Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Etsy Inc (ETSY, Financial) reported revenue growth of 3% year-over-year, reaching $648 million.
- The company posted a healthy adjusted EBITDA margin of approximately 28%, ahead of guidance.
- Etsy Inc (ETSY) saw a 210 basis point improvement in marketplace GMS performance from Q1 to Q2.
- The company has made significant progress in improving customer experience, particularly in gifting, which saw a 4% year-over-year GMS growth.
- Etsy Inc (ETSY) is leveraging AI and large language models to enhance search and recommendation systems, improving the visibility of quality listings.
Negative Points
- Consolidated GMS was down approximately 2.1% year-over-year, reflecting ongoing macroeconomic headwinds.
- Etsy marketplace GMS declined by 3.2% year-over-year, indicating challenges in maintaining growth.
- The company faces stiff competition in the increasingly crowded and promotional e-commerce landscape.
- Active buyer growth was modest, with only a 1% year-over-year increase, and GMS per active buyer decreased by 3.2%.
- The upcoming retirement of CFO Rachel Glaser may lead to transitional challenges as the company searches for her successor.
Q & A Highlights
Q: Josh, I want to dig into the new seller classification program. When do you think you'll be able to tell if it improves buyer conversion, and any thoughts on getting your sellers to raise their prices?
A: (Josh Silverman, CEO) I hope it will raise frequency rather than conversion. Our search engine is optimized for conversion, but we need to show a broader variety of items to drive more frequent visits. Regarding seller pricing, we provide market information to help them price their items. Emphasizing the humanity and artisanal nature of Etsy products can support sellers in maintaining their pricing power.
Q: How has the macro environment changed versus three months ago, and why wouldn't we expect GMS recovery to continue sequentially given increased marketing and product initiatives?
A: (Rachel Glaser, CFO) The macro environment remains volatile with mixed signals. We expect similar pressure for the rest of the year. Despite this, we're planning for a strong Q4 with investments in quality and gifting initiatives. We're cautious but optimistic about our strategic investments.
Q: Can you provide more details on the new loyalty program going into beta? Who is the target customer, and how are you thinking about pricing and profitability?
A: (Josh Silverman, CEO) The target is occasional Etsy shoppers, aiming to increase their frequency. We're considering a price point similar to the cost of a latte per month. The program will include benefits like free shipping and exclusive deals. We'll test and iterate to ensure profitability over time.
Q: What do you think is the most exciting initiative for 2025, and why launch the loyalty program now?
A: (Josh Silverman, CEO) I'm excited about our quality initiatives and the improvements in gifting. We're leaning into what makes Etsy unique. The loyalty program aims to increase consideration and frequency, encouraging users to start their shopping missions on Etsy. We believe this will drive long-term growth.
Q: Can you discuss your efforts to emphasize value on the marketplace and how you work with sellers to offer sharper price points and discounts?
A: (Josh Silverman, CEO) We provide sellers with tools to offer discounts and promotions. We're also focusing on highlighting the unique value of Etsy products and the role of the seller in the creation process. This helps differentiate Etsy and supports sellers in maintaining their pricing power.
Q: Can you talk about sustaining the 2023 EBITDA margin for 2024 and the engagement on the app?
A: (Rachel Glaser, CFO) We have a variable cost base that allows us to maintain margins even with modest revenue growth. We expect higher GMS in Q4 to support margins. (Josh Silverman, CEO) The app represents 42% of GMS and is growing. Users who download the app visit more frequently and have higher lifetime value. We're focusing on making the app the centerpiece of the customer experience.
Q: Can you quantify the effectiveness of the onboarding speed bump in reducing fraud and discuss the opportunity for on-site ads?
A: (Rachel Glaser, CFO) The seller onboarding fee has been effective in reducing fraud, contributing to lower reserves for fraud. (Josh Silverman, CEO) There's still room for growth in Etsy Ads by improving ad targeting and increasing seller budgets. We continue to focus on showing the right ad to the right buyer to drive value for sellers and shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
