market conditions, along with the Company’s working capital requirements, general business conditions, and other factors.
Under the June 2023 Stock Repurchase Program, the Company may purchase shares of its common stock through various means, including open market transactions, privately negotiated transactions, tender offers, or any combination thereof. In addition, open market repurchases of common stock could be made pursuant to trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit common stock to be repurchased at a time that the Company might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.
The following table summarizes the Company’s cumulative share repurchase activity under the program noted above (in thousands, except per share amounts):
Shares RepurchasedAverage Price Paid per Share (1)Value of Shares Repurchased (1)Remaining Amount Authorized
Balance as of January 1, 2024
$724,360 
Repurchases of common stock for the three months ended:
March 31, 20242,222 $71.28 $158,377 (158,377)
Balance as of March 31, 20242,222 $71.28 $158,377 $565,983 
(1) Average price paid per share excludes broker commissions and excise tax. Value of shares repurchased includes broker commissions.
All repurchases were made using cash on hand, and all repurchased shares of common stock have been retired.

20

Etsy, Inc.
Notes to Consolidated Financial Statements
Note 10—Stock-Based Compensation
During the three months ended March 31, 2024, the Company granted restricted stock units (“RSUs”), including financial performance-based restricted stock units (“Financial PBRSUs”) and total shareholder return performance-based restricted stock units (“TSR PBRSUs”), under its 2015 Equity Incentive Plan (“2015 Plan”). At March 31, 2024, 56,644,564 shares were authorized under the 2015 Plan and 33,859,046 shares were available for future grant.
Effective in the first quarter of 2024, the Company updated its vesting terms for new RSU issuances from semi-annually to quarterly. In general, awards vest ratably each three-month period over a four-year period following the vesting commencement date, except for RSU awards to newly-hired employees, which vest 25% after the first year of service and ratably each subsequent three-month period.
The following table summarizes the activity for the Company’s unvested RSUs, which includes Financial PBRSUs and TSR PBRSUs, during the three months ended March 31, 2024 (in thousands, except per share amounts):
SharesWeighted-Average
Grant Date Fair Value
Unvested at December 31, 20236,197 $117.14 
Granted3,652 67.56 
Vested(183)129.92 
Forfeited/Canceled(156)151.30 
Unvested at March 31, 20249,510 97.29 
The total unrecognized compensation expense at March 31, 2024 related to the Company’s unvested RSUs, including the Financial PBRSUs and TSR PBRSUs, was $761.0 million, which will be recognized over an estimated weighted-average amortization period of 2.85 years.
Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for the periods presented below is as follows (in thousands):
 Three Months Ended 
 March 31,
 20242023
Cost of revenue$7,704 $7,246 
Marketing6,437 5,262 
Product development34,064 36,709 
General and administrative22,478 19,466 
Stock-based compensation expense$70,683 $68,683 

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Etsy, Inc.
Notes to Consolidated Financial Statements
Note 11—Restructuring and Other Exit Costs
On December 12, 2023, the Company’s Board of Directors approved a restructuring plan designed to increase Etsy’s operational efficiencies, reduce operating costs, and better align Etsy’s workforce and cost structure with current business needs, top strategic priorities, and key growth opportunities (collectively, the “Restructuring Plan”). The Restructuring Plan included an approximately 11% reduction of the Etsy marketplace workforce, which is approximately 225 employees.
Additionally, in the fourth quarter of 2023, Reverb reduced its workforce by approximately 13% to gain operational efficiencies and enable critical growth investments into 2024 and beyond.
In connection with these workforce reductions, Etsy incurred $27.0 million in charges, primarily consisting of severance and employee-related benefits, a majority of which were incurred during the year ended December 31, 2023 and related to the Etsy marketplace. As of the end of the first quarter of 2024, the execution of the Restructuring Plan is substantially complete.
The following table is a summary of the changes in the Company’s liability for severance and employee-related benefit costs associated with restructuring and other exit costs, included in accrued expenses in the Consolidated Balance Sheets (in thousands):
Restructuring and Other Exit Costs
Balance as of December 31, 2023$24,340 
Severance and employee-related benefits408 
Cash payments(18,928)
Balance as of March 31, 2024$5,820 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 21, 2024 (the “Annual Report”). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, “Risk Factors.” We also believe that our performance and future success depend on a number of factors that present significant opportunities for us, as discussed in Part I, Item 1, “Business,” in our Annual Report, which we incorporate by reference.
Overview
Business
Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. These marketplaces - which collectively create a “House of Brands” - share our mission, common levers for growth, similar business models, and a strong commitment to use business and technology to strengthen communities and empower people.
Our primary marketplace, Etsy.com, is the global destination for unique and creative goods made by independent sellers. The Etsy marketplace connects creative artisans and entrepreneurs with thoughtful consumers looking for items that are a joyful expression of their taste and values. By surfacing quality listings at a great value and providing a reliable shopping experience to buyers, we aim to create a virtuous cycle that not only benefits Etsy, but creates economic opportunities for the millions of sellers in our marketplace. Our success is aligned with our sellers; we make money when they do. In addition to bringing them an audience of tens of millions of buyers, we offer a range of features and services designed to help them generate more sales and run their businesses. Similarly, we also make money when we meet our buyers’ expectations. When they find quality listings, at great value, and have a reliable and dependable experience from discovery to delivery, it fuels a virtuous cycle, benefiting our global community of sellers and buyers, as well as Etsy and our broader stakeholders.
In addition to our core Etsy marketplace, our “House of Brands” includes Reverb Holdings, Inc. (“Reverb”), our musical instrument marketplace, and Depop Limited (“Depop”), our fashion resale marketplace. Each of our marketplaces primarily operate independently, although some of our key operational functions such as finance, legal, and human resources, for example, support all of our marketplaces to some extent. Our goal is that our marketplaces benefit from shared expertise in product, marketing, technology, and customer support, and that the sum of the whole, over time, will equal more than its individual parts.
The results of Elo7, sold on August 10, 2023, are included in all financial and other metrics discussed in this report, unless otherwise noted, until August 10, 2023.
We generate revenue primarily from marketplace activities, including transaction (inclusive of offsite advertising), payments processing, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels.

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Our strategy is focused around:
Building a sustainable competitive advantage for the Etsy Marketplace - our “Right to Win;”
Growing the Etsy marketplace in our six core geographies; and
Leveraging our marketplace expertise and playbook across our “House of Brands.”
10K_2023_Graphics_RTW (1).jpg
Our investments in technology infrastructure, product development, marketing, trust and safety, member support, and helping sellers grow support our strategy, which you can read more about in our Annual Report.
First Quarter 2024 Key Metrics and Financial Highlights
As of March 31, 2024, our marketplaces connected 9.1 million active sellers and 96.4 million active buyers in nearly every country in the world. In the three months ended March 31, 2024, sellers generated GMS of $3.0 billion. We are a global company and approximately 45% of our GMS in the three months ended March 31, 2024 came from transactions in which either a seller or a buyer, or both, were located outside of the United States.
Total revenue was $646.0 million in the three months ended March 31, 2024. In the three months ended March 31, 2024, we recorded net income of $63.0 million and non-GAAP Adjusted EBITDA of $167.9 million. See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP.
Cash and cash equivalents and short-term investments were $1.0 billion as of March 31, 2024. As of March 31, 2024, we had three outstanding series of convertible notes, which collectively had a net carrying value of $2.3 billion. Additionally, we have the ability to draw down on our $400.0 million senior secured revolving credit facility. In the three months ended March 31, 2024, we had positive operating cash flows of $69.0 million.

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Key Operating and Financial Metrics
We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). We are providing Etsy marketplace standalone information in certain instances where particularly relevant. The financial results of Elo7 have been included in our condensed consolidated financial results (“Consolidated”) until August 10, 2023 (date of sale). Accordingly, our condensed consolidated financial results for the three months ended March 31, 2024 and related discussions of this period do not include the results of Elo7. The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:
 Three Months Ended 
 March 31,
% (Decline)
Growth
Y/Y
 20242023
 (in thousands, except percentages)
GMS (1)$2,986,500 $3,101,358 (3.7)%
Revenue$645,954 $640,877 0.8 %
Marketplace revenue$466,982 $467,516 (0.1)%
Services revenue$178,972 $173,361 3.2 %
Gross profit$458,821 $445,424 3.0 %
Operating expenses$390,731 $367,225 6.4 %
Net income$63,004 $74,537 (15.5)%
Net income margin9.8 %11.6 %(180) bps
Adjusted EBITDA (Non-GAAP)$167,935 $170,344 (1.4)%
Adjusted EBITDA margin (Non-GAAP)26.0 %26.6 %(60) bps
Active sellers (2)9,131 7,942 15.0 %
Active buyers (2)96,392 95,526 0.9 %
Percent GMS ex-U.S. domestic (1)45 %45 %—  bps
(1)Consolidated GMS for the three months ended March 31, 2024 includes Etsy marketplace GMS of $2.6 billion. Percent GMS ex-U.S. domestic for the Etsy marketplace for the three months ended March 31, 2024 was 48%.
(2)Consolidated active sellers and active buyers includes Etsy marketplace active sellers and active buyers of 7.0 million and 91.6 million, respectively, as of March 31, 2024.
GMS
Gross merchandise sales (“GMS”) is the dollar value of items sold in our marketplaces, excluding shipping fees and net of refunds, within the applicable period. GMS does not represent revenue earned by us. GMS is largely driven by transactions in our marketplaces and is not directly impacted by Services activity. However, because our revenue and cost of revenue depend significantly on the dollar value of items sold in our marketplace, we believe that GMS is an indicator of the success of our sellers, the satisfaction of our buyers, and the health, scale, and growth of our business. We track “Paid GMS” for the Etsy marketplace and define it as Etsy marketplace GMS that is attributable to our performance marketing efforts, which excludes most of our marketing investments focused on brand awareness like TV and digital video.
GMS decreased $114.9 million to $3.0 billion in the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The decrease in GMS between the three months ended March 31, 2024 and 2023 was primarily driven by a decrease in Etsy marketplace GMS, partially offset by an increase in GMS for the Depop marketplace. Etsy marketplace GMS reflected a still dynamic macroeconomic environment that impacted consumer discretionary product spending, particularly in our top three geographies, the U.S., U.K., and Germany. The Etsy marketplace GMS per active buyer on a trailing twelve month basis declined 3.5% year-over-year to $125. This decline was partially offset by year-over-year growth of 1.9% for active buyers on the Etsy marketplace to 91.6 million.

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On a consolidated basis we experienced the following decline in new buyer and existing buyer GMS in the periods presented:
Three Months Ended 
 March 31,
20242023
% Decline Y/Y% of GMS% Decline Y/Y% of GMS
New Buyer GMS (1)(13)%11 %(7)%12 %
Existing Buyer GMS(2)%89 %(4)%88 %
(1)New buyer GMS represents the total GMS from each new buyer’s first purchase day in each of our marketplaces. It does not include GMS from each new buyer’s subsequent purchase days, if any, in the periods presented. A new buyer for a given marketplace is a buyer who has made a purchase with a new e-mail address for the first time in the relevant marketplace.
Our business may continue to be impacted by macroeconomic factors beyond our control such as inflation, interest rates, disruptions to the banking industry, potential recessionary factors, foreign exchange rate volatility, changing consumer shopping preferences, continued pressure on consumer discretionary product spending, global geopolitical uncertainties, supply-chain disruptions, an increasingly competitive retail environment, and employment levels, among others. See Part II, Item 1A, “Risk Factors” for further detail.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents our net income adjusted to exclude: interest and other non-operating income, net; provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange (gain) loss; acquisition, divestiture, and corporate structure-related expenses; and restructuring and other exit costs. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue. See “Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
Active Sellers
An active seller is a seller who has had a charge or sale in the last 12 months. Charges include Marketplace and Services revenue fees, discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Business.” A seller is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple seller accounts and can count as a distinct active seller in each of our marketplaces and we continue to exclude certain disqualified sellers. We succeed when sellers succeed, so we view the number of active sellers as a key indicator of consumer awareness of our brands, the reach of our platforms, the potential for growth in GMS and revenue, and the health of our business.
Active Buyers
An active buyer is a buyer who has made at least one purchase in the last 12 months. A buyer is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple buyer accounts and can count as a distinct active buyer in each of our marketplaces. We generate revenue when buyers order items from sellers, so we view the number of active buyers as a key indicator of our potential for growth in GMS and revenue, the reach of our platforms, consumer awareness of our brands, the engagement and loyalty of buyers, and the health of our business.
GMS ex-U.S. Domestic
GMS ex-U.S. domestic is GMS from transactions in which (1) the billing address for the seller and/or (2) the shipping address for the buyer at the time of sale is outside of the United States. GMS ex-U.S. domestic represents all GMS other than GMS from transactions in which the billing address for the seller and the shipping address for the buyer are both in the United States, which we refer to as U.S. domestic GMS. We believe that GMS ex-U.S. domestic shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.
For both the three months ended March 31, 2024 and the three months ended March 31, 2023, GMS ex-U.S. domestic as a percentage of total GMS was approximately 45%. Additionally, GMS ex-U.S. domestic decreased 3% from March 31, 2023 to March 31, 2024.

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Currency-Neutral GMS Growth
We calculate currency-neutral GMS growth by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.
As reported and currency-neutral GMS decline for the periods presented below are as follows:
 Quarter-to-Date Period Ended
As ReportedCurrency-NeutralFX Impact
March 31, 2024(3.7)%(4.1)%0.4 %
March 31, 2023(4.6)%(2.6)%(2.0)%
Results of Operations
Comparison of Three Months Ended March 31, 2024 and 2023
Revenue
 Three Months Ended 
 March 31,
Change
 20242023$%
 (in thousands, except percentages)
Revenue:
Marketplace$466,982 $467,516 $(534)(0.1)%
Percentage of total revenue72.3 %72.9 %
Services$178,972 $173,361 $5,611 3.2 %
Percentage of total revenue27.7 %27.1 %
Total revenue$645,954 $640,877 $5,077 0.8 %
The decrease in Marketplace revenue was primarily due to a $114.9 million decrease in the volume of GMS on our marketplaces for the three months ended March 31, 2023 compared to the three months ended March 31, 2024, which was primarily driven by a decline in GMS for the Etsy marketplace, partially offset by an increase in GMS for the Depop marketplace. Marketplace revenue decreased less than GMS primarily due to pricing mix, in which we had higher payments revenue in locations in which we charge a higher payments fee as well as less of a decline in transaction fee revenue due to offsite advertising which generates a higher transaction fee. The share of Etsy marketplace GMS processed through our Etsy Payments platform was 96% for the three months ended March 31, 2024 compared to 93% the three months ended March 31, 2023.
The growth in Services revenue was primarily driven by an increase of 2.5% in on-site advertising revenue, which represented a significant majority of the overall Services revenue increase. The increase in on-site advertising revenue was due to an increase in average price per click on Etsy Ads.
Cost of Revenue
 Three Months Ended 
 March 31,
Change
 20242023$%
 (in thousands, except percentages)
Cost of revenue$187,133 $195,453 $(8,320)(4.3)%
Percentage of total revenue29.0 %30.5 %
The decrease in cost of revenue was driven by a decrease in cost of refunds and cloud-related hosting and bandwidth costs. These decreases are partially offset by an increase in amortization, which is primarily due to an increase in capitalized website development costs and internal-use software.

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Operating Expenses
Marketing 
 Three Months Ended 
 March 31,
Change
 20242023$%
 (in thousands, except percentages)
Marketing$191,811 $171,314 $20,497 12.0 %
Percentage of total revenue29.7 %26.7 %
Marketing expenses increased, primarily driven by increased Etsy marketplace non-digital marketing costs, due to an increase in broadcasting costs across different media channels primarily in North America, including a prime time big game television advertisement, and the United Kingdom. Paid GMS was 20% of overall GMS for the three months ended March 31, 2024 compared to 21% for the three months ended March 31, 2023.
Product development
 Three Months Ended 
 March 31,
Change
 20242023$%
 (in thousands, except percentages)
Product development$109,846 $115,924 $(6,078)(5.2)%
Percentage of total revenue17.0 %18.1 %
Product development expenses decreased, primarily due to decreased employee compensation-related expenses, including stock-based compensation, related to our workforce reductions in the fourth quarter of 2023, partially offset by the issuance of equity awards as part of our compensation strategy.
General and administrative
 Three Months Ended 
 March 31,
Change
 20242023$%
 (in thousands, except percentages)
General and administrative$89,074 $79,987 $9,087 11.4 %
Percentage of total revenue13.8 %12.5 %
General and administrative expenses increased, primarily due to increased stock-based compensation, including higher performance-based restricted stock units, increased charitable donations, and net favorable non-income tax items in the prior year.
Other Income, net
 Three Months Ended 
 March 31,
Change
 20242023$%
 (in thousands, except percentages)
Other income, net$11,565 $3,072 $8,493 276.5 %
Percentage of total revenue1.8 %0.5 %
Other income, net increased, primarily driven by favorable changes in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates in the current year versus the prior year which impact our intercompany and other non-functional currency cash balances.


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Provision for Income Taxes
 Three Months Ended 
 March 31,
Change
 20242023$%
 (in thousands, except percentages)
Provision for income taxes$16,651 $6,734 $9,917 147.3 %
Percentage of total revenue2.6 %1.1 %
The primary drivers of our income tax provision for the three months ended March 31, 2024 were tax expense on income before income taxes, tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant, and state and local income taxes.
The primary driver of our income tax provision for the three months ended March 31, 2023 was tax expense on income before income taxes, partially offset by a benefit related to research and development tax credits.
Non-GAAP Financial Measures
The following table reflects the reconciliation of net income to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for each of the periods indicated:
 Three Months Ended 
 March 31,
 20242023
 
(in thousands, except percentages)
Net income$63,004 $74,537 
Excluding:
Interest and other non-operating income, net(5,310)(5,689)
Provision for income taxes16,651 6,734 
Depreciation and amortization26,846 23,172 
Stock-based compensation expense70,683 68,683 
Foreign exchange (gain) loss(6,255)2,618 
Acquisition, divestiture, and corporate structure-related expenses1,898 289 
Restructuring and other exit costs418 — 
Adjusted EBITDA$167,935 $170,344 
Divided by:
Revenue$645,954 $640,877 
Adjusted EBITDA margin26.0 %26.6 %
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments were $1.0 billion as of March 31, 2024. Additionally, we have $84.4 million in long-term investments, a majority of which we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $400.0 million senior secured revolving credit facility. As of March 31, 2024, we had net working capital of $839.3 million and in the three months ended March 31, 2024, we had positive operating cash flows of $69.0 million. We believe that this capital structure, as well as the nature and framework of our business, will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.
As of March 31, 2024, a majority of our cash and cash equivalents, which were primarily held in cash deposits and money market funds, were held in the United States for future investments, working capital funding, and general corporate purposes. We fund our non-U.S. operations from our funds held in the United States on an as-needed basis.
We typically invest in short- and long-term instruments, which are intended to allow us to preserve our principal, maintain the ability to meet our liquidity needs, deliver positive yields across a balanced portfolio, and continue to provide us with direct fiduciary control. In accordance with our investment policy, all investments, other than investments made through our Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.

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Sources of Liquidity
We have the ability to draw down on a $400.0 million senior secured revolving credit facility (the “2023 Credit Agreement”). See Part I, Item 1, “Note 7—Debt” for more information on the 2023 Credit Agreement.
We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. While this belief is based on our current expectations and assumptions, in light of current macroeconomic conditions, our future capital requirements and the adequacy of available funds will depend on many factors, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report.
Historical Cash Flows
 Three Months Ended 
 March 31,
 20242023
 (in thousands)
Cash provided by (used in):
Operating activities$69,033 $55,631 
Investing activities(25,106)(36,097)
Financing activities(163,014)(158,548)
Net Cash Provided by Operating Activities
Our cash flows from operations are largely dependent on the amount of revenue generated on our platforms, as well as associated cost of revenue and other operating expenses. Our primary source of cash from operating activities is cash collections from our customers. Net cash provided by operating activities in each period presented has been influenced by changes in working capital.
Net cash provided by operating activities was $69.0 million in the three months ended March 31, 2024, primarily driven by cash net income of $154.3 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $85.3 million in cash, primarily driven by timing of payment of accrued expenses and offset in part by timing of payment of prepaid expenses and other current assets in the period.
Net cash provided by operating activities was $55.6 million in the three months ended March 31, 2023, primarily driven by cash net income of $165.9 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $110.3 million in cash, primarily driven by timing of payment of accrued expenses in the period.
Net Cash Used in Investing Activities
Our primary investing activities consist of purchases and maturities of short- and long-term investments and capital expenditures, including investments in capitalized website development and internal-use software and purchases of property and equipment to support our overall business growth.
Net cash used in investing activities was $25.1 million in the three months ended March 31, 2024. This was primarily attributable to net purchases of investments of $15.4 million, and to a lesser extent, $9.7 million in capital expenditures, including $7.5 million for website development and internal-use software as we continued to invest in projects adding new features and functionality to our platforms.
Net cash used in investing activities was $36.1 million in the three months ended March 31, 2023. This was primarily attributable to net purchases of investments of $27.9 million, and to a lesser extent, $8.2 million in capital expenditures, including $6.0 million for website development and internal-use software.


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Net Cash Used in Financing Activities
Our primary financing activities include repurchases of common stock and payment of tax obligations on vested equity awards.
Net cash used in financing activities was $163.0 million in the three months ended March 31, 2024. This was primarily attributable to stock repurchases of $158.3 million, and to a lesser extent, payment of tax obligations on vested equity awards of $5.9 million.
Net cash used in financing activities was $158.5 million in the three months ended March 31, 2023. This was primarily attributable to stock repurchases of $148.2 million, and to a lesser extent, payment of tax obligations on vested equity awards of $9.2 million.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We continue to monitor the effects of global macroeconomic and geopolitical factors on our results of operations, cash flows, and financial position. We believe we have used reasonable estimates and assumptions in preparing the condensed consolidated financial statements. Our actual results could differ from these estimates.
There have been no significant changes to our critical accounting policies and estimates included in our Annual Report.
Recent Accounting Pronouncements
See Part I, Item 1, “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for information regarding recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Management believes there are no material changes to our quantitative and qualitative disclosures about market risks during the three months ended March 31, 2024, compared to those disclosed in the Annual Report.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. “Disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2024 at the reasonable assurance level.
Our disclosure controls and procedures and internal controls over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) of the Exchange Act during the first quarter of 2024 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Part II - Other Information
Item 1. Legal Proceedings.
See Part I, Item 1, Note 8—Commitments and ContingenciesLegal Proceedings.
Item 1A. Risk Factors.
Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, our Condensed Consolidated Financial Statements and related notes, and the other information in this Quarterly Report on Form 10-Q. If any of these risks actually occur, our business, financial condition, results of operations, and prospects could be adversely affected. As a result, the price of our securities could decline and you could lose part or all of your investment. In addition, factors other than those discussed below or in other of our reports filed with or furnished to the SEC also could adversely affect our business, financial condition, or results of operations. We cannot assure you that the risk factors described below or elsewhere in our reports address all potential risks that we may face. These risk factors also serve to describe factors which may cause our results to differ materially from those described in forward-looking statements included herein or in other documents or statements that make reference to this Quarterly Report. For more information, see the “Note Regarding Forward-Looking Statements.”
Operational Risks Related to Our Business
While we have experienced rapid growth in our business in the past, our revenue growth rate and financial performance have fluctuated, which makes it difficult to predict the extent of demand for our services or the products sold in our marketplaces.
During 2020 and 2021, we experienced rapid growth in our business, in the number of buyers and sellers, and purchase frequency. While our revenue growth continued more modestly in 2022 and 2023 and grew slightly in the first three months of 2024, our GMS declined in 2022, 2023, and the quarter ended March 31, 2024. Our business may continue to be impacted by macroeconomic factors beyond our control such as inflation, interest rates, disruptions to the banking industry, potential recessionary factors, foreign exchange rate volatility, changing consumer shopping preferences, continued pressure on consumer discretionary product spending, global geopolitical uncertainties, supply-chain disruptions, an increasingly competitive retail environment, and employment levels, among others (collectively, “Macroeconomic Conditions”).
Even if our revenue continues to grow, we may not be able to maintain profitability in the future. Our costs have and may continue to increase as we continue to invest in the development of our marketplaces, including our services and technological enhancements, and as we increase our marketing efforts and expand our operations. Further, the growth of our business places significant demands on our management team and pressure to expand our operational, compliance, payments, and financial infrastructure. For example, we may need to continue to develop and improve our operational, financial, compliance, payments, and management controls and enhance our reporting systems and procedures to support our recent and any future growth.
If we do not continue to grow our business or manage our growth effectively, the increases in our cash operating expenses could outpace any increases in our revenue and our business could be harmed. For example, in December 2023, we implemented a Restructuring Plan, which was intended to reduce our operating expenses. In addition, our revenue may decline and our revenue growth rate has and may continue to decelerate for a number of reasons, including as a result of Macroeconomic Conditions and other factors described elsewhere in these Risk Factors. For further information, see Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenue.” You should not rely on prior periods as an indication of our future performance.
The trustworthiness of our marketplaces and the connections within our communities are important to our success. If we are unable to retain our existing buyers and sellers and activate new ones, our financial performance could decline.
Creating trusted brands is one of the key elements of our strategy. We are focused on ensuring that our marketplaces embody our mission and values, and that we deliver trust and reliability throughout the buyer and seller experiences. Our reputation and brands depend, in part, upon our ability to maintain trustworthy marketplaces, and also upon our sellers, the quality of their offerings, their adherence to our policies, and their ability to deliver a trusted purchasing experience. We view the trustworthiness and reliability of our marketplaces, as well as the connections we foster in our buyer/seller communities, to be cornerstones of our business and key to our success. Many things could undermine these cornerstones, such as:
a failure to operate our business in a way that is consistent with our guiding principles and mission;
an inability to gain the trust of prospective buyers;

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disruptions or defects in our marketplaces, privacy or data security incidents, website outages, payment disruptions, or other incidents that impact the reliability of our platforms;
lack of awareness of, or adherence to, our policies by our communities or confusion about how they are applied;
a failure to enforce our policies effectively, consistently, and transparently, including, for example, by allowing the repeated widespread listing of prohibited items in our marketplaces;
changes to our policies or fees that members of our communities perceive as inconsistent with their best interests or our mission, or that are not clearly articulated;
complaints or negative publicity about us, our platforms, or our policies and guidelines, even if factually incorrect or based on isolated incidents;
inadequacies in our House Rules, policies, and other terms of use;
frequent product launches, updates, and experiments that could deteriorate member trust and/or engagement; or
inadequate or unsatisfactory customer service experiences, failure to adequately respond to feedback from our communities, or failure of our sellers to fulfill their orders in accordance with our policies, including as a result of fraud, their own shop-specific policies, or buyer expectations.
We are and may continue to be an attractive target to bad actors and fraudsters targeting our marketplaces and our communities, civil litigants, and those seeking to enforce alleged intellectual property rights and/or alleged contractual rights. Additionally, there have been and may continue to be attempts to impersonate, exploit, misrepresent or mischaracterize us or our marketplaces, such as on social media, or via individual or coordinated spam or other campaigns. We are not always successful in defending against these types of tactics which, when successful, cause buyers and sellers to lose trust in our marketplaces, and could lead to fewer active buyers and sellers or otherwise damage our brands and our business. Even if we are successful in defending against these tactics, we may be required to spend significant resources in those efforts which may distract our management and otherwise negatively impact our results of operations. In addition, the recent increased scrutiny and regulation of marketplace platforms, though principally focused on other larger platforms, has and may continue to create burdens on both Etsy and its communities of buyers and sellers. This may lead to increased risks that shift more quickly than our policies, enforcement mechanisms, and systems can react.
We continue to evolve our marketplaces and invest to improve our customer experience. If our efforts are unsuccessful, or if our customer service platforms or our trust and safety program fail to meet legal requirements or buyers’ and sellers’ expectations, we may need to invest significant additional resources. If we are unable to maintain trusted brands and marketplaces, our ability to attract and retain buyers and sellers could be harmed.
Our business, financial performance, and growth depends on our ability to attract and retain active and engaged communities of buyers and sellers.
Our financial performance, specifically our GMS, revenue, and Adjusted EBITDA, has been and will continue to be significantly determined by our success in attracting and retaining active buyers and active sellers and increasing their engagement. We believe that many new buyers and sellers find us by word of mouth and other non-paid referrals from existing buyers and sellers. If existing buyers do not find our platforms appealing, for example, because of a negative experience, lack of competitive shipping costs, delayed shipping times, inadequate customer service, lack of buyer-friendly features, declining interest in the goods offered by our sellers, or other factors, they may make fewer purchases and they may not refer others to us. Likewise, if existing sellers are dissatisfied with their experience on our platforms, or feel they have more attractive alternatives, they may stop listing items in our marketplaces and using our services and may stop referring others to us, which could negatively impact our financial performance.
In addition, our GMS and revenue are concentrated in our most active buyers and sellers. The COVID-19 pandemic fueled an unprecedented increase in the growth of active buyers, and the number of active buyers remains significantly above pre-pandemic levels. If we lose a significant number of buyers or sellers, or our buyers or sellers do not maintain their level of activity, for any reason, including due to the pressure on or shifts in consumer discretionary spending or increased seller fees, our financial performance and growth could be harmed. Even if we are able to attract new buyers and sellers to replace the ones that we may lose, we may not be able to do so at comparable levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave, or reduce their activity level on our marketplaces. If we are unable to attract and retain buyers and sellers, or our buyers or sellers do not maintain their level of activity, our business, financial performance, and growth could be harmed.
Additionally, the demand for the goods listed in our marketplaces is dependent on consumer preferences and available discretionary spending, which can and do change quickly and may differ across generations, genders, and cultures. If demand for the goods that our sellers offer declines, or if demand for goods falls and is not replaced by demand in new or different

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categories, we may not be able to attract and retain buyers and our business could be harmed. Further, a shift in trends away from unique or vintage goods, socially-conscious consumerism, second-hand fashion, or specialty items such as musical instruments, could also make it more difficult to attract new buyers and sellers. Under any of these circumstances, we may have difficulty attracting new buyers and sellers without incurring additional expense.
We rely on our sellers to provide a fulfilling experience to our buyers.
A small portion of buyers complain to us about their experience on our platforms. As a pure marketplace, our sellers manage their shops, certain shop policies, products and product descriptions, shipping, and returns. As a result, we do not have the ability to control important aspects of buyers’ experiences on our platforms. For example, a buyer may report that they have not received the items they purchased, that the items received were not as represented by a seller, or that a seller has not been responsive to their questions. While we have introduced new features designed to protect buyers, there can be no assurance that these measures will be effective in combating fraudulent transactions or improve overall buyer satisfaction. Further, negative publicity and sentiment generated as a result of these types of complaints, or any associated enforcement action taken against sellers, could reduce our ability to attract and retain our sellers and buyers or damage our reputation.
Similarly, we rely on sellers to be responsive to buyers and to fulfill orders from buyers. Anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers. Service interruptions and delivery delays may be caused by events that are beyond the control of our sellers, such as interruptions in order or payment processing, interruptions in sellers’ supply chains, transportation disruptions, customs delays, natural disasters, inclement weather, terrorism, public health crises, political unrest, or geopolitical conflict. Additionally, popular or trending sellers