Q4 2023 Etsy Inc Earnings Call

Joining me today are Josh Silverman, CEO and Rachel Glaser, our CFO. Once we're finished with the presentation. We will take questions from our publishing sell side analysts on video. Please keep in mind that our remarks today include forward looking statements related to our financial guidance, our business and our operating results as noted in the slide deck posted to our website for your reference.

Actual results may differ materially.

Forward looking statements involve risks and uncertainties some of which are described in today's earnings release and our most recent Form 10-Q, and which will be updated in future periodic reports that we file with the SEC any forward looking statements that we make on this call are based on our beliefs and assumptions today and we disclaim any obligation to update them also during.

The call, we'll present, both GAAP and non-GAAP financial measures, which are reconciled to GAAP financial measures in today's earnings press release or the slide deck posted on our IR website, along with the replay of this call with that I'll turn it over to Josh.

Thanks, Tim we're pleased to speak with you today about our recent performance, but more importantly to preview some of our exciting initiatives for 2024, we've built an ambitious portfolio of growth initiatives, what we consider some very bold moves while staying focused on protecting or expanding our overall profitability we've done a lot.

To set etsy up for success, making some difficult choices last year to be able to invest in our vital few with an eye to getting etsy back to growth.

We enter 2024 energized with the right team are highly relevant and differentiated right to win strategy, a disciplined investment approach and a resilient business model our.

Our focus will be to make etsy, even more etsy leaning into our core strengths to get even better at what we do that is unlike anyone else in e-commerce.

We had a strong finish to 2023 in the core etsy marketplace as well as at our subsidiaries, which collectively brought Q4 in a bit better than expected as Rachel will review shortly.

The etsy marketplace performed well during the holiday season, with our highest ever cyber five gms up about 4% year over year, both cyber Monday, and gifting Tuesday set new records.

Posted on our IR website, along with the replay of this call with that I'll turn it over to Josh.

We know Etsy is a great place to shop for gifts and our focus on this message paid off more to come on gifting in a moment.

Josh: Thanks, Tim we're pleased to speak with you today about our recent performance, but more importantly to preview some of our exciting initiatives for 2024, we've built an ambitious portfolio of growth initiatives, what we consider some very bold moves while staying focused on protecting or expanding our overall profitability we've done a.

With this strong finish to 2023 consolidated Gms was $13.2 billion roughly flat with 2022 revenue was a record $2 $7 billion up about 7% adjusted EBITDA was about $754 million and free cash flow was very strong at about 666.

Josh: Lot to set etsy up for success, making some difficult choices last year to be able to invest in our vital few with an eye to getting etsy back to growth. We enter 2024 energized with the right team are highly relevant and differentiated right to win strategy, a disciplined investment approach and a resilient business.

Yeah.

Etsy has ability to deliver healthy revenue growth and strong levels of profit and cash flow gives us great confidence in the power of our special financial model and our ability to invest in long term sustainable growth.

2023 was a banner year for our Etsy marketplace product development teams, who delivered our highest ever level of incremental annualized Gms, we dramatically improved experiences for buyers, making it easier to find what you're looking for better at highlighting the best stuff using new signals and nudges to drive conversion.

Josh: This model.

Josh: Our focus will be to make etsy, even more etsy leaning into our core strengths to get even better at what we do that is unlike anyone else in e-commerce.

Josh: We had a strong finish to 2023 and the core etsy marketplace as well as at our subsidiaries, which collectively brought Q4 in a bit better than expected as Rachel will review shortly the etsy marketplace performed well during the holiday season, with our highest ever cyber five gms up about 4% year over year, both cyber my.

Rate, improving reviews, and recommendations and developing new category purchase pathways and experiences.

We built entirely new ways to feature handcrafted high quality listings at great value. Our marketing team was also extremely productive with memorable above the line campaigns contributing to our highest ever level for buyer intent to purchase on Etsy and our top three countries increased visibility for seller funded promotions scaled social.

Josh: Today, and gifting Tuesdays set new records.

Josh: We know Etsy is a great place to shop for gifts and our focus on this message paid off more to come on gifting in a moment.

Josh: With this strong finish to 2023 consolidated Gms was $13.2 billion roughly flat with 2022 revenue was a record $2 $7 billion up about 7% adjusted EBITDA was about $754 million and free cash flow was very strong at about 666.

Spend in new tools for buyer engagement all in all a respectable year in a tough environment.

By any measure Etsy starts twenty-twenty for a much more meaningful ecommerce company than we were just a few years ago, we've doubled our buyer base, which has now grown on a year over year basis for four consecutive quarters and buyers on average are still shopping more frequently and spending much more on etsy now than they were before the pandemic.

Josh: Yeah.

Josh: Etsy has ability to deliver healthy revenue growth and strong levels of profit and cash flow gives us great confidence in the power of our special financial model and our ability to invest in long term sustainable growth.

Our $12 billion in 'twenty twenty-three etsy marketplace, Gms was roughly $3 billion more than we outlined in the three to five year target we set in 2019.

Josh: 2023 was a banner year for our Etsy marketplace product development teams, who delivered our highest ever level of incremental annualized Gms, we dramatically improved experiences for buyers, making it easier to find what you're looking for better at highlighting the best stuff using new signals and nudges to drive conversion.

As you can see on this chart after many years of over performing our sector, it's been difficult to outgrow during the past few years, particularly given the tepid macro climate for consumer discretionary products, but this just means we have to work, even harder and more efficiently to deliver accelerated topline growth.

Josh: Rate, improving reviews, and recommendations and developing new category purchase pathways and experiences.

So where do we go from here lets start with the size of the prize. We all know that ecommerce is a massive business still taking share from traditional retail we estimate that the Tam in our core geographies and categories is $500 billion, just online with our market share sitting at just about 2%.

Josh: We built entirely new ways to feature handcrafted high quality listings at great value. Our marketing team was also extremely productive with memorable above the line campaigns contributing to our highest ever level for buyer intent to purchase on Etsy and our top three countries increased visibility for seller funded promotions scaled social.

So we still have a very long runway for growth. Most other players are competing head to head to sell the exact same merchandize focused on selling it two cents cheaper or shipping it two hours faster and this has resulted in the commoditization of the entire experience, but that's just not etsy, while we have an opportunity.

Josh: Spend in new tools for buyer engagement all in all a respectable year in a tough environment.

By any measure Etsy starts twenty-twenty for a much more meaningful ecommerce company than we were just a few years ago, we've doubled our buyer base, which has now grown on a year over year basis for four consecutive quarters and buyers on average are still shopping more frequently and spending much more on etsy now than they were before the pandemic.

<unk> to continue to enhance our offering to deliver on the table Stakes ecommerce expectations. We also stand for something more we offer something different in a sea of sameness, which is why highlighting the best stuff remains one of our top focus areas and we're confident that we can get back to growing faster and taking share more broad.

Josh: Our $12 billion in 2023, Etsy marketplace, Gms was roughly $3 billion more than we outlined in the three to five year target we set in 2019.

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As you can see on this chart after many years of over performing our sector, it's been difficult to outgrow during the past few years, particularly given the tepid macro climate for consumer discretionary products, but this just means we have to work even harder and more efficiently to deliver accelerated top line growth.

We believe Etsy is differentiation is partially why based on consumer edges U S. E Commerce retail data, we largely continued to gain share throughout 2023, when compared to our pure play competitors in most of our top categories.

Competition is indeed fierce yet were up for the challenge I'm excited to tell you how and why we believe we can win as we built our plans to Reaccelerate growth. This year, we've been very clear eyed about where we are today, where our competitors are and where our strengths lie some of what makes US special is also what's historically held.

Josh: So where do we go from here lets start with the size of the prize. We all know that ecommerce is a massive business still taking share from traditional retail we estimate that the Tam in our core geographies and categories is $500 billion, just online with our market share sitting at just about 2%.

US back from being thought of for everyday purchase needs buyers too often think of etsy only for very specific needs or at the end of their shopping journey or it simply takes too much time and effort to find the best things among our now over 100 million items are buyers worry about the post purchase experience and because of that the number of.

Josh: So we still have a very long runway for growth. Most other players are competing head to head to sell the exact same merchandize focused on selling it two cents cheaper are shipping at two hours faster and this has resulted in the commoditization of the entire experience, but that's just not etsy, while we have an opportunity.

Times buyers purchase from Etsy per year as well as what they spend with US are both still much lower than for some of our peers. We know etsy has many millions of high quality listings that offer great value. We also know that if we can provide these in a way that's both reliable and dependable we should be able to earn both.

Josh: <unk> to continue to enhance our offering to deliver on the table Stakes ecommerce expectations. We also stand for something more we offer something different in a sea of sameness, which is why highlighting the best stuff remains one of our top focus areas and we're confident that we can get back to growing faster and taking share more broad.

More frequency and higher <unk>, while also still having significant room to continue expanding our active buyer base.

Josh: <unk>.

Josh: We believe Etsy is differentiation is partially why based on consumer edges U S. E Commerce retail data, we largely continued to gain share throughout 2023, when compared to our pure play competitors in most of our top categories.

As we work to gain share in 'twenty 'twenty, four and beyond we'll stay focused on our vital few making some bold moves 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 and ultimately increased frequency, which we bill.

Josh: Competition is indeed fierce yet were up for the challenge I'm excited to tell you how and why we believe we can win as we built our plans to Reaccelerate growth. This year, we've been very clear eyed about where we are today, where our competitors are and where our strengths lie some of what makes US special is also what's historically held.

Leave is one of the keys to unlocking growth for Etsy. So while we'll continue to focus on adding more buyers around the globe expanding seller services and revenue streams and so on today I'll focus primarily on this consideration opportunity.

Josh: US back from being thought of for everyday purchase needs buyers too often think of etsy only for very specific needs or at the end of their shopping journey or it simply takes too much time and effort to find the best things among our now over 100 million items are buyers worry about the post purchase experience and because of that the number of.

In fact, we've got a portfolio of compelling initiatives lined up designed to move the needle on consideration and frequency. In addition to gift mode, which I'll tell you more about in a moment. We're also hard at work researching options for a buyer loyalty program to give buyers explicit reasons to come back and shop more often will do a lot more on the valley.

Josh: Times buyers purchase from Etsy per year as well as what they spend with US are both still much lower than for some of our peers. We know etsy has many millions of high quality listings that offer great value. We also know that if we can provide these in a way that's both reliable and dependable we should be able to earn both.

<unk> and the reliability front for example, with innovation planned to improve the predictability of shipping cost for both buyers and sellers as well as work to improve shipping timeliness for example, shortening our estimated delivery dates this year by at least two days, while we've made great progress in both of these areas we have significantly more room.

Josh: More frequency and higher <unk>, while also still having significant room to continue expanding our active buyer base.

To go to make sure we can meet buyers' expectations and drive significant G. M S. While doing it in a way that remains very etsy.

Josh: As we work to gain share in 2024 and beyond we'll stay focused on our vital few making some bold moves 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 and ultimately increased frequency, which we bill.

We've also seen some really strong growth in international markets over the last few years and are particularly excited about plans we have to not only concentrated on building domestic vibrancy in our core markets, but also some new initiatives to drive cross border transactions and further growth and vibrancy across key geographies, especially in Europe.

Josh: Leave is one of the keys to unlocking growth for Etsy. So while we'll continue to focus on adding more buyers around the globe expanding seller services and revenue streams and so on today I'll focus primarily on this consideration opportunity.

We've got a lot in store, but for today, the one bulb move I'm thrilled to tell you about his gift mode.

As you've likely seen over the last few weeks Etsy is all in on gifting. Our goal is to evolve etsy from being one of the places you can go to find a gift to being the indispensable partner for all of your gifting missions not only his gift mode. An important product launch it represents a significant deviation from our normal.

In fact, we've got a portfolio of compelling initiatives lined up designed to move the needle on consideration and frequency. In addition to gift mode, which I'll tell you more about in a moment. We're also hard at work researching options for a buyer loyalty program to give buyers explicit reasons to come back and shop more often will do a lot more on the Val.

<unk>, where we historically launch a series of measurable incremental product improvements with minimal fanfare with gift mode. We've meaningfully augmented our playbook to not only create a great new product experience, but also to create consumer buzz about the product in a way we've never done before with unmissable stories content and moments to.

Josh: <unk> and the reliability front for example, with innovation planned to improve the predictability of shipping cost for both buyers and sellers as well as work to improve shipping timeliness for example, shortening our estimated delivery dates this year by at least two days, while we've made great progress in both of these areas we have significantly more room.

Build excitement.

Why gifting for Etsy.

Gifting can be stressful and fundamentally different than buying for yourself in multiple ways, knowing what to buy the logistics of how when and where your gift will arrive what if the gift recipient doesn't like it and so on a gift can be perceived as a representation of yourself or how much you care for the recipient all of which makes it important.

Josh: To go to make sure we can meet buyers' expectations and drive significant G. M S. While doing it in a way that remains very etsy.

Josh: We've also seen some really strong growth in international markets over the last few years and are particularly excited about plans, we have to not only concentrate on building domestic vibrancy in our core markets, but also some new initiatives to drive cross border transactions and further growth and vibrancy across key geographies, especially in Europe.

And stressful give.

Given we're known for that special item made and sent with a human touch we believe we're uniquely positioned to take the stress out of gift by.

Josh: We've got a lot in store, but for today. The one bulb move I'm thrilled to tell you about is gift mode.

Data supports that buyers crave help here two thirds of American struggled to find the perfect present in the vast majority 71% of felt anxiety about gift shopping in the past year. We believe gifting is an ideal use case for etsy, we have an enormous conviction that this is a space, we can and should own and if done well.

As you've likely seen over the last few weeks Etsy is all in on gifting. Our goal is to evolve etsy from being one of the places you can go to find a gift to being the indispensable partner for all of your gifting machines not only his gift mode. An important product launch it represents a significant deviation from our normal.

Well can lead to market share gains across our core categories. After all do you really want to buy that special gift at a mass retailer, whose brand primarily stands for commoditized and cheap.

Josh: <unk>, where we historically launch a series of measurable incremental product improvements with minimal fanfare with gift mode. We've meaningfully augmented our playbook to not only create a great new product experience, but also to create consumer buzz about the product in a way we've never done before with unmissable stories content and moments.

Not only is gifting the perfect Etsy use case, it's an always on opportunity for us to add value gifting is not just a seasonal buyer need there are reasons to give gifts nearly everyday of the year. According to our survey work about 45% of gifts are purchased for personal occasions, such as birthdays births.

To build excitement.

Josh: Why gifting for Etsy.

Josh: Gifting can be stressful and fundamentally different than buying for yourself in multiple ways, knowing what to buy the logistics of how when and where your gift will arrive what if the gift recipient doesn't like it and so on a gift can be perceived as a representation of yourself or how much you care for the recipient all of which makes it important.

Weddings, another 45% of all gifting happens for holidays, both seasonal and secular holidays, Valentine's day mother's and father's day and more and the remaining 10% or just because gifting occasions missing a loved one or sending a thoughtful item to a sick relative.

Josh: And stressful given we're known for that special item made incent with a human touch we believe we're uniquely positioned to take the stress out of gift by.

Further our data shows that U S consumers spend an average of $1600 a year on gifts, we estimate that on average etsy as U S. Buyers spent about 2% of that just $38 for gifts on etsy. There are literally millions of high quality items on etsy made and designed by <unk>.

Josh: Data supports that buyers crave help here two thirds of American struggled to find the perfect present in the vast majority 71% have felt anxiety about gift shopping in the past year. We believe gifting is an ideal use case for etsy, we have an enormous conviction that this is a space, we can and should own and if done well.

Real people that make great gifts for every occasion budget and interest yet because we sell so many things for such a vast variety of purposes, it's difficult for people to know when to turn to us and we often aren't the first place people think of or come to when they're on a gifting journey only about 10% of U S shoppers name Etsy.

Josh: Well can lead to market share gains across our core categories. After all do you really want to buy that special gift at a mass retailer, whose brand primarily stands for commoditized and cheap.

Of mind is the place to shop for gifts and there's no single brand that really owns gifting. So we see this as an early stage opportunity another way to look at this opportunity we estimate that only $43 million of our global Etsy buyers bought a gift from our sellers last year, which means that over half of our active.

Josh: Not only is gifting the perfect Etsy use case, it's an always on opportunity for us to add value gifting is not just a seasonal buyer need there are reasons to give gifts nearly every day of the year. According to our survey work about 45% of gifts are purchased for personal occasions, such as birthdays births.

Buyers didn't.

Weddings, another 45% of all gifting happens for holidays, both seasonal and secular holidays, Valentine's day mother's and father's day and more and the remaining 10% or just because gifting occasions missing a loved one or sending a thoughtful item to a sick relative.

And that's not even counting the tens of millions of other shoppers for whom gifting can be a compelling reason to start shopping on etsy.

Gifting represents a huge Tam we estimate the relevant opportunity to be about $200 billion in the U S alone. We believe our market share is about 1%. So even moving up to 2% would be a 2 billion dollar growth opportunity for us obviously that $2 billion is already captured in the very large Tam mentioned.

Josh: Further our data shows that U S consumers spend an average of $1600 a year on gifts, we estimate that on average etsy as U S. Buyers spent about 2% of that just $38 for gifts on etsy. There are literally millions of high quality items on etsy made and designed by <unk>.

Earlier, but by defining the space and investing with focus and gifting. We believe we can move the needle on growth.

So what's gift mode.

Josh: Real people that make great gifts for every occasion budget and interest yet because we sell so many things for such a vast variety of purposes, it's difficult for people to know when to turn to us and we often aren't the first place people think of or come to when they're on a gifting journey only about 10% of U S shoppers name Etsy.

It's a whole new shopping experience, where gifter simply enter a few quick details about the person they're shopping for and we use the power of artificial intelligence and machine learning to match them with unique gifts from etsy sellers, creating a separate experience helps us know immediately if you're shopping for yourself or someone else hugely beneficial information.

Josh: Of mine, just a place to shop for gifts and Theres No single brand that really owns gifting. So we see this as an early stage opportunity another way to look at this opportunity we estimate that only $43 million of our global Etsy buyers bought a gift from our sellers last year, which means that over half of our active.

To help our search engines solve for your needs within gift mode. We've identified more than 200 recipient personas everything from rock climber to the crossword genius to the sandwich specialist I've already told my family that when shopping for me go straight to the music lover, the adventurer the pet parent.

We've incorporated some great new ways to help the procrastinator or alleviate the general concern that etsy gifts won't arrive in time, let's show you how it works.

Josh: Buyers didn't.

And that's not even counting the tens of millions of other shoppers for whom gifting can be a compelling reason to start shopping on etsy.

Finding the perfect gift can be stressful don't panic tried gift Tonight.

Gifting represent a huge Tam we estimate the relevant opportunity to be about $200 billion in the U S alone. We believe our market share is about 1%. So even moving up to 2% would be a 2 billion dollar growth opportunity for us obviously that $2 billion is already captured in the very large Tam mentioned.

Brand new shopping experience from Etsy that supercharge also gift giving potential.

I think it does though is that they are coming up so I had to give tonight.

On the gifting consulate.

Okay.

We'll take a couple of things.

Josh: Earlier, but by defining the space and investing with focus and gifting. We believe we can move the needle on growth.

C G I.

Home Deco Oh.

Our strategy with Wawa Gizmos give me tons of ideas Capex does that mean.

Josh: So whats gift mode.

Josh: It's a whole new shopping experience, where gift or simply enter a few quick details about the person they're shopping for and we use the power of artificial intelligence and machine learning to match them with unique gifts from etsy sellers, creating a separate experience helps us know immediately if you're shopping for yourself or someone else hugely beneficial information.

Check out the thinking she loves this oh and I can personalize it without grandmothers famous cookie recipe, a coffee with belly to celebrate.

She gets an email from exiting letting him know that it gets on the way from yours truly.

Then we click the link to have personalized gift page I've also chosen to let say, we reveal epsilon and she can't help herself. She can even reply to thank me for the gift.

Josh: To help our search engines solve for your needs within gift mode. We've identified more than 200 recipient personas everything from rock climber to the crossword genius to the sandwich specialist I've already told my family that when shopping for me go straight to the music lover, the adventurer the pet parent.

It could be this easy to win at gifting find gifts made online and in the Etsy App today.

Early indications are that gift mode is off to a good start including positive sentiment from buyers and sellers and our social channels very strong earned media coverage and nearly 6 million visits in the first two weeks as you test and shopping gift mode. Keep in mind that this is just the beginning we have an exciting roadmap plan for gifting.

Josh: We've incorporated some great new ways to help the procrastinator or alleviate the general concern that etsy gifts won't arrive in time, let's show you how it works.

Josh: Finding the perfect gift can be stressful.

Josh: Don't panic trying get made.

Josh: Brand new shopping experience from Etsy that supercharge also gift giving potential.

Coverage, Ernie logistics and experiences to gift to make gift mode easier and more delightful for both the gift or and the gift D and to get both coming to us more often.

Josh: Does that is that they are coming out so I had to give tonight.

Josh: I'll make it can create conflict.

Josh: Pick a couple of areas.

Before closing I'll comment on the solid recent contributions from our subsidiaries deep hops performance significantly improved in 2023, returning to healthy year over year Gms growth with very strong double digit growth in the U S and strong growth in revenue. The U S is a large opportunity for deep hub with the resale Mark.

Josh: She like home Deco Oh.

Josh: Okay.

Josh: Just give me kind of idea Pathics Azeri.

Josh: Let's check out the thinking she loves this oh I can personalize it but our grandmother famous cookie recipe I can't be with family to celebrate the one she gets an email from etsy nothing have made as it gets underway from yours truly.

It forecasted to be over $40 billion by 2027 growing nine times faster than the broader retail clothing sector for.

Josh: Then he clicks the link to have personalized gift page I've also chosen to let say, we reveal if shuang and Ya com help herself. She can even reply to thank me for the guest who knew it could be this easy to win gifting find gifts made online and in the Etsy App today.

For the full year reverb significantly outperformed the musical instruments industry and while Gms was about flat revenue increased on a year over year basis reverb returned to Gms growth in the fourth quarter, primarily attributable to their focus on used and outlet inventory. The reverb team made some organizational changes late in the year, which we currently.

Josh: Early indications are that gift mode is off to a good start including positive sentiment from buyers and sellers and our social channels very strong earned media coverage and nearly 6 million visits in the first two weeks as you test and shopping gift mode. Keep in mind that this is just the beginning we have an exciting roadmap plan for gifting.

We expect will help the business achieve adjusted EBITDA profitability this year.

We believe the best is still ahead for Etsy right now is a moment when many consumers are feeling stretched with low confidence in the economy and less money to spend on discretionary items, but it is a moment that we believe will pass at CS mission and compelling right to win remain relevant and sound I'd like to officially welcome Marc Steinberg the edge.

Josh: Discovery journeys logistics and experiences to gift to make gift mode easier and more delightful for both the gifter and the gift D and to get both coming to us more often.

These board of directors and believe he'll bring unique and valuable experience as an investor and board member in the technology Digital media and E Commerce industries and most importantly, he shares our passion for its etsy as mission and excitement about our future growth opportunities I want to thank the etsy reverb and deep hop team's you've all worked with incredible.

Josh: Before closing I'll comment on the solid recent contributions from our subsidiaries deep hops performance significantly improved in 2023, returning to healthy year over year Gms growth with very strong double digit growth in the U S and strong growth in revenue. The U S is a large opportunity for deepak with the resale of <unk>.

Heart creativity and determination to delight, our buyers and help our sellers grow we're going to lean in hard to our differentiation and believe we have the financial strength to do so in a sustainable way we started the year off with a bang with gift mode and that's just the beginning I'm confident we can get back to the kind of growth that we.

Josh: <unk> forecasted to be over $40 billion by 2027 growing nine times faster than the broader retail clothing sector.

Josh: For the full year reverb significantly outperformed the musical instruments industry and while Gms was about flat revenue increased on a year over year basis reverb returned to Gms growth in the fourth quarter, primarily attributable to their focus on used and outlet inventory. The reverb team made some organizational changes late in the year, which we currently.

And all of our stakeholders can be proud of with that I'll turn it over to Rachel.

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

My commentary today will cover consolidated results key drivers of that performance and Etsy marketplace Standalone results where appropriate.

Josh: We expect will help the business achieve adjusted EBITDA profitability this year.

Josh: We believe the best is still ahead for Etsy right now is a moment when many consumers are feeling stretched with low confidence in the economy and less money to spend on discretionary items, but it's a moment that we believe will pass at Sea's mission and compelling right to win remained relevant and sound I'd like to officially welcome Marc Steinberg to Etsy.

As a reminder, we divested <unk> seven on August 10, 2023. So please take that into consideration when you compare year over year and quarter over quarter consolidated results.

And you delivered $4 billion in consolidated DNS, roughly flat to the fourth quarter of 2022.

Josh: The board of directors and believe he'll bring unique and valuable experience as an investor and board member in the technology Digital media and E Commerce industries and most importantly, he shares our passion for its etsy is mission and excitement about our future growth opportunities I want to thank the etsy reverb and deep hop team's you've all worked with incredible.

FX benefit moderated to 90 basis points in the fourth quarter down from the 130 basis point tailwind in the third quarter.

Revenue increased four 3% year over year to a record $842 million and adjusted EBITDA grew to an all time quarterly high of $236 million up nearly 4% from the prior year.

Josh: Heart creativity and determination to delight, our buyers and help our sellers grow we're going to lean in hard to our differentiation and believe we have the financial strength to do so in a sustainable way we started the year off with a bang with gift mode and that's just the beginning I'm confident we can get back to the kind of growth that we.

Note that Elis, evidenced divestiture resulted in small headwinds to both gms and revenue for the quarter and was modestly accretive to consolidated adjusted EBITDA margin.

Following a challenging October etsy marketplaces year over year G. M. S trend line improved in November and December due to the solid holiday performance Josh described earlier.

Josh: And all of our stakeholders can be proud of with that I'll turn it over to Rachel.

Rachel: Thanks, Josh and thank you everyone for joining our fourth quarter call.

We had a nice end to the quarter with better than expected gms growth across all of our brands, enabling us to come in slightly above our mid December revised guidance for Gms and revenue.

Rachel: My commentary today will cover consolidated results key drivers of that performance and Etsy marketplace Standalone results where appropriate.

Within our consolidated year over year revenue growth of four 3% consolidated marketplace revenue grew two 6% due to higher payments revenue related to a mix shift of more international transactions that yield higher fees.

Rachel: As a reminder, we divested seven on August 10, 2023. So please take that into consideration when you compare year over year and quarter over quarter consolidated results.

Rachel: And you delivered $4 billion in consolidated DNS, roughly flat to the fourth quarter of 2022.

Growth in subsidiary payments fees and higher off site ads revenue.

Rachel: FX benefit moderated to 90 basis points in the fourth quarter down from the 130 basis point tailwind in the third quarter.

Services revenue was once again, a key contributor to growth increasing nine 4% year over year.

Etsy ads is the primary driver of this strain with continued improvements to add relevance.

Rachel: Revenue increased four 3% year over year to a record $842 million and adjusted EBITDA grew to an all time quarterly high of $236 million.

We delivered a consolidated take rate of 21% largely flat to the prior quarter and slightly above the take rate implied at the midpoint of our quarterly guidance provided in mid December.

Rachel: Nearly 4% from the prior year.

Rachel: Note that evidence divestiture resulted in a small headwind to both gms and revenue for the quarter and was modestly accretive to consolidated adjusted EBITDA margin.

For the full year, our consolidated take rate increased approximately 160 basis points due to strong growth in Etsy ads. Our April 2022 transaction fee increase that was incremental for most of the first half of 2023 as well as payment fee expansion.

Following a challenging October etsy marketplaces year over year Gms trend line improved in November and December due to the solid holiday performance Josh described earlier.

Fourth quarter consolidated adjusted EBITDA margin was 28% at the high end of our latest guidance, but down about 10 basis points from last year, partially due to a lower gross margin primarily the result of an increase in the cost of refunds for orders not covered by Etsy purchase protection as.

Rachel: We had a nice end to the quarter with better than expected G. M. S growth across all of our brands, enabling us to come in slightly above our mid December revised guidance for Gms and revenue.

Rachel: Within our consolidated year over year revenue growth of four 3% consolidated marketplace revenue grew two 6% due to higher payments revenue related to a mix shift of more international transactions that yield higher fees.

Well as higher marketing spend.

Note that due to a discrete non income tax benefit related to deep hop. Our subsidiaries represented only about a 200 basis point margin headwind in Q4.

Rachel: Growth in subsidiary payments fees and higher off site ads revenue.

Overall, we are very proud that even with investments in important product and marketing initiatives to make etsy, a great holiday shopping destination fourth quarter 2023, adjusted EBITDA of $236 million was higher than any quarterly period, including pandemic peaks.

Rachel: Services revenue was once again, a key contributor to growth increasing nine 4% year over year.

Rachel: Etsy ads is the primary driver of this strain with continued improvements to add relevance.

Rachel: We delivered a consolidated take rate of 21% largely flat to the prior quarter and slightly above the take rate implied at the midpoint of our quarterly guidance provided in mid December.

During the fourth quarter consolidated product development spend increased 4% year over year to $117 million.

Rachel: For the full year, our consolidated take rate increased approximately 160 basis points due to strong growth in Etsy ads. Our April 2022 transaction fee increase that was incremental for most of the first half of 2023 as well as payment fee expansion.

As a percent of revenue we gained about 10 basis points of leverage from the prior year largely due to the IMO seven divestiture.

On a full year basis, Etsy marketplace product development investments delivered approximately $1.5 billion in incremental annualized CNS a significant increase from last year.

Fourth quarter consolidated adjusted EBITDA margin was 28% at the high end of our latest guidance, but down about 10 basis points from last year, partially due to a lower gross margin primarily the result of an increase in the cost of refunds for orders not covered by Etsy purchase protection as well.

Stiff headwinds pressuring our baseline G. M S offset some of these excellent gains and we are also very pleased to report that product development launches increased approximately 30% from the prior year.

Fourth quarter consolidated marketing spend increased 7% year over year to $261 million, which drove marketing spend as a percent of revenue to increase modestly from the prior year.

Rachel: L as higher marketing spend.

Rachel: Note that due to a discrete non income tax benefit related to deep hop. Our subsidiaries represented only about a 200 basis point margin headwind in Q4.

Given our focus on building <unk> brand awareness for specific purchase occasions, our consolidated brand spending increased 24% year over year in the fourth quarter with the vast majority of this increase coming from etsy marketplace spend.

Rachel: Overall, we are very proud that even with investments in important product and marketing initiatives to make etsy, a great holiday shopping destination.

Rachel: Fourth quarter 2023, adjusted EBITDA of $236 million was higher than any quarterly period, including pandemic peaks.

Our holiday campaigns, which highlighted etsy as an indispensable partner for all gifting missions resonated with buyers further we significantly expanded etsy ROI on U S above the line spend during the quarter as our media efficiencies continued to improve consolidated performance marketing spend decreased.

Rachel: During the fourth quarter consolidated product development spend increased 4% year over year to $117 million.

Rachel: As a percent of revenue we gained about 10 basis points of leverage from the prior year largely due to the IMO seven divestiture.

4% year over year in the fourth quarter as we adjusted our strategy and improved ROI efficiencies.

Rachel: On a full year basis, Etsy marketplace product development investments delivered approximately $1.5 billion in incremental annualized CNS a significant increase from last year.

We dynamically pulled back on P. L. A spending as competitor spending push CPC is higher than the normal seasonality, we see at this time of year.

Offsetting this we were able to lean into new channels and geographies, increasing spending in certain geographies and ramping mid funnel investments with several social media partners or site wide 24 hour cyber Monday promotion funded with a small amount of etsy marketing dollars delivered solid incremental gms and <unk>.

Rachel: Stiff headwinds pressuring our baseline G. M S offset some of these excellent games and we are also very pleased to report that product development launches increased approximately 30% from the prior year.

Rachel: Fourth quarter consolidated marketing spend increased 7% year over year to $261 million, which drove marketing spend as a percent of revenue to increase modestly from the prior year.

Frank ROI.

For the full year consolidated marketing spend increased 7% year over year, and our consolidated marketing spend as a percentage of revenue decreased modestly to 27, 6%.

Rachel: Given our focus on building <unk> brand awareness for specific purchase occasions, our consolidated brand spending increased 24% year over year in the fourth quarter with the vast majority of this increase coming from etsy marketplace spend.

Etsy Standalone marketplace performance marketing spend delivered approximately $2 6 billion in incremental annualized CMS up roughly 5% from 2022.

Rachel: Our holiday campaigns, which highlighted etsy as an indispensable partner for all gifting missions resonated with buyers further we significantly expanded etsy ROI on U S above the line spend during the quarter as our media efficiencies continued to improve consolidated performance marketing spend decreased.

Moving now to our Etsy marketplace, Gms and buyer metrics during the fourth quarter Etsy marketplace G. M. S decreased one 4% year over year to $3 $6 billion overall headwinds continued including pressure on consumer discretionary products spending softness in our home and living category.

Rachel: 4% year over year in the fourth quarter as we adjusted our strategy and improved ROI efficiencies.

In a highly competitive retail environment focused on deep discounting.

Our year over year Etsy marketplace G. M. S trend line improved in November and December following the challenging October that we described on our November call, bringing results in ahead of our internal expectations.

Rachel: We dynamically pulled back on P. L. A spending as competitor spending push CPC is higher than the normal seasonality, we see at this time of year.

Rachel: Offsetting this we were able to lean into new channels and geographies, increasing spending in certain geographies and ramping mid funnel investments with several social media partners or statewide 24 hour cyber Monday promotion funded with a small amount of etsy marketing dollars delivered solid incremental gms and our store.

International markets were once again, a bright spot with etsy marketplace Gms, excluding U S domestic up 4% year over year in the fourth quarter.

The growth was led by positive trends in the U K and strength in the Netherlands, Switzerland, and Austria with largely flat trends in Germany.

Rachel: Frank ROI.

This slide shows full year 2023 etsy marketplace Gms performance for our top six categories, which represented approximately 87% of Gms positive year over ear G. M S trends in apparel, and paper and party or offset by softness in home and living jewelry and accessories and craft supplies.

Rachel: For the full year consolidated marketing spend increased 7% year over year, and our consolidated marketing spend as a percentage of revenue decreased modestly to 27, 6%.

Rachel: Etsy Standalone marketplace performance marketing spend delivered approximately $2 6 billion in incremental annualized CMS up roughly 5% from 2022.

We ended the year with a record 92 million active buyers up 3% year over year, marking the fourth consecutive quarter of year over year growth.

Rachel: Moving now to our Etsy marketplace, Gms and buyer metrics during the fourth quarter Etsy marketplace G. M. S decreased one 4% year over year to $3 $6 billion.

U S active buyer trends continued to improve international buyer growth remains strong and we had 6% growth in buyers who identify as mail.

Rachel: Overall headwinds continued including pressure on consumer discretionary product spending softness in our home and living category and a highly competitive retail environment focused on deep discounting.

We added over 8 million Etsy marketplace, new buyers in the fourth quarter up over 40% from the fourth quarter of 2019, and we reactivated nearly 10 million lapsed buyers a record number up 13% year over year and up 122% from 2019.

Rachel: Our year over year Etsy marketplace Gms trend line improved in November and December following the challenging October that we described on our November call, bringing results in ahead of our internal expectations.

Lastly, habitual buyer trends remained stable in the quarter with over 7 million of these loyal buyers at the end of the quarter largely in line with the prior two quarters.

Rachel: International markets were once again, a bright spot with etsy marketplace Gms, excluding U S domestic up 4% year over year in the fourth quarter.

Our number of repeat buyers continue to grow a healthy 4% year over year to $37 million Gms per active buyer on a trailing 12 month basis for the Etsy marketplace continued to stabilize sequentially, but declined 4% year over year to $126 in the fourth quarter, yet remains 22% higher than the fourth quarter of <unk>.

Rachel: The growth was led by positive trends in the U K and strength in the Netherlands, Switzerland, and Austria with largely flat trends in Germany.

Rachel: This slide shows full year 2023, Etsy marketplace Gms performance for our top six categories, which represented approximately 87% of Gms positive year over year, Gms trends in apparel, and paper and party or offset by softness in home and living jewelry and accessories and craft supplies.

19.

Additional etsy marketplace metrics can be found in the appendix to this deck as posted to our website.

Moving now to the balance sheet as of December 31, we had $1 $2 billion in cash cash equivalents and short and long term investments during.

Rachel: We ended the year with a record 92 million active buyers up 3% year over year, marking the fourth consecutive quarter of year over year growth.

During the fourth quarter, we repurchased a total of $93 million in stock under our $1 billion June 2023 board authorized repurchase program.

Rachel: U S active buyer trends continued to improve international buyer growth remains strong and we had 6% growth in buyers who identify as Neal.

Which approximately $724 million remained available as of December 31st.

Rachel: We added over 8 million Etsy marketplace, new buyers in the fourth quarter up over 40% from the fourth quarter of 2019.

Our operational rigor and capital light business model allowed us to deliver about $754 million and consolidated adjusted EBITDA in 2023, and 27, 4% margin and to convert nearly 90% of that EBITDA to free cash flow.

Rachel: And we reactivated nearly 10 million lapsed buyers a record number up 13% year over year and up 122% from 2019.

Rachel: Lastly, habitual buyer trends remained stable in the quarter with over 7 million of these loyal buyers at the end of the quarter largely in line with the prior two quarters.

Our free cash flow in the fourth quarter with a healthy $283 million.

As we continue to focus on growing our EBITDA and cash flow all else being equal we would likely see our gross leverage ratio continue to trend down. We also expect to retain a strong balance sheet with ample liquidity relative to our current leverage levels to manage the business across various macroeconomic cycles and support continued organic.

Our number of repeat buyers continue to grow a healthy 4% year over year to $37 million Gms per active buyer on a trailing 12 month basis for the Etsy marketplace continued to stabilize sequentially, but declined 4% year over year to $126 in the fourth quarter. It remains 22% higher than the fourth quarter of <unk>.

Investments as well as capital return to shareholders.

Rachel: 19.

We remain committed to an active and disciplined capital allocation strategy that prioritizes opportunities. We believe will generate the highest level of long term shareholder value in.

Rachel: Additional etsy marketplace metrics can be found in the appendix to this deck as posted to our website.

Rachel: Moving now to the balance sheet as of December 31, we had $1 $2 billion in cash cash equivalents and short and long term investments.

In the past, we have communicated our philosophy to offset dilution from stock based compensation by repurchasing our shares in 2023 capital return accounted for nearly 90% of our free cash flow demonstrating a shift in our capital return strategy to more intentionally returned a higher percentage of free cash flow.

Rachel: During the fourth quarter, we repurchased a total of $93 million in stock under our $1 billion June 'twenty two 'twenty three board authorized repurchase program of which approximately $724 million remained available as of December 31st.

Especially during times of volatility in our stock and when valuations are meaningfully below our view of fair value. We continue to see attractive organic growth opportunities for etsy, and we expect a balanced capital return appropriate leverage and liquidity and investments in our business to deliver a long term shareholder value.

Rachel: Our operational rigor and capital light business model allowed us to deliver about $754 million and consolidated adjusted EBITDA in 2023, and 27, 4% margin and to convert nearly 90% of that EBITDA to free cash flow.

Rachel: Our fate free cash flow in the fourth quarter with a healthy $283 million.

Before turning to our guidance I will discuss our recent workforce realignment, which brought core etsy marketplace head count to about 1780 employees at the start of 2024.

Rachel: As we continue to focus on growing our EBITDA and cash flow all else being equal we would likely see our gross leverage ratio continue to trend down. We also expect to retain a strong balance sheet with ample liquidity relative to our current leverage levels to manage the business across various macroeconomic cycles and support continued organic.

As you know we were to lean even during the high growth periods consistently maintaining a disciplined approach to head count and then pulling back our pace of hiring proactively as we experienced G. M. S headwinds in early 2022.

Rachel: Investments as well as capital returned to shareholders.

For 2024, we wanted to build a roadmap designed to reaccelerate growth, while also delivering very strong levels of profitability.

Rachel: We remain committed to an active and disciplined capital allocation strategy that prioritizes opportunities. We believe will generate the highest level of long term shareholder value in.

We made some tough choices about how to organize our team from the top down focused on driving efficiencies to further speed product development, and creating more impactful marketing and customer experiences designed to build frequency and loyalty as Josh described.

Rachel: In the past, we have communicated our philosophy to offset dilution from stock based compensation by repurchasing our shares in 2023 capital return accounted for nearly 90% of our free cash flow demonstrating a shift in our capital return strategy to more intentionally return a higher percentage of free cash flow.

In addition to our focus on people costs, we've taken a number of actions intended to ensure margin hold stable or expands in 2024, including reduced reducing certain benefits and continuing to optimize our cost base.

Rachel: Especially during times of volatility in our stock and when valuations are meaningfully below our view of fair value. We continue to see attractive organic growth opportunities for etsy, and we expect a balanced capital return appropriate leverage and liquidity and investments in our business to deliver a long term shareholder value.

All in all we reduced our previous internal projections for total 2024 operating cost by over $90 million.

Most of these savings are being reinvested back into the all important growth investments we plan to make this year, including the modest addition of critical hires we are optimistic that the significant productivity and measurable value creation, we see from our team can fuel at these growth this year.

Rachel: Before turning to our guidance I will discuss our recent workforce realignment, which brought core etsy marketplace head count to about 1780 employees at the start of 2024.

Rachel: As you know we were to lean even during the high growth periods consistently maintaining a disciplined approach to head count and then pulling back our pace of hiring proactively as we experienced gms headwinds in early 2022.

Now turning to our outlook.

It remains a challenging macro environment with consumer sentiment in the U S and international markets remaining low making us cautious in our forecasting at the start of the year.

Rachel: For 2024, we wanted to build a roadmap designed to reaccelerate growth, while also delivering very strong levels of profitability.

Consolidated Gms for the first quarter of 2024 is currently estimated to decline in the low single digit range on a year over year basis. This guidance reflects our slow start to the quarter and our current expectation that gms for the core etsy marketplace improves as we move through the rest of the quarter as a result of our planned product and.

Rachel: We made some tough choices about how to organize our teams from the top down focused on driving efficiencies to further speed product development, and creating more impactful marketing and customer experiences designed to build frequency and loyalty as Josh described.

Marketing investments.

However, if our trends fail to improve as we currently expect this could become a mid single digit decline.

Rachel: In addition to our focus on people costs, we've taken a number of actions intended to ensure margin hold stable or expands in 2024, including reduced reducing certain benefits and continuing to optimize our cost base.

Reverb indie pop are expected to provide a tailwind within the consolidated performance.

We estimate Q1 2020 for take rate to be between 21 and 21, 5%.

Rachel: All in all we reduced our previous internal projections for total 2024 operating cost by over $90 million.

This can be used to estimate revenue range for the quarter.

Note that earlier today, we announced to our seller community that we are strengthening our new shop onboarding process to continue to promote a trusted marketplace, including introducing a stellar onboarding see.

Rachel: Most of these savings are being reinvested back into the all important growth investments we plan to make this year, including the modest addition of critical hires we are optimistic that the significant productivity and measurable value creation, we see from our team can fuel <unk> growth this year.

This initiative requires certain new technology investments, particularly for seller verification. So the net benefit to our margins will be nominal. We currently anticipate that our consolidated adjusted EBITDA margin will be approximately 26%, reflecting a heightened level of investment in the launch of gift mode, particularly costs associated with.

Rachel: Now turning to our outlook.

Rachel: It remains a challenging macro environment with consumer sentiment in the U S and international markets remaining low making us cautious in our forecasting at the start of the year.

Our big game advertising.

Rachel: Consolidated Gms for the first quarter of 2024 is currently estimated to decline in the low single digit range on a year over year basis. This guidance reflects our slow start to the quarter and our current expectation that gms for the core etsy marketplace improves as we move through the rest of the quarter as a result of our planned product and.

Our subsidiaries are expected to pose about a 300 basis point headwind as their revenue flows through at lower margins largely because of lower take rates.

We currently expect the first quarter to be our low point in year over year growth for both Gms and revenue as we began to see the expected benefits of our product and marketing investments kick in starting in the second quarter.

Rachel: Marketing investments.

Rachel: However, if our trends fail to improve as we currently expect this could become a mid single digit decline.

We currently expect that consolidated revenue growth should outpace gms growth in 2024 with full year take rate at or ahead of the Q1 level with further expansion of Etsy ads and the annualized impact of the recent etsy payments expansion into seven new markets being the primary drivers of improvement.

Rachel: Reverb and deep hop are expected to provide a tailwind within the consolidated performance.

Rachel: We estimate Q1 2020 for take rate to be between 21 and 21, 5%.

Rachel: This can be used to estimate revenue range for the quarter.

Beyond this we will continue to look for ways to drive a fair exchange of value for all three of our marketplaces. We currently expect to maintain very healthy margins with consolidated adjusted EBITDA margin in 2024 at least similar to the level that we delivered in 2023.

Rachel: Note that earlier today, we announced to our seller community that we are strengthening our new shop onboarding process to continue to promote a trusted marketplace, including introducing a seller onboarding see.

Rachel: This initiative requires certain new technology investments, particularly for seller verification. So the net benefit to our margins will be nominal. We currently anticipate that our consolidated adjusted EBITDA margin will be approximately 26%, reflecting a heightened level of investment in the launch of gift mode, particularly costs associated with.

We are energized by our portfolio of growth initiatives for 2024, which we believe can reignite our growth. Despite the continued challenging macro.

Thank you all for your time today I'll now turn the call over to the operator to take your questions.

Rachel: Our big game advertising.

Right. If you would like to ask a question. Please click on the Raytheon button, which can be found in the black bar at the bottom of your screen.

Rachel: Our subsidiaries are expected to pose about a 300 basis point headwind as their revenue flows through at lower margins largely because of lower take rates.

You may remove yourself from the queue at any time by lowering your hat.

Rachel: We currently expect the first quarter to be our low point in year over year growth for both Gms and revenue as we began to see the expected benefits of our product and marketing investments kick in starting in the second quarter.

When it is your turn you'll hear your name called and receive a message on your screen asking to be promoted to our panelists.

Wait a moment and once you have been promoted video.

Video and audio and ask your question.

Rachel: We currently expect that consolidated revenue growth should outpace gms growth in 2024 with full year take rate at or ahead of the Q1 level with further expansion of Etsy ads and the annualized impact of the recent etsy payments expansion into seven new markets being the primary drivers of improvement.

Reminder, we're allowing analysts one question and one related follow up today.

We will wait a moment to allow the uniform.

Thank you our first question will come from.

Mckeel Devine with Bernstein.

Rachel: Beyond this we will continue to look for ways to drive a fair exchange of value for all three of our marketplaces. We currently expect to maintain very healthy margins with consolidated adjusted EBITDA margin in 2024 at least similar to the level that we delivered in 2023.

You May now I mean, your audio and video and ask your question.

Hi, there thanks for taking the question I appreciate it and thanks for providing 24 commentary as well and I just wanted to ask about the Gms outlook a little bit more can you talk about the kind of magnitude of improvement that you're expecting to see in gms as the year goes on do you think that there is line of sight that to positive year on year growth as well.

Rachel: We are energized by our portfolio of growth initiatives for 2024, which we believe can reignite our growth. Despite the continued challenging macro.

Speaker Change: Thank you all for your time today I'll now turn the call over to the operator to take your questions.

At some point in the year and then as a follow on could you provide some clarity around product and marketing initiatives that.

Speaker Change: Right. If you would like to ask a question. Please click on the Raytheon button, which can be found in the black bar at the bottom of your screen.

Our kind of backing up this outlook for improvement in GMB. Thank you.

Speaker Change: You may remove yourself from the queue at any time by liner.

So in terms of the magnitude of the growth. We gave you what were comfortable giving you right now.

Operator: When it is your turn you'll hear your name called and receive a message on your screen asking to be promoted into a panelist.

So.

Anything more than that if we could have been more specifically what are in terms of when do we get back to positive growth.

Operator: Wait a moment and once you have been promoted.

Operator: Video and audio and ask your question.

Et cetera, it's certainly our aspiration, we believe we have every right to be growing.

Operator: A reminder, we're allowing analysts one question and one related follow up today.

Not just positive but faster than e-commerce, and we think especially when our category stopped being under such pressure and when discretionary consumer.

Operator: We will wait one moment to allow the uniform.

Speaker Change: Thank you our first question will come from.

Product spend in particular stops being under so much pressure that's going to be very helpful.

Mckeel Cavani: Mckeel Cavani with Bernstein.

We do think we outgrew our categories, yet again, our pure play competitors in our categories, yet again in the fourth quarter in terms of the.

Mckeel Cavani: You May now I mean, your audio and video and ask your question.

Product and marketing initiatives that we expect to drive a lot of growth.

Mckeel Cavani: Hi, there thanks for taking the question I appreciate it and thanks for providing 24 commentary as well and I just wanted to ask about the Gms outlook a little bit more can you talk about the kind of magnitude of improvement that you're expecting to see in gms as the year goes on do you think that there's line of sight back to positive year on year growth as well.

We laid them out in the call and so first on consideration that is the biggest thing people thinking to look on etsy, because when they do things to look on etsy. They usually find something really compelling. So gift mode is a great example of US giving you a moment in time when you should really think.

The buy gift I want to go to Etsy, and gifting isn't all year kind of thing its not just mothers' day, and Christmas Theres birthdays anniversaries back to school and on and on.

Mckeel Cavani: At some point in the year and then as a follow on could you provide some clarity around product and marketing initiatives that.

Mckeel Cavani: Our kind of backing up this outlook for improvement in GMB. Thank you.

And on the other key elements in consideration. We said we're in early stages of planning our loyalty program, which is designed to drive consideration among loyal users.

Mckeel Cavani: So in terms of the magnitude of the growth. We gave you what were comfortable giving you right now.

Mckeel Cavani: So.

More value.

Mckeel Cavani: Anything more than that if we could have been more specific we would have in terms of when do we get back to positive growth.

More and more on quality and more on reliability and I think that the that portfolio of bold initiatives. I think can do a lot to continue to drive growth combined with compelling marketing campaigns and we're going to continue to work through the funnel and really compelling marketing campaigns as well.

Mckeel Cavani: Et cetera, it's certainly our aspiration, we believe we have every right to be growing.

Mckeel Cavani: Not just positive but faster than e-commerce, and we think especially when our category stop being under such pressure and when discretionary consumer.

Thank you.

Mckeel Cavani: <unk> spend in particular stops being under so much pressure that's going to be very helpful.

Mckeel Cavani: We do think we outgrew our categories, yet again, our pure play competitors in our categories, yet again in the fourth quarter in terms of the.

Our next question comes from Yigal <unk> with Citi.

Mckeel Cavani: Product and marketing initiatives that we expect to drive a lot of growth.

Please that make our audio video and ask your question.

Mckeel Cavani: We laid them out in the call and so first on consideration that is the biggest thing people thinking to look on etsy, because when they do think to look on etsy. They usually find something really compelling. So gift mode is a great example of US giving you a moment in time when you should really think I need.

But there you go.

Sorry.

Got it.

No delay there.

I'm going to follow up on that a little bit maybe more narrowly focused I guess on the <unk> guidance.

Mckeel Cavani: The buy gift I want to go to Etsy, and gifting isn't all year kind of thing its not just mothers' day, and Christmas Theres birthdays anniversaries back to school and on and on.

And you know what.

It sounds like sitting here today, where we're down mid single digits, but kind of the expectation is that over the course of the quarter that starts to improve what what happened. So quickly I guess like between now and then in the March or its just a little bit over a month and then again also just to dig into the marketing a little bit more.

Mckeel Cavani: And on other key elements in consideration we said we're in early stages of planning our loyalty program, which is designed to drive consideration among loyal users.

Mckeel Cavani: More value.

So you're you pulled back a little bit on performance marketing some of that is efficiency. Some of that is coming from the competitive environment or spending more brands.

Mckeel Cavani: More and more on quality and more on reliability and I think that that portfolio of bold initiatives. I think can do a lot to continue to drive growth combined with compelling marketing campaigns and we're going to continue to work through the funnel on really compelling marketing campaigns as well.

Typically we think of the payback period for the brand marketing being a little bit longer, but you're expecting that to drive incremental growth both in the quarter and throughout the year. So are you starting to see the benefits of that and it's been an investment over multiple years here.

Speaker Change: Thank you.

Starting to pay back the way you like or how should we think about that thanks.

Speaker Change: Our next question comes from Yigal <unk> with Citi.

Okay.

And I can jump on it I mean, certainly the way you're right.

Speaker Change: Okay.

Yigal: On your video and ask your question.

January was a little bumpy and that's the sort of the baseline.

Okay provide guidance for the rest of the quarter the way we do our planning is the SC.

Yigal: There you go.

Sorry.

Yigal: Got it a little delay there.

Estimate the incremental Tms that would be generating some discrete product.

Yigal: I'm going to follow up on that a little bit maybe more narrowly focused I guess on the <unk> guidance.

Marketing investment that we make so they start to stack on top of each other and we do a pretty good.

Yigal: And you know what.

Yigal: Sounds like sitting here today or were down mid single digits, but kind of the expectation is that over the course of the quarter that starts to improve what what happened. So quickly that guys like between now and then in the March or its just a little bit over a month and then again also just to dig into the marketing a little bit more.

Yigal: So you're you pulled back a little bit on performance marketing some of that is efficiency. Some of that is coming from the competitive environment or spending more brands.

Yigal: Typically we think of the payback period for the brand marketing being a little bit longer, but you're expecting that to drive incremental growth both in the quarter and throughout the year. So are you starting to see the benefits of that and I know, it's been an investment over multiple years here.

Yigal: Starting to pay back the way you like or how should we think about that thanks.

Yigal: Okay.

Yigal: And I can say, Tim Barton I mean, so the way you're right.

Yigal: January was a little bumpy and that's the sort of the baseline.

Tim Barton: Okay provide guidance for the rest of the quarter the way, we do our planning as we estimate.

We're excited about with that brand.

The repetition of that that campaign in that branch can do.

Tim Barton: Estimate the incremental Tms that would be generated.

For consideration with our customers and there's a lot of things being wrapped around that area.

She's gifting officer.

And a lot of promotional campaigns that we also laid down to to attract people.

So the marketing and stay on a product I think we expected date of birth is a genius and the order.

<unk>, we have been very focused a year after year what is the value creation of every single squad and what is the value creation of every single dollar we spend in marketing. It has been a very big focus of ours and and we think we're pretty good at it what obviously, we can't predict with perfect accuracy is what's gonna happen to the basement, what's gonna help with overall consumer discretionary.

<unk> in our categories and so that's that's the unknown and you know, we'll we'll wait and see but we gave you the best guidance. We know when we do but we have reason to believe that we shouldn't see trends improve in the second half of the quarter based on the work we're doing.

Oh, Okay, great. So you might step back a little bit further into performance is the environment, they're changed at all yeah. So.

Performance is dynamic really hour to hour basis, depending on the or why we're seeing on every dollar we're spending and we've got pretty sophisticated algorithms that work on is this bad is it worth this much right now and how much should we bed and so to the extent that C. P. C's rise, we naturally pull back or to the.

Extent that C. B CS lower we naturally lean and the other thing by the way, it's not just C. P. C. As it's also conversion rates. So in times when people are really budget constrained you, we see them actually we see conversion rate across the industry go down we see people comparison shop, a lot more and so we are looking at all of that and and and not humans.

But machines using AI are looking at a very sophisticated way of what's happening conversion rate right now what's happening with C. P. C's right now and therefore, how much is each visit worth and how much should we be bedding and it naturally titrate delivered to the reason why it's hard to pinpoint exactly what our margins gonna be in any given quarter because it's it's it's based on what's the <unk>.

R Y will getting right now and will naturally lean it or pull back what we won't do is spend an unprofitably not on purpose. So we work hard to try to understand what is the return we're getting and if the market. We think is getting a rational or at least a rational for us we pull back okay. Thanks, yeah.

Okay. Your next plan.

Our next question comes from <unk> Deutsche Bank.

Alright. Thanks.

Thanks for taking my question, maybe too if I could just you know you highlight you charged on the deck one that shows actually share gains versus pure play comps. It seems to stand somewhat in contrast to the overall e-commerce market <unk> growing more slowly it seems that would suggest that big box non pure play competitors are are taking care of the overall I guess.

Why do you think consumers are leaning into these platforms that I have to compete on sure speeds, perhaps a couple of bucks in price and not leading into things like product quality or uniqueness and maybe how do you think that may evolve and 24 and beyond and one follow up if I could great. Great question. So let's put aside travel online dining if you look at <unk>.

Commerce very broadly it picks up things that are totally unrelated to etsy. When you put those aside you really look at just product.

It's very clear that the people gaining share Amazon Walmart <unk>.

And almost everyone else is losing share the number of other people that are growing quickly you can count on one hand, almost everyone is losing share to Amazon Walmart Teemu <unk> and so first of all those are people, particularly if we look at Amazon and Walmart and they're really the big winner. So if you look at who's actually in terms of volume.

Taking volume any commerce based all essentials and when you read their earnings call scripts, what they say in their earnings call is what's driving their sales is essentials and their headwinds are discretionary products. The second thing is all four of those brands Stanford deep discounting and.

The trends, we see right now are people feel their wallet is under a lot of pressure by the way tax returns looked like they were gonna be lower this year than they were last year, you still hear a low consumer confidence and concerns about inflation encore things like food.

Prices and people when they have discretionary dollars Wanna spend them on travel and want to spend them on dining and so in this moment. Many people are looking for the cheapest way to buy something when they need to buy something that is discretionary now in that environment Etsy added 8 million new buyers.

<unk> <unk> $3.6 billion on the Etsy marketplace in the fourth quarter alone. So.

You know tens of millions of people are 92 million people. In fact are opening their wallet to come and buy something on etsy, even in this environment and in fact, the average buyer on Etsy spending 20 per cent more more than 20 per cent more today than they were pre pandemic.

This is a time when I think products that are not the cheapest possible are out of favour and I don't think that's forever when I imagine you know.

Going forward does everyone always want the cheapest version of any given product no absolutely not I think that that trend. This is a cycle. We're in a moment in the cycle and I think will move to better moments in the cycle. Hopefully soon alright, I have just a couple of quick points about things that are happening <unk> specifically.

Josh: Seal their wallet is under a lot of pressure by the way tax returns look like theyre going to be lower this year than they were last year, you're still here low consumer confidence and concerns about inflation on core things like food.

January 21 activities that are happening in the macro world One Christmas time people get a lot of gift cards and today and she doesn't have a gift card program and they come they come into January and a <unk> and go into retailing my send their gift cards at places like Walmart Amazon second they won't give me a <unk>.

Josh: Prices and people when they have discretionary dollars want to spend them on travel and want to spend them on dining and so in this moment. Many people are looking for the cheapest way to buy something when they need to buy something that is discretionary now in that environment Etsy added 8 million new buyers.

Kinda returns when they're going to physically into the stores and doing a lot of our time and the third is that.

Uhm Big box stores are doing it all their class right now so things are continuing to be in deep deep discount. This justice and those are three things that you know the early part of this year as he really wasn't in the game on those three areas and you know I think it affected our January Sam G. M S to some extent.

Josh: See buyers spent $3 $6 billion on the etsy marketplace in the fourth quarter alone. So.

Josh: Tens of millions of people are 92 million people in fact are opening their wallet to come and buy something on etsy.

Josh: Even in this environment and in fact, the average buy on Etsy spending 20% more more than 20% more today than they were pre pandemic, but this is a time when I think products that are not the cheapest possible are out of favor.

Very helpful. And then maybe one follow up on a marketing.

How do you guys just think about I guess efficiently deploying performance marketing dollars. In 2024, you know obviously you talked about dynamic models are dynamic, but do you do you feel like you need to perhaps lower the authorized thresholds given you about a week or consumers you called out, but you know rising option costs from from those competitors.

Josh: And I don't think Thats forever when I imagine.

Josh: Going forward as everyone always want the cheapest version of any given product no absolutely not I think that that trend. This is a cycle. We are in a moment in the cycle and I think we will.

Josh: Move to better moments in the cycle hopefully soon.

I guess just helped me understand you know how you guys. Maybe are adjusting the way you guys think about marketing, giving the the challenging underlying dynamics of higher cost, but tougher demand well the the the.

Speaker Change: Just a couple of quick points about things that are happening.

Josh: I think we hit on January.

Josh: And Q1 activities that are happening in the macro world.

Models are automatically incorporate well there's some lag it takes a couple of weeks for them to experience the bags and conversion rates for example, or down or up for them to incorporate that but things like weaker demand turning meeting conversion rate goes down the models all automatically incorporate that we're we're always we're finding our understanding is we run an increase.

Josh: At Christmas time people got a lot of gift cards and today I think doesn't have a gift card program and they come back they come into January and they go into retail and they send their gift cards at places like Walmart and Amazon.

Josh: Second they are giving a lot of returns where they.

Josh: Going physically into the stores and doing a lot of returns and the third is that big Big box stores are doing in all of our clients right. Now so things are continuing to be in deep deep discount as Justin said those are three things that.

Mentality test for example on P. L. A's twice a year, we hold part of the country Dark and we look at if we hadn't bought that click would we still have gotten it anyway and it it turns out that often the answer may be yes. It also maybe that if someone didn't click on etsy, but they saw etsy. It made them think.

Josh: The early part of this year Etsy really wasn't in the game on those three areas.

Josh: I think affecting our January gms to some extent.

Oh, etsy cells that and they come without having clicked and so you can over or under attribute and so several times a year, we actually run a test to determine what we call Incrementality test how much of the final sale value should we attribute to the fact that someone clicked on that AD and that changes over time as well based on <unk> can compare.

Speaker Change: Very helpful. And then maybe one follow up on marketing how do you guys. Just think about I guess efficiently deploying performance marketing dollars in 2024, obviously, you've talked about dynamic the models are dynamic, but do you feel like you need to perhaps lower the ROI thresholds given you have a weaker consumer as you can.

Live environment. So we are constantly adjusting.

Josh: All it out but rising auction costs from from those competitors I guess.

Based on that and another input that goes into the model is what do we think about things like future take great. You know would you pay today would that impact the L. T V of a of a buy or if you think you're taking it might go up over time or if you think you might get more or less frequency overtime. So there's some amount of judgment you make but the models do most of the <unk>.

Speaker Change: Help me understand how you guys maybe are adjusting the way you guys think about marketing given the challenging underlying dynamics of higher costs, but tougher demand.

Speaker Change: The models are automatically incorporate well there is some lag it takes a couple of weeks for them to experience. The fact in conversion rates for example are down or up for them to incorporate that but things like weaker demand turning meaning conversion rate goes down the models all automatically incorporate that.

Work and we really do try to let the models do the work so that we aren't tempted to irrationally over or under invest it.

In any given <unk>.

Josh: We're we're always refining our understanding is we run an incremental test for example on Pls twice a year, we hold part of the country Dark and we look at if we hadn't bought that click would we still have gotten it anyway.

Great point on the L. T D dynamic constantly update email <unk> T V will there be any product launch that we haven't actually because that that's incorporated in the activation model. So that that's happening and the other thing and he would talk about performance ads, specifically, but we've been able to start to spend more money in new channels like paying social and any geography.

Josh: And it turns out that often the answer may be yes. It also may be that if someone didn't click on etsy, but they saw etsy. It made them think etsy sells that and they come without having clicked and so you can over or under attribute and so several times a year, we actually run the test to determine what we call <unk> test how much.

<unk> and experimented with other kinds of marketing like please that just came out to do some.

S C funded promotional campaign, so what <unk>, what would be great to get another Google P. L. E channel, France is that works it works as hard for us. So that's what I'm <unk>. That's all we do more of our experimental marketing spend to see how we can optimize to get those struggles to be out of my closet as well looks like we will be can just drop the R Y special next.

Josh: Of the final sale value should we attribute to the fact that someone clicked on that AD and that changes over time as well based on.

Josh: <unk> environments. So we are constantly adjusting.

Josh: Based on that and another.

<unk> alright.

Alright, Great. Thankfully next question next question <unk> with at a car F I F. At.

Josh: Input that goes into the model is what do we think about things like future take rate.

Josh: Would you pay today would that impact the LTV of a buyer. If you think your take rate might go up over time or if you think you might get more or less frequency over time. So there is some amount of judgment you make but the models to most of the work and we really do try to let the models do the work.

Thanks for taking my questions <unk> on the G. M. S growth for this year has the visibility for you changed and I guess, what gives you the confidence in improving Jan that's great. If you could please lay out the key drivers <unk> consideration and the gifting initiative, primarily driving it.

Josh: So that we aren't tempted to irrationally over underinvest.

Josh: In any given quarter.

Josh: Yes.

And or quality value reliability drivers, if if you want to point to any of those and then the second question is on the $90 million in savings that <unk> could you. Please provide a little bit more color on biggest buckets of investments. Thank you yeah I'm happy to take the first if you want that so.

Josh: That was a great point on the LCD dynamic constantly updating models.

Speaker Change: You mean with every new product launch that we Havent MTV goes up <unk>.

Josh: And the attribution model so that that's happening. The other thing is you talked about performance ads, specifically, but we've been able to start to spend more money in new channels like paid social and in new geographies and we've experimented with other kinds of marketing.

Yeah. So we laid out you know first of all and thanks for the questions and you know that that slot that had consideration and quality value and reliability with key initiatives under each that's a pretty good roadmap for some of the bigger levers of the year. There are a lot of other things we're constantly doing to just.

Josh: <unk> P&L to do some.

Josh: Etsy funded promotional campaign, so we're constantly but would be great to get another Google Pls channel, France that works and it works as hard for us. So that's where we're that's what we do more of our experimental marketing spend to see how we can optimize.

<unk> incrementally get better in ways that drive real measurable value, but the way we run this business as we task every spot in the company with a value creation goal. So if you're working on Shortener, you expect the delivery date or servicing higher quality items higher in search there's a customer metric, but there's also how much extra G M.

Josh: All of those together and then as well less likely would be to just drop the ROI threshold expected negative return right alright, great. Thanks Lee.

Speaker Change: Next question. Our next question comes from Slater touch area with Evercore ISI.

<unk> does that need to produce and the sum total of that for last year with the team produced about $1.5 billion from incremental G. M. S. We've tests the team with more even more efficiency.

Speaker Change: Thanks for taking my question, let me try two please.

Speaker Change: On the Gms growth for this year.

Slater: Has the visibility for you changed and I guess, what gives you the confidence in improving Gms growth. If you could please lay out the key drivers is that consideration and the gifting initiative, primarily driving it and or quality value reliability drivers.

Then that this year, we continue to find ways to get more efficient leveraging new tools and techniques leveraging new processes, we're pretty agile and we work on getting even more agile and even more focused and then with with performance.

Josh: If you want to point to any of those and then the second question is on the $90 million in savings that largely be reinvested could you. Please provide a little bit more color on our biggest buckets of investments. Thank you.

Marketing and above the line marketing, we're also always working to get more efficient and I'm. Realizing now is when I talked about how the algorithms are doing the work I don't want you to think it's static. We also have multiple squads working on martek and they're constantly focused on things like how can we make our landing pages more efficient how can we perform better in F. C. O. How can we make our beds you know even more.

Speaker Change: I'm happy to take the first one so.

Speaker Change: Yeah, So we laid out.

Speaker Change: First of all thanks for the questions and that slide that had consideration in quality value and reliability with key initiatives under each that's a pretty good roadmap for some of the bigger levers of the year. There are a lot of other things we're constantly doing that.

Sophisticated segment, our audience, even more so we're constantly driving efficiency games from each of our teams in each of our dollar spent and so what we've done is we've looked at our plan for the year. What we think it's going to deliver in terms of incremental G. M. S. The assumption on that again is what's going.

Josh: Incrementally get better in ways that drive real measurable value, but the way we run this business as we task every squad in the company with our value creation goal. So if youre working on Shortener, you expected delivery date or servicing higher quality items higher in search.

Happened with the baseline and that is the part that charged for us to know so the risk in this plan is you know I think we're gonna execute on the plan and I think we're gonna drive a lot of value and what's gonna happen with the baseline and and and to what extent does that a tailwind or headwind to us for the year is still yet to be known.

Josh: There's a customer metric, but theres also how much extra gms does that need to produce and the sum total of that.

On the $90 million of a couple of things that I want to point out we've in case, our workforce by about 12% and we cut.

<unk> operating expenses, where we thought that there was room to set something about losing any productivity and efficiency in in writing our business.

Yes.

Josh: We're pretty agile and we work on getting EBIT more agile and even more focused and then with with performance.

<unk> of the workforce reduction that we made we also reduced future open higher so.

Josh: Marketing and above the line marketing, we're also always working to get more efficient and I'm. Realizing now as when I talked about how the algorithms are doing the work I don't want you to think it's static. We also have multiple squads working on martech and they're constantly focused on things like how can we make our landing pages more efficient how can we perform better in SCO, how can we make our beds even.

<unk> <unk> <unk> <unk> current dollars, but we're saving some $200.

We.

Our main focus is always on the vital for Ya. So what we the guiding principle of what we are about <unk>.

We prioritize and realign our team working on a seamless as possible things that are driving the highest possible impact that does not mean that we stop hiring at at a stop in that same you see so much room for for gross.

About our 500 billion dollar tamblyn less than two per cent of it today. We just have so many ideas jocelyn at a bunch of them that we're currently working on the call. So we're continuing to invest for growth. We are at the top of the pack and turns out revenue per head cat in the company were very lean Etsy alone just chest.

Josh: Turning to deliver in terms of incremental Gms the assumption on that again is what's going to happen with the baseline and that is the part that's hard for us to know so the risk in this plan is I think we're going to execute on the plan and I think we're going to drive a lot of value.

Josh: And what's going to happen with the baseline and to what extent is that a tailwind or headwind to us for the year is still yet to be known.

<unk> is only about 1800 people on the revenue per head, it's hard to find companies of our size and shape that have revenue per head.

Josh: On the $90 million of a couple of things that I want to point out.

Josh: We reduced our workforce by about 12% and we cut.

Higher than that we're really.

Josh: Various operating expenses.

Waiting there and if we cut too far backward or get them you know get in the way of our own ability to invest for growth. So we feel very comfortable with finding constantly looking furniture in operational efficiencies very comfortable with the way that we we prioritize our our expunged package and very comfortable with the level of investment let me can tell me.

Josh: We thought that there was room to talk them about losing any productivity or efficiency in operating our business obviously.

Josh: The workforce reduction that we made we also reduced future open higher so the.

Josh: We not only saved current dollars that we're saving from future dollars.

For it and.

Just put add that.

Josh: We.

I find the whole commentary on year of efficiency interesting because every year as a year of efficiency for us every quarter as a quarter of efficiency, there hasn't been a quarter or a year. When we've said Oh screw. It. Let's just you know in invest in hope hope for the best we've been obsessed with efficiency and value creation per dollar invested for the seven plus years that Rachel and I have been.

Josh: Our main focus is always on the vital few so what we the guiding principle of what we are about.

Josh: We prioritize and realigned our teams to be working on a seamless possible things that are driving the highest possible impact that does not mean that we stop hiring and that we stopped investing we see so much room for growth, we talked about our $500 billion tam or less than 2% of it today. We just have so many ideas Josh laid out of it.

And then here and so every quarter. We are looking at is there a way to squeeze more efficiency is there a way to cut more cost and when we find an opportunity to cut costs. The first thing. We look at is can we invest that reinvest at profitably to drive growth, what's gonna really move the stock prices getting growth getting to your <unk>.

Josh: Each of them that we're currently working on in the call. So we're continuing to invest for growth. We are at the top of the pack in terms of.

Josh: Revenue per head count in the company, we're very lean FC alone just Etsy is only about 1800 people and the revenue per head, it's hard to find companies of our size and shape that have revenue per head.

Up again, so that we're we're driving the multiple that's what's gonna drive growth, but we have to do with cost disciplined. So what we're not gonna do is invest irrationally invest a dollar to get a dollar or less back. So when we see an opportunity to put that money back into something that's gonna drive growth. We're gonna do it. The result of that is a business where at the core market place on Etsy generates.

Josh: <unk>.

Josh: Higher than that we're really well.

Josh: Winning there and if we cut too far backward.

Josh: Getting the way of our own ability to invest for growth. So we feel very comfortable with.

EBITDA margin right now over 30%.

It's hard to find a marketplace of our size and scale generating EBITDA margins anywhere close to that and we're very focused on also reinvesting for driving growth and and we're gonna continue to make sure we balance those two with an emphasis on investing in growth. When we think there's a good opportunity to do so.

Finding constantly looking for operational efficiencies very comfortable with the way that we've.

Josh: Re prioritize our expense buckets and very comfortable with the level of investment, we're making going forward.

Speaker Change: Just put add.

Speaker Change: And the whole commentary at year of efficiency interesting because every year is a year of efficiency for us every quarter is a quarter of efficiency, there hasnt been a quarter or a year. When we've said host screw it let's just.

And you just want that because she got two in there we're going to go to the next question. Thanks. Thanks, Thanks when it.

Our next question comes spam Steven arms like didn't hang partners. Please I need your audio in your area and ask you a question.

Josh: Invest and hope hope for the best we've been obsessed with efficiency and value creation per dollar invested.

Josh: The seven plus years that Rachel and I have been been here and so every quarter we are looking at.

Good evening everybody.

And you have a good evening.

Maybe just to expand on some of the initiatives like you know like if mode and loyalty.

Speaker Change: Is there a way to squeeze more efficiency is there a way to cut more costs and when we find an opportunity to cut costs. The first thing. We look at is can we invest that reinvest that profitably to drive growth, which can really move the stock price is getting growth, giving gms growth up again, so that we're driving the multiple that's what's going to drive growth, but we have to do with cost discipline.

You mentioned the investment in the big game advertising.

Anytime you sort of hear loyalty. It helps if you can maybe contextualize, what you're thinking of doing with loyalty as we potentially have like timing disconnects with the benefits and there may be some mortgage application. So just any sort of expansion on what you mean by royalty.

Josh: So what we're not going to do is invest irrationally invest a dollar to get a dollar or less back. So when we see an opportunity to put that money back into something thats going to drive growth, we're going to do it. The result of that is a business where at the core marketplace on Etsy generates EBITDA margin right now over 30%, it's hard to find a marketplace of ours.

Sure I would say, we don't have anything to announce yet and I know, that's not going to be very satisfying, but we paid a lot of attention to loyalty economics and a lot of places.

Having sided amex, we're not only just amex, Ron really big loyalty programs and things like membership rewards, but we partner with you know when I was at Amex Delta and Starwood and a lot of other places I had a chance to study a lot of loyalty programs.

Josh: Some scale generating EBITDA margins anywhere close to that and we're very focused on also reinvesting for driving growth.

Josh: And we're going to continue to make sure we balance those two with an emphasis on investing in growth when we think theres a good opportunity to do so.

And thinking hard about which are the ones that truly drive more return and truly drive more consideration is a big focus for us. It's gotta have both rational and emotional benefits can't be just rational there's gotta be some yearn to it and the goal is to get people to consider etsy more often people love that you talk to buyers and they're all going to.

Speaker Change: Thanks for that because you got two in there we're going to go to the next question. Thanks. Thanks Winter.

Speaker Change: Our next question comes from Steven Arm's length Guggenheim Partners. Please go meet your audio and video and ask your question.

I Love Etsy, why didn't you shopping at the mall and I didn't think of it so committing to some form of loyalty program. We think can get them to prioritise etsy and so I mean, the so the program I should stop by Etsy and see if they have something to offer if we can just get them to stop by and see if we have something to offer the answer is gonna be yes, a whole lot of the time.

Speaker Change: Good evening everybody.

Speaker Change: Thank you Andrew.

Speaker Change: Maybe just to expand on some of the initiatives.

Speaker Change: Like gift mode and loyalty.

Speaker Change: You mentioned the investment in the big game advertising.

And then maybe just a quick follow up.

Speaker Change: Anytime you sort of hear loyalty. It helps if you could maybe contextualize, what youre thinking of doing with loyalty as we potentially have a timing disconnect with the benefits and maybe some market implications. So just any sort of expansion on what you mean by royalty.

A lot of.

A lot of noise out there in terms of a O V. As we're ticket related challenges across the discretionary landscape or you just wear deflation is right within the respective categories. You mentioned it sort of is this optimism around stabilization and G. M. S proactive buyer yep, you're curious maybe expand on what's giving you the optimism.

Josh: Sure.

Speaker Change: Say.

Speaker Change: We don't have anything to announce yet and I know, that's not going to be very satisfying, but we paid a lot of attention to loyalty economics in a lot of places I.

And what you're seeing with you know price behavior across the product categories you serve.

Josh: Having sat at Amex.

Josh: We're not only does amex, Ron really big loyalty programs and things like membership rewards, but we partnered with when I was at Amex Delta and Starwood and a lot of other places had a chance to study a lot of loyalty programs.

It has stabilized a bit you know if you look at the last four quarters G. M. S practice buyer has been relatively stable at $126. So that's that's good news and by the way that's up from about $100 before the pandemic. So in spite of all the headwinds and everything we've talked about with [laughter] you know the macro still spending 20 per cent more more than 20 per sir.

Josh: And thinking hard about which are the ones that truly drive more return and truly drive more consideration is a big focus for us. It's got to have both rational and emotional benefits can't be just rational there's got to be some yearn to it and the goal is to get people to consider etsy more often people love that to car buyers and their organs.

More than they were pre pandemic in the you know the the headwinds for the beginning of this quarter. When we said we were off to a slower start these are down slightly so when we talk about.

Josh: And I Love Etsy, why did you shop on Etsy more often I didn't think of it so committing to some form of loyalty program. We think can get them to prioritize etsy and so I mean, the so the program I should start by Etsy and see if they have something to offer if we can just get them to stop by and see if we have something to offer the answer is going to be yes, a whole lot of time.

Starting from a low down.

Single digit and and and.

Guiding too we think we will get back to low single digit by the end of the quarter. What are the headwinds. We're seeing is is a L V. As her down the good news and that is it means transaction volumes are actually holding up better than than what those numbers would suggest buyers are still coming in buying on etsy, they're just even more price sensitive.

Josh: And then maybe just a quick follow up all right a lot of.

Josh: A lot of noise out there in terms of <unk>. So we're ticket related challenges across the discretionary landscape.

In this moment and that I think is pretty consistent with what we hear with a lot of others.

Okay.

Josh: The deflation is right within the respective categories.

And last question and next question comes from Anna Andrei that company.

Josh: You mentioned sort of this optimism around stabilization in gms per active buyer.

Company.

Great. Thanks.

Thanks for all the color that.

Speaker Change: Curious if you can maybe expand on what's giving you the optimism.

We had one question on pay grade came in a little bit better than expectations and a fourth order, what's driving that expectation for the year it should be at or higher the four Q levels. I think you mentioned some of the seller onboarding fees and then if that.

Speaker Change: And what youre seeing with price behavior across the product categories you serve.

Speaker Change: It has stabilized a bit you know if you look at the last four quarters Gms per active buyer has been relatively stable at $126.

Speaker Change: So that's good news and by the way that's up from about $100 before the pandemic. So in spite of all the headwinds and everything we've talked about with.

<unk> the number of insurance buyers I think I'm crazy, but a little bit and four Q can you further elaborate on that <unk> was the first to take the <unk>. Okay. So <unk> <unk> <unk> <unk> rolled out at sea payments to line one market. So that that helps us a lot with an incremental uhm.

Josh: The macro still spending 20% more more than 20% more than they were pre pandemic.

Josh: The headwinds for the beginning of this quarter. When we said we were off to a slower start alds are down slightly so when we talk about.

Josh: Starting from a low down.

Transaction fees that we just weren't getting before.

Josh: Mid single digit and.

And today, we launch C. As a seller theme, which not only has the benefit of incremental take right, which by the way completely is reinvested back and safety of the market place and it creates uhm did you call. It suddenly fiction earlier friendly connection so that way, we create a little speed.

Josh: Guiding to it we think we will get back to low single digit by the end of the quarter. One of the headwinds. We are seeing is <unk> down the good news in that is it means transaction volumes are actually holding up better than than what those numbers would suggest fires are still coming in buying on etsy, there just even more price sensitive.

Josh: This moment and that I think is pretty consistent with what we hear with a lot of others.

For lots of us any seller can and create a listing for 20 cents on that and.

Speaker Change: Thank you Keith.

Speaker Change: And our next question. Our next question comes from Anna <unk> with Needham <unk> Company.

<unk> a moment to think about while I'm going to have to make the payments fee and that helps us with bad actors on the site. So that we get those benefits of that yeah, and and that by the way is not a big take great driver you know I think the revenue and that is gonna be relatively small, but it's gonna be good value exchange, making sure it's really sick.

Anna: Oh, great. Thanks, so much thanks.

Anna: Thanks for all the color that.

Josh: We had one question on take rate came in a little bit better than expectations in the fourth quarter, what's driving that expectation for the year, it should be at or higher than <unk>.

<unk> to become a seller on Etsy and I think that's good for all of the sellers and the buyers on Etsy and the fee were charging is nominal you know if it's not worth $15 to create a shop on I'd say that maybe you know you're not committed enough to likely succeed on etsy, but that's it's not that's not a huge revenue driver.

Josh: <unk> levels I think you mentioned some of the seller onboarding fees.

Josh: And then secondly, the number of churned buyers I think increased a little bit in <unk> can you further elaborate on that thanks and that was the first week of December.

Josh: Okay.

Josh: We.

Josh: Well about etsy payments to line more market, so that that helps us a lot with the incremental.

You know, we'll continue to see payments coverage expand in other markets and and and other areas where.

Josh: Transaction days that we just weren't getting before.

We think that's fair value exchange and we think will achieve the take rate that we got into let me out a quick window that is also what let me see international business increase we get.

Josh: And today, we launched our salary team, which not only has the benefit of incremental take rate, which by the way completely is reinvested back in safety in the marketplace and it creates.

Slightly higher take right uhm on Etsy payments for the buyer on a Saturday 10 different currency, because we used to have a premium that'd be charged for that currency exchange. So that's another thing affecting take great and lastly can.

Josh: And you called Hanmi fiction earlier friendly fashion, so that we create a little speed bump for not just any <unk> can.

Josh: Cleaner lifting for 'twenty.

Can see Islip pharmacy ads again and will continue to C. N T. At some frequent as we continue to make investments in better.

Josh: And that.

Josh: From a balance.

Josh: I think the.

Josh: A moment to think about how to make that payment fee and that helps us with bad actors on the site. So that we get both the benefits of that and.

Mmm got better and better.

Brought relevant <unk> offer antsy at the highest rushing me and.

And an active buyers. We we ended the quarter ended the year with about 92 million active buyers on a trailing 12 month basis. So add an all time high roughly stable I'd want a crow too much about it roughly stable from the prior quarter, but I'm not sure where the comment about more churn who was but.

Josh: And that by the way is not a big take rate driver.

Josh: I think the revenue and that is can be relatively small, but it's going to be good value exchange, making sure it's really secure.

Josh: To become a seller on Etsy and I think that's good for all of the sellers and the buyers on etsy in the fee. We're charging is nominal if its not worth $15 to create a shop on etsy that maybe.

What exact buyers had been have been stable.

That's terrific next to my bed.

Josh: Youre not committed enough to likely succeed.

<unk>, Yeah, and then I think the last one is gonna be from Jason right off writer.

Josh: But that's it's not that's not a huge revenue driver.

Jason <unk> with Oppenheimer and the next question.

Josh: We will continue to see payments coverage expand in other markets.

Okay.

Hey, Thank you. So two questions really want is a question was about how are you thinking about helping sellers correct.

Josh: And other areas where.

Josh: Where we think Theres fair value exchange and we think we'll achieve the take rate that we guided to EMEA. Our equivalent of that is also when we see international business increase we get.

Use correct pricing and not just under cause each other and just be more sophisticated with with ultimate lifting prices and the second really it's in Africa common investor concern over here is really around the ability to grow cohorts is it something you would provide in the future perhaps like annual G. M B.

Josh: Slightly higher take rate.

Josh: The payments for the buyer and the seller are two different currencies, because we need to have a premium that we charge for that current exchange. So that's another thing affecting takeaway and lastly.

Josh: You can see a nice lift from Etsy ads again, and we will continue to see Etsy ads improvement as we continue to make investments in better.

<unk> word on a year of acquisition I think would help people better understand that in our 10-K, we have we have T. M S retention and our 10-K, but let's just be filed Tonight Tomorrow morning, Yeah, you'll have it very soon so it'll be a stack BARF. Every every year you know the classic joined in 2017, what are they delivered the classy 2018, all that stuff and you know what I what I <unk>.

Josh: Better search relevancy and financing at the higher conversion rate and.

Josh: And on active buyers.

Josh: We ended the quarter ended the year with about 92 million active buyers on a trailing 12 month basis. So at.

You'll see and that the those cords just to start with that is uhm used to in a lot of ecommerce businesses seeing that asymptote down over time, and what you see would that she is that it's it's been more of a smile curve and we think that's really healthy obviously the inflection drove just like a massive uptick and then a little bit of a settling back down which.

Josh: All time high.

Josh: Roughly stable I do want to grow too much about it is roughly stable from the prior quarter, but.

Josh: I'm not sure where the comment about more churn.

Josh: It was but.

Josh: Active buyers have been have been stable.

Speaker Change: That's terrific.

Josh: Thanks.

Speaker Change: I think last one is going to be some cases right operator.

<unk> everything a little messy, that's a little harder to make sense of but the fact that you know the cohorts do generally stock on each other really nicely. We think is a pretty powerful part of what makes that she really compelling and we've still just been experiencing a bit of when you look at the stacking of those cohorts dealing with the post pandemic.

Speaker Change: Jason <unk> with Oppenheimer has our next question.

Jason: Hey, Joe.

Jason: Thank you. So two questions really one is question wasn't asked.

Josh: How are you thinking about helping sellers correct.

Josh: Used correct pricing and not just undercut each other and just be more sophisticated with with ultimately lifting prices in the second.

You know slight compression coming out of the <unk> pandemic cause just provides a bit of a headwind.

Josh: Really it's an after a common investor concern over here is really around the ability to grow cohorts.

On your first point of the price of seller pricing, yes, helping to celebrate a great. Great question. So a couple of things one we've had a very big focus on not handmade and we've shared in the past that the percentage of views that encounter an item that's not handmade as you know I think the last time, we give an update it was cut in half we've made even more progress since then.

Josh: Is it something you would provide in the future, perhaps like annual GMB by cohort on the year of acquisition I think would help people better understand that in our 10-K, we have we mtm's retention in our 10-K, which should be filed Tonight Tomorrow morning.

So it's a very big focus of ours to make sure that mass produced items are not visible on the site. It's bad for the brand and it's not helpful for a sellers in terms of price competition, but another thing I talked about very briefly in the call. Let me unpack that a little bit more is really elevating quality, even more in search results and what I mean by that is R. R.

Josh: Youll have it very soon so it'll be a stack bar every year.

Josh: She joined in 2017, what they delivered the class of 2018.

Josh: That stuff.

I think youll see in those core just to start with that is used.

Josh: We used to in a lot of E. Commerce business is seeing that asymptote down over time, and what Youll see with Etsy is that it's it's been more of a smile curve and we think thats really healthy obviously the inflection drove just like a massive uptick and then a little bit of a settling back down which makes everything a little messy little harder to make sense of.

Search algorithm today is designed to pick items, you are likely to buy <unk>.

So the search algorithm using cutting edge machine learning is saying, what's Jason likely to purchase what we wanted to do is say, what Jason likely to love purchase and loved and so forming more of a point of view around does the seller give consistently good quality service is the item consistently delight.

Josh: But the fact that the cohorts do generally stack on each other really nicely. We think is a pretty powerful part of what makes etsy really compelling and we still just been experiencing a bit of when you look at the stacking of those cohorts dealing with the post pandemic.

Four and that leading to frequent more frequent purchases.

Feeling that kind of fidelity and forming a point of view, what's the quality of photography here, what's the quality of the return policies does the seller consistently ship on time and using that to create unexplainable, a I model to rank who should be on top and search we think can unlock a ton of value, especially as you then start to expose at the <unk>.

Josh: Slide <unk>.

Josh: Compression coming out of the post pandemic caused.

Josh: Just provides a bit of a headwind.

Josh: On your first part of that price in seller pricing yet.

Speaker Change: Yes, helping the solid pricing great. Great question. So couple of things one we've had a very big focus on not handmade and we've shared in the past that the percentage of views that encounter an item that's not handmade is.

<unk> and say to sellers and ordered a rank higher the way to do that is to get better on one of the following metrics Here's how you're currently doing and the better you do on these metrics the better you will rank and search that for each race to the top and I think that's an incredibly exciting thing that we're gonna do either.

Josh: I think the last time, we gave an update it was cut in half we've made even more progress. Since then so it's a very big focus of ours to make sure that mass produced items are not visible on the site. It's bad for the brand and it's not helpful for our sellers in terms of price competition, but another thing I talked about very briefly in the call. Let me unpack that a little bit more is really.

Very focused on right now it's one of the initiatives I talked about this year and I think that over the next couple of years can I have a very big impact says easy does hard because our unexplainable machine learning model is incredibly sophisticated at picking the thing you're likely to convert most app and so we've got to come up with an explainable.

Josh: <unk> quality, even more in search results and what I mean by that is R. R.

Josh: Our search algorithm today is designed to pick items youre likely to buy.

Josh: Alright, so that search algorithm using cutting edge machine learning is saying, what's Jason likely to purchase what we wanted to do is say whats, Jason likely to love purchase and loved and so forming more of a point of view around does the seller give consistently good quality service is the item consistently delight.

Version of the model that doesn't do any damage at least try that that can largely match or black box model and then get better from there and there's some R&D that needs to happen and that's the kind of R&D that's happening right now.

Mmk alright, thanks, Jason I think we went overtime. So operator, I think we're gonna put it here.

Josh: Full and that leading to frequent more frequent purchases.

Josh: Meaning that kind of fidelity informing our point of view, what's the quality of photography here, what's the quality of the return policies does the seller consistently ship on time and using that to.

Thank you that concludes the call for today. We appreciate your participation have a great evening. Thanks, everyone. Thank you very much.

Josh: To create unexplainable AI model to rank, who should be on top in search we think can a market ton of value, especially as you then start to expose that to sellers and say to sellers in order to rank higher the way to do that is to get better on one of the following metrics Here's how you're currently doing in the better you do on these metrics.

Josh: The better you will rank in search that creates a race to the top and I think thats, an incredibly exciting thing that we're going to do.

Josh: We're very focused on right now is one of the initiatives I talked about this year and I think that over the next couple of years can have a very big impact says easy thus far because our <unk>.

Josh: Unexploited machine learning model is incredibly sophisticated at picking the thing you are likely to convert most app.

Josh: So we've got to come up with an explainable version of the model that doesn't do any damage at least right that can largely match, our black box model and then get better from there and there is some R&D.

Josh: That needs to happen and that's the kind of R&D that's happening right now.

Speaker Change: Okay, Alright, thanks, Jason I think we went over time, so operator, I think we're going to cut it here.

Speaker Change: Thank you that concludes our call for today. We appreciate your participation have a great evening. Thanks.

Speaker Change: Thanks, everyone. Thank you very much.