Q3 2024 Etsy Inc Earnings Call

Come to Etsy as third quarter 2024 earnings conference call I'm Deb Wasser VP of Investor Relations. Today's prepared remarks have been prerecorded. Joining me today are Josh Silverman, our CEO and Rachel Glaser, our CFO. Once we have 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 our actual results may differ materially.

Looking statements involve risks and uncertainties some of which are described in today's earnings release and our most recent Form 10-Q, 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 in our slide deck posted on our IR website, along with the replay of this call with that I'll turn it over to Josh.

Josh Silverman: Thanks, Tim and good afternoon, everyone. We're pleased to have delivered solid consolidated revenue and profit despite a challenging gms quarter for the etsy marketplace with overall performance roughly in line with our guidance consolidated Gms was $2 $9 billion down about four 1% year over year.

Josh Silverman: Revenue grew four 1% to $662 million benefiting from continued take rate expansion.

Josh Silverman: And we posted a very healthy adjusted EBITDA margin of approximately 28%.

Josh Silverman: Etsy marketplace Gms was down about 6% year over year, it's encouraging to see our active buyer levels remained solid at approximately $91 million. We maintained strong revenue flow through in profitability. Despite continued macro headwinds and multiple mindshare events. This quarter I'm excited to tell you more about how we're in.

Josh Silverman: Investing with focus and discipline and the things that we believe truly differentiate etsy in order to get us growing as quickly and strongly as possible.

Josh Silverman: Earlier this year, we outlined our commitment to driving consideration among our customers centered around highlighting etsy is quality value and reliability, we said, we'd elevate gifting prioritize quality and search foster loyalty and improve shipping.

Despite a challenging GMS quarter for the Etsy marketplace.

Josh Silverman: Fast forward to today, we've delivered on those goals, we have created a more intuitive gifting experience enhanced our search algorithms to showcase higher quality and more diverse listings launched the etsy insider beta loyalty program to encourage repeat purchases and reduced estimated global shipping times and charges.

Josh Silverman: <unk> of items.

Josh Silverman: Achievements like these are part of a bigger story at a time when it feels like everyone else in retail is focused on slashing prices and offering steep discounts we're approaching things differently.

Josh Silverman: We know that our strength lies not in a race to the bottom it's simply not who we are it's not who are sellers are instead, we're choosing a different direction choosing to double down on the things that make etsy markedly different and markedly better as the best path to restarting our growth engine and so far this year I believe.

Course centered around highlighting etsy is quality value and reliability, we said, we'd elevate gifting prioritize quality and search foster loyalty and improve shipping fast forward to today, we've delivered on those goals, we've created a more intuitive gifting experience enhanced our search algorithms.

Josh Silverman: We've done more to holistically improve the customer experience than in any other year in my tenure.

Josh Silverman: A lot of this work has been foundational in nature throughout the year, you've heard us talk about our journey to evolve from a historical focus on in period conversion and incremental Gms banking to infuse engagement and better customer experiences as core metrics of success for our team we've shifted the ways, we hire math.

To showcase higher quality and more diverse listings launched the etsy insider beta loyalty program to encourage repeat purchases and reduced estimated global shipping times and charges on millions of items.

Josh Silverman: <unk> and Golar people, how we manage our portfolio of product development investments, how we operate and measure success across teams and how we deploy technology on the Etsy platform. We've moved with urgency taking the steps that we believe are necessary to build a springboard for future growth, even as there's been some opportunity costs.

Achievements like these are part of a bigger story at a time when it feels like everyone else in retail is focused on slashing prices and offering steep discounts we're approaching things differently.

We know that our strength lies not in a race to the bottom it's simply not who we are it's not who are sellers are instead, we're choosing a different direction choosing to double down on the things that make etsy markedly different and markedly better as the best path to restarting our growth engine and so far this year I believe.

Josh Silverman: Related to these initiatives.

Josh Silverman: Two areas, where youll start to see the shift are within our App and search.

Josh Silverman: For the Etsy App, while it's early days, we've started making real progress getting a buyer to download the app increases their lifetime spend on etsy by at least 40% yet less than half of our Gms is transacted on the app. So there's tons of untapped potential we've tasked our teams with revamping the app homepage to dedicate.

We've done more to holistically improve the customer experience than in any other year in my tenure.

A lot of this work has been foundational in nature throughout the year, you've heard us talk about our journey to evolve from a historical focus on in period conversion and incremental Gms banking to infuse engagement and better customer experiences as core metrics of success for our team we've shifted the ways, we hire math.

Josh Silverman: Far more screen real estate to inspiring new shopping missions, but to do so without hurting conversion that alone was a big undertaking and just in time for the holidays millions of users now see a dramatically improved experience with a 33% reduction in what we call rear view mirror impressions.

Josh Silverman: When we show you items influenced by your past shopping missions instead, we're using that real estate to offer fresh exciting shopping inspiration perfect for those who arrived without a clear idea of exactly what theyre looking for.

Josh Silverman: We also stepped up efforts to secure incremental app downloads by increasing the rate at which we intervened in mobile web visits, prompting more shoppers to download the app mid journey.

Josh Silverman: We're willing to briefly interrupt to shoppers current mission to promote better overall experiences initial experiments showed these boulder prompts led to incremental lifts in app downloads, which we believe is very promising for example in one experiment, we drove 3 million incremental app downloads from placing a prompt on.

Josh Silverman: <unk> signed out listing page on mobile web.

Josh Silverman: We're also testing and learning with paid ads to drive downloads, while we optimize our presence and placement in the App store.

Josh Silverman: The other major area, where we're building engagement more intentionally is within search we've historically built our algorithms to help buyers find the specific thing that theyre looking for now we're working to also show the wide range of items that we have to offer to do that we're taking a three pronged approach focused on diversity.

Josh Silverman: Quality and agency <unk>.

Josh Silverman: Let's touch on each each one.

Starting with diversity as you know our teams are leveraging journey to increase variety in search results, creating a more inspiring and engaging and less repetitive shopping experience as we shared last quarter, we drastically reduced search results that have identical images to even further diversify results were.

Been casting a wider net to also incorporate items with similar images not just those that feature exact matches. We're now seeing an approximately 40% reduction in search results were at least a quarter of the listings look alike.

Josh Silverman: And we're working to improve from here.

Josh Silverman: We believe the impact of this work will be to better expose our buyers to the incredible breadth of offerings on etsy in turn leading to increased consideration and visit frequency over time.

Josh Silverman: And to quality this year, we retrained, our search algorithms, adding indicators of high caliber listings like having a shipping charge that aligns with buyer expectations, providing return policy and the shops level of customer service, we want to not just match it with an item you are likely to buy but with an overall purchase.

Josh Silverman: Experience, you're likely to love, we're encouraged that our experimentation in these areas appears to be leading to an increase in the number of four and five star by reviews and decreases in both the number of reviews at three stars are lower as well as the rate at which buyers request refunds.

Josh Silverman: These are great signs that we're doing an even better job delivering consistently delightful buying experiences on etsy, which we believe ought to lead to more purchase frequency and even better word of mouth.

Josh Silverman: A key ingredient to bring these quality efforts to life is giving sellers more agency over what affects their search ranking so in late August we launched the Etsy search visibility page within the seller dashboard. This new page features tailored actions sellers can take to improve their position in search such as listing.

Josh Silverman: <unk> quality and quantity return policies message response times and shipping charges for domestic listings.

Overall purchase experience you're likely to love, we're encouraged that our experimentation in these areas appears to be leading to an increase in the number of four and five star buyer reviews and decreases in both the number of reviews that are three stars are lower as well as the rate at which buyers request refunds.

Josh Silverman: Our sellers make these changes they'll have the ability to track improvements in real time.

Josh Silverman: In one example of this work in action since launch sellers have lowered shipping charges on approximately two and a half million items to better meet buyer expectations. In fact, we've already seen excellent overall uptake and sellers, taking an action that we've suggested beating our internal adoption target by approximately 60%.

These are great signs that we're doing an even better job delivering consistently delightful buying experiences on etsy, which we believe ought to lead to more purchase frequency and even better word of mouth.

Josh Silverman: We're positioning ourselves to evolve from being the place you come after you know exactly what you want and haven't been able to find it elsewhere.

A key ingredient to bring these quality efforts to life is giving sellers more agency over what affects their search ranking so in late August we launched the Etsy search visibility page within the seller dashboard. This new page features tailored actions sellers can take to improve their position in search such as <unk>.

Josh Silverman: To also being a place you come early on for inspiration and to discover what you want in the first place.

Josh Silverman: Connected to our focus on highlighting what makes etsy different and special in July we introduced creativity standards to help fortify our position as the market place for original items from real people. We pulled these creativity standards through to the shopping experience, adding descriptor for each item to underscore the role.

Listing image quality and quantity return policies message response times and shipping charges for domestic listings.

Sellers make these changes they'll have the ability to track improvements in real time.

Josh Silverman: The seller played in making or designing that item and to show buyers why what theyre seeing belongs on Etsy. We spent much of the third quarter refining label accuracy and are continuing to explore how to highlight them to buyers in areas like search discovery and new marketing experiences this effort involving doesn't.

And one example of this work in action since launch sellers have lowered shipping charges on approximately two and a half million items to better meet buyer expectations. In fact, we've already seen excellent overall uptake in sellers, taking an action that we've suggested beating our internal adoption target by approximately 60%.

Josh Silverman: A product development and marketing staff exemplifies this year's shift towards long term customer experience improvements prioritizing fundamental changes that will benefit etsy in the long run rather than focusing primarily on short term metrics like conversion rate in Gms. These.

We're positioning ourselves to evolve from being the place you come after you know exactly what you want and haven't been able to find it elsewhere to also being a place you come early on for inspiration and to discover what you want in the first place.

Josh Silverman: These updates were accompanied by what I considered to be our most profoundly human marketing campaign to date, featuring real etsy sellers in the throes of creating their bespoke items. The campaign resonated with buyers. Our research shows that supporting small was among the top recalled messages along with themes of originally.

Made made and handcrafted goods. These findings aligned with our belief that there is no one better positioned to tell the world what creativity means then etsy and our sellers.

Josh Silverman: Now, let's talk loyalty in mid September we began officially inviting a highly targeted group of occasional buyers to join Etsy insider through email push and onsite prompt with the app driving the majority of sign ups across platform. So far we're just beginning to glean insights on how to best approach buyers.

Josh Silverman: And peak their interest we plan to evolve our beta offering along the way as we formulate a rewards program that is uniquely etsy and encourages buyers to think of us first and shop with us more often.

Josh Silverman: Our gifting strategy as the gift that keeps on giving with a number of product improvements. This quarter, we've introduced new ways to browse and discover unique gifts, while tripling the number of gift ideas available to buyers. We've also increased by our adoption of existing gifting features for instance, approximately $1 1 million gift.

Josh Silverman: Gift list have been created and $1 3 million incremental visits came from people who received a gift teaser and then went directly to the site.

Josh Silverman: We've also just started rolling out physical etsy gift cards at more than 20000 stores in the U S, including major pharmacies and retailers and starting today U S. Consumers can also purchase and ship physical cards directly from Etsy Dot com another way to help people give the perfect gift as we head into the holiday.

Josh Silverman: Gift cards represent less than 1% of our gms compared to industry estimates of a few percent of gms for peer specialty retailers. So we see significant opportunity here and naturally gifting takes center stage in our holiday marketing this season with an amazing lineup of creative content onsite and off.

Turning to our house of brands Deep hop has been a stellar top line performer with Gms growth accelerating on a sequential basis in July the marketplace removed U S selling fees and introduced a small buyer marketplace fee. Following their UK model. This changes made deepak more appealing to sellers.

Josh Silverman: Increasing listings and giving buyers a wider selection since launch U S listing growth has accelerated by 26 percentage points and an August deepak rolled out its biggest ever U S marketing campaign amplifying the no selling fees proposition to more than 70 million people building on its position of strength.

Josh Silverman: <unk> is a market share gainer in the U S retail.

Josh Silverman: On reverb used music gear sales growth in the U S continues to outpace new gear sales and outlet and exclusive music gear is seeing double digit year over year growth in August reverb partnered with vendor one of the world's leading guitar manufacturers to launch vendor certified pre owned on reverb, helping.

Josh Silverman: Musicians access of affordable pre owned music geared directly from a trusted brand reverb continued to focus on operational efficiencies to drive profitability and value added services for its community.

In closing I'm extremely proud of the progress we've made so far this year to make etsy, even more differentiated our right to win is more important than ever as we work to restart our long term growth flywheel by shifting our energy towards cohesive engaging experiences while the rest of the world is obsessed with discounts and.

Josh Silverman: <unk>, we're obsessed with making our customer experience, even better with making etsy, even more etsy in doing so we made good on our promise to keep commerce human while the tide is out right now for discretionary products were hard at work, ensuring our boat is large and strong ready to sail even for.

Further and faster as the tide comes in.

Speaker Change: Thanks, Josh and thank you for joining our call my commentary today will cover our consolidated financial results key drivers of performance and Etsy marketplace Standalone results where appropriate.

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

Our right to win is more important than ever as we work to restart our long term growth flywheel by shifting our energy towards cohesive engaging experiences while the rest of the world is obsessed with discounts and promotions, we're obsessed with making our customer experience, even better with making etsy, even more etsy.

S. A 's third quarter 2024, consolidated Gms is $2 9 billion down approximately four 1% year over year with the third.

Speaker Change: 80 basis point FX tailwind.

The marketplace, CMS, theres down 6% year over year.

Speaker Change: Strong Deepak performance contributed a nice benefit to consolidated Gms as they delivered excellent top line growth in the U S and also performed well in Australia.

In doing so we made good on our promise to keep commerce human while the tide is out right now for discretionary products were hard at work, ensuring our boat is large and strong ready to sail even further and faster as the tide comes in.

Speaker Change: Third quarter consolidated revenue increased by four 1% year over year to $662 million and adjusted EBITDA was $184 million, representing a very healthy 27, 7% margin down 90 basis points year over year and ahead of our guidance we gained lever.

Thanks, Josh and thank you for joining our call my commentary today will cover our consolidated financial results key drivers of that performance and Etsy marketplace Standalone results, where appropriate as a reminder, we divested evo seven on August 10th 2023, So please take that into.

Speaker Change: Year over year in employee costs and cost of revenue, which was offset by a higher level of consolidated marketing spend this quarter.

When you compare year over year consolidated results.

Speaker Change: Note that even though <unk> divestiture resulted in a small headwind to GM mass and revenue growth in the quarter, but was modestly accretive to our consolidated adjusted EBITDA margin.

It's a third quarter 2024, consolidated Gms was $2 $9 billion down approximately four 1% year over year with a 30 basis point FX tailwind.

Speaker Change: Digging into the consolidated revenue growth marketplace revenue increased three 3% year over year, primarily driven by payments fee revenue.

The marketplace Gms was down 6% year over year.

Strong deep Hot performance contributed a nice benefit to consolidated Gms as they delivered excellent top line growth in the U S and also performed well in Australia.

Speaker Change: We continue to drive Etsy payments expansion with penetration of our payments platform now at about 99% of Etsy marketplace Tms.

Speaker Change: Compared to 93% in the corresponding prior year period.

Third quarter consolidated revenue increased by four 1% year over year to $662 million and adjusted EBITDA was $184 million, representing a very healthy 27, 7% margin down 90 basis points year over year and ahead of our guidance we gained left.

Speaker Change: Our nearest stellar setup fee and Offsite ads fees also contributed to marketplace revenue expansion.

Speaker Change: In addition to an increase in Gms and resulting transaction fee revenue for the deep hop marketplace with a tailwind to our consolidated performance.

Speaker Change: The growth in consolidated services revenue was EBIT faster at 6% for the core Etsy marketplace as revenue performance accelerated on a year over year and sequential basis. The result of significant strides made in optimizing how we bid on behalf of our sellers, which resulted in better balancing.

Bridge year over year unemployed cost in cost of revenue, which was offset by a higher level of consolidated marketing spend this quarter.

Speaker Change: Stellar add value across seller segments.

Speaker Change: All while maintaining consistent seller Roe <expletive>.

Speaker Change: We also incorporated more features and multimodal model embedding into our ranking models, capturing listing image representations, which led to an improvement in ads conversion rates.

All in all as you can see in the chart on the right our.

Speaker Change: <unk> Q3, 2004 take rate improved to 22, 7%.

Speaker Change: Above our guidance of approximately 22% and 180 basis points above the 29% reported in the same period last year.

This strong year over year performance is a great demonstration of how we have been able to drive value for our sellers and improve by our experiences while also delivering more revenue and a higher take rate for etsy and are truly win win manner.

Speaker Change: We are proud that etsy has been able to invest with discipline and bold initiatives.

Josh described while also managing our spend during a challenging macro and economic time for our core etsy marketplace.

Speaker Change: For example, we continued to drive leverage within consolidated product development spend which decreased approximately 6% year over year to $107 million during the third quarter, primarily due to decreased employee compensation expense connected with our 2023 workforce reductions.

Speaker Change: You can see from the chart on the right that revenue per head count for the Etsy marketplace continues to grow on a year over year basis and remains well above many of our peers, even those are significantly larger size and scale.

Speaker Change: Third quarter consolidated marketing spend increased 22% year over year to $197 million.

Speaker Change: In addition to increases in Etsy marketplace performance marketing spend taper off had a large step up in it spend versus last year in support of its U S E change announcement.

As we highlighted on our last call. We also expanded mid funnel and newer performance channels, particularly within paid social which increased meaningfully as you can see from the chart in the lower right portion of this slide.

Speaker Change: We have been increasing our paid social spend throughout the year as a test and learn but it is not yet fully matured and optimize.

Speaker Change: This investment is well aligned with our overall push into discovery and inspiration.

Speaker Change: Solving for our buyers more generalized needs such as the recent addition of a new baby and your family rather than helping you find a specific personalized onesie.

Speaker Change: Paid social is having a positive impact on our buyer reactivation, which is beneficial sets of reactivated buyers spend 40% more with us in the next 12 months and a new buyer.

Speaker Change: Consolidated brand spend increased 21% year over year also connected to detox higher level of spend.

Speaker Change: As previewed on our last call Q3 brand spend also includes the creative costs incurred for Etsy seller focused campaign.

Speaker Change: Moving to Etsy marketplace, Gms performance and related metrics, we had a year over year decline in our top categories and Gms was down in our U S. Domestic only trade routes as well as non U S trade rich we did see some modest growth in our international non domestic trade as well as U S imports.

Speaker Change: Digging into this performance there are three primary frac factors at play first overall macro conditions, which influence consumers budgets continue to weigh on the wallet share we're able to win.

Speaker Change: As you can see from this chart the percentage of U S personal consumption going to discretionary spend continues to decline versus the COVID-19 peaks.

Speaker Change: Second there were a few discrete mindshare events during the quarter, which we believe created additional headwinds for our business.

Speaker Change: These included general elections in the UK and France.

Speaker Change: Most of major sporting events, including European football.

Speaker Change: Highly popular Olympics events tied to U S politics, and the general election, and Hurricane Helene at the end of September.

Speaker Change: And third as Josh described we've really focused on shoring up the core etsy marketplace, meaning into item quality and making sure we have a great cohesive experience, especially in the App.

Speaker Change: These are pretty large shifts in how we run the company and they are putting some pressure on insertion conversion and creating some modest headwinds to G. M S.

Speaker Change: That said, we are pleased to have been able to drive some pockets of strength in the quarter.

Speaker Change: Our focus on making etsy the destination for gifting again resulted in Sitewide gms growth, albeit not as strong as experienced in the second quarter, which featured very important calendar driven holiday gifting occasions, such as mother's day and father's day.

Speaker Change: To help fill in such gaps will continue to focus on driving more evergreen gift purchases such as for birthdays and anniversaries.

Speaker Change: We've also seen personalize and customize items continuing to outpace site like performance up 4% year over year.

Speaker Change: Reinforcing one way that our brand can resonate with buyers and in the U S back to school merchandise CNS grew 5% year over year.

Speaker Change: We have continued to see resilience in our etsy marketplace active buyer count, which was approximately $91 2 million, taking down only slightly on a year over year basis.

Speaker Change: We reactivated over 6 million lapsed buyers in the quarter.

Speaker Change: Up close to 6% year over year.

Speaker Change: And we added over 5 million new buyers in the quarter down around 13% per year.

Speaker Change: Habitual buyers decreased by about 5% year over year, However, our retention rate of habitual buyers with slightly better on a year over year basis.

And habitual buyers remain a very healthy 43% of our Gms.

Speaker Change: Lastly, gms per active buyer was down eight 4% in the corner to $123.

Speaker Change: In keeping with translate have been seeing for quite a while the year over year decline in Gms per active buyer is predominantly due to virus visiting us a bit less frequently and spending less for purchasing.

Speaker Change: I wanted to take a moment to talk about the etsy seller community.

Speaker Change: Our heart goes out to those in regions hard hit by recent Hurricanes.

Which was approximately $91 2 million ticking down only slightly on a year over year basis.

Speaker Change: As is our normal course, we have adjusted their billing schedules offer disaster grants to sellers and need extended star seller status as relevant and proactively provided guidance around managing our taking a break from their businesses.

We reactivated over 6 million of lapsed buyers in the quarter.

Up close to 6% year over year.

And we added over 5 million new buyers in the quarter down around 13% for year.

Speaker Change: Our hope is that these steps provide impacted sellers with the flexibility they need to focus on their health and safety.

Habitual buyers decreased by about 5% year over year, However, our retention rate of habitual buyers with slightly better on a year over year basis.

Speaker Change: As you may have noticed in our press release, the active seller account for the Etsy marketplace was $6 2 million down eight 5% versus the prior year and down sequentially.

And habitual buyers remain a very healthy 43% of our G. M S.

Lastly, gms per active buyer was down three 4% in the corner to $123.

Speaker Change: We have a long asserted that when we lose a stellar we rarely lose a sale given the large amount of substitution available.

In keeping with trends, we have been seeing for quite a while the year over year decline in Gms per active buyer is predominantly due to buyers visiting us a bit less frequently and spending less per purchasing.

Speaker Change: In fact, we believe that the decline in our active seller count is actually a helpful. Byproduct of our focus on quality and stepped up enforcement actions, including our new seller setup fee and other actions. We are taking to ensure that the right sellers those with the scale and will succeed on etsy can win.

I wanted to take a moment to talk about the etsy seller community.

Our heart goes out to those in regions hard hit by recent Hurricanes as is our normal course, we have adjusted their billing schedules offer disaster grants to sellers in need.

Speaker Change: To that point, we're very pleased to see a year over year increase in the percentage of sellers, who made a sale during the third quarter, a metric, which it's been moving in the right direction. This year and we also see strong pockets of seller growth such as in Ukraine, and other emerging markets.

Stemmed in star seller status as relevant and proactively provided guidance around managing or taking a break from their businesses.

Our hope is that these steps provide impacted sellers with the flexibility they need to focus on their health and safety.

Speaker Change: As of September 30th we had $1 $2 billion in cash cash equivalents and short and long term investments.

As you may have noticed in our press release, the active seller count for the Etsy marketplace was $6 2 million down eight 5% versus the prior year and down sequentially.

Speaker Change: During the third quarter, we repurchased a total of $156 million in stock under our $1 billion June 2023 board authorized repurchase program.

We have a long asserted that when we lose a stellar we rarely lose a sale given the large amount of substitution available.

Speaker Change: Of which approximately $260 million remained available as of September 30th.

In fact, we believe that the decline in our active seller count is actually a helpful. Byproduct of our focus on quality and stepped up enforcement actions, including our new seller setup fee and other actions we are taking to ensure that the right sellers.

Speaker Change: Our capital light business model allowed us to deliver strong free cash flow this quarter of approximately $204 million.

Speaker Change: We also continued to convert approximately 90% of adjusted EBITDA to free cash flow on a trailing 12 month basis.

With the skill and will succeed on Etsy can win.

Speaker Change: Related our net income was impacted by a noncash foreign currency loss comparison noncash foreign currency gain in the prior year.

Speaker Change: In addition earlier today, our board of directors approved a new stock repurchase program authorizing etsy to repurchase up to an additional $1 billion of our common stock.

Speaker Change: We see significant value in our shares and we and our board have confidence in the growth plans we have underway.

Speaker Change: Given that we have $1 $2 billion in cash and generate such strong free cash flow. This new authorization will give us the flexibility to potentially go beyond our already high level of share repurchase.

Speaker Change: And it's worth noting that these repurchases do not come at the expense of important investments in our business.

Speaker Change: Turning to our outlook.

Speaker Change: Our guidance is that fourth quarter consolidated Gms will decline in the low to mid single digit percentage range on a year over year basis.

Speaker Change: We're confident that Etsy is the best we've ever been for holiday gifting, which gives us reason for optimism.

Speaker Change: We also know there is a lot of pressure on our consumer and our core markets and they appear to be prioritizing deep discounts and value within tight budgets.

Speaker Change: Let's see what percent of gifting front and center onsite and off and we will be running cyber sales and highlighting our sellers great value and highly differentiated product.

Speaker Change: With that said our brand stands for special and unique rather than cheap and deals.

Speaker Change: One other unknown is how the U S general election may impact, the consumer psyche or holiday spending trends.

Speaker Change: Q4, 'twenty four consolidated take rate is currently estimated to be 22, 3%.

Speaker Change: Versus the prior year result, but a slight step down from Q3 24, with our normal sequential seasonal trend coming into play with higher levels of organic Gms in the fourth quarter relative to revenue we earned from Etsy ads in the quarter.

Speaker Change: Consolidated adjusted EBITDA margin will be in the range of 28% to 29% ahead of the Q3 24 and prior year Q4 performance.

The sequential improvement in adjusted EBITDA can be attributed to seasonal volume and cost efficiencies as well as the pop scaling back on performance and brand marketing spend after the higher than normal Q3 spend tied to the buyer fee campaign.

Speaker Change: Yeah.

Speaker Change: So for the full year using the midpoint of this guidance, we will have withstood a host of stiff macro headwinds with consolidated Gms down roughly in the low single digits still driving very respectable growth in revenue all is being created at fair value and fair exchange for our sellers made.

Speaker Change: Critical investments that we believe can reignite future growth.

Speaker Change: <unk> delivered strong adjusted EBITDA profitability at least as good if not better than our commitment for the year.

While we're not satisfied with the lack of Tms expansion, we take comfort that if this is what our business can deliver in an extremely challenging period, the future for etsy will be bright indeed.

Speaker Change: You all for your time today I will now turn the call over to the operator to take your questions.

Speaker Change: Thank you Rachel at this time, if you would like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of your screen.

Speaker Change: You may remove yourself from the queue at any time by lowering your hand.

Speaker Change: When it is your turn you'll hear your name called and receive a message on your screen asking you to be promoted to panelist. Please accept wait a moment and once you have been promoted you mean, Amit your video and audio and ask your question.

Speaker Change: As a reminder, we are allowing analysts one question today.

Speaker Change: We will wait one moment to allow the queue to form.

Speaker Change: Question will come from Nick Jones from JMP Securities.

Speaker Change: Great.

Nick Jones: Thanks for taking the question.

Nick Jones: Could you speak to kind of leverage you're driving and product development.

Nick Jones: I think you've played out in the past that you're able to do a lot within a relatively lower head count to other platforms.

Nick Jones: Do you kind of rank order what you wanted to invest in.

Nick Jones: Particularly as you kind of I accelerating gms growth over time.

Nick Jones: And should we be thinking about a potential investment cycle at some point as you kind of get your arms around all of this new technology.

Nick Jones: And potentially maybe a bigger lift to move the needle more thanks.

Speaker Change: Thanks for that Great question and you know.

Speaker Change: We go through a process at the beginning of the year, where we say what are that while at the end of the year, we're going through it right now for next year, what are the customer experiences. We really want to uplift that we think are going to translate into more lifetime value more gms and more revenue and then you know.

Speaker Change: We are a top down bottoms up approach to challenge the team with what are your best ideas and based on the quality of the ideas. We decide how many squads to dedicate to those tasks and as you know Nik the unit of work at Etsy as a squad it's roughly eight to 10 people and so those atomic units can can operate really quickly the velocity is usually really.

Speaker Change: Good so we empower them to hey, you've got to improve this customer experienced by this much in those times, you're right that we are seeing some leverage in product development.

Speaker Change: This year based on the reduction in force that we did last year. You know we've always believed we've never been a growth at all cost company. We've always believed that scarcity breeds focus and that focus is a great thing.

Speaker Change: We also care a lot about the productivity of the team and measuring the productivity of the team. This year as you know we've decided through the course of the year to invest in some more foundational experience says that we think are.

Speaker Change: A really critical to setting up ourselves for growth in the years to come that are not as focused on getting to grinding out incremental gms in the quarter. Some examples are adding Q score two.

Speaker Change: So search that's a really foundational thing that we think is going to drive tremendous improvements in the marketplace and leading to a lot more gms growth in the future as sellers know what they can do to earn a higher spot in search and we do a better job pairing customers not just with products they buy with products. They love. So we think that.

Speaker Change: It's a really foundational investment, but it took months and months of work from multiple squads to be able to do that and have it be gms neutral.

Speaker Change: In normal times or in other times, we've really getting to neutral has not been the goal everything has been about incremental I think on this a lot of the foundational work. We've done this year and I think we've made a lot of progress on that we're well positioned next year to have more of the work from our existing squads be added up.

Typically the team this year as you know we've decided through the course of the year to invest in some more foundational experiences that we think are really critical to setting up ourselves for growth in the years to come that are not as focused on getting to grinding out incremental.

Speaker Change: The other thing I will say is we are doing some incremental hiring.

Speaker Change: We continue to be very cautious about that but for example, making the app the premier experience on Etsy, We decided we don't have enough App engineers. So we are hiring more app engineers. The other place we're seeing tremendous value and I think there is so much more value creation for US is machine learning and so we have opened up more rex to hire some more people and machine learning.

Gms in the quarter. Some examples are adding in Q score.

<unk>.

To search that is a really foundational thing that we think is going to drive tremendous improvements in the marketplace and leading to a lot more gms growth in the future as sellers know what they can do to earn a higher spot in search and we do a better job pairing customers not just with products they buy with products. They love. So we think that.

Speaker Change: <unk>.

Speaker Change: So we're always working to strike the right balance we've always been disciplined.

So really foundational investment, but it took months and months of work from multiple squads to be able to do that and have it be gms neutral.

Speaker Change: About our investments, but we'll continue to lean in where we think it's going to drive real growth.

Speaker Change: <unk>.

Speaker Change: Being disciplined about investments.

Normal times or in other times, we've really getting to neutral has not been the goal everything has been about incremental I think on this or.

Speaker Change: But trying to make sure we're optimized in terms of our cost of our full time employee. So we've talked about before that we have a development centers that are outside of the U S where the cost per FTE is not the same rate that we're paying in the U S and we try to load balance not only open up the aperture where I can get the talent in places like mix.

Lot of the foundational work we've done this year and I think we've made a lot of progress on that we're well positioned next year to have more of the work from our existing squads be additive.

The other thing I will say is we are doing some incremental hiring.

Speaker Change: The city and in Dublin, and in addition to the United States, but also the talent market have different compensation levels. There. So we get we get the lower the effective cost per FTE at the same time, we're always looking at what's the right.

We continue to be very cautious about that but for example, making the app the premier experience on Etsy, We decided we don't have enough App engineers. So we are hiring more app engineers. The other place we're seeing tremendous value and I think there is so much more value creation for US is machine learning and so we have opened up more rex to hire some more people and machine learning.

Speaker Change: Market price for that level of talent that we need.

Speaker Change: Through that assessment every single year, and we make adjustments.

<unk>.

So we're always working to strike the right balance we've always been disciplined.

Speaker Change: It up or down to be able to make sure that we're paying competitively.

Speaker Change: Thanks, Thanks, Nick oscillator.

Our investments, but we will continue to lean in where we think it's going to drive real growth.

Speaker Change: Our next question will come from Ana and driver from Piper. Please go ahead.

With that being.

Speaker Change: Great. Thanks, so much and great to see you guys are good to hear about the progress in thirds and profitability on a couple of from US just curious any color that you can share what youre seeing in the business quarter to date and what's implied at the low end versus the high end of the Gms guide for the fourth quarter.

Being disciplined about and vessel.

Trying to make sure we are optimized in terms of the cost of our full time employee Phil will talk about before that we have at <unk>.

Is that what makes centers that are outside of the U S where the cost per FTE is.

Not the same rate that we're paying in the U S and we try to load balance not only open up the aperture, where we can get the talent in places like CDN in Dublin. In addition to.

If I'm not mistaken the last year October started off tougher, but then the business improved in November and December but then you have a big gift mode, that's incremental which should be helpful. And then just as a follow up could you elaborate on the physical Etsy gift card launch this quarter just sounds pretty interesting.

On its face, but also the talent market have different compensation levels. There. So we get we get to lower the effective cost per FTE at the same time, we're always looking at.

The right.

Market price for that level of talent that we need and we will do that assessment of every single year, and we make adjustments as needed up or down to be able to make sure that we're paying competitively.

Speaker Change: I'm curious how you plan to be marketing that and if any of that upside implied in the guide. Thank you.

Speaker Change: It was a gift card.

Thanks, Nick asked later.

Speaker Change: Well, we're not going to give quarter to date.

Our next question will come from Ann driver from Piper. Please go ahead.

Speaker Change: How is October gone, so far, but I will say that the.

Great. Thanks, so much and great to see you guys.

Speaker Change: The holiday season. This year is later than normal and shorter than normal. So we think November and December and particularly mid to late November and December are going to loom, particularly large.

Ann driver: Good to hear about the progress in search and profitability.

Ann driver: From US just curious any color that you can share what youre seeing in the business quarter to date and whats implied at the low end versus the high end of the Gms guide for the fourth quarter, if I'm not mistaken the last year October started off tougher, but then the business improved in November and December but then you.

Speaker Change: In the quarter, it's always the case that they do but probably even more so in this quarter. Obviously, we have an election going on in the United States. That's an incredibly distracting mind share event, where lots of people aren't necessarily thinking about shopping in the early part of November. So we'll see how that goes of course, we consider that in the <unk>.

Have the gift mode.

That's incremental which should be helpful. And then just as a follow up could you elaborate on the physical Etsy gift card launch this quarter, just sounds pretty interesting I'm curious, how you plan to be marketing that and if any of that upside implied in the guide. Thank you.

Speaker Change: But it's hard to know exactly how that.

Speaker Change: How that will affect things, we certainly do consider though that we have an election coming up and that we have a shorter.

Speaker Change: We have a shorter Christmas in terms of of of.

It's a gift card.

Speaker Change: The gift card it is baked into the guide.

Well, we're not going to give quarter to date.

Speaker Change: I think it's over time going to be really exciting for etsy.

How is October gone, so far, but I will say that the.

Speaker Change: Our marketing it through a third party that has deep relationships with the retailers, but building awareness and mindshare for retailers I do think it takes time so.

The holiday season. This year is later than normal and shorter than normal. So we think November and December and particularly mid to late November and December are going to loom, particularly large.

Speaker Change: We think that as we said gift cards for us or maybe 1% of Gms, maybe even a little bit less than or many of our peers. It's it's two or three percentage points. So we think there could be real upside I doubt it happens all at once but thats something that builds over a little bit of that.

In the quarter, it's always the case that they do but probably even more so in this quarter. Obviously, we have an election going on in the United States. That's an incredibly distracting mind share event, where lots of people aren't necessarily thinking about shopping in the early part of November. So we'll see how that goes of course, we consider that.

Speaker Change: Let me remind you that the accounting for that because they don't get to recognize revenue from a gift card until the gift cards redeemed.

Speaker Change: In some cases people get caught in Regina immediately in some cases it fits in the desktop somewhere and it takes takes Simon and then we're recognizing the breakage over some period of time, so it's not a straight sale.

The guide, but it's hard to know exactly how that.

That will affect things, we certainly do consider though that we have an election coming up and that we have a shorter.

Speaker Change: Sales of gift card to hit the P&L directly.

A shorter Christmas in terms of Av.

Speaker Change: The other thing I'll say about gift cards.

The gift card it is baked into the guide.

Speaker Change: Is that what we do find is people to redeem a gift card attended by more than the value of the gift card. We think that's a great opportunity to bring new people to Etsy, We think it's a great opportunity to also gain more frequency. We also have started testing refund credit.

Ann driver: I think it's over time going to be really exciting for etsy, we are marketing it through a third party that has deep relationships with the retailers, but building awareness and mindshare for retailers I do think it takes time so.

Speaker Change: Uh huh.

Speaker Change: The rare occasion someone's not happy and they get a refund sometimes theyre happy to get a refund of credit and that actually drives a lot of incremental purchase behavior too. So I think theres gift cards and generally stored value is a really interesting place for etsy to be investing in the in the years to come and one more point to the to the shorter shopping season.

We think that as we said gift cards for us or maybe 1% of Gms, maybe even a little bit less and for many of our peers. It's two or three percentage points. So we think there could be real upside.

It happens all at once but thats something that builds over a little bit of time and I. Just wanted to remind you that the accounting for that because they don't get to recognize revenue from a gift card until the gift cards redeemed so.

Speaker Change: We do have our gifts either in our gift load. So I think that really helps a lot when they can actually buy something and they'll get it to people in time for Christmas.

In some cases people get the gift card and regain immediately in some cases it fits in a desktop somewhere and it takes takes Simon and then we're recognizing the breakage over some period of time, so it's not a straight <unk>.

Speaker Change: T J and I guess that we're excited about that alright next question. Thanks Donna.

Speaker Change: Our next question comes from Scott Devitt from Wedbush. Please go ahead.

Sales of gift card to hit the P&L directly.

The other thing I'll say about gift cards.

Scott Devitt: Everyone hope you're doing well.

Is that what we do find is people who redeem a gift card tend to buy more than the value of the gift card. We think that's a great opportunity to bring new people to Etsy, We think it's a great opportunity to also gain more frequency. We also have started testing refund credit.

Scott Devitt: And just one question.

I think part of the growth in the business recovery seems to be related to just the category, which.

Scott Devitt: Etsy sellers do well in and and so that will take care of itself over time.

Ann driver: And.

On the rare occasion, someone's not happy and they get a refund sometimes they are happy to get a refund credit and that actually drives a lot of incremental purchase behavior too. So I think theres gift cards and generally stored value is a really interesting place for etsy to be investing in the in the years to come.

Scott Devitt: These initiatives that you're pushing.

Scott Devitt: When that does happen it can be more stimulative than maybe they are right now and you talked a bit about gifting search is shifting loyalty.

Scott Devitt: If you were to.

Scott Devitt: Look at those five categories. Those are the those are the five areas, where you're kind of investing to enhance consumer experience in different ways.

One more point to the to the sugar shopping season, we do have our gifts either in our gift flow and so I think that really helps a lot or you can actually buy something and still get it to people on time for questions.

Speaker Change: It would be the one or two that really stand out that you think could move the needle.

Speaker Change: One I'm most excited to be in a normally don't pick amongst your kids, then hedge but honestly the thing I'm. Most excited about is consideration and the way I'm. Most excited to build consideration is on the site and the experience itself I think we have the opportunity to show people a lot more of it.

Okay, and I guess that we're excited about that.

Ann driver: Our next question Thanks Donna.

Speaker Change: Our next question comes from Scott Devitt from Wedbush. Please go ahead.

Everyone hope you're doing well.

Speaker Change: And just one question.

I think part of the growth in the business recovery seems to be related to just the categories, which.

Speaker Change: To inspire new shopping missions. In addition to fulfilling the shopping mission that they're already on <unk>.

Speaker Change: And I think that the advances we are seeing in jet AI are really really helpful. For example, it is very common for someone to type in wedding take tougher or cake copper would be a very common search term on etsy take tougher and.

Etsy sellers do well in and and so that will take care of itself over time and then you have these initiatives that you are pushing.

When that does happen it can be more stimulative than maybe they are right now and you talked a bit about gifting search and shifting loyalty app.

Speaker Change: And Jenny I suddenly can understand Ah ha cake topper as it related to wedding. This person is probably in the process of planning a wedding. That's an interesting context for us to know and here's five other popular things that people planning weddings would also want and so freeing up screen real estate to not just <unk>.

Speaker Change: If you were here too.

Look at those five categories. Those are the if those are the five areas, where you're kind of investing to enhance consumer experience in different ways.

It would be the one or two that really stand out that you think could move the needle.

One I'm most excited normally don't pick amongst your kids and hedge but honestly the thing I'm. Most excited about is consideration and the way I'm. Most excited to build consideration is on the site and the experience itself I think we have the opportunity to show people a lot more of it.

Speaker Change: So people kick toppers, let's say by the way did you realize that we also can do table Stakes table scapes stationary bridesmaids gifts and Jennie O I's even good at if you're at the stage of the wedding, where youre youre buying the cake topper what are the other things at that stage of wedding planning that are particularly relevant and I think that the opportune.

Speaker Change: To inspire new shopping missions. In addition to fulfilling the shopping mission that they're already on <unk>.

Speaker Change: <unk> to just spark new shopping missions. In addition to the existing missions that you're on.

And I think that the advances we're seeing in <unk> are really really helpful. For example, it is very common for someone to type in wedding cake tougher or cake copper would be a very common search term on etsy take tougher and Jenny I suddenly can understand our hot cake topper as it related to wedding. This person is probably.

Speaker Change: As a huge opportunity it is requiring us to re factor our use of screen real estate.

Speaker Change: So that we can make the real estate available to do that and so for example, this holiday season.

Speaker Change: On the App, we said that on the homepage, we've got a third more screen real estate leaning into discovery and away from what we call pick up the thread or recommendations based on the thing you. Most recently did it took a lot of work to figure out how to consolidate that pick up the three.

In the process of planning a wedding, that's an interesting context for us to know and here's five other popular things that people planning weddings would also want and so freeing up screen real estate to not just show people kick toppers, let's say by the way did you realize that we also can do table Stakes tables.

Speaker Change: Without a meaningful loss of conversion it took a fair amount of iteration to get to flat, but now that we've freed up that screen real estate I'm really excited about how we can learn to use it to drive a lot more shopping mission. So over time, we've talked for a long time about consideration and having people think of us for more things.

Scapes stationary bridesmaids gifts and Jennie O I's even good at if you're at the stage of the blending where you are buying the cake topper what are the other things at that stage of wedding planning that are particularly relevant and I think that the opportunity to just spark new shopping missions. In addition to the existing missions that you're on.

Speaker Change: <unk> the place to really make that work is on the site and I think we've done a lot of foundational work this year that I'm really excited about.

I think as a huge opportunity it is requiring us to re factor our use of screen real estate.

Speaker Change: Okay excellent.

Speaker Change: Our next question will come from Nikhil <unk> from Bernstein. Please go ahead.

So that we can make the real estate available to do that and so for example, this holiday season.

Speaker Change: Hey, guys. Thanks for taking the question.

On the App, we said that on the homepage, we've got a third more screen real estate leaning into discovery and away from what we call pick up the thread or recommendations based on the thing you've most recently did it took a lot of work to figure out how to consolidate that pick up the <unk>.

Nikhil: Josh it's encouraging to hear the incremental hiring plans how do you when you step back Big picture, how do you think about the right margin level for Etsy here is there room to be more aggressive even if it means trading off a bit of margin I feel like we've seen Julian enter depot and it seems like it's working quite well even in this macro backdrop not that you need to.

Fred without a meaningful loss of conversion it took a fair amount of iteration to get to flat, but now that we've freed up that screen real estate I'm really excited about how we can learn to use it to drive a lot more shopping mission. So over time, we've talked for a long time about consideration and having people think of us for more.

<unk> the place to really make that work is on the site and I think we've done a lot of foundational work this year that I'm really excited about.

Okay excellent.

Our next question will come from Nikhil <unk> from Bernstein. Please go ahead.

Hey, guys. Thanks for taking the question.

Josh it's encouraging to hear the incremental hiring plans how do you when you step back Big picture, how do you think about the right margin level for Etsy here is there room to be more aggressive even if it means trading off a bit of margin I would say like we've seen Julian enter depot and it seems like it's working quite well even in this macro backdrop not that you need to.

Deploy the exact same playbook on seller fees, there, but I'm just wondering if that experience is the right inspiration to rethink the margin structure for etsy in the level of investment intensity for Etsy. If it means the tradeoff is a better growth profile in a bigger pool of profit dollars down the road. Thank you yes.

Speaker Change: We're trying to grow the market cap of the business and thinking about what is going to grow the market cap of the business and obviously, we care about profitability and free cash flow, but we care a lot about growth.

Speaker Change: And.

This year, we've been investing in a fair number of foundational things that I really believe have been incredibly powerful to position us for future growth.

Nikhil: Or just the Red planet.

Nikhil: Maybe we're wrong.

Speaker Change: There was another question within Nicole's question, which was about <unk>.

Speaker Change: Yes.

Speaker Change: How we think about that and the seller fees. They are and if that had any relevant yes.

I would like to see those things start to translate into the growth, we expect to see and as we see proof of that leaning.

Speaker Change: I would like to just do a shout out for depot I mean, if you look at our guide baked within that is deep up growing more than 30% year over year Gms Deepak grew more than 30% year over year, I will say the U S within that for Deepak growing substantially faster than 30% year over year.

Leaning more then it may well be that leading more into hiring.

Speaker Change: Could make sense.

We are very data driven and we like to see proof of ROI.

Roy at least green shoots.

Speaker Change: And then invest behind that I think we're taking a very prudent approach.

Speaker Change: I think it's really exciting what's going on there.

Speaker Change: And I think it's a testament to the leadership of that team.

Do have a team that.

Speaker Change: Is capable of investing in a fair number of things at the same time, but we think that a good number not too many not too few.

Speaker Change: Has been providing I think it is also some validation of the portfolio strategy, we've invested in the more popular than others with our investors, but gaining exposure to retail apparel resell, which we've always thought as a great sector.

And so we're going to continue to try to strike the right balance.

Speaker Change: Here, a few quarters ago people worried that maybe we were investing too much now where people are worried that maybe we're not investing enough and so maybe we are.

Speaker Change: We're seeing some benefits from that now and lastly, what we see in the environment right now as it is just exceptionally promotional driven and <unk>.

Or just the room telescoping line maybe.

There was another question within Nicole's question, which was about <unk> <unk>.

Speaker Change: <unk> is an opportunity to buy brand name clothing at a relatively deep discount because you're buying them second hand from someone else and those kinds of products or the products that we think are really winning in this market where people are so focused on promotions and discounting. So we're really pleased with the work that team is doing in the perf.

And how we think about that and the seller fees. They are and if that had any relevant yes, I mean I.

Speaker Change: I would like to just do a shout out for Deepak I mean, if you look at our guide baked within that is deep up growing more than 30% year over year, Gms Deepak growing more than 30% year over year, I will say the U S within that for deep hop growing substantially faster than 30% year over year I think it's really exciting what's going on there.

Speaker Change: <unk> deep up and I think it plays into the portfolio that is the <unk> brands.

Speaker Change: Sure.

And I think it's a testament to the leadership of that team.

Speaker Change: Great question.

Speaker Change: Our next question will come from Maria <unk> with Canaccord. Please go ahead.

<unk> has been providing I think it is also some validation of the portfolio strategy, we've invested in more popular than others with our investors, but gaining exposure to retail apparel resell, which we've always thought as a great sector.

Speaker Change: Great. Thanks, so much for taking my questions.

Speaker Change: As you approach your first holiday season with gift mode.

We're seeing some benefits from that now and lastly, what we see in the environment right. Now is just exceptionally promotional driven and <unk>.

<unk> is an opportunity to buy brand name clothing at a relatively deep discount because you're buying them second hand from someone else and those kinds of products or the products that we think are really winning in this market where people are so focused on promotions and discounting. So we're really pleased with the work that team is doing in the perf.

Speaker Change: <unk> Deepak.

Speaker Change: It plays into the portfolio that is the <unk> brands.

Speaker Change: Great question.

Our next question will come from Maria <unk> with Canaccord. Please go ahead.

Great. Thanks, so much for taking my questions.

As you approach your first holiday season with gift mode.

Maria <unk>: What are your expectations for the offering and how is how are you measuring success here isn't.

Speaker Change: In terms of Gms in terms of percent of Jim Thats in terms of the number of active buyers and can you maybe expand a little bit one what you're doing on the marketing front to drive awareness of this outbreak.

Speaker Change: Right.

Speaker Change: Sure so.

We are measuring it based on absolute Gms.

Speaker Change: We're pleased that in the third quarter gifting Gms grew substantially faster than the overall marketplace as it did also in the second quarter, we think thats.

Some validation that the investments we've been making are.

Speaker Change: Showing showing real benefit.

Speaker Change: And.

So we've launched some great product features that we think set us up to have the best gifting experience. This year. The gift finder has many times more.

Speaker Change: Three times more gift ideas 5000 different gift ideas the adoption of wished lifts in the gift teaser are great by the way at a time when the shopping season is shorter the gift teaser is a great thing for people, who are giving gifts more last minute to still have the teaser arrive on time.

Speaker Change: But for somebody else yet.

Speaker Change: Engaging with the gift mode is just a part of the funnel, which leads them to other items that they can tell you what they are just exactly okay. Cool next question.

So we think the investments, we're making are great and you will hear us talk.

Speaker Change: Our next question will come from <unk> <unk> with B Riley Securities. Please go ahead.

Speaker Change: In all of our marketing channels, a lot about gifting in the fourth quarter, we have a great above the line campaign that launches in just a couple of days.

Speaker Change: Hey, it's Ryan on for Doug Thanks for taking the question.

Speaker Change: Wanted to ask on Etsy insider and the.

Speaker Change: That really is focused on.

Seeing someone in your gift being an expression of really seeing that person in a way that we think is super cool and we think youre going to like this.

Speaker Change: The seller reaction to Etsy insider and then also initial takeaways.

Speaker Change: Maybe seasonal versus monthly subscription numbers are.

Thats one part of your question I, just want to clarify you mentioned active buyers and gifts mode and I think we've talked about that a little bit in the past we don't track in gift mode. If you are buyer and guess where distracting gifting Gms because you can start out and gets mode. And then you can actually buy a gift.

Speaker Change: Anything that you can kind of get clarity on thank.

Speaker Change: But we're very early in fact, I think we're in spring training, we're not in the first inning, we're in like spring training.

Speaker Change: Yes, we are.

Speaker Change: We're in the earliest of early days, it's been live for six weeks in a beta that by design was only a limited population of people have been invited to so we're really trying to learn.

Somewhere else on the site. So just wanted to clarify that.

Speaker Change: Our best measure for tracking is if they select gift for somebody else.

Speaker Change: What is the what happens when shipping price goes away, what's the propensity to want to subscribe to our loyalty program. What are the kinds of value props that make people want to subscribe what are the economics of that look like so we are intentionally limiting the population and the uptake. So we can have a sandbox if you will too.

So engaging with the gift mode. It's just that part of the funnel, which leads them to other items that they can tell you exact.

Exactly Okay Cool next question.

Our next question will come from <unk> <unk> with B Riley Securities. Please go ahead.

Hey, it's Ryan on for Doug Thanks for taking the question.

To play with that and so we're pleased with how it is launched.

So I wanted to ask on Etsy insider and the <unk>.

Speaker Change: I think it's.

So the reaction to Etsy insider and then also initial takeaways.

Speaker Change: Pretty beautiful pretty well presented.

Speaker Change: And the sellers.

Maybe seasonal versus monthly subscription numbers are.

Speaker Change: <unk> are mostly concerned that we don't cause their economics to get worse. So what when we did our salad research and our buyer research. They both said wed love free shipping as long as it doesn't mean that sellers have to have lower margins.

The thing that you can kind of get clarity on so but we're very early innings. In fact, I think we're in spring training, we're not in the first inning, we're in like spring training.

Speaker Change: Yes, we are.

We're in the earliest of early days, it's been live for six weeks in a beta that by design was only a limited population of people had been invited too. So we're really trying to learn.

What is the what happens when shipping price goes away, what's the propensity to want to subscribe to our loyalty program. What are the kinds of value props that make people want to subscribe what are the <unk>.

Economics of that look like so we are intentionally limiting the population and the uptake. So we can have a sandbox if you will two to <unk>.

With that and so we're pleased with how it is launched.

Speaker Change: I think it's.

Pretty beautiful pretty well presented.

Speaker Change: And the sellers.

Mostly concerned that we don't cause their economics to get worse, so what they are.

We did our salad research and our buyer research. They both said wed love free shipping as long as it doesn't mean that sellers have to have lower margins.

So for the buyers interestingly and this is one of the wonderful things about etsy that I think is so different than anywhere else. When we said to buyers do you want free shipping on it or what do you want out of a loyalty program. They said all I want free shipping Thats the thing I want, but I don't want the sellers to have to.

To pay for it.

Speaker Change: And.

And Thats cool I don't think people are thinking that on ebay.

Our Amazon or other marketplaces, I think it speaks to the real connection between the buyer and the seller I'll call you back and the care of the buyer and the seller so.

So the seller reaction I think it's been generally positive.

And I think it's early days, but this is something when we look at loyalty programs that have succeeded.

It typically takes a while.

Speaker Change: To work through and figure it out and they evolve quite a bit from start to to the point that they really get scale, that's what I would expect for us as well.

Thank you next question.

Our next question will come from Robert <unk> with Evercore. Please go ahead.

Hi, good afternoon, thanks for taking our questions. Josh I think you just confirmed it earlier, but wanted to check if the Q score has remained conversion in gms neutral as you scale that up.

Speaker Change: Had we decided to keep running the business the way we have in prior years and just grind out Gms wins, we probably could have had several percentage points less decline in gms this year.

And then in a similar vein any additional color on the scale of the Gms headwind from the changes in mobile App and web.

Would you expect to be a consistent headwind into Q4 or do you, perhaps refocus a bit on conversion versus download cities.

Speaker Change: But.

Your term consideration in Q4. Thank you, yes, so we were able to get the Q score when we launched it in search to be roughly neutral to conversion rate.

Towards what end.

Speaker Change: I don't think that that would have set the business up in the strongest possible way to differentiate itself and grow I think the things we're doing to really lean into what makes us different what makes it special to highlight the quality of the uniqueness of Etsy to show more diversity to spark to create screen real estate.

Have been putting more friction in the mobile web experience to drive people to App I said in the pre recorded portion of that for example, like an interstitial on the signed out listing page is driving we think an incremental $3 million annualized downloads theres, obviously, some cost to conversion rate, but it's not that high.

Speaker Change: <unk> more new missions instead of just.

Speaker Change: Leading into mission you arrived already knowing the investments we're making in that are great investment to set us up better for growth in future quarters. So I think it is that opportunity cost that is the bigger piece of the cost we felt this year.

Speaker Change: We think it is very appropriate in ROI positive to do that.

So I think the headwinds from the changes that we've made are actually quite modest the bigger cost candidly as opportunity cost had we decided to keep running the business. The way we have in prior years and just grind out Gms wins, we probably could have had several percentage points.

Speaker Change: Great Alright next question.

Speaker Change: Our next question will come from Laura Champine from loop. Please go ahead.

Less decline in Gms this year.

Speaker Change: Alright.

Speaker Change: But <unk>.

Speaker Change: Okay.

Speaker Change: Towards what end.

Speaker Change: Alright. Your line is open cell fate on mute.

Speaker Change: I don't think that that would have set the business up in the strongest possible way to differentiate itself and grow I think the things we're doing to really lean into what makes us different what makes it special to highlight the quality of the uniqueness of Etsy to show more diversity to <unk>.

Okay, we can return and.

Speaker Change: We'll take our next question from Marvin Fong from <unk>.

Park to create screen real estate, the spark more new missions instead of just.

If it's us right.

Speaker Change: Please go ahead Marvin.

Leading into the mission you arrived already knowing I think the investments we're making in that are great investment to set us up better for growth in future quarters. So I think it is that opportunity cost that is the bigger piece of the cost we felt this year.

Yes.

Speaker Change: Great Alright next question.

Our next question will come from Laura Champine from loop. Please go ahead.

Speaker Change: Alright.

Speaker Change: Okay.

Alright. Your line is open until freights on mute.

Okay, we can return.

We will take our next question from Marvin Fong from <unk>.

Marvin Fong: You beat us please.

Speaker Change: Please go ahead ma'am.

Marvin Fong: Okay show up there at all okay, great awesome well, thanks for taking my questions I really appreciate it just two quick ones for me so.

You gave us the category numbers, which always appreciate that I mean, I know you just give us some small numbers here, but but maybe there is as I calculated it maybe film.

Speaker Change: Small marginal improvement in maybe the home category, but just as a broader question are you seeing any pain.

Speaker Change: It's different among the different categories in terms of sort of like the pressure on your business or pharma over reading into that and then second question Stefan.

Marvin Fong: Buyback.

Marvin Fong: You guys are generating north of $700 million in free cash flow, so kind of similar to the buyback now what's sort of the appetite here too.

Outrun the free cash flow generation, and maybe maybe elaborate lever up the balance sheet here obviously.

You guys have called out that you think the stock is.

Undervalued here just any thoughts on how you think about capital structure and deploying the buyback would be great I'll take that last century.

So yes, we did say.

Recall that the board approved an additional $1 billion and that does give us the flexibility to work into buying back even above the current level, which <unk> been doing about 90% of our free cash flow return to shareholders.

And we can do that we have the luxury of being able to do that and continue to invest the way, we want to and our organic investments that we feel pleased about that yes. The balance sheet. We have three outstanding converts and the first one coming in fall of 2026 that we want to be thinking about that.

And we don't have the lever up right now to be able to be meaning more heated.

Speaker Change: Can find real gold handmade by Goldsmith just for you at a price that's really compelling relative to what you may pay at the mall and so we're winning.

To share repurchase or domain, bringing ample when purchasing and we have the flexibility to go lower.

But we're definitely contained around that's pretty great thing about this business that our capital requirements are so low for many companies EBITDA still does not translate into free cash flow for us it largely does and so this is a business that generates a lot of free cash flow has $1 2 billion on the balance sheet, which we think is more than we need.

Speaker Change: In that jewelry under $20 is under more pressure.

Speaker Change: You've got to pay shipping.

Speaker Change: On Etsy for something under $20, where it might be it will go to the mall and by a $15 something.

Speaker Change: Without needing to pay that so.

So it gives us the flexibility.

Speaker Change: We are seeing pockets within every with every category and value right now in this market is very important.

And on the categories candidly not a lot interesting F&B and very direct.

Not a lot interesting insight and I think I might have even talked about this in the last call that we continue to see is where there are pockets of real value. So for example in jewelry.

Speaker Change: Well I think we'll take one more an operator.

Speaker Change: Our next question comes from <unk> from Wolfe Research.

Speaker Change: Hi, Tien sweater.

Speaker Change: Hi, everyone. This is Brian <unk> on for Scott sorry about that.

Marvin Fong: We are.

Marvin Fong: Growing in what we call <unk> fine jewelry, so think like an engagement ring that youre, giving to you.

Speaker Change: Right.

Speaker Change: Congrats on the quarter really nice to see the upside in the take rate both in Q3 and the guide for Q4, just was curious if there's any incremental drivers beyond advertising that you called out in the letter payments as well anything we should consider on the seller side, either with the quality score or other initiatives and how to think about this into 2025. Thank you for taking my question. Thanks for taking my question.

Partner that might cost between one and $500 on Etsy, you can find real gold handmade by Goldsmith just for you at a price that's really compelling relative to what you may pay at the mall and so we're winning.

Marvin Fong: In that jewelry under $20 is under more pressure.

Speaker Change: Im really excited about is we made significant gains in take rate. This year. If you look at it through the year, it's like a 130 basis points of take rate, we did that without impacting our sellers margins I think theres often a view that somehow if that <unk> take rate goes up it must come at the expense of sellers that's not true.

You've got to pay shipping.

On Etsy for something under $20, where you might be able go to the mall and by a $15 something.

Without needing to pay that so.

Marvin Fong: We are seeing pockets.

And then every within every category and value right now in this market is very important.

Speaker Change: Certainly not this year.

Speaker Change: We saw payments coverage go up that means instead of paying some other third party payments provider they are paying etsy, instead, and having a better experience our buyers and sellers are both safer when it runs through etsy payments and theyre not paying more for that Etsy ads, just got better at we're getting better.

Speaker Change: Well I think we'll take one more and our operator.

Our next question comes from Scott <unk> from Wolfe Research.

Speaker Change: Hi, Tien sweater.

Everyone. This is Brian <unk> on for Scott I'm, sorry about that.

Congrats on the quarter really nice to see the upside in the take rate both in Q3 and the guide for Q4, just was curious if there's any incremental drivers beyond advertising that you called out in the letter payments as well anything we should consider on the seller side, either with the quality score or other initiatives and how to think about this into 2025. Thank you for taking my question. Thanks for that.

Speaker Change: Better at picking the right AD that a buyer is likely to buy.

Great question, what I'm really excited about is we made significant gains in take rate. This year. If you look at it through the year, it's like 130 basis points of take rate, we did that without impacting our sellers margins. I think there is often a view that somehow if that <unk> take rate goes up it must come at the expense of sellers that's not true.

Speaker Change: Certainly not this year.

Speaker Change: We saw payments coverage go up that means instead of paying some other third party payments provider they are paying etsy, instead, and having a better experience our buyers and sellers of both safer when it runs through etsy payments and theyre not paying more for that Etsy ads, just got better at we're getting better.

Speaker Change: And better at picking the right AD that a buyer is likely to buy.

And so our sellers Rojas stayed roughly consistent but etsy earns more take rate that's a win win for everyone. Because it allows etsy to go back and invest more in the business without sellers margins on average being negatively impacted.

The seller Onboarding fee is.

Is a small component of that as well what we're seeing is that it's doing a good job stopping bad actors and its not stopping sellers that we're likely to succeed so the amount of sales from new sellers has not declined in any meaningful way as a result of that so it feels like that's been a very heavy.

The amount of friction to add to the marketplace and in OSA.

Is the other component of it so we feel like the take rate gains. We have made this year are healthy we think they are sustainable.

And we feel good about that and we think there continues to be opportunity for a fair exchange of value and frankly to continue to get better at offering services that add value to our sellers help them grow their business without coming at expense to their margin how does that work.

Recall that the payments that were made in 2024, we'll annualize that in 2025, so that they can.

But we'll get them all on the first year, and then OSA Bethesda definitions Offsite ads so anyway.

More on our performance marketing are able to collect more OSA revenue.

Great fear at times that they were going to call. It the evening.

Speaker Change: Thank you.

Marvin Fong: Okay.

Marvin Fong: Okay.