☒
|
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
|
For the fiscal year ended
|
December 31, 2019
|
|
|
|
|
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
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
Common Stock
|
$0.001 par value per share
|
ETSY
|
The Nasdaq Global Select Market
|
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
|
|
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: Etsy boasts a large assortment of handmade, customized, personalized, vintage, and craft supply products from all over the world. There are currently approximately 65 million items listed on the Etsy 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, Germany, Australia and France, in addition to sellers and buyers in nearly every other 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 2019, 40% of Etsy sellers were located outside the United States, and 37% 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 Etsy buyers on the platform without significant investment in acquisition marketing until 2013, eight years after being founded. The vast majority of visits to the Etsy marketplace came through organic channels, including a large portion from buyers visiting Etsy directly as well as from non-paid channels such as search, social, email, and push notifications.
|
•
|
Connection Between Etsy Buyers and Sellers: We believe that human connection is central to buyer engagement. We emphasize that the items listed for sale on the Etsy marketplace are brought to life by real people. Additionally, buyers are
|
•
|
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 the Etsy marketplace. Our mobile website and our “Buy on Etsy” mobile app for Etsy buyers include search and discovery, curation, personalization and social shopping features. We offer a connected experience through each channel, desktop, mobile web, and mobile app, to help ensure that no matter what device Etsy buyers use they will have the best possible experience. Additionally, our “Sell on Etsy” mobile app helps Etsy sellers operate their shops and manage orders. For the year ended December 31, 2019 approximately 59% of Etsy.com GMS was generated on a mobile device, up from 55% in 2018. We are focused on increasing conversion rates in general; however, we are particularly focused on our mobile app. Our mobile app conversion rate is the channel with the highest conversion rate, followed by desktop and mobile web, however, mobile web contributes the largest share of traffic followed by desktop and our mobile app. Therefore, if mobile app visits continue to grow as a percentage of overall visits, we believe it could be a tailwind to future conversion rate gains.
|
•
|
Buyer Intent; People Come to the Etsy marketplace 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 2019, we launched a number of initiatives to enhance search, including improving recommendations, making the home page more personalized and dynamic allowing buyers to more easily pick up where they left off, and incorporating more attributes to our search algorithm to improve search ranking. We also incorporated additional advanced machine learning techniques such as improved model engines and continuous feature expansion in order to drive further search improvements. 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, including increased model complexity and further contextual cues to deliver an even more personalized shopping experience. Lastly, our full migration to Google Cloud, which we completed in the beginning of 2020, is expected to further improve our search and discovery effectiveness.
|
•
|
A strong brand in a large, fragmented market, with healthy growth dynamics.
|
•
|
On-site product promotion and a strong content-driven marketing strategy, which is in the early stages of fueling incremental growth for the platform.
|
•
|
Reverb's seller base spans many countries, including key international markets such as Canada, United Kingdom, France, Germany and Australia. However, the U.S. is Reverb’s largest market by GMS volume.
|
•
|
Advertising: Etsy’s advertising platform allows sellers to pay for prominent placement of their listings in search results. During 2019, 16.6% of active Etsy sellers used our advertising platform, up from 15.1% in 2018. In 2019, we enhanced our dynamic cost-per-click onsite advertising, which we call Promoted Listings, by expanding inventory across all devices and applying our improved search algorithms to drive ad relevance and higher click-through rates, leading to accelerated
|
•
|
Etsy Shipping Labels: This service allows Etsy 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 2019, 22.9% of active Etsy sellers in regions where Etsy Shipping Labels was offered used this product, down from 24.7% in 2018. The reduction in percentage of active sellers using Etsy Shipping Labels was driven by the expansion of the service in the United Kingdom and Australia in late 2018 where we continue to expand the scope of these services. In addition, throughout the year we’ve added Pitney Bowes, ChitChats, and UShip; logistics solutions that help Etsy sellers save time and money.
|
•
|
Seller Tools: We offer a variety of free tools to Etsy sellers, including our Shop Manager dashboard, which we launched in 2017, and which 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. We also made significant improvements to Etsy seller analytics pages in 2019 to provide additional insights regarding traffic acquisition for their 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 Etsy sellers with their marketing needs and allows them to stand out on and off the Etsy platform. Also, through a partnership with Intuit, Etsy 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.
|
How an Etsy Seller Spends Her Time
|
2020 seller survey
|
•
|
83% identify as women;
|
•
|
66% consider their Etsy shop to be a business;
|
•
|
95% 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Year 4
|
|
|
|
|
|
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Year 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVG GMS
|
|
2012
|
|
$1,079
|
|
$2,598
|
|
$3,935
|
|
$4,557
|
|
|
|
AVG GMS
|
|
2012
|
|
$96
|
|
$163
|
|
$173
|
|
$181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SELLER
|
|
2013
|
|
$1,260
|
|
$3,110
|
|
$4,190
|
|
$4,620
|
|
|
|
PER BUYER
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$1,660
|
|
$3,198
|
|
$4,278
|
|
$5,004
|
|
|
|
|
|
2016
|
|
$101
|
|
$157
|
|
$174
|
|
$187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cohorts of 2016, 2015, 2014, 2013, and 2012 Active Sellers and Active Buyers
|
•
|
Etsy sellers contributed $6.16 billion to the U.S. economy, up 14.7% from our 2018 baseline;
|
•
|
We continued to attract and retain world-class talent, strengthened through diversity, leading the industry in gender balance, and exceeding our goal to double hiring of under-represented minorities at Etsy in 2019; and
|
•
|
The Etsy marketplace became the first major online shopping destination to offset 100% of emissions from shipping, completing our journey to become a carbon neutral company.
|
Board
|
Overall
|
Leadership
|
Tech
|
Engineering
|
Other Business Roles
|
RACE & ETHNICITY METRICS - U.S. ONLY
|
||||||||||||||||||||||||||||||
|
Overall
|
Leadership
|
Tech
|
Engineering
|
Other Business Roles
|
|||||||||||||||||||||||||
|
2017
|
|
2018‡
|
|
2019†
|
|
2017
|
|
2018‡
|
|
2019†
|
|
2017
|
|
2018‡
|
|
2019†
|
|
2017
|
|
2018‡
|
|
2019†
|
|
2017
|
|
2018‡
|
|
2019†
|
|
American Indian or Alaska Native
|
0.2
|
%
|
0.1
|
%
|
0.1
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
—
|
%
|
0.3
|
%
|
0.3
|
%
|
0.2
|
%
|
Asian
|
13.9
|
%
|
16.5
|
%
|
15.3
|
%
|
16.9
|
%
|
19.3
|
%
|
15.5
|
%
|
20.9
|
%
|
22.6
|
%
|
21.1
|
%
|
20.4
|
%
|
21.9
|
%
|
20.0
|
%
|
7.0
|
%
|
8.5
|
%
|
7.7
|
%
|
Black/African American
|
4.4
|
%
|
3.7
|
%
|
5.2
|
%
|
3.4
|
%
|
3.4
|
%
|
2.7
|
%
|
3.3
|
%
|
2.6
|
%
|
4.6
|
%
|
4.2
|
%
|
3.2
|
%
|
5.1
|
%
|
5.4
|
%
|
5.5
|
%
|
5.9
|
%
|
Hispanic
|
4.1
|
%
|
4.8
|
%
|
5.2
|
%
|
1.7
|
%
|
—
|
%
|
1.8
|
%
|
4.5
|
%
|
4.7
|
%
|
4.7
|
%
|
4.2
|
%
|
5.1
|
%
|
5.5
|
%
|
3.8
|
%
|
5.2
|
%
|
5.7
|
%
|
Two or More Races
|
2.7
|
%
|
2.8
|
%
|
3.1
|
%
|
5.1
|
%
|
2.3
|
%
|
2.7
|
%
|
2.1
|
%
|
3
|
%
|
3.6
|
%
|
2
|
%
|
3.2
|
%
|
4.1
|
%
|
3.5
|
%
|
2.7
|
%
|
2.4
|
%
|
White
|
71.8
|
%
|
67.0
|
%
|
64.6
|
%
|
72.9
|
%
|
75
|
%
|
72.7
|
%
|
65.6
|
%
|
60.8
|
%
|
58.8
|
%
|
65
|
%
|
60.8
|
%
|
58.4
|
%
|
78.1
|
%
|
74.8
|
%
|
72.1
|
%
|
Not Declared
|
2.9
|
%
|
5.1
|
%
|
6.5
|
%
|
—
|
%
|
—
|
%
|
4.6
|
%
|
3.6
|
%
|
6.3
|
%
|
7.2
|
%
|
4.2
|
%
|
5.8
|
%
|
6.9
|
%
|
1.9
|
%
|
3
|
%
|
6.0
|
%
|
AGE METRICS - GLOBAL
|
||||||
|
2017
|
|
2018‡
|
|
2019†
|
|
24 years and younger
|
4.2
|
%
|
5.3
|
%
|
4.3
|
%
|
25-29 years
|
28.4
|
%
|
27.9
|
%
|
27.6
|
%
|
30-34 years
|
34.1
|
%
|
32.2
|
%
|
34.9
|
%
|
35-39 years
|
21.2
|
%
|
20.8
|
%
|
19.5
|
%
|
40-49 years
|
9.4
|
%
|
11.1
|
%
|
11.0
|
%
|
50+ years
|
2.7
|
%
|
2.7
|
%
|
2.7
|
%
|
SASB Metrics
|
||||||||
SASB Code
|
Metric
|
2017
|
|
2018
|
|
2019
|
|
|
CG-EC-330a.4
|
Percentage of technical employees who are H-1B visa holders
|
|
2.5
|
%
|
3.5
|
%
|
||
Product Packaging and Distribution
|
||||||||
CG-EC-410a.1
|
Total greenhouse gas (GHG) footprint of product shipments in metric tons CO2e (Etsy only)
|
118,153
|
‡
|
135,459
|
‡
|
154,078
|
†
|
|
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. In February 2019, we announced immediate action to balance our footprint by offsetting 100% of our emissions generated from Etsy.com shipping through investment in verified emissions reductions. In addition, we continue to take action in support of solutions that will help to drive carbon reduction in the long term, including advocating at the federal and state level for comprehensive climate and carbon reduction policies, and collaborating with peers on industry-wide efforts to drive efficiency and resilience in the shipping and logistics sector. Our 2019 shipping footprint does not include Reverb.com shipments, but we plan to include Reverb’s shipping emissions in our 2020 footprint.
|
•
|
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, such as our free shipping initiative and changes to our on-site and off-site ads products, including changes to our advertising products that we intend to launch in the second quarter of 2020;
|
•
|
the success of our marketing efforts;
|
•
|
the success of our integration of acquired businesses, such as Reverb, which we acquired in 2019;
|
•
|
adverse 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; and
|
•
|
our ability to recruit and retain employees.
|
•
|
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;
|
•
|
frequent product launches or updates that could deteriorate member trust;
|
•
|
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 U.K. and 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;
|
•
|
integrating 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;
|
•
|
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 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 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 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; 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, 2019 (1)
|
409,052
|
|
|
$
|
55.81
|
|
|
255,360
|
|
|
$
|
110,371
|
|
November 1 - 30, 2019 (1)
|
175,619
|
|
|
46.35
|
|
|
169,718
|
|
|
102,500
|
|
||
December 1 - 31, 2019 (1)
|
3,995
|
|
|
43.39
|
|
|
—
|
|
|
102,500
|
|
||
Total
|
588,666
|
|
|
52.90
|
|
|
425,078
|
|
|
102,500
|
|
(1)
|
The total number of shares purchased includes 163,588 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. Share repurchases may be executed through open market repurchases, privately negotiated transactions or by other means, including repurchase plans designed to comply with Rule 10b5-1 and other derivative, accelerated share repurchase and other structured transactions. The timing and exact amount of any common stock repurchases will depend on various factors, including market conditions, common stock trading price, our liquidity and financial performance and legal considerations.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2019 (1)
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Marketplace (2)
|
$
|
593,646
|
|
|
$
|
444,765
|
|
|
$
|
329,362
|
|
|
$
|
275,534
|
|
|
$
|
208,576
|
|
Services
|
224,733
|
|
|
158,928
|
|
|
111,869
|
|
|
89,433
|
|
|
64,923
|
|
|||||
Total revenue
|
818,379
|
|
|
603,693
|
|
|
441,231
|
|
|
364,967
|
|
|
273,499
|
|
|||||
Cost of revenue (3)(4)
|
271,036
|
|
|
190,762
|
|
|
150,986
|
|
|
123,328
|
|
|
96,979
|
|
|||||
Gross profit
|
547,343
|
|
|
412,931
|
|
|
290,245
|
|
|
241,639
|
|
|
176,520
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Marketing (3)(4)
|
215,570
|
|
|
158,013
|
|
|
109,085
|
|
|
82,248
|
|
|
66,771
|
|
|||||
Product development (3)(4)
|
121,878
|
|
|
97,249
|
|
|
74,616
|
|
|
55,083
|
|
|
42,694
|
|
|||||
General and administrative (3)(4)
|
121,134
|
|
|
82,883
|
|
|
91,486
|
|
|
86,180
|
|
|
68,939
|
|
|||||
Asset impairment charges
|
—
|
|
|
—
|
|
|
3,162
|
|
|
551
|
|
|
—
|
|
|||||
Total operating expenses
|
458,582
|
|
|
338,145
|
|
|
278,349
|
|
|
224,062
|
|
|
178,404
|
|
|||||
Income (loss) from operations
|
88,761
|
|
|
74,786
|
|
|
11,896
|
|
|
17,577
|
|
|
(1,884
|
)
|
|||||
Other (expense) income, net
|
(8,115
|
)
|
|
(19,708
|
)
|
|
20,369
|
|
|
(20,453
|
)
|
|
(26,110
|
)
|
|||||
Income (loss) before income taxes
|
80,646
|
|
|
55,078
|
|
|
32,265
|
|
|
(2,876
|
)
|
|
(27,994
|
)
|
|||||
Benefit (provision) for income taxes (5)
|
15,248
|
|
|
22,413
|
|
|
49,535
|
|
|
(27,025
|
)
|
|
(26,069
|
)
|
|||||
Net income (loss)
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
|
$
|
(54,063
|
)
|
Net income (loss) per share attributable to common stockholders:
|
|||||||||||||||||||
Basic
|
$
|
0.80
|
|
|
$
|
0.64
|
|
|
$
|
0.69
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.59
|
)
|
Diluted
|
$
|
0.76
|
|
|
$
|
0.61
|
|
|
$
|
0.68
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.59
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
119,665,248
|
|
|
120,146,076
|
|
|
118,538,687
|
|
|
113,562,738
|
|
|
91,122,291
|
|
|||||
Diluted
|
125,720,073
|
|
|
127,084,785
|
|
|
122,267,673
|
|
|
113,562,738
|
|
|
91,122,291
|
|
(1)
|
The financial results of Reverb have been included in our consolidated financial results from August 15, 2019 (the date of acquisition).
|
(2)
|
In the fourth quarter of 2019, we reclassified Other revenue to Marketplace revenue. The following table provides our Marketplace and Other revenue under our previous and current presentation:
|
|
Year-to-Date Period Ended
|
||||||||||||||
|
Previous Presentation
|
|
Current Presentation
|
||||||||||||
|
Marketplace Revenue
|
|
Other Revenue
|
|
Marketplace Revenue
|
|
Other Revenue
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2018
|
$
|
440,740
|
|
|
$
|
4,025
|
|
|
$
|
444,765
|
|
|
$
|
—
|
|
December 31, 2017
|
326,076
|
|
|
3,286
|
|
|
329,362
|
|
|
—
|
|
||||
December 31, 2016
|
269,628
|
|
|
5,906
|
|
|
275,534
|
|
|
—
|
|
||||
December 31, 2015
|
204,333
|
|
|
4,243
|
|
|
208,576
|
|
|
—
|
|
(3)
|
Includes total stock-based compensation expense as follows:
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Cost of revenue
|
$
|
5,787
|
|
|
$
|
3,357
|
|
|
$
|
1,739
|
|
|
$
|
1,057
|
|
|
$
|
871
|
|
Marketing
|
3,774
|
|
|
2,507
|
|
|
1,933
|
|
|
971
|
|
|
560
|
|
|||||
Product development
|
21,085
|
|
|
21,234
|
|
|
8,274
|
|
|
5,079
|
|
|
2,860
|
|
|||||
General and administrative
|
13,749
|
|
|
11,133
|
|
|
14,613
|
|
|
8,794
|
|
|
6,550
|
|
|||||
Total stock-based compensation expense
|
$
|
44,395
|
|
|
$
|
38,231
|
|
|
$
|
26,559
|
|
|
$
|
15,901
|
|
|
$
|
10,841
|
|
(4)
|
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.
|
(5)
|
In the year ended December 31, 2019, we recognized an income tax benefit associated with stock-based compensation of $16.3 million and research and development credit of $9.9 million. Although these items are recurring in nature, the amount of the benefit derived is largely dependent on several factors, including our stock price and certain research and development expenses incurred in any given year. 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,
|
||||||||||||||||||
|
2019 (1)
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands, except percentages)
|
||||||||||||||||||
Other Operational and Non-GAAP Financial Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
GMS
|
$
|
4,974,944
|
|
|
$
|
3,931,745
|
|
|
$
|
3,253,609
|
|
|
$
|
2,841,985
|
|
|
$
|
2,388,387
|
|
Adjusted EBITDA (Non-GAAP)
|
186,268
|
|
|
139,510
|
|
|
80,009
|
|
|
57,124
|
|
|
31,007
|
|
|||||
Active sellers
|
2,699
|
|
|
2,115
|
|
|
1,933
|
|
|
1,748
|
|
|
1,563
|
|
|||||
Active buyers
|
46,351
|
|
|
39,447
|
|
|
33,364
|
|
|
28,566
|
|
|
24,046
|
|
|||||
Percent mobile GMS
|
58
|
%
|
|
55
|
%
|
|
51
|
%
|
|
48
|
%
|
|
43
|
%
|
|||||
Percent international GMS
|
36
|
%
|
|
35
|
%
|
|
33
|
%
|
|
30
|
%
|
|
30
|
%
|
(1)
|
The financial results of Reverb have been included in our consolidated results from August 15, 2019 (the date of acquisition).
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2019 (1)
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Net income (loss)
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
$
|
(29,901
|
)
|
|
$
|
(54,063
|
)
|
Excluding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest and other non-operating expense, net
|
11,121
|
|
|
13,221
|
|
|
8,736
|
|
|
5,502
|
|
|
1,202
|
|
|||||
(Benefit) provision for income taxes
|
(15,248
|
)
|
|
(22,413
|
)
|
|
(49,535
|
)
|
|
27,025
|
|
|
26,069
|
|
|||||
Depreciation and amortization
|
48,031
|
|
|
26,742
|
|
|
27,197
|
|
|
22,525
|
|
|
18,550
|
|
|||||
Stock-based compensation expense (2)
|
44,395
|
|
|
38,231
|
|
|
23,857
|
|
|
15,901
|
|
|
10,841
|
|
|||||
Foreign exchange (gain) loss
|
(3,006
|
)
|
|
6,487
|
|
|
(29,105
|
)
|
|
14,951
|
|
|
21,775
|
|
|||||
Acquisition-related expenses
|
3,917
|
|
|
—
|
|
|
—
|
|
|
570
|
|
|
—
|
|
|||||
Non-ordinary course disputes
|
1,164
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring and other exit costs (income)
|
—
|
|
|
(249
|
)
|
|
13,897
|
|
|
—
|
|
|
—
|
|
|||||
Asset impairment charges
|
—
|
|
|
—
|
|
|
3,162
|
|
|
551
|
|
|
—
|
|
|||||
Net unrealized loss on warrant and other liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,133
|
|
|||||
Contribution to Good Work Institute (formerly Etsy.org)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|||||
Adjusted EBITDA
|
$
|
186,268
|
|
|
$
|
139,510
|
|
|
$
|
80,009
|
|
|
$
|
57,124
|
|
|
$
|
31,007
|
|
(1)
|
The financial results of Reverb have been included in our consolidated results from August 15, 2019 (the date of acquisition).
|
(2)
|
$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,
|
||||||||||||||||||
|
2019 (1)
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and short- and long-term investments
|
$
|
906,595
|
|
|
$
|
624,287
|
|
|
$
|
340,550
|
|
|
$
|
282,086
|
|
|
$
|
292,864
|
|
Net working capital
|
732,510
|
|
|
568,227
|
|
|
336,787
|
|
|
287,024
|
|
|
278,932
|
|
|||||
Total assets
|
1,542,352
|
|
|
901,851
|
|
|
605,583
|
|
|
581,193
|
|
|
553,061
|
|
|||||
Long-term debt, net (2)
|
785,126
|
|
|
276,486
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Long-term liabilities
|
947,190
|
|
|
388,891
|
|
|
106,212
|
|
|
152,428
|
|
|
142,441
|
|
|||||
Total stockholders’ equity
|
406,634
|
|
|
400,898
|
|
|
396,894
|
|
|
344,757
|
|
|
330,498
|
|
(1)
|
The financial results of Reverb have been included in our consolidated results from August 15, 2019 (the date of acquisition).
|
(2)
|
In September 2019, we issued $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026 (the “2019 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). In March 2018, we issued $345.0 million aggregate principal amount of 0% Convertible Senior Notes due 2023 (the “2018 Notes”) in a private placement to qualified institutional buyers pursuant to the Securities Act. For more information on the 2019 and 2018 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 Etsy buyers find the right product at the right time, or discover inspiration among the items in the Etsy marketplace. Product experiment velocity reached a record high during the year. We made a foundational upgrade to our ranking algorithms, which will continue to enable us to provide more relevant search results to Etsy buyers. In addition, we continued to improve our mobile app, highlighting items that are similar to items Etsy 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 focused on our collection of unique items by enhancing the image quality for listings on desktop, our largest channel by device, which is intended to convert more visits into purchases.
|
•
|
We continued to focus on utilizing our marketing efforts to drive new and existing buyers to Etsy. We launched a new national television campaign, which had a positive impact on visits and purchase intent. We also launched our 2019 holiday television campaign in the second half of the year, which continued to positively move brand metrics on purchase intent and brand awareness. We kicked off our first international television campaign towards the end of 2019.
|
•
|
We continued to enhance, expand, and introduce new product offerings and seller tools. In July, we began providing Etsy sellers with tools and support to make it easy for them to guarantee free shipping on orders of $35 or more to U.S. buyers. We also launched a regional sales feature, which allows for Etsy sellers to set a country-specific sale, with a focus on their domestic listings. As of the end of the year, 65% of U.S. buyer GMS shipped for free, 74% of U.S. listing views were eligible to ship for free, and 48% of orders were delivered with free shipping.
|
•
|
We made progress simplifying our marketing tools for Etsy sellers to enable them to more easily invest in their growth. In the third quarter of 2019, we streamlined Promoted Listings, Etsy’s onsite 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. With the initial launch of Etsy Ads, our Promoted Listings service was no longer offered as a standalone advertising option during the fourth quarter of 2019.
|
•
|
We progressed on our impact goals, including our ecological goal to build long-term resilience by eliminating our carbon impacts and fostering responsible resource use. In February 2019, we began offsetting 100% of carbon emissions generated by shipping on Etsy.com, which represent 97% of our total measured emissions.
|
•
|
We have also focused on growth investments, such as our migration to Google Cloud. In 2019, we achieved significant milestones in the process by beginning to serve our search traffic from Google Cloud and migrating a majority of our systems to Google Cloud, including our machine learning efforts. As a result of migrating our Etsy.com search efforts to Google Cloud, we were able to make the foundational upgrade to our ranking algorithms for the Etsy marketplace. We spent approximately $30 million on cloud migration costs in 2019, which includes
|
|
Previous Presentation
|
|
Current Presentation
|
||||||||||||
Year-to-Date Period Ended
|
Marketplace Revenue
|
|
Other Revenue
|
|
Marketplace Revenue
|
|
Other Revenue
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2018
|
$
|
440,740
|
|
|
$
|
4,025
|
|
|
$
|
444,765
|
|
|
$
|
—
|
|
December 31, 2017
|
326,076
|
|
|
3,286
|
|
|
329,362
|
|
|
—
|
|
|
|
Year Ended December 31,
|
|
% Growth
Y/Y |
|
Year Ended December 31,
|
|
% Growth
(Decline) Y/Y |
||||||||||
|
|
2019
|
|
2018
|
|
|
2017
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
(in thousands, except percentages)
|
||||||||||||||||
GMS (1)
|
|
$
|
4,974,944
|
|
|
$
|
3,931,745
|
|
|
26.5
|
%
|
|
$
|
3,253,609
|
|
|
20.8
|
%
|
Revenue (2)
|
|
$
|
818,379
|
|
|
$
|
603,693
|
|
|
35.6
|
%
|
|
$
|
441,231
|
|
|
36.8
|
%
|
Marketplace revenue (3)
|
|
$
|
593,646
|
|
|
$
|
444,765
|
|
|
33.5
|
%
|
|
$
|
329,362
|
|
|
35.0
|
%
|
Services revenue
|
|
$
|
224,733
|
|
|
$
|
158,928
|
|
|
41.4
|
%
|
|
$
|
111,869
|
|
|
42.1
|
%
|
Net income
|
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
23.7
|
%
|
|
$
|
81,800
|
|
|
(5.3
|
)%
|
Adjusted EBITDA (Non-GAAP)
|
|
$
|
186,268
|
|
|
$
|
139,510
|
|
|
33.5
|
%
|
|
$
|
80,009
|
|
|
74.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Active sellers (4)
|
|
2,699
|
|
|
2,115
|
|
|
27.6
|
%
|
|
1,933
|
|
|
9.4
|
%
|
|||
Active buyers (4)
|
|
46,351
|
|
|
39,447
|
|
|
17.5
|
%
|
|
33,364
|
|
|
18.2
|
%
|
|||
Percent mobile GMS
|
|
58
|
%
|
|
55
|
%
|
|
300
|
bps
|
|
51
|
%
|
|
400
|
bps
|
|||
Percent international GMS (1)
|
|
36
|
%
|
|
35
|
%
|
|
100
|
bps
|
|
33
|
%
|
|
200
|
bps
|
(1)
|
GMS for the year ended December 31, 2019, includes Reverb’s GMS of $242.4 million. Percent international GMS includes Reverb’s percent international GMS of 18% for the year ended December 31, 2019. Etsy.com GMS for the year ended December 31, 2019 was $4.7 billion.
|
(2)
|
Revenue for the year ended December 31, 2019, includes Reverb’s revenue of $19.1 million. Etsy.com revenue for the year ended December 31, 2019 was $799.3 million.
|
(3)
|
In the fourth quarter of 2019, we reclassified Other revenue to Marketplace revenue. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Reclassification of Revenue Categories” for our Marketplace and Other revenue under our previous and current presentation for the years ended December 31, 2018 and 2017.
|
(4)
|
Active sellers and active buyers includes Reverb’s active sellers and active buyers of 162 thousand and 624 thousand, respectively, as of December 31, 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.comactive sellers and active buyers were approximately 2.5 million and 45.7 million, respectively.
|
Year-to-Date Period Ended
|
|
As Reported
|
|
Currency-Neutral
|
|
FX Impact
|
|||
December 31, 2019
|
|
26.5
|
%
|
|
27.5
|
%
|
|
(1.0
|
)%
|
December 31, 2018
|
|
20.8
|
%
|
|
20.4
|
%
|
|
0.4
|
%
|
December 31, 2017
|
|
14.5
|
%
|
|
14.3
|
%
|
|
0.2
|
%
|
•
|
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 (gain) 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 costs (income);
|
•
|
Adjusted EBITDA does not consider the impact of asset impairment charges;
|
•
|
other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Net income
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
Excluding:
|
|
|
|
|
|
||||||
Interest and other non-operating expense, net (1)
|
11,121
|
|
|
13,221
|
|
|
8,736
|
|
|||
Benefit for income taxes
|
(15,248
|
)
|
|
(22,413
|
)
|
|
(49,535
|
)
|
|||
Depreciation and amortization (1)
|
48,031
|
|
|
26,742
|
|
|
27,197
|
|
|||
Stock-based compensation expense (2)
|
44,395
|
|
|
38,231
|
|
|
23,857
|
|
|||
Foreign exchange (gain) loss (3)
|
(3,006
|
)
|
|
6,487
|
|
|
(29,105
|
)
|
|||
Acquisition-related expenses (4)
|
3,917
|
|
|
—
|
|
|
—
|
|
|||
Non-ordinary course disputes
|
1,164
|
|
|
—
|
|
|
—
|
|
|||
Restructuring and other exit costs (income) (5)
|
—
|
|
|
(249
|
)
|
|
13,897
|
|
|||
Asset impairment charges (6)
|
—
|
|
|
—
|
|
|
3,162
|
|
|||
Adjusted EBITDA
|
$
|
186,268
|
|
|
$
|
139,510
|
|
|
$
|
80,009
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Cost of revenue
|
$
|
5,787
|
|
|
$
|
3,357
|
|
|
$
|
1,739
|
|
Marketing
|
3,774
|
|
|
2,507
|
|
|
1,933
|
|
|||
Product development
|
21,085
|
|
|
21,234
|
|
|
8,274
|
|
|||
General and administrative
|
13,749
|
|
|
11,133
|
|
|
14,613
|
|
|||
Total stock-based compensation expense
|
$
|
44,395
|
|
|
$
|
38,231
|
|
|
$
|
26,559
|
|
(3)
|
See “Results of Operations—Other Expense, net” for more information on the fluctuation in foreign exchange (gain) loss in the years ended December 31, 2019, 2018, and 2017.
|
(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.
|
(5)
|
See “Note 17—Restructuring and Other Exit Costs (Income)” in the Notes to Consolidated Financial Statements for a description of the matters related to these events.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
|
|
|
|
||||||
|
(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
|
|
(6)
|
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.
|
|
|
|
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Year 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVG GMS
|
|
2012
|
|
$96
|
|
$163
|
|
$173
|
|
$181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER BUYER
|
|
2013
|
|
$96
|
|
$161
|
|
$168
|
|
$174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$99
|
|
$157
|
|
$164
|
|
$169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
$101
|
|
$158
|
|
$163
|
|
$180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$101
|
|
$157
|
|
$174
|
|
$187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Etsy Cohort of 2016, 2015, 2014, 2013, and 2012 Active Buyers
|
|
|
|
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Year 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVG GMS
|
|
2012
|
|
$1,079
|
|
$2,598
|
|
$3,935
|
|
$4,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SELLER
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$1,660
|
|
$3,198
|
|
$4,278
|
|
$5,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Etsy Cohort of 2016, 2015, 2014, 2013, and 2012 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. 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 offered 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. The revenue that we recognize 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 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.
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
|
|
|
|
||||||
|
(in thousands)
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||
Marketplace
|
$
|
593,646
|
|
|
$
|
444,765
|
|
|
$
|
329,362
|
|
Services
|
224,733
|
|
|
158,928
|
|
|
111,869
|
|
|||
Total revenue
|
818,379
|
|
|
603,693
|
|
|
441,231
|
|
|||
Cost of revenue
|
271,036
|
|
|
190,762
|
|
|
150,986
|
|
|||
Gross profit
|
547,343
|
|
|
412,931
|
|
|
290,245
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
215,570
|
|
|
158,013
|
|
|
109,085
|
|
|||
Product development
|
121,878
|
|
|
97,249
|
|
|
74,616
|
|
|||
General and administrative
|
121,134
|
|
|
82,883
|
|
|
91,486
|
|
|||
Asset impairment charges
|
—
|
|
|
—
|
|
|
3,162
|
|
|||
Total operating expenses
|
458,582
|
|
|
338,145
|
|
|
278,349
|
|
|||
Income from operations
|
88,761
|
|
|
74,786
|
|
|
11,896
|
|
|||
Other (expense) income, net
|
(8,115
|
)
|
|
(19,708
|
)
|
|
20,369
|
|
|||
Income before income taxes
|
80,646
|
|
|
55,078
|
|
|
32,265
|
|
|||
Benefit for income taxes
|
15,248
|
|
|
22,413
|
|
|
49,535
|
|
|||
Net income
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
|
|
|
|
|
|
||||||
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Marketplace
|
72.5
|
%
|
|
73.7
|
%
|
|
74.6
|
%
|
|||
Services
|
27.5
|
|
|
26.3
|
|
|
25.4
|
|
|||
Total revenue
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|||
Cost of revenue
|
33.1
|
|
|
31.6
|
|
|
34.2
|
|
|||
Gross profit
|
66.9
|
|
|
68.4
|
|
|
65.8
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
26.3
|
|
|
26.2
|
|
|
24.7
|
|
|||
Product development
|
14.9
|
|
|
16.1
|
|
|
16.9
|
|
|||
General and administrative
|
14.8
|
|
|
13.7
|
|
|
20.7
|
|
|||
Asset impairment charges
|
—
|
|
|
—
|
|
|
0.7
|
|
|||
Total operating expenses
|
56.0
|
|
|
56.0
|
|
|
63.1
|
|
|||
Income from operations
|
10.8
|
|
|
12.4
|
|
|
2.7
|
|
|||
Other (expense) income, net
|
(1.0
|
)
|
|
(3.3
|
)
|
|
4.6
|
|
|||
Income before income taxes
|
9.9
|
|
|
9.1
|
|
|
7.3
|
|
|||
Benefit for income taxes
|
1.9
|
|
|
3.7
|
|
|
11.2
|
|
|||
Net income
|
11.7
|
%
|
|
12.8
|
%
|
|
18.5
|
%
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
|
$
|
593,646
|
|
|
$
|
444,765
|
|
|
$
|
148,881
|
|
|
33.5
|
%
|
Percentage of total revenue
|
|
72.5
|
%
|
|
73.7
|
%
|
|
|
|
|
|||||
Services
|
|
$
|
224,733
|
|
|
$
|
158,928
|
|
|
$
|
65,805
|
|
|
41.4
|
%
|
Percentage of total revenue
|
|
27.5
|
%
|
|
26.3
|
%
|
|
|
|
|
|||||
Total revenue
|
|
$
|
818,379
|
|
|
$
|
603,693
|
|
|
$
|
214,686
|
|
|
35.6
|
%
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Cost of revenue
|
|
$
|
271,036
|
|
|
$
|
190,762
|
|
|
$
|
80,274
|
|
|
42.1
|
%
|
Percentage of total revenue
|
|
33.1
|
%
|
|
31.6
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Marketing
|
|
$
|
215,570
|
|
|
$
|
158,013
|
|
|
$
|
57,557
|
|
|
36.4
|
%
|
Percentage of total revenue
|
|
26.3
|
%
|
|
26.2
|
%
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(24,320
|
)
|
|
$
|
(22,178
|
)
|
|
$
|
(2,142
|
)
|
|
9.7
|
%
|
Percentage of total revenue
|
(3.0
|
)%
|
|
(3.7
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
13,199
|
|
|
$
|
8,957
|
|
|
$
|
4,242
|
|
|
47.4
|
%
|
Percentage of total revenue
|
1.6
|
%
|
|
1.5
|
%
|
|
|
|
|
|||||
Foreign exchange gain (loss)
|
$
|
3,006
|
|
|
$
|
(6,487
|
)
|
|
$
|
9,493
|
|
|
(146.3
|
)%
|
Percentage of total revenue
|
0.4
|
%
|
|
(1.1
|
)%
|
|
|
|
|
|||||
Other expense, net
|
$
|
(8,115
|
)
|
|
$
|
(19,708
|
)
|
|
$
|
11,593
|
|
|
(58.8
|
)%
|
Percentage of total revenue
|
(1.0
|
)%
|
|
(3.3
|
)%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Benefit for income taxes
|
|
$
|
15,248
|
|
|
$
|
22,413
|
|
|
$
|
(7,165
|
)
|
|
(32.0
|
)%
|
Percentage of total revenue
|
|
1.9
|
%
|
|
3.7
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
|
$
|
444,765
|
|
|
$
|
329,362
|
|
|
$
|
115,403
|
|
|
35.0
|
%
|
Percentage of total revenue
|
|
73.7
|
%
|
|
74.6
|
%
|
|
|
|
|
|||||
Services
|
|
$
|
158,928
|
|
|
$
|
111,869
|
|
|
$
|
47,059
|
|
|
42.1
|
%
|
Percentage of total revenue
|
|
26.3
|
%
|
|
25.4
|
%
|
|
|
|
|
|||||
Total revenue
|
|
$
|
603,693
|
|
|
$
|
441,231
|
|
|
$
|
162,462
|
|
|
36.8
|
%
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Cost of revenue
|
|
$
|
190,762
|
|
|
$
|
150,986
|
|
|
$
|
39,776
|
|
|
26.3
|
%
|
Percentage of total revenue
|
|
31.6
|
%
|
|
34.2
|
%
|
|
|
|
|
|
|
Year Ended
December 31, |
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Marketing
|
|
$
|
158,013
|
|
|
$
|
109,085
|
|
|
$
|
48,928
|
|
|
44.9
|
%
|
Percentage of total revenue
|
|
26.2
|
%
|
|
24.7
|
%
|
|
|
|
|
|
|
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 (provision) for income taxes
|
|
$
|
22,413
|
|
|
$
|
49,535
|
|
|
$
|
(27,122
|
)
|
|
54.8
|
%
|
Percentage of total revenue
|
|
3.7
|
%
|
|
11.2
|
%
|
|
|
|
|
(1)
|
The financial results of Reverb have been included in our consolidated results from August 15, 2019 (the date of acquisition).
|
(2)
|
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. We have 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.
|
(3)
|
In the fourth quarter of 2019, we reclassified Other revenue to Marketplace revenue. The following table provides our Marketplace and Other revenue under our previous and current presentation:
|
|
Quarter-to-Date Period Ended
|
||||||||||||||
|
Previous Presentation
|
|
Updated Presentation
|
||||||||||||
|
Marketplace Revenue
|
|
Other Revenue
|
|
Marketplace Revenue
|
|
Other Revenue
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands)
|
||||||||||||||
September 30, 2019
|
$
|
140,966
|
|
|
$
|
662
|
|
|
$
|
141,628
|
|
|
$
|
—
|
|
June 30, 2019
|
134,403
|
|
|
796
|
|
|
135,199
|
|
|
—
|
|
||||
March 31, 2019
|
126,130
|
|
|
1,038
|
|
|
127,168
|
|
|
—
|
|
||||
December 31, 2018
|
150,540
|
|
|
866
|
|
|
151,406
|
|
|
—
|
|
||||
September 30, 2018
|
110,927
|
|
|
1,245
|
|
|
112,172
|
|
|
—
|
|
||||
June 30, 2018
|
91,306
|
|
|
1,574
|
|
|
92,880
|
|
|
—
|
|
||||
March 31, 2018
|
87,967
|
|
|
340
|
|
|
88,307
|
|
|
—
|
|
(4)
|
Includes total stock-based compensation expense as follows:
|
|
Three Months Ended
|
|||||||||||||||||||||||
|
Dec. 31,
2019 |
Sept. 30,
2019 |
June 30,
2019 |
Mar. 31,
2019 |
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
Cost of revenue
|
$
|
1,658
|
|
$
|
1,574
|
|
$
|
1,456
|
|
$
|
1,099
|
|
$
|
990
|
|
$
|
894
|
|
$
|
927
|
|
$
|
546
|
|
Marketing
|
1,224
|
|
1,196
|
|
723
|
|
631
|
|
688
|
|
642
|
|
699
|
|
478
|
|
||||||||
Product development (a)
|
6,519
|
|
5,752
|
|
5,294
|
|
3,520
|
|
9,873
|
|
4,697
|
|
4,025
|
|
2,639
|
|
||||||||
General and administrative
|
3,938
|
|
3,615
|
|
3,364
|
|
2,832
|
|
2,693
|
|
2,683
|
|
2,966
|
|
2,791
|
|
||||||||
Total stock-based compensation expense
|
$
|
13,339
|
|
$
|
12,137
|
|
$
|
10,837
|
|
$
|
8,082
|
|
$
|
14,244
|
|
$
|
8,916
|
|
$
|
8,617
|
|
$
|
6,454
|
|
(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.
|
(5)
|
Includes restructuring and other exit income, as shown in the quarterly reconciliation of net income 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.
|
(6)
|
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.
|
(7)
|
Since the Company expects to settle in cash the principal outstanding under the 2019 Notes (see “Note 13—Debt”), we use the treasury stock method when calculating the potential dilutive effect of the conversion spread on diluted net income per share, if applicable. We used the if-converted method when calculating the dilutive effect of the 2018 Notes for the three months ended December 31, 2019 and September 30, 2019 and used the treasury stock method for the three months ended June 30, 2019, March 31, 2019, and all quarterly periods in 2018.
|
|
Three Months Ended
|
|||||||||||||||
|
Dec. 31,
2019 |
Sept. 30,
2019 |
June 30,
2019 |
Mar. 31,
2019 |
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
||||||||
Marketplace
|
70.2
|
%
|
71.5
|
%
|
74.7
|
%
|
75.1
|
%
|
75.7
|
%
|
74.6
|
%
|
70.2
|
%
|
73.0
|
%
|
Services
|
29.8
|
|
28.5
|
|
25.3
|
|
24.9
|
|
24.3
|
|
25.4
|
|
29.8
|
|
27.0
|
|
Total revenue
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
100.0
|
|
Cost of revenue
|
33.6
|
|
34.8
|
|
32.4
|
|
31.1
|
|
28.6
|
|
31.2
|
|
34.3
|
|
34.2
|
|
Gross profit
|
66.4
|
|
65.2
|
|
67.6
|
|
68.9
|
|
71.4
|
|
68.8
|
|
65.7
|
|
65.8
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Marketing
|
31.1
|
|
25.3
|
|
25.4
|
|
20.9
|
|
31.7
|
|
26.3
|
|
21.9
|
|
21.7
|
|
Product development
|
13.2
|
|
16.4
|
|
15.9
|
|
14.7
|
|
14.3
|
|
16.2
|
|
17.8
|
|
17.1
|
|
General and administrative
|
12.7
|
|
16.3
|
|
16.5
|
|
14.6
|
|
10.8
|
|
13.8
|
|
16.4
|
|
15.6
|
|
Total operating expenses
|
57.1
|
|
58.0
|
|
57.8
|
|
50.2
|
|
56.7
|
|
56.3
|
|
56.1
|
|
54.4
|
|
Income from operations
|
9.3
|
|
7.2
|
|
9.9
|
|
18.7
|
|
14.7
|
|
12.5
|
|
9.6
|
|
11.4
|
|
Other expense, net
|
(0.8
|
)
|
(2.1
|
)
|
(0.8
|
)
|
(0.1
|
)
|
(3.3
|
)
|
(2.8
|
)
|
(6.1
|
)
|
(0.7
|
)
|
Income before income taxes
|
8.4
|
|
5.1
|
|
9.0
|
|
18.6
|
|
11.4
|
|
9.7
|
|
3.5
|
|
10.7
|
|
Benefit (provision) for income taxes
|
3.2
|
|
2.4
|
|
1.0
|
|
0.1
|
|
9.2
|
|
3.5
|
|
(0.9
|
)
|
—
|
|
Net income
|
11.6
|
%
|
7.5
|
%
|
10.1
|
%
|
18.6
|
%
|
20.6
|
%
|
13.2
|
%
|
2.6
|
%
|
10.7
|
%
|
|
Three Months Ended
|
|||||||||||||||||||||||
|
Dec. 31,
2019 |
Sept. 30,
2019 |
June 30,
2019 |
Mar. 31,
2019 |
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
Other financial and operations data (1):
|
||||||||||||||||||||||||
GMS
|
$
|
1,655,716
|
|
$
|
1,200,371
|
|
$
|
1,094,829
|
|
$
|
1,024,028
|
|
$
|
1,246,472
|
|
$
|
922,513
|
|
$
|
901,685
|
|
$
|
861,075
|
|
GMS growth
|
32.8
|
%
|
30.1
|
%
|
21.4
|
%
|
18.9
|
%
|
22.3
|
%
|
20.4
|
%
|
20.4
|
%
|
19.8
|
%
|
||||||||
Currency-neutral GMS growth
|
33.0
|
%
|
31.1
|
%
|
22.8
|
%
|
20.6
|
%
|
23.1
|
%
|
20.8
|
%
|
19.3
|
%
|
17.6
|
%
|
||||||||
Adjusted EBITDA
|
$
|
54,624
|
|
$
|
42,076
|
|
$
|
39,701
|
|
$
|
49,867
|
|
$
|
51,359
|
|
$
|
34,035
|
|
$
|
27,695
|
|
$
|
26,421
|
|
Active sellers
|
2,699
|
|
2,592
|
|
2,333
|
|
2,227
|
|
2,115
|
|
2,043
|
|
1,983
|
|
1,970
|
|
||||||||
Active buyers
|
46,351
|
|
44,807
|
|
42,742
|
|
41,029
|
|
39,447
|
|
37,134
|
|
35,830
|
|
34,693
|
|
||||||||
Percent mobile GMS
|
58
|
%
|
59
|
%
|
58
|
%
|
58
|
%
|
56
|
%
|
56
|
%
|
55
|
%
|
54
|
%
|
||||||||
Percent international GMS
|
35
|
%
|
36
|
%
|
38
|
%
|
38
|
%
|
36
|
%
|
35
|
%
|
34
|
%
|
35
|
%
|
(1)
|
See “Key Operating and Financial Metrics” for the definitions of the following terms: “active buyers,” “active sellers,” “Adjusted EBITDA,” “GMS,” “currency-neutral GMS growth,” “international GMS,” and “mobile GMS.”
|
|
Three Months Ended
|
|||||||||||||||||||||||
|
Dec. 31,
2019 |
Sept. 30,
2019 |
June 30,
2019 |
Mar. 31,
2019 |
Dec. 31,
2018 |
Sept. 30,
2018 |
June 30,
2018 |
Mar. 31,
2018 |
||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
Net income
|
$
|
31,291
|
|
$
|
14,801
|
|
$
|
18,223
|
|
$
|
31,579
|
|
$
|
41,251
|
|
$
|
19,894
|
|
$
|
3,379
|
|
$
|
12,967
|
|
Excluding:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest and other non-operating expense, net
|
6,372
|
|
2,194
|
|
1,287
|
|
1,268
|
|
3,099
|
|
3,768
|
|
3,687
|
|
2,667
|
|
||||||||
(Benefit) provision for income taxes
|
(8,540
|
)
|
(4,712
|
)
|
(1,854
|
)
|
(142
|
)
|
(18,375
|
)
|
(5,298
|
)
|
1,246
|
|
14
|
|
||||||||
Depreciation and amortization
|
15,271
|
|
12,808
|
|
9,810
|
|
10,142
|
|
7,626
|
|
6,439
|
|
6,357
|
|
6,320
|
|
||||||||
Stock-based compensation expense
|
13,339
|
|
12,137
|
|
10,837
|
|
8,082
|
|
14,244
|
|
8,916
|
|
8,617
|
|
6,454
|
|
||||||||
Foreign exchange (gain) loss
|
(4,085
|
)
|
1,949
|
|
192
|
|
(1,062
|
)
|
3,514
|
|
373
|
|
4,450
|
|
(1,850
|
)
|
||||||||
Acquisition-related expenses
|
976
|
|
1,735
|
|
1,206
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Non-ordinary course disputes
|
—
|
|
1,164
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Restructuring and other exit costs (income)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(57
|
)
|
(41
|
)
|
(151
|
)
|
||||||||
Adjusted EBITDA
|
$
|
54,624
|
|
$
|
42,076
|
|
$
|
39,701
|
|
$
|
49,867
|
|
$
|
51,359
|
|
$
|
34,035
|
|
$
|
27,695
|
|
$
|
26,421
|
|
|
|
As of December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
|
|
(in thousands)
|
||||||
Cash and cash equivalents
|
|
$
|
443,293
|
|
|
$
|
366,985
|
|
Short-term investments
|
|
373,959
|
|
|
257,302
|
|
||
Accounts receivable, net
|
|
15,386
|
|
|
12,244
|
|
||
Long-term investments
|
|
89,343
|
|
|
—
|
|
||
Net working capital
|
|
732,510
|
|
|
568,227
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(in thousands)
|
||||||||||
Cash provided by (used in):
|
|
|
|
|
|
|
||||||
Operating activities
|
|
$
|
206,920
|
|
|
$
|
198,925
|
|
|
$
|
69,101
|
|
Investing activities
|
|
(488,373
|
)
|
|
(285,393
|
)
|
|
61,836
|
|
|||
Financing activities
|
|
359,607
|
|
|
144,006
|
|
|
6,555
|
|
|
|
Total
|
|
Less than 1
Year
|
|
2–3
Years
|
|
4–5
Years
|
|
More than
5 Years
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Finance lease obligations, including imputed interest
|
|
$
|
70,948
|
|
|
$
|
10,805
|
|
|
$
|
21,829
|
|
|
$
|
21,277
|
|
|
$
|
17,037
|
|
Operating lease obligations, including imputed interest
|
|
29,989
|
|
|
5,152
|
|
|
9,870
|
|
|
9,279
|
|
|
5,688
|
|
|||||
Long-term obligations
|
|
995,089
|
|
|
89
|
|
|
—
|
|
|
345,000
|
|
|
650,000
|
|
|||||
Interest payments
|
|
5,703
|
|
|
828
|
|
|
1,625
|
|
|
1,625
|
|
|
1,625
|
|
|||||
Purchase obligations
|
|
97,710
|
|
|
34,153
|
|
|
62,857
|
|
|
700
|
|
|
—
|
|
|||||
Total contractual obligations
|
|
$
|
1,199,439
|
|
|
$
|
51,027
|
|
|
$
|
96,181
|
|
|
$
|
377,881
|
|
|
$
|
674,350
|
|
•
|
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 Etsy.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 we recognize 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 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 shipping label revenue when an Etsy seller purchases a shipping label. We recognize 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. Shipping label revenue is recorded net of refunds.
|
•
|
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,
|
||||
|
|
2019
|
|
2018
|
|
2017
|
Expected volatility
|
|
39.1% - 39.5%
|
|
38.6% - 47.8%
|
|
41.7% - 44.2%
|
Risk-free interest rate
|
|
1.6% - 2.5%
|
|
2.6% - 2.9%
|
|
1.9% - 2.2%
|
Expected term (in years)
|
|
5.5 - 6.2
|
|
5.5 - 6.3
|
|
5.5 - 6.3
|
Dividend rate
|
|
—%
|
|
—%
|
|
—%
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Balance Sheets as of December 31, 2019 and 2018
|
|
Consolidated Statements of Operations for the years ended December 31, 2019, 2018, and 2017
|
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018, and 2017
|
|
Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, 2019, 2018, and 2017
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017
|
|
Notes to Consolidated Financial Statements
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
443,293
|
|
|
$
|
366,985
|
|
Short-term investments
|
373,959
|
|
|
257,302
|
|
||
Accounts receivable, net
|
15,386
|
|
|
12,244
|
|
||
Prepaid and other current assets
|
38,614
|
|
|
22,686
|
|
||
Funds receivable and seller accounts
|
49,786
|
|
|
21,072
|
|
||
Total current assets
|
921,038
|
|
|
680,289
|
|
||
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Property and equipment, net
|
144,864
|
|
|
120,179
|
|
||
Goodwill
|
138,731
|
|
|
37,482
|
|
||
Intangible assets, net
|
199,236
|
|
|
34,589
|
|
||
Deferred tax assets
|
14,257
|
|
|
23,464
|
|
||
Long-term investments
|
89,343
|
|
|
—
|
|
||
Other assets
|
29,542
|
|
|
507
|
|
||
Total assets
|
$
|
1,542,352
|
|
|
$
|
901,851
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
26,324
|
|
|
$
|
26,545
|
|
Accrued expenses
|
88,345
|
|
|
49,158
|
|
||
Finance lease obligations—current
|
8,275
|
|
|
3,884
|
|
||
Funds payable and amounts due to sellers
|
49,786
|
|
|
21,072
|
|
||
Deferred revenue
|
7,617
|
|
|
7,478
|
|
||
Other current liabilities
|
8,181
|
|
|
3,925
|
|
||
Total current liabilities
|
188,528
|
|
|
112,062
|
|
||
Finance lease obligations—net of current portion
|
53,611
|
|
|
2,095
|
|
||
Deferred tax liabilities
|
64,497
|
|
|
30,455
|
|
||
Facility financing obligation
|
—
|
|
|
59,991
|
|
||
Long-term debt, net
|
785,126
|
|
|
276,486
|
|
||
Other liabilities
|
43,956
|
|
|
19,864
|
|
||
Total liabilities
|
1,135,718
|
|
|
500,953
|
|
||
Commitments and contingencies (Note 14)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of December 31, 2019 and 2018; 118,342,772 and 119,771,702 shares issued and outstanding as of December 31, 2019 and 2018, respectively)
|
119
|
|
|
120
|
|
||
Preferred stock ($0.001 par value, 25,000,000 shares authorized as of December 31, 2019 and 2018)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
642,628
|
|
|
562,033
|
|
||
Accumulated deficit
|
(227,414
|
)
|
|
(153,442
|
)
|
||
Accumulated other comprehensive loss
|
(8,699
|
)
|
|
(7,813
|
)
|
||
Total stockholders’ equity
|
406,634
|
|
|
400,898
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,542,352
|
|
|
$
|
901,851
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue
|
$
|
818,379
|
|
|
$
|
603,693
|
|
|
$
|
441,231
|
|
Cost of revenue
|
271,036
|
|
|
190,762
|
|
|
150,986
|
|
|||
Gross profit
|
547,343
|
|
|
412,931
|
|
|
290,245
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Marketing
|
215,570
|
|
|
158,013
|
|
|
109,085
|
|
|||
Product development
|
121,878
|
|
|
97,249
|
|
|
74,616
|
|
|||
General and administrative
|
121,134
|
|
|
82,883
|
|
|
91,486
|
|
|||
Asset impairment charges
|
—
|
|
|
—
|
|
|
3,162
|
|
|||
Total operating expenses
|
458,582
|
|
|
338,145
|
|
|
278,349
|
|
|||
Income from operations
|
88,761
|
|
|
74,786
|
|
|
11,896
|
|
|||
Other (expense) income:
|
|
|
|
|
|
||||||
Interest expense
|
(24,320
|
)
|
|
(22,178
|
)
|
|
(11,130
|
)
|
|||
Interest and other income
|
13,199
|
|
|
8,957
|
|
|
2,394
|
|
|||
Foreign exchange gain (loss)
|
3,006
|
|
|
(6,487
|
)
|
|
29,105
|
|
|||
Total other (expense) income
|
(8,115
|
)
|
|
(19,708
|
)
|
|
20,369
|
|
|||
Income before income taxes
|
80,646
|
|
|
55,078
|
|
|
32,265
|
|
|||
Benefit for income taxes
|
15,248
|
|
|
22,413
|
|
|
49,535
|
|
|||
Net income
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
Net income per share attributable to common stockholders:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.80
|
|
|
$
|
0.64
|
|
|
$
|
0.69
|
|
Diluted
|
$
|
0.76
|
|
|
$
|
0.61
|
|
|
$
|
0.68
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
119,665,248
|
|
|
120,146,076
|
|
|
118,538,687
|
|
|||
Diluted
|
125,720,073
|
|
|
127,084,785
|
|
|
122,267,673
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
||||||
Cumulative translation adjustment
|
(1,078
|
)
|
|
(1,399
|
)
|
|
(24,898
|
)
|
|||
Unrealized gains (losses) on marketable securities, net of tax expense (benefit) of $65, $0, and ($15), respectively
|
192
|
|
|
(35
|
)
|
|
47
|
|
|||
Total other comprehensive loss
|
(886
|
)
|
|
(1,434
|
)
|
|
(24,851
|
)
|
|||
Comprehensive income
|
$
|
95,008
|
|
|
$
|
76,057
|
|
|
$
|
56,949
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total
|
|||||||||||||
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|||||||||||||||||||
Balance as of December 31, 2016
|
115,973,039
|
|
|
$
|
116
|
|
|
$
|
442,510
|
|
|
$
|
(116,341
|
)
|
|
$
|
18,472
|
|
|
$
|
344,757
|
|
Cumulative effect adjustment related to the adoption of ASU 2016-16
|
—
|
|
|
—
|
|
|
85
|
|
|
(51,449
|
)
|
|
—
|
|
|
(51,364
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
26,594
|
|
|
—
|
|
|
—
|
|
|
26,594
|
|
|||||
Exercise of vested options
|
5,760,263
|
|
|
6
|
|
|
33,832
|
|
|
—
|
|
|
—
|
|
|
33,838
|
|
|||||
Vesting of restricted stock units, net of shares withheld
|
622,167
|
|
|
1
|
|
|
(6,418
|
)
|
|
—
|
|
|
—
|
|
|
(6,417
|
)
|
|||||
Stock repurchase
|
(586,231
|
)
|
|
(1
|
)
|
|
—
|
|
|
(10,300
|
)
|
|
—
|
|
|
(10,301
|
)
|
|||||
Conversion of liability-classified restricted shares upon vesting
|
—
|
|
|
—
|
|
|
2,838
|
|
|
—
|
|
|
—
|
|
|
2,838
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,851
|
)
|
|
(24,851
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
81,800
|
|
|
—
|
|
|
81,800
|
|
|||||
Balance as of December 31, 2017
|
121,769,238
|
|
|
122
|
|
|
499,441
|
|
|
(96,290
|
)
|
|
(6,379
|
)
|
|
396,894
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
40,483
|
|
|
—
|
|
|
—
|
|
|
40,483
|
|
|||||
Exercise of vested options
|
1,588,779
|
|
|
1
|
|
|
18,252
|
|
|
—
|
|
|
—
|
|
|
18,253
|
|
|||||
Issuance of convertible senior notes, net of issuance costs and taxes
|
—
|
|
|
—
|
|
|
53,323
|
|
|
—
|
|
|
—
|
|
|
53,323
|
|
|||||
Purchase of capped call, net of taxes
|
—
|
|
|
—
|
|
|
(25,400
|
)
|
|
—
|
|
|
—
|
|
|
(25,400
|
)
|
|||||
Vesting of restricted stock units, net of shares withheld
|
860,102
|
|
|
1
|
|
|
(24,066
|
)
|
|
—
|
|
|
—
|
|
|
(24,065
|
)
|
|||||
Stock repurchase
|
(4,446,417
|
)
|
|
(4
|
)
|
|
—
|
|
|
(134,643
|
)
|
|
—
|
|
|
(134,647
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,434
|
)
|
|
(1,434
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
77,491
|
|
|
—
|
|
|
77,491
|
|
|||||
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
|
—
|
|
|
—
|
|
|
45,697
|
|
|
—
|
|
|
—
|
|
|
45,697
|
|
|||||
Exercise of vested options
|
840,835
|
|
|
1
|
|
|
9,790
|
|
|
—
|
|
|
—
|
|
|
9,791
|
|
|||||
Issuance of convertible senior notes, net of issuance costs and taxes
|
—
|
|
|
—
|
|
|
115,980
|
|
|
—
|
|
|
—
|
|
|
115,980
|
|
|||||
Purchase of capped call, net of taxes
|
—
|
|
|
—
|
|
|
(58,324
|
)
|
|
—
|
|
|
—
|
|
|
(58,324
|
)
|
|||||
Vesting of restricted stock units, net of shares withheld
|
832,642
|
|
|
1
|
|
|
(32,548
|
)
|
|
—
|
|
|
—
|
|
|
(32,547
|
)
|
|||||
Stock repurchase
|
(3,102,407
|
)
|
|
(3
|
)
|
|
—
|
|
|
(176,982
|
)
|
|
—
|
|
|
(176,985
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(886
|
)
|
|
(886
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
95,894
|
|
|
—
|
|
|
95,894
|
|
|||||
Balance as of December 31, 2019
|
118,342,772
|
|
|
$
|
119
|
|
|
$
|
642,628
|
|
|
$
|
(227,414
|
)
|
|
$
|
(8,699
|
)
|
|
$
|
406,634
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
44,395
|
|
|
38,231
|
|
|
26,559
|
|
|||
Depreciation and amortization expense
|
48,031
|
|
|
26,742
|
|
|
27,197
|
|
|||
Bad debt expense
|
10,963
|
|
|
4,124
|
|
|
2,497
|
|
|||
Foreign exchange (gain) loss
|
(5,708
|
)
|
|
5,997
|
|
|
(27,424
|
)
|
|||
Amortization of debt issuance costs
|
2,006
|
|
|
1,191
|
|
|
463
|
|
|||
Non-cash interest expense
|
19,108
|
|
|
10,968
|
|
|
3,117
|
|
|||
Interest (income) expense on marketable securities
|
(4,182
|
)
|
|
(2,887
|
)
|
|
426
|
|
|||
Loss on disposal of assets
|
1,667
|
|
|
136
|
|
|
520
|
|
|||
Asset impairment charges
|
—
|
|
|
—
|
|
|
3,162
|
|
|||
Deferred income taxes
|
(15,248
|
)
|
|
(22,414
|
)
|
|
(49,535
|
)
|
|||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable
|
(12,656
|
)
|
|
17,215
|
|
|
(8,826
|
)
|
|||
Funds receivable and seller accounts
|
(23,177
|
)
|
|
23,436
|
|
|
(13,477
|
)
|
|||
Prepaid expenses and other current assets
|
(14,156
|
)
|
|
(4,785
|
)
|
|
3,024
|
|
|||
Other assets
|
4,045
|
|
|
43
|
|
|
(28
|
)
|
|||
Accounts payable
|
(953
|
)
|
|
13,364
|
|
|
2,837
|
|
|||
Accrued and other current liabilities
|
37,410
|
|
|
23,079
|
|
|
(2,659
|
)
|
|||
Funds payable and amounts due to sellers
|
23,177
|
|
|
(23,436
|
)
|
|
13,477
|
|
|||
Deferred revenue
|
191
|
|
|
1,331
|
|
|
434
|
|
|||
Other liabilities
|
(3,887
|
)
|
|
9,099
|
|
|
5,537
|
|
|||
Net cash provided by operating activities
|
206,920
|
|
|
198,925
|
|
|
69,101
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Cash paid for asset acquisition and intangible assets
|
(1,963
|
)
|
|
(35,494
|
)
|
|
—
|
|
|||
Acquisition of businesses, net of cash acquired
|
(270,409
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of property and equipment
|
(7,528
|
)
|
|
(1,019
|
)
|
|
(3,948
|
)
|
|||
Development of internal-use software
|
(7,750
|
)
|
|
(19,537
|
)
|
|
(9,208
|
)
|
|||
Purchases of marketable securities
|
(661,821
|
)
|
|
(514,286
|
)
|
|
(62,348
|
)
|
|||
Sales of marketable securities
|
461,098
|
|
|
284,943
|
|
|
137,340
|
|
|||
Net cash (used in) provided by investing activities
|
(488,373
|
)
|
|
(285,393
|
)
|
|
61,836
|
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Payment of tax obligations on vested equity awards
|
(32,547
|
)
|
|
(24,065
|
)
|
|
(6,417
|
)
|
|||
Repurchase of stock
|
(176,985
|
)
|
|
(134,647
|
)
|
|
(10,301
|
)
|
|||
Proceeds from exercise of stock options
|
9,791
|
|
|
18,253
|
|
|
33,838
|
|
|||
Proceeds from issuance of convertible senior notes
|
650,000
|
|
|
345,000
|
|
|
—
|
|
|||
Payment of debt issuance costs
|
(11,904
|
)
|
|
(9,962
|
)
|
|
—
|
|
|||
Purchase of capped call
|
(76,180
|
)
|
|
(34,224
|
)
|
|
—
|
|
|||
Payments on finance lease obligations
|
(10,833
|
)
|
|
(6,057
|
)
|
|
(7,798
|
)
|
|||
Payments on facility financing obligation
|
—
|
|
|
(10,164
|
)
|
|
(5,883
|
)
|
|||
Other financing, net
|
8,265
|
|
|
(128
|
)
|
|
3,116
|
|
|||
Net cash provided by financing activities
|
359,607
|
|
|
144,006
|
|
|
6,555
|
|
|||
Effect of exchange rate changes on cash
|
(1,846
|
)
|
|
(5,995
|
)
|
|
(3,642
|
)
|
|||
Net increase in cash, cash equivalents, and restricted cash
|
76,308
|
|
|
51,543
|
|
|
133,850
|
|
|||
Cash, cash equivalents, and restricted cash at beginning of period
|
372,326
|
|
|
320,783
|
|
|
186,933
|
|
|||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
448,634
|
|
|
$
|
372,326
|
|
|
$
|
320,783
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Supplemental cash flow disclosures:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
3,206
|
|
|
$
|
10,002
|
|
|
$
|
7,555
|
|
Cash paid for income taxes
|
$
|
2,084
|
|
|
$
|
966
|
|
|
$
|
1,003
|
|
Supplemental non-cash disclosures:
|
|
|
|
|
|
||||||
Stock-based compensation capitalized in development of capitalized software
|
$
|
1,302
|
|
|
$
|
2,252
|
|
|
$
|
807
|
|
Additions to development of internal-use software and property and equipment included in accounts payable and accrued expenses
|
$
|
1,148
|
|
|
$
|
1,211
|
|
|
$
|
956
|
|
Right-of-assets obtained in exchange for new lease liabilities:
|
|
|
|
|
|
||||||
Finance Leases
|
$
|
849
|
|
|
$
|
2,122
|
|
|
$
|
5,586
|
|
|
As of December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Beginning 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
|
|
|
|
|
|
|
|
||||||
Ending balance:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
443,293
|
|
|
$
|
366,985
|
|
|
$
|
315,442
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
|
5,341
|
|
|||
Total cash, cash equivalents, and restricted cash
|
$
|
448,634
|
|
|
$
|
372,326
|
|
|
$
|
320,783
|
|
•
|
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 the seller’s listings in search results in the Etsy.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 offered 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 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.
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash and cash equivalents
|
$
|
443,293
|
|
|
$
|
366,985
|
|
Short-term investments
|
373,959
|
|
|
257,302
|
|
||
Long-term investments
|
89,343
|
|
|
—
|
|
||
Total cash, cash equivalents, and short- and long-term investments
|
$
|
906,595
|
|
|
$
|
624,287
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Balance as of the beginning of period
|
$
|
4,720
|
|
|
$
|
2,687
|
|
|
$
|
1,999
|
|
Bad debt expense
|
10,963
|
|
|
4,124
|
|
|
2,497
|
|
|||
Write-offs, net of recoveries and other adjustments
|
(10,650
|
)
|
|
(2,091
|
)
|
|
(1,809
|
)
|
|||
Balance as of the end of period
|
$
|
5,033
|
|
|
$
|
4,720
|
|
|
$
|
2,687
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Marketplace revenue (1)
|
$
|
593,646
|
|
|
$
|
444,765
|
|
|
$
|
329,362
|
|
Services revenue
|
224,733
|
|
|
158,928
|
|
|
111,869
|
|
|||
Revenue
|
$
|
818,379
|
|
|
$
|
603,693
|
|
|
$
|
441,231
|
|
(1)
|
Other revenue for the years ended December 31, 2019, 2018, and 2017 has been reclassified and presented within Marketplace revenue. Comparative periods have been reclassified to conform to current period presentation.
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Domestic
|
$
|
14,544
|
|
|
$
|
36,157
|
|
|
$
|
(16,583
|
)
|
Foreign
|
66,102
|
|
|
18,921
|
|
|
48,848
|
|
|||
Income before income taxes
|
$
|
80,646
|
|
|
$
|
55,078
|
|
|
$
|
32,265
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
(3,967
|
)
|
|
$
|
709
|
|
|
$
|
(6,397
|
)
|
State
|
1,053
|
|
|
(578
|
)
|
|
79
|
|
|||
Foreign
|
352
|
|
|
600
|
|
|
476
|
|
|||
Total current
|
(2,562
|
)
|
|
731
|
|
|
(5,842
|
)
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
(19,734
|
)
|
|
(3,343
|
)
|
|
(34,948
|
)
|
|||
State
|
(1,564
|
)
|
|
3,496
|
|
|
(8,778
|
)
|
|||
Foreign
|
8,612
|
|
|
(23,297
|
)
|
|
33
|
|
|||
Total deferred
|
(12,686
|
)
|
|
(23,144
|
)
|
|
(43,693
|
)
|
|||
Total income tax benefit
|
$
|
(15,248
|
)
|
|
$
|
(22,413
|
)
|
|
$
|
(49,535
|
)
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Income tax provision at the federal statutory rate (a)
|
$
|
16,936
|
|
|
$
|
11,566
|
|
|
$
|
11,308
|
|
State and local income taxes net of federal benefit
|
973
|
|
|
3,839
|
|
|
(691
|
)
|
|||
Foreign income tax rate differential
|
(5,454
|
)
|
|
(298
|
)
|
|
(11,878
|
)
|
|||
Stock-based compensation
|
(16,281
|
)
|
|
(11,717
|
)
|
|
(12,584
|
)
|
|||
Research and development credit
|
(9,864
|
)
|
|
(4,115
|
)
|
|
(1,098
|
)
|
|||
U.S. tax reform (b)
|
(4,197
|
)
|
|
3,897
|
|
|
(31,063
|
)
|
|||
Non-deductible expenses
|
1,784
|
|
|
(329
|
)
|
|
168
|
|
|||
Uncertain tax positions
|
380
|
|
|
382
|
|
|
789
|
|
|||
Change in valuation allowance (c)
|
—
|
|
|
(28,733
|
)
|
|
(4,673
|
)
|
|||
Return to provision adjustment
|
500
|
|
|
3,293
|
|
|
167
|
|
|||
Other
|
(25
|
)
|
|
(198
|
)
|
|
20
|
|
|||
Total income tax benefit
|
$
|
(15,248
|
)
|
|
$
|
(22,413
|
)
|
|
$
|
(49,535
|
)
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carryforwards
|
$
|
19,599
|
|
|
$
|
13,347
|
|
Research and development credit carryforwards
|
13,133
|
|
|
7,567
|
|
||
Lease liability (a)
|
18,666
|
|
|
—
|
|
||
Stock-based compensation expense
|
7,642
|
|
|
6,623
|
|
||
Excess tax basis in intangible assets
|
3,572
|
|
|
12,109
|
|
||
Accrued bonus
|
4,065
|
|
|
1,049
|
|
||
Deferred rent (a)
|
—
|
|
|
529
|
|
||
Other deferred tax assets
|
3,944
|
|
|
1,858
|
|
||
Total deferred tax assets
|
70,621
|
|
|
43,082
|
|
||
Less: valuation allowance
|
883
|
|
|
1,673
|
|
||
Total net deferred tax asset
|
69,738
|
|
|
41,409
|
|
||
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
||||
Excess book basis in intangible assets
|
(39,500
|
)
|
|
(362
|
)
|
||
Restructuring liability
|
(29,635
|
)
|
|
(33,730
|
)
|
||
Convertible debt
|
(22,839
|
)
|
|
(7,283
|
)
|
||
Right-of-use asset (a)
|
(17,596
|
)
|
|
—
|
|
||
Depreciation (a)
|
(10,328
|
)
|
|
(6,933
|
)
|
||
Other deferred tax liabilities
|
(80
|
)
|
|
(92
|
)
|
||
Total deferred tax liabilities
|
(119,978
|
)
|
|
(48,400
|
)
|
||
Net deferred tax liabilities
|
$
|
(50,240
|
)
|
|
$
|
(6,991
|
)
|
|
December 31, 2019
|
|
Expiration Period
|
||
U.S. Federal net operating loss carryforwards
|
$
|
30,403
|
|
|
2035-Unlimited
|
U.S. Federal credit carryforwards
|
13,054
|
|
|
2035-2039
|
|
U.S. State net operating loss carryforwards
|
21,150
|
|
|
2027-2039
|
|
U.S. State credit carryforwards
|
184
|
|
|
2020-2024
|
|
Non-U.S. net operating loss carryforwards
|
91,440
|
|
|
Unlimited
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Balance as of the beginning of period
|
$
|
1,673
|
|
|
$
|
32,455
|
|
|
$
|
13,839
|
|
Additions charged to expense
|
504
|
|
|
—
|
|
|
16,743
|
|
|||
Deletions credited to expense
|
(4
|
)
|
|
(28,733
|
)
|
|
—
|
|
|||
Currency translation and other balance sheet activity
|
(1,290
|
)
|
|
(2,049
|
)
|
|
1,873
|
|
|||
Balance as of the end of period
|
$
|
883
|
|
|
$
|
1,673
|
|
|
$
|
32,455
|
|
|
As of December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Balance as of the beginning of period
|
$
|
18,819
|
|
|
$
|
17,013
|
|
|
$
|
23,574
|
|
Additions based on tax positions related to the current year
|
1,847
|
|
|
921
|
|
|
732
|
|
|||
Additions for tax positions of prior years
|
3,620
|
|
|
946
|
|
|
118
|
|
|||
Reductions for tax provisions of prior years
|
(2,423
|
)
|
|
(61
|
)
|
|
(7,411
|
)
|
|||
Lapse of Statute of Limitation
|
(184
|
)
|
|
—
|
|
|
—
|
|
|||
Additions recorded through goodwill as part of business combination
|
1,334
|
|
|
—
|
|
|
—
|
|
|||
Settlements
|
(3,080
|
)
|
|
—
|
|
|
—
|
|
|||
Balance as of the end of period
|
$
|
19,933
|
|
|
$
|
18,819
|
|
|
$
|
17,013
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net income
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
Net income allocated to participating securities under the two-class method
|
—
|
|
|
(37
|
)
|
|
(80
|
)
|
|||
Net income attributable to common stockholders—basic
|
95,894
|
|
|
77,454
|
|
|
81,720
|
|
|||
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 attributable to common stockholders—diluted
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
82,571
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding—basic (1)
|
119,665,248
|
|
|
120,146,076
|
|
|
118,538,687
|
|
|||
Dilutive effect of assumed conversion of options to purchase common stock
|
4,516,413
|
|
|
4,238,622
|
|
|
2,498,448
|
|
|||
Dilutive effect of assumed conversion of restricted stock units
|
1,521,719
|
|
|
1,721,658
|
|
|
1,177,799
|
|
|||
Dilutive effect of assumed conversion of convertible debt (2)
|
—
|
|
|
900,580
|
|
|
—
|
|
|||
Diluted effective of assumed conversion of restricted stock from acquisition
|
16,693
|
|
|
77,849
|
|
|
52,739
|
|
|||
Weighted average common shares outstanding—diluted
|
125,720,073
|
|
|
127,084,785
|
|
|
122,267,673
|
|
|||
|
|
|
|
|
|
||||||
Net income per share attributable to common stockholders—basic
|
$
|
0.80
|
|
|
$
|
0.64
|
|
|
$
|
0.69
|
|
Net income per share attributable to common stockholders—diluted
|
$
|
0.76
|
|
|
$
|
0.61
|
|
|
$
|
0.68
|
|
(1)
|
57,482, and 114,963 shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for the year ended December 31, 2018 and 2017, respectively.
|
(2)
|
Since the Company expects to settle in cash the principal outstanding under the 2019 Notes (see “Note 13—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 year ended December 31, 2019 and used the treasury stock method for the year ended December 31, 2018.
|
|
Initial Fair Value Estimate (1)
|
|
Measurement Period Adjustments (2)
|
|
Final Fair Value as Adjusted
|
|||||||
Short-term investments
|
$
|
1,028
|
|
|
$
|
—
|
|
|
$
|
1,028
|
|
|
Other current assets (3)
|
6,442
|
|
|
(3,540
|
)
|
|
2,902
|
|
||||
Funds receivable and seller accounts
|
5,578
|
|
|
—
|
|
|
5,578
|
|
||||
Property and equipment other
|
1,543
|
|
|
—
|
|
|
1,543
|
|
||||
Developed technology
|
30,300
|
|
|
—
|
|
|
30,300
|
|
||||
Trademark
|
79,400
|
|
|
—
|
|
|
79,400
|
|
||||
Customer relationships
|
93,500
|
|
|
—
|
|
|
93,500
|
|
||||
Goodwill
|
102,039
|
|
|
(336
|
)
|
|
101,703
|
|
||||
Other assets (3)
|
3,225
|
|
|
3,518
|
|
|
6,743
|
|
||||
Other net working capital
|
(208
|
)
|
|
—
|
|
|
(208
|
)
|
||||
Funds payable and amounts due to sellers
|
(5,578
|
)
|
|
—
|
|
|
(5,578
|
)
|
||||
Other current liabilities (3)
|
(8,520
|
)
|
|
4,836
|
|
|
(3,684
|
)
|
||||
Other liabilities (3)
|
(2,497
|
)
|
|
(4,836
|
)
|
|
(7,333
|
)
|
||||
Deferred tax liability, net
|
(34,898
|
)
|
|
(587
|
)
|
|
(35,485
|
)
|
||||
Total purchase price
|
$
|
271,354
|
|
|
$
|
(945
|
)
|
|
$
|
270,409
|
|
(1)
|
As previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. This was the quarter in which the business combination was completed.
|
(2)
|
The Company recorded measurement period adjustments in the fourth quarter of fiscal 2019 due to the final working capital adjustment as well as new facts and circumstances related to assets and liabilities which existed at the acquisition date. The adjustments included an increase in deferred tax liability of $0.6 million and a decrease in goodwill of $0.3 million. Other adjustments are related to the classification of certain assets and liabilities within the balance sheet.
|
(3)
|
Other current liabilities and other liabilities are primarily related to non-income tax related contingency reserves, which are wholly offset by an indemnification asset and a deferred tax asset.
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenue
|
$
|
847,154
|
|
|
$
|
639,743
|
|
Net income
|
88,595
|
|
|
53,587
|
|
|
Year Ended
December 31, |
||||||
|
2019
|
|
2018
|
||||
Balance as of the beginning of the period
|
$
|
37,482
|
|
|
$
|
38,541
|
|
Business combination
|
101,703
|
|
|
—
|
|
||
Foreign currency translation adjustments
|
(454
|
)
|
|
(1,059
|
)
|
||
Balance as of the end of the period
|
$
|
138,731
|
|
|
$
|
37,482
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||||||||||||||||||
|
Gross book
value |
|
Accumulated
amortization |
|
Foreign currency translation
|
|
Net book
value |
|
Gross book
value |
|
Accumulated
amortization |
|
Foreign currency translation
|
|
Net book
value |
||||||||||||||||
Customer relationships
|
$
|
93,500
|
|
|
$
|
(2,338
|
)
|
|
$
|
—
|
|
|
$
|
91,162
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Trademark
|
79,400
|
|
|
(1,985
|
)
|
|
—
|
|
|
77,415
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Referral agreement
|
37,127
|
|
|
(5,417
|
)
|
|
(1,356
|
)
|
|
30,354
|
|
|
35,323
|
|
|
(1,890
|
)
|
|
(712
|
)
|
|
32,721
|
|
||||||||
Technology
|
7,200
|
|
|
(7,200
|
)
|
|
—
|
|
|
—
|
|
|
7,200
|
|
|
(5,500
|
)
|
|
—
|
|
|
1,700
|
|
||||||||
Patent licenses
|
332
|
|
|
(27
|
)
|
|
—
|
|
|
305
|
|
|
172
|
|
|
(4
|
)
|
|
—
|
|
|
168
|
|
||||||||
Intangible assets, net
|
$
|
217,559
|
|
|
$
|
(16,967
|
)
|
|
$
|
(1,356
|
)
|
|
$
|
199,236
|
|
|
$
|
42,695
|
|
|
$
|
(7,394
|
)
|
|
$
|
(712
|
)
|
|
$
|
34,589
|
|
2020
|
$
|
15,148
|
|
2021
|
15,148
|
|
|
2022
|
15,148
|
|
|
2023
|
15,148
|
|
|
2024
|
15,148
|
|
|
Thereafter
|
123,496
|
|
|
Total amortization expense
|
$
|
199,236
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
United States
|
$
|
550,257
|
|
|
$
|
422,523
|
|
|
$
|
317,755
|
|
International
|
268,122
|
|
|
181,170
|
|
|
123,476
|
|
|||
Revenue
|
$
|
818,379
|
|
|
$
|
603,693
|
|
|
$
|
441,231
|
|
|
|
|
|
|
|
||||||
United States (1)(2)
|
$
|
(23,702
|
)
|
|
$
|
7,460
|
|
|
$
|
(43,014
|
)
|
International
|
104,348
|
|
|
47,618
|
|
|
75,279
|
|
|||
(Loss) income before income taxes
|
$
|
80,646
|
|
|
$
|
55,078
|
|
|
$
|
32,265
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
510
|
|
|
$
|
7,175
|
|
|
$
|
7,029
|
|
International
|
95,384
|
|
|
70,316
|
|
|
74,771
|
|
|||
Net income
|
$
|
95,894
|
|
|
$
|
77,491
|
|
|
$
|
81,800
|
|
(1)
|
The United States loss before income taxes in the year ended December 31, 2019 was primarily driven by a majority of operating expenses being incurred in the United States.
|
(2)
|
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 10—Property and Equipment” for additional information on restructuring and other exit costs and asset impairment charges, respectively.
|
|
As of December 31, 2019
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Asset
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
—
|
|
|
$
|
5,794
|
|
|
$
|
—
|
|
|
$
|
5,794
|
|
Certificate of deposit
|
—
|
|
|
2,959
|
|
|
—
|
|
|
2,959
|
|
||||
Money market funds
|
228,859
|
|
|
—
|
|
|
—
|
|
|
228,859
|
|
||||
|
228,859
|
|
|
8,753
|
|
|
—
|
|
|
237,612
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
29,320
|
|
|
—
|
|
|
29,320
|
|
||||
Certificate of deposit
|
—
|
|
|
26,132
|
|
|
—
|
|
|
26,132
|
|
||||
Corporate bonds
|
—
|
|
|
114,202
|
|
|
—
|
|
|
114,202
|
|
||||
U.S. Government and agency securities
|
204,305
|
|
|
—
|
|
|
—
|
|
|
204,305
|
|
||||
|
204,305
|
|
|
169,654
|
|
|
—
|
|
|
373,959
|
|
||||
Funds receivable and seller accounts:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
18,168
|
|
|
—
|
|
|
—
|
|
|
18,168
|
|
||||
|
18,168
|
|
|
—
|
|
|
—
|
|
|
18,168
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
—
|
|
|
4,729
|
|
|
—
|
|
|
4,729
|
|
||||
Corporate bonds
|
—
|
|
|
38,563
|
|
|
—
|
|
|
38,563
|
|
||||
U.S. Government and agency securities
|
46,051
|
|
|
—
|
|
|
—
|
|
|
46,051
|
|
||||
|
46,051
|
|
|
43,292
|
|
|
—
|
|
|
89,343
|
|
||||
|
$
|
497,383
|
|
|
$
|
221,699
|
|
|
$
|
—
|
|
|
$
|
719,082
|
|
|
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
|
|
|
Cost
|
|
Gross
Unrealized Holding Loss |
|
Gross
Unrealized Holding Gain |
|
Fair Value
|
||||||||
December 31, 2019
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
5,794
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,794
|
|
Certificate of deposit
|
2,958
|
|
|
—
|
|
|
1
|
|
|
2,959
|
|
||||
|
8,752
|
|
|
—
|
|
|
1
|
|
|
8,753
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
29,319
|
|
|
(1
|
)
|
|
2
|
|
|
29,320
|
|
||||
Certificate of deposit
|
26,129
|
|
|
(3
|
)
|
|
6
|
|
|
26,132
|
|
||||
Corporate bonds
|
114,068
|
|
|
(22
|
)
|
|
156
|
|
|
114,202
|
|
||||
U.S. Government and agency securities
|
204,246
|
|
|
(8
|
)
|
|
67
|
|
|
204,305
|
|
||||
|
373,762
|
|
|
(34
|
)
|
|
231
|
|
|
373,959
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
4,727
|
|
|
—
|
|
|
2
|
|
|
4,729
|
|
||||
Corporate bonds
|
38,582
|
|
|
(35
|
)
|
|
16
|
|
|
38,563
|
|
||||
U.S. Government and agency securities
|
46,017
|
|
|
(2
|
)
|
|
36
|
|
|
46,051
|
|
||||
|
89,326
|
|
|
(37
|
)
|
|
54
|
|
|
89,343
|
|
||||
|
$
|
471,840
|
|
|
$
|
(71
|
)
|
|
$
|
286
|
|
|
$
|
472,055
|
|
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
|
|
|
|
|
As of
December 31, |
||||||
|
Estimated useful lives
|
|
2019
|
|
2018
|
||||
Computer equipment (1)
|
3 years
|
|
$
|
35,190
|
|
|
$
|
36,670
|
|
Furniture and equipment
|
2 - 4 years
|
|
7,999
|
|
|
6,574
|
|
||
Leasehold improvements (2)
|
Shorter of life of asset or lease term
|
|
48,688
|
|
|
10,731
|
|
||
Construction in progress
|
Not applicable
|
|
206
|
|
|
551
|
|
||
Building (2)
|
25 years
|
|
66,650
|
|
|
81,892
|
|
||
Website development and internal-use software (3)
|
3 - 5 years
|
|
106,215
|
|
|
69,201
|
|
||
|
|
|
264,948
|
|
|
205,619
|
|
||
|
|
|
|
|
|
||||
Less: Accumulated depreciation and amortization
|
|
|
120,084
|
|
|
85,440
|
|
||
|
|
|
$
|
144,864
|
|
|
$
|
120,179
|
|
(1)
|
Computer equipment includes leased equipment which are accounted for as finance leases since the adoption of ASU 2016-02—Leases in the first quarter of 2019. These leases were previously accounted for as capital leases.
|
(2)
|
In 2014 the Company applied build-to-suit accounting treatment to its headquarters lease in Brooklyn, New York. Upon adoption of ASU 2016-02—Leases in the first quarter of 2019, the Company derecognized the existing facility financing obligation and existing building asset for sale-leaseback transactions that currently do not qualify for sale accounting of $60.0 million and $51.1 million, respectively, and $22.1 million was reclassified from building to leasehold improvements and the Company recognized a new ROU asset of $66.7 million for the associated lease. For more information on the adoption of ASU 2016-02—Leases see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies.”
|
(3)
|
On August 15, 2019, the Company acquired Reverb in a business combination, including the developed technology which was recognized at fair value. This amount is included in website development and internal-use software and is amortized on a straight-line basis over a period of 3 years.
|
|
Year Ended
December 31, |
||||||
|
2019
|
|
2018
|
||||
Balance as of the beginning of the period
|
$
|
69,201
|
|
|
$
|
48,333
|
|
Additions to website development
|
8,687
|
|
|
22,068
|
|
||
Acquisition of developed technology
|
30,300
|
|
|
—
|
|
||
Less: Retirements
|
1,973
|
|
|
1,200
|
|
||
|
106,215
|
|
|
69,201
|
|
||
Less:
|
|
|
|
||||
Accumulated amortization balance as of the beginning of the period
|
38,418
|
|
|
29,991
|
|
||
Amortization Expense
|
18,737
|
|
|
9,519
|
|
||
Less: Retirements
|
340
|
|
|
1,092
|
|
||
Accumulated amortization balance as of the end of the period
|
56,815
|
|
|
38,418
|
|
||
|
$
|
49,400
|
|
|
$
|
30,783
|
|
|
Year Ended December 31, 2019
|
||
Operating lease cost
|
$
|
5,405
|
|
Finance lease cost:
|
|
||
Amortization of right-of-use assets
|
13,124
|
|
|
Interest on lease liabilities
|
3,205
|
|
|
Total finance lease cost
|
16,329
|
|
|
Other lease cost, net (1)
|
1,149
|
|
|
Total lease cost
|
$
|
22,883
|
|
(1)
|
Other lease cost, net includes short-term sublease income, short-term lease costs, and variable lease costs, which are immaterial.
|
|
As of December 31, 2019
|
||
Operating leases:
|
|
||
Other assets
|
$
|
24,362
|
|
Other current liabilities
|
$
|
4,134
|
|
Other liabilities
|
22,322
|
|
|
Total operating lease liabilities
|
$
|
26,456
|
|
|
|
||
Finance leases:
|
|
||
Property and equipment, net
|
$
|
59,696
|
|
Finance lease obligations—current
|
$
|
8,275
|
|
Finance lease obligations—net of current portion
|
53,611
|
|
|
Total finance lease liabilities
|
$
|
61,886
|
|
|
As of December 31, 2019
|
|
Weighted average remaining lease term:
|
|
|
Operating leases
|
5.94 years
|
|
Finance leases
|
6.37 years
|
|
Weighted average discount rate:
|
|
|
Operating leases
|
4.26
|
%
|
Finance leases
|
4.31
|
%
|
|
Operating Leases
|
|
Finance Leases
|
||||
2020
|
$
|
5,152
|
|
|
$
|
10,805
|
|
2021
|
4,928
|
|
|
11,152
|
|
||
2022
|
4,942
|
|
|
10,677
|
|
||
2023
|
4,981
|
|
|
10,599
|
|
||
2024
|
4,298
|
|
|
10,678
|
|
||
Thereafter
|
5,688
|
|
|
17,037
|
|
||
Total future minimum lease payments
|
29,989
|
|
|
70,948
|
|
||
Less imputed interest
|
3,533
|
|
|
9,062
|
|
||
Total
|
$
|
26,456
|
|
|
$
|
61,886
|
|
|
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 December 31,
|
||||||
|
2019
|
|
2018
|
||||
Sales and use tax payable
|
$
|
39,250
|
|
|
$
|
12,242
|
|
Vendor accruals
|
25,760
|
|
|
17,817
|
|
||
Accrued bonus
|
19,561
|
|
|
12,906
|
|
||
Payroll-related liabilities
|
3,172
|
|
|
2,406
|
|
||
Accrued vacation
|
602
|
|
|
3,787
|
|
||
Total accrued expenses
|
$
|
88,345
|
|
|
$
|
49,158
|
|
|
Purchase Obligations
|
||
Periods ending
|
|
||
2020
|
$
|
34,153
|
|
2021
|
30,735
|
|
|
2022
|
32,122
|
|
|
2023
|
700
|
|
|
2024
|
—
|
|
|
Thereafter
|
—
|
|
|
Total purchase obligations
|
$
|
97,710
|
|
|
Shares Repurchased
|
|
Average Price Paid per Share (1)
|
|
Value of Shares Repurchased (1)
|
|
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
|
|
|||
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
|
)
|
|||
December 31, 2019
|
425,078
|
|
|
52.21
|
|
|
22,202
|
|
|
(22,202
|
)
|
|||
Balance as of December 31, 2019
|
6,040,859
|
|
|
$
|
32.68
|
|
|
$
|
197,500
|
|
|
$
|
102,500
|
|
|
Year Ended
December 31, |
||||
|
2019
|
|
2018
|
|
2017
|
Volatility
|
39.1% - 39.5%
|
|
38.6% - 47.8%
|
|
41.7% - 44.2%
|
Risk-free interest rate
|
1.6% - 2.5%
|
|
2.6% - 2.9%
|
|
1.9% - 2.2%
|
Expected term (in years)
|
5.5 - 6.2
|
|
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, 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
|
|
||
Granted
|
462,563
|
|
|
64.29
|
|
|
|
|
|
|||
Exercised
|
(840,835
|
)
|
|
11.64
|
|
|
|
|
|
|||
Forfeited/Canceled
|
(217,803
|
)
|
|
30.11
|
|
|
|
|
|
|||
Outstanding at December 31, 2019
|
6,294,919
|
|
|
16.26
|
|
|
7.24
|
|
185,900
|
|
||
Total exercisable at December 31, 2019
|
3,835,279
|
|
|
12.30
|
|
|
6.88
|
|
123,671
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Weighted average grant date fair value of options granted
|
$
|
26.75
|
|
|
$
|
13.33
|
|
|
$
|
4.85
|
|
Intrinsic value of options exercised
|
42,758
|
|
|
34,268
|
|
|
52,693
|
|
|||
Fair value of awards vested
|
41,997
|
|
|
32,717
|
|
|
19,826
|
|
|
Shares
|
|
Weighted-Average
Fair Value |
|||
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
|
|
|
Granted
|
1,464,785
|
|
|
61.92
|
|
|
Vested
|
(1,392,295
|
)
|
|
22.67
|
|
|
Forfeited/Canceled
|
(592,445
|
)
|
|
31.25
|
|
|
Unvested at December 31, 2019
|
2,960,413
|
|
|
40.61
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cost of revenue
|
$
|
5,787
|
|
|
$
|
3,357
|
|
|
$
|
1,739
|
|
Marketing
|
3,774
|
|
|
2,507
|
|
|
1,933
|
|
|||
Product development
|
21,085
|
|
|
21,234
|
|
|
8,274
|
|
|||
General and administrative
|
13,749
|
|
|
11,133
|
|
|
14,613
|
|
|||
Total stock-based compensation expense
|
$
|
44,395
|
|
|
$
|
38,231
|
|
|
$
|
26,559
|
|
|
Severance Charge
|
|
Stock-Based Compensation
|
|
Other Exit Costs
|
|
Total
|
||||||||
Balance, December 31, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total restructuring and other exit costs
|
10,204
|
|
|
2,701
|
|
|
992
|
|
|
13,897
|
|
||||
Costs charged against equity/assets
|
—
|
|
|
(2,701
|
)
|
|
(286
|
)
|
|
(2,987
|
)
|
||||
Cash payments
|
(8,896
|
)
|
|
—
|
|
|
(672
|
)
|
|
(9,568
|
)
|
||||
Balance, December 31, 2017
|
1,308
|
|
|
—
|
|
|
34
|
|
|
1,342
|
|
||||
Total restructuring and other exit income
|
(244
|
)
|
|
—
|
|
|
(5
|
)
|
|
(249
|
)
|
||||
Cash payments
|
(1,064
|
)
|
|
—
|
|
|
(29
|
)
|
|
(1,093
|
)
|
||||
Balance, December 31, 2018
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance, December 31, 2019
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Year Ended
December 31, |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
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
|
|
|
S-1/A
|
|
333-202497
|
|
10.4
|
|
3/31/2015
|
|
|
||
|
S-1
|
|
333-202497
|
|
10.6
|
|
3/4/2015
|
|
|
||
|
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
|
|
|
||
|
10-K
|
|
001-36911
|
|
10.11
|
|
2/28/2019
|
|
|
||
|
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
|
||
|
10-Q
|
|
001-36911
|
|
10.1
|
|
5/9/2019
|
|
|
||
|
10-Q
|
|
001-36911
|
|
10.1
|
|
10/31/2019
|
|
|
||
|
8-K
|
|
001-36911
|
|
99.1
|
|
9/23/2019
|
|
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
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.
|
**
|
The cover page interactive data file is embedded within the inline XBRL document and included in Exhibit 101.
|
ETSY, INC.
|
|
Date: February 26, 2020
|
/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 26, 2020
|
/s/ Rachel Glaser
Rachel Glaser
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
February 26, 2020
|
/s/ Fred Wilson
Fred Wilson
|
Chair
|
February 26, 2020
|
/s/ Gary Briggs
Gary Briggs
|
Director
|
February 26, 2020
|
/s/ M. Michele Burns
M. Michele Burns
|
Director
|
February 26, 2020
|
/s/ Edith Cooper
Edith Cooper
|
Director
|
February 26, 2020
|
/s/ Jonathan D. Klein
Jonathan D. Klein
|
Director
|
February 26, 2020
|
/s/ Melissa Reiff
Melissa Reiff
|
Director
|
February 26, 2020
|
/s/ Margaret M. Smyth
Margaret M. Smyth
|
Director
|
February 26, 2020
|
Board Chair
|
$100,000
|
Chair of the Audit Committee
|
$20,000
|
Member (other than Chair) of the Audit Committee
|
$10,000
|
Chair of the Compensation Committee
|
$15,000
|
Member (other than Chair) of the Compensation Committee
|
$7,500
|
Chair of the Nominating and Corporate Governance Committee
|
$8,000
|
Member (other than Chair) of the Nominating and Corporate Governance Committee
|
$4,000
|
Member of any other Committee constituted by the Board from time to time
|
$40,000 (unless otherwise determined by the Board or Compensation Committee)
|
Name of Subsidiary
|
|
Jurisdiction of Incorporation or Organization
|
Etsy Ireland UC
|
|
Ireland
|
Reverb Holdings, Inc.
|
|
United States
|
Reverb.com, LLC
|
|
United States
|
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:
|