ETSY INC Q1 FY2025 earnings call

Josh Silverman emphasized Etsy's strengths in supporting creative sellers, product differentiation, and resilience through macroeconomic shocks. They launched a new Discovery Centric Shopping experience leveraging AI-driven curation. The mobile app saw increased buyer conversion rate and app GMS outperformed non-app GMS, with app reaching 44.5% of total Etsy marketplace GMS. They improved customer understanding by incorporating ad and recommendation data, and saw success in personalized homepages and email/push notifications. Enabled Etsy experiences in third-party AI-based shopping platforms. Kruti Patel Goyal discussed Depop's performance and her vision for Etsy's future opportunities, focusing on personalized shopping experiences and strengthening buyer-seller partnerships. Lanny Baker covered financial results, including GMS, revenue, adjusted EBITDA, and marketing spend details.

Etsy Marketplace GMS in the first quarter was down 8.9%, and down 8.1% on a currency neutral basis. Depop delivered very strong top line growth with its best GMS quarterly performance since acquisition in 2021 and set a record for seller acquisition. Reverb's year-to-year GMS performance was similar to that of the core Etsy Marketplace during the first quarter. Consolidated revenue in the first quarter increased by approximately 1% year-over-year to $651 million. Adjusted EBITDA was $171 million for the first quarter, representing a 26.3% margin, up 30 basis points year-over-year and ahead of guidance. Etsy Marketplace active buyer metrics were muted, with GMS per buyer at $120, declining 3.5% year-over-year.

Second quarter consolidated GMS is anticipated to decline at a rate similar to, potentially slightly better than the first quarter's year-over-year percentage decline. Second quarter consolidated take rate is expected to be similar to the first quarter. Consolidated adjusted EBITDA margin for Q2 is approximately 25%, reflecting higher year-over-year marketing spend and people costs associated with annual compensation increases and hiring.

Global tariff regulation is in flux, which could impact consumer spending on core items and demand for discretionary items. Uncertainty around potential changes to de minimis exceptions and how they may influence U.S. consumers' willingness to purchase goods. Potential impacts of higher tariffs on supply chains and competition, with unknowns regarding how these may affect Etsy's business.

Q: On outlook, update thoughts on improving GMS trends through the year and second quarter EBITDA margin guide, and whether leaning into social media is driven by APAC advertisers?

A: Josh Silverman said macroeconomic backdrop is challenging but they're encouraged by product and marketing work stacking, re-engagement progress, and paid social progress. Second quarter margin target has deleverage on marketing line, and paid social progress is encouraging but not tied to specific APAC advertiser pullout.

Q: What's next on the app product roadmap and app's percent of GMS over time?

A: Josh Silverman said they're encouraged by app's 44.5% GMS, continuing efforts to drive mobile web to app, and next step is highly personalized browsing based on user behavior.

Q: Concern that decline in active sellers is driving loss of conversion events and network effects?

A: Josh Silverman said no, decline in active sellers is intended due to $29 new shop setup fee to filter out non-successful sellers, and active buyer decline is due to macro consumer discretionary spending.

Q: Take rate guidance for 2Q being flat sequentially?

A: Josh Silverman said lapping dynamics like new seller fee and Etsy ads progress, outlook is take rate to be consistent across rest of year.

Q: Second quarter GMS guide moderation and path to driving more buyer frequency?

A: Josh Silverman said second quarter comp is tough due to holiday date shifts, and focusing on quality items, personalized experience, and app use, with infrastructure laid for growth.

Q: Leveraging Made in USA and pricing competitiveness under World on Etsy platform and category mix?

A: Josh Silverman said leaning into domestic shopping opportunity, and Lanny Baker said top six categories remain same, and they perform better than pure play peers in four categories.

Q: Tariff changes, de minimis, and AI shopping experiences?

A: Josh Silverman said de minimis changes for China may not impact much, and AI shopping experiences are good for Etsy as they can offer unique products, and they have good partnerships with Gen AI providers.