☒
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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|
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For the quarterly period ended
|
September 30, 2019
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OR
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☐
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
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Delaware
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|
20-4898921
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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117 Adams Street
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Brooklyn
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NY
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11201
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(Address of principal executive offices)
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(Zip code)
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Title of each class
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Trading Symbol(s)
|
Name of each exchange on which registered
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Common Stock
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$0.001 par value per share
|
ETSY
|
The Nasdaq Global Select Market
|
Large Accelerated Filer
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☒
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Accelerated Filer
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☐
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Non-accelerated Filer
|
☐
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Smaller Reporting Company
|
☐
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Emerging Growth Company
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☐
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Page
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Note Regarding Forward-Looking Statements
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Part I - Financial Information
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|
Item 1.
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Consolidated Financial Statements (Unaudited)
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|
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Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018
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Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018
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Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018
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Consolidated Statement of Changes in Stockholders' Equity for the three and nine months ended September 30, 2019 and 2018
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Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018
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Notes to Consolidated Financial Statements
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Part II - Other Information
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Item 1.
|
Legal Proceedings
|
|
Item 1A.
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Risk Factors
|
|
Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Item 3.
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Defaults Upon Senior Securities
|
|
Item 4.
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Mine Safety Disclosures
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Item 5.
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Other Information
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|
Item 6.
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Exhibits
|
|
|
Signatures
|
|
As of
September 30, 2019 |
|
As of
December 31, 2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
671,769
|
|
|
$
|
366,985
|
|
Short-term investments
|
180,170
|
|
|
257,302
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $5,291 and $4,720 as of September 30, 2019 and December 31, 2018, respectively
|
12,494
|
|
|
12,244
|
|
||
Prepaid and other current assets
|
43,934
|
|
|
22,686
|
|
||
Funds receivable and seller accounts
|
37,473
|
|
|
21,072
|
|
||
Total current assets
|
945,840
|
|
|
680,289
|
|
||
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Property and equipment, net of accumulated depreciation and amortization of $108,972 and $85,440 as of September 30, 2019 and December 31, 2018, respectively
|
153,262
|
|
|
120,179
|
|
||
Goodwill
|
138,474
|
|
|
37,482
|
|
||
Intangible assets, net of accumulated amortization of $13,005 and $7,378 as of September 30, 2019 and December 31, 2018, respectively
|
202,102
|
|
|
34,589
|
|
||
Deferred tax assets
|
22,380
|
|
|
23,464
|
|
||
Long-term investments
|
4,765
|
|
|
—
|
|
||
Other assets
|
27,034
|
|
|
507
|
|
||
Total assets
|
$
|
1,499,198
|
|
|
$
|
901,851
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
23,416
|
|
|
$
|
26,545
|
|
Accrued expenses
|
70,325
|
|
|
49,158
|
|
||
Finance lease obligations—current
|
8,770
|
|
|
3,884
|
|
||
Funds payable and amounts due to sellers
|
37,473
|
|
|
21,072
|
|
||
Deferred revenue
|
7,434
|
|
|
7,478
|
|
||
Other current liabilities
|
7,289
|
|
|
3,925
|
|
||
Total current liabilities
|
154,707
|
|
|
112,062
|
|
||
Finance lease obligations—net of current portion
|
55,576
|
|
|
2,095
|
|
||
Deferred tax liabilities
|
83,130
|
|
|
30,455
|
|
||
Facility financing obligation
|
—
|
|
|
59,991
|
|
||
Long-term debt, net
|
776,127
|
|
|
276,486
|
|
||
Other liabilities
|
40,396
|
|
|
19,864
|
|
||
Total liabilities
|
1,109,936
|
|
|
500,953
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 118,449,657 and 119,771,702 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively)
|
119
|
|
|
120
|
|
||
Preferred stock ($0.001 par value, 25,000,000 shares authorized as of September 30, 2019 and December 31, 2018)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
637,176
|
|
|
562,033
|
|
||
Accumulated deficit
|
(236,510
|
)
|
|
(153,442
|
)
|
||
Accumulated other comprehensive loss
|
(11,523
|
)
|
|
(7,813
|
)
|
||
Total stockholders’ equity
|
389,262
|
|
|
400,898
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,499,198
|
|
|
$
|
901,851
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenue
|
$
|
197,947
|
|
|
$
|
150,366
|
|
|
$
|
548,381
|
|
|
$
|
403,665
|
|
Cost of revenue
|
68,949
|
|
|
46,947
|
|
|
180,212
|
|
|
133,651
|
|
||||
Gross profit
|
128,998
|
|
|
103,419
|
|
|
368,169
|
|
|
270,014
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Marketing
|
50,098
|
|
|
39,516
|
|
|
131,536
|
|
|
94,651
|
|
||||
Product development
|
32,465
|
|
|
24,418
|
|
|
86,177
|
|
|
68,707
|
|
||||
General and administrative
|
32,203
|
|
|
20,748
|
|
|
86,733
|
|
|
61,359
|
|
||||
Total operating expenses
|
114,766
|
|
|
84,682
|
|
|
304,446
|
|
|
224,717
|
|
||||
Income from operations
|
14,232
|
|
|
18,737
|
|
|
63,723
|
|
|
45,297
|
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(5,077
|
)
|
|
(6,135
|
)
|
|
(14,408
|
)
|
|
(16,024
|
)
|
||||
Interest and other income
|
2,883
|
|
|
2,367
|
|
|
9,659
|
|
|
5,902
|
|
||||
Foreign exchange loss
|
(1,949
|
)
|
|
(373
|
)
|
|
(1,079
|
)
|
|
(2,973
|
)
|
||||
Total other expense
|
(4,143
|
)
|
|
(4,141
|
)
|
|
(5,828
|
)
|
|
(13,095
|
)
|
||||
Income before income taxes
|
10,089
|
|
|
14,596
|
|
|
57,895
|
|
|
32,202
|
|
||||
Benefit for income taxes
|
4,712
|
|
|
5,298
|
|
|
6,708
|
|
|
4,038
|
|
||||
Net income
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
Net income per share attributable to common stockholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.12
|
|
|
$
|
0.17
|
|
|
$
|
0.54
|
|
|
$
|
0.30
|
|
Diluted
|
$
|
0.12
|
|
|
$
|
0.15
|
|
|
$
|
0.51
|
|
|
$
|
0.29
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
120,351,095
|
|
|
119,870,711
|
|
|
120,090,291
|
|
|
120,469,066
|
|
||||
Diluted
|
126,243,168
|
|
|
129,086,137
|
|
|
126,471,364
|
|
|
126,497,281
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net income
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Cumulative translation adjustment
|
(3,948
|
)
|
|
(544
|
)
|
|
(4,027
|
)
|
|
(696
|
)
|
||||
Unrealized (losses) gains on marketable securities, net of tax of $97, $0, $97, and $0, respectively
|
(160
|
)
|
|
5
|
|
|
317
|
|
|
(12
|
)
|
||||
Total other comprehensive loss
|
(4,108
|
)
|
|
(539
|
)
|
|
(3,710
|
)
|
|
(708
|
)
|
||||
Comprehensive income
|
$
|
10,693
|
|
|
$
|
19,355
|
|
|
$
|
60,893
|
|
|
$
|
35,532
|
|
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Total
|
|||||||||||||
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|||||||||||||||||||
Balance as of December 31, 2018
|
119,771,702
|
|
|
$
|
120
|
|
|
$
|
562,033
|
|
|
$
|
(153,442
|
)
|
|
$
|
(7,813
|
)
|
|
$
|
400,898
|
|
Cumulative effect adjustment related to the adoption of the leasing standard
|
—
|
|
|
—
|
|
|
—
|
|
|
7,116
|
|
|
—
|
|
|
7,116
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
8,616
|
|
|
—
|
|
|
—
|
|
|
8,616
|
|
|||||
Exercise of vested options
|
534,693
|
|
|
1
|
|
|
5,929
|
|
|
—
|
|
|
—
|
|
|
5,930
|
|
|||||
Vesting of restricted stock units, net of shares withheld
|
159,403
|
|
|
—
|
|
|
(5,672
|
)
|
|
—
|
|
|
—
|
|
|
(5,672
|
)
|
|||||
Stock repurchase
|
(532,412
|
)
|
|
(1
|
)
|
|
—
|
|
|
(27,491
|
)
|
|
—
|
|
|
(27,492
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(962
|
)
|
|
(962
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
31,579
|
|
|
—
|
|
|
31,579
|
|
|||||
Balance as of March 31, 2019
|
119,933,386
|
|
|
$
|
120
|
|
|
$
|
570,906
|
|
|
$
|
(142,238
|
)
|
|
$
|
(8,775
|
)
|
|
$
|
420,013
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
11,280
|
|
|
—
|
|
|
—
|
|
|
11,280
|
|
|||||
Exercise of vested options
|
154,197
|
|
|
—
|
|
|
1,910
|
|
|
—
|
|
|
—
|
|
|
1,910
|
|
|||||
Vesting of restricted stock units, net of shares withheld
|
247,941
|
|
|
—
|
|
|
(10,485
|
)
|
|
—
|
|
|
—
|
|
|
(10,485
|
)
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,360
|
|
|
1,360
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
18,223
|
|
|
—
|
|
|
18,223
|
|
|||||
Balance as of June 30, 2019
|
120,335,524
|
|
|
$
|
120
|
|
|
$
|
573,611
|
|
|
$
|
(124,015
|
)
|
|
$
|
(7,415
|
)
|
|
$
|
442,301
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
12,323
|
|
|
—
|
|
|
—
|
|
|
12,323
|
|
|||||
Exercise of vested options
|
85,390
|
|
|
—
|
|
|
1,094
|
|
|
—
|
|
|
—
|
|
|
1,094
|
|
|||||
Issuance of convertible senior notes, net of issuance costs and taxes
|
—
|
|
|
—
|
|
|
115,891
|
|
|
—
|
|
|
—
|
|
|
115,891
|
|
|||||
Purchase of capped call, net of taxes
|
—
|
|
|
—
|
|
|
(58,294
|
)
|
|
—
|
|
|
—
|
|
|
(58,294
|
)
|
|||||
Vesting of restricted stock units, net of shares withheld
|
173,660
|
|
|
1
|
|
|
(7,449
|
)
|
|
—
|
|
|
—
|
|
|
(7,448
|
)
|
|||||
Stock repurchase
|
(2,144,917
|
)
|
|
(2
|
)
|
|
—
|
|
|
(127,296
|
)
|
|
—
|
|
|
(127,298
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,108
|
)
|
|
(4,108
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
14,801
|
|
|
—
|
|
|
14,801
|
|
|||||
Balance as of September 30, 2019
|
118,449,657
|
|
|
$
|
119
|
|
|
$
|
637,176
|
|
|
$
|
(236,510
|
)
|
|
$
|
(11,523
|
)
|
|
$
|
389,262
|
|
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Total
|
|||||||||||||
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|||||||||||||||||||
Balance as of December 31, 2017
|
121,769,238
|
|
|
$
|
122
|
|
|
$
|
499,441
|
|
|
$
|
(96,290
|
)
|
|
$
|
(6,379
|
)
|
|
$
|
396,894
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
6,704
|
|
|
—
|
|
|
—
|
|
|
6,704
|
|
|||||
Exercise of vested options
|
887,906
|
|
|
1
|
|
|
10,248
|
|
|
—
|
|
|
—
|
|
|
10,249
|
|
|||||
Issuance of convertible senior notes, net of issuance costs and taxes
|
—
|
|
|
—
|
|
|
54,184
|
|
|
—
|
|
|
—
|
|
|
54,184
|
|
|||||
Purchase of capped call, net of taxes
|
—
|
|
|
—
|
|
|
(26,243
|
)
|
|
—
|
|
|
—
|
|
|
(26,243
|
)
|
|||||
Vesting of restricted stock units, net of shares withheld
|
104,849
|
|
|
—
|
|
|
(1,780
|
)
|
|
—
|
|
|
—
|
|
|
(1,780
|
)
|
|||||
Stock repurchase
|
(2,807,393
|
)
|
|
(3
|
)
|
|
—
|
|
|
(68,583
|
)
|
|
—
|
|
|
(68,586
|
)
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
98
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
12,967
|
|
|
—
|
|
|
12,967
|
|
|||||
Balance as of March 31, 2018
|
119,954,600
|
|
|
$
|
120
|
|
|
$
|
542,554
|
|
|
$
|
(151,906
|
)
|
|
$
|
(6,281
|
)
|
|
$
|
384,487
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
9,179
|
|
|
—
|
|
|
—
|
|
|
9,179
|
|
|||||
Exercise of vested options
|
59,736
|
|
|
—
|
|
|
476
|
|
|
—
|
|
|
—
|
|
|
476
|
|
|||||
Issuance of convertible senior notes, net of issuance costs and taxes
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|||||
Vesting of restricted stock units, net of shares withheld
|
253,989
|
|
|
—
|
|
|
(6,118
|
)
|
|
—
|
|
|
—
|
|
|
(6,118
|
)
|
|||||
Stock repurchase
|
(722,941
|
)
|
|
—
|
|
|
—
|
|
|
(21,075
|
)
|
|
—
|
|
|
(21,075
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(267
|
)
|
|
(267
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
3,379
|
|
|
—
|
|
|
3,379
|
|
|||||
Balance as of June 30, 2018
|
119,545,384
|
|
|
$
|
120
|
|
|
$
|
546,121
|
|
|
$
|
(169,602
|
)
|
|
$
|
(6,548
|
)
|
|
$
|
370,091
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
9,563
|
|
|
—
|
|
|
—
|
|
|
9,563
|
|
|||||
Exercise of vested options
|
407,244
|
|
|
—
|
|
|
4,848
|
|
|
—
|
|
|
—
|
|
|
4,848
|
|
|||||
Vesting of restricted stock units, net of shares withheld
|
292,046
|
|
|
1
|
|
|
(9,239
|
)
|
|
—
|
|
|
—
|
|
|
(9,238
|
)
|
|||||
Stock repurchase
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(539
|
)
|
|
$
|
(539
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
19,894
|
|
|
—
|
|
|
19,894
|
|
|||||
Balance as of September 30, 2018
|
120,244,674
|
|
|
$
|
120
|
|
|
$
|
551,293
|
|
|
$
|
(149,707
|
)
|
|
$
|
(7,087
|
)
|
|
$
|
394,619
|
|
|
Nine Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
64,603
|
|
|
$
|
36,240
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Stock-based compensation expense
|
31,056
|
|
|
23,987
|
|
||
Depreciation and amortization expense
|
32,760
|
|
|
19,116
|
|
||
Bad debt expense
|
7,464
|
|
|
3,617
|
|
||
Foreign exchange loss
|
25
|
|
|
2,717
|
|
||
Other non-cash losses, net
|
9,836
|
|
|
6,914
|
|
||
Deferred income taxes
|
(6,708
|
)
|
|
(4,038
|
)
|
||
Changes in operating assets and liabilities, net of effects from purchase of acquired company:
|
|
|
|
||||
Current assets
|
(23,131
|
)
|
|
(24,874
|
)
|
||
Non-current assets
|
2,839
|
|
|
32
|
|
||
Current liabilities
|
13,748
|
|
|
28,487
|
|
||
Non-current liabilities
|
(4,153
|
)
|
|
4,678
|
|
||
Net cash provided by operating activities
|
128,339
|
|
|
96,876
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Acquisition of businesses, net of cash acquired
|
(271,353
|
)
|
|
—
|
|
||
Cash paid for asset acquisition and intangible assets
|
(1,898
|
)
|
|
(35,323
|
)
|
||
Purchases of property and equipment
|
(5,889
|
)
|
|
(442
|
)
|
||
Development of internal-use software
|
(6,242
|
)
|
|
(13,674
|
)
|
||
Purchases of marketable securities
|
(318,221
|
)
|
|
(359,182
|
)
|
||
Sales of marketable securities
|
395,348
|
|
|
164,443
|
|
||
Net cash used in investing activities
|
(208,255
|
)
|
|
(244,178
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Payment of tax obligations on vested equity awards
|
(23,605
|
)
|
|
(17,136
|
)
|
||
Repurchase of stock
|
(154,790
|
)
|
|
(89,661
|
)
|
||
Proceeds from exercise of stock options
|
8,934
|
|
|
15,573
|
|
||
Proceeds from issuance of convertible senior notes
|
650,000
|
|
|
345,000
|
|
||
Payment of debt issuance costs
|
(11,142
|
)
|
|
(9,962
|
)
|
||
Purchase of capped call
|
(76,180
|
)
|
|
(34,224
|
)
|
||
Payments on finance lease obligations
|
(8,177
|
)
|
|
(4,748
|
)
|
||
Payments on facility financing obligation
|
—
|
|
|
(7,817
|
)
|
||
Other financing, net
|
3,148
|
|
|
3,977
|
|
||
Net cash provided by financing activities
|
388,188
|
|
|
201,002
|
|
||
Effect of exchange rate changes on cash
|
(3,488
|
)
|
|
(6,415
|
)
|
||
Net increase in cash, cash equivalents, and restricted cash
|
304,784
|
|
|
47,285
|
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
372,326
|
|
|
320,783
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
677,110
|
|
|
$
|
368,068
|
|
|
Nine Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
Supplemental non-cash disclosures:
|
|
|
|
||||
Stock-based compensation capitalized in development of capitalized software
|
$
|
1,163
|
|
|
$
|
1,459
|
|
Additions to development of internal-use software and property and equipment included in accounts payable and accrued expenses
|
$
|
1,444
|
|
|
$
|
1,354
|
|
Debt issuance costs included in accounts payable and accrued expenses
|
$
|
900
|
|
|
$
|
—
|
|
Right-of-use assets obtained in exchange for new lease liabilities:
|
|
|
|
||||
Finance leases
|
$
|
657
|
|
|
$
|
1,909
|
|
|
Nine Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
Beginning balance:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
366,985
|
|
|
$
|
315,442
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
372,326
|
|
|
$
|
320,783
|
|
|
|
|
|
||||
Ending balance:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
671,769
|
|
|
$
|
362,727
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
677,110
|
|
|
$
|
368,068
|
|
|
As of
September 30, 2019 |
|
As of
December 31, 2018 |
||||
Cash and cash equivalents
|
$
|
671,769
|
|
|
$
|
366,985
|
|
Short-term investments
|
180,170
|
|
|
257,302
|
|
||
Long-term investments
|
4,765
|
|
|
—
|
|
||
Total cash and cash equivalents, and short- and long-term investments
|
$
|
856,704
|
|
|
$
|
624,287
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Marketplace revenue
|
$
|
140,966
|
|
|
$
|
110,927
|
|
|
$
|
401,499
|
|
|
$
|
290,200
|
|
Services revenue
|
56,319
|
|
|
38,194
|
|
|
144,386
|
|
|
110,306
|
|
||||
Other revenue
|
662
|
|
|
1,245
|
|
|
2,496
|
|
|
3,159
|
|
||||
Revenue
|
$
|
197,947
|
|
|
$
|
150,366
|
|
|
$
|
548,381
|
|
|
$
|
403,665
|
|
•
|
Revenue from Promoted Listings, Etsy.com’s on-site advertising service, consists of cost-per-click fees an Etsy seller pays for prominent placement of her listings in search results in the Esty.com 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. In the third quarter of 2019, Etsy streamlined Promoted Listings and Google Shopping, an off-site marketing tool for Etsy sellers, into one unified ad platform called Etsy Ads, where Etsy sellers can set a budget, which allows Etsy to allocate that budget between channels, targeting optimal return on seller spend. Due to this new offering, Etsy no longer offers its Promoted Listings service as a standalone advertising service after September 30, 2019. Revenue from Etsy Ads consists of cost-per-click fees, which are nonrefundable and are charged to a seller’s Etsy bill when the ad is clicked, at which time revenue is recognized. The revenue the Company recognizes related to Etsy Ads is recorded on a gross basis in Services revenue with an offsetting expense recorded in cost of revenue.
|
•
|
Revenue from 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 at discounted pricing due to the volume of purchases through its platform. The Company recognizes shipping label revenue when an Etsy seller purchases a shipping label. The Company recognizes 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. 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. Each performance obligation is recognized in accordance with how the benefit is transferred to the customer.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
Net income allocated to participating securities under the two-class method
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(17
|
)
|
||||
Net income applicable to common stockholders—basic
|
14,801
|
|
|
19,884
|
|
|
64,603
|
|
|
36,223
|
|
||||
Dilutive effect of net income allocated to participating securities under the two-class method
|
—
|
|
|
10
|
|
|
—
|
|
|
17
|
|
||||
Net income attributable to common stockholders—diluted
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding—basic (1)
|
120,351,095
|
|
|
119,870,711
|
|
|
120,090,291
|
|
|
120,469,066
|
|
||||
Dilutive effect of assumed conversion of options to purchase common stock
|
4,443,408
|
|
|
4,752,871
|
|
|
4,652,088
|
|
|
4,134,016
|
|
||||
Dilutive effect of assumed conversion of restricted stock units
|
1,429,305
|
|
|
2,368,406
|
|
|
1,711,362
|
|
|
1,812,373
|
|
||||
Dilutive effect of assumed conversion of convertible debt (2)
|
—
|
|
|
2,004,447
|
|
|
—
|
|
|
—
|
|
||||
Dilutive effect of assumed conversion of restricted stock from acquisition
|
19,360
|
|
|
89,702
|
|
|
17,623
|
|
|
81,826
|
|
||||
Weighted-average common shares outstanding—diluted
|
126,243,168
|
|
|
129,086,137
|
|
|
126,471,364
|
|
|
126,497,281
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income per share attributable to common stockholders—basic
|
$
|
0.12
|
|
|
$
|
0.17
|
|
|
$
|
0.54
|
|
|
$
|
0.30
|
|
Net income per share attributable to common stockholders—diluted
|
$
|
0.12
|
|
|
$
|
0.15
|
|
|
$
|
0.51
|
|
|
$
|
0.29
|
|
(1)
|
57,482 shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for each of the three and nine months ended September 30, 2018.
|
(2)
|
Since the Company expects to settle in cash the principal outstanding under the 2019 Notes (see “Note 11—Debt”), it uses the treasury stock method when calculating the potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The Company uses the if-converted method when calculating the dilutive effect of the 2018 Notes for the three and nine months ended September 30, 2019 and used the treasury stock method for the three and nine months ended September 30, 2018.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Stock options
|
392,435
|
|
|
8,166
|
|
|
276,803
|
|
|
467,072
|
|
Restricted stock units
|
836,684
|
|
|
52,197
|
|
|
581,439
|
|
|
1,174,618
|
|
Convertible senior notes
|
3,647,693
|
|
|
—
|
|
|
3,877,636
|
|
|
—
|
|
Total anti-dilutive securities
|
4,876,812
|
|
|
60,363
|
|
|
4,735,878
|
|
|
1,641,690
|
|
|
Initial Fair Value Estimate
|
|||
Other current assets
|
$
|
6,442
|
|
|
Funds receivable and seller accounts
|
5,578
|
|
||
Property and equipment other
|
1,543
|
|
||
Developed technology
|
30,300
|
|
||
Trademark
|
79,400
|
|
||
Customer relationships
|
93,500
|
|
||
Goodwill
|
102,039
|
|
||
Long-term investments
|
1,028
|
|
||
Other assets
|
3,225
|
|
||
Other net working capital
|
(208
|
)
|
||
Funds payable and amounts due to sellers
|
(5,578
|
)
|
||
Other current liabilities
|
(8,520
|
)
|
||
Other liabilities
|
(2,497
|
)
|
||
Deferred tax liability, net
|
(34,898
|
)
|
||
Total purchase price
|
$
|
271,354
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenue
|
$
|
203,632
|
|
|
$
|
159,127
|
|
|
$
|
577,156
|
|
|
$
|
429,261
|
|
Net income
|
14,341
|
|
|
14,263
|
|
|
57,306
|
|
|
18,275
|
|
|
Net Book Value
|
|||
December 31, 2018
|
$
|
37,482
|
|
|
Foreign currency translation adjustments
|
(1,047
|
)
|
||
Business combination
|
102,039
|
|
||
September 30, 2019
|
$
|
138,474
|
|
|
As of September 30, 2019
|
||||||||||||
|
Gross book
value |
|
Accumulated
amortization |
|
Net book
value |
|
Estimated Useful Life
|
||||||
Trademark
|
$
|
79,400
|
|
|
$
|
662
|
|
|
$
|
78,738
|
|
|
15 years
|
Customer relationships
|
93,500
|
|
|
779
|
|
|
92,721
|
|
|
15 years
|
|||
Total acquired intangible assets
|
$
|
172,900
|
|
|
$
|
1,441
|
|
|
$
|
171,459
|
|
|
|
Remainder of 2019
|
$
|
2,882
|
|
2020
|
11,527
|
|
|
2021
|
11,527
|
|
|
2022
|
11,527
|
|
|
2023
|
11,527
|
|
|
Thereafter
|
122,469
|
|
|
Total amortization expense
|
$
|
171,459
|
|
|
As of September 30, 2019
|
||||||||||||
|
Gross book
value |
|
Accumulated
amortization |
|
Net book
value |
|
Estimated Useful Life
|
||||||
Developed technology
|
$
|
30,300
|
|
|
$
|
1,263
|
|
|
$
|
29,037
|
|
|
3 years
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
United States
|
$
|
133,677
|
|
|
$
|
103,514
|
|
|
$
|
366,611
|
|
|
$
|
285,242
|
|
International
|
64,270
|
|
|
46,852
|
|
|
181,770
|
|
|
118,423
|
|
||||
Revenue
|
$
|
197,947
|
|
|
$
|
150,366
|
|
|
$
|
548,381
|
|
|
$
|
403,665
|
|
|
|
|
|
|
|
|
|
||||||||
United States (1) (2)
|
$
|
(1,190
|
)
|
|
$
|
(5,242
|
)
|
|
$
|
(8,092
|
)
|
|
$
|
510
|
|
International
|
11,279
|
|
|
19,838
|
|
|
65,987
|
|
|
31,692
|
|
||||
(Loss) income before income taxes
|
$
|
10,089
|
|
|
$
|
14,596
|
|
|
$
|
57,895
|
|
|
$
|
32,202
|
|
|
|
|
|
|
|
|
|
||||||||
United States (2)
|
$
|
3,024
|
|
|
$
|
(236
|
)
|
|
$
|
5,570
|
|
|
$
|
5,271
|
|
International
|
11,777
|
|
|
20,130
|
|
|
59,033
|
|
|
30,969
|
|
||||
Net income (loss)
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
(1)
|
The United States loss before income taxes in the three and nine months ended September 30, 2019 was primarily driven by a majority of operating expenses being incurred in the United States.
|
(2)
|
The United States loss before income taxes and net loss in the three months ended September 30, 2018 was primarily driven by non-cash interest expense related to the amortization of debt discount and transaction costs in connection with the convertible debt issued in the first quarter of 2018 and interest associated with the build-to-suit lease accounting related to the Company’s corporate headquarters. As part of the adoption of ASU 2016-02—Leases in the first quarter of 2019, the Company now accounts for its headquarters as a financing lease.
|
|
As of September 30, 2019
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
541,608
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
541,608
|
|
|
541,608
|
|
|
—
|
|
|
—
|
|
|
541,608
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
42,001
|
|
|
—
|
|
|
42,001
|
|
||||
Certificate of deposit
|
4,526
|
|
|
—
|
|
|
—
|
|
|
4,526
|
|
||||
Corporate bonds
|
—
|
|
|
77,620
|
|
|
—
|
|
|
77,620
|
|
||||
U.S. Government and agency securities
|
56,023
|
|
|
—
|
|
|
—
|
|
|
56,023
|
|
||||
|
60,549
|
|
|
119,621
|
|
|
—
|
|
|
180,170
|
|
||||
Funds receivable and seller accounts:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
7,906
|
|
|
—
|
|
|
—
|
|
|
7,906
|
|
||||
|
7,906
|
|
|
—
|
|
|
—
|
|
|
7,906
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
1,030
|
|
|
—
|
|
|
—
|
|
|
1,030
|
|
||||
Corporate bonds
|
—
|
|
|
690
|
|
|
—
|
|
|
690
|
|
||||
U.S. Government and agency securities
|
3,045
|
|
|
—
|
|
|
—
|
|
|
3,045
|
|
||||
|
4,075
|
|
|
690
|
|
|
—
|
|
|
4,765
|
|
||||
|
$
|
614,138
|
|
|
$
|
120,311
|
|
|
$
|
—
|
|
|
$
|
734,449
|
|
|
As of December 31, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
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
|
|
|
Cost
|
|
Gross
Unrealized Holding Loss |
|
Gross
Unrealized Holding Gain |
|
Fair Value
|
||||||||
September 30, 2019
|
|
|
|
|
|
|
|
||||||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
41,977
|
|
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
42,002
|
|
Certificate of deposit
|
4,526
|
|
|
—
|
|
|
—
|
|
|
4,526
|
|
||||
Corporate bonds
|
77,378
|
|
|
—
|
|
|
242
|
|
|
77,620
|
|
||||
U.S. Government and agency securities
|
55,927
|
|
|
—
|
|
|
95
|
|
|
56,022
|
|
||||
|
179,808
|
|
|
—
|
|
|
362
|
|
|
180,170
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
1,030
|
|
|
—
|
|
|
—
|
|
|
1,030
|
|
||||
Corporate bonds
|
687
|
|
|
—
|
|
|
3
|
|
|
690
|
|
||||
U.S. Government and agency securities
|
3,039
|
|
|
—
|
|
|
6
|
|
|
3,045
|
|
||||
|
4,756
|
|
|
—
|
|
|
9
|
|
|
4,765
|
|
||||
|
$
|
184,564
|
|
|
$
|
—
|
|
|
$
|
371
|
|
|
$
|
184,935
|
|
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
|
|
|
Three Months Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2019 |
||||
Operating lease cost
|
$
|
1,383
|
|
|
$
|
3,932
|
|
Finance lease cost:
|
|
|
|
||||
Amortization of right-of-use assets
|
3,252
|
|
|
9,942
|
|
||
Interest on lease liabilities
|
778
|
|
|
2,470
|
|
||
Total finance lease cost
|
4,030
|
|
|
12,412
|
|
||
Other lease cost, net (1)
|
126
|
|
|
193
|
|
||
Total lease cost
|
$
|
5,539
|
|
|
$
|
16,537
|
|
(1)
|
Other lease cost, net includes short-term sublease income, short-term lease costs, and variable lease costs, which are immaterial.
|
|
As of September 30, 2019
|
||
Operating leases:
|
|
||
Other assets
|
$
|
25,278
|
|
Other current liabilities
|
$
|
4,491
|
|
Other liabilities
|
22,951
|
|
|
Total operating lease liabilities
|
$
|
27,442
|
|
|
|
||
Finance leases:
|
|
||
Property and equipment, net
|
$
|
62,687
|
|
Finance lease obligations—current
|
$
|
8,770
|
|
Finance lease obligations—net of current portion
|
55,576
|
|
|
Total finance lease liabilities
|
$
|
64,346
|
|
|
As of September 30, 2019
|
|
Weighted average remaining lease term:
|
|
|
Operating leases
|
6.13 years
|
|
Finance leases
|
6.56 years
|
|
Weighted average discount rate:
|
|
|
Operating leases
|
4.26
|
%
|
Finance leases
|
4.35
|
%
|
|
Operating Leases
|
|
Finance Leases
|
||||
2019
|
$
|
1,143
|
|
|
$
|
2,579
|
|
2020
|
5,483
|
|
|
11,521
|
|
||
2021
|
4,884
|
|
|
11,080
|
|
||
2022
|
4,890
|
|
|
10,613
|
|
||
2023
|
4,929
|
|
|
10,599
|
|
||
Thereafter
|
9,913
|
|
|
27,720
|
|
||
Total future minimum lease payments
|
31,242
|
|
|
74,112
|
|
||
Less imputed interest
|
3,800
|
|
|
9,766
|
|
||
Total
|
$
|
27,442
|
|
|
$
|
64,346
|
|
|
Capital Lease
Obligations |
|
Operating
Leases |
|
Build-to-Suit
Lease |
||||||
Periods ending
|
|
|
|
|
|
||||||
2019
|
$
|
4,392
|
|
|
$
|
4,904
|
|
|
$
|
9,451
|
|
2020
|
1,754
|
|
|
4,783
|
|
|
9,522
|
|
|||
2021
|
481
|
|
|
4,185
|
|
|
10,354
|
|
|||
2022
|
—
|
|
|
4,180
|
|
|
10,520
|
|
|||
2023
|
—
|
|
|
4,205
|
|
|
10,599
|
|
|||
Thereafter
|
—
|
|
|
9,760
|
|
|
27,715
|
|
|||
Total minimum payments required
|
$
|
6,627
|
|
|
$
|
32,017
|
|
|
$
|
78,161
|
|
Amounts representing interest
|
648
|
|
|
|
|
|
|||||
Present value of net minimum payments
|
5,979
|
|
|
|
|
|
|||||
Current maturities
|
3,884
|
|
|
|
|
|
|||||
Long-term payment obligations
|
$
|
2,095
|
|
|
|
|
|
|
As of September 30,
2019 |
|
As of December 31,
2018 |
||||
Sales and use tax payable
|
$
|
25,236
|
|
|
$
|
12,232
|
|
Vendor accruals
|
20,575
|
|
|
17,817
|
|
||
Accrued bonus
|
14,469
|
|
|
12,906
|
|
||
Income tax payable
|
6,196
|
|
|
10
|
|
||
Payroll-related liabilities
|
3,058
|
|
|
2,406
|
|
||
Accrued vacation
|
791
|
|
|
3,787
|
|
||
Total accrued expenses
|
$
|
70,325
|
|
|
$
|
49,158
|
|
|
Shares Repurchased
|
|
Average Price Paid per Share (1)
|
|
Value of Shares Repurchased (1)
|
|
Remaining Amount Authorized
|
|||||||
Balance as of December 31, 2018
|
5,032,648
|
|
|
$
|
28.80
|
|
|
$
|
145,000
|
|
|
$
|
155,000
|
|
Repurchases of common stock for the three months ended:
|
|
|
|
|
|
|
|
|||||||
March 31, 2019
|
532,412
|
|
|
51.64
|
|
|
27,500
|
|
|
(27,500
|
)
|
|||
June 30, 2019
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
September 30, 2019
|
50,721
|
|
|
55.16
|
|
|
2,798
|
|
|
(2,798
|
)
|
|||
Balance as of September 30, 2019
|
5,615,781
|
|
|
$
|
31.20
|
|
|
$
|
175,298
|
|
|
$
|
124,702
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Volatility
|
39.2%
|
|
47.8%
|
|
39.2% - 39.5%
|
|
38.6% - 47.8%
|
Risk-free interest rate
|
1.9%
|
|
2.8%
|
|
1.9% - 2.4%
|
|
2.6% - 2.9%
|
Expected term (in years)
|
6.2
|
|
6.1
|
|
5.5 - 6.2
|
|
5.5 - 6.3
|
Dividend rate
|
—%
|
|
—%
|
|
—%
|
|
—%
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Weighted-average grant date fair value of options granted
|
$
|
25.40
|
|
|
$
|
25.00
|
|
|
$
|
28.52
|
|
|
$
|
15.53
|
|
Intrinsic value of options exercised
|
3,787
|
|
|
13,493
|
|
|
40,683
|
|
|
24,690
|
|
||||
Fair value of awards vested
|
7,047
|
|
|
8,783
|
|
|
25,238
|
|
|
23,182
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Cost of revenue
|
$
|
1,574
|
|
|
$
|
894
|
|
|
$
|
4,129
|
|
|
$
|
2,367
|
|
Marketing
|
1,196
|
|
|
642
|
|
|
2,550
|
|
|
1,819
|
|
||||
Product development
|
5,752
|
|
|
4,697
|
|
|
14,566
|
|
|
11,361
|
|
||||
General and administrative
|
3,615
|
|
|
2,683
|
|
|
9,811
|
|
|
8,440
|
|
||||
Total stock-based compensation expense
|
$
|
12,137
|
|
|
$
|
8,916
|
|
|
$
|
31,056
|
|
|
$
|
23,987
|
|
•
|
In July, we began providing Etsy.com sellers with tools and support to make it easy for them to offer free shipping on orders of $35 or more to U.S. buyers. In September, we launched a campaign to notify our buyers of this new program, highlighting shops that are offering free shipping on their orders. As of the end of the third quarter, 62% of items on the Etsy marketplace offered free shipping to U.S. buyers and 74% of U.S. listing views were eligible to ship for free.
|
•
|
We continued to utilize our marketing efforts to drive new and existing buyers to Etsy.com. We launched our 2019 holiday television campaign in September, which highlights that Etsy.com is the destination for all things special, for moments big and small throughout the holiday season, and also highlights that millions of items are available to ship for free. We anticipate that our ongoing marketing investments will continue to help drive GMS in 2019.
|
•
|
We continued to focus on capitalizing on our core competitive advantages, or our “Right to Win.” As a result of migrating our Etsy.com search efforts to Google Cloud, we made a foundational upgrade to our ranking algorithms, which will continue to enable us to provide more relevant search results to buyers on the Etsy.com platform. In addition, we continued to improve our mobile app, highlighting items that are similar to items buyers have made a favorite in the past, launched variation photos, and integrated several shipping solutions, all geared to helping improve their shopping experience. We also launched a regional sales feature, which allows for sellers to set a country-specific sale, with a focus on their domestic listings.
|
•
|
We made progress simplifying our marketing tools for sellers to enable them to more easily invest in their growth. In the third quarter of 2019, we streamlined Promoted Listings, Etsy.com’s on-site ads platform, and Google Shopping, an off-site marketing tool for Etsy.com sellers, into one unified ad platform, called Etsy Ads. Etsy Ads enables Etsy sellers to set a budget and Etsy then allocates that budget between channels, targeting optimal return on seller spend. This is intended to be responsive to seller feedback and enhance the marketing experience on Etsy.com for sellers and help them drive sales more effectively through the new ads platform. With the launch of Etsy Ads, our Promoted Listings service is no longer offered as a standalone advertising option, effective starting the fourth quarter of 2019.
|
•
|
On August 15, 2019 we acquired Reverb, a privately held marketplace for new, used, and vintage music gear. The financial results of Reverb have been included in our consolidated financial statements from the date of acquisition.
|
|
Three Months Ended
September 30, |
|
% Growth
(Decline)
Y/Y
|
|
Nine Months Ended
September 30, |
|
% Growth
Y/Y
|
||||||||||||||
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||||
GMS (1)
|
$
|
1,200,371
|
|
|
$
|
922,513
|
|
|
30.1
|
%
|
|
$
|
3,319,228
|
|
|
$
|
2,685,273
|
|
|
23.6
|
%
|
Revenue (2)
|
$
|
197,947
|
|
|
$
|
150,366
|
|
|
31.6
|
%
|
|
$
|
548,381
|
|
|
$
|
403,665
|
|
|
35.9
|
%
|
Marketplace revenue
|
$
|
140,966
|
|
|
$
|
110,927
|
|
|
27.1
|
%
|
|
$
|
401,499
|
|
|
$
|
290,200
|
|
|
38.4
|
%
|
Services revenue
|
$
|
56,319
|
|
|
$
|
38,194
|
|
|
47.5
|
%
|
|
$
|
144,386
|
|
|
$
|
110,306
|
|
|
30.9
|
%
|
Net income
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
(25.6
|
)%
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
|
78.3
|
%
|
Adjusted EBITDA
|
$
|
42,076
|
|
|
$
|
34,035
|
|
|
23.6
|
%
|
|
$
|
131,644
|
|
|
$
|
88,151
|
|
|
49.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Active sellers (3)
|
2,592
|
|
|
2,043
|
|
|
26.9
|
%
|
|
2,592
|
|
|
2,043
|
|
|
26.9
|
%
|
||||
Active buyers (3)
|
44,807
|
|
|
37,134
|
|
|
20.7
|
%
|
|
44,807
|
|
|
37,134
|
|
|
20.7
|
%
|
||||
Percent mobile GMS
|
59
|
%
|
|
56
|
%
|
|
300
|
bps
|
|
59
|
%
|
|
55
|
%
|
|
400
|
bps
|
||||
Percent international GMS (1)
|
36
|
%
|
|
35
|
%
|
|
100
|
bps
|
|
38
|
%
|
|
35
|
%
|
|
300
|
bps
|
(1)
|
Consolidated GMS for the three and nine months ended September 30, 2019, includes Reverb’s GMS of $76.9 million. Consolidated percent international GMS, includes Reverb’s percent international GMS of 17% for both the three and nine months ended September 30, 2019, and is determined based on the Reverb GMS of $76.9 million. Etsy standalone GMS for the three and nine months ended September 30, 2019 was $1.1 billion and $3.2 billion, respectively.
|
(2)
|
Consolidated Revenue for the three and nine months ended September 30, 2019, includes Reverb’s revenue of $6.0 million. Etsy standalone revenue for the three and nine months ended September 30, 2019 was $191.9 million and $542.4 million, respectively.
|
(3)
|
Consolidated active sellers and active buyers includes Reverb’s active sellers and active buyers of 155 thousand and 594 thousand, respectively, as of September 30, 2019. Reverb active sellers and active buyers are sellers and buyers who have incurred at least one charge or made at least one purchase, respectively, from Reverb in the last 12 months. Etsy standalone active sellers and active buyers were approximately 2.4 million and 44.2 million, respectively.
|
|
Quarter-to-Date Period Ended
|
|
Year-to-Date Period Ended
|
||||||||||||||
|
As Reported
|
|
Currency-Neutral
|
|
FX Impact
|
|
As Reported
|
|
Currency-Neutral
|
|
FX Impact
|
||||||
September 30, 2019
|
30.1
|
%
|
|
31.1
|
%
|
|
(1.0
|
)%
|
|
23.6
|
%
|
|
26.1
|
%
|
|
(2.5
|
)%
|
June 30, 2019
|
21.4
|
%
|
|
22.8
|
%
|
|
(1.4
|
)%
|
|
20.2
|
%
|
|
21.7
|
%
|
|
(1.5
|
)%
|
March 31, 2019
|
18.9
|
%
|
|
20.6
|
%
|
|
(1.7
|
)%
|
|
18.9
|
%
|
|
20.6
|
%
|
|
(1.7
|
)%
|
December 31, 2018
|
22.3
|
%
|
|
23.1
|
%
|
|
(0.8
|
)%
|
|
20.8
|
%
|
|
20.4
|
%
|
|
0.4
|
%
|
September 30, 2018
|
20.4
|
%
|
|
20.8
|
%
|
|
(0.4
|
)%
|
|
20.2
|
%
|
|
19.2
|
%
|
|
1.0
|
%
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Marketplace
|
$
|
140,966
|
|
|
$
|
110,927
|
|
|
$
|
401,499
|
|
|
$
|
290,200
|
|
Services
|
56,319
|
|
|
38,194
|
|
|
144,386
|
|
|
110,306
|
|
||||
Other
|
662
|
|
|
1,245
|
|
|
2,496
|
|
|
3,159
|
|
||||
Total revenue
|
197,947
|
|
|
150,366
|
|
|
548,381
|
|
|
403,665
|
|
||||
Cost of revenue
|
68,949
|
|
|
46,947
|
|
|
180,212
|
|
|
133,651
|
|
||||
Gross profit
|
128,998
|
|
|
103,419
|
|
|
368,169
|
|
|
270,014
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Marketing
|
50,098
|
|
|
39,516
|
|
|
131,536
|
|
|
94,651
|
|
||||
Product development
|
32,465
|
|
|
24,418
|
|
|
86,177
|
|
|
68,707
|
|
||||
General and administrative
|
32,203
|
|
|
20,748
|
|
|
86,733
|
|
|
61,359
|
|
||||
Total operating expenses
|
114,766
|
|
|
84,682
|
|
|
304,446
|
|
|
224,717
|
|
||||
Income from operations
|
14,232
|
|
|
18,737
|
|
|
63,723
|
|
|
45,297
|
|
||||
Other expense, net
|
(4,143
|
)
|
|
(4,141
|
)
|
|
(5,828
|
)
|
|
(13,095
|
)
|
||||
Income before income taxes
|
10,089
|
|
|
14,596
|
|
|
57,895
|
|
|
32,202
|
|
||||
Benefit for income taxes
|
4,712
|
|
|
5,298
|
|
|
6,708
|
|
|
4,038
|
|
||||
Net income
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Marketplace
|
71.2
|
%
|
|
73.8
|
%
|
|
73.2
|
%
|
|
71.9
|
%
|
||||
Services
|
28.5
|
|
|
25.4
|
|
|
26.3
|
|
|
27.3
|
|
||||
Other
|
0.3
|
|
|
0.8
|
|
|
0.5
|
|
|
0.8
|
|
||||
Total revenue
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
||||
Cost of revenue
|
34.8
|
|
|
31.2
|
|
|
32.9
|
|
|
33.1
|
|
||||
Gross profit
|
65.2
|
|
|
68.8
|
|
|
67.1
|
|
|
66.9
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Marketing
|
25.3
|
|
|
26.3
|
|
|
24.0
|
|
|
23.4
|
|
||||
Product development
|
16.4
|
|
|
16.2
|
|
|
15.7
|
|
|
17.0
|
|
||||
General and administrative
|
16.3
|
|
|
13.8
|
|
|
15.8
|
|
|
15.2
|
|
||||
Total operating expenses
|
58.0
|
|
|
56.3
|
|
|
55.5
|
|
|
55.7
|
|
||||
Income from operations
|
7.2
|
|
|
12.5
|
|
|
11.6
|
|
|
11.2
|
|
||||
Other expense, net
|
(2.1
|
)
|
|
(2.8
|
)
|
|
(1.1
|
)
|
|
(3.2
|
)
|
||||
Income before income taxes
|
5.1
|
|
|
9.7
|
|
|
10.6
|
|
|
8.0
|
|
||||
Benefit for income taxes
|
2.4
|
|
|
3.5
|
|
|
1.2
|
|
|
1.0
|
|
||||
Net income
|
7.5
|
%
|
|
13.2
|
%
|
|
11.8
|
%
|
|
9.0
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
$
|
140,966
|
|
|
$
|
110,927
|
|
|
$
|
30,039
|
|
|
27.1
|
%
|
Percentage of total revenue
|
71.2
|
%
|
|
73.8
|
%
|
|
|
|
|
|||||
Services
|
$
|
56,319
|
|
|
$
|
38,194
|
|
|
$
|
18,125
|
|
|
47.5
|
%
|
Percentage of total revenue
|
28.5
|
%
|
|
25.4
|
%
|
|
|
|
|
|||||
Other
|
$
|
662
|
|
|
$
|
1,245
|
|
|
$
|
(583
|
)
|
|
(46.8
|
)%
|
Percentage of total revenue
|
0.3
|
%
|
|
0.8
|
%
|
|
|
|
|
|||||
Total revenue
|
$
|
197,947
|
|
|
$
|
150,366
|
|
|
$
|
47,581
|
|
|
31.6
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(5,077
|
)
|
|
$
|
(6,135
|
)
|
|
$
|
1,058
|
|
|
(17.2
|
)%
|
Percentage of total revenue
|
(2.6
|
)%
|
|
(4.1
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
2,883
|
|
|
$
|
2,367
|
|
|
$
|
516
|
|
|
21.8
|
%
|
Percentage of total revenue
|
1.5
|
%
|
|
1.6
|
%
|
|
|
|
|
|||||
Foreign exchange loss
|
$
|
(1,949
|
)
|
|
$
|
(373
|
)
|
|
$
|
(1,576
|
)
|
|
422.5
|
%
|
Percentage of total revenue
|
(1.0
|
)%
|
|
(0.2
|
)%
|
|
|
|
|
|||||
Other expense, net
|
$
|
(4,143
|
)
|
|
$
|
(4,141
|
)
|
|
$
|
(2
|
)
|
|
—
|
%
|
Percentage of total revenue
|
(2.1
|
)%
|
|
(2.8
|
)%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Benefit for income taxes
|
$
|
4,712
|
|
|
$
|
5,298
|
|
|
$
|
(586
|
)
|
|
(11.1
|
)%
|
Percentage of total revenue
|
2.4
|
%
|
|
3.5
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
$
|
401,499
|
|
|
$
|
290,200
|
|
|
$
|
111,299
|
|
|
38.4
|
%
|
Percentage of total revenue
|
73.2
|
%
|
|
71.9
|
%
|
|
|
|
|
|||||
Services
|
$
|
144,386
|
|
|
$
|
110,306
|
|
|
$
|
34,080
|
|
|
30.9
|
%
|
Percentage of total revenue
|
26.3
|
%
|
|
27.3
|
%
|
|
|
|
|
|||||
Other
|
$
|
2,496
|
|
|
$
|
3,159
|
|
|
$
|
(663
|
)
|
|
(21.0
|
)%
|
Percentage of total revenue
|
0.5
|
%
|
|
0.8
|
%
|
|
|
|
|
|||||
Total revenue
|
$
|
548,381
|
|
|
$
|
403,665
|
|
|
$
|
144,716
|
|
|
35.9
|
%
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Cost of revenue
|
$
|
180,212
|
|
|
$
|
133,651
|
|
|
$
|
46,561
|
|
|
34.8
|
%
|
Percentage of total revenue
|
32.9
|
%
|
|
33.1
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Marketing
|
$
|
131,536
|
|
|
$
|
94,651
|
|
|
$
|
36,885
|
|
|
39.0
|
%
|
Percentage of total revenue
|
24.0
|
%
|
|
23.4
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Product development
|
$
|
86,177
|
|
|
$
|
68,707
|
|
|
$
|
17,470
|
|
|
25.4
|
%
|
Percentage of total revenue
|
15.7
|
%
|
|
17.0
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
General and administrative
|
$
|
86,733
|
|
|
$
|
61,359
|
|
|
$
|
25,374
|
|
|
41.4
|
%
|
Percentage of total revenue
|
15.8
|
%
|
|
15.2
|
%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(14,408
|
)
|
|
$
|
(16,024
|
)
|
|
$
|
1,616
|
|
|
(10.1
|
)%
|
Percentage of total revenue
|
(2.6
|
)%
|
|
(4.0
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
9,659
|
|
|
$
|
5,902
|
|
|
$
|
3,757
|
|
|
63.7
|
%
|
Percentage of total revenue
|
1.8
|
%
|
|
1.5
|
%
|
|
|
|
|
|||||
Foreign exchange loss
|
$
|
(1,079
|
)
|
|
$
|
(2,973
|
)
|
|
$
|
1,894
|
|
|
(63.7
|
)%
|
Percentage of total revenue
|
(0.2
|
)%
|
|
(0.7
|
)%
|
|
|
|
|
|||||
Other expense, net
|
$
|
(5,828
|
)
|
|
$
|
(13,095
|
)
|
|
$
|
7,267
|
|
|
(55.5
|
)%
|
Percentage of total revenue
|
(1.1
|
)%
|
|
(3.2
|
)%
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Benefit for income taxes
|
$
|
6,708
|
|
|
$
|
4,038
|
|
|
$
|
2,670
|
|
|
66.1
|
%
|
Percentage of total revenue
|
1.2
|
%
|
|
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;
|
•
|
Adjusted EBITDA does not reflect acquisition-related expenses;
|
•
|
Adjusted EBITDA does not consider the impact of non-ordinary course disputes;
|
•
|
Adjusted EBITDA does not consider the impact of restructuring and other exit expense (income); and
|
•
|
other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income
|
$
|
14,801
|
|
|
$
|
19,894
|
|
|
$
|
64,603
|
|
|
$
|
36,240
|
|
Excluding:
|
|
|
|
|
|
|
|
||||||||
Interest and other non-operating expense, net (1)
|
2,194
|
|
|
3,768
|
|
|
4,749
|
|
|
10,122
|
|
||||
Benefit for income taxes
|
(4,712
|
)
|
|
(5,298
|
)
|
|
(6,708
|
)
|
|
(4,038
|
)
|
||||
Depreciation and amortization (1)
|
12,808
|
|
|
6,439
|
|
|
32,760
|
|
|
19,116
|
|
||||
Stock-based compensation expense (2)
|
12,137
|
|
|
8,916
|
|
|
31,056
|
|
|
23,987
|
|
||||
Foreign exchange loss (3)
|
1,949
|
|
|
373
|
|
|
1,079
|
|
|
2,973
|
|
||||
Acquisition-related expenses (4)
|
1,735
|
|
|
—
|
|
|
2,941
|
|
|
—
|
|
||||
Non-ordinary course disputes
|
1,164
|
|
|
—
|
|
|
1,164
|
|
|
—
|
|
||||
Restructuring and other exit income
|
—
|
|
|
(57
|
)
|
|
—
|
|
|
(249
|
)
|
||||
Adjusted EBITDA
|
$
|
42,076
|
|
|
$
|
34,035
|
|
|
$
|
131,644
|
|
|
$
|
88,151
|
|
(1)
|
Included in interest and depreciation expense amounts above, are interest and depreciation expense related to our headquarters lease. As part of the adoption of ASU 2016-02—Leases in the first quarter of 2019, we now account for our headquarters as a financing lease. Previously, we accounted for our headquarters under build-to-suit accounting requirements. For further information, see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” in the Notes to Consolidated Financial Statements. In the three and nine months ended September 30, 2019 and 2018 those amounts are as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Interest expense
|
$
|
660
|
|
|
$
|
2,249
|
|
|
$
|
2,033
|
|
|
$
|
6,748
|
|
Depreciation
|
2,197
|
|
|
819
|
|
|
6,592
|
|
|
2,457
|
|
(2)
|
Total stock-based compensation expense included in the Consolidated Statements of Operations is as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of revenue
|
$
|
1,574
|
|
|
$
|
894
|
|
|
$
|
4,129
|
|
|
$
|
2,367
|
|
Marketing
|
1,196
|
|
|
642
|
|
|
2,550
|
|
|
1,819
|
|
||||
Product development
|
5,752
|
|
|
4,697
|
|
|
14,566
|
|
|
11,361
|
|
||||
General and administrative
|
3,615
|
|
|
2,683
|
|
|
9,811
|
|
|
8,440
|
|
||||
Total stock-based compensation expense
|
$
|
12,137
|
|
|
$
|
8,916
|
|
|
$
|
31,056
|
|
|
$
|
23,987
|
|
(3)
|
See “Results of Operations—Other Expense, net” for more information on the fluctuation in foreign exchange loss in the three and nine months ended September 30, 2019 and 2018.
|
(4)
|
Acquisition-related expenses are expenses related to our acquisition of Reverb. For further information, see “Note 5—Business Combinations” in the Notes to Consolidated Financial Statements.
|
|
As of
September 30, 2019 |
||
|
(in thousands)
|
||
Cash and cash equivalents
|
$
|
671,769
|
|
Short-term investments
|
180,170
|
|
|
Accounts receivable, net
|
12,494
|
|
|
Long-term investments
|
4,765
|
|
|
Net working capital
|
791,133
|
|
|
Nine Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
128,339
|
|
|
$
|
96,876
|
|
Investing activities
|
(208,255
|
)
|
|
(244,178
|
)
|
||
Financing activities
|
388,188
|
|
|
201,002
|
|
•
|
fluctuations in GMS or revenue, including as a result of the seasonality of market transactions, and our sellers’ use of services;
|
•
|
our ability to convert visits into sales for our sellers;
|
•
|
the amount and timing of our operating expenses;
|
•
|
our success in attracting and retaining sellers and 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, including our recently launched free shipping initiative and our unified ad platform, called Etsy Ads;
|
•
|
the success of our marketing efforts;
|
•
|
the success of our integration of Reverb;
|
•
|
economic and market conditions, such as currency fluctuations and adverse global events;
|
•
|
disruptions or defects in our marketplaces, such as privacy or data security breaches, errors in our software, or other incidents that impact the availability, reliability, or performance of our platform;
|
•
|
the impact of competitive developments and our response to those developments;
|
•
|
our ability to manage our business and future growth;
|
•
|
our ability to recruit and retain employees; and
|
•
|
the impact of our global corporate structure.
|
•
|
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 marketplaces, 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 marketplaces;
|
•
|
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.
|
•
|
integrating new businesses and technologies into our infrastructure;
|
•
|
implementing growth initiatives;
|
•
|
consolidating operational and administrative functions;
|
•
|
retaining and integrating key employees;
|
•
|
supporting and enhancing morale and culture;
|
•
|
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.
|
•
|
we may choose to prohibit the sale of items in our marketplaces 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 global scale of our marketplaces and the breadth of our online presence;
|
•
|
the extent to which our tools and services can ease the administrative tasks that a seller might encounter in running her business;
|
•
|
the number and engagement of buyers;
|
•
|
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 and quality of items that sellers list in our marketplaces;
|
•
|
the ease of finding the 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 to Etsy buyers;
|
•
|
ease of payment; and
|
•
|
the availability and reliability of our platform.
|
•
|
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 Quarterly Report on Form 10-Q, 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 marketplaces due to hardware, software or network problems, security breaches, or other issues;
|
•
|
the strength of the global economy or the economy in the jurisdictions in which we operate, currency fluctuations, and market conditions in our industry and those affecting members of our community;
|
•
|
the trading activity of our largest stockholders;
|
•
|
the number of shares of our common stock that are available for public trading;
|
•
|
litigation or other claims against us;
|
•
|
stockholder activism;
|
•
|
the performance of the equity markets in general and in our industry;
|
•
|
the operating performance of other similar companies;
|
•
|
changes in legal requirements relating to our business; and
|
•
|
any other factors discussed in this Quarterly Report on Form 10-Q.
|
•
|
provide for a classified board of directors so that not all members of our Board of Directors are elected at one time;
|
•
|
permit our Board of Directors to establish the number of directors and fill any vacancies and newly created directorships;
|
•
|
provide that directors may only be removed for cause;
|
•
|
require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;
|
•
|
authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;
|
•
|
eliminate the ability of our stockholders to call special meetings of stockholders;
|
•
|
prohibit stockholder action by written consent, which means all stockholder actions must be taken at a meeting of our stockholders;
|
•
|
provide that our Board of Directors is expressly authorized to amend or repeal any provision of our bylaws;
|
•
|
restrict the forum for certain litigation against us to Delaware; and
|
•
|
require advance notice for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
|
Period
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
(in thousands) |
||||||
July 1 - 31, 2019 (1)
|
74,746
|
|
|
$
|
62.06
|
|
|
—
|
|
|
$
|
127,500
|
|
August 1 - 31, 2019 (1)
|
1,641
|
|
|
68.14
|
|
|
—
|
|
|
127,500
|
|
||
September 1 - 30, 2019 (1)
|
2,191,278
|
|
|
59.32
|
|
|
50,721
|
|
|
124,702
|
|
||
Total
|
2,267,665
|
|
|
$
|
59.42
|
|
|
50,721
|
|
|
$
|
124,702
|
|
(1)
|
The total number of shares purchased includes 122,748 shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units (“RSUs”).
|
Exhibit
Number
|
|
|
Incorporated by Reference
|
|
|
Filed
Herewith
|
|
|||||||||||||||||
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|||||||||||||
|
8-K
|
|
001-36911
|
|
2.01
|
|
7/22/2019
|
|
|
|
||||||||||||||
|
8-K
|
|
001-36911
|
|
4.1
|
|
9/23/2019
|
|
|
|
||||||||||||||
|
8-K
|
|
001-36911
|
|
4.2
|
|
9/23/2019
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
8-K
|
|
001-36911
|
|
99.1
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9/23/2019
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8-K
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001-36911
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99.2
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9/23/2019
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X
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X
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X
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X
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101.INS
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XBRL Instance Document
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X
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101.SCH
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XBRL Taxonomy Schema Linkbase Document
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X
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101.CAL
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XBRL Taxonomy Calculation Linkbase Document
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X
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101.DEF
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XBRL Taxonomy Definition Linkbase Document
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X
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101.LAB
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XBRL Taxonomy Labels Linkbase Document
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X
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101.PRE
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XBRL Taxonomy Presentation Linkbase Document’
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X
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104
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Cover Page Interactive Data File - the cover page interactive data is embedded within the Inline XBRL document
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X
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ETSY, INC.
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Date: October 31, 2019
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/s/ Rachel Glaser
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Rachel Glaser
Chief Financial Officer
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(Principal Financial and Accounting Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;
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2.
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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;
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3.
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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;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;
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2.
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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;
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3.
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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;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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