x
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the quarterly period ended September 30, 2018
|
|
|
|
OR
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|
|
¨
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from
to
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Delaware
|
|
20-4898921
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
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117 Adams Street, Brooklyn, NY
|
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11201
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(Address of principal executive offices)
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(Zip code)
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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Emerging growth company
¨
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Page
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Note Regarding Forward-Looking Statements
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Part I - Financial Information
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|
Item 1.
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Consolidated Financial Statements (Unaudited)
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|
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Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017
|
|
|
Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017
|
|
|
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017
|
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Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 2018
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|
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017
|
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Notes to Consolidated Financial Statements
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Part II - Other Information
|
|
Item 1.
|
Legal Proceedings
|
|
Item 1A.
|
Risk Factors
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Item 3.
|
Defaults Upon Senior Securities
|
|
Item 4.
|
Mine Safety Disclosures
|
|
Item 5.
|
Other Information
|
|
Item 6.
|
Exhibits
|
|
|
Signatures
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
362,727
|
|
|
$
|
315,442
|
|
Short-term investments
|
221,409
|
|
|
25,108
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $4,641 and $2,687 as of September 30, 2018 and December 31, 2017, respectively
|
36,385
|
|
|
33,677
|
|
||
Prepaid and other current assets
|
23,958
|
|
|
20,379
|
|
||
Funds receivable and seller accounts
|
63,470
|
|
|
44,658
|
|
||
Total current assets
|
707,949
|
|
|
439,264
|
|
||
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Property and equipment, net of accumulated depreciation and amortization of $80,248 and $66,226 as of September 30, 2018 and December 31, 2017, respectively
|
119,243
|
|
|
117,617
|
|
||
Goodwill
|
37,802
|
|
|
38,541
|
|
||
Intangible assets, net of accumulated amortization
|
36,360
|
|
|
4,100
|
|
||
Other assets
|
673
|
|
|
720
|
|
||
Total assets
|
$
|
907,368
|
|
|
$
|
605,583
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
14,130
|
|
|
$
|
13,622
|
|
Accrued expenses
|
37,191
|
|
|
28,743
|
|
||
Capital lease obligations—current
|
4,284
|
|
|
5,798
|
|
||
Funds payable and amounts due to sellers
|
63,470
|
|
|
44,658
|
|
||
Deferred revenue
|
7,180
|
|
|
6,262
|
|
||
Other current liabilities
|
2,676
|
|
|
3,394
|
|
||
Total current liabilities
|
128,931
|
|
|
102,477
|
|
||
Capital lease obligations—net of current portion
|
2,791
|
|
|
4,115
|
|
||
Deferred tax liabilities
|
30,851
|
|
|
23,786
|
|
||
Facility financing obligation
|
60,008
|
|
|
60,049
|
|
||
Long-term debt, net
|
272,790
|
|
|
—
|
|
||
Other liabilities
|
17,378
|
|
|
18,262
|
|
||
Total liabilities
|
512,749
|
|
|
208,689
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of September 30, 2018 and December 31, 2017; 120,244,674 and 121,769,238 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively)
|
120
|
|
|
122
|
|
||
Preferred stock ($0.001 par value, 25,000,000 shares authorized as of September 30, 2018 and December 31, 2017)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
551,293
|
|
|
499,441
|
|
||
Accumulated deficit
|
(149,707
|
)
|
|
(96,290
|
)
|
||
Accumulated other comprehensive loss
|
(7,087
|
)
|
|
(6,379
|
)
|
||
Total stockholders’ equity
|
394,619
|
|
|
396,894
|
|
||
Total liabilities and stockholders’ equity
|
$
|
907,368
|
|
|
$
|
605,583
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue
|
$
|
150,366
|
|
|
$
|
106,380
|
|
|
$
|
403,665
|
|
|
$
|
304,963
|
|
Cost of revenue
|
46,947
|
|
|
36,383
|
|
|
133,651
|
|
|
106,766
|
|
||||
Gross profit
|
103,419
|
|
|
69,997
|
|
|
270,014
|
|
|
198,197
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Marketing
|
39,516
|
|
|
23,520
|
|
|
94,651
|
|
|
74,495
|
|
||||
Product development
|
24,418
|
|
|
16,958
|
|
|
68,707
|
|
|
56,828
|
|
||||
General and administrative
|
20,748
|
|
|
22,094
|
|
|
61,359
|
|
|
73,268
|
|
||||
Total operating expenses
|
84,682
|
|
|
62,572
|
|
|
224,717
|
|
|
204,591
|
|
||||
Income
(loss)
from operations
|
18,737
|
|
|
7,425
|
|
|
45,297
|
|
|
(6,394
|
)
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(6,135
|
)
|
|
(2,908
|
)
|
|
(16,024
|
)
|
|
(8,195
|
)
|
||||
Interest and other income
|
2,367
|
|
|
654
|
|
|
5,902
|
|
|
1,636
|
|
||||
Foreign exchange (loss)
gain
|
(373
|
)
|
|
8,069
|
|
|
(2,973
|
)
|
|
26,952
|
|
||||
Total other (expens
e) inc
ome
|
(4,141
|
)
|
|
5,815
|
|
|
(13,095
|
)
|
|
20,393
|
|
||||
Income
before
income taxes
|
14,596
|
|
|
13,240
|
|
|
32,202
|
|
|
13,999
|
|
||||
Benefit f
or income taxes
|
5,298
|
|
|
12,562
|
|
|
4,038
|
|
|
23,051
|
|
||||
Net
inco
me
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
$
|
36,240
|
|
|
$
|
37,050
|
|
Net
inco
me per shar
e attributable to common stockholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.17
|
|
|
$
|
0.22
|
|
|
$
|
0.30
|
|
|
$
|
0.32
|
|
Diluted
|
$
|
0.15
|
|
|
$
|
0.21
|
|
|
$
|
0.29
|
|
|
$
|
0.31
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
119,870,711
|
|
|
119,592,191
|
|
|
120,469,066
|
|
|
117,387,714
|
|
||||
Diluted
|
129,086,137
|
|
|
123,224,559
|
|
|
126,497,281
|
|
|
121,346,921
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net
inco
me
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
$
|
36,240
|
|
|
$
|
37,050
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Cumulative translation adjustment
|
(544
|
)
|
|
(6,267
|
)
|
|
(696
|
)
|
|
(22,603
|
)
|
||||
Unrealized gains (losses) on marketable securities, n
et of tax
|
5
|
|
|
40
|
|
|
(12
|
)
|
|
29
|
|
||||
Total other comprehensive loss
|
(539
|
)
|
|
(6,227
|
)
|
|
(708
|
)
|
|
(22,574
|
)
|
||||
Comprehensive
inco
me
|
$
|
19,355
|
|
|
$
|
19,575
|
|
|
$
|
35,532
|
|
|
$
|
14,476
|
|
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Total
|
|||||||||||||
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|||||||||||||||||||
Balance as of December 31, 2017
|
121,769,238
|
|
|
$
|
122
|
|
|
$
|
499,441
|
|
|
$
|
(96,290
|
)
|
|
$
|
(6,379
|
)
|
|
$
|
396,894
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
23,288
|
|
|
—
|
|
|
—
|
|
|
23,288
|
|
|||||
Exercise of vested options
|
1,354,886
|
|
|
1
|
|
|
15,572
|
|
|
—
|
|
|
—
|
|
|
15,573
|
|
|||||
Issuance of convertible senior notes, net of issuance costs and taxes
|
—
|
|
|
—
|
|
|
54,214
|
|
|
—
|
|
|
—
|
|
|
54,214
|
|
|||||
Purchase of capped call, net of taxes
|
—
|
|
|
—
|
|
|
(26,243
|
)
|
|
—
|
|
|
—
|
|
|
(26,243
|
)
|
|||||
Vesting of restricted stock units, net of shares withheld
|
650,884
|
|
|
1
|
|
|
(17,137
|
)
|
|
—
|
|
|
—
|
|
|
(17,136
|
)
|
|||||
Stock repurchase
|
(3,530,334
|
)
|
|
(4
|
)
|
|
—
|
|
|
(89,657
|
)
|
|
—
|
|
|
(89,661
|
)
|
|||||
Stock-based compensation—acquisitions
|
—
|
|
|
—
|
|
|
2,158
|
|
|
—
|
|
|
—
|
|
|
2,158
|
|
|||||
Other comprehensive
loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(708
|
)
|
|
(708
|
)
|
|||||
Net
inco
me
|
—
|
|
|
—
|
|
|
—
|
|
|
36,240
|
|
|
—
|
|
|
36,240
|
|
|||||
Balance as of September 30, 2018
|
120,244,674
|
|
|
$
|
120
|
|
|
$
|
551,293
|
|
|
$
|
(149,707
|
)
|
|
$
|
(7,087
|
)
|
|
$
|
394,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net
inco
me
|
$
|
36,240
|
|
|
$
|
37,050
|
|
Adjustments to reconcile net
inco
me to net cas
h provided
by operating activitie
s:
|
|
|
|
||||
Stock-based compensation expense
|
21,829
|
|
|
17,389
|
|
||
Stock-based compensation expense—acquisitions
|
2,158
|
|
|
3,179
|
|
||
Depreciation and amortization expense
|
19,116
|
|
|
20,620
|
|
||
Bad debt expense
|
3,617
|
|
|
2,059
|
|
||
Foreign exchange loss
(gain)
|
2,973
|
|
|
(26,952
|
)
|
||
Amortization of debt issuance costs
|
831
|
|
|
164
|
|
||
Non-cash interest expense
|
7,632
|
|
|
6,752
|
|
||
Interest on marketable securities
|
(1,575
|
)
|
|
384
|
|
||
Loss on disposal of assets
|
26
|
|
|
395
|
|
||
Deferred income taxes
|
(4,038
|
)
|
|
(23,051
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(6,631
|
)
|
|
(2,139
|
)
|
||
Funds receivable and seller accounts
|
(19,398
|
)
|
|
(14,202
|
)
|
||
Prepaid expenses and other current assets
|
1,155
|
|
|
(1,715
|
)
|
||
Other assets
|
32
|
|
|
(48
|
)
|
||
Accounts payable
|
(80
|
)
|
|
(2,574
|
)
|
||
Accrued and other current liabilities
|
8,178
|
|
|
(66
|
)
|
||
Funds payable and amounts due to sellers
|
19,398
|
|
|
14,202
|
|
||
Deferred revenue
|
991
|
|
|
512
|
|
||
Other liabilities
|
4,678
|
|
|
363
|
|
||
Net cash
provided by
operating activities
|
97,132
|
|
|
32,322
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Cash paid for asset acquisition
|
(35,323
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(442
|
)
|
|
(3,872
|
)
|
||
Development of internal-use software
|
(13,674
|
)
|
|
(8,042
|
)
|
||
Purchases of marketable securities
|
(359,182
|
)
|
|
(46,808
|
)
|
||
Sales of marketable securities
|
164,443
|
|
|
96,540
|
|
||
Net cash
(used i
n) provided by invest
ing activities
|
(244,178
|
)
|
|
37,818
|
|
||
Cash flows from financing activities
|
|
|
|
||||
Repurchase of stock for tax on RSU vesting
|
(17,136
|
)
|
|
(4,897
|
)
|
||
Repurchase of stock
|
(89,661
|
)
|
|
—
|
|
||
Proceeds from exercise of stock options
|
15,573
|
|
|
21,936
|
|
||
Proceeds from issuance of convertible senior notes
|
345,000
|
|
|
—
|
|
||
Payment of debt issuance costs
|
(9,962
|
)
|
|
—
|
|
||
Purchase of capped call
|
(34,224
|
)
|
|
—
|
|
||
Payments on capital lease obligations
|
(4,748
|
)
|
|
(5,838
|
)
|
||
Payments on facility financing obligation
|
(7,817
|
)
|
|
(4,330
|
)
|
||
Net cash provided by
financing
activities
|
197,025
|
|
|
6,871
|
|
||
Effect of exchange rate changes on cash
|
(2,694
|
)
|
|
1,685
|
|
||
Net increase
in cash, c
ash equivalents, and restrict
ed cash
|
47,285
|
|
|
78,696
|
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
320,783
|
|
|
186,933
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
368,068
|
|
|
$
|
265,629
|
|
|
Nine Months Ended
September 30, |
||||||
|
2018
|
|
2017
|
||||
Supplemental non-cash disclosures
|
|
|
|
||||
Equipment acquired under capital lease obligations
|
$
|
1,909
|
|
|
$
|
5,422
|
|
Stock-based compensation capitalized in development of capitalized software
|
$
|
1,459
|
|
|
$
|
672
|
|
Additions to development of internal-use software and property and equipment included in accounts payable and accrued expenses
|
$
|
1,354
|
|
|
$
|
118
|
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
Cash and cash equivalents
|
$
|
362,727
|
|
|
$
|
315,442
|
|
Short-term investments
|
221,409
|
|
|
25,108
|
|
||
Total cash, cash equivalents, and short-term investments
|
$
|
584,136
|
|
|
$
|
340,550
|
|
|
Nine Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Beginning balance:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
315,442
|
|
|
$
|
181,592
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
320,783
|
|
|
$
|
186,933
|
|
|
|
|
|
||||
Ending balance:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
362,727
|
|
|
$
|
260,288
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
368,068
|
|
|
$
|
265,629
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Marketplace revenue (1)
|
$
|
110,927
|
|
|
$
|
77,808
|
|
|
$
|
290,200
|
|
|
$
|
223,815
|
|
Services revenue
|
38,194
|
|
|
27,976
|
|
|
110,306
|
|
|
77,560
|
|
||||
Other revenue
|
1,245
|
|
|
596
|
|
|
3,159
|
|
|
3,588
|
|
||||
Revenue
|
$
|
150,366
|
|
|
$
|
106,380
|
|
|
$
|
403,665
|
|
|
$
|
304,963
|
|
(1)
|
Etsy Payments revenue for
the three and nine months ended
September 30, 2018
has been classified and presented within Marketplace revenue. Comparative periods have been reclassified to conform to current period presentation.
|
•
|
Revenue from Promoted Listings, the Company’s on-site advertising service, consists of cost-per-click fees an Etsy seller pays for prominent placement of the seller’s listings in search results in the Company’s marketplace. Promoted Listings fees are based on an auction system, which utilizes the budget that each Etsy seller sets when using Promoted Listings to determine the cost-per-click fee. Promoted Listing fees are nonrefundable and are charged to a seller’s Etsy bill when the Promoted Listing is clicked; at which time revenue is recognized.
|
•
|
Revenue from Etsy Shipping Labels consists of fees an Etsy seller pays the Company when the seller purchases shipping labels through our platform, net of the cost the Company incurs in purchasing those shipping labels. The Company provides sellers access to purchase shipping labels from the United States Postal Service, FedEx, and Canada Post at discounted pricing due to the volume of purchases through its platform. The Company recognizes Etsy Shipping Label revenue when an Etsy seller purchases a shipping label. The Company recognizes Etsy Shipping Label revenue on a net basis as the Company is an agent in this arrangement and does not take ownership of shipping labels prior to transferring the labels to the Etsy Seller. Etsy Shipping Label revenue is recorded net of refunds.
|
•
|
Revenue from Pattern by Etsy consists of monthly subscription fees an Etsy seller pays to use the Company’s custom website services. The Company recognizes revenue from Pattern ratably over the term of the subscription. The Pattern subscription fee is
$15
per month and is nonrefundable.
|
•
|
Revenue from Etsy Plus consists of monthly subscription fees an Etsy seller pays for enhanced tools and credits for use on the Company’s platform. The Etsy Plus subscription fee is
$10
per month and is nonrefundable. Each feature represents its own distinct performance obligation. The Company allocates subscription revenue based on the relative actual or estimated stand-alone selling price of the features included in the Etsy Plus offering. Enhanced tools include advanced shop customization options, targeted restock notifications, discounts on branded packaging and promotional materials, and free or discounted custom web addresses, all of which are recognized ratably over the
30
-day subscription period. Additionally, the subscription includes
$5
of Promoted Listing credits and
15
free listing credits per month. The allocated value of Promoted Listing credits is recognized when the Promoted Listing is clicked, or when the 30-day subscription period expires. The allocated value of listing credits is deferred until the option is used, and once used, allocated over the four-month listing period. Any unused listing credits are recognized when the 30-day subscription period expires.
|
•
|
Revenue from Targeted Offers consists of fees an Etsy seller pays the Company to send email notifications with offer discounts and coupons to buyers who have favorited items or added items to their cart. A nonrefundable fee of
$0.10
per email is charged to a seller’s Etsy bill when the email is sent; at which time the revenue is recognized.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Volatility
|
47.8%
|
|
42.4% - 44.1%
|
|
38.6% - 47.8%
|
|
41.7% - 44.2%
|
Risk-free interest rate
|
2.8%
|
|
1.9% - 2.1%
|
|
2.6% - 2.9%
|
|
1.9% - 2.2%
|
Expected term (in years)
|
6.1
|
|
5.5 - 6.3
|
|
5.5 - 6.3
|
|
5.5 - 6.3
|
Dividend rate
|
—%
|
|
—%
|
|
—%
|
|
—%
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contract Term (in years)
|
|
Aggregate Intrinsic Value
|
|||||
Outstanding at December 31, 2017
|
7,947,939
|
|
|
$
|
11.02
|
|
|
|
|
|
||
Granted
|
768,263
|
|
|
28.86
|
|
|
|
|
|
|||
Exercised
|
(1,354,886
|
)
|
|
11.49
|
|
|
|
|
|
|||
Forfeited/Canceled
|
(245,909
|
)
|
|
15.40
|
|
|
|
|
|
|||
Outstanding at September 30, 2018
|
7,115,407
|
|
|
12.70
|
|
|
8.15
|
|
$
|
275,193
|
|
|
Total exercisable at September 30, 2018
|
2,842,638
|
|
|
|
|
|
7.34
|
|
116,034
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Weighted-average grant date fair value of options granted
|
$
|
25.00
|
|
|
$
|
6.50
|
|
|
$
|
15.53
|
|
|
$
|
4.83
|
|
Intrinsic value of options exercised
|
13,493
|
|
|
31,361
|
|
|
24,690
|
|
|
44,227
|
|
||||
Fair value of awards vested
|
8,783
|
|
|
5,943
|
|
|
23,182
|
|
|
16,428
|
|
|
Shares
|
|
Weighted-Average
Grant Date Fair Value |
|||
Unvested at December 31, 2017
|
3,074,247
|
|
|
$
|
11.98
|
|
Granted
|
2,281,143
|
|
|
26.13
|
|
|
Vested
|
(1,148,993
|
)
|
|
11.92
|
|
|
Forfeited/Canceled
|
(414,966
|
)
|
|
17.16
|
|
|
Unvested at September 30, 2018
|
3,791,431
|
|
|
20.97
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of revenue
|
$
|
894
|
|
|
$
|
469
|
|
|
$
|
2,367
|
|
|
$
|
1,231
|
|
Marketing
|
642
|
|
|
447
|
|
|
1,819
|
|
|
1,419
|
|
||||
Product development
|
4,697
|
|
|
2,180
|
|
|
11,361
|
|
|
6,253
|
|
||||
General and administrative
|
2,683
|
|
|
4,425
|
|
|
8,440
|
|
|
11,665
|
|
||||
Total stock-based compensation expense
|
$
|
8,916
|
|
|
$
|
7,521
|
|
|
$
|
23,987
|
|
|
$
|
20,568
|
|
|
Shares Repurchased
|
|
Average Price Paid per Share (1)
|
|
Value of Shares Repurchased (1)
|
|
Remaining Amount Authorized
|
|||||||
Balance as of December 31, 2017
|
586,231
|
|
|
$
|
17.57
|
|
|
$
|
10,301
|
|
|
$
|
89,699
|
|
Repurchases of common stock for the three months ended:
|
|
|
|
|
|
|
|
|||||||
March 31, 2018
|
2,807,393
|
|
|
24.43
|
|
|
68,586
|
|
|
(68,586
|
)
|
|||
June 30, 2018
|
722,941
|
|
|
29.15
|
|
|
21,113
|
|
|
(21,113
|
)
|
|||
Balance as of September 30, 2018
|
4,116,565
|
|
|
$
|
24.28
|
|
|
$
|
100,000
|
|
|
$
|
—
|
|
|
As of September 30, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
—
|
|
|
$
|
2,994
|
|
|
$
|
—
|
|
|
$
|
2,994
|
|
Money market funds
|
186,583
|
|
|
—
|
|
|
—
|
|
|
186,583
|
|
||||
|
186,583
|
|
|
2,994
|
|
|
—
|
|
|
189,577
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
125,976
|
|
|
—
|
|
|
125,976
|
|
||||
Corporate bonds
|
—
|
|
|
40,607
|
|
|
—
|
|
|
40,607
|
|
||||
U.S. Government and agency securities
|
54,826
|
|
|
—
|
|
|
—
|
|
|
54,826
|
|
||||
|
54,826
|
|
|
166,583
|
|
|
—
|
|
|
221,409
|
|
||||
Funds receivable and seller accounts:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
30,433
|
|
|
—
|
|
|
—
|
|
|
30,433
|
|
||||
|
30,433
|
|
|
—
|
|
|
—
|
|
|
30,433
|
|
||||
|
$
|
271,842
|
|
|
$
|
169,577
|
|
|
$
|
—
|
|
|
$
|
441,419
|
|
|
As of December 31, 2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
—
|
|
|
$
|
11,290
|
|
|
$
|
—
|
|
|
$
|
11,290
|
|
Money market funds
|
204,867
|
|
|
—
|
|
|
—
|
|
|
204,867
|
|
||||
U.S. Government and agency securities
|
24,989
|
|
|
—
|
|
|
—
|
|
|
24,989
|
|
||||
|
229,856
|
|
|
11,290
|
|
|
—
|
|
|
241,146
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
2,998
|
|
|
—
|
|
|
2,998
|
|
||||
Corporate bonds
|
—
|
|
|
12,748
|
|
|
—
|
|
|
12,748
|
|
||||
U.S. Government and agency securities
|
9,362
|
|
|
—
|
|
|
—
|
|
|
9,362
|
|
||||
|
9,362
|
|
|
15,746
|
|
|
—
|
|
|
25,108
|
|
||||
Funds receivable and seller accounts:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
14,144
|
|
|
—
|
|
|
—
|
|
|
14,144
|
|
||||
|
14,144
|
|
|
—
|
|
|
—
|
|
|
14,144
|
|
||||
|
$
|
253,362
|
|
|
$
|
27,036
|
|
|
$
|
—
|
|
|
$
|
280,398
|
|
|
Cost
|
|
Gross
Unrealized Holding Loss |
|
Gross
Unrealized Holding Gain |
|
Fair Value
|
||||||||
September 30, 2018
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
2,994
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,994
|
|
|
2,994
|
|
|
—
|
|
|
—
|
|
|
2,994
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
125,976
|
|
|
—
|
|
|
—
|
|
|
125,976
|
|
||||
Corporate bonds
|
40,610
|
|
|
(6
|
)
|
|
3
|
|
|
40,607
|
|
||||
U.S. Government and agency securities
|
54,832
|
|
|
(17
|
)
|
|
11
|
|
|
54,826
|
|
||||
|
221,418
|
|
|
(23
|
)
|
|
14
|
|
|
221,409
|
|
||||
|
$
|
224,412
|
|
|
$
|
(23
|
)
|
|
$
|
14
|
|
|
$
|
224,403
|
|
December 31, 2017
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
11,290
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,290
|
|
U.S. Government and agency securities
|
24,990
|
|
|
(1
|
)
|
|
—
|
|
|
24,989
|
|
||||
|
36,280
|
|
|
(1
|
)
|
|
—
|
|
|
36,279
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
2,998
|
|
|
—
|
|
|
—
|
|
|
2,998
|
|
||||
Corporate bonds
|
12,754
|
|
|
(6
|
)
|
|
—
|
|
|
12,748
|
|
||||
U.S. Government and agency securities
|
9,352
|
|
|
(1
|
)
|
|
11
|
|
|
9,362
|
|
||||
|
25,104
|
|
|
(7
|
)
|
|
11
|
|
|
25,108
|
|
||||
|
$
|
61,384
|
|
|
$
|
(8
|
)
|
|
$
|
11
|
|
|
$
|
61,387
|
|
|
As of September 30, 2018
|
|
As of December 31, 2017
|
||||||||||||||||||||
|
Gross book
value |
|
Accumulated
amortization |
|
Net book
value |
|
Gross book
value |
|
Accumulated
amortization |
|
Net book
value |
||||||||||||
Patents and developed technology
|
$
|
7,200
|
|
|
$
|
(4,900
|
)
|
|
$
|
2,300
|
|
|
$
|
7,200
|
|
|
$
|
(3,100
|
)
|
|
$
|
4,100
|
|
Referral agreement
|
35,084
|
|
|
(1,024
|
)
|
|
34,060
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total intangible assets
|
$
|
42,284
|
|
|
$
|
(5,924
|
)
|
|
$
|
36,360
|
|
|
$
|
7,200
|
|
|
$
|
(3,100
|
)
|
|
$
|
4,100
|
|
2018
|
$
|
1,478
|
|
2019
|
5,208
|
|
|
2020
|
3,508
|
|
|
2021
|
3,508
|
|
|
2022
|
3,508
|
|
|
Thereafter
|
19,150
|
|
|
Total amortization expense
|
$
|
36,360
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net
inco
me
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
$
|
36,240
|
|
|
$
|
37,050
|
|
Net income allocated to participating securities under the two-class method
|
(10
|
)
|
|
(25
|
)
|
|
(17
|
)
|
|
(37
|
)
|
||||
Net
inco
me applicable to common stockholde
rs—basic
|
19,884
|
|
|
25,777
|
|
|
36,223
|
|
|
37,013
|
|
||||
Dilutive effect of net income allocated to participating securities under the two-class method
|
10
|
|
|
25
|
|
|
17
|
|
|
37
|
|
||||
Change in fair value of liability classified restricted stock
|
—
|
|
|
—
|
|
|
—
|
|
|
771
|
|
||||
Net income attributable to common stockholders—diluted
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
$
|
36,240
|
|
|
$
|
37,821
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding—basic (1)
|
119,870,711
|
|
|
119,592,191
|
|
|
120,469,066
|
|
|
117,387,714
|
|
||||
Common equivalent shares from options to purchase common stock and restricted stock units
|
4,752,871
|
|
|
2,254,792
|
|
|
4,134,016
|
|
|
2,847,662
|
|
||||
Dilutive effect of assumed conversion of restricted stock units
|
2,368,406
|
|
|
1,308,104
|
|
|
1,812,373
|
|
|
1,075,915
|
|
||||
Dilutive effect of assumed conversion of convertible debt
|
2,004,447
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Dilutive effect of assumed conversion of restricted stock from acquisition
|
89,702
|
|
|
69,472
|
|
|
81,826
|
|
|
35,630
|
|
||||
Weighted-average common shares outstanding—diluted
|
129,086,137
|
|
|
123,224,559
|
|
|
126,497,281
|
|
|
121,346,921
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net
inco
me per share attributable to common stockholders—b
asic
|
$
|
0.17
|
|
|
$
|
0.22
|
|
|
$
|
0.30
|
|
|
$
|
0.32
|
|
Net income per share a
ttri
butable to common stockholders—diluted
|
$
|
0.15
|
|
|
$
|
0.21
|
|
|
$
|
0.29
|
|
|
$
|
0.31
|
|
(1)
|
57,482
shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for
the three and nine months ended
September 30, 2018
.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Stock options
|
8,166
|
|
|
2,211,038
|
|
|
467,072
|
|
|
4,980,520
|
|
Restricted stock units
|
52,197
|
|
|
185,472
|
|
|
1,174,618
|
|
|
792,024
|
|
Total anti-dilutive securities
|
60,363
|
|
|
2,396,510
|
|
|
1,641,690
|
|
|
5,772,544
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
United States
|
$
|
106,228
|
|
|
$
|
75,829
|
|
|
$
|
287,956
|
|
|
$
|
220,898
|
|
International
|
44,138
|
|
|
30,551
|
|
|
115,709
|
|
|
84,065
|
|
||||
Revenue
|
$
|
150,366
|
|
|
$
|
106,380
|
|
|
$
|
403,665
|
|
|
$
|
304,963
|
|
|
|
|
|
|
|
|
|
||||||||
United States (1)
|
$
|
(2,527
|
)
|
|
$
|
(9,116
|
)
|
|
$
|
3,224
|
|
|
$
|
(41,421
|
)
|
International
|
17,123
|
|
|
22,356
|
|
|
28,978
|
|
|
55,420
|
|
||||
(Loss) income before income taxes
|
$
|
14,596
|
|
|
$
|
13,240
|
|
|
$
|
32,202
|
|
|
$
|
13,999
|
|
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
2,478
|
|
|
$
|
3,549
|
|
|
$
|
7,985
|
|
|
$
|
(17,386
|
)
|
International
|
17,416
|
|
|
22,253
|
|
|
28,255
|
|
|
54,436
|
|
||||
Net income (loss)
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
$
|
36,240
|
|
|
$
|
37,050
|
|
(1)
|
The loss before income taxes in
the three months ended September 30, 2018
was primarily driven by non-cash interest expense related to the amortization of debt discount and transaction costs in connection with the convertible debt issued in the first quarter of 2018 and interest associated with the build-to-suit lease accounting related to our corporate headquarters.
|
|
Severance Charge
|
|
Stock-Based Compensation
|
|
Other Exit Costs
|
|
Total
|
||||||||
Balance, December 31, 2017
|
$
|
1,308
|
|
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
1,342
|
|
Total restructuring and other exit costs (income)
|
(156
|
)
|
|
—
|
|
|
5
|
|
|
(151
|
)
|
||||
Cash payments
|
(793
|
)
|
|
—
|
|
|
—
|
|
|
(793
|
)
|
||||
Balance, March 31, 2018
|
359
|
|
|
—
|
|
|
39
|
|
|
398
|
|
||||
Total restructuring and other exit costs (income)
|
(43
|
)
|
|
—
|
|
|
2
|
|
|
(41
|
)
|
||||
Cash payments
|
(271
|
)
|
|
—
|
|
|
(16
|
)
|
|
(287
|
)
|
||||
Balance, June 30, 2018
|
45
|
|
|
—
|
|
|
25
|
|
|
70
|
|
||||
Total restructuring and other exit costs (income)
|
(45
|
)
|
|
—
|
|
|
(12
|
)
|
|
(57
|
)
|
||||
Cash payments
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(13
|
)
|
||||
Balance, September 30, 2018
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of revenue
|
$
|
(6
|
)
|
|
$
|
5
|
|
|
$
|
(19
|
)
|
|
$
|
699
|
|
Marketing
|
(12
|
)
|
|
337
|
|
|
(82
|
)
|
|
2,686
|
|
||||
Product development
|
(14
|
)
|
|
79
|
|
|
(110
|
)
|
|
3,180
|
|
||||
General and administrative
|
(25
|
)
|
|
1,345
|
|
|
(38
|
)
|
|
6,461
|
|
||||
Total restructuring and other exit costs (income)
|
$
|
(57
|
)
|
|
$
|
1,766
|
|
|
$
|
(249
|
)
|
|
$
|
13,026
|
|
•
|
Enhancing search and discovery
. Helping buyers better navigate the over
50 million
items on Etsy.com is a key area of focus.
|
•
|
Improving trust and reliability.
We want to ensure that the Etsy brand delivers trust and reliability throughout the buying experience and improve conversion.
|
•
|
Building world-class marketing capabilities
. We are focused on driving traffic to Etsy.com utilizing our own marketing efforts and the efforts of our sellers, primarily through digital acquisition marketing, search engine optimization, social and television channels, and email.
|
•
|
Providing best-in-class seller tools and services
. We plan to continue to invest in tools and paid services that enable Etsy sellers to start, manage, and scale their businesses.
|
•
|
Enhancing search and discovery:
We continued to launch new product enhancements and build upon prior launches to help buyers find the right product at the right time, or discover inspiration among the items in our marketplace. We continued to improve search relevance using context specific ranking and worked to accelerate home and search page load times. We optimized landing pages by adding more recommendations and notifications, including alerts on listing cards when scarce items appear in other people's carts and introduced a new discovery feed to inspire buyers to explore more products and expand their search beyond their original intent. Additionally, we optimized the desktop browsing experience by opening listing pages in a new tab to reduce the friction of searching through multiple listings.
|
•
|
Improving trust and reliability:
We launched several product enhancements aimed at bolstering trust on the platform and improving conversion rates. We made several significant customer support improvements by introducing live chat for our sellers and, in October, we launched inbound phone support for both buyers and sellers. Our service is now a 24x7 offering. We improved our buyer experience to make it easier for buyers to provide information for personalization and customization details on the listing and cart pages, and a notification on our cart page to inform a buyer when they are close to meeting criteria for a shop sale. We added shop review ratings on the cart page to give buyers more confidence in making a purchase decision.
|
•
|
Building world-class marketing capabilities:
We continued to focus on utilizing our marketing efforts to drive new and existing buyers to Etsy. We began sending on-site and email notifications to inform buyers when one of their recently favorited items goes on sale. We ran our first-ever television advertising campaign in select regional markets in the U.S and also began to test specific new top of the funnel ad campaigns.
|
•
|
Providing best-in-class seller tools and services:
We launched subscription packages designed to give sellers more ways to grow their businesses and their brands, and continued to focus on shipping improvements. In October, we expanded our Etsy Shipping Labels offering to our sellers in the United Kingdom through our new agreement with Royal Mail. Also, we launched our Seller Holiday Campaign, which provides tools and guidance to our sellers as they prepare for the holiday season.
|
|
Quarter-to-Date Period Ended
|
|
Year-to-Date Period Ended
|
||||||||||||||||||||||||||||
|
Previous Presentation
|
|
Updated Presentation
|
|
Previous Presentation
|
|
Updated Presentation
|
||||||||||||||||||||||||
|
Marketplace Revenue
|
|
Services Revenue
|
|
Marketplace Revenue
|
|
Services Revenue
|
|
Marketplace Revenue
|
|
Services Revenue
|
|
Marketplace Revenue
|
|
Services Revenue
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||
December 31, 2017
|
$
|
54,251
|
|
|
$
|
82,319
|
|
|
$
|
102,261
|
|
|
$
|
34,309
|
|
|
$
|
179,492
|
|
|
$
|
258,453
|
|
|
$
|
326,076
|
|
|
$
|
111,869
|
|
September 30, 2017
|
42,413
|
|
|
63,371
|
|
|
77,808
|
|
|
27,976
|
|
|
125,241
|
|
|
176,134
|
|
|
223,815
|
|
|
77,560
|
|
||||||||
June 30, 2017
|
42,069
|
|
|
58,816
|
|
|
75,445
|
|
|
25,440
|
|
|
82,828
|
|
|
112,763
|
|
|
146,007
|
|
|
49,584
|
|
||||||||
March 31, 2017
|
40,759
|
|
|
53,947
|
|
|
70,562
|
|
|
24,144
|
|
|
40,759
|
|
|
53,947
|
|
|
70,562
|
|
|
24,144
|
|
|
Three Months Ended
September 30, |
|
% Growth
(Decline)
Y/Y
|
|
Nine Months Ended
September 30, |
|
% Growth
(Decline)
Y/Y
|
||||||||||||||
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||
GMS
|
$
|
922,513
|
|
|
$
|
766,354
|
|
|
20.4
|
%
|
|
$
|
2,685,273
|
|
|
$
|
2,234,157
|
|
|
20.2
|
%
|
Revenue
|
$
|
150,366
|
|
|
$
|
106,380
|
|
|
41.3
|
%
|
|
$
|
403,665
|
|
|
$
|
304,963
|
|
|
32.4
|
%
|
Marketplace revenue
|
$
|
110,927
|
|
|
$
|
77,808
|
|
|
42.6
|
%
|
|
$
|
290,200
|
|
|
$
|
223,815
|
|
|
29.7
|
%
|
Services revenue
|
$
|
38,194
|
|
|
$
|
27,976
|
|
|
36.5
|
%
|
|
$
|
110,306
|
|
|
$
|
77,560
|
|
|
42.2
|
%
|
Net
inco
me
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
(22.9
|
)%
|
|
$
|
36,240
|
|
|
$
|
37,050
|
|
|
(2.2
|
)%
|
Adjusted EBITDA
|
$
|
34,035
|
|
|
$
|
22,769
|
|
|
49.5
|
%
|
|
$
|
88,151
|
|
|
$
|
45,187
|
|
|
95.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Active sellers
|
2,043
|
|
|
1,891
|
|
|
8.0
|
%
|
|
2,043
|
|
|
1,891
|
|
|
8.0
|
%
|
||||
Active buyers
|
37,134
|
|
|
31,680
|
|
|
17.2
|
%
|
|
37,134
|
|
|
31,680
|
|
|
17.2
|
%
|
||||
Percent mobile GMS
|
56
|
%
|
|
52
|
%
|
|
400
|
bps
|
|
55
|
%
|
|
51
|
%
|
|
400
|
bps
|
||||
Percent international GMS
|
35
|
%
|
|
34
|
%
|
|
100
|
bps
|
|
35
|
%
|
|
33
|
%
|
|
200
|
bps
|
|
Quarter-to-Date Period Ended
|
|
Year-to-Date Period Ended
|
||||||||||||||
|
As Reported
|
|
Currency Neutral
|
|
FX Impact
|
|
As Reported
|
|
Currency Neutral
|
|
FX Impact
|
||||||
September 30, 2018
|
20.4
|
%
|
|
20.8
|
%
|
|
(0.4
|
)%
|
|
20.2
|
%
|
|
19.2
|
%
|
|
1.0
|
%
|
June 30, 2018
|
20.4
|
%
|
|
19.3
|
%
|
|
1.1
|
%
|
|
20.1
|
%
|
|
18.5
|
%
|
|
1.6
|
%
|
March 31, 2018
|
19.8
|
%
|
|
17.6
|
%
|
|
2.2
|
%
|
|
19.8
|
%
|
|
17.6
|
%
|
|
2.2
|
%
|
December 31, 2017
|
17.8
|
%
|
|
16.5
|
%
|
|
1.3
|
%
|
|
14.5
|
%
|
|
14.3
|
%
|
|
0.2
|
%
|
September 30, 2017
|
13.2
|
%
|
|
12.6
|
%
|
|
0.6
|
%
|
|
13.0
|
%
|
|
13.4
|
%
|
|
(0.4
|
)%
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Marketplace
|
$
|
110,927
|
|
|
$
|
77,808
|
|
|
$
|
290,200
|
|
|
$
|
223,815
|
|
Services
|
38,194
|
|
|
27,976
|
|
|
110,306
|
|
|
77,560
|
|
||||
Other
|
1,245
|
|
|
596
|
|
|
3,159
|
|
|
3,588
|
|
||||
Total revenue
|
150,366
|
|
|
106,380
|
|
|
403,665
|
|
|
304,963
|
|
||||
Cost of revenue
|
46,947
|
|
|
36,383
|
|
|
133,651
|
|
|
106,766
|
|
||||
Gross profit
|
103,419
|
|
|
69,997
|
|
|
270,014
|
|
|
198,197
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Marketing
|
39,516
|
|
|
23,520
|
|
|
94,651
|
|
|
74,495
|
|
||||
Product development
|
24,418
|
|
|
16,958
|
|
|
68,707
|
|
|
56,828
|
|
||||
General and administrative
|
20,748
|
|
|
22,094
|
|
|
61,359
|
|
|
73,268
|
|
||||
Total operating expenses
|
84,682
|
|
|
62,572
|
|
|
224,717
|
|
|
204,591
|
|
||||
Income (loss) from operations
|
18,737
|
|
|
7,425
|
|
|
45,297
|
|
|
(6,394
|
)
|
||||
Other (expense) income, net
|
(4,141
|
)
|
|
5,815
|
|
|
(13,095
|
)
|
|
20,393
|
|
||||
Income before income taxes
|
14,596
|
|
|
13,240
|
|
|
32,202
|
|
|
13,999
|
|
||||
Benefit for income taxes
|
5,298
|
|
|
12,562
|
|
|
4,038
|
|
|
23,051
|
|
||||
Net inco
me
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
$
|
36,240
|
|
|
$
|
37,050
|
|
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Marketplace
|
73.8
|
%
|
|
73.1
|
%
|
|
71.9
|
%
|
|
73.4
|
%
|
||||
Services
|
25.4
|
|
|
26.3
|
|
|
27.3
|
|
|
25.4
|
|
||||
Other
|
0.8
|
|
|
0.6
|
|
|
0.8
|
|
|
1.2
|
|
||||
Total revenue
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
||||
Cost of revenue
|
31.2
|
|
|
34.2
|
|
|
33.1
|
|
|
35.0
|
|
||||
Gross profit
|
68.8
|
|
|
65.8
|
|
|
66.9
|
|
|
65.0
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Marketing
|
26.3
|
|
|
22.1
|
|
|
23.4
|
|
|
24.4
|
|
||||
Product development
|
16.2
|
|
|
15.9
|
|
|
17.0
|
|
|
18.6
|
|
||||
General and administrative
|
13.8
|
|
|
20.8
|
|
|
15.2
|
|
|
24.0
|
|
||||
Total operating expenses
|
56.3
|
|
|
58.8
|
|
|
55.7
|
|
|
67.1
|
|
||||
Income (loss) from operations
|
12.5
|
|
|
7.0
|
|
|
11.2
|
|
|
(2.1
|
)
|
||||
Other (expense) income, net
|
(2.8
|
)
|
|
5.5
|
|
|
(3.2
|
)
|
|
6.7
|
|
||||
Income before income taxes
|
9.7
|
|
|
12.4
|
|
|
8.0
|
|
|
4.6
|
|
||||
Benefit for income taxes
|
3.5
|
|
|
11.8
|
|
|
1.0
|
|
|
7.6
|
|
||||
Net inco
me
|
13.2
|
%
|
|
24.3
|
%
|
|
9.0
|
%
|
|
12.1
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
$
|
110,927
|
|
|
$
|
77,808
|
|
|
$
|
33,119
|
|
|
42.6
|
%
|
Percentage of total revenue
|
73.8
|
%
|
|
73.1
|
%
|
|
|
|
|
|||||
Services
|
$
|
38,194
|
|
|
$
|
27,976
|
|
|
$
|
10,218
|
|
|
36.5
|
%
|
Percentage of total revenue
|
25.4
|
%
|
|
26.3
|
%
|
|
|
|
|
|||||
Other
|
$
|
1,245
|
|
|
$
|
596
|
|
|
$
|
649
|
|
|
108.9
|
%
|
Percentage of total revenue
|
0.8
|
%
|
|
0.6
|
%
|
|
|
|
|
|||||
Total revenue
|
$
|
150,366
|
|
|
$
|
106,380
|
|
|
$
|
43,986
|
|
|
41.3
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Cost of revenue
|
$
|
46,947
|
|
|
$
|
36,383
|
|
|
$
|
10,564
|
|
|
29.0
|
%
|
Percentage of total revenue
|
31.2
|
%
|
|
34.2
|
%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Marketing
|
$
|
39,516
|
|
|
$
|
23,520
|
|
|
$
|
15,996
|
|
|
68.0
|
%
|
Percentage of total revenue
|
26.3
|
%
|
|
22.1
|
%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
General and administrative
|
$
|
20,748
|
|
|
$
|
22,094
|
|
|
$
|
(1,346
|
)
|
|
(6.1
|
)%
|
Percentage of total revenue
|
13.8
|
%
|
|
20.8
|
%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Other (expense) income, net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(6,135
|
)
|
|
$
|
(2,908
|
)
|
|
$
|
(3,227
|
)
|
|
111.0
|
%
|
Percentage of total revenue
|
(4.1
|
)%
|
|
(2.7
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
2,367
|
|
|
$
|
654
|
|
|
$
|
1,713
|
|
|
261.9
|
%
|
Percentage of total revenue
|
1.6
|
%
|
|
0.6
|
%
|
|
|
|
|
|||||
Foreign exchange (loss) gain
|
$
|
(373
|
)
|
|
$
|
8,069
|
|
|
$
|
(8,442
|
)
|
|
(104.6
|
)%
|
Percentage of total revenue
|
(0.2
|
)%
|
|
7.6
|
%
|
|
|
|
|
|||||
Other (expense) income, net
|
$
|
(4,141
|
)
|
|
$
|
5,815
|
|
|
$
|
(9,956
|
)
|
|
(171.2
|
)%
|
Percentage of total revenue
|
(2.8
|
)%
|
|
5.5
|
%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Benefit for income taxes
|
$
|
5,298
|
|
|
$
|
12,562
|
|
|
$
|
(7,264
|
)
|
|
(57.8
|
)%
|
Percentage of total revenue
|
3.5
|
%
|
|
11.8
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
$
|
290,200
|
|
|
$
|
223,815
|
|
|
$
|
66,385
|
|
|
29.7
|
%
|
Percentage of total revenue
|
71.9
|
%
|
|
73.4
|
%
|
|
|
|
|
|||||
Services
|
$
|
110,306
|
|
|
$
|
77,560
|
|
|
$
|
32,746
|
|
|
42.2
|
%
|
Percentage of total revenue
|
27.3
|
%
|
|
25.4
|
%
|
|
|
|
|
|||||
Other
|
$
|
3,159
|
|
|
$
|
3,588
|
|
|
$
|
(429
|
)
|
|
(12.0
|
)%
|
Percentage of total revenue
|
0.8
|
%
|
|
1.2
|
%
|
|
|
|
|
|||||
Total revenue
|
$
|
403,665
|
|
|
$
|
304,963
|
|
|
$
|
98,702
|
|
|
32.4
|
%
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Cost of revenue
|
$
|
133,651
|
|
|
$
|
106,766
|
|
|
$
|
26,885
|
|
|
25.2
|
%
|
Percentage of total revenue
|
33.1
|
%
|
|
35.0
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Marketing
|
$
|
94,651
|
|
|
$
|
74,495
|
|
|
$
|
20,156
|
|
|
27.1
|
%
|
Percentage of total revenue
|
23.4
|
%
|
|
24.4
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Product development
|
$
|
68,707
|
|
|
$
|
56,828
|
|
|
$
|
11,879
|
|
|
20.9
|
%
|
Percentage of total revenue
|
17.0
|
%
|
|
18.6
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
General and administrative
|
$
|
61,359
|
|
|
$
|
73,268
|
|
|
$
|
(11,909
|
)
|
|
(16.3
|
)%
|
Percentage of total revenue
|
15.2
|
%
|
|
24.0
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Other (expense) income, net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(16,024
|
)
|
|
$
|
(8,195
|
)
|
|
$
|
(7,829
|
)
|
|
95.5
|
%
|
Percentage of total revenue
|
(4.0
|
)%
|
|
(2.7
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
5,902
|
|
|
$
|
1,636
|
|
|
$
|
4,266
|
|
|
260.8
|
%
|
Percentage of total revenue
|
1.5
|
%
|
|
0.5
|
%
|
|
|
|
|
|||||
Foreign exchange (loss) gain
|
$
|
(2,973
|
)
|
|
$
|
26,952
|
|
|
$
|
(29,925
|
)
|
|
(111.0
|
)%
|
Percentage of total revenue
|
(0.7
|
)%
|
|
8.8
|
%
|
|
|
|
|
|||||
Other (expense) income, net
|
$
|
(13,095
|
)
|
|
$
|
20,393
|
|
|
$
|
(33,488
|
)
|
|
(164.2
|
)%
|
Percentage of total revenue
|
(3.2
|
)%
|
|
6.7
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Benefit for income taxes
|
$
|
4,038
|
|
|
$
|
23,051
|
|
|
$
|
(19,013
|
)
|
|
(82.5
|
)%
|
Percentage of total revenue
|
1.0
|
%
|
|
7.6
|
%
|
|
|
|
|
•
|
Adjusted EBITDA does not reflect other non-operating expenses, net of other non-operating income, including net interest expense;
|
•
|
Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
•
|
Adjusted EBITDA does not consider the impact of
stock-based compensation expense
;
|
•
|
Adjusted EBITDA does not consider the impact of
foreign exchange loss (gain)
;
|
•
|
Adjusted EBITDA does not consider the impact of restructuring and other exit costs (income); and
|
•
|
other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Net
inco
me
|
$
|
19,894
|
|
|
$
|
25,802
|
|
|
$
|
36,240
|
|
|
$
|
37,050
|
|
Excluding:
|
|
|
|
|
|
|
|
||||||||
Interest and other non-operating expense, net (1)
|
3,768
|
|
|
2,254
|
|
|
10,122
|
|
|
6,559
|
|
||||
Benefit for income taxes
|
(5,298
|
)
|
|
(12,562
|
)
|
|
(4,038
|
)
|
|
(23,051
|
)
|
||||
Depreciation and amortization (1)
|
6,439
|
|
|
7,022
|
|
|
19,116
|
|
|
20,620
|
|
||||
Stock-based compensation expense (2)
|
8,191
|
|
|
5,832
|
|
|
21,829
|
|
|
14,756
|
|
||||
Stock-based compensation expense—acquisitions
|
725
|
|
|
724
|
|
|
2,158
|
|
|
3,179
|
|
||||
Foreign exchange loss (gain) (3)
|
373
|
|
|
(8,069
|
)
|
|
2,973
|
|
|
(26,952
|
)
|
||||
Restructuring and other exit costs (income) (4)
|
(57
|
)
|
|
1,766
|
|
|
(249
|
)
|
|
13,026
|
|
||||
Adjusted EBITDA
|
$
|
34,035
|
|
|
$
|
22,769
|
|
|
$
|
88,151
|
|
|
$
|
45,187
|
|
(1)
|
Included in interest and depreciation expense amounts above, are interest and depreciation expense related to our headquarters under build-to-suit accounting requirements, which commenced in May 2016. In
the three and nine months ended
September 30, 2018
and
2017
those amounts are as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Interest expense
|
$
|
2,249
|
|
|
$
|
2,384
|
|
|
$
|
6,748
|
|
|
$
|
6,752
|
|
Depreciation
|
819
|
|
|
819
|
|
|
2,457
|
|
|
2,457
|
|
(2)
|
$1.0 million
and
$2.6 million
of restructuring-related stock-based compensation expense has been excluded from
the three and nine months ended
September 30, 2017
, respectively, and is included in total restructuring and other exit costs below. See note (4). Total stock-based compensation expense included in the Consolidated Statements of Operations is as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of revenue
|
$
|
894
|
|
|
$
|
469
|
|
|
$
|
2,367
|
|
|
$
|
1,231
|
|
Marketing
|
642
|
|
|
447
|
|
|
1,819
|
|
|
1,419
|
|
||||
Product development
|
4,697
|
|
|
2,180
|
|
|
11,361
|
|
|
6,253
|
|
||||
General and administrative
|
2,683
|
|
|
4,425
|
|
|
8,440
|
|
|
11,665
|
|
||||
Total stock-based compensation expense
|
$
|
8,916
|
|
|
$
|
7,521
|
|
|
$
|
23,987
|
|
|
$
|
20,568
|
|
(3)
|
See “—
Results of Operations
—
Other (Expense) Income, net
” for more information on the fluctuation in foreign exchange loss (gain) in
the three and nine months ended
September 30, 2018
and
2017
.
|
(4)
|
Total restructuring and other exit costs (income) related to the Actions included in the Consolidated Statements of Operations are as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of revenue
|
$
|
(6
|
)
|
|
$
|
5
|
|
|
$
|
(19
|
)
|
|
$
|
699
|
|
Marketing
|
(12
|
)
|
|
337
|
|
|
(82
|
)
|
|
2,686
|
|
||||
Product development
|
(14
|
)
|
|
79
|
|
|
(110
|
)
|
|
3,180
|
|
||||
General and administrative
|
(25
|
)
|
|
1,345
|
|
|
(38
|
)
|
|
6,461
|
|
||||
Total restructuring and other exit costs (income)
|
$
|
(57
|
)
|
|
$
|
1,766
|
|
|
$
|
(249
|
)
|
|
$
|
13,026
|
|
•
|
many of these costs were or will be settled in cash;
|
•
|
there is no certainty that
restructuring and other exit costs (income)
will not recur;
|
•
|
other companies, including companies in our industry, may adjust for similar items in a different manner, or may not exclude such charges, which reduces their usefulness as comparative measures.
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
As Reported
|
|
Restructuring and Other Exit Costs (Income)
|
|
Excluding Restructuring and Other Exit Costs (Income)
|
|
As Reported
|
|
Restructuring and Other Exit Costs (Income)
|
|
Excluding Restructuring and Other Exit Costs (Income)
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Revenue
|
$
|
150,366
|
|
|
$
|
—
|
|
|
$
|
150,366
|
|
|
$
|
403,665
|
|
|
$
|
—
|
|
|
$
|
403,665
|
|
Cost of revenue
|
46,947
|
|
|
(6
|
)
|
|
46,953
|
|
|
133,651
|
|
|
(19
|
)
|
|
133,670
|
|
||||||
Gross profit
|
103,419
|
|
|
(6
|
)
|
|
103,413
|
|
|
270,014
|
|
|
(19
|
)
|
|
269,995
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketing
|
39,516
|
|
|
(12
|
)
|
|
39,528
|
|
|
94,651
|
|
|
(82
|
)
|
|
94,733
|
|
||||||
Product development
|
24,418
|
|
|
(14
|
)
|
|
24,432
|
|
|
68,707
|
|
|
(110
|
)
|
|
68,817
|
|
||||||
General and administrative
|
20,748
|
|
|
(25
|
)
|
|
20,773
|
|
|
61,359
|
|
|
(38
|
)
|
|
61,397
|
|
||||||
Total operating expenses
|
84,682
|
|
|
(51
|
)
|
|
84,733
|
|
|
224,717
|
|
|
(230
|
)
|
|
224,947
|
|
||||||
Income from operations
|
$
|
18,737
|
|
|
$
|
(57
|
)
|
|
$
|
18,680
|
|
|
$
|
45,297
|
|
|
$
|
(249
|
)
|
|
$
|
45,048
|
|
|
Three Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2017
|
||||||||||||||||||||
|
As Reported
|
|
Restructuring and Other Exit Costs (Income)
|
|
Excluding Restructuring and Other Exit Costs (Income)
|
|
As Reported
|
|
Restructuring and Other Exit Costs (Income)
|
|
Excluding Restructuring and Other Exit Costs (Income)
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Revenue
|
$
|
106,380
|
|
|
$
|
—
|
|
|
$
|
106,380
|
|
|
$
|
304,963
|
|
|
$
|
—
|
|
|
$
|
304,963
|
|
Cost of revenue
|
36,383
|
|
|
5
|
|
|
36,378
|
|
|
106,766
|
|
|
699
|
|
|
106,067
|
|
||||||
Gross profit
|
69,997
|
|
|
5
|
|
|
70,002
|
|
|
198,197
|
|
|
699
|
|
|
198,896
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketing
|
23,520
|
|
|
337
|
|
|
23,183
|
|
|
74,495
|
|
|
2,686
|
|
|
71,809
|
|
||||||
Product development
|
16,958
|
|
|
79
|
|
|
16,879
|
|
|
56,828
|
|
|
3,180
|
|
|
53,648
|
|
||||||
General and administrative
|
22,094
|
|
|
1,345
|
|
|
20,749
|
|
|
73,268
|
|
|
6,461
|
|
|
66,807
|
|
||||||
Total operating expenses
|
62,572
|
|
|
1,761
|
|
|
60,811
|
|
|
204,591
|
|
|
12,327
|
|
|
192,264
|
|
||||||
Loss from operations
|
$
|
7,425
|
|
|
$
|
1,766
|
|
|
$
|
9,191
|
|
|
$
|
(6,394
|
)
|
|
$
|
13,026
|
|
|
$
|
6,632
|
|
|
As of
September 30, 2018 |
||
|
(in thousands)
|
||
Cash and cash equivalents
|
$
|
362,727
|
|
Short-term investments
|
221,409
|
|
|
Accounts receivable, net
|
36,385
|
|
|
Net working capital
|
579,018
|
|
|
Nine Months Ended
September 30, |
||||||
|
2018
|
|
2017
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
97,132
|
|
|
$
|
32,322
|
|
Investing activities
|
(244,178
|
)
|
|
37,818
|
|
||
Financing activities
|
197,025
|
|
|
6,871
|
|
•
|
fluctuations in revenue generated from Etsy sellers on our platform, including as a result of the seasonality of market transactions, and Etsy sellers’ use of Services;
|
•
|
our ability to convert visits to Etsy.com into sales for our sellers;
|
•
|
the amount and timing of our operating expenses;
|
•
|
our success in attracting and retaining Etsy sellers and Etsy buyers;
|
•
|
our success in executing on our strategy and the impact of any changes in our strategy;
|
•
|
the timing and success of product launches, including new services and features we may introduce, such as the launch and adoption of our new seller subscription packages in connection with our new pricing model;
|
•
|
the success of our marketing efforts;
|
•
|
economic and market conditions, such as currency fluctuations and global events;
|
•
|
disruptions or defects in our marketplace, such as privacy or data security breaches or other incidents that impact the reliability of our platform;
|
•
|
the impact of competitive developments and our response to those developments;
|
•
|
our ability to manage our existing business and future growth;
|
•
|
our ability to recruit and retain employees;
|
•
|
the impact and success of the actions that we implemented during the second quarter of 2017 to increase efficiency, streamline our cost structure, and improve our focus on key strategic growth opportunities; and
|
•
|
the impact of our revised global corporate structure that was implemented on January 1, 2015.
|
•
|
perceived uncertainties as to our commitment to our mission, values and culture;
|
•
|
skepticism regarding our ability to continue to accelerate GMS growth in the future;
|
•
|
continuing to offer competitive compensation and benefits;
|
•
|
enhancing engagement levels among existing employees and their work-life balance;
|
•
|
attracting and retaining qualified employees who support our mission and share our values;
|
•
|
promoting existing employees into leadership positions to help sustain and grow our culture;
|
•
|
hiring employees in multiple locations globally; and
|
•
|
responding to competitive pressures and changing business conditions in ways that do not divert us from our values.
|
•
|
complaints or negative publicity about us, our platform or our policies and guidelines, even if factually incorrect or based on isolated incidents;
|
•
|
an inability to gain the trust of prospective buyers;
|
•
|
disruptions or defects in our marketplace, such as the increased pace of product experimentation, privacy or data security breaches, site outages, payment disruptions or other incidents that impact the reliability of our platform;
|
•
|
lack of awareness of our policies;
|
•
|
changes to our policies that members of our community perceive as inconsistent with our values or that are not clearly articulated;
|
•
|
a failure to enforce our policies effectively, fairly and transparently, including, for example, by allowing the widespread listing of prohibited items in our marketplace;
|
•
|
inadequate or unsatisfactory customer service experiences;
|
•
|
a failure to respond to feedback from our community; or
|
•
|
a failure to operate our business in a way that is consistent with our values and mission.
|
•
|
actions taken by providers of mobile operating systems or mobile app download stores;
|
•
|
unfavorable treatment received by our mobile apps, especially as compared to competing apps, such as the placement of our mobile apps in a mobile app download store;
|
•
|
increased costs to distribute or use our mobile apps; or
|
•
|
changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps or that give preferential treatment to competitive products.
|
•
|
complying with different (and sometimes conflicting) laws and regulatory standards (particularly including those related to the use and disclosure of personal information, online payments, intellectual property, consumer protection, online platform liability and taxation of goods and services);
|
•
|
fluctuations of foreign exchange rates;
|
•
|
potentially heightened risk of fraudulent transactions;
|
•
|
limitations on the repatriation of funds;
|
•
|
exposure to liabilities under anti-corruption, anti-money laundering and export control laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act of 2010, trade controls and sanctions administered by the U.S. Office of Foreign Assets Control, and similar laws and regulations in other jurisdictions;
|
•
|
varying levels of internet, e-commerce, and mobile technology adoption and infrastructure;
|
•
|
our ability to enforce contracts and intellectual property rights in jurisdictions outside the United States;
|
•
|
geopolitical events such as natural disasters, terrorism and acts of war;
|
•
|
uncertainties and instability in European markets caused by the United Kingdom’s decision to exit the European Union; and
|
•
|
barriers to international trade, such as tariffs, customs or other taxes.
|
•
|
we may choose to prohibit the sale of items in our marketplace that are inconsistent with our policies even though we could benefit financially from the sale of those items; or
|
•
|
we may choose to revise our policies in ways that we believe will be beneficial to our community in the long term even though the changes may be perceived unfavorably, such as updates to the way we define “handmade.”
|
•
|
our brand awareness;
|
•
|
the extent to which our Services can ease the administrative tasks that an Etsy seller might encounter in running her business, wherever she chooses to pursue commerce;
|
•
|
the global scale of our marketplace and the breadth of our online presence;
|
•
|
the number and engagement of Etsy buyers;
|
•
|
our seller education resources and tools;
|
•
|
our policies and fees;
|
•
|
the ability to scale her business, including through Pattern or with a production partner;
|
•
|
our mobile apps;
|
•
|
the strength of our community; and
|
•
|
our values.
|
•
|
the breadth of unique goods that Etsy sellers list in our marketplace;
|
•
|
the ease of finding the special item a buyer is looking for;
|
•
|
our brand awareness;
|
•
|
the person-to-person commerce experience;
|
•
|
our reputation for trustworthiness;
|
•
|
our mobile apps;
|
•
|
ease of payment; and
|
•
|
the availability and reliability of our platform.
|
•
|
integrating new businesses and technologies into our infrastructure;
|
•
|
consolidating operational and administrative functions;
|
•
|
coordinating outreach to our community;
|
•
|
maintaining morale and culture and retaining and integrating key employees;
|
•
|
maintaining or developing controls, procedures and policies (including effective internal control over financial reporting and disclosure controls and procedures); and
|
•
|
assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, commercial disputes, cyber attacks, taxes, and other matters.
|
•
|
variations in our operating results and other financial and operational metrics, including the key financial and operating metrics disclosed in this Quarterly Report, as well as how those results and metrics compare to analyst and investor expectations;
|
•
|
forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections or changes in our financial guidance or projections;
|
•
|
failure of analysts to initiate or maintain coverage of our company, changes in their estimates of our operating results or changes in recommendations by analysts that follow our common stock or a negative view of our financial guidance or projections and our failure to meet or exceed the estimates of such analysts;
|
•
|
announcements of new services or enhancements, such as the launch of our new seller subscription packages in connection with our new pricing model, strategic alliances or significant agreements or other developments by us or our competitors;
|
•
|
announcements by us or our competitors of mergers or acquisitions or rumors of such transactions involving us or our competitors;
|
•
|
the amount and timing of our operating expenses and the success of any cost-savings actions we take;
|
•
|
changes in our Board of Directors, management or other key personnel;
|
•
|
disruptions in our marketplace due to hardware, software or network problems, security breaches or other issues;
|
•
|
the strength of the global economy or the economy in the jurisdictions in which we operate, currency fluctuations, and market conditions in our industry and those affecting members of our community;
|
•
|
the trading activity of our largest stockholders;
|
•
|
the number of shares of our common stock that are available for public trading;
|
•
|
litigation or other claims against us;
|
•
|
stockholder activism;
|
•
|
the performance of the equity markets in general and in our industry;
|
•
|
the operating performance of other similar companies;
|
•
|
changes in legal requirements relating to our business; and
|
•
|
any other factors discussed in this Quarterly Report.
|
•
|
provide for a classified board of directors so that not all members of our Board of Directors are elected at one time;
|
•
|
permit our Board of Directors to establish the number of directors and fill any vacancies and newly created directorships;
|
•
|
provide that directors may only be removed for cause;
|
•
|
require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;
|
•
|
authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;
|
•
|
eliminate the ability of our stockholders to call special meetings of stockholders;
|
•
|
prohibit stockholder action by written consent, which means all stockholder actions must be taken at a meeting of our stockholders;
|
•
|
provide that our Board of Directors is expressly authorized to amend or repeal any provision of our bylaws;
|
•
|
restrict the forum for certain litigation against us to Delaware; and
|
•
|
require advance notice for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
|
Period
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
(in thousands) |
||||||
July 1 - 31, 2018 (1)
|
137,140
|
|
|
$
|
42.19
|
|
|
—
|
|
|
$
|
—
|
|
August 1 - 31, 2018
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
September 1 - 30, 2018 (1)
|
68,829
|
|
|
50.16
|
|
|
—
|
|
|
—
|
|
||
Total
|
205,969
|
|
|
$
|
44.85
|
|
|
—
|
|
|
$
|
—
|
|
Exhibit
Number
|
|
|
Incorporated by Reference
|
|
|
Filed
Herewith
|
|
|||||||||||||||||
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
101.INS
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.SCH
|
XBRL Taxonomy Schema Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.CAL
|
XBRL Taxonomy Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.DEF
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.LAB
|
XBRL Taxonomy Labels Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document
’
|
|
|
|
|
|
|
|
|
|
X
|
|
ETSY, INC.
|
|
Date: November 6, 2018
|
/s/ Rachel Glaser
|
|
Rachel Glaser
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
(a)
|
Continuation of your base salary at an annualized rate of $350,000 (but not your employment) for a period of six (6) months after the Effective Date, which base salary shall be paid to you in accordance with the Company’s normal payroll practices, commencing within thirty (30) days following the Effective Date, provided that the initial payment will include a catch-up payment to cover the period between the Effective Date and the date of such first payment;
|
(b)
|
Reimbursement of your COBRA premiums for the health coverage you were covered under the Company’s plans immediately prior to the Effective Date for
|
(c)
|
An additional lump sum payment to you of $262,500, payable within 60 days of the Effective Date.
|
(d)
|
Full (
i.e.
, 100%) acceleration, on the Effective Date, of the stock options and restricted stock units ("RSUs") awarded to you on June 1, 2016, such that all such options will be fully vested and exercisable, and all RSUs will be fully vested, on and as of the Effective Date.
|
(e)
|
Full (
i.e.
, 100%) acceleration, on the Effective Date, of the stock options and RSUs awarded to you on March 15, 2017, such that all such options will be fully vested and exercisable, and all RSUs will be fully vested, on and as of the Effective Date.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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