x
|
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the fiscal year ended December 31, 2018
|
|
|
|
OR
|
|
|
¨
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from
to
|
Delaware
|
|
20-4898921
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
117 Adams Street, Brooklyn, NY
|
|
11201
|
(Address of principal executive offices)
|
|
(Zip code)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Stock, par value $0.001 per share
|
|
The Nasdaq Stock Market LLC
|
Large accelerated filer
x
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
Emerging growth company
¨
|
|
|
Page
|
|
Note Regarding Forward-Looking Statements
|
|
|
Part I
|
|
Item 1.
|
Business
|
|
Item 1A.
|
Risk Factors
|
|
Item 1B.
|
Unresolved Staff Comments
|
|
Item 2.
|
Properties
|
|
Item 3.
|
Legal Proceedings
|
|
Item 4.
|
Mine Safety Disclosures
|
|
|
Part II
|
|
Item 5.
|
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
Item 6.
|
Selected Consolidated Financial and Other Data
|
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2018, 2017, and 2016
|
|
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017, and 2016
|
|
|
Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, 2018, 2017, and 2016
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016
|
|
|
Notes to Consolidated Financial Statements
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
|
Item 9A.
|
Controls and Procedures
|
|
Item 9B.
|
Other Information
|
|
|
Part III
|
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
|
Item 11.
|
Executive Compensation
|
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
|
Item 14.
|
Principal Accounting Fees and Services
|
|
|
Part IV
|
|
Item 15.
|
Exhibits, Financial Statement Schedules
|
|
|
Exhibit Index
|
|
Item 16.
|
Form 10-K Summary
|
|
|
Signatures
|
Key Components of Our Platform
|
•
|
Unique Products:
Our marketplace boasts a large assortment of handmade, customized, personalized, vintage, and craft supply products from all of the world. There are currently more than
60 million
items listed on our marketplace. We intend to continue to improve the customer experience by investing in our search and discovery capabilities to help buyers efficiently find the special items they are looking for and deliver a brand promise around shipping to align with our buyers’ expectations of when they can expect to receive our unique items.
|
•
|
Global Reach:
Etsy’s six core geographic markets are the United States, United Kingdom, Canada, Australia, Germany, and France, and there are people using our platform to buy and sell in nearly every country around the world. Our platform makes it easy for Etsy buyers and Etsy sellers to interact across borders even if they do not speak the same language and wish to transact in different currencies. We use innovative machine translation technology to translate listings, reviews, Promoted Listings, and conversations between Etsy buyers and Etsy sellers. Our payments platform allows Etsy sellers to offer Etsy buyers a wide range of payment options. In
2018
,
37%
of Etsy sellers were located outside the United States, and
35%
of our GMS was generated between an Etsy seller, Etsy buyer, or both, located outside of the United States.
|
•
|
Organic Traffic Base:
We’ve built a loyal, global base of buyers on the platform without significant investment in acquisition marketing until 2013, eight years after being founded. Unlike many other ecommerce companies, the vast majority of visits to Etsy.com came through organic channels. In fact, approximately,
85%
of visits in
2018
were from organic sources, including a large portion from buyers visiting Etsy.com directly as well as from non-paid channels such as search, social, email, and push notifications.
|
•
|
Connection Between Buyers and Sellers:
We believe that human connection is central to buyer engagement. On Etsy, we emphasize that the items listed for sale are brought to life by real people. Additionally, buyers are able to connect directly with sellers in order to ask questions and personalize or customize items to their specifications. We also encourage buyers
|
•
|
Connected Experience Across all Devices:
We want to engage Etsy buyers wherever they are and to provide an enjoyable and accessible shopping experience no matter how they come to Etsy. Our mobile website and our “Buy on Etsy” mobile app for Etsy buyers include search and discovery, curation, personalization and social shopping features. Our Etsy.com iOS and Android mobile apps have been downloaded approximately
56 million
times as of
December 31, 2018
. We offer a connected experience through each channel, desktop, mobile web, and mobile app, to help ensure that no matter what device our buyers use they will have the best possible experience. For the year ended
December 31, 2018
approximately
55%
of our GMS was generated on a mobile device. This is an
increase
compared with 2017, during which
51%
of our GMS was generated on a mobile device. We are focused on increasing conversion rates in general; however, we are particularly focused on mobile web, which continued to be the largest driver of both overall visits growth and mobile GMS growth. Mobile web conversion rate is about
half
the conversion rate on desktop and the conversion rate on our mobile Buy on Etsy app is about
1.2
x the desktop conversion rate. Therefore, if mobile web visits continue to grow as a percentage of overall visits, it could be a headwind to future conversion rate gains.
|
•
|
Buyer Intent; People Come to Etsy to Browse and be Inspired:
Our platform is designed to provide a personalized search experience to Etsy buyers, adjusting in real time based on transaction data and previous browsing history. A large portion of our buyers come to Etsy not in search of a specific item, but to browse and be inspired. We are continuing to build more sophisticated algorithms that allow us to deliver more personalized results to our buyers, utilizing browse and transaction data to surface items they didn’t know they wanted. In
2018
, we launched a number of products to enhance search, including adding recommendations to item landing pages and incorporating more attributes to our search algorithm to improve search ranking. All of this helps bring fun to the discovery and shopping experience. We believe we have significant opportunities to further enhance our search and discovery capabilities and plan to leverage our machine learning technology to deliver an even more personalized shopping experience. In addition, our full migration to Google Cloud by the beginning of 2020 is expected to further improve our search and discovery effectiveness.
|
•
|
Promoted Listings:
Promoted Listings enable Etsy sellers to pay a cost-per-click based fee to feature and promote their goods in our marketplace in search results generated by Etsy buyers. This service allows Etsy sellers to target Etsy buyers who are specifically searching for goods similar to those she offers for sale. During
2018
,
15.1%
of active sellers used Promoted Listings
up
from
15.0%
in
2017
. In
2018
, we enhanced Promoted Listings by expanding inventory across all devices and adding context specific search ranking to improve ad relevance and higher click-through rates, which both led to accelerated year-over-year revenue growth for this service. We optimized our sellers’ budgets and generated a positive return on their spend in 2018. We aim for sellers to be ROI positive and often utilize less than their allocated budget.
|
•
|
Etsy Shipping Labels:
This service allows sellers in the United States, Canada, United Kingdom, and Australia to purchase discounted United States Postal Service, FedEx, Canada Post, Royal Mail, and DAI Post shipping labels through our platform. The ability to print the shipping labels at home reduces the cost and time it takes Etsy sellers to ship items to Etsy buyers, reduces the chance for administrative error through features such as auto population of shipping addresses, and automatically provides tracking information when available and shipping notifications to buyers. During
2018
,
24.7%
of active sellers in regions where Etsy Shipping Labels is offered used this product,
down
from
28.1%
in
2017
. The reduction in percentage of active sellers using Etsy Shipping Labels was driven by the expansion of the service in the United
|
•
|
Pattern:
With Pattern, Etsy sellers can create their own custom websites with unique domain names within minutes. Pattern imports listings and content from Etsy shops, syncs inventory and orders, and utilizes our Etsy Payments and Etsy Shipping Label services. In
2018
, we began allowing sellers to sell items or services on their Pattern website that don’t follow the handmade and vintage guidelines within our Etsy.com marketplace. Sellers may use Pattern for free for the first 30 days, then they are charged
$15
per month, plus payment processing fees and Etsy Shipping Label fees, if they choose to use this service.
|
•
|
Subscription Packages:
Our subscription packages were launched in July 2018 as a way for us to bundle and simplify our offerings for sellers. The Etsy Plus subscription package, which allows sellers to pay for enhanced tools and credits to use on the Etsy.com platform, is
$10
per month and features enhanced tools such as advanced shop customization options, targeted restock notifications, discounts on branded packaging and promotional materials, and free or discounted custom web addresses. Additionally, Etsy Plus includes
$5
of Promoted Listing credits and
15
free listing credits per month.
|
•
|
Seller Tools:
We offer a variety of free tools to Etsy sellers, including marketing tools such as our Google Shopping tool. Google Shopping gives our sellers a complementary way to target buyers outside of the Etsy marketplace at key moments when they are searching for items on Google. Sellers set a daily budget and a target country or a number of geographies through their Shop Manager dashboard and we optimize their budget and target a return on their spend. Our Shop Manager dashboard, which we launched in 2017, serves as a centralized hub for Etsy sellers to track orders, manage inventory, view metrics and statistics, and have conversations with their customers across all of their Etsy shops. In 2018, we added a single, easy-to-use interface that streamlines sellers’ bills and payments accounts. Other marketing tools include Targeted Offers, our sales and promotions tool, and our social media tool, which help sellers with their marketing needs and allows them to stand out on and off the Etsy platform. Also, through a partnership with Intuit, sellers in the United States and the United Kingdom can simplify their accounting and bookkeeping.
|
•
|
Education:
We provide extensive educational resources to teach Etsy sellers how to start, manage, and scale their businesses on our platform, including blog posts, video tutorials, the Etsy Seller Handbook (available on Etsy.com), Etsy.com online forums, and insights from Etsy.com support teams. In addition to our resources, Etsy sellers connect through self-organized Etsy Teams to build personal relationships with other Etsy sellers, collaborate, educate, and support each other as they build their independent creative businesses. Currently, over
16,000
Etsy Teams have formed around the world.
|
How an Etsy Seller Spends Her Time
|
2018 seller survey
|
•
|
87%
identify as women;
|
•
|
75%
consider their Etsy shop to be a business;
|
•
|
97%
run their shops from their homes;
|
•
|
82%
aspire to grow their sales in the future; and
|
•
|
64%
started their Etsy shop as a way to supplement income.
|
Etsy Sellers
|
Active Buyers by Purchase Type
|
Visits Contribution by Source Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVG GMS
|
|
2011
|
|
$817
|
|
$2,241
|
|
$3,314
|
|
$4,299
|
|
|
|
AVG GMS
|
|
2011
|
|
$103
|
|
$177
|
|
$186
|
|
$195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SELLER
|
|
2012
|
|
$1,079
|
|
$2,598
|
|
$3,935
|
|
$4,557
|
|
|
|
PER BUYER
|
|
2012
|
|
$96
|
|
$163
|
|
$173
|
|
$181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
$1,260
|
|
$3,110
|
|
$4,190
|
|
$4,620
|
|
|
|
|
|
2013
|
|
$96
|
|
$161
|
|
$168
|
|
$174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$1,465
|
|
$3,325
|
|
$4,228
|
|
$4,615
|
|
|
|
|
|
2014
|
|
$99
|
|
$157
|
|
$164
|
|
$169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
$1,558
|
|
$3,296
|
|
$4,062
|
|
$4,939
|
|
|
|
|
|
2015
|
|
$101
|
|
$158
|
|
$163
|
|
$180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cohorts of 2015, 2014, 2013, 2012, and 2011 Active Sellers and Active Buyers
|
Board
|
Overall
|
Leadership
|
Tech
|
Engineering
|
Other Business Roles
|
RACE & ETHNICITY METRICS - U.S. ONLY
|
||||||||||||||||||||||||||||||
|
Overall
|
Leadership
|
Tech
|
Engineering
|
Other Business Roles
|
|||||||||||||||||||||||||
|
2016
|
|
2017
|
|
2018†
|
|
2016
|
|
2017
|
|
2018†
|
|
2016
|
|
2017
|
|
2018†
|
|
2016
|
|
2017
|
|
2018†
|
|
2016
|
|
2017
|
|
2018†
|
|
American Indian or Alaska Native
|
—
|
%
|
0.2
|
%
|
0.1
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
0.3
|
%
|
0.3
|
%
|
Asian
|
13.2
|
%
|
13.9
|
%
|
16.5
|
%
|
11.4
|
%
|
16.9
|
%
|
19.3
|
%
|
18.0
|
%
|
20.9
|
%
|
22.6
|
%
|
17.7
|
%
|
20.4
|
%
|
21.9
|
%
|
9.0
|
%
|
7.0
|
%
|
8.5
|
%
|
Black/African American
|
3.9
|
%
|
4.4
|
%
|
3.7
|
%
|
2.5
|
%
|
3.4
|
%
|
3.4
|
%
|
3.2
|
%
|
3.3
|
%
|
2.6
|
%
|
3.3
|
%
|
4.2
|
%
|
3.2
|
%
|
4.5
|
%
|
5.4
|
%
|
5.5
|
%
|
Hispanic
|
4.1
|
%
|
4.1
|
%
|
4.8
|
%
|
1.3
|
%
|
1.7
|
%
|
—
|
%
|
4.4
|
%
|
4.5
|
%
|
4.7
|
%
|
3.9
|
%
|
4.2
|
%
|
5.1
|
%
|
3.6
|
%
|
3.8
|
%
|
5.2
|
%
|
Two or More Races
|
3.5
|
%
|
2.7
|
%
|
2.8
|
%
|
5.1
|
%
|
5.1
|
%
|
2.3
|
%
|
4.2
|
%
|
2.1
|
%
|
3.0
|
%
|
4.6
|
%
|
2.0
|
%
|
3.2
|
%
|
2.9
|
%
|
3.5
|
%
|
2.7
|
%
|
White
|
73.9
|
%
|
71.8
|
%
|
67.0
|
%
|
78.5
|
%
|
72.9
|
%
|
75.0
|
%
|
68.4
|
%
|
65.6
|
%
|
60.8
|
%
|
68.9
|
%
|
65.0
|
%
|
60.8
|
%
|
78.6
|
%
|
78.1
|
%
|
74.8
|
%
|
Not Declared
|
1.4
|
%
|
2.9
|
%
|
5.1
|
%
|
1.2
|
%
|
—
|
%
|
—
|
%
|
1.8
|
%
|
3.6
|
%
|
6.3
|
%
|
1.6
|
%
|
4.2
|
%
|
5.8
|
%
|
1.4
|
%
|
1.9
|
%
|
3.0
|
%
|
AGE METRICS - GLOBAL
|
||||||
|
2016
|
|
2017
|
|
2018†
|
|
24 years and younger
|
5.7
|
%
|
4.2
|
%
|
5.3
|
%
|
25-29 years
|
29.2
|
%
|
28.4
|
%
|
27.9
|
%
|
30-34 years
|
35.8
|
%
|
34.1
|
%
|
32.2
|
%
|
35-39 years
|
19.0
|
%
|
21.2
|
%
|
20.8
|
%
|
40-49 years
|
8.3
|
%
|
9.4
|
%
|
11.1
|
%
|
50+ years
|
1.9
|
%
|
2.7
|
%
|
2.7
|
%
|
SASB Metrics
|
||||||||
SASB Code
|
Metric
|
2016
|
|
2017
|
|
2018
|
|
|
Product Packaging and Distribution
|
||||||||
CG-EC-410a.1
|
Total greenhouse gas (GHG) footprint of product shipments in metric tons CO
2
e
|
103,646
|
‡
|
118,153
|
‡
|
135,459
|
†
|
|
CG-EC-410a.2
|
Discussion of strategies to reduce the environmental impact of product delivery.
The delivery of products sold on our marketplace represents the majority of Etsy’s carbon footprint. As a peer-to-peer marketplace, Etsy does not directly control seller shipping or the associated logistics networks, however, we are committed to addressing carbon emissions from shipping. We have identified a number of levers that we expect to help to drive carbon reduction in the long term, including policy advocacy, vendor negotiation, and peer collaboration. In the near term, Etsy recognizes the need to act on climate change and we are taking immediate action to help balance our footprint. In 2019, we are committing to offset 100% of our emissions from shipping through investments in verified emissions reductions.
|
Greenhouse Gas (“GHG”) Emissions Summary
(tCO
2
e)
|
2016
|
|
2017
|
|
2018
|
|
GHG Emissions by Scope
|
|
|
|
|||
Scope 1
|
410
|
‡
|
467
|
‡
|
372
|
†
|
Scope 2 - Market
|
2,946
|
‡
|
2,209
|
‡
|
1,213
|
†
|
Scope 2 - Location
|
3,076
|
‡
|
3,152
|
‡
|
2,923
|
†
|
Scope 3
|
105,295
|
|
119,444
|
|
137,042
|
|
Scope 3 GHG Emissions by Activity Source
|
|
|
|
|||
Shipping
|
103,646
|
‡
|
118,153
|
‡
|
135,459
|
†
|
Air Travel
|
967
|
‡
|
550
|
‡
|
943
|
†
|
Commuting
|
597
|
|
663
|
|
544
|
|
Remote Workers
|
49
|
|
64
|
|
87
|
|
Waste
|
18
|
|
7
|
|
6
|
|
Water
|
9
|
|
4
|
|
3
|
|
Electricity, Transmission and Distribution Losses
|
9
|
|
3
|
|
<1
|
|
•
|
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;
|
•
|
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; 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, guiding principles 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 supporting their work-life balance;
|
•
|
attracting and retaining qualified employees who support our mission and guiding principles;
|
•
|
promotion opportunities for employees into leadership positions ;
|
•
|
hiring employees in multiple locations globally; and
|
•
|
responding to competitive pressures and changing business conditions in ways that do not divert us from our guiding principles.
|
•
|
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, website outages, payment disruptions or other incidents that impact the reliability of our platform;
|
•
|
lack of awareness of our policies or confusion about how they are applied;
|
•
|
changes to our policies that members of our community perceive as inconsistent with their best interests or our mission, or that are not clearly articulated;
|
•
|
inadequacies in our terms of use;
|
•
|
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 guiding principles 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 and money transmission, intellectual property, consumer protection, online platform liability and taxation of goods and services);
|
•
|
fluctuations of foreign exchange rates;
|
•
|
potentially heightened risk of fraudulent or other illegal 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 Brexit; 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 tools and services can ease the administrative tasks that an Etsy seller might encounter in running her business;
|
•
|
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 mission.
|
•
|
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;
|
•
|
customer service;
|
•
|
our reputation for trustworthiness;
|
•
|
our mobile apps;
|
•
|
the availability of fair and free shipping offered by Etsy sellers;
|
•
|
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.
|
•
|
disposing of assets;
|
•
|
completing mergers or acquisitions;
|
•
|
incurring additional indebtedness;
|
•
|
encumbering our properties or assets;
|
•
|
paying dividends or making other distributions;
|
•
|
making specified investments; and
|
•
|
engaging in transactions with our affiliates.
|
•
|
variations in our operating results and other financial and operational metrics, including the key financial and operating metrics disclosed in this Annual 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, 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 or senior management team;
|
•
|
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 Annual 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(2)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)(4)
|
|
Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
(in thousands)(3) |
||||||
October 1 - 31, 2018 (1)
|
138,695
|
|
|
$
|
49.96
|
|
|
—
|
|
|
$
|
—
|
|
November 1 - 30, 2018
|
676,955
|
|
|
47.27
|
|
|
676,955
|
|
|
168,000
|
|
||
December 1 - 31, 2018
|
239,128
|
|
|
54.37
|
|
|
239,128
|
|
|
155,000
|
|
||
Total
|
1,054,778
|
|
|
$
|
49.23
|
|
|
916,083
|
|
|
$
|
155,000
|
|
(1)
|
The total number of shares purchased includes
138,695
shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units (“RSUs”).
|
(2)
|
Average price paid per share excludes broker commissions.
|
(3)
|
On November 6, 2018, we announced that our Board of Directors had approved a stock repurchase program for the repurchase of up to
$200 million
of our common stock. The stock repurchase program has no expiration date.
|
(4)
|
A portion of these shares were purchased pursuant to a 10b5-1 trading plan.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands except share and per share amounts)
|
||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Marketplace (1)
|
$
|
440,740
|
|
|
$
|
326,076
|
|
|
$
|
269,628
|
|
|
$
|
204,333
|
|
|
$
|
156,821
|
|
Services (1)
|
158,928
|
|
|
111,869
|
|
|
89,433
|
|
|
64,923
|
|
|
34,413
|
|
|||||
Other
|
4,025
|
|
|
3,286
|
|
|
5,906
|
|
|
4,243
|
|
|
4,357
|
|
|||||
Total revenue
|
603,693
|
|
|
441,231
|
|
|
364,967
|
|
|
273,499
|
|
|
195,591
|
|
|||||
Cost of revenue (2)(3)
|
190,762
|
|
|
150,986
|
|
|
123,328
|
|
|
96,979
|
|
|
73,633
|
|
|||||
Gross profit
|
412,931
|
|
|
290,245
|
|
|
241,639
|
|
|
176,520
|
|
|
121,958
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Marketing (2)(3)
|
158,013
|
|
|
109,085
|
|
|
82,248
|
|
|
66,771
|
|
|
39,655
|
|
|||||
Product development (2)(3)
|
97,249
|
|
|
74,616
|
|
|
55,083
|
|
|
42,694
|
|
|
36,634
|
|
|||||
General and administrative (2)(3)
|
82,883
|
|
|
91,486
|
|
|
86,180
|
|
|
68,939
|
|
|
51,920
|
|
|||||
Asset impairment charges
|
—
|
|
|
3,162
|
|
|
551
|
|
|
—
|
|
|
—
|
|
|||||
Total operating expenses
|
338,145
|
|
|
278,349
|
|
|
224,062
|
|
|
178,404
|
|
|
128,209
|
|
|||||
Income (loss) from operations
|
74,786
|
|
|
11,896
|
|
|
17,577
|
|
|
(1,884
|
)
|
|
(6,251
|
)
|
|||||
Other (expense) income, net
|
(19,708
|
)
|
|
20,369
|
|
|
(20,453
|
)
|
|
(26,110
|
)
|
|
(4,009
|
)
|
|||||
Income (loss) before income taxes
|
55,078
|
|
|
32,265
|
|
|
(2,876
|
)
|
|
(27,994
|
)
|
|
(10,260
|
)
|
|||||
Benefit (provision) for income taxes (4)
|
22,413
|
|
|
49,535
|
|
|
(27,025
|
)
|
|
(26,069
|
)
|
|
(4,983
|
)
|
|||||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
|
$
|
(54,063
|
)
|
|
$
|
(15,243
|
)
|
Net income (loss) per share attributable to common stockholders:
|
|||||||||||||||||||
Basic
|
$
|
0.64
|
|
|
$
|
0.69
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.59
|
)
|
|
$
|
(0.38
|
)
|
Diluted
|
$
|
0.61
|
|
|
$
|
0.68
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.59
|
)
|
|
$
|
(0.38
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
120,146,076
|
|
|
118,538,687
|
|
|
113,562,738
|
|
|
91,122,291
|
|
|
40,246,663
|
|
|||||
Diluted
|
127,084,785
|
|
|
122,267,673
|
|
|
113,562,738
|
|
|
91,122,291
|
|
|
40,246,663
|
|
(1)
|
In connection with the adoption of ASU 2014-09
—
Revenue from Contracts with Customers (“ASC 606”) in the first quarter of 2018, we renamed our revenue categories Marketplace and Services revenue. In addition, we reclassified Etsy Payments from Services to Marketplace revenue as described in “
Note 2—Revenue
.” The following table provides our Marketplace and Services revenue under our previous and current presentation:
|
|
Year-to-Date Period Ended
|
||||||||||||||
|
Previous Presentation
|
|
Updated Presentation
|
||||||||||||
|
Marketplace Revenue
|
|
Services Revenue
|
|
Marketplace Revenue
|
|
Services Revenue
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2017
|
$
|
179,492
|
|
|
$
|
258,453
|
|
|
$
|
326,076
|
|
|
$
|
111,869
|
|
December 31, 2016
|
158,204
|
|
|
200,857
|
|
|
269,628
|
|
|
89,433
|
|
||||
December 31, 2015
|
132,648
|
|
|
136,608
|
|
|
204,333
|
|
|
64,923
|
|
||||
December 31, 2014
|
108,732
|
|
|
82,502
|
|
|
156,821
|
|
|
34,413
|
|
(2)
|
Includes total stock-based compensation expense as follows:
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Cost of revenue
|
$
|
3,357
|
|
|
$
|
1,739
|
|
|
$
|
1,057
|
|
|
$
|
871
|
|
|
$
|
1,113
|
|
Marketing
|
2,507
|
|
|
1,933
|
|
|
971
|
|
|
560
|
|
|
216
|
|
|||||
Product development
|
21,234
|
|
|
8,274
|
|
|
5,079
|
|
|
2,860
|
|
|
1,461
|
|
|||||
General and administrative
|
11,133
|
|
|
14,613
|
|
|
8,794
|
|
|
6,550
|
|
|
7,260
|
|
|||||
Total stock-based compensation expense
|
$
|
38,231
|
|
|
$
|
26,559
|
|
|
$
|
15,901
|
|
|
$
|
10,841
|
|
|
$
|
10,050
|
|
(3)
|
Includes the impact of
$0.2 million
in restructuring and other exit income recognized in the year ended
December 31, 2018
and
$13.9 million
in restructuring and other exit costs recognized in the year ended
December 31, 2017
. For a summary of restructuring and other exit costs (income), see “
Note 17—Restructuring and Other Exit Costs (Income)
” in the Notes to Consolidated Financial Statements.
|
(4)
|
In the year ended
December 31, 2018
, we recognized an income tax benefit associated with the release of a valuation allowance on certain deferred tax assets. The valuation allowance release resulted in a non-recurring benefit for income taxes of
$23.4 million
for the year ended
December 31, 2018
. In the year ended
December 31, 2017
, we recognized an income tax benefit associated with the enactment of the Tax Cuts and Jobs Act (the “TCJA”). As a result of the TCJA, our deferred taxes at
December 31, 2017
have been revalued at the reduced 21% corporate income tax rate. The revaluation resulted in a non-recurring benefit for income taxes of approximately
$31.1 million
for the year ended
December 31, 2017
.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands except percentages)
|
||||||||||||||||||
Other Operational and Non-GAAP Financial Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
GMS
|
$
|
3,931,745
|
|
|
$
|
3,253,609
|
|
|
$
|
2,841,985
|
|
|
$
|
2,388,387
|
|
|
$
|
1,931,981
|
|
Adjusted EBITDA
|
$
|
139,510
|
|
|
$
|
80,009
|
|
|
$
|
57,124
|
|
|
$
|
31,007
|
|
|
$
|
23,081
|
|
Active sellers
|
2,115
|
|
|
1,933
|
|
|
1,748
|
|
|
1,563
|
|
|
1,353
|
|
|||||
Active buyers
|
39,447
|
|
|
33,364
|
|
|
28,566
|
|
|
24,046
|
|
|
19,810
|
|
|||||
Percent mobile GMS
|
55
|
%
|
|
51
|
%
|
|
48
|
%
|
|
43
|
%
|
|
37
|
%
|
|||||
Percent international GMS
|
35
|
%
|
|
33
|
%
|
|
30
|
%
|
|
30
|
%
|
|
31
|
%
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
|
$
|
(54,063
|
)
|
|
$
|
(15,243
|
)
|
Excluding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest and other non-operating expense, net
|
13,221
|
|
|
8,736
|
|
|
5,502
|
|
|
1,202
|
|
|
549
|
|
|||||
(Benefit) provision for income taxes
|
(22,413
|
)
|
|
(49,535
|
)
|
|
27,025
|
|
|
26,069
|
|
|
4,983
|
|
|||||
Depreciation and amortization
|
26,742
|
|
|
27,197
|
|
|
22,525
|
|
|
18,550
|
|
|
17,223
|
|
|||||
Stock-based compensation expense (1)
|
34,477
|
|
|
19,953
|
|
|
13,168
|
|
|
8,981
|
|
|
5,920
|
|
|||||
Stock-based compensation expense—acquisitions
|
3,754
|
|
|
3,904
|
|
|
2,733
|
|
|
1,860
|
|
|
4,130
|
|
|||||
Foreign exchange loss (gain)
|
6,487
|
|
|
(29,105
|
)
|
|
14,951
|
|
|
21,775
|
|
|
3,049
|
|
|||||
Restructuring and other exit costs (income)
|
(249
|
)
|
|
13,897
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Asset impairment charges
|
—
|
|
|
3,162
|
|
|
551
|
|
|
—
|
|
|
—
|
|
|||||
Acquisition-related expenses
|
—
|
|
|
—
|
|
|
570
|
|
|
—
|
|
|
2,059
|
|
|||||
Net unrealized loss on warrant and other liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
3,133
|
|
|
411
|
|
|||||
Contribution to Good Work Institute (formerly Etsy.org)
|
—
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|
—
|
|
|||||
Adjusted EBITDA
|
$
|
139,510
|
|
|
$
|
80,009
|
|
|
$
|
57,124
|
|
|
$
|
31,007
|
|
|
$
|
23,081
|
|
(1)
|
$2.7 million
of restructuring-related stock-based compensation expense has been excluded from the year ended
December 31, 2017
, and is included in the restructuring and other exit costs (income) line.
|
|
As of December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and short-term investments
|
$
|
624,287
|
|
|
$
|
340,550
|
|
|
$
|
282,086
|
|
|
$
|
292,864
|
|
|
$
|
88,843
|
|
Net working capital
|
568,227
|
|
|
336,787
|
|
|
287,024
|
|
|
278,932
|
|
|
85,608
|
|
|||||
Total assets
|
901,851
|
|
|
605,583
|
|
|
581,193
|
|
|
553,061
|
|
|
246,203
|
|
|||||
Deferred revenue
|
7,478
|
|
|
6,262
|
|
|
5,648
|
|
|
4,712
|
|
|
3,452
|
|
|||||
Long-term debt, net (1)
|
276,486
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Long-term liabilities
|
388,891
|
|
|
106,212
|
|
|
152,428
|
|
|
142,441
|
|
|
57,450
|
|
|||||
Convertible preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80,212
|
|
|||||
Total stockholders’ equity
|
400,898
|
|
|
396,894
|
|
|
344,757
|
|
|
330,498
|
|
|
67,088
|
|
(1)
|
In
March 2018
, we issued
$345.0 million
aggregate principal amount of
0%
Convertible Senior Notes due
2023
in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. For more information on the Notes, see “
Note 13—Debt
” in the Notes to Consolidated Financial Statements.
|
•
|
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 improved search relevance using context specific ranking (“CSR”), optimized landing pages by adding more recommendations and notifications, including alerts on listing cards when scarce items appear in other people’s carts, and reduced friction in the search and discovery experience by accelerating home and search page load times.
|
•
|
We launched several product enhancements aimed at bolstering trust in the Etsy brand, Etsy sellers, the items available in our marketplace, and the overall Etsy experience. We made customer support improvements by introducing live chat for our sellers and inbound phone support for both buyers and sellers. We improved our checkout experience to make it easier for buyers to provide information for personalization and customization details on the listing and cart pages, enhanced guest checkout on mobile web and introduced Klarna, a pay later option for buyers in Germany. We also added trust signals to give more confidence in making a purchase decision, including best-seller badges on listing cards and shop review ratings on the cart page.
|
•
|
We continued to focus on utilizing our marketing efforts to drive new and existing buyers to Etsy. We made structural improvements to Search Engine Optimization, one of our largest channels, to drive incremental traffic to Etsy. We began sending on-site and email notifications to inform buyers when one of their recently favorited items goes on sale. Additionally, following the increase in our marketplace transaction fee, we were able to invest a portion of our incremental revenue into marketing. We ran our first-ever television advertising campaign in the U.S and also began to test offline marketing campaigns.
|
•
|
We continued to enhance, expand and introduce new product offerings and seller tools. We optimized Promoted Listings by using context specific ranking to surface more relevant ads, and launched a tool to better utilize seller’s budgets. We focused on shipping improvements, including the expansion of the Etsy Shipping Labels offering to our sellers in the United Kingdom and Australia through our new agreements with Royal Mail and DAI Post. We also launched Etsy Plus and Targeted Offers, new products and tools designed to give sellers more ways to grow their businesses and brands. Additionally, we launched a redesigned payment account intended to make it easier to manage
|
|
Year-to-Date Period Ended
|
||||||||||||||
|
Previous Presentation
|
|
Updated Presentation
|
||||||||||||
|
Marketplace Revenue
|
|
Services Revenue
|
|
Marketplace Revenue
|
|
Services Revenue
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2017
|
$
|
179,492
|
|
|
$
|
258,453
|
|
|
$
|
326,076
|
|
|
$
|
111,869
|
|
December 31, 2016
|
158,204
|
|
|
200,857
|
|
|
269,628
|
|
|
89,433
|
|
|
|
Year Ended December 31,
|
|
% Growth
(Decline)
Y/Y |
|
Year Ended December 31,
|
|
% Growth
Y/Y |
||||||||||
|
|
2018
|
|
2017
|
|
|
2016
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
(in thousands except percentages)
|
||||||||||||||||
GMS
|
|
$
|
3,931,745
|
|
|
$
|
3,253,609
|
|
|
20.8
|
%
|
|
$
|
2,841,985
|
|
|
14.5
|
%
|
Revenue
|
|
$
|
603,693
|
|
|
$
|
441,231
|
|
|
36.8
|
%
|
|
$
|
364,967
|
|
|
20.9
|
%
|
Marketplace revenue
|
|
$
|
440,740
|
|
|
$
|
326,076
|
|
|
35.2
|
%
|
|
$
|
269,628
|
|
|
20.9
|
%
|
Services revenue
|
|
$
|
158,928
|
|
|
$
|
111,869
|
|
|
42.1
|
%
|
|
$
|
89,433
|
|
|
25.1
|
%
|
Net income (loss)
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
(5.3
|
)%
|
|
$
|
(29,901
|
)
|
|
373.6
|
%
|
Adjusted EBITDA
|
|
$
|
139,510
|
|
|
$
|
80,009
|
|
|
74.4
|
%
|
|
$
|
57,124
|
|
|
40.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Active sellers
|
|
2,115
|
|
|
1,933
|
|
|
9.4
|
%
|
|
1,748
|
|
|
10.6
|
%
|
|||
Active buyers
|
|
39,447
|
|
|
33,364
|
|
|
18.2
|
%
|
|
28,566
|
|
|
16.8
|
%
|
|||
Percent mobile GMS
|
|
55
|
%
|
|
51
|
%
|
|
400
|
bps
|
|
48
|
%
|
|
300
|
bps
|
|||
Percent international GMS
|
|
35
|
%
|
|
33
|
%
|
|
200
|
bps
|
|
30
|
%
|
|
300
|
bps
|
|
Year-to-Date Period Ended
|
|||||||
|
As Reported
|
|
Currency-Neutral
|
|
FX Impact
|
|||
December 31, 2018
|
20.8
|
%
|
|
20.4
|
%
|
|
0.4
|
%
|
December 31, 2017
|
14.5
|
%
|
|
14.3
|
%
|
|
0.2
|
%
|
December 31, 2016
|
19.0
|
%
|
|
20.0
|
%
|
|
(1.0
|
)%
|
•
|
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) related to the Actions as described below;
|
•
|
Adjusted EBITDA does not consider the impact of
asset impairment charges
;
|
•
|
Adjusted EBITDA does not reflect
acquisition-related expenses
; and
|
•
|
other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
Excluding:
|
|
|
|
|
|
||||||
Interest and other no
n-operating expense, net (1)
|
13,221
|
|
|
8,736
|
|
|
5,502
|
|
|||
(Benefit) provision for income taxes
|
(22,413
|
)
|
|
(49,535
|
)
|
|
27,025
|
|
|||
Depreciation and amortization (1)
|
26,742
|
|
|
27,197
|
|
|
22,525
|
|
|||
Stock-based compensation expense (2)
|
34,477
|
|
|
19,953
|
|
|
13,168
|
|
|||
Stock-based compensation expense—acquisitions
|
3,754
|
|
|
3,904
|
|
|
2,733
|
|
|||
Foreign exchange loss (gain) (3)
|
6,487
|
|
|
(29,105
|
)
|
|
14,951
|
|
|||
Restructuring and other exit costs (income) (4)
|
(249
|
)
|
|
13,897
|
|
|
—
|
|
|||
Asset impairment charges (5)
|
—
|
|
|
3,162
|
|
|
551
|
|
|||
Acquisition-related expenses
|
—
|
|
|
—
|
|
|
570
|
|
|||
Adjusted EBITDA
|
$
|
139,510
|
|
|
$
|
80,009
|
|
|
$
|
57,124
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Cost of revenue
|
$
|
3,357
|
|
|
$
|
1,739
|
|
|
$
|
1,057
|
|
Marketing
|
2,507
|
|
|
1,933
|
|
|
971
|
|
|||
Product development
|
21,234
|
|
|
8,274
|
|
|
5,079
|
|
|||
General and administrative
|
11,133
|
|
|
14,613
|
|
|
8,794
|
|
|||
Total stock-based compensation expense
|
$
|
38,231
|
|
|
$
|
26,559
|
|
|
$
|
15,901
|
|
(3)
|
See “
Results of Operations
—
Other (Expense) Income, net
” for more information on the fluctuation in foreign exchange loss (gain) in the years ended
December 31, 2018
,
2017
, and
2016
.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Cost of revenue
|
$
|
(19
|
)
|
|
$
|
738
|
|
|
$
|
—
|
|
Marketing
|
(82
|
)
|
|
2,950
|
|
|
—
|
|
|||
Product development
|
(110
|
)
|
|
3,232
|
|
|
—
|
|
|||
General and administrative
|
(38
|
)
|
|
6,977
|
|
|
—
|
|
|||
Total restructuring and other exit costs (income)
|
$
|
(249
|
)
|
|
$
|
13,897
|
|
|
$
|
—
|
|
(5)
|
In the fourth quarter of 2017, we made the decision to discontinue certain product offerings, including Etsy Studio and Etsy Manufacturing, which resulted in the recognition of a $3.2 million impairment charge to write the related capitalized web development and internal-use software assets down to zero. This decision was based on our strategy to focus on the growth of the Etsy.com marketplace.
|
•
|
many of these costs were settled in cash;
|
•
|
there is no certainty that restructuring and other exit costs (income) will not recur; and
|
•
|
other companies, including companies in our industry, may adjust for similar items in a different manner, or may not exclude such charges, which reduces its usefulness as a comparative measure.
|
|
Year Ended December 31, 2018
|
||||||||||
|
As Reported
|
|
Restructuring and Other Exit Costs (Income)
|
|
Excluding Restructuring and Other Exit Costs (Income)
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Revenue
|
$
|
603,693
|
|
|
$
|
—
|
|
|
$
|
603,693
|
|
Cost of revenue
|
190,762
|
|
|
(19
|
)
|
|
190,781
|
|
|||
Gross profit
|
412,931
|
|
|
(19
|
)
|
|
412,912
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
158,013
|
|
|
(82
|
)
|
|
158,095
|
|
|||
Product development
|
97,249
|
|
|
(110
|
)
|
|
97,359
|
|
|||
General and administrative
|
82,883
|
|
|
(38
|
)
|
|
82,921
|
|
|||
Total operating expenses
|
338,145
|
|
|
(230
|
)
|
|
338,375
|
|
|||
Income from operations
|
$
|
74,786
|
|
|
$
|
(249
|
)
|
|
$
|
74,537
|
|
|
Year Ended December 31, 2017
|
||||||||||
|
As Reported
|
|
Restructuring and Other Exit Costs (Income)
|
|
Excluding Restructuring and Other Exit Costs (Income)
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Revenue
|
$
|
441,231
|
|
|
$
|
—
|
|
|
$
|
441,231
|
|
Cost of revenue
|
150,986
|
|
|
738
|
|
|
150,248
|
|
|||
Gross profit
|
290,245
|
|
|
738
|
|
|
290,983
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
109,085
|
|
|
2,950
|
|
|
106,135
|
|
|||
Product development
|
74,616
|
|
|
3,232
|
|
|
71,384
|
|
|||
General and administrative
|
91,486
|
|
|
6,977
|
|
|
84,509
|
|
|||
Asset impairment charges
|
3,162
|
|
|
—
|
|
|
3,162
|
|
|||
Total operating expenses
|
278,349
|
|
|
13,159
|
|
|
265,190
|
|
|||
Income from operations
|
$
|
11,896
|
|
|
$
|
13,897
|
|
|
$
|
25,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVG GMS
|
|
2011
|
|
$103
|
|
$177
|
|
$186
|
|
$195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER BUYER
|
|
2012
|
|
$96
|
|
$163
|
|
$173
|
|
$181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
$96
|
|
$161
|
|
$168
|
|
$174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$99
|
|
$157
|
|
$164
|
|
$169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
$101
|
|
$158
|
|
$163
|
|
$180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cohort of 2015, 2014, 2013, 2012, and 2011 Active Buyers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVG GMS
|
|
2011
|
|
$817
|
|
$2,241
|
|
$3,314
|
|
$4,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SELLER
|
|
2012
|
|
$1,079
|
|
$2,598
|
|
$3,935
|
|
$4,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
$1,260
|
|
$3,110
|
|
$4,190
|
|
$4,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$1,465
|
|
$3,325
|
|
$4,228
|
|
$4,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
$1,558
|
|
$3,296
|
|
$4,062
|
|
$4,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cohort of 2015, 2014, 2013, 2012, and 2011 Active Sellers
|
•
|
Revenue from Promoted Listings, our on-site advertising service, consists of cost-per-click fees an Etsy seller pays us for prominent placement of her listings in search results in our marketplace.
|
•
|
Revenue from Etsy Shipping Labels consists of fees an Etsy seller pays us when she purchases shipping labels directly through our platform, net of the cost we incur in purchasing those shipping labels. We are able to provide our sellers shipping labels from the United States Postal Service, FedEx, Canada Post, Royal Mail, and DAI Post at discounted pricing due to the volume of purchases through our platform.
|
•
|
Revenue from Pattern consists of monthly subscription fees an Etsy seller pays to use our custom website services.
|
•
|
Revenue from Etsy Plus consists of monthly subscription fees an Etsy seller pays for enhanced tools and credits for use on our platform.
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||
Marketplace
|
$
|
440,740
|
|
|
$
|
326,076
|
|
|
$
|
269,628
|
|
Services
|
158,928
|
|
|
111,869
|
|
|
89,433
|
|
|||
Other
|
4,025
|
|
|
3,286
|
|
|
5,906
|
|
|||
Total revenue
|
603,693
|
|
|
441,231
|
|
|
364,967
|
|
|||
Cost of revenue
|
190,762
|
|
|
150,986
|
|
|
123,328
|
|
|||
Gross profit
|
412,931
|
|
|
290,245
|
|
|
241,639
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
158,013
|
|
|
109,085
|
|
|
82,248
|
|
|||
Product development
|
97,249
|
|
|
74,616
|
|
|
55,083
|
|
|||
General and administrative
|
82,883
|
|
|
91,486
|
|
|
86,180
|
|
|||
Asset impairment charges
|
—
|
|
|
3,162
|
|
|
551
|
|
|||
Total operating expenses
|
338,145
|
|
|
278,349
|
|
|
224,062
|
|
|||
Income from operations
|
74,786
|
|
|
11,896
|
|
|
17,577
|
|
|||
Other (expense) income, net
|
(19,708
|
)
|
|
20,369
|
|
|
(20,453
|
)
|
|||
Income (loss) before income taxes
|
55,078
|
|
|
32,265
|
|
|
(2,876
|
)
|
|||
Benefit (provision) for income taxes
|
22,413
|
|
|
49,535
|
|
|
(27,025
|
)
|
|||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
|
|
|
|
|
|
||||||
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Marketplace
|
73.0
|
%
|
|
73.9
|
%
|
|
73.9
|
%
|
|||
Services
|
26.3
|
|
|
25.4
|
|
|
24.5
|
|
|||
Other
|
0.7
|
|
|
0.7
|
|
|
1.6
|
|
|||
Total revenue
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|||
Cost of revenue
|
31.6
|
|
|
34.2
|
|
|
33.8
|
|
|||
Gross profit
|
68.4
|
|
|
65.8
|
|
|
66.2
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
26.2
|
|
|
24.7
|
|
|
22.5
|
|
|||
Product development
|
16.1
|
|
|
16.9
|
|
|
15.1
|
|
|||
General and administrative
|
13.7
|
|
|
20.7
|
|
|
23.6
|
|
|||
Asset impairment charges
|
—
|
|
|
0.7
|
|
|
0.2
|
|
|||
Total operating expenses
|
56.0
|
|
|
63.1
|
|
|
61.4
|
|
|||
Income from operations
|
12.4
|
|
|
2.7
|
|
|
4.8
|
|
|||
Other (expense) income, net
|
(3.3
|
)
|
|
4.6
|
|
|
(5.6
|
)
|
|||
Income (loss) before income taxes
|
9.1
|
|
|
7.3
|
|
|
(0.8
|
)
|
|||
Benefit (provision) for income taxes
|
3.7
|
|
|
11.2
|
|
|
(7.4
|
)
|
|||
Net income (loss)
|
12.8
|
%
|
|
18.5
|
%
|
|
(8.2
|
)%
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
|
$
|
440,740
|
|
|
$
|
326,076
|
|
|
$
|
114,664
|
|
|
35.2
|
%
|
Percentage of total revenue
|
|
73.0
|
%
|
|
73.9
|
%
|
|
|
|
|
|||||
Services
|
|
$
|
158,928
|
|
|
$
|
111,869
|
|
|
$
|
47,059
|
|
|
42.1
|
%
|
Percentage of total revenue
|
|
26.3
|
%
|
|
25.4
|
%
|
|
|
|
|
|||||
Other
|
|
$
|
4,025
|
|
|
$
|
3,286
|
|
|
$
|
739
|
|
|
22.5
|
%
|
Percentage of total revenue
|
|
0.7
|
%
|
|
0.7
|
%
|
|
|
|
|
|||||
Total revenue
|
|
$
|
603,693
|
|
|
$
|
441,231
|
|
|
$
|
162,462
|
|
|
36.8
|
%
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
Product development
|
|
$
|
97,249
|
|
|
$
|
74,616
|
|
|
$
|
22,633
|
|
|
30.3
|
%
|
Percentage of total revenue
|
|
16.1
|
%
|
|
16.9
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
General and administrative
|
|
$
|
82,883
|
|
|
$
|
91,486
|
|
|
$
|
(8,603
|
)
|
|
(9.4
|
)%
|
Percentage of total revenue
|
|
13.7
|
%
|
|
20.7
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
Asset impairment charges
|
|
$
|
—
|
|
|
$
|
3,162
|
|
|
$
|
(3,162
|
)
|
|
(100.0
|
)%
|
Percentage of total revenue
|
|
—
|
%
|
|
0.7
|
%
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Other (expense) income, net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(22,178
|
)
|
|
$
|
(11,130
|
)
|
|
$
|
(11,048
|
)
|
|
99.3
|
%
|
Percentage of total revenue
|
(3.7
|
)%
|
|
(2.5
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
8,957
|
|
|
$
|
2,394
|
|
|
$
|
6,563
|
|
|
274.1
|
%
|
Percentage of total revenue
|
1.5
|
%
|
|
0.5
|
%
|
|
|
|
|
|||||
Foreign exchange (loss) gain
|
$
|
(6,487
|
)
|
|
$
|
29,105
|
|
|
$
|
(35,592
|
)
|
|
(122.3
|
)%
|
Percentage of total revenue
|
(1.1
|
)%
|
|
6.6
|
%
|
|
|
|
|
|||||
Other (expense) income, net
|
$
|
(19,708
|
)
|
|
$
|
20,369
|
|
|
$
|
(40,077
|
)
|
|
(196.8
|
)%
|
Percentage of total revenue
|
(3.3
|
)%
|
|
4.6
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
Benefit for income taxes
|
|
$
|
22,413
|
|
|
$
|
49,535
|
|
|
$
|
(27,122
|
)
|
|
(54.8
|
)%
|
Percentage of total revenue
|
|
3.7
|
%
|
|
11.2
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
|
$
|
326,076
|
|
|
$
|
269,628
|
|
|
$
|
56,448
|
|
|
20.9
|
%
|
Percentage of total revenue
|
|
73.9
|
%
|
|
73.9
|
%
|
|
|
|
|
|||||
Services
|
|
$
|
111,869
|
|
|
$
|
89,433
|
|
|
$
|
22,436
|
|
|
25.1
|
%
|
Percentage of total revenue
|
|
25.4
|
%
|
|
24.5
|
%
|
|
|
|
|
|||||
Other
|
|
$
|
3,286
|
|
|
$
|
5,906
|
|
|
$
|
(2,620
|
)
|
|
(44.4
|
)%
|
Percentage of total revenue
|
|
0.7
|
%
|
|
1.6
|
%
|
|
|
|
|
|||||
Total revenue
|
|
$
|
441,231
|
|
|
$
|
364,967
|
|
|
$
|
76,264
|
|
|
20.9
|
%
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
Marketing
|
|
$
|
109,085
|
|
|
$
|
82,248
|
|
|
$
|
26,837
|
|
|
32.6
|
%
|
Percentage of total revenue
|
|
24.7
|
%
|
|
22.5
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands except percentages)
|
|||||||||||||
Product development
|
|
$
|
74,616
|
|
|
$
|
55,083
|
|
|
$
|
19,533
|
|
|
35.5
|
%
|
Percentage of total revenue
|
|
16.9
|
%
|
|
15.1
|
%
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands except percentages)
|
|||||||||||||
Other income (expense), net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(11,130
|
)
|
|
$
|
(7,204
|
)
|
|
$
|
(3,926
|
)
|
|
54.5
|
%
|
Percentage of total revenue
|
(2.5
|
)%
|
|
(2.0
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
2,394
|
|
|
$
|
1,702
|
|
|
$
|
692
|
|
|
40.7
|
%
|
Percentage of total revenue
|
0.5
|
%
|
|
0.5
|
%
|
|
|
|
|
|||||
Foreign exchange gain (loss)
|
$
|
29,105
|
|
|
$
|
(14,951
|
)
|
|
$
|
44,056
|
|
|
(294.7
|
)%
|
Percentage of total revenue
|
6.6
|
%
|
|
(4.1
|
)%
|
|
|
|
|
|||||
Other income (expense), net
|
$
|
20,369
|
|
|
$
|
(20,453
|
)
|
|
$
|
40,822
|
|
|
(199.6
|
)%
|
Percentage of total revenue
|
4.6
|
%
|
|
(5.6
|
)%
|
|
|
|
|
(1)
|
During the three months ended
December 31, 2018
, we recorded adjustments to correct errors in the years ended
December 31, 2018
and
2017
that increased income before income taxes by $1.6 million in the current quarter and decreased net income by $1.8 million in the current quarter. The Company has concluded that the errors and their correction were not material to the Consolidated Financial Statements for any of the periods impacted nor are they material for results in the fourth quarter of 2018.
|
(2)
|
In connection with the adoption of ASU 2014-09
—
Revenue from Contracts with Customers (“ASC 606”) in the first quarter of 2018, we renamed our revenue categories Marketplace and Services revenue. In addition, we reclassified Etsy Payments from Services to Marketplace revenue as described in “
Note 2—Revenue
.” The following table provides our Marketplace and Services revenue under our previous and current presentation:
|
|
Quarter-to-Date Period Ended
|
||||||||||||||
|
Previous Presentation
|
|
Updated Presentation
|
||||||||||||
|
Marketplace Revenue
|
|
Services Revenue
|
|
Marketplace Revenue
|
|
Services Revenue
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2017
|
$
|
54,251
|
|
|
$
|
82,319
|
|
|
$
|
102,261
|
|
|
$
|
34,309
|
|
September 30, 2017
|
42,413
|
|
|
63,371
|
|
|
77,808
|
|
|
27,976
|
|
||||
June 30, 2017
|
42,069
|
|
|
58,816
|
|
|
75,445
|
|
|
25,440
|
|
||||
March 31, 2017
|
40,759
|
|
|
53,947
|
|
|
70,562
|
|
|
24,144
|
|
(3)
|
Includes total stock-based compensation expense as follows:
|
|
Three Months Ended
|
|||||||||||||||||||||||
|
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
Dec. 31,
2017 |
Sept. 30,
2017 |
June 30,
2017 |
Mar. 31,
2017 |
||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
Cost of revenue
|
$
|
990
|
|
$
|
894
|
|
$
|
927
|
|
$
|
546
|
|
$
|
508
|
|
$
|
469
|
|
$
|
398
|
|
$
|
364
|
|
Marketing
|
688
|
|
642
|
|
699
|
|
478
|
|
514
|
|
447
|
|
528
|
|
444
|
|
||||||||
Product development (a)
|
9,873
|
|
4,697
|
|
4,025
|
|
2,639
|
|
2,021
|
|
2,180
|
|
2,053
|
|
2,020
|
|
||||||||
General and administrative
|
2,693
|
|
2,683
|
|
2,966
|
|
2,791
|
|
2,948
|
|
4,425
|
|
5,183
|
|
2,057
|
|
||||||||
Total stock-based compensation expense
|
$
|
14,244
|
|
$
|
8,916
|
|
$
|
8,617
|
|
$
|
6,454
|
|
$
|
5,991
|
|
$
|
7,521
|
|
$
|
8,162
|
|
$
|
4,885
|
|
(a)
|
Product development includes $6.0 million and $1.0 million of expense resulting from the modification of stock options and RSUs in the three months ended December 31, 2018 and September 30, 2018, respectively, in connection with certain employee departures See “
Note 16—Stock-based Compensation
” in the Notes to Consolidated Financial Statements for additional information.
|
(4)
|
Includes restructuring and other exit costs (income), as shown in the quarterly reconciliation of
net income (loss)
to Adjusted EBITDA below. For a summary of restructuring and other exit costs (income) see “
Note 17—Restructuring and Other Exit Costs (Income)
” in the Notes to Consolidated Financial Statements.
|
(5)
|
In the year ended
December 31, 2018
, we recognized an income tax benefit associated with the release of a valuation allowance on certain deferred tax assets. The valuation allowance release resulted in a non-recurring benefit for income taxes of
$23.4 million
for the year ended
December 31, 2018
. In the quarter ended
December 31, 2017
, we recognized an income tax benefit associated with the enactment of the TCJA as defined above. As a result of the TCJA, our deferred taxes at
December 31, 2017
have been revalued at the reduced 21% corporate income tax rate. The revaluation resulted in a non-recurring benefit for income taxes of approximately
$31.1 million
for the quarter ended
December 31, 2017
.
|
|
Three Months Ended
|
|||||||||||||||
|
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
Dec. 31,
2017 |
Sept. 30,
2017 |
June 30,
2017 |
Mar. 31,
2017 |
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
||||||||
Marketplace
|
75.3
|
%
|
73.8
|
%
|
69.0
|
%
|
72.8
|
%
|
75.0
|
%
|
73.1
|
%
|
74.2
|
%
|
72.8
|
%
|
Services
|
24.3
|
|
25.4
|
|
29.8
|
|
27.0
|
|
25.2
|
|
26.3
|
|
25.0
|
|
24.9
|
|
Other
|
0.4
|
|
0.8
|
|
1.2
|
|
0.3
|
|
(0.2
|
)
|
0.6
|
|
0.8
|
|
2.3
|
|
Total revenue
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
Cost of revenue
|
28.6
|
|
31.2
|
|
34.3
|
|
34.2
|
|
32.5
|
|
34.2
|
|
35.1
|
|
35.8
|
|
Gross profit
|
71.4
|
|
68.8
|
|
65.7
|
|
65.8
|
|
67.5
|
|
65.8
|
|
64.9
|
|
64.2
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Marketing
|
31.7
|
|
26.3
|
|
21.9
|
|
21.7
|
|
25.4
|
|
22.1
|
|
27.1
|
|
24.2
|
|
Product development
|
14.3
|
|
16.2
|
|
17.8
|
|
17.1
|
|
13.1
|
|
15.9
|
|
21.4
|
|
18.7
|
|
General and administrative
|
10.8
|
|
13.8
|
|
16.4
|
|
15.6
|
|
13.4
|
|
20.8
|
|
27.9
|
|
23.5
|
|
Asset impairment charges
|
—
|
|
—
|
|
—
|
|
—
|
|
2.3
|
|
—
|
|
—
|
|
—
|
|
Total operating expenses
|
56.7
|
|
56.3
|
|
56.1
|
|
54.4
|
|
54.1
|
|
58.8
|
|
76.4
|
|
66.4
|
|
Income (loss) from operations
|
14.7
|
|
12.5
|
|
9.6
|
|
11.4
|
|
13.4
|
|
7.0
|
|
(11.5
|
)
|
(2.2
|
)
|
Other (expense) income, net
|
(3.3
|
)
|
(2.8
|
)
|
(6.1
|
)
|
(0.7
|
)
|
—
|
|
5.5
|
|
13.7
|
|
0.6
|
|
Income (loss) before income taxes
|
11.4
|
|
9.7
|
|
3.5
|
|
10.7
|
|
13.4
|
|
12.4
|
|
2.2
|
|
(1.5
|
)
|
Benefit (provision) for income taxes
|
9.2
|
|
3.5
|
|
(0.9
|
)
|
—
|
|
19.4
|
|
11.8
|
|
9.3
|
|
1.1
|
|
Net income (loss)
|
20.6
|
%
|
13.2
|
%
|
2.6
|
%
|
10.7
|
%
|
32.8
|
%
|
24.3
|
%
|
11.5
|
%
|
(0.4
|
)%
|
|
Three Months Ended
|
|||||||||||||||||||||||
|
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
Dec. 31,
2017 |
Sept. 30,
2017 |
June 30,
2017 |
Mar. 31,
2017 |
||||||||||||||||
|
(in thousands except percentages)
|
|||||||||||||||||||||||
Other financial and operations data (1):
|
||||||||||||||||||||||||
GMS
|
$
|
1,246,472
|
|
$
|
922,513
|
|
$
|
901,685
|
|
$
|
861,075
|
|
$
|
1,019,452
|
|
$
|
766,354
|
|
$
|
748,762
|
|
$
|
719,041
|
|
GMS growth
|
22.3
|
%
|
20.4
|
%
|
20.4
|
%
|
19.8
|
%
|
17.8
|
%
|
13.2
|
%
|
11.8
|
%
|
14.2
|
%
|
||||||||
Currency-neutral GMS growth
|
23.1
|
%
|
20.8
|
%
|
19.3
|
%
|
17.6
|
%
|
16.5
|
%
|
12.6
|
%
|
12.6
|
%
|
15.2
|
%
|
||||||||
Adjusted EBITDA
|
$
|
51,359
|
|
$
|
34,035
|
|
$
|
27,695
|
|
$
|
26,421
|
|
$
|
34,822
|
|
$
|
22,769
|
|
$
|
12,696
|
|
$
|
9,722
|
|
Active sellers
|
2,115
|
|
2,043
|
|
1,983
|
|
1,970
|
|
1,933
|
|
1,891
|
|
1,834
|
|
1,801
|
|
||||||||
Active buyers
|
39,447
|
|
37,134
|
|
35,830
|
|
34,693
|
|
33,364
|
|
31,680
|
|
30,584
|
|
29,669
|
|
||||||||
Percent mobile GMS
|
56
|
%
|
56
|
%
|
55
|
%
|
54
|
%
|
52
|
%
|
52
|
%
|
51
|
%
|
51
|
%
|
||||||||
Percent international GMS
|
36
|
%
|
35
|
%
|
34
|
%
|
35
|
%
|
33
|
%
|
34
|
%
|
32
|
%
|
32
|
%
|
(1)
|
See “
Key Operating and Financial Metrics
” for the definitions of the following terms: “active buyer,” “active seller,” “Adjusted EBITDA,” “GMS,” “international GMS,” and “mobile GMS.”
|
|
Three Months Ended
|
|||||||||||||||||||||||
|
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
Dec. 31,
2017 |
Sept. 30,
2017 |
June 30,
2017 |
Mar. 31,
2017 |
||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
Net income (loss)
|
$
|
41,251
|
|
$
|
19,894
|
|
$
|
3,379
|
|
$
|
12,967
|
|
$
|
44,750
|
|
$
|
25,802
|
|
$
|
11,669
|
|
$
|
(421
|
)
|
Excluding:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest and other non-operating expense, net
|
3,099
|
|
3,768
|
|
3,687
|
|
2,667
|
|
2,177
|
|
2,254
|
|
2,153
|
|
2,152
|
|
||||||||
(Benefit) provision for income taxes
|
(18,375
|
)
|
(5,298
|
)
|
1,246
|
|
14
|
|
(26,484
|
)
|
(12,562
|
)
|
(9,437
|
)
|
(1,052
|
)
|
||||||||
Depreciation and amortization
|
7,626
|
|
6,439
|
|
6,357
|
|
6,320
|
|
6,577
|
|
7,022
|
|
6,660
|
|
6,938
|
|
||||||||
Stock-based compensation expense(1)
|
12,648
|
|
8,191
|
|
7,898
|
|
5,740
|
|
5,197
|
|
5,832
|
|
4,881
|
|
4,043
|
|
||||||||
Stock-based compensation expense—acquisitions
|
1,596
|
|
725
|
|
719
|
|
714
|
|
725
|
|
724
|
|
1,613
|
|
842
|
|
||||||||
Foreign exchange loss (gain)
|
3,514
|
|
373
|
|
4,450
|
|
(1,850
|
)
|
(2,153
|
)
|
(8,069
|
)
|
(16,103
|
)
|
(2,780
|
)
|
||||||||
Restructuring and other exit costs (income)
|
—
|
|
(57
|
)
|
(41
|
)
|
(151
|
)
|
871
|
|
1,766
|
|
11,260
|
|
—
|
|
||||||||
Asset impairment charges (2)
|
—
|
|
—
|
|
—
|
|
—
|
|
3,162
|
|
—
|
|
—
|
|
—
|
|
||||||||
Adjusted EBITDA
|
$
|
51,359
|
|
$
|
34,035
|
|
$
|
27,695
|
|
$
|
26,421
|
|
$
|
34,822
|
|
$
|
22,769
|
|
$
|
12,696
|
|
$
|
9,722
|
|
(1)
|
$0.1 million
,
$1.0 million
, and
$1.7 million
of restructuring-related stock-based compensation expense has been excluded from the three months ended
December 31, 2017
, September 30, 2017, and June 30, 2017, respectively, and is included in the restructuring and other exit costs (income) line.
|
|
|
As of December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Cash and cash equivalents
|
|
$
|
366,985
|
|
|
$
|
315,442
|
|
Short-term investments
|
|
257,302
|
|
|
25,108
|
|
||
Accounts receivable, net
|
|
12,244
|
|
|
33,677
|
|
||
Net working capital
|
|
568,227
|
|
|
336,787
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(in thousands)
|
||||||||||
Cash provided by (used in):
|
|
|
|
|
|
|
||||||
Operating activities
|
|
$
|
198,925
|
|
|
$
|
69,101
|
|
|
$
|
47,964
|
|
Investing activities
|
|
(285,393
|
)
|
|
61,836
|
|
|
(135,430
|
)
|
|||
Financing activities
|
|
144,006
|
|
|
6,555
|
|
|
(524
|
)
|
|
|
Total
|
|
Less than 1
Year
|
|
1–3
Years
|
|
3–5
Years
|
|
More than
5 Years
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Capital lease obligations
|
|
$
|
5,979
|
|
|
$
|
3,884
|
|
|
$
|
2,095
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating lease obligations
|
|
32,017
|
|
|
4,904
|
|
|
8,968
|
|
|
8,385
|
|
|
9,760
|
|
|||||
Long-term obligations
|
|
345,223
|
|
|
132
|
|
|
91
|
|
|
345,000
|
|
|
—
|
|
|||||
Interest payments
|
|
648
|
|
|
504
|
|
|
144
|
|
|
—
|
|
|
—
|
|
|||||
Facility financing obligations
|
|
78,161
|
|
|
9,451
|
|
|
19,876
|
|
|
21,119
|
|
|
27,715
|
|
|||||
Purchase obligations
|
|
61,070
|
|
|
10,696
|
|
|
33,374
|
|
|
17,000
|
|
|
—
|
|
|||||
Total contractual obligations
|
|
$
|
523,098
|
|
|
$
|
29,571
|
|
|
$
|
64,548
|
|
|
$
|
391,504
|
|
|
$
|
37,475
|
|
•
|
Revenue from Promoted Listings, our on-site advertising service, consists of cost-per-click fees an Etsy seller pays us for prominent placement of the seller’s listings in search results in our 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 us when she purchases shipping labels through our platform, net of the cost we incur in purchasing those shipping labels. We provide our sellers access to purchase shipping labels from the United States Postal Service, FedEx, Canada Post, Royal Mail and DAI Post at discounted pricing due to the volume of purchases through its platform. We recognize Etsy Shipping Label revenue when an Etsy seller purchases a shipping label. We recognize Etsy Shipping Label revenue on a net basis as we are an agent in this arrangement and do not take control of shipping labels prior to transferring the labels to the Etsy Seller. Etsy Shipping Label revenue is recorded net of refunds.
|
•
|
Revenue from Pattern consists of monthly subscription fees an Etsy seller pays to use our custom website services. We recognize 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 our platform. The Etsy Plus subscription fee is
$10
per month and is nonrefundable. Each feature represents its own distinct performance obligation. We allocate 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.
|
•
|
Fair Value of Our Common Stock:
Prior to our initial public offering in April 2015, our Board of Directors considered numerous objective and subjective factors to determine the fair value of our common stock at each meeting at which awards were approved. The factors included: contemporaneous third-party valuations of our common stock; the prices, rights, preferences, and privileges of our preferred stock relative to those of our common stock; the prices of preferred stock sold by us to third-party investors in arms-length transactions; the prices of common stock sold to third-party investors by us and in secondary transactions or repurchased by us in arms-length transactions; the lack of marketability of our common stock; our operating and financial results; current business conditions and projections; and the likelihood of achieving a liquidity event, such as an initial public offering or sale of our company, given then prevailing market conditions. Since our initial public offering, we have used the market closing price for our common stock as reported on the Nasdaq to determine the fair value of our common stock.
|
•
|
Expected Volatility:
As we do not have a sufficient trading history for our common stock, the expected stock price volatility for our common stock is estimated by taking the average historical price volatility for Etsy and certain industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers, which we have selected, consist of several public companies in the industry similar in size, stage of life cycle, and financial leverage. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case more suitable companies whose share prices are publicly available would be used in the calculation.
|
•
|
Risk-free Interest Rate:
The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.
|
•
|
Expected Term:
The expected term represents the period that our stock-based awards are expected to be outstanding. We base our expected term for awards issued to employees or members of our Board of Directors on the simplified method, which represents the average period from vesting to the expiration of the stock option.
|
•
|
Expected Dividend Yield:
We have never declared or paid any cash dividends to common stockholders and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero.
|
|
|
Year Ended
December 31,
|
||||
|
|
2018
|
|
2017
|
|
2016
|
Expected volatility
|
|
38.6% - 47.8%
|
|
41.7% - 44.2%
|
|
38.6% - 44.6%
|
Risk-free interest rate
|
|
2.6% - 2.9%
|
|
1.9% - 2.2%
|
|
1.1% - 2.1%
|
Expected term (in years)
|
|
5.5 - 6.3
|
|
5.5 - 6.3
|
|
5.5 - 6.3
|
Dividend rate
|
|
—%
|
|
—%
|
|
—%
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
Consolidated Statements of Operations for the years ended December 31, 2018, 2017, and 2016
|
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017, and 2016
|
|
Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, 2018, 2017, and 2016
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016
|
|
Notes to Consolidated Financial Statements
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
366,985
|
|
|
$
|
315,442
|
|
Short-term investments
|
257,302
|
|
|
25,108
|
|
||
Accounts receivable, net
|
12,244
|
|
|
33,677
|
|
||
Prepaid and other current assets
|
22,686
|
|
|
20,379
|
|
||
Funds receivable and seller accounts
|
21,072
|
|
|
44,658
|
|
||
Total current assets
|
680,289
|
|
|
439,264
|
|
||
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Property and equipment, net
|
120,179
|
|
|
117,617
|
|
||
Goodwill
|
37,482
|
|
|
38,541
|
|
||
Intangible assets, net
|
34,589
|
|
|
4,100
|
|
||
Deferred tax assets
|
23,464
|
|
|
159
|
|
||
Other assets
|
507
|
|
|
561
|
|
||
Total assets
|
$
|
901,851
|
|
|
$
|
605,583
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
26,545
|
|
|
$
|
13,622
|
|
Accrued expenses
|
49,158
|
|
|
28,743
|
|
||
Capital lease obligations—current
|
3,884
|
|
|
5,798
|
|
||
Funds payable and amounts due to sellers
|
21,072
|
|
|
44,658
|
|
||
Deferred revenue
|
7,478
|
|
|
6,262
|
|
||
Other current liabilities
|
3,925
|
|
|
3,394
|
|
||
Total current liabilities
|
112,062
|
|
|
102,477
|
|
||
Capital lease obligations—net of current portion
|
2,095
|
|
|
4,115
|
|
||
Deferred tax liabilities
|
30,455
|
|
|
23,786
|
|
||
Facility financing obligation
|
59,991
|
|
|
60,049
|
|
||
Long-term debt, net
|
276,486
|
|
|
—
|
|
||
Other liabilities
|
19,864
|
|
|
18,262
|
|
||
Total liabilities
|
500,953
|
|
|
208,689
|
|
||
Commitments and contingencies
(Note 14)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of December 31, 2018 and 2017; 119,771,702 and 121,769,238 shares issued and outstanding as of December 31, 2018 and 2017, respectively)
|
120
|
|
|
122
|
|
||
Preferred stock ($0.001 par value, 25,000,000 shares authorized as of December 31, 2018 and 2017)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
562,033
|
|
|
499,441
|
|
||
Accumulated deficit
|
(153,442
|
)
|
|
(96,290
|
)
|
||
Accumulated other comprehensive loss
|
(7,813
|
)
|
|
(6,379
|
)
|
||
Total stockholders’ equity
|
400,898
|
|
|
396,894
|
|
||
Total liabilities and stockholders’ equity
|
$
|
901,851
|
|
|
$
|
605,583
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
$
|
603,693
|
|
|
$
|
441,231
|
|
|
$
|
364,967
|
|
Cost of revenue
|
190,762
|
|
|
150,986
|
|
|
123,328
|
|
|||
Gross profit
|
412,931
|
|
|
290,245
|
|
|
241,639
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
158,013
|
|
|
109,085
|
|
|
82,248
|
|
|||
Product development
|
97,249
|
|
|
74,616
|
|
|
55,083
|
|
|||
General and administrative
|
82,883
|
|
|
91,486
|
|
|
86,180
|
|
|||
Asset impairment charges
|
—
|
|
|
3,162
|
|
|
551
|
|
|||
Total operating expenses
|
338,145
|
|
|
278,349
|
|
|
224,062
|
|
|||
Income from operations
|
74,786
|
|
|
11,896
|
|
|
17,577
|
|
|||
Other (expense) income:
|
|
|
|
|
|
||||||
Interest expense
|
(22,178
|
)
|
|
(11,130
|
)
|
|
(7,204
|
)
|
|||
Interest and other income
|
8,957
|
|
|
2,394
|
|
|
1,702
|
|
|||
Foreign exchange (loss) gain
|
(6,487
|
)
|
|
29,105
|
|
|
(14,951
|
)
|
|||
Total other (expense) income
|
(19,708
|
)
|
|
20,369
|
|
|
(20,453
|
)
|
|||
Income (loss) before income taxes
|
55,078
|
|
|
32,265
|
|
|
(2,876
|
)
|
|||
Benefit (provision) for income taxes
|
22,413
|
|
|
49,535
|
|
|
(27,025
|
)
|
|||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
Net income (loss) per share attributable to common stockholders:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.64
|
|
|
$
|
0.69
|
|
|
$
|
(0.26
|
)
|
Diluted
|
$
|
0.61
|
|
|
$
|
0.68
|
|
|
$
|
(0.26
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
120,146,076
|
|
|
118,538,687
|
|
|
113,562,738
|
|
|||
Diluted
|
127,084,785
|
|
|
122,267,673
|
|
|
113,562,738
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
||||||
Cumulative translation adjustment
|
(1,399
|
)
|
|
(24,898
|
)
|
|
7,675
|
|
|||
Unrealized (losses) gains on marketable securities, net of tax of $0, $15, and $5, respectively
|
(35
|
)
|
|
47
|
|
|
(8
|
)
|
|||
Total other comprehensive (loss) income
|
(1,434
|
)
|
|
(24,851
|
)
|
|
7,667
|
|
|||
Comprehensive income (loss)
|
$
|
76,057
|
|
|
$
|
56,949
|
|
|
$
|
(22,234
|
)
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
34,477
|
|
|
22,655
|
|
|
13,168
|
|
|||
Stock-based compensation expense—acquisitions
|
3,754
|
|
|
3,904
|
|
|
2,733
|
|
|||
Depreciation and amortization expense
|
26,742
|
|
|
27,197
|
|
|
22,525
|
|
|||
Bad debt expense
|
4,124
|
|
|
2,497
|
|
|
1,770
|
|
|||
Foreign exchange loss (gain)
|
5,997
|
|
|
(27,424
|
)
|
|
12,921
|
|
|||
Amortization of debt issuance costs
|
1,191
|
|
|
463
|
|
|
184
|
|
|||
Non-cash interest expense
|
10,968
|
|
|
3,117
|
|
|
5,337
|
|
|||
Interest on marketable securities
|
(2,887
|
)
|
|
426
|
|
|
914
|
|
|||
Loss on disposal of assets
|
136
|
|
|
520
|
|
|
1,143
|
|
|||
Asset impairment charges
|
—
|
|
|
3,162
|
|
|
551
|
|
|||
Deferred income taxes
|
(22,414
|
)
|
|
(49,535
|
)
|
|
9,969
|
|
|||
Amortization of deferred tax charge
|
—
|
|
|
—
|
|
|
17,132
|
|
|||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable
|
17,215
|
|
|
(8,826
|
)
|
|
(8,192
|
)
|
|||
Funds receivable and seller accounts
|
23,436
|
|
|
(13,477
|
)
|
|
(10,910
|
)
|
|||
Prepaid expenses and other current assets
|
(4,785
|
)
|
|
3,024
|
|
|
(1,384
|
)
|
|||
Other assets
|
43
|
|
|
(28
|
)
|
|
438
|
|
|||
Accounts payable
|
13,364
|
|
|
2,837
|
|
|
(3,585
|
)
|
|||
Accrued and other current liabilities
|
23,079
|
|
|
(2,659
|
)
|
|
795
|
|
|||
Funds payable and amounts due to sellers
|
(23,436
|
)
|
|
13,477
|
|
|
10,910
|
|
|||
Deferred revenue
|
1,331
|
|
|
434
|
|
|
964
|
|
|||
Other liabilities
|
9,099
|
|
|
5,537
|
|
|
482
|
|
|||
Net cash provided by operating activities
|
198,925
|
|
|
69,101
|
|
|
47,964
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Cash paid for asset acquisition and intangible assets
|
(35,494
|
)
|
|
—
|
|
|
—
|
|
|||
Acquisition of businesses, net of cash acquired
|
—
|
|
|
—
|
|
|
(7,880
|
)
|
|||
Purchases of property and equipment
|
(1,019
|
)
|
|
(3,948
|
)
|
|
(35,981
|
)
|
|||
Development of internal-use software
|
(19,537
|
)
|
|
(9,208
|
)
|
|
(11,769
|
)
|
|||
Purchases of marketable securities
|
(514,286
|
)
|
|
(62,348
|
)
|
|
(160,504
|
)
|
|||
Sales of marketable securities
|
284,943
|
|
|
137,340
|
|
|
80,704
|
|
|||
Net cash (used in) provided by investing activities
|
(285,393
|
)
|
|
61,836
|
|
|
(135,430
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Payment of tax obligations on vested equity awards
|
(24,065
|
)
|
|
(6,417
|
)
|
|
(1,258
|
)
|
|||
Repurchase of stock
|
(134,647
|
)
|
|
(10,301
|
)
|
|
—
|
|
|||
Proceeds from exercise of stock options
|
18,253
|
|
|
33,838
|
|
|
10,568
|
|
|||
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
|
(6,057
|
)
|
|
(7,798
|
)
|
|
(6,086
|
)
|
|||
Deferred payments on acquisition of business
|
—
|
|
|
—
|
|
|
(649
|
)
|
|||
Payments on facility financing obligation
|
(10,164
|
)
|
|
(5,883
|
)
|
|
—
|
|
|||
Other financing, net
|
(128
|
)
|
|
3,116
|
|
|
(3,099
|
)
|
|||
Net cash provided by (used in) financing activities
|
144,006
|
|
|
6,555
|
|
|
(524
|
)
|
|||
Effect of exchange rate changes on cash
|
(5,995
|
)
|
|
(3,642
|
)
|
|
(1,662
|
)
|
|||
Net increase (decrease) in cash, cash equivalents, and restricted cash
|
51,543
|
|
|
133,850
|
|
|
(89,652
|
)
|
|||
Cash, cash equivalents, and restricted cash
at beginning of period
|
320,783
|
|
|
186,933
|
|
|
276,585
|
|
|||
Cash, cash equivalents, and restricted cash
at end of period
|
$
|
372,326
|
|
|
$
|
320,783
|
|
|
$
|
186,933
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Supplemental cash flow disclosures:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
10,002
|
|
|
$
|
7,555
|
|
|
$
|
2,000
|
|
Cash paid for income taxes
|
$
|
966
|
|
|
$
|
1,003
|
|
|
$
|
10,559
|
|
Supplemental non-cash disclosures:
|
|
|
|
|
|
||||||
Equipment acquired under capital lease obligations
|
$
|
2,122
|
|
|
$
|
5,586
|
|
|
$
|
5,030
|
|
Stock-based compensation capitalized in development of capitalized software
|
$
|
2,252
|
|
|
$
|
807
|
|
|
$
|
792
|
|
Additions to development of internal-use software and property and equipment included in accounts payable and accrued expenses
|
$
|
1,211
|
|
|
$
|
956
|
|
|
$
|
2,239
|
|
Fair value of common stock issued in acquisition
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,966
|
|
•
|
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 she purchases shipping labels through its platform, net of the cost the Company incurs in purchasing those shipping labels. The Company provides its sellers access to purchase shipping labels from the United States Postal Service, FedEx, Canada Post, Royal Mail, and DAI 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 it is an agent in this arrangement and does not take control of shipping labels prior to transferring the labels to the Etsy Seller. Etsy Shipping Label revenue is recorded net of refunds.
|
•
|
Revenue from Pattern 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.
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
Cash and cash equivalents
|
$
|
366,985
|
|
|
$
|
315,442
|
|
Short-term investments
|
257,302
|
|
|
25,108
|
|
||
Total cash, cash equivalents, and short-term investments
|
$
|
624,287
|
|
|
$
|
340,550
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Balance as of the beginning of period
|
$
|
2,687
|
|
|
$
|
1,999
|
|
|
$
|
2,071
|
|
Bad debt expense
|
4,124
|
|
|
2,497
|
|
|
1,770
|
|
|||
Write-offs, net of recoveries and other adjustments
|
(2,091
|
)
|
|
(1,809
|
)
|
|
(1,842
|
)
|
|||
Balance as of the end of period
|
$
|
4,720
|
|
|
$
|
2,687
|
|
|
$
|
1,999
|
|
•
|
recognize additional operating liabilities and corresponding right-of-use assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases;
|
•
|
derecognize existing facility financing obligations and the related existing building asset for our corporate headquarters. Any gains or losses associated with this change in accounting will be recognized through a cumulative-effect adjustment to accumulated deficit as of January 1, 2019. Additionally, a new right-of-use asset and lease liability
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Beginning balance:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
315,442
|
|
|
$
|
181,592
|
|
|
$
|
271,244
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
|
5,341
|
|
|||
Total cash, cash equivalents, and restricted cash
|
$
|
320,783
|
|
|
$
|
186,933
|
|
|
$
|
276,585
|
|
|
|
|
|
|
|
||||||
Ending balance:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
366,985
|
|
|
$
|
315,442
|
|
|
$
|
181,592
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
|
5,341
|
|
|||
Total cash, cash equivalents, and restricted cash
|
$
|
372,326
|
|
|
$
|
320,783
|
|
|
$
|
186,933
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Marketplace revenue (1)
|
$
|
440,740
|
|
|
$
|
326,076
|
|
|
$
|
269,628
|
|
Services revenue
|
158,928
|
|
|
111,869
|
|
|
89,433
|
|
|||
Other revenue
|
4,025
|
|
|
3,286
|
|
|
5,906
|
|
|||
Revenue
|
$
|
603,693
|
|
|
$
|
441,231
|
|
|
$
|
364,967
|
|
(1)
|
Etsy Payments revenue for the
years ended December 31, 2018, 2017, and 2016
has been reclassified and presented within Marketplace revenue. Comparative periods have been reclassified to conform to current period presentation.
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Domestic
|
$
|
36,157
|
|
|
$
|
(16,583
|
)
|
|
$
|
25,910
|
|
Foreign
|
18,921
|
|
|
48,848
|
|
|
(28,786
|
)
|
|||
Income (loss) before income taxes
|
$
|
55,078
|
|
|
$
|
32,265
|
|
|
$
|
(2,876
|
)
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
709
|
|
|
$
|
(6,397
|
)
|
|
$
|
22,084
|
|
State
|
(578
|
)
|
|
79
|
|
|
2,623
|
|
|||
Foreign
|
600
|
|
|
476
|
|
|
580
|
|
|||
Total current
|
731
|
|
|
(5,842
|
)
|
|
25,287
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
(3,343
|
)
|
|
(34,948
|
)
|
|
2,008
|
|
|||
State
|
3,496
|
|
|
(8,778
|
)
|
|
(247
|
)
|
|||
Foreign
|
(23,297
|
)
|
|
33
|
|
|
(23
|
)
|
|||
Total deferred
|
(23,144
|
)
|
|
(43,693
|
)
|
|
1,738
|
|
|||
Total income tax (benefit) provision
|
$
|
(22,413
|
)
|
|
$
|
(49,535
|
)
|
|
$
|
27,025
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Income tax provision (benefit) at federal statutory rate
|
$
|
11,566
|
|
|
$
|
11,308
|
|
|
$
|
(1,007
|
)
|
State and local taxes net of federal benefit
|
3,839
|
|
|
(691
|
)
|
|
1,545
|
|
|||
Foreign income tax rate differential
|
(298
|
)
|
|
(11,878
|
)
|
|
5,849
|
|
|||
Stock-based compensation
|
(11,717
|
)
|
|
(12,584
|
)
|
|
1,412
|
|
|||
Non-deductible items
|
(329
|
)
|
|
168
|
|
|
267
|
|
|||
Uncertain tax positions
|
382
|
|
|
789
|
|
|
4,033
|
|
|||
Return to provision adjustment
|
3,293
|
|
|
167
|
|
|
(498
|
)
|
|||
Non-deductible acquisition costs
|
—
|
|
|
—
|
|
|
199
|
|
|||
Change in valuation allowance
|
(28,733
|
)
|
|
(4,673
|
)
|
|
4,911
|
|
|||
Research and development credit
|
(4,115
|
)
|
|
(1,098
|
)
|
|
(2,170
|
)
|
|||
Deferred charge on restructuring
|
—
|
|
|
—
|
|
|
12,168
|
|
|||
U.S. tax reform
|
3,897
|
|
|
(31,063
|
)
|
|
—
|
|
|||
Other
|
(198
|
)
|
|
20
|
|
|
316
|
|
|||
Total income tax (benefit) provision
|
$
|
(22,413
|
)
|
|
$
|
(49,535
|
)
|
|
$
|
27,025
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carryforwards
|
$
|
13,347
|
|
|
$
|
24,625
|
|
Amortization of acquired intangibles
|
12,109
|
|
|
15,631
|
|
||
Research and development credit carryforwards
|
7,567
|
|
|
3,597
|
|
||
Stock-based compensation expense
|
6,623
|
|
|
3,776
|
|
||
Accrued VAT liability
|
43
|
|
|
42
|
|
||
Alternative minimum tax credit
|
274
|
|
|
274
|
|
||
Allowance for doubtful accounts
|
545
|
|
|
384
|
|
||
Deferred rent
|
529
|
|
|
573
|
|
||
Accrued vacation
|
744
|
|
|
623
|
|
||
Unrealized loss on foreign currency
|
—
|
|
|
527
|
|
||
Other, net
|
1,301
|
|
|
300
|
|
||
Total deferred tax assets
|
43,082
|
|
|
50,352
|
|
||
Less valuation allowance
|
1,673
|
|
|
32,455
|
|
||
Total net deferred tax asset
|
41,409
|
|
|
17,897
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Depreciation
|
(6,933
|
)
|
|
(6,850
|
)
|
||
Global corporate restructuring liability
|
(33,730
|
)
|
|
(33,783
|
)
|
||
Convertible debt
|
(7,283
|
)
|
|
—
|
|
||
Unrealized gain on foreign currency
|
(92
|
)
|
|
—
|
|
||
Other liabilities
|
(362
|
)
|
|
(891
|
)
|
||
Total deferred tax liabilities
|
(48,400
|
)
|
|
(41,524
|
)
|
||
Net deferred tax liabilities
|
$
|
(6,991
|
)
|
|
$
|
(23,627
|
)
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Balance as of the beginning of period
|
$
|
32,455
|
|
|
$
|
13,839
|
|
|
$
|
9,540
|
|
Additions charged to expense
|
—
|
|
|
16,743
|
|
|
4,886
|
|
|||
Deletions credited to expense
|
(28,733
|
)
|
|
—
|
|
|
—
|
|
|||
Currency translation
|
(2,049
|
)
|
|
1,873
|
|
|
(587
|
)
|
|||
Balance as of the end of period
|
$
|
1,673
|
|
|
$
|
32,455
|
|
|
$
|
13,839
|
|
|
As of December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Balance as of the beginning of period
|
$
|
17,013
|
|
|
$
|
23,574
|
|
|
$
|
22,229
|
|
Additions based on tax positions related to the current year
|
921
|
|
|
732
|
|
|
1,071
|
|
|||
Additions for tax positions of prior years
|
946
|
|
|
118
|
|
|
274
|
|
|||
Reductions for tax provisions of prior years
|
(61
|
)
|
|
(7,411
|
)
|
|
—
|
|
|||
Balance as of the end of period
|
$
|
18,819
|
|
|
$
|
17,013
|
|
|
$
|
23,574
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
Net income (loss) allocated to participating securities under the two-class method
|
(37
|
)
|
|
(80
|
)
|
|
—
|
|
|||
Net income (loss) applicable to common stockholders—basic
|
77,454
|
|
|
81,720
|
|
|
(29,901
|
)
|
|||
Dilutive effect of net income allocated to participating securities under the two-class method
|
37
|
|
|
80
|
|
|
—
|
|
|||
Change in fair value of liability classified restricted stock
|
—
|
|
|
771
|
|
|
—
|
|
|||
Net income (loss) applicable to common stockholders—diluted
|
$
|
77,491
|
|
|
$
|
82,571
|
|
|
$
|
(29,901
|
)
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding—basic (1)
|
120,146,076
|
|
|
118,538,687
|
|
|
113,562,738
|
|
|||
Dilutive effect of assumed conversion of options to purchase common stock
|
4,238,622
|
|
|
2,498,448
|
|
|
—
|
|
|||
Dilutive effect of assumed conversion of restricted stock units
|
1,721,658
|
|
|
1,177,799
|
|
|
—
|
|
|||
Dilutive effect of assumed conversion of convertible debt
|
900,580
|
|
|
—
|
|
|
—
|
|
|||
Diluted effective of assumed conversion of restricted stock from acquisition
|
77,849
|
|
|
52,739
|
|
|
—
|
|
|||
Weighted average common shares outstanding—diluted
|
127,084,785
|
|
|
122,267,673
|
|
|
113,562,738
|
|
|||
|
|
|
|
|
|
||||||
Net income (loss) per share applicable to common stockholders—basic
|
$
|
0.64
|
|
|
$
|
0.69
|
|
|
$
|
(0.26
|
)
|
Net income (loss) per share applicable to common stockholders—diluted
|
$
|
0.61
|
|
|
$
|
0.68
|
|
|
$
|
(0.26
|
)
|
(1)
|
57,482
shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for
the year ended December 31, 2018
.
|
|
Year Ended
December 31, |
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Stock options
|
475,238
|
|
|
4,902,664
|
|
|
10,041,403
|
|
Restricted stock units
|
136,998
|
|
|
435,358
|
|
|
2,043,544
|
|
Warrants
|
—
|
|
|
—
|
|
|
33,447
|
|
Total anti-dilutive securities
|
612,236
|
|
|
5,338,022
|
|
|
12,118,394
|
|
Cash paid
|
$
|
8,050
|
|
Common shares
|
6,966
|
|
|
Total purchase consideration
|
$
|
15,016
|
|
Net working capital
|
$
|
81
|
|
Developed technology
|
7,200
|
|
|
Customer relationships
|
1,250
|
|
|
Goodwill
|
8,660
|
|
|
Deferred tax liability
|
(2,175
|
)
|
|
Net assets acquired
|
$
|
15,016
|
|
|
Year Ended December 31,
|
||
|
2016
|
||
Revenue
|
$
|
365,786
|
|
Net loss
|
(35,401
|
)
|
|
Basic and diluted net loss per share
|
(0.31
|
)
|
|
Year Ended
December 31, |
||||||
|
2018
|
|
2017
|
||||
Balance as of the beginning of the period
|
$
|
38,541
|
|
|
$
|
35,657
|
|
Foreign currency translation adjustments
|
(1,059
|
)
|
|
2,884
|
|
||
Balance as of the end of the period
|
$
|
37,482
|
|
|
$
|
38,541
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||||||||||
|
Gross book
value |
|
Accumulated
amortization |
|
Net book
value |
|
Gross book
value |
|
Accumulated
amortization |
|
Net book
value |
||||||||||||
Technology
|
$
|
7,200
|
|
|
$
|
(5,500
|
)
|
|
$
|
1,700
|
|
|
$
|
7,200
|
|
|
$
|
(3,100
|
)
|
|
$
|
4,100
|
|
Referral agreement
|
34,595
|
|
|
(1,874
|
)
|
|
32,721
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Patent licenses
|
172
|
|
|
(4
|
)
|
|
168
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Intangible assets, net
|
$
|
41,967
|
|
|
$
|
(7,378
|
)
|
|
$
|
34,589
|
|
|
$
|
7,200
|
|
|
$
|
(3,100
|
)
|
|
$
|
4,100
|
|
2019
|
$
|
5,178
|
|
2020
|
3,477
|
|
|
2021
|
3,477
|
|
|
2022
|
3,477
|
|
|
2023
|
3,477
|
|
|
Thereafter
|
15,503
|
|
|
Total amortization expense
|
$
|
34,589
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
United States
|
$
|
425,841
|
|
|
$
|
317,755
|
|
|
$
|
276,537
|
|
International
|
177,852
|
|
|
123,476
|
|
|
88,430
|
|
|||
Revenue
|
$
|
603,693
|
|
|
$
|
441,231
|
|
|
$
|
364,967
|
|
|
|
|
|
|
|
||||||
United States (1)
|
$
|
10,778
|
|
|
$
|
(43,014
|
)
|
|
$
|
9,123
|
|
International (2)
|
44,300
|
|
|
75,279
|
|
|
(11,999
|
)
|
|||
Income (loss) before income taxes
|
$
|
55,078
|
|
|
$
|
32,265
|
|
|
$
|
(2,876
|
)
|
|
|
|
|
|
|
||||||
United States (3)
|
$
|
10,493
|
|
|
$
|
7,029
|
|
|
$
|
(17,345
|
)
|
International (2)
|
66,998
|
|
|
74,771
|
|
|
(12,556
|
)
|
|||
Net income (loss)
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
(1)
|
The United States loss before income taxes in
the year ended December 31, 2017
was primarily driven by a foreign exchange loss, interest associated with the build-to-suit lease accounting related to our corporate headquarters, restructuring and other exit costs, and asset impairment charges. See “
Note 17—Restructuring and Other Exit Costs (Income)
” and “
Note 6—Goodwill and Intangible Assets
” for additional information on restructuring and other exit costs and asset impairment charges.
|
(2)
|
The international loss before income taxes and net loss in
the year ended December 31, 2016
was primarily driven by a foreign exchange loss related to the U.S. Dollar to Euro exchange rate fluctuations on the Company's intercompany and other non-functional currency balances.
|
(3)
|
The United States net loss in
the year ended December 31, 2016
was primarily driven by an income tax provision recorded in the period, mainly attributable to tax expense related to the updated corporate structure. See “
Note 3—Income Taxes
” for additional information.
|
|
As of December 31, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Asset
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
—
|
|
|
$
|
7,775
|
|
|
$
|
—
|
|
|
$
|
7,775
|
|
Money market funds
|
244,856
|
|
|
—
|
|
|
—
|
|
|
244,856
|
|
||||
|
244,856
|
|
|
7,775
|
|
|
—
|
|
|
252,631
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
147,860
|
|
|
—
|
|
|
147,860
|
|
||||
Corporate bonds
|
—
|
|
|
46,801
|
|
|
—
|
|
|
46,801
|
|
||||
U.S. Government and agency securities
|
62,641
|
|
|
—
|
|
|
—
|
|
|
62,641
|
|
||||
|
62,641
|
|
|
194,661
|
|
|
—
|
|
|
257,302
|
|
||||
Funds receivable and seller accounts:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
9,229
|
|
|
—
|
|
|
—
|
|
|
9,229
|
|
||||
|
9,229
|
|
|
—
|
|
|
—
|
|
|
9,229
|
|
||||
|
$
|
316,726
|
|
|
$
|
202,436
|
|
|
$
|
—
|
|
|
$
|
519,162
|
|
|
As of December 31, 2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Asset
|
|
|
|
|
|
|
|
||||||||
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
|
||||||||
December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
7,775
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,775
|
|
|
7,775
|
|
|
—
|
|
|
—
|
|
|
7,775
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
147,860
|
|
|
—
|
|
|
—
|
|
|
147,860
|
|
||||
Corporate bonds
|
46,836
|
|
|
(35
|
)
|
|
—
|
|
|
46,801
|
|
||||
U.S. Government and agency securities
|
62,638
|
|
|
(9
|
)
|
|
12
|
|
|
62,641
|
|
||||
|
257,334
|
|
|
(44
|
)
|
|
12
|
|
|
257,302
|
|
||||
|
$
|
265,109
|
|
|
$
|
(44
|
)
|
|
$
|
12
|
|
|
$
|
265,077
|
|
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
December 31, |
||||||
|
Estimated useful lives
|
|
2018
|
|
2017
|
||||
Computer equipment
|
3 years
|
|
$
|
36,670
|
|
|
$
|
35,587
|
|
Furniture and equipment
|
2 - 4 years
|
|
6,574
|
|
|
6,194
|
|
||
Software
|
1 - 3 years
|
|
—
|
|
|
908
|
|
||
Leasehold improvements
|
Shorter of life of asset or lease term
|
|
10,731
|
|
|
10,929
|
|
||
Construction in progress
|
Not applicable
|
|
551
|
|
|
—
|
|
||
Building
|
25 years
|
|
81,892
|
|
|
81,892
|
|
||
Website development and internal-use software
|
Shorter of life of asset or contract term
|
|
69,201
|
|
|
48,333
|
|
||
|
|
|
205,619
|
|
|
183,843
|
|
||
|
|
|
|
|
|
||||
Less: Accumulated depreciation and amortization
|
|
|
85,440
|
|
|
66,226
|
|
||
|
|
|
$
|
120,179
|
|
|
$
|
117,617
|
|
|
Year Ended
December 31, |
||||||
|
2018
|
|
2017
|
||||
Balance as of the beginning of the period
|
$
|
48,333
|
|
|
$
|
43,294
|
|
Additions to website development, excluding stock-based compensation
|
19,816
|
|
|
10,028
|
|
||
Additions to website development—stock-based compensation
|
2,252
|
|
|
807
|
|
||
Less: Retirements
|
1,200
|
|
|
625
|
|
||
Less: Impairments
|
—
|
|
|
5,171
|
|
||
|
69,201
|
|
|
48,333
|
|
||
Less:
|
|
|
|
||||
Accumulated amortization balance as of the beginning of the period
|
29,991
|
|
|
24,155
|
|
||
Amortization Expense
|
9,519
|
|
|
8,209
|
|
||
Less: Retirements
|
1,092
|
|
|
364
|
|
||
Less: Impairments
|
—
|
|
|
2,009
|
|
||
Accumulated amortization balance as of the end of the period
|
38,418
|
|
|
29,991
|
|
||
|
$
|
30,783
|
|
|
$
|
18,342
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
Vendor accruals
|
$
|
17,817
|
|
|
$
|
14,576
|
|
Accrued bonus
|
12,906
|
|
|
4,364
|
|
||
Sales and use tax payable
|
12,232
|
|
|
3,682
|
|
||
Accrued vacation
|
3,787
|
|
|
3,136
|
|
||
Payroll-related liabilities
|
2,406
|
|
|
2,920
|
|
||
Other
|
10
|
|
|
65
|
|
||
Total accrued expenses
|
$
|
49,158
|
|
|
$
|
28,743
|
|
|
Capital Lease
Obligations |
|
Operating
Leases |
|
Build-to-Suit
Lease |
|
Purchase Obligations
|
||||||||
Periods ending
|
|
|
|
|
|
|
|
||||||||
2019
|
$
|
4,392
|
|
|
$
|
4,904
|
|
|
$
|
9,451
|
|
|
$
|
10,696
|
|
2020
|
1,754
|
|
|
4,783
|
|
|
9,522
|
|
|
17,374
|
|
||||
2021
|
481
|
|
|
4,185
|
|
|
10,354
|
|
|
16,000
|
|
||||
2022
|
—
|
|
|
4,180
|
|
|
10,520
|
|
|
17,000
|
|
||||
2023
|
—
|
|
|
4,205
|
|
|
10,599
|
|
|
—
|
|
||||
Thereafter
|
—
|
|
|
9,760
|
|
|
27,715
|
|
|
—
|
|
||||
Total minimum payments required
|
$
|
6,627
|
|
|
$
|
32,017
|
|
|
$
|
78,161
|
|
|
$
|
61,070
|
|
Amounts representing interest
|
648
|
|
|
|
|
|
|
|
|||||||
Present value of net minimum payments
|
5,979
|
|
|
|
|
|
|
|
|||||||
Current maturities
|
3,884
|
|
|
|
|
|
|
|
|||||||
Long-term payment obligations
|
$
|
2,095
|
|
|
|
|
|
|
|
|
Shares Repurchased
|
|
Average Price Paid per Share (1)
|
|
Value of Shares Repurchased
|
|
Remaining Amount Authorized
|
|||||||
New Authorization on November 17, 2017 of $100 million
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100,000
|
|
Repurchases of common stock for the three months ended:
|
|
|
|
|
|
|
|
|||||||
December 31, 2017
|
586,231
|
|
|
17.57
|
|
|
10,301
|
|
|
(10,301
|
)
|
|||
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
|
)
|
|||
September 30, 2018
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
New Authorization on November 1, 2018 of $200 million
|
—
|
|
|
—
|
|
|
—
|
|
|
200,000
|
|
|||
Repurchases of common stock for the three months ended:
|
|
|
|
|
|
|
|
|||||||
December 31, 2018
|
916,083
|
|
|
49.11
|
|
|
45,000
|
|
|
(45,000
|
)
|
|||
Balance as of December 31, 2018
|
5,032,648
|
|
|
$
|
28.80
|
|
|
$
|
145,000
|
|
|
$
|
155,000
|
|
|
Year Ended
December 31, |
||||
|
2018
|
|
2017
|
|
2016
|
Volatility
|
38.6% - 47.8%
|
|
41.7% - 44.2%
|
|
38.6% - 44.6%
|
Risk-free interest rate
|
2.6% - 2.9%
|
|
1.9% - 2.2%
|
|
1.1% - 2.1%
|
Expected term (in years)
|
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, 2015
|
11,068,859
|
|
|
$
|
6.94
|
|
|
7.01
|
|
$
|
31,932
|
|
Granted
|
1,700,234
|
|
|
9.35
|
|
|
|
|
|
|||
Exercised
|
(2,535,620
|
)
|
|
4.17
|
|
|
|
|
|
|||
Forfeited/Canceled
|
(893,906
|
)
|
|
9.51
|
|
|
|
|
|
|||
Outstanding at December 31, 2016
|
9,339,567
|
|
|
7.89
|
|
|
6.64
|
|
43,613
|
|
||
Granted
|
5,887,183
|
|
|
11.04
|
|
|
|
|
|
|||
Exercised
|
(5,760,263
|
)
|
|
5.87
|
|
|
|
|
|
|||
Forfeited/Canceled
|
(1,518,548
|
)
|
|
11.36
|
|
|
|
|
|
|||
Outstanding at December 31, 2017
|
7,947,939
|
|
|
11.02
|
|
|
7.93
|
|
74,996
|
|
||
Granted
|
797,201
|
|
|
29.87
|
|
|
|
|
|
|||
Exercised
|
(1,588,779
|
)
|
|
11.49
|
|
|
|
|
|
|||
Forfeited/Canceled
|
(265,367
|
)
|
|
15.68
|
|
|
|
|
|
|||
Outstanding at December 31, 2018
|
6,890,994
|
|
|
12.91
|
|
|
7.94
|
|
239,177
|
|
||
Total exercisable at December 31, 2018
|
3,032,251
|
|
|
10.94
|
|
|
7.28
|
|
111,071
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Weighted average grant date fair value of options granted
|
$
|
13.33
|
|
|
$
|
4.85
|
|
|
$
|
4.03
|
|
Intrinsic value of options exercised
|
34,268
|
|
|
52,693
|
|
|
19,130
|
|
|||
Fair value of awards vested
|
32,717
|
|
|
19,826
|
|
|
9,533
|
|
|
Shares
|
|
Weighted-Average
Fair Value |
|||
Unvested at December 31, 2015
|
395,846
|
|
|
$
|
13.70
|
|
Granted
|
3,200,297
|
|
|
10.29
|
|
|
Vested
|
(255,868
|
)
|
|
10.64
|
|
|
Forfeited/Canceled
|
(205,094
|
)
|
|
10.15
|
|
|
Unvested at December 31, 2016
|
3,135,181
|
|
|
10.70
|
|
|
Granted
|
2,360,315
|
|
|
12.17
|
|
|
Vested
|
(1,072,321
|
)
|
|
10.44
|
|
|
Forfeited/Canceled
|
(1,348,928
|
)
|
|
10.56
|
|
|
Unvested at December 31, 2017
|
3,074,247
|
|
|
11.98
|
|
|
Granted
|
2,448,169
|
|
|
28.22
|
|
|
Vested
|
(1,496,906
|
)
|
|
13.80
|
|
|
Forfeited/Canceled
|
(545,142
|
)
|
|
18.47
|
|
|
Unvested at December 31, 2018
|
3,480,368
|
|
|
22.87
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of revenue
|
$
|
3,357
|
|
|
$
|
1,739
|
|
|
$
|
1,057
|
|
Marketing
|
2,507
|
|
|
1,933
|
|
|
971
|
|
|||
Product development
|
21,234
|
|
|
8,274
|
|
|
5,079
|
|
|||
General and administrative
|
11,133
|
|
|
14,613
|
|
|
8,794
|
|
|||
Total stock-based compensation expense
|
$
|
38,231
|
|
|
$
|
26,559
|
|
|
$
|
15,901
|
|
|
Severance Charge
|
|
Stock-Based Compensation
|
|
Other Exit Costs
|
|
Total
|
||||||||
Balance, December 31, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total restructuring and other exit costs
|
8,972
|
|
|
1,668
|
|
|
620
|
|
|
11,260
|
|
||||
Costs charged against equity/assets
|
—
|
|
|
(1,668
|
)
|
|
—
|
|
|
(1,668
|
)
|
||||
Cash payments
|
(2,110
|
)
|
|
—
|
|
|
(278
|
)
|
|
(2,388
|
)
|
||||
Balance, June 30, 2017
|
6,862
|
|
|
—
|
|
|
342
|
|
|
7,204
|
|
||||
Total restructuring and other exit costs
|
871
|
|
|
965
|
|
|
(70
|
)
|
|
1,766
|
|
||||
Costs charged against equity/assets
|
—
|
|
|
(965
|
)
|
|
—
|
|
|
(965
|
)
|
||||
Cash payments
|
(4,385
|
)
|
|
—
|
|
|
(180
|
)
|
|
(4,565
|
)
|
||||
Balance, September 30, 2017
|
3,348
|
|
|
—
|
|
|
92
|
|
|
3,440
|
|
||||
Total restructuring and other exit costs
|
361
|
|
|
68
|
|
|
442
|
|
|
871
|
|
||||
Costs charged against equity/assets
|
—
|
|
|
(68
|
)
|
|
(286
|
)
|
|
(354
|
)
|
||||
Cash payments
|
(2,401
|
)
|
|
—
|
|
|
(214
|
)
|
|
(2,615
|
)
|
||||
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
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance, December 31, 2018
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Year Ended
December 31, |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of revenue
|
$
|
(19
|
)
|
|
$
|
738
|
|
|
$
|
—
|
|
Marketing
|
(82
|
)
|
|
2,950
|
|
|
—
|
|
|||
Product development
|
(110
|
)
|
|
3,232
|
|
|
—
|
|
|||
General and administrative
|
(38
|
)
|
|
6,977
|
|
|
—
|
|
|||
Total restructuring and other exit costs (income)
|
$
|
(249
|
)
|
|
$
|
13,897
|
|
|
$
|
—
|
|
Exhibit
Number
|
|
|
Incorporated by Reference
|
|
Filed
Herewith
|
||||||
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
8-K
|
|
001-36911
|
|
3.1
|
|
4/21/2015
|
|
|
||
|
8-K
|
|
001-36911
|
|
3.2
|
|
4/21/2015
|
|
|
||
|
S-1/A
|
|
333-202497
|
|
10.1
|
|
3/31/2015
|
|
|
||
|
S-1
|
|
333-202497
|
|
10.2.1
|
|
3/4/2015
|
|
|
||
|
S-1/A
|
|
333-202497
|
|
10.3
|
|
4/14/2015
|
|
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
S-1/A
|
|
333-202497
|
|
10.4
|
|
3/31/2015
|
|
|
||
|
S-1
|
|
333-202497
|
|
10.6
|
|
3/4/2015
|
|
|
||
|
10-K
|
|
001-36911
|
|
10.15
|
|
2/28/2017
|
|
|
||
|
10-Q
|
|
001-36911
|
|
10.1
|
|
11/7/2018
|
|
|
||
|
10-Q
|
|
001-36911
|
|
10.1
|
|
8/7/2017
|
|
|
||
|
8-K
|
|
001-36911
|
|
10.1
|
|
4/3/2017
|
|
|
||
|
10-Q
|
|
001-36911
|
|
10.2.2
|
|
8/7/2017
|
|
|
||
|
10-K
|
|
001-36911
|
|
10.11
|
|
3/1/2018
|
|
|
||
|
10-K
|
|
001-36911
|
|
10.12
|
|
3/1/2018
|
|
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
S-1
|
|
333-202497
|
|
10.14
|
|
3/4/2015
|
|
|
||
|
10-Q
|
|
001-36911
|
|
10.1
|
|
8/4/2016
|
|
|
|
10-K
|
|
001-36911
|
|
10.19.3
|
|
3/1/2018
|
|
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
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
|
*
|
Indicates a management contract or compensatory plan.
|
†
|
These certifications are not deemed to be filed with the SEC and are not to be incorporated by reference into any filing of Etsy, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
|
ETSY, INC.
|
|
Date: February 28, 2019
|
/s/ Rachel Glaser
|
|
Rachel Glaser
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
Signature
|
Title
|
Date
|
/s/ Josh Silverman
Josh Silverman
|
President, Chief Executive Officer, and Director (Principal Executive Officer)
|
February 28, 2019
|
/s/ Rachel Glaser
Rachel Glaser
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
February 28, 2019
|
/s/ Fred Wilson
Fred Wilson
|
Chair
|
February 28, 2019
|
/s/ Gary Briggs
Gary Briggs
|
Director
|
February 28, 2019
|
/s/ M. Michele Burns
M. Michele Burns
|
Director
|
February 28, 2019
|
/s/ Edith Cooper
Edith Cooper
|
Director
|
February 28, 2019
|
/s/ Jonathan D. Klein
Jonathan D. Klein
|
Director
|
February 28, 2019
|
/s/ Melissa Reiff
Melissa Reiff
|
Director
|
February 28, 2019
|
/s/ Margaret M. Smyth
Margaret M. Smyth
|
Director
|
February 28, 2019
|
IV.
|
CLAIMS AND APPEALS
|
V.
|
MISCELLANEOUS
|
•
|
Entity
- All references in the Plan to Etsy, Inc. shall also refer to Etsy UK Limited.
|
•
|
Coordination with Substantive Entitlements
– Your rights under the Plan do not vary your substantive entitlements; provided, however, that any payment that you receive under your employment agreement (or otherwise) in lieu of notice (
i.e.
, pay for any period after your separation from service) shall count toward your benefit under the Plan such that the payment you received under the calculations set out in the Plan will be reduced by any amounts you receive by way of payment in lieu of notice. If you are entitled to payment in lieu of notice, such payment(s) shall be made first, followed by payments under the Plan for the remainder (if any) of your Severance Period.
|
•
|
Conditions to Receive Benefits
– The Release (as defined within the Plan) that you will be required to enter into as a condition of you receiving benefits under the Plan will be an English law governed binding settlement agreement. The Release will be intended to satisfy all statutory requirements for validly waiving claims under English law (such as, but not limited to, the requirement that you obtain advice from a legal representative).
|
•
|
Health Benefits
– You are not eligible for the health benefits described in Section II of the Plan. You will not be eligible for company-provided health benefits after your employment with Etsy UK Limited ends.
|
•
|
Tax
– As noted in Section V.7 of the Plan, all sums paid to you under the Plan will be subject to applicable deductions and withholdings. Such withholdings include legally required withholdings in respect of income tax and national insurance contributions at the applicable rates.
|
Name of Recipient:
|
Name
|
Total Number of Stock Units Granted:
|
TotalUnits
|
Date of Grant:
|
DateGrant
|
Vesting Commencement Date:
|
VestDay
|
Vesting Schedule:
|
TBD
|
Grant of Units
|
Subject to all of the terms and conditions set forth in the Notice of Stock Unit Award, this Stock Unit Agreement (the "Agreement") and the Plan, the Company has granted to you the number of stock units set forth in the Notice of Stock Unit Award.
All capitalized terms used in this Agreement shall have the meanings assigned to them in this Agreement, the Notice of Stock Unit Award or the Plan.
|
|
|
Payment for Units
|
No payment is required for the stock units that you are receiving.
|
|
|
Vesting
|
The stock units vest in accordance with the vesting schedule set forth in the Notice of Stock Unit Award. No additional stock units will vest after your Service has terminated for any reason.
|
|
|
Forfeiture
|
If your Service terminates for any reason, then your stock units will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination of your Service. This means that any stock units that have not vested under this Agreement will be cancelled immediately. You receive no payment for stock units that are forfeited. The Company determines when your Service terminates for all purposes of your stock units.
|
|
|
Leaves of Absence and Part-Time Work
|
For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another
bona fide
leave of absence, if the leave was approved by the Company in writing and if continued crediting of Service is required by applicable law, the Company’s leave of absence policy, or the terms of your leave. However, your Service terminates when the approved leave ends, unless you immediately return to active work.
|
|
|
|
If you go on a leave of absence, then the vesting schedule specified in the Notice of Stock Unit Award may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, the Company may adjust the vesting schedule so that the rate of vesting is commensurate with your reduced work schedule.
|
Settlement of Units
|
Each stock unit will be settled when it vests; provided, that in the event of a Change in Control in which Administrator determines to accelerate the vesting of the stock units upon the occurrence of such Change in Control in accordance with Section 9.3 of the Plan, then notwithstanding anything in Section 9.3 of the Plan to the contrary, your stock units will vest upon the occurrence of such Change in Control; provided, however, that if it is determined that the settlement of these stock units is not exempt from Code Section 409A, then these stock units will not be settled until the earliest of (i) the Change in Control, if such Change in Control constitutes a "change in control event" as defined in Treasury Regulation Section 1.409A-3(i)(5); (ii) the date these stock units would otherwise be settled pursuant to the terms of this Agreement, and (iii) your "separation of service" within the meaning of Section 409A of the Code.
At the time of settlement, you will receive one share of the Company’s common stock for each vested stock unit. The Company, in its sole discretion, may substitute an equivalent amount of cash. The amount of cash will be determined on the basis of the market value of the Company’s common stock at the time of settlement. No fractional shares will be issued upon settlement. |
|
|
Section 409A
|
This paragraph applies only if the Company determines that you are a "specified employee," as defined in the regulations under Code Section 409A at the time of your "separation from service," as defined in Treasury Regulation Section 1.409A-1(h) and it is determined that settlement of these stock units is not exempt from Code Section 409A. If this paragraph applies, and the event triggering settlement is your "separation from service," then any stock units that otherwise would have been settled during the first six months following your "separation from service" will instead be settled on the first business day following the earlier of (i) the six-month anniversary of your separation from service or (ii) your death.
Each installment of stock units that vests is hereby designated as a separate payment for purposes of Code Section 409A. |
|
|
Nature of Units
|
Your stock units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issue shares of common stock (or distribute cash) on a future date. As a holder of stock units, you have no rights other than the rights of a general creditor of the Company.
|
|
|
No Voting Rights or Dividends
|
Your stock units carry neither voting rights nor rights to cash dividends. You have no rights as a stockholder of the Company unless and until your stock units are settled by issuing shares of the Company’s common stock.
|
|
|
Units Nontransferable
|
You may not sell, transfer, assign, pledge or otherwise dispose of any stock units. For instance, you may not use your stock units as security for a loan.
|
|
|
Beneficiary Designation
|
You may dispose of your stock units in a written beneficiary designation. A beneficiary designation must be filed with the Company on the proper form and must have been received before your death. If you file no beneficiary designation or if none of your designated beneficiaries survives you, then your estate will receive any vested stock units that you hold at the time of your death.
|
|
|
Withholding Taxes
|
No stock certificates (or their electronic equivalent) or cash will be distributed to you unless you have paid any withholding taxes that are due as a result of the vesting or settlement of stock units. Withholding taxes will be paid (a) by the Company withholding shares of Company stock from those that otherwise would be issued to you when the stock units are settled, (b) if permitted by the Company, by the Company withholding cash from cash compensation otherwise payable to you or (c) if required at the Company’s discretion (or with the Company’s permission, at your election), by paying cash to the Company or by payment from the proceeds of the sale of shares through a Company-approved broker.
|
|
|
Restrictions on Resale
|
You agree not to sell any shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
|
|
|
Retention Rights
|
Your award or this Agreement does not give you the right to be retained by the Company, a Parent, Subsidiary, or an Affiliate in any capacity. The Company and its Parents, Subsidiaries, and Affiliates reserve the right to terminate your Service at any time, with or without cause.
|
|
|
Adjustments
|
In the event of a stock split, a stock dividend or a similar change in Company stock, the number of your stock units will be adjusted accordingly, as the Company may determine pursuant to the Plan.
|
|
|
Effect of Significant Corporate Transactions
|
If the Company is a party to a merger, consolidation, or certain change in control transactions, then your stock units will be subject to the applicable provisions of Article 9 of the Plan, provided that any action taken must either (a) preserve the exemption of your stock units from Code Section 409A or (b) comply with Code Section 409A.
|
|
|
Recoupment Policy
|
This award, and the shares acquired upon settlement of this award, shall be subject to any Company recoupment or clawback policy in effect from time to time.
|
|
|
Applicable Law
|
This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to its choice-of-law provisions).
|
|
|
The Plan and Other Agreements
|
The text of the Plan is incorporated in this Agreement by reference.
The Plan, this Agreement and the Notice of Stock Unit Award constitute the entire understanding between you and the Company regarding this award. Any prior agreements, commitments or negotiations concerning this award are superseded. This Agreement may be amended only by another written agreement between the parties.
|
Name of Optionee:
|
Name
|
Total Number of Shares:
|
TotalShares
|
Type of Option:
|
ISO Incentive Stock Option
NSO Nonstatutory Stock Option
|
Exercise Price per Share:
|
$PricePerShare
|
Date of Grant:
|
DateGrant
|
Vesting Commencement Date:
|
VestDay
|
Vesting Schedule:
|
[TBD]
|
Expiration Date:
|
ExpDate This option expires earlier if your Service terminates earlier, as described in the Stock Option Agreement, and may terminate earlier in connection with certain corporate transactions as described in Article 9 of the Plan.
|
Grant of Option
|
Subject to all of the terms and conditions set forth in the Notice of Stock Option Grant, this Stock Option Agreement (the "Agreement") and the Plan, the Company has granted you an option to purchase up to the total number of shares specified in the Notice of Stock Option Grant at the exercise price indicated in the Notice of Stock Option Grant.
All capitalized terms used in this Agreement shall have the meanings assigned to them in this Agreement, the Notice of Stock Option Grant or the Plan. For all purposes applicable to this option, "Service" means your continuous service as an Employee. |
|
|
Tax Treatment
|
This option is intended to be an incentive stock option under Section 422 of the Code or a nonstatutory stock option, as provided in the Notice of Stock Option Grant. However, even if this option is designated as an incentive stock option in the Notice of Stock Option Grant, it shall be deemed to be a nonstatutory stock option to the extent it does not qualify as an incentive stock option under federal tax law, including under the $100,000 annual limitation under Section 422(d) of the Code.
|
|
|
Vesting
|
This option vests and becomes exercisable in accordance with the vesting schedule set forth in the Notice of Stock Option Grant.
In no event will this option vest or become exercisable for additional shares after your Service has terminated for any reason.
|
|
|
Term
|
This option expires in any event at the close of business at Company headquarters on the day before the 10
th
anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant. (This option will expire earlier if your Service terminates, as described below, and this option may be terminated earlier as provided in Article 9 of the Plan.)
|
|
|
Termination of Service
|
If your Service terminates for any reason, this option will expire immediately to the extent the option is unvested as of your termination date and does not vest as a result of your termination of Service. The Company determines when your Service terminates for all purposes of this option.
|
|
|
Regular Termination
|
If your Service terminates for any reason except death or total and permanent disability, then this option, to the extent vested as of your termination date, will expire at the close of business at Company headquarters on the date three months after your termination date.
|
|
|
Death
|
If you die before your Service terminates, then this option will expire at the close of business at Company headquarters on the date 12 months after the date of death.
|
|
|
Name of Subsidiary
|
|
Jurisdiction of Incorporation or Organization
|
Etsy Ireland UC
|
|
Ireland
|
Etsy France SAS
|
|
France
|
Etsy Ireland Holding Unlimited Company
|
|
Ireland
|
1.
|
I have reviewed this Annual Report on Form 10-K 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 Annual Report on Form 10-K 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:
|