Q3 2023 Etsy Inc Earnings Call

Joshua Silverman: Etsy has taken actions that can most directly and immediately help our sellers who live in the impacted region, including covering their existing balances as of October 31st, which represent the contribution of about $1 million, and we're providing additional resources to help sellers manage their shops during this incredibly difficult time. Turning to our results, Etsy performed in line with expectations from modest to top line growth, and strong profitability continued. Consolidated GMS was $3 billion up 1.2% compared to last year, revenue grew 7% to $636 million, and our adjusted EBITDA margin was again very strong at 28.6%.

<unk> directly and immediately help our sellers, who live in the impacted region, including covering their existing balances as of October 31st which represent a contribution of about $1 million and we're providing additional resources to help sellers manage their shops. During this incredibly difficult time.

Turning to our results Etsy performed inline with expectations for modest topline growth and strong profitability continued consolidated Gms was $3 billion up one 2% compared to last year revenue grew 7% to $636 million and our adjusted EBITDA margin was again very strong at <unk>.

Eight 6%.

Joshua Silverman: As you all know, there's been significant pressure on consumer discretionary product spending, as high inflation, elevated interest in mortgage rates, splurges on yolo experiences, and declining savings balances have meant that there's little left over for many consumers after paying for food, gas prices. We're also experiencing an increasingly competitive retail environment with a very heavy emphasis on deep discounting, and in some cases, competitors investing at potentially unsustainable levels in marketing and promotions.

As you all know there has been significant pressure on consumer discretionary products' spending as high inflation elevated interest and mortgage rates splurges on yolo experiences and declining savings balances have meant that there's little leftover for many consumers after paying for food gas rent and childcare.

These issues are magnified for lower income buyers and we feel the impact on the etsy marketplace.

We're also experiencing an increasingly competitive retail environment with a very heavy emphasis on deep discounting and in some cases competitors investing it potentially unsustainable levels in marketing and promotions.

Joshua Silverman: While the headwinds were facing at this moment in the cycle are undeniable, I'm pleased that once again, performance green shoots for the Etsy marketplace were evident in the third quarter. GMS grew about 1% versus the prior year, and the prior quarter. We hit another new record of inactive buyers, now at 92 million, with slight growth in US active buyers as well, and buyer additions were up over 6% year over year. On a sequential basis, we reported accelerated international growth and improving trend in GMS per buyer and flat performance in habitual buyers.

While the headwinds we're facing at this moment in the cycle are undeniable I'm pleased that once again performance green shoots for the Etsy marketplace were evident in the third quarter Gms grew about 1% versus the prior year.

And the prior quarter, we hit another new record of inactive buyers now at $92 million with slight growth in U S active buyers as well and buyer additions were up over 6% year over year on a sequential basis, we reported accelerated international growth and improving trend in gms per buyer and flat performance in <unk>.

Batesville buyers.

Joshua Silverman: In this very challenging environment, it's more important than ever that we bring our A-game, competing hard to win our share of consumers' wallets, and we are. We believe that overall, we're at least holding our market share gains and that our product and marketing investments are making a difference for buyers and sellers. We've been laser focused all year on knocking down barriers that stop buyers from shopping or shopping more often on Etsy.

In this very challenging environment, it's more important than ever that we bring our a game competing hard to win our share of consumers' wallets and we are we believe that overall, we're at least holding our market share gains and that our product and marketing investments are making a difference for buyers and sellers we've been laser focused on.

All year on knocking down barriers that stop buyers from shopping or shopping more often on etsy, we know that buyers turned to etsy, most often for low risk items, but we believe our opportunity is so much larger than that because we know that etsy can offer high quality merchandise at a great value in a way that is both reliable and convenient.

Joshua Silverman: We know that buyers turn to Etsy most often for low risk items, but we believe our opportunity is so much larger than that, because we know that Etsy can offer high quality merchandise at a great value in a way that is both reliable and convenient. We've been hard at work to break down brand barriers so that buyers will think to shop with us even more often across a wider range of purchase occasions leading to significantly improved consideration beyond just those low risk items and ultimately market share gains.

We've been hard at work to breakdown brand barriers. So that buyers will think to shop with us even more often across a wider range of purchase occasions, leading to significantly improved consideration beyond just those low risk items and ultimately market share gains throughout 'twenty twenty-three, we've moved boldly and with great <unk>.

Joshua Silverman: Throughout 2023, we've moved boldly and with great urgency to address these areas, making strong progress in order to deliver a significantly better experience we can shout from the rooftops this holiday season. I'll explain each area further. With over 120 million items for sale, we've got millions of beautifully crafted items we believe are perfect for almost any person or occasion. Our opportunity is to organize and carry, at the Experience, to help get you to the very best of Etsy quickly and easily.

Regency to address these areas, making strong progress in order to deliver a significantly better experience. We can shout from the rooftops. This holiday season I'll explain each area further.

With over 120 million items for sale, we've got millions of beautifully crafted items. We believe are perfect for almost any person or occasion.

Our opportunity is to organize and curate the experience to help get you to the very best of Etsy quickly and easily we're moving beyond relevance to the next frontier of search focused on better identify the quality of each etsy listing utilizing humans and ml technology, so that from a highly relevant results set we.

Joshua Silverman: We're moving beyond relevance to the next frontier of search, focused on better identifying the quality of each Etsy listing, utilizing humans and ML technology so that from a highly relevant result set, we bring the very best of Etsy to the top, personalized to what we understand of your tastes and preferences. For example, from the start of the year, we're tracking to a ninefold increase in the number of human curated listings on Etsy to over 1.5 million listings by year end. We're also utilizing ML models designed to determine the visual appeal of items and incorporating that information into our search algorithms. Frankly, our timing on this work is important.

Bring the very best of Etsy to the top personalized to what we understand of your tastes and preferences.

For example from the start of the year, we're tracking to a nine fold increase in the number of human curated listings on etsy to over 1.5 million listings by year end. We're also utilizing ml models designed to determine the visual appeal of items and incorporating that information into our search algorithms frankly, our timing on this work is important.

Joshua Silverman: With more competition than ever, offering low quality, same as everyone else mass manufactured merchandise. There's also a huge opportunity to evolve the Etsy experience so that we show buyers a more diverse set of options when they search for open-ended head query items, such as back to school. On the left of this slide, you can see an example of how a search for back to school items looks on Etsy. We generally show multiple very similar versions of customized pencils, stickers, lawn signs and so on, all mixed together.

With more competition than ever offering low quality same as everyone else mass manufactured merchandize.

There's also a huge opportunity to evolve the etsy experience. So that we show buyers a more diverse set of options when they search for open ended headquarter of items such as back to school on.

On the left of this slide you can see an example of how a search for back to school items looks on Etsy, We generally show multiple very similar versions of customized pencils stickers lawn signs and so on all mixed together. This is sub optimal as it offers buyers only a few main ideas on the first page of search and requires a ton of cognitive load to distinguish.

Joshua Silverman: This is suboptimal as it offers buyers only a few main ideas on the first page of search and requires a ton of cognitive load to distinguish between virtually identical items. We've recently launched a variety of experiments with the help of Genai to evolve these types of head query searches. As we move into 2024, when a buyer searches for broad queries, we expect to be able to show a far more diverse and compelling set of ideas all beautifully curated.

Between virtually identical items, we've recently launched a variety of experiments with the help of Gen. II to evolve these types of headquarter researches.

As we move into 'twenty 'twenty four when a buyer searches for broad queries, we expect it to be able to show a far more diverse and compelling set of ideas all beautifully curated by organizing search results into a number of ideas for you that are truly different and helping to elevate the very best items within each of these idle.

Joshua Silverman: By organizing search results into a number of ideas for you that are truly different and helping to elevate the very best items within each of these ideas, we can take a lot of the hard work out of finding exactly the perfect item and help build frequency as we highlight the wide range of merchandise available on Etsy.

Yes, we can take a lot of the hard work out of finding exactly the perfect item.

And helped build frequency as we highlight the wide range of merchandise available on etsy.

Joshua Silverman: Another critical part of highlighting the good stuff and leading into our competitive differentiation is doing a better job than ever to enforce our Etsy seller house rules. In the race to the bottom of commoditized commerce, it's never been more important that Etsy stands apart, showcasing items that meet our policies and stand for keeping commerce human. Handmade policy takedowns are up over 120 percent for the third quarter. I'm also pleased to say that in just a few months of work, we've nearly cut in half the percentage of visits where a buyer comes across a violating listing, based on our constant sampling of the marketplace.

Another critical part of highlighting the good stuff and leading into a competitive differentiation is doing a better job than ever to enforce our etsy seller house rules in the race to the bottom of Commoditized Commerce, it's never been more important than etsy stands apart showcasing items that meet our policies and stand for keeping <unk>.

<unk> human handmade policy take downs are up over 120% for the third quarter. I'm also pleased to say that in just a few months of work we've nearly cut in half the percentage of visits where a buyer comes across a violating listing based on our constant sampling of the marketplace.

Joshua Silverman: So while buyers don't come to Etsy looking for mass manufactured merchandise, it's critical we do an ever better job elevating the best of Etsy to keep Etsy special in the minds of our buyers and sellers. We're all aware of what an incredibly promotional environment this is.

So well buyers don't come to Etsy looking for mass manufactured merchandize, it's critical we do an ever better job elevating the best of Etsy to keep Etsy special in the minds of our buyers and sellers.

We're all aware of what an incredibly promotional environment. This is we pivoted our roadmap this year to invest significant resources into highlighting the great value Etsy sellers can offer many consumers don't realize how cost effective it can be to buy directly from the maker, even when buying something produced just for you or in very small lots because there are.

Joshua Silverman: We pivoted our roadmap this year to invest significant resources into highlighting the great value Etsy sellers can offer. Many consumers don't realize how cost effective it can be to buy directly from the maker, even when buying something produced just for you or in very small lots. Because there are not layers of distributors and middlemen taking markups along the way. But our sellers don't have pricing departments giving them insights into things like how best to price each item and how or when to use promotions, so we need to be the ones to provide those insights and be their advocates.

Our not layers of distributors and middlemen, taking markups, along the way, but our salaries don't have pricing departments, giving them insights into things like how best to price each item and how or when to use promotions. So we need to be the ones to provide those insights and be their advocates.

Joshua Silverman: We're helping sellers by providing information so that they can set their own appropriate and sustainable prices and offer promotions that make sense. During the quarter we began initial limited testing of new features such as a pricing optimizer that provides real-time information on market prices for similar items and a cost recovery insight feature for heavy users of sales and offers. We've also improved the way that sellers can put items on sale and provided insights that will help them understand how to use those sales in a way that can drive GMS.

We're helping sellers by providing information so that they can set their own appropriate and sustainable prices and offer promotions that makes sense. During the quarter. We began initial limited testing of new features such as a pricing optimizer that provides real time information on market prices for similar items and it cost recovery insight feature for.

Our heavy users of sales and offers.

Joshua Silverman: We continue to elevate seller-funded sales using a series of evergreen promotional content throughout the quarter, such as our best of home at 40% off sale, five-star gifts under $30, back to school basics under $50 and so on. Seller sales coupons and urgency signals drove well over $100 million in incremental GMS during the quarter.

We've also improved the way that sellers can put items on sale and provided insights that will help them understand how to use those sales in a way that can drive G. M S.

We continued to elevate seller funded sales using a series of evergreen promotional content throughout the quarter, such as our best of home at 40% off sale five star gifts under $30 back to school basics under $50 and so on seller sales coupons and urgency signals drove well over $100 million in incremental Gms.

During the quarter.

Joshua Silverman: We told you on our last call that we would pull out all the stops to help Etsy sellers compete and win, and in September we ran an Etsy funded 48-hour promotion in North America and Europe. The sale impacted GMS had a positive ROI and created a nice bump in reactivation of lapsed buyers. Buyers loved our get-five promotion. In fact we saw an increase in average order value during the sale period as buyers spent more than the $25 minimum needed to use the coupon. We'll continue to test and optimize new marketing approaches including Etsy funded offers in a disciplined and ROI-focused way.

We told you on our last call that we would pull out all the stops to help etsy sellers compete and win and then September we ran an etsy funded 48 hour promotion in North America, and Europe. The sale impacted Gms had a positive ROI and created a nice bump and reactivation of lapsed buyers.

I always loved our get five promotion in fact, we saw an increase in average order value during the sale period as buyers spent more than the 25 dollar minimum needed to use the coupon will continue to test and optimize new marketing approaches, including Etsy funded offers in a disciplined and ROI focused way.

Joshua Silverman: If buyers are unsure whether an item will arrive on time, if they lack confidence in the fit or quality or if they're unsure of someone will have their back when something goes wrong, it provides a lot of friction causing shoppers to buy on Etsy less often. The good news is we've made so much progress against these metrics in the recent past. As you can see on this slide, which represents our greatest hits in improving reliability and convenience. We've driven a tremendous increase in coverage for estimated delivery dates, better tracking of packages, big improvements in on-time delivery and transparent return policies and information.

If buyers are unsure whether an item will arrive on time, if they lack confidence in the fit or quality or if theyre unsure of someone will have their back when something goes wrong. It provides a lot of friction, causing shoppers to buy on etsy less often the good news is we've made so much progress against these metrics in the recent past as you can see on this slide.

<unk>, which represents our greatest hits in improving reliability and convenience, we've driven a tremendous increase in coverage for estimated delivery dates better tracking of packages big improvements in on time delivery and transparent return policies and information.

Joshua Silverman: But perception is not kept based with reality and we need to close that gap. We know that generally buyers have a great experience on Etsy.

But perception has not kept pace with REIT with reality and we need to close that gap. We know that generally buyers have a great experience on etsy. So in addition to doing this work we need to disrupt buyer perceptions. Even further so that they can see etsy as a convenient and trusted place to shop, and we will do that in a big way this holiday season.

Joshua Silverman: So in addition to doing this work, we need to disrupt buyer perceptions even further so that they can see Etsy as a convenient and trusted place to shop.

Joshua Silverman: And we'll do that in a big way this holiday season as I'll explain in a moment.

As I'll explain in a moment only 12% of buyers will name Etsy top of mind as the place to shop for gifts and association levels are much lower for other major categories like home and living and style. We believe our efforts to improve quality value and reliability will significantly improve consideration for etsy start.

Joshua Silverman: Only 12% of buyers will name Etsy top of mind as the place to shop for gifts. And association levels are much lower for other major categories like home and living and style.

Joshua Silverman: We believe our efforts to improve quality, value and reliability will significantly improve consideration for Etsy starting in these important categories and purchase occasions. Our Etsy hazard campaign is an important component given direct messaging and call to action alongside a significant amount of on-site product work such as our new wedding, baby and gift registries, new home and living category pages and more.

In these important categories and purchase occasions. Our Etsy has had campaign is an important component given direct messaging and call to action alongside a significant amount of onsite product work such as our new wedding baby and gift registries, new home and living category pages and more bill.

Joshua Silverman: Building this type of brand association to help buyers and potential buyers understand the when and why of Etsy is a long Turnplay, and I'm confident that a powerful combination of better on-site experiences and off-site amplification can build Etsy's consideration over time.

Building this type of brand association to help buyers and potential buyers understand the win and why of Etsy is a long term play and I'm confident that a powerful combination of better onsite experiences and offsite amplification can build etsy as consideration over time.

Joshua Silverman: It's game time for holiday, and thanks to all the work I've just described, I think our offering is the most compelling we've ever had, and we're ready to win. Our message of this holiday season is that we'll make you a gifting hero, helping you find the exact right quality gift at a great value for the special people in your life. All while supporting independent makers. No one has a better opportunity to own gifting than Etsy, and what better time than the holiday season?

It's game time for holiday and thanks to all the work I've. Just described I think our offering is the most compelling we've ever had and we're ready to win our message of this holiday season is that will make you a gifting hero, helping you find the exact right quality gift at a great value for the special people in your life.

All while supporting independent makers.

No one has a better opportunity to own gifting than etsy, and what better time than holiday season. So here are some of our new initiatives first we've launched a new and improved curated gift finder now available in our App and feature more prominently on mobile web second our new deals tab replaces our update.

Joshua Silverman: So here are some of our new initiatives. First, we've launched a new and improved curated gift finder, now available in our app and featured more prominently on mobile web. Second, our new deals tab replaces our updates tab in our app, making it easier to find personalized deals and amazing gifts at an affordable price. And third, we'll continue to selectively test Etsy funded offers with an eye to optimizing our return on investment.

[noise] tab in our App, making it easier to find personalized deals an amazing gifts at an affordable price and third we will continue to selectively test Etsy funded offers with an Ida optimizing our return on investment.

Joshua Silverman: And last, but certainly not least, we couldn't be more excited about our holiday plans to market in the US that Etsy gifts will be delivered on time or your money back. Our estimated delivery date performance and Etsy purchase protection program enable us to stand behind purchases and work to disrupt fire perceptions.

And last but certainly not least we couldnt be more excited about our holiday plans to market in the U S that etsy gifts will be delivered on time or your money back our estimated delivery date performance and let's see purchase protection program enabled us to stand behind purchases and work to disrupt buyer perceptions.

Joshua Silverman: Here is one of our new TV campaigns, all of which aim to disrupt fire perceptions of Etsy this holiday season.

He was one of our new TV campaigns, all of which aimed to disrupt buyer perceptions of Etsy. This holiday season.

Sure.

But look the same.

Different.

Company when they occur.

Mike.

Okay.

Okay.

Peter.

Thompson.

Uh huh.

Hi.

Children.

Great gifts made by real people Etsy has it.

Joshua Silverman: Shifting to our subsidiaries, Deepop had a great quarter. GMS and revenue both grew double digits on a year-over-year basis with growth and active buyers sparked by strong new buyer growth in the US. Deepop success can be attributed to compelling product and marketing investments which have accelerated growth alongside an increasing flywheel impact from higher transaction of velocity and improved user experience.

Shifting to our subsidiaries deep hop had a great quarter Gms and revenue both grew double digits on a year over year basis with growth in active buyers sparked by strong new buyer growth in the U S. D pop success can be attributed to compelling product and marketing investments, which have accelerated growth alongside them.

And increasing flywheel impact from higher transaction velocity and improved user experience, we're continuing to broaden <unk> appeal to feel more accessible to a wider audience emphasizing value even more in the buyer experience while further streamlining the seller experience.

Joshua Silverman: We're continuing to broaden Deepop's appeal to feel more accessible to a wider audience, emphasizing value even more in the buyer experience while further streamlining the seller experience. While Reverb's GMS was down modestly in Q3, the business outperformed the musical instrument industry while also improving take rate and growing revenue compared to Q3 of 2022. Reverb enhanced the buyer experience by expanding search and category filters, improved negotiation tools, and increased the prominence of promotions and price drops to help buyers more easily find the perfect piece of gear for their budget.

While reverbed Gms was down modestly in Q3, the business outperformed the musical instrument industry, while also improving take rate and growing revenue compared to Q3 of 2022.

We've ever been enhanced the buyer experience by expanding search and category filters improved negotiation tools and increase the prominence of promotions and price drops to help buyers more easily find the perfect piece of gear for their budget.

Joshua Silverman: There's no doubt that this is an incredibly challenging environment for spending on consumer discretionary items. It's therefore important to acknowledge that the volatile macro climate is going to make it challenging for us to grow this quarter. I can't control, there's still a lot we can. So we are obsessively focused on those. All of us at Etsy feel a great responsibility to deliver profitable growth. Growth for our millions of sellers, for our shareholders, and for all of our stakeholders.

There's no doubt that this is an incredibly challenging environment for spending on consumer discretionary items.

It's therefore important to acknowledge that the volatile macro climate is going to make it challenging for us to grow this quarter. While there are many things we cant control theres still a lot. We can so we are obsessive we focused on those all of us at Etsy feel a great responsibility to deliver profitable growth growth for our millions of sellers for.

Our shareholders and for all of our stakeholders. Our team is working passionately and with the highest level of urgency and I'm more excited about our current road map and the progress we've made this year than at anytime in my tenure.

Joshua Silverman: Our team is working passionately and with the highest level of urgency. And I'm more excited about our current roadmap and the progress we've made this year than at any time in my tenure. We're confident we're working on areas that will positively impact Etsy. In the months and years ahead, we believe our tam is enormous. Our market share remains small. Our value proposition is highly differentiated, and we're solving for something no one else is keeping commerce human. We're keeping our eye on the prize and look forward to getting back to strong growth again as we move through this cycle.

We're confident we're working on areas that will positively impact etsy in the months and years ahead. We believe our Tam is enormous our market share remains small our value proposition is highly differentiated and we're solving for something no. One else is keeping commerce human.

We're keeping our eye on the prize and look forward to getting back to strong growth again as we move through this cycle.

Thanks for your time I'll now turn the call over to Rachel.

Joshua Silverman: Thanks for your time.

Thanks, Josh and thank you everyone for joining our third quarter call.

Rachel Glaser: I'll turn the call over to Rachel. Thanks, Josh, and thank you everyone for joining our third quarter call. My commentary today will cover consolidated results. Key drivers of performance and Etsy marketplace stand-alone results were appropriate. As a reminder, reverb, D-pop, and ELO 7 were all reflected in our consolidated financial results and KPIs for the third quarter 2022 with ELO 7 divested on August 10, 2023. Etsy delivered $3 billion in consolidated GMS, which increased 1.2% year over year.

My commentary today will cover consolidated results.

The drivers of performance.

Etsy marketplace, standalone herself where appropriate.

As a reminder, reverb deep hop in Evo seven were all reflected in our consolidated financial results and Kpis for the third quarter 2022, with Elis, Devon divest it on August 10 2023.

And he delivered $3 billion in consolidated DNS, which increased one 2% year over year, our first positive growth quarter since Q1 'twenty two.

Rachel Glaser: Our first positive GMS growth quarter since Q1-22. Revenue increased 7% year over year to $636 million. And adjusted EBITDA was $182 million up nearly 9% from the third quarter of last year. Note that ELO 7's mid-quarter divestiture resulted in small headwinds to both GMS and revenue and was modestly accretive to adjusted EBITDA margin. Given the volatile macroeconomic landscape that continues to impact consumer discretionary product spending, we believe these results demonstrate the underlying strength of our brand and consumer relevance.

Revenue increased 7% year over year to $636 million and adjusted EBITDA was $182 million up nearly 9% from the third quarter of last year.

Note that igo seven mid quarter divestiture resulted in small headwinds to both Gms and revenue and was modestly accretive to adjusted EBITDA margin.

Given the volatile macro economic landscape that continues to impact consumer discretionary products spending. We believe these results demonstrate the underlying strength of our brand and consumer relevance.

Rachel Glaser: Our year over year consolidated GMS growth was positive each month of the quarter, driven by strong Etsy marketplace growth in several of our top international markets and continued active buyer expansion, as well as meaningful acceleration at D-pop that outpaced consolidated growth. The FX headwinds that impacted our business in the prior seven quarters reversed in the third quarter, providing a 130 basis point tailwind. GMS for our subsidiaries increased in the third quarter, driven by the strong growth at D-pop I just mentioned and partially offset by softness at reverb.

Our year over year consolidated Gms growth was positive each month of the quarter driven by strong etsy marketplace growth in several of our top international markets and continued active buyer expansion as well as meaningful acceleration that deep hop that outpaced consolidated growth.

The FX headwinds that impacted our business in the prior seven quarters reversed in the third quarter, providing a 130 basis point tailwind.

Gms for our subsidiaries increased in the third quarter driven by the strong growth at deep hop I, just mentioned and partially offset by softness at reverb.

Rachel Glaser: Within our consolidated year over year revenue growth of 7%, consolidated marketplace revenue grew 4%, due to an increase in the volume of GMS, including growth and payments fees for Etsy, primarily driven by a mixed shift to more international transactions that yield higher fees, growth and subsidiary payments fees, as well as growth and revenue from off-site ads. Services revenue remained to stand out contributor to growth, increasing 16%, year over year. Etsy ads was the primary driver of this strength as we optimized our Xbox functionality to better value potential listing conversion and pricing into our ads ranking system, allowing us to show more ads in our search results without negatively impacting our conversion rate.

Within our consolidated year over year revenue growth of 7% consolidated marketplace revenue grew 4% due to an increase in the volume of Tms, including growth and payments needs for Etsy, primarily driven by a mix shift to more international transactions that yield higher fees.

And subsidiary payments fees as well as growth in revenue from Offsite ads.

Services revenue remained a standout contributor to growth increasing 16% year over year.

Let's see ads was the primary driver of this strength as we optimized our ex lock functionality to better value potential lifting conversion and pricing into our ads ranking system, allowing us to show more ads in our search results without negatively impacting our conversion rate.

Rachel Glaser: We delivered a consolidated take rate of 20.9 percent in line with the prior quarter and modestly above the take rate implied at the midpoint of our quarterly guidance. Even while continuing to invest in product and marketing, our consolidated EBITDA margin expanded 40 basis points year over year to a very strong 28.6 percent above the high end of our guidance and our highest level since the fourth quarter of 2021. This strength was driven in part by leverage in product development spend.

We delivered a consolidated take rate of 29% in line with the prior quarter and modestly above the take rate implied at the midpoint of our quarterly guidance.

Even while continuing to invest in product and marketing our consolidated EBITDA margin expanded 40 basis points year over year to a very strong $28, 6% above the high end of our guidance and our highest level since the fourth quarter of 2021.

This strength was driven in part by leverage and product development spend.

Rachel Glaser: Our subsidiaries represent about a 300 to 400 basis point headwind to our consolidated adjusted EBITDA margin in the third quarter. We are very pleased with our ability to continue to balance disciplined ROI focused investments and strong profitability. We are pleased with the excellent returns on our product development spend this quarter. Etsy marketplace product initiatives delivered approximately 40 percent more product launches than in the prior year with very healthy wind rates. Looking at the quarter's product development spend, we reported a 5 percent year over year increase to $114 million in the third quarter, gaining 30 basis points of leverage year over year, partially due to lower employee cop and professional services costs.

Our subsidiaries Rep represented about a 300 to 400 basis point headwind to our consolidated adjusted EBITDA margin in the third quarter.

We are very pleased with our ability to continue to balance disciplined ROI focused investments and strong profitability.

We are pleased with the excellent returns on our product development spend this quarter etsy marketplace product initiatives delivered approximately 40% more product launches than in the prior year with very healthy win rates.

Looking at the quarter's product development spend we reported a 5% year over year increase to $114 million in the third quarter, gaining 30 basis points of leverage year over year, partially due to lower employee comp and professional services costs.

Rachel Glaser: Our consolidated headcount declined year over year due to the ELO7 divestiture, although we increased our core Etsy headcount a bit as we usually do this time of year to invest in important growth initiatives, particularly those that highlight Etsy's offering of high quality merchandise with great value and convenience for buyers. On a trailing 12 plus basis, Etsy marketplace revenue per average full time headcount for the third quarter was about $1.3 million. Well above the approximately $800,000 for the Etsy marketplace in full year 2019 and some of the highest amongst our peer group.

Our consolidated head count declined year over year due to the Evo seven divestiture, although we increased our core etsy head count a bit as we usually do this time of year to invest in important growth initiatives, particularly those that highlight etsy offering of high quality merchandise with great value and convenience for buyers.

On a trailing 12 month basis Etsy marketplace revenue per average full time head count for the third quarter with about $1 $3 million well above the approximately $800000 for the etsy marketplace and full year 2019, and some of the highest amongst our peer group.

Rachel Glaser: Third quarter consolidated marketing spend increased 9 percent year over year to $161 million. While the increased competitive environment drove CPCs up, we continue to execute against our disciplined ROI focused strategy. Our consolidated performance marketing spend increased 16 percent year over year as we expanded Etsy marketplace spending in several channels. We've also been making significant progress scaling paid social, which as a proportion of our total marketing mix is now approaching a similar level to our peers.

Third quarter consolidated marketing spend increased 9% year over year to $161 million.

While the increased competitive environment drove CPC up we continue to execute against our disciplined ROI focused strategy.

Our consolidated performance marketing spend increased 16% year over year, as we expanded etsy marketplace spending in several channels.

We've also been making significant progress scaling paid social which as a proportion of our total marketing mix is now approaching a similar level to our peers.

Rachel Glaser: Our consolidated brand spend decreased 4 percent year over year as we pulled back a bit to run incrementally test and select Etsy market markets. During the quarter, we were on air in our top three core markets and tested TV advertising in Austria and Switzerland. Our site wide promotional event drove incremental GMS and was funded with a small amount of marketing dollars delivering positive our RY. During the quarter, revenue from off-site ads offset approximately 35% of our Etsy marketplace performance marketing spend.

Our consolidated brand spend decreased 4% year over year as they pulled back a bit to run incrementally test in select etsy market markets.

During the quarter, we were on air and our top three core markets and tested TV advertising in Austria and Switzerland.

Our our site wide promotional event drove incremental Gms and was funded with a small amount of marketing dollars delivering positive ROI.

During the quarter revenue from off site ads offset approximately 35% of our etsy marketplace performance marketing spend.

Rachel Glaser: Moving to our Etsy marketplace GMS and fire metrics, during the third quarter, Etsy marketplace GMS increased 1% year-over-year to $2.7 billion. This increase was driven by a higher number of orders in FX tailwind and healthy growth in select international markets. Q3GMS was relatively stable, with modest year-over-year growth in each month of the quarter. While our GMS trends began to soften in late August, our increased marketing investments supported our positive growth through September.

Moving to our Etsy marketplace, Gms and buyer metrics during the third quarter Etsy marketplace, Gms increased 1% year over year to $2 $7 billion.

This increase was driven by a higher number of orders in FX tailwind and healthy growth in select international markets.

Q3, Gms is relatively stable with modest year over year growth in each month of the quarter.

Well our G. M S trends began to soften in late August our increased marketing investments supported our positive growth through September.

Rachel Glaser: However, towards the end of September and through October, similar to overall U.S, e-commerce trends, our GMS growth turned slightly negative as the consumer discretionary product spending headwinds worsened. While we are pleased that our business returned to modest growth, we experienced the following key headwinds, macroeconomic challenges that pressured consumer discretionary product spending, particularly for lower household incomes, and a higher competitive retail environment focused on deep discounting. Using U.S. Census average household income data by ZIP code, our estimates support continued GMS pressures from buyers with household incomes under 100,000, whereas GMS from our buyers with household incomes over 100,000 increased.

However towards the end of September and through October similar to overall U S e-commerce trends, our gms growth turned slightly negative as the consumer discretionary products spending headwinds worsened.

While we are pleased that our business returned to modest growth we experienced the following key headwinds.

Macroeconomic challenges that pressured consumer discretionary products spending, particularly for lower household income.

And a higher competitive retail environment focused on deep discounting.

Using U S centers average household income data by ZIP code or estimate support continued gms pressures from buyers with household incomes under 100000.

Whereas gms from our buyers with household income over 100000 increased fair.

Rachel Glaser: Further, while representing a small segment of our buyer base and U.S, household in general, we estimate that GMS from our buyers in the top deathile of household income increased over 20% year-over-year in the third quarter. A positive indicator that Etsy's overall growth can improve as macro conditions stabilize over time. International markets continue to represent a bright spot for Etsy with GMS excluding U.S, domestic up 7% in the third quarter, led by a return to positive growth in the UK as well as healthy growth in Germany and France.

Further while representing a small segment of our of our buyer base and U S households in general we estimate that Gms from our buyers in the top decile of household income increased over 20% year over year in the third quarter, a positive indicator that etsy is overall growth can improve as macro conditions stabilize over.

Time.

International markets continue to represent a bright spot for etsy with Gms, excluding U S domestic up 7% in the third quarter led by a return to positive growth in the U K as well as healthy growth in Germany and France.

Rachel Glaser: We also sustained in other non-core countries such as Switzerland and Austria. In this economy, we are seeing that mass merchants who sell essentials and whose brands stand for low prices and deep discounts are generally gaining e-commerce share broadly at the expense of most others. So, in order to drill down to Etsy's performance on a category adjusted basis, on this slide we compared Etsy Marketplace GMS generated from our U.S, buyers versus consumer edge's U.S, e-commerce retailer data for pure-play competitors in some of our largest categories.

We also saw strength in other noncore countries, such as Switzerland, and Austria.

In this economy, we are seeing that mass merchants, who sell essentials and his brand stand for low prices and deep discounts are generally gaining e-commerce share broadly at the expense of most others.

So in order to drill down to Etsy as performance on a category adjusted basis.

This slide if we compare the etsy marketplace Gms generated from our U S buyers versus consumer edges U S e-commerce retailer data for pure play competitors in some of our largest category.

Encouragingly. This data supports the notion that we are gaining share compare to our pure play competitors.

Rachel Glaser: Encouragingly, this data supports the notion that we are gaining share compared to our pure-play competitors. Further, external credit card data we have studied indicates that even when including the largest mass merchants, we are holding our share of e-commerce on a category adjusted basis, even in this incredibly pressured and discount-oriented moment in the cycle. As we look ahead, we are confident that Etsy has a significant opportunity to gain meaningful share in all of our top categories and beyond as we expand buyer consideration for Etsy and macro Doctors Improve.

Further external credit card data, we have studied indicates that even when including the largest mass merchants. We are holding our share of E. Commerce on a category adjusted basis, even in this incredibly pressured and discount oriented moment in the cycle.

As we look ahead, we're confident that etsy has a significant opportunity to gain meaningful share in all of our top categories and beyond as we expand buyer consideration for etsy and macro factors improve.

Rachel Glaser: Given our estimate that Etsy marketplaces global GMS is only about 2.5% of the tam for all of our relevant categories in aggregate, we continue to see a significant room to be a net share gainer in e-commerce over time. It's also encouraging that Etsy marketplaces active buyers grew year-over-year for the third consecutive quarter to a new all-time high of 92 million with growth accelerating sequentially to a 4% increase from 3% in Q2.

Given our estimate that Etsy marketplaces Global G. M. S is only about 2.5% of the Tam for all of our relevant categories. In aggregate, we continue to see a significant room to be a net share gainer in ecommerce over time.

It's also encouraging that etsy marketplaces active buyers grew year over year for the third consecutive quarter to a new all time high of 92 million with growth accelerating sequentially to a 4% increase from 3% in Q2.

Rachel Glaser: US active buyer trends turned modestly positive for the first time in seven quarters. International active buyer growth remains strong and we had a 9% increase in active buyers who identify as men. We added 6 million Etsy marketplace new buyers in the third quarter, which was over 40% above our pre-COVID average quarterly new buyer additions yet down 4% year-over-year. We reactivated 6 million laps buyers up 19% year-over-year with the vast majority of these reactivative buyers in the US.

U S active buyer trends turned modestly positive for the first time in seven quarters International active buyer growth remains strong and we had a 9% increase in active buyers who identify as men.

We added 6 million etsy marketplace, new buyers in the third quarter, which was over 40% above our pre COVID-19 average quarterly new buyer additions it down 4% year over year.

We reactivated 6 million lapsed buyers up 19% year over year with the vast majority of these reactivated buyers in the U S.

Rachel Glaser: Our retention rates improve from the prior year and remain above pre-pandemic levels on a trailing 12 month basis providing further evidence that our investments over the past few years have enhanced overall buyer engagement. Our number of habitual buyers was largely unchanged on a sequential basis at 7 million in encouraging sign of continued stabilization in this metric. These loyal buyers accounted for 44% of our third quarter GMS, which increased slightly from the prior quarter.

Our retention rates improved from the prior year and remain above pre pandemic levels on a trailing 12 month basis, providing further evidence that our investments over the past few years have enhanced overall buyer engagement.

Our number of habitual buyers was largely unchanged on a sequential basis at $7 million and encouraging sign of continued stabilization in this metric.

These loyal buyers accounted for 44% of our third quarter G MFS, which increased slightly from the prior quarter.

Rachel Glaser: It's important to note that we retained a slightly larger portion of our prior year habitual buyers in the third quarter than in the second quarter. Our number of repeat buyers grew 3% year-over-year to nearly 37 million, also driven by the previously mentioned markets. Encouragingly, we upgraded more prior-year active and laps buyers to repeat buyers in the third quarter than in any of the last six quarters. GMS per active buyer on a trailing 12 month basis for the Etsy marketplace continued to stabilize sequentially, but declined 6% year-over-year to 127 dollars in a third quarter.

It's important to note that we retained its slightly larger portion of our prior year habitual buyers in the third quarter than in the second quarter.

Our number of repeat buyers grew 3% year over year to nearly 37 million also driven by the previously mentioned market Encouragingly, we upgraded more prior year active and lapsed buyers to repeat buyers in the third quarter than in any of the last six quarters.

<unk> per active buyer on a trailing 12 month basis for the Etsy marketplace continue to stabilize sequentially, but declined 6% year over year to $127 in the third quarter overall, our gms per buyer is 25% higher than the third quarter of 2019.

Rachel Glaser: Overall, our GMS per buyer is 25% higher than the third quarter of 2019. As of September 30, we had 1.1 billion dollars in cash, cash equivalents, and short and long-term investments. During the third quarter, we repurchased a total of 297 million dollars in stock under our two-board authorized repurchase programs, which together total $1.6 billion. So far in all of 2023, we have repurchased $484 million of our stock, or $5.5 million shares, and our 2022 $600 million authorization is now complete.

As of September 30th we had $1 $1 billion in cash cash equivalents and short and long term investments.

During the third quarter, we repurchased a total of $297 million in stock under our two board authorized repurchase programs, which together totaled $1 $6 billion.

So far in all of 2023, we have repurchased $484 million of our stock or $5 5 million shares and our 2022 $600 million authorization is now complete.

Rachel Glaser: Our free cash flow this quarter was a strong $208 million. We continued to convert approximately 90% of our just EBITDA to free cash flow on a trailing 12 month basis as our marketplace operates with minimal capital requirements.

Our free cash flow this quarter was a strong $208 million, we continued to convert approximately 90% of our adjusted EBITDA to free cash flow on a trailing 12 month basis as our marketplace operates with minimal capital requirements now turning to our outlook.

Rachel Glaser: Now, turning to our outlook, we dare working vigorously to deliver gross disolidated season, yet we anticipate that it will be challenging to do so given a multitude of headwinds. These include many of those discussions, today, such as pressure on consumer discretionary product spending, fairly cautious external forecast about the holiday season, and at these category mix. In addition, we are seeing a highly competitive landscape for advertising, with some competitors investing without an eye to ROI, to be clear this is not a game we will play.

We are working vigorously to deliver growth. This holiday season, yet we anticipate that it'll be it will be challenging to do so given a multitude of headwinds.

These include many of those discussed today, such as pressure on consumer discretionary products spending.

Fairly cautious external forecast about the holiday season, and Etsy category mix.

In addition, we are seeing a highly competitive landscape for advertising with some competitors investing without an eye to ROI to be clear. This is not a game we will play at.

Rachel Glaser: At these performance marketing spending models dynamically adjust pulling back when we reach marginal return thresholds. So higher CPCs could naturally reduce our spend for paid traffic. And of course, the world is now unfortunately faced with yet another significant geopolitical conflict, which could have implications for consumer spending. We believe some of these factors contributed to a deceleration in our at the marketplace year over year trend line, particularly in the US, starting at the end of September and extending into a slightly negative trend line lasting through October.

These performance marketing spending models dynamically adjust pulling back when we reach marginal return thresholds, so higher CP fees could naturally reduce our spend for paid traffic.

And of course, the World is now unfortunately faced with yet another significant geopolitical conflict, which could have implications for consumer spending.

We believe some of these factors contributed to a deceleration in our etsy marketplace year over year trend line, particularly in the U S. Starting at the end of September and extending into a slightly negative trend line lasting through October.

Rachel Glaser: Last, a reminder that our guidance no longer includes zero seven and represents a slight decrease to the top line, so please factor that into your models. With a month of negative year over your trends and limited visibility to how consumers will behave this upcoming holiday season, we're doing our best to land the plane with our guidance, which has always been our goal. Our current expectation is that consolidated Q4 gms with decline in the low single digit range on a year over your basis.

Lastly, a reminder, that our guidance no longer includes iOS seven and represents a slight decrease of the topline. So please factor that into your models.

Rachel Glaser: However, if trends worsen, that could become a mid single digit decline. And if trends improve, gms could be flat or even slightly up year over year. Obviously with two thirds of the quarter less to go, and the all important holiday shopping season having barely begun, it's tough to call it right now. We anticipate Q4 take rate to be approximately 20.8 percent down slightly on a sequential basis due to normal seasonality, so you can use that to estimate our revenue range for the quarter.

With a month of negative year over year trends and limited visibility to how consumers will behave this upcoming holiday season, we're doing our best to land the plane with our guidance, which has always been our goal.

Our current expectation is that consolidated Q4, Gms with decline in the low single digit range on a year over year basis.

However, if trends worsen that could become a mid single digit decline.

And if trends improve gms could be flat or even slightly up year over year.

Obviously with two thirds of the quarter left to go and the all important holiday shopping season, having barely begun it's tough to call. It right now we anticipate Q4 take rate to be approximately 28% down slightly on a sequential basis due to normal seasonality.

You can use that to estimate our revenue range for the quarter.

Rachel Glaser: Recent expansion of that to payments into new international markets is not expected to impact take rate in Q4 and will likely represent a modest increase for 2024. We are guiding to a consolidated adjusted EBITDA margin of 26 to 27 percent with seasonally higher marketing spend being the primary driver of the sequential decline, although of course consolidated EBITDA dollars are expected to be up sequentially. We plan to increase investments in performance marketing, both in the U.S, and internationally, will run select at see funded promotions and invest in a powerful combination of brand visibility that includes TV, digital video, out of home, audio and more.

Recent expansion of Etsy payments into new international markets is not expected to impact take rate in Q4.

And will likely represent a modest increase for 2024.

We are guiding to a consolidated adjusted EBITDA margin of 26% to 27% with seasonally higher marketing spend being the primary driver of the sequential decline although of course consolidated EBITDA dollars are expected to be up sequentially.

We plan to increase investments in performance marketing both in the U S and internationally will run select Etsy funded promotions and invested in a powerful combination of brand visibility that includes T V digital video out of home audio and more.

Rachel Glaser: I'm super excited for our new mission and possible themed holiday creative, which is a great gifting call to action, turning an impossible and stressful gifting mission into a Tom Cruise level heroic moment. With our subsidiaries expected to represent about a 300 basis point headwind to adjust at EBITDA margin in the fourth quarter, the core at see marketplace margin implied in our guidance approaches are previously provided long term target of 30 percent.

I'm Super excited for our new mission impossible themed holiday creative which is a great gifting call to action turning in an impossible and stressful gifting mission into a Tom cruise level heroic moment.

With our subsidiary is expected to represent about a 300 basis point headwind to adjusted EBITDA margin in the first fourth quarter. The core etsy marketplace margin implied in our guidance approaches. Our previously provided long term target of 30%.

Rachel Glaser: In fact, on a full year basis for the empty marketplace, we expect to finish the year just a bit shy of being a rule of 40 company, which many see as best in class. Performance. Thank you all for your time.

In fact on a full year basis for the Etsy marketplace, we expect to finish the year, just a bit shy of being a rule of 40 company, which many see as best in class performance.

Thank you all for your time I'll close by encouraging you all to check out our new gifting and deals features for your holiday shopping.

Joshua Silverman: I'll close by encouraging you all to check out our new gifting and deal speeches for your holiday shopping.

Unknown Executive: Dev will now moderate our Q&A session. Okay.

Deb will now moderate our Q&A session.

Okay, Hi, everyone happy to be here this evening and we're going to.

Unknown Executive: Hi everyone. Happy to be here this evening and we're going to take your questions. We've got a bunch into you.

Take your questions and we've got a bunch into southern a dive right in from Lee Horowitz at Deutsche Bank.

Joshua Silverman: So I'm going to dive right in from Lee Horowitz at Deutsche Bank. Josh, you were able to impressively reaccelerate growth at Etsy when you landed the company back in 2017 and the environment was much different than it is today, but what are the learnings from that initial time and how can you apply that to getting Etsy growing from here? Yeah, thanks. I appreciate the question. You know, when I arrived in 2017, we had a lot of opportunity to improve our operations and our execution and a few principles, one, picking a few things and focusing on them, moving really fast and making sure that every single dollar we spent or hard to drive growth.

Josh you were able to impressively, we accelerate growth at Etsy. When you landed the company back in 2017, and the environment was much different than it is today, but what are the learnings from that initial time and how can you apply that to getting etsy growing from here.

Thanks, Lee I appreciate the question.

You know when I arrived in 2017, we had a lot of opportunity to improve our operations and our execution and a few principles one picking a few things and focusing on them moving really fast and making sure that every single dollar. We spent worked hard to drive growth.

Joshua Silverman: And I think we continue to get even better at those things. When I look at the progress we've made this year, when I look at how much we've executed over the course of this year and how good our shopping experience is going to be this fourth quarter versus what it was last fourth quarter, I'm incredibly proud of what this relatively small team has done. So we stayed very focused, we stayed very urgent and we work hard to make sure every dollar is working really hard.

And I think we continue to get even better at those things when I look at the progress. We've made this year when I look at how much we've executed over the course of this year and how good our shopping experience is going to be this fourth quarter versus what it was last fourth quarter I'm incredibly proud of what this relatively small team has done so we stay very.

Sorry focused we stay very urgent and we work hard to make sure. Every dollar is working really hard this is the toughest macro.

Joshua Silverman: This is the toughest macro I've run this business in by far. And you know, in spite of that, we think we have gained share against our pure plays. And even when you put mass discounters in, you know, we think we're at least holding share within our categories. So even in this tough environment, I think we're more than holding our own. And I think that because the team is executing with a ton of focus and with a ton of urgency and we feel a huge responsibility to be driving growth for our sellers, for our shareholders, for everyone. And we're going to keep driving super hard to do that. Appreciate the question.

I've run this business.

<unk> by far.

And.

In spite of that we think we have gained share against our pure plays and even when you put a mass discounters in.

We think we're at least holding share within our categories. So even in this tough environment.

I think we're we're more than holding our own and I think that's because the team is executing with a ton of focus and with a ton of urgency and we feel a huge responsibility to be driving growth for our sellers for our shareholders for everyone and we're going to keep driving super hard to do that I. Appreciate the question.

Joshua Silverman: Great. Thanks, Josh, from Egaloronian at City. And it's a connected question.

Thanks, Josh from Yigal Iranian at Citi.

Can a connected question there remains growing concern from investors on the competitive environment in the Congress.

Joshua Silverman: There remains growing concern from investors on the competitive environment in the commerce. We touched on it last quarter, but are you seeing anything different from here, particularly from the newer Chinese entrance? No, if I'd say anything different, but there's no question that the Timo and Shian are having an impact in the market. You don't get that big, that fast without taking share from many people. And, you know, I think we and most players in any commerce have had some impact.

At summit last quarter, but are you seeing anything different from here, particularly from the newer Chinese entrants.

If I'd say anything different but theres no question that the T. Mo in Xi'an are having an impact in the market you don't get that big that fast without taking share from many people and I think we and most players in the N E Commerce have had some impact.

Joshua Silverman: And, you know, the other thing that is happening is they're spending a large amount of money on marketing, not clear that they're using ROI thresholds to do that. And so I think those two players are almost single handedly having an impact on the cost of advertising, particularly in some paid channels in Google and in Meta.

And.

The other thing that is happening is there spending a large amount of money on marketing not clear that they're using ROI thresholds to do that and so I think those two players are almost singlehandedly, having an impact on the cost of advertising, particularly in from paid channels and Google and in meta.

Joshua Silverman: We are the opposite of Timo. If I had to think about what is the polar opposite of Etsy, I'd probably get pretty close to Timo. And so, you know, continuing to focus on the incredible quality of the merchandise for sale on Etsy at affordable prices delivered really reliably. I think the more people experience super cheap and super disposable, the more they crave something different and something better. And that's us. And even as they invest a lot in, you know, certain marketing channels.

We are the opposite of chemo, if I had to think about what is the polar opposite of Etsy, I'd, probably get pretty close to chemo and so continuing to focus on the incredible quality of the merchandise for sale on etsy at affordable prices delivered really reliably I think the more people experience super.

Cheap and Super disposable them more they crave something different and something better than us.

Even as they invest a lot in.

Certain marketing channels, we have other channels, we can invest in we are not going to drive a race to the bottom we're not going to invest unprofitably, but we are for example, shifting some spend to TV.

Joshua Silverman: We have other channels we can invest in. We are not going to drive a race to the bottom. We're not going to invest unprofitably. But we are, for example, shifting some spend to TV. So if we can't invest as much in some paid marketing channels, there's other channels we can invest in. We're going to keep competing and I believe to keep keep keep pointing over time.

So if we can't invest as much in in some.

Some paid marketing channels, there's other channels, we can invest and we're going to keep competing and I believe can keep compete keep winning overtime.

Rachel Glaser: Just a couple of notes, just to what Josh said, just to reemphasize, you know, Etsy is a very differentiated marketplace where we have a human being on the other end of every transaction. This is a marketplace that is economic, we're creating economic empowerment. Most of them, most of our sellers are women. And their hand crafting these items oftentimes customize or personalize to the buyer specification in a sustainable way. So to underscore Josh's point about being the opposite of some of the new mass merchant entrance, these are things that we really care about and matter to many of our buyers.

Just a couple of notes just to what Josh said and just to re emphasize.

He is a very differentiated marketplace, where we have a human being on the other end of every transaction.

This is a marketplace that is economic we're creating economic empowerment most of them most of our sellers are women and their hand crafting these items oftentimes customize or personalize too to the Irish specification in a sustainable way so to underscore Josh is point about being.

The opposite of some of the new mass merchant and trends and these are things that we really care about and matter to many of our buyers.

Unknown Executive: Thank you both.

Thank you both and the next question is also connected from Mike Morton at Moffett Nathan cents during the quarter. There are some announcements to etsy sellers from the trust and safety team about keeping etsy special through doubling down on enforcement, adding more human reviews and improving the integrity.

Joshua Silverman: And the next question is also connected from Mike Morton at Moffit Nathanson during the quarter there were some announcements to Etsy sellers from the trust and safety team about keeping Etsy special through doubling down on enforcement, adding more human reviews and improving the integrity. We've we've observed a difference in recent weeks and we were wondering if you could speak to any impacts it could have on GMF and how you would size the impact of a stepped up enforcement at Josh that's for you.

We've observed a difference in recent weeks and we were wondering if you could speak to any impact that could have on gms and how you would size the impact of the stepped up enforcement that Josh that's for you. Yeah. So thanks for noticing a first we're investing about $50 million and enforcement throughout our policies. This year, we've hired a lot of people and we also have been investing.

Joshua Silverman: Yeah, so thanks for noticing first, you know, we're investing about $50 million in enforcement throughout our policies this year. We've hired a lot of people and we also have been investing a lot of machine learning and machine learning is really helping us to be able to identify among the 120 million listings on Etsy. Those that may not conform with our policy take downs are up 140% year over year and we've really been focusing on what percentage of buyers come across one listing or more that doesn't doesn't comply with our policies.

A lot of machine learning and machine learning is really helping us to be able to identify among the 120 million listings on etsy those that may not conform with our policy take downs are up 140% year over year, and we've really been focusing on what percentage of buyers come across one listing or more that doesn't.

Doesn't comply with our policies. The fact that something exists on etsy doesn't mean that it sheet of what percentage of of buyers.

Joshua Silverman: So the fact that something exists on Etsy doesn't mean that it's seen but what percentage of of buyers, you know, we'll see a violating view. We've cut that number in half in just the past four months. I'm glad you're noticing. I think it is very noticeable and we think there's even more we can do. I'm also proud to say that we are seeing no deleterious effect GMS from that people don't come to Etsy wanting mass produced product and we're finding that, you know, as we do even more to suppress those listings on the site. The site experience only gets better we only get more differentiated. Great.

We'll see a violating view we've cut that number in half in just the past four months I'm glad you're noticing I think it is very noticeable and we think there's even more we can do I'm also proud to say that we are seeing no deleterious effect gms from that people don't come to Etsy wanting mass produced product and where.

Finding that as we do even more to suppress those listings on the site.

<unk> experienced only gets better we only get more differentiate it.

Great. Thank you and the next one I'm going to give to Rachel is from Anna and drive that need them.

Rachel Glaser: Thank you. The next one I'm going to give to Rachel is from Anna and Drea that need them product development line item leveraged for the first time in several quarters what drove that and how should we think about the growth and that line item in the fourth quarter and into 2024. Yeah, I think that the top line is that we're adding product development people that are that we're investing in them for growth.

Product development line item leverage for the first time in several quarters, what drove that and how should we think about the growth in that line item in the fourth quarter and into 2024.

And I think that the top line is that we're adding product development people that are in that that we're investing in them for growth. They are actually driving more gms and revenue and the cost to have them.

Rachel Glaser: They are actually driving more GMS and revenue than the cost to have them in our overall cost base. So the biggest driver of product development cost coming down was employee conversation. The technical answer to it is also that we that that's in ourselves of E07 so there's a chunk of cost that came out of the product development line. And because E07 was not profitable you would have expected that cost to be higher than the amount of revenue they were generating.

In our our overall cost base. So the biggest driver of product development costs coming down was employee compensation.

Technical answer to it is also that we divested ourselves of a seven so there's a chunk of cost that came out of the product development line.

And because he must have almost not profitable you would have expected that cost to be higher than the amount of revenues neighboring generating and then just a reminder, that we really measure our product development investments.

Rachel Glaser: And then just a reminder that we really we measure our product development investment with an eye on ROI just like we do with marketing and we invest in areas where we believe they're going to drive incremental GMS and they are and we talked about how product development velocity increased the product number of product launches actually increased 40% this last quarter. So it's just a great demonstration of how we're getting return on the investment public. Thank you.

With an eye on ROI, just like we do with marketing and we invest in areas, where we believe they're going to drive incremental.

G M S and they are and we talked about how product development velocity increased at the product number of product launches actually increased 40%. This last quarter. So it's just.

A great demonstration of how we're getting return on the investment in Capex.

Thank you and then there's two questions that I would say a very connected one from shadow criteria at ISI Evercore and one from Maria <unk> at Canaccord really asking for some initial thoughts on 2024 in terms of market marketing and product spend how do we balance growth and profitability could we expect to see any margin expansion.

Joshua Silverman: And then there's two questions that I would say are very connected, one from Shweta Khajuria at ISI Evercore and one from Maria Ripps at Khan Accord, really asking for some initial thoughts on 2024 in terms of marketing and product spend how we balance growth and profitability. Could we expect to see any margin expansion? How are we thinking about next year's macro? It's sort of a loaded question around all of the things for 2024 from multiple analysts.

Spansion how are we thinking about next year's macro instead of a loaded question around all of the things for 'twenty 'twenty four from multiple analysts. So I think I would start maybe with Josh and then Rachel I think you'll have a lot to say or whichever one of you want to go first because I think there's probably both room for both of you here Josh.

Joshua Silverman: So I think I would start maybe with Josh and then Rachel, I think you'll have a lot to say or whichever one of you want to go first, because I think there's probably both room for both of you here, Josh. Well, we haven't given 2024 guidance yet. But what I would say is we are always thoughtful about balance and growth and profitability. You have never seen us be a growth at all cost company or throw discipline to the wind.

Well, we haven't given 20 Dwayne for guidance yet.

But what I would say is we are always thoughtful about balancing growth and profitability you have never seen us be a growth at all cost company or throw discipline to the wind you've never seen us try to buy market share indiscriminately.

Joshua Silverman: You've never seen us try to buy market share indiscriminately. So, you know, when I just was speaking about competition from some of the Chinese recent competitors and, you know, if they drive costs up in the auction too much in performance marketing, let's say we'll go to other channels, but we're not willing to bid higher than than a keyword is worth. We also measure, as you all know, our product development and what value have they created our team each squad in terms of additional GM s additional revenue or cost savings.

So when I just was speaking about competition from some of the Chinese.

Our recent competitors and you know if they drive costs up in the auction too much.

In performance marketing lets say, we will go to other channels, but we're not willing to bid higher than than a keyword is worth.

We also measure as you all know our product development.

And what value have they created our team each squad in terms of additional gms additional revenue or cost savings and I'm really proud of the team and how they're delivering we talked about you know launches being up 40% year over year, but productivity is very high.

Joshua Silverman: And I'm really proud of the team and how they're delivering we talked about, you know, launch is being up 40% year over year, but productivity is very high. We feel great urgency to be giving everything we can give right now to help our sellers grow at this time to deliver even more value to our buyers and even more value to our shareholders. And so the team is acting with with great urgency and we are thoughtful and careful about hiring.

We we feel great urgency to be given.

Giving everything we can give right now to help our sellers grow at this time to deliver even more value to our buyers and even more value to our shareholders and so.

The team is acting with greater urgency.

And we are thoughtful and careful about hiring we are thoughtful and careful about the investment we make in R&D to make sure that it is delivering it is driving growth on where we're going to we're going to keep doing that when we see opportunities to invest to grow we'll take them.

Joshua Silverman: We are thoughtful and careful about the investment we make in in our indeed to make sure that it is delivering it is driving growth. And we're going to we're going to keep doing that when we see opportunities to invest to grow will take them. But we're always going to do it with with discipline and care. And I can just add just a couple of notes on first on the marketing point we have been able to scale additional marketing channels.

But we're we're always going to deal with with discipline and care.

And I can just add just a couple of notes on first on the marketing point, we have been able to scale additional marketing channels.

Joshua Silverman: One of them is paid social so we've gotten a number of paid social campaigns to work and we've gradually increased our level of investment and paid social as a channel so that we're just about at the same level as many of our peers in that space. We've also been able to scale CRM where we've got really effective targeted emails going going to our buyers. And we have also been able to scale internationally so we're bringing in many new and reactivated buyers internationally.

One of them is a paid social so we've gotten a number of pain social campaigns to work and we.

Gradually increased our level of investment in paid social channels. So that we're just about at the same level as many of our peers in that space. We've also been able to scale CRM, where we've got really effective targeted emails going going to our buyers.

And we.

We have also been able to scale internationally. So we're bringing in many new and reactivated buyers internationally, we talked about being in three markets, but also testing television in Austria, and Switzerland lots Dennis last quarter all of those are.

Joshua Silverman: We talked about being in three markets but also testing television in Austria and Switzerland and in this last quarter all of those are campaigns that reach our marginal ROI threshold. On the product side and Josh will probably talk about this more but we have really been able to leverage machine learning to make all of our engineers more productive and more efficient so we can develop and produce faster. We're bringing in, increasing the payback period on our product investments so we're always we're never really done optimizing we've been able to work down costs on our Google Cloud investment considerably as we've leaned into that platform for our cloud computing costs. And so that all gets picked into our ROI calculations on product development spend. Great. Thank you.

Campaigns that reach our marginal ROI threshold.

On the product side, and Josh probably talk about this more but we have really been able to leverage machine learning to make all of our engineers more productive and more efficient. So we can develop and produce faster.

Brain G M slightly decreasing the payback period on our on our product investments are where we're always we're never really done optimizing we've been able to.

Worked down costs on our Google cloud investment considerably as we've leaned into that platform first for our cloud computing.

Costs, and so that all gets baked into our ROI calculations on product development.

Great. Thank you and since we were on the topic of marketing and you touched on this but I'll just ask a specific question. We got asked from its Orange, Egypt, Shimon I Hope I said that right at D. A Davidson and I'll give Mr. Josh can you give your current thoughts on advertising, including your efforts on linear TV OTT in digital advertising, including Tictac, we touched on it but I might as well ask.

Joshua Silverman: And since we were on the topic of marketing and you touched on this, but I'll just ask the specific question we got asked from Sarenjit Sheema. I hope I said that right at the Davidson and I'll give us to Josh. Can you give your current thoughts on advertising, including your efforts on linear TV, OTT and digital advertising, including TikTok? We could touch on it, but I might as well ask that. Yeah, great.

Yeah, Great Great question. So if you look at Etsy back since 2017, and 2017 and 2018, we really were focused on performance marketing, we've gotten a lot better performance marketing, we've got a lot more sophisticated there.

Joshua Silverman: Great question. So if you look at Etsy back since 2017 and 2017 and 2018, we really were focused on performance marketing. We've gotten a lot better at performance marketing. We've got a lot more sophisticated there. Then we started moving up the funnel. We moved into social social video and then TV above the line. And we're getting a lot more sophisticated at TV and we're now, you know, the affordability of OTT has been a bit of a challenge for us.

Then we started moving up the funnel, we moved into social social video and then.

TV above one we are getting a lot more sophisticated at TV and we're now.

The affordability of OTT has been a bit of a challenge for us. The cpm's are just so much higher that linear that you've seen us mostly invest in in linear we are starting to crack the code on being able to pay for OTT and get enough value out of it to have the rois really work, obviously with OTT you get more target ability.

Joshua Silverman: The CPMs are just so much higher than linear that you've seen us mostly invest in linear. We are starting to crack the code on being able to pay for OTT and get enough value out of it to have the ROI is really work. Obviously with OTT, you get more target ability. And, you know, some other benefits track ability as well. So really excited there, but mid funnel is also an area we're really working on using things like YouTube and paid social video to find people who are, you know, planning a wedding, let's say, or, or having a baby, you know, the opportunity to build consideration when you don't necessarily have a specific product.

And.

Some other benefits track ability as well.

So really excited there, but mid funnel is also an area, we're really working on using things like Youtube and paid social video to find people, who are planning a wedding, let's say or or or having a baby you know the opportunity to build consideration when you don't necessarily have a specific product.

Joshua Silverman: That they're already looking for, but when you think that they're in the market generally for things is an area where I think there's a lot of opportunity for us to continue to get better. We are investing. We are seeing gains and, you know, we have started, for example, in sourcing more creative there. So headcount has grown a little bit, but actually we're paying less agency fees. And when we insert more of our creative, we can make content for mid funnel really fast and really cheap and that allows us to have more targeted content that's more of the moment.

Theyre already looking for but when you think that they are in the market generally for things is an area, where I think theres a lot of opportunity for us to continue to get better. We are investing we are seeing gains and we have started for example in sourcing more creative there. So head count has grown a little bit, but actually we're paying less agency fees and.

When we in source more of our creative we can make content for mid funnel.

Really fast and really cheap and that allows us to have more targeted content. That's more of the moment. So it's those kinds of capabilities and muscles. We keep building that I think is getting us to be a better and better full funnel marketer.

Joshua Silverman: So it's those kinds of capabilities and muscles we keep building that I think is getting us to be a better and better full funnel marketer. Another thing I'll just say about marketing and we're above the funnel that they can help a lot is Etsy is now a brand many people are familiar with. If you walk around in the United States or UK and say, you know, have you heard of Etsy, most people will say yes.

Another thing I'll, just say about marketing and we're above the funnel.

But they can help a lot is.

Etsy is now a brand many people are familiar with if you walk around in the United States for U K and say have you heard of Etsy. Most people will say, yes. If you ask the next question what do you think of Etsy almost everyone.

Joshua Silverman: If you ask the next question, what do you think of Etsy, almost everyone. You talked to is going to say the same three things the same three words, I love Etsy, great. But they think they know us already and they have a set of opinions that we need to disrupt. For example, it must cost more because it's made just for me. And in this very highly promotional environment when a lot of people are looking for deals, they don't necessarily associate Etsy with deals.

You talked to was going to say the same three things. It's the same thing works I love Etsy, great, but they think they know us already and they have a set of opinions that we need to disrupt for example, it must cost more because it's made just for me and in this very highly promotional environment. When a lot of people are looking for deals they don't necessarily associate.

Etsy with deals now Etsy is never going to be a blue light special.

Joshua Silverman: Now Etsy is never going to be a blue light special, you know, bargain basement place. It's not our brand. But with 120 million things for sale, we do have millions of items that our sellers want to put on sale at really attractive prices. And so disrupting people's understanding of Etsy by saying, actually, not only is it a beautiful product, but you can afford it. And it's priced well is disruptive. I'm really excited about arrives on time or your money back.

Bargain basement place, that's not our brand but.

With 120 million things for sale, we do have millions of items that are sellers want to put on sale at really attractive prices and so disrupting people's understanding of etsy by saying actually not only as a beautiful product, but you can afford it and it's priced well is disruptive I'm really excited about arrives on time.

Or your money back that isn't a totally novel plane, but its novel for Etsy people don't realize how reliable etsy sellers are at delivering on time and I think that kind of thing is actually disruptive to Oh I didn't realize that she could do that.

Joshua Silverman: That isn't a totally novel claim, but it's novel for Etsy people don't realize how reliable Etsy sellers are at delivering on time. And I think that kind of thing is actually disruptive to, oh, I didn't realize that she could do that. And so those kinds of disruptive claims is how we're thinking a lot about how we're messaging above the line right now. Thanks. Great. Thanks, Josh.

And so those kinds of disruptive claims just how we're thinking a lot about how we're messaging above the line right now.

Okay, great. Thanks, Josh.

Joshua Silverman: We have several questions about promotions. So I'm going to combine them. One is from Eddie Ruma at Piper Sandler and one is from Nathan Suther at Morton Stanley, but it's basically getting at how, how do we think our Q3 promotions want the Etsy funded promotions. And how do we think about those more as a go forward marketing strategy. I think we can start with Josh on that one. So the Q3 promotion was just five off 25 spend 25 or more and you get $5 off work.

We have several questions about promotions, so I'm going to combine them. One is from Eddie rumour at Piper Sandler and one is from Nathan Feather at Morgan Stanley, but it's basically getting at how how do we think our Q3 promotions with the Etsy funded promotions and how do we think about those more as they go forward marketing strategy I think we can start with Josh.

On that one.

So the Q3 promotion with just five off 25, and 25 or more and you get $5 off work, great. We saw a nice little bump in Gms.

Joshua Silverman: Great. We saw a nice little bump in GMS. And you know buyers really liked it sellers loved it. And it was ROI positive. It was a relatively small investment and it worked terrific. Then in October, we ran $10 off 40 didn't work as well. It was not ROI positive. It pulled forward sales as much as it increased sales didn't drive as much incremental lift. I could go a lot deeper into how did it work in one market versus another and one category versus another with new buyers for slash buyers.

And.

Buyers really liked the seller's loved it.

And it was ROI positive.

It was a relatively small investment and it worked terrific. Then in October we ran $10 off 40 didn't work as well it was not ROI positive.

Pulled forward sales as much as it increased sales.

Didn't drive as much incremental lift.

I could go a lot deeper into how did it work in one market versus another in one category versus another with new buyers for lapsed buyers, but the point is we're learning and this is our tool will have in our toolkit.

Joshua Silverman: The point is we're learning. And this is a tool we'll have in our toolkit. I would expect we'll do more in the fourth quarter as we continue to test and learn with an eye towards testing and learning the investments are, you know, something we put an ROI threshold on like anything else we do. But the vast majority of promotions on Etsy are seller funded. It's when sellers put things on sale. And the new deals tab in our app, for example, I'm really excited about it just launched.

I would expect we will do more in the fourth quarter as we continue to test and learn with an eye towards testing and learning the investments are.

Something we put in our ROI threshold, unlike anything else we do.

But the vast majority of promotions on Etsy are seller funded its when sellers put things on sale and the new deals tab in our App for example, I'm really excited about it just launched its very early days, but buyers seem excited that there is a deal step one place I can go to find deals just for me.

Joshua Silverman: It's very early days but buyers seem excited that there is a deals tab. One place I can go to find deals just for me and maybe something they didn't think of and associate with Etsy. So I think, you know, we have a lot of sellers who want to put things on sale. We can do a better job and we really are focused right now and giving them insights on how when and for how much should they put things on sale.

And maybe something they didn't think of an associate with etsy. So.

I think we have a lot of sellers, who one of the things on sale, we can do a better job and we really are focused right now and giving them insights on how when and for how much should they put things on sale and then us highlighting those things that's going to be most of how promotions continue to work, but if it's it can be the icing on the cake business with some etsy funded things and make that a <unk>.

Joshua Silverman: And then us highlighting those things. That's going to be most of how promotions continue to work. But if Etsy can be the icing on the cake lessons with some Etsy funded things and make that a good investment. We're going to keep testing and I'm optimistic that that's going to be a lever in our tool. Great, I like the icing on the cake, that was great.

Good investment, we're going to keep testing and I'm optimistic that that's going to be a lever in our toolkit.

Great I like the icing on the cake that's great.

Rachel Glaser: Next question comes from Rick Patel, Raymond Games, Rachel, I'm going to give this one to you. Can you expand on new buyer as how much is coming from the US versus international and anything around categories and how people are spending when the new buyers come in? Sure, so first of all, we love our growth internationally. We said up 70%, and so we're seeing that we're opening up new market which is fantastic. We've certainly seen a lot of new buyer growth coming from international, but we've also seen a material amount of growth coming from new buyers coming from the US.

The next question comes from Rick Patel at Raymond James Rachel I'm going to give this one to you can you expand a new buyer add how much is coming from the U S versus international and anything around categories and how people are spending when the new buyers come in sure. So first of all we love our growth internationally, we said up 7% and.

And so where we're seeing that where we're opening up new markets, which is fantastic. We've certainly seen a lot of new buyer growth coming from international but we've also seen a material amount of growth coming from.

FERC for new buyers coming from the U S. So.

Rachel Glaser: So really in both places that we haven't disclosed the breakdown of new buyers by gene geography, so that's as much as I can say there. And no, we don't really see any category differences by geographic market. It's sort of a universal appetite for all of our major categories, our long-term tale of categories across all of the geographies.

Really in both places we haven't disclosed the breakdown of new buyers.

By geography, so that's as.

As much as I can say, there and no we don't really see any cat category differences by by geographic market It sort of a universal appetite for all of our major categories, our long tail of categories across all of the geographies.

Unknown Executive: Great, thanks, Rachel.

Great. Thanks Rachel.

Joshua Silverman: There are two questions about areas of interest that we have for investment. One is from Ashley Owens at T and the other one is from Nick Jones at JMP and I'll basically read a version of the combined question which is for Josh. As you look at over the next couple of years, what are your priorities in terms of investments in market for the marketplace for buyers and sellers in search, in other tools, and how do you see those types of investments inflecting frequency over time? I think it's really the net result of the question.

There are two questions about sort of areas of interest that we have for investment one is from Ashley Owens at key and the other one is from Nick Jones at JMP and I'll I'll basically read a version of the combined question, which is for Josh as you look out over the next couple of years, what are your priorities in terms of investments and mark for the marketplace for buyers and sellers in search.

And other tools.

And how you how do you see those types of investments inflicting frequency over time I think it's really the net net result of the question great. So thank you for the questions. We think we are in the early days of unpacking. It sees opportunity. We think that we can gain a lot of share in our categories and versus e-commerce and through <unk>.

Joshua Silverman: Great, so thank you for the questions. You know, we think we are in the early days of unpacking at these opportunities. We think that we can gain a lot of share in our categories in versus e-commerce and through both adding new buyers and frequency and there's four things we're really focused on right now. It's quality, value, reliability, and consideration. Starting with quality, value, and reliability, you know, we've made a ton of progress on relevance, so whatever you enter in the search engine, we do a pretty good job of understanding what you meant and finding a set of results that are relevant to what you meant, maybe not what you said.

Both adding new buyers and frequency and there's four things, we're really focused on right now it's quality value reliability and consideration starting with quality value and reliability, we've made a ton of progress on relevant so.

Whenever you enter in the search engine, we do a pretty good job of understanding what you meant and finding a set of results that are relevant to what you meant maybe not what you said, but giving you a diverse set of idea what are the five or 10 best ideas for that provided its a relatively generic thing like gift for mom.

Joshua Silverman: But giving you a diverse set of ideas, what are the five or ten best ideas for that provided it's a relatively generic thing like gift from mom or whatnot? You know, giving you a really good compelling diverse set of ideas and then picking the few best examples within each of those ideas is a big focus. I think we have a ton of opportunity to do better, so we don't just match you with the product you're likely to buy, it's a product you're going to love, and in the process we show you the breadth of the kinds of things that you can do for you.

Or or whatnot give.

Giving you a really good compelling diverse set of ideas and then picking the few best examples within each of those ideas.

Is a big focus I think we have a ton of opportunity to do better. So we don't just match it with the product you are likely to buy a product you're going to love and in the process. We show you the breadth of the kinds of things that you can do for you I think there's a ton of opportunity and as we do that we will get a lot more frequency in terms of value.

Joshua Silverman: I think there's a ton of opportunity and as we do that, we will get a lot more frequency. In terms of value, people assume that if it's mass produced somewhere and lots of 100,000, you know, it's going to be cheap and it is, but it turns out that if somebody makes it just for you and there aren't three markups along the way, that also can be affordable and can be special. And so highlighting the fact that you're getting great value on Etsy is something that is a big focus helping us sell this price while use promotions while that's a big focus.

People assume that if it's mass produced somewhere in lots of 100000, you know, it's going to be cheap and it is but it turns out that if somebody makes it just for you and there arent three markups along the way that also can be affordable and can be special and so highlighting the fact that you are getting great value on etsy is something.

That is a big focus, helping our sellers price while use promotion as well.

That's a big focus and then on reliability. We've made so much progress on making sure items arrive on time, making sure. There's clear return policies, making sure it's easy to fix things on the rare occasion that something goes wrong.

Joshua Silverman: And then on reliability, we've made so much progress on making sure items arrive on time, making sure there's clear return policies, making sure it's easy to fix things on the rare occasion that something goes wrong. We now need buyers to understand all the progress we've made and we can continue to do better, make delivery windows shorter without losing the special nature of Etsy. So a lot we think we can continue to do on reliability.

Joshua Silverman: As we do better on quality value and reliability, we then need consumers to understand that we need to disrupt their consideration of Etsy so that we're in their considerations set a lot more of the time. And again, you know, with only 3% of people, if you say name a place to shop for home furnishings, only 3% of people can name Etsy. Name a place to shop for gifts, only 12% of people are naming Etsy.

Now need buyers to understand all the progress we've made and we can continue to do better make delivery window shorter without losing the special nature of Etsy. So a lot. We think we can continue to do on reliability as we do better on quality value and reliability. We then need consumers to understand that we need to disrupt their there.

Joshua Silverman: We think there's an enormous, enormous opportunity there.

Unknown Executive: Okay, great.

Their consideration of Etsy, so that we're in their consideration set a lot more of the time and again with only 3% of people. If you say name a place to shop for home furnishings, only 3% of people are.

Can name Etsy, even name a place to shop for gifts only 12% of people are naming etsy, we think theres enormous enormous opportunity there okay great.

Joshua Silverman: I'm going to jump to a question from Trevor Young and his team at Barkley's and it's related to our seller growth. We've had it over a million active sellers in the last three quarters. He talked about the levers that drive that strong growth. And Josh, I'll give that one to you. You know, I'd say that's the other side of a tough macro. We can't have they haven't done anything different to acquire a million sellers.

Jump to a question from Trevor young and his team at Barclays and it.

Related to our seller growth with existing and we've added over a million active sellers in the last three quarters can you talk about the levers that drive that strong growth and Josh I'll give that one to you.

I'd say, that's the other side of a tough macro.

We candidly haven't done anything different.

To acquire a million sellers nothing.

Joshua Silverman: It's just I think it's a tougher time. A lot of people are learning to make some extra money and Etsy is a fantastic place. If you make things and you want to sell them, there's no place like Etsy. And so I think it's just a testament to the great value that we offer to our sellers. Great. Thank you, Josh.

It's just I think it's a tougher time a lot of people are learning are wanting to make some extra money in etsy is a fantastic place. If you make things and do you want to sell them. There's no place like Etsy and so I think it's just a testament to the great value that we offer to our sellers.

Thank you Josh and the next one's for Rachel from Ana and driver at Needham.

Rachel Glaser: And the next one's for Rachel from Anna Andreeva at medium question on take rate. You mentioned there could be an opportunity to still raise some of the fee structure at poor Etsy and the subsidiaries. What is the sensitivity toward towards additional raises from the seller community?

Question on take rate you mentioned, there could be an opportunity to still raise some of the fee structure at more at the end of subsidiaries what is the sensitivity towards towards additional raises from the seller community.

Yeah.

Rachel Glaser: At least story of hard to make sure that if there's any changes to fee structure that we are providing value back to sellers that they can actually feel. And that's just value the sellers, but that's good for the buyers too.

We strive hard to make sure that if there's any changes to fee structure that we are providing value back to sellers that they can actually feel and that has value to sellers that that it's good for the buyers to there's really three or four ways to expand take rate one of them would be to expand.

Rachel Glaser: There's really three or four ways to expand take rate. One of them would be to expand services we already offer. So for instance, at the ads is a service we provide that we continue to improve the efficacy of that product and it allows us to grow the revenue from that product. Etsy payments is another example of that where we just talked about launching more Etsy payments markets and that expands these from Etsy payments. Also benefit to the sellers in those markets.

Services, we already offer so for instance, Etsy ads is a service we provide that we've continued to improve the efficacy of that product and it allows us to grow the revenue from that product Etsy payments is another example of that where we just talked about launching more etsy payments markets and that expands.

Fees from Etsy payments also a benefit to the sellers in those markets and other way to expand take rate would be to offer new services. So.

Rachel Glaser: Another way to expand take rate would be to offer new services. So you can we have nothing specific to announce on our call today, but you can look at other marketplaces and you can see a lot of services that Etsy does not currently provide. And those might be services that are beneficial to our sellers that we could consider investing in and then there's straight pricing increases and you've seen us do that a couple of times.

You can see.

We have nothing specific to announce on our call today, but I mean, you can look at other marketplaces and you can see a lot of services that Etsy does not currently provide and those might be services that are beneficial to our sellers that we could consider investing in it and.

And then there is straight.

Pricing increases and you've seen us do that a couple of times.

Rachel Glaser: And again, we would never just make up or we have never made make just a wholesale change to our pricing, but we would do it in conjunction for to answer this question. What what can we why would we be, how would we be investing that incremental revenue to rise from a higher price. And we think hard about that. So you've seen us as you go back over time, you've seen us been able to increase our market investment because we've taken lifetime value up and we can continue to invest our dollars and still have a high.

And again, we would never just make up or we have never made make just a wholesale change to our pricing, but we would do it in conjunction for to answer. This question what what can wait why would we be how would we be investing that incremental revenue derived from our higher priced and we think hard about that say you've seen.

If you go back over time, you've seen us been able to increase our or our marketing investment because we've taken lifetime value up and we can continue to invest our dollars and still.

Hi.

Rachel Glaser: We can achieve our our marginal our wife thresholds and in turn you've seen as we've done that not only has marketing increased so has GMS, so it's been out of virtuous circle that we've really appreciated. So we need to answer that question for ourselves what what what way could we put those dollars to work that we beneficial to the overall marketplace and that's how we look at it.

Our our Marshall ROI thresholds.

And in turn you've seen as we've done that not only is marketing increased but so has gms. So it's been out virtuous circle that we'd really appreciate it so we need to answer that question of ourselves what what.

Unknown Executive: Okay, great.

What way can we put those dollars to work that will be beneficial to the overall marketplace and that's how we look at it.

Okay great.

Joshua Silverman: We have a question in from any room at hypersammer and it's really about the financials of the depot which I want to ask Rachel but I first want to ask Josh sort of what we're seeing in the business there talk about the financial performance just in general of the pop and what do we think is attributing their growth and then Rachel maybe can add on how we think about their even out margin drag.

Got a question from Andy rumour at Piper Sandler and it's really about the financials of <unk>, which I want to ask Rachel, but I first want to ask Josh sort of what we're seeing in the business. There talk about the financial performance just in general of deep happened. What do we think is attributing that growth and then Rachel and then they can add on how we think about their EBITDA margin drag in T pump his deep I've had a great quarter.

Joshua Silverman: Deep up is deep up had a great quarter. Deep up is doing great and particularly in the US. Deep up is doing fantastic in the US right now and again I think this is the other side of a tough macro is you know deep up is a way to get very affordable close. It doesn't have a negative impact on the environment and that's very popular right now and so deep up is no question benefiting from that.

Deep up is doing great and particularly in the U S. P. Pup is doing fantastic in the U S. Right now and again I think this is the other side of a tough macro is.

Keep up as a way to get very affordable clothes.

That doesn't have a negative impact on the environment.

And that's very popular right now and so Deepak is no question benefiting from that I also think the management team we've put in place from the <unk>.

Joshua Silverman: I also think you know the management team we put in place from the the specific programs they're executing or working the marketing programs they're executing or working. So it is the benefit of a portfolio as we as we hope when when we bought that company that you know having a portfolio allows you to benefit from different sectors of the economy at different times and that's for seeing.

Specific programs, they're executing our working the marketing programs are executing are working.

It is the benefit of our portfolio as.

As we as we hoped when we bought that company that having a portfolio allows you to benefit from different sectors of the economy at different times and that's we're seeing yes.

Rachel Glaser: Rachel did you want to add anything there? Yes, the only thing I'd add is that when we talked about our guidance we said that we expect in the fourth quarter are our subsidiaries to be that a 300 basis point contraction to our overall margins. That's down from the 300 to 400 basis points that we've been talking about previously due in part from the the divestiture of E07 but also strong growth at. That deep up.

Rachel do you want to add anything there the only thing I'd add is that when.

When we talked about our guidance, we said that we expect in the fourth quarter or our subsidiaries to make that a 300 basis point contraction to our overall margins that's down from the 300 or 400 basis points that we have been talking about previously due in part from the divestiture of <unk> seven but also strong growth at <unk>.

Net at Netscape up Okay, and then Rachel while I have a question from Laura Champine at loop is the Q4 Gms outlook in line with the quarter to date trend I assume assuming through October.

Rachel Glaser: Okay, and then Rachel well I have you question from Laura Sampine at loop is the Q4 CMS outlook in line with the quarter to date trend. I assume she means the rocktober if so what you attribute the flow down from the pace of Q3 and then she had asked us a connected question separately which was is it is it really coming from. That's he getting crowded out by other advertisers who may lack a hurdle rate in their investments.

So what do you attribute the slowdown from the pace of Q3, and then she had asked US a connected question separately, which was is it is it really coming from etsy getting crowded out by other advertisers, who may lack of hurdle rates in their investments.

Rachel Glaser: So I think that's that's a yes and. So with the doctor to reiterate the guidance we gave we said that we grew every single month of Q3 but we started to see some softness towards the end of September. And that continued into October or he started to see slightly negative trends the guidance we we gave reflects that softness in October and we said that would we would expect about low single digit declines for the fourth quarter.

So I think that that's a S N.

So with that just to reiterate the guidance. We gave we said that we were at we grew every single month of Q3, but we started to see some softness towards the end of September and that continued into October or are you starting to see slightly negative trends the guidance we.

We gave reflects that softness in October and we said that would we then expect about low single digit declines for the fourth quarter, if the macro or to worsen.

Rachel Glaser: If the macro were to worsen and we have a long list of macro that I think everyone's familiar with but we're seeing decrease and consumer discretionary product spending. And I can double click on that for a second if it worsens we would be maybe that would shift to mid single digit declines but if it improves we could be flat to even positive. The double click on the decreases in consumer discretionary product spending is to just point out what we've seen and I'm sure you've all seen the economic data.

And we have a long list of macro that I think everyone's familiar with that we're seeing decrease in consumer discretionary product spending.

And I can I can double click on that for a second if it worsens they would be maybe that would shift to mid single digit declines, but if it improves we could be flat to even positive the double click on that decreases and a consumer discretionary product spending is to just point out what we've seen and I'm sure you've all seen the economic data is that we see.

Rachel Glaser: Is that we've seen actually growth and spending in services and we've seen. Stability and some growth in good from durable goods but the non durable goods, which is where as he primarily is. And particularly non-dermal discretionary goods is the piece that's really under that pressure and it's even love ahead when from the macro. The increase is spent in non durable goods just primarily in essentials and items that are heavily discounted and so we're really in the sweet spot of I have the storm I would say on top of that we are seeing.

And actually growth in spending in services and we've seen.

<unk> stability and some growth in some goods from durable goods, but the nondurable goods, which is where etsy primarily is.

And particularly non dermal discretionary goods is the piece that's really.

Under heavy pressure seen.

And a lot of the headwind from the macro.

The increases in spend and nondurable goods, primarily in essentials and items that are heavily discounted. So we're really in the sweet spot of the eye of the storm I would say on top of that we are seeing.

Rachel Glaser: A lot of competitive pressure on advertising spend as the CPCs go up our model dynamically pull back only just naturally spend less which obviously the point to bringing in less the acquiring less traffic less fires. The only thing I'd add there is, you know, everything Rachel talked about is GMS. So the GMS guide is down, low single digits, take grade is actually up your every year you'll notice in our guide. And so a low single digit GMS would still be roughly flat, maybe even slightly positive revenue for the quarter with very healthy margins.

A lot of competitive.

The pressure on advertising spend is the CPC is go up our models dynamically pullback only just naturally spend less which obviously the point to bring in unless you're acquiring less traffic.

Traffic less buyers.

Unknown Executive: So that's a good way to end.

The only thing I'd add there is everything Rachel talked about his gms. So the gms guidance down low single digits take rate is actually up year over year, you'll notice in our guide and so a low single digit Gms would still be up roughly flat, maybe even slightly positive revenue for the quarter, which with very healthy margins. So.

Okay. That's a good way to end we're at time. So thank everybody for your time and we will be talking to you all as we go through the quarter and shop on Etsy for all your gifting needs.

Unknown Executive: We are at time. So thank everybody for your time and we will be talking to you all as we go through the quarter and shop on Etsy for all your gifting needs. Thank you all.

Unknown Executive: Thank you.

Thank you. Thank you.