☒
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended
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March 31, 2020
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OR
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☐
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
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Delaware
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20-4898921
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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117 Adams Street
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Brooklyn
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NY
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11201
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(Address of principal executive offices)
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(Zip code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock
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$0.001 par value per share
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ETSY
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The Nasdaq Global Select Market
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Large Accelerated Filer
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☒
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Accelerated Filer
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☐
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Non-accelerated Filer
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☐
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Smaller Reporting Company
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☐
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Emerging Growth Company
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☐
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Page
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Note Regarding Forward-Looking Statements
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Part I - Financial Information
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Item 1.
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Consolidated Financial Statements (Unaudited)
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Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019
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Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019
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Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019
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Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2020 and 2019
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Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019
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Notes to Consolidated Financial Statements
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Part II - Other Information
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Item 1.
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Legal Proceedings
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Item 1A.
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Risk Factors
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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Item 3.
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Defaults Upon Senior Securities
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Other Information
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Item 6.
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Exhibits
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|
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Signatures
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As of
March 31, 2020 |
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As of
December 31, 2019 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
442,354
|
|
|
$
|
443,293
|
|
Short-term investments
|
361,640
|
|
|
373,959
|
|
||
Accounts receivable, net of expected credit losses of $6,734 and $5,033 as of March 31, 2020 and December 31, 2019, respectively
|
11,712
|
|
|
15,386
|
|
||
Prepaid and other current assets
|
36,074
|
|
|
38,614
|
|
||
Funds receivable and seller accounts
|
55,172
|
|
|
49,786
|
|
||
Total current assets
|
906,952
|
|
|
921,038
|
|
||
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Property and equipment, net of accumulated depreciation and amortization of $131,114 and $120,084 as of March 31, 2020 and December 31, 2019, respectively
|
134,519
|
|
|
144,864
|
|
||
Goodwill
|
138,305
|
|
|
138,731
|
|
||
Intangible assets, net of accumulated amortization of $13,377 and $16,911 as of March 31, 2020 and December 31, 2019, respectively
|
194,874
|
|
|
199,236
|
|
||
Deferred tax assets
|
15,232
|
|
|
14,257
|
|
||
Long-term investments
|
94,080
|
|
|
89,343
|
|
||
Other assets
|
28,339
|
|
|
29,542
|
|
||
Total assets
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$
|
1,517,642
|
|
|
$
|
1,542,352
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
10,557
|
|
|
$
|
26,324
|
|
Accrued expenses
|
68,885
|
|
|
88,345
|
|
||
Finance lease obligations—current
|
8,000
|
|
|
8,275
|
|
||
Funds payable and amounts due to sellers
|
55,172
|
|
|
49,786
|
|
||
Deferred revenue
|
8,250
|
|
|
7,617
|
|
||
Other current liabilities
|
7,985
|
|
|
8,181
|
|
||
Total current liabilities
|
158,849
|
|
|
188,528
|
|
||
Finance lease obligations—net of current portion
|
51,458
|
|
|
53,611
|
|
||
Deferred tax liabilities
|
63,126
|
|
|
64,497
|
|
||
Long-term debt, net
|
794,129
|
|
|
785,126
|
|
||
Other liabilities
|
43,233
|
|
|
43,956
|
|
||
Total liabilities
|
1,110,795
|
|
|
1,135,718
|
|
||
Commitments and contingencies (Note 10)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 118,376,782 and 118,342,772 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively)
|
118
|
|
|
119
|
|
||
Preferred stock ($0.001 par value, 25,000,000 shares authorized as of March 31, 2020 and December 31, 2019)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
657,311
|
|
|
642,628
|
|
||
Accumulated deficit
|
(239,883
|
)
|
|
(227,414
|
)
|
||
Accumulated other comprehensive loss
|
(10,699
|
)
|
|
(8,699
|
)
|
||
Total stockholders’ equity
|
406,847
|
|
|
406,634
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,517,642
|
|
|
$
|
1,542,352
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Revenue
|
$
|
228,055
|
|
|
$
|
169,339
|
|
Cost of revenue
|
82,416
|
|
|
52,658
|
|
||
Gross profit
|
145,639
|
|
|
116,681
|
|
||
Operating expenses:
|
|
|
|
||||
Marketing
|
48,505
|
|
|
35,444
|
|
||
Product development
|
37,782
|
|
|
24,947
|
|
||
General and administrative
|
33,987
|
|
|
24,647
|
|
||
Total operating expenses
|
120,274
|
|
|
85,038
|
|
||
Income from operations
|
25,365
|
|
|
31,643
|
|
||
Other (expense) income:
|
|
|
|
||||
Interest expense
|
(9,967
|
)
|
|
(4,653
|
)
|
||
Interest and other income
|
3,613
|
|
|
3,385
|
|
||
Foreign exchange (loss) gain
|
(9,318
|
)
|
|
1,062
|
|
||
Total other expense
|
(15,672
|
)
|
|
(206
|
)
|
||
Income before income taxes
|
9,693
|
|
|
31,437
|
|
||
Benefit for income taxes
|
2,829
|
|
|
142
|
|
||
Net income
|
$
|
12,522
|
|
|
$
|
31,579
|
|
Net income per share attributable to common stockholders:
|
|
|
|
||||
Basic
|
$
|
0.11
|
|
|
$
|
0.26
|
|
Diluted
|
$
|
0.10
|
|
|
$
|
0.24
|
|
Weighted-average common shares outstanding:
|
|
|
|
||||
Basic
|
118,138,186
|
|
|
119,679,149
|
|
||
Diluted
|
123,119,053
|
|
|
130,237,875
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Net income
|
$
|
12,522
|
|
|
$
|
31,579
|
|
Other comprehensive loss:
|
|
|
|
||||
Cumulative translation adjustment
|
(2,671
|
)
|
|
(1,061
|
)
|
||
Unrealized gains on marketable securities, net of tax expense of $205 and $0, respectively
|
671
|
|
|
99
|
|
||
Total other comprehensive loss
|
(2,000
|
)
|
|
(962
|
)
|
||
Comprehensive income
|
$
|
10,522
|
|
|
$
|
30,617
|
|
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Total
|
|||||||||||||
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|||||||||||||||||||
Balance as of December 31, 2018
|
119,771,702
|
|
|
$
|
120
|
|
|
$
|
562,033
|
|
|
$
|
(153,442
|
)
|
|
$
|
(7,813
|
)
|
|
$
|
400,898
|
|
Cumulative effect adjustment related to the adoption of the leasing standard
|
—
|
|
|
—
|
|
|
—
|
|
|
7,116
|
|
|
—
|
|
|
7,116
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
8,616
|
|
|
—
|
|
|
—
|
|
|
8,616
|
|
|||||
Exercise of vested options
|
534,693
|
|
|
1
|
|
|
5,929
|
|
|
—
|
|
|
—
|
|
|
5,930
|
|
|||||
Vesting of restricted stock units, net of shares withheld
|
159,403
|
|
|
—
|
|
|
(5,672
|
)
|
|
—
|
|
|
—
|
|
|
(5,672
|
)
|
|||||
Stock repurchase
|
(532,412
|
)
|
|
(1
|
)
|
|
—
|
|
|
(27,491
|
)
|
|
—
|
|
|
(27,492
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(962
|
)
|
|
(962
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
31,579
|
|
|
—
|
|
|
31,579
|
|
|||||
Balance as of March 31, 2019
|
119,933,386
|
|
|
$
|
120
|
|
|
$
|
570,906
|
|
|
$
|
(142,238
|
)
|
|
$
|
(8,775
|
)
|
|
$
|
420,013
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
12,522
|
|
|
$
|
31,579
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Stock-based compensation expense
|
13,811
|
|
|
8,082
|
|
||
Depreciation and amortization expense
|
15,163
|
|
|
10,142
|
|
||
Bad debt expense
|
3,684
|
|
|
1,182
|
|
||
Foreign exchange loss (gain)
|
8,157
|
|
|
(171
|
)
|
||
Non-cash interest expense
|
8,570
|
|
|
3,376
|
|
||
Deferred income taxes
|
(2,829
|
)
|
|
(142
|
)
|
||
Other non-cash expense (income), net
|
530
|
|
|
(448
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Current assets
|
(2,784
|
)
|
|
(48,293
|
)
|
||
Non-current assets
|
915
|
|
|
1,008
|
|
||
Current liabilities
|
(27,235
|
)
|
|
25,815
|
|
||
Non-current liabilities
|
(840
|
)
|
|
(672
|
)
|
||
Net cash provided by operating activities
|
29,664
|
|
|
31,458
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(567
|
)
|
|
(683
|
)
|
||
Development of internal-use software
|
(1,261
|
)
|
|
(3,390
|
)
|
||
Purchases of marketable securities
|
(101,501
|
)
|
|
(158,883
|
)
|
||
Sales of marketable securities
|
109,422
|
|
|
140,952
|
|
||
Net cash provided by (used in) investing activities
|
6,093
|
|
|
(22,004
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Payment of tax obligations on vested equity awards
|
(4,198
|
)
|
|
(5,672
|
)
|
||
Repurchase of stock
|
(24,992
|
)
|
|
(27,492
|
)
|
||
Proceeds from exercise of stock options
|
4,896
|
|
|
5,930
|
|
||
Payment of debt issuance costs
|
(14
|
)
|
|
(1,192
|
)
|
||
Payments on finance lease obligations
|
(2,566
|
)
|
|
(2,745
|
)
|
||
Other financing, net
|
(5,804
|
)
|
|
1,864
|
|
||
Net cash used in financing activities
|
(32,678
|
)
|
|
(29,307
|
)
|
||
Effect of exchange rate changes on cash
|
(4,018
|
)
|
|
(1,458
|
)
|
||
Net decrease in cash, cash equivalents, and restricted cash
|
(939
|
)
|
|
(21,311
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
448,634
|
|
|
372,326
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
447,695
|
|
|
$
|
351,015
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Supplemental non-cash disclosures:
|
|
|
|
||||
Stock-based compensation capitalized in development of capitalized software
|
$
|
174
|
|
|
$
|
534
|
|
Additions to development of internal-use software and property and equipment included in accounts payable and accrued expenses
|
$
|
65
|
|
|
$
|
1,180
|
|
Additions to intangible assets included in other current liabilities
|
$
|
—
|
|
|
$
|
1,348
|
|
Right-of-use assets obtained in exchange for new lease liabilities:
|
|
|
|
||||
Finance leases
|
$
|
135
|
|
|
$
|
202
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Beginning balance:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
443,293
|
|
|
$
|
366,985
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
448,634
|
|
|
$
|
372,326
|
|
|
|
|
|
||||
Ending balance:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
442,354
|
|
|
$
|
345,674
|
|
Restricted cash
|
5,341
|
|
|
5,341
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
447,695
|
|
|
$
|
351,015
|
|
|
As of March 31,
2020 |
||
Balance as of the beginning of period
|
$
|
5,033
|
|
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings
|
—
|
|
|
Provision for expected credit losses
|
3,684
|
|
|
Amounts written off charged against the allowance
|
(1,983
|
)
|
|
Balance as of the end of period
|
$
|
6,734
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Marketplace revenue
|
$
|
155,921
|
|
|
$
|
127,168
|
|
Services revenue
|
72,134
|
|
|
42,171
|
|
||
Revenue
|
$
|
228,055
|
|
|
$
|
169,339
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Numerator:
|
|
|
|
||||
Net income
|
$
|
12,522
|
|
|
$
|
31,579
|
|
Net income allocated to participating securities under the two-class method
|
—
|
|
|
(15
|
)
|
||
Net income attributable to common stockholders—basic
|
12,522
|
|
|
31,564
|
|
||
Dilutive effect of net income allocated to participating securities under the two-class method
|
—
|
|
|
15
|
|
||
Net income attributable to common stockholders—diluted
|
$
|
12,522
|
|
|
$
|
31,579
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Weighted-average common shares outstanding—basic (1)
|
118,138,186
|
|
|
119,679,149
|
|
||
Dilutive effect of assumed conversion of options to purchase common stock
|
4,000,177
|
|
|
4,849,246
|
|
||
Dilutive effect of assumed conversion of restricted stock units
|
980,690
|
|
|
1,970,865
|
|
||
Dilutive effect of assumed conversion of convertible debt (2)
|
—
|
|
|
3,720,694
|
|
||
Dilutive effect of assumed conversion of restricted stock from acquisition
|
—
|
|
|
17,921
|
|
||
Weighted-average common shares outstanding—diluted
|
123,119,053
|
|
|
130,237,875
|
|
||
|
|
|
|
||||
Net income per share attributable to common stockholders—basic
|
$
|
0.11
|
|
|
$
|
0.26
|
|
Net income per share attributable to common stockholders—diluted
|
$
|
0.10
|
|
|
$
|
0.24
|
|
(1)
|
23,759 shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for the three months ended March 31, 2019.
|
(2)
|
Since the Company expects to settle in cash the principal outstanding under the 0.125% Convertible Senior Notes due 2026 (the “2019 Notes”), 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 0% Convertible Senior Notes due 2023 (the “2018 Notes”) for the three months ended March 31, 2020 and used the treasury stock method for the three months ended March 31, 2019. See “Note 9—Debt” for more information on the 2019 Notes and the 2018 Notes.
|
|
Three Months Ended
March 31, |
||||
|
2020
|
|
2019
|
||
Stock options
|
624,906
|
|
|
111,444
|
|
Restricted stock units
|
1,144,169
|
|
|
174,681
|
|
Convertible senior notes
|
16,924,593
|
|
|
—
|
|
Total anti-dilutive securities
|
18,693,668
|
|
|
286,125
|
|
|
Final Fair Value as Adjusted
|
|||
Short-term investments
|
$
|
1,028
|
|
|
Other current assets (1)
|
2,902
|
|
||
Funds receivable and seller accounts
|
5,578
|
|
||
Property and equipment other
|
1,543
|
|
||
Developed technology
|
30,300
|
|
||
Trademark
|
79,400
|
|
||
Customer relationships
|
93,500
|
|
||
Goodwill
|
101,703
|
|
||
Other assets (1)
|
6,743
|
|
||
Other net working capital
|
(208
|
)
|
||
Funds payable and amounts due to sellers
|
(5,578
|
)
|
||
Other current liabilities (1)
|
(3,684
|
)
|
||
Other liabilities (1)
|
(7,333
|
)
|
||
Deferred tax liability, net (1)
|
(35,485
|
)
|
||
Total purchase price
|
$
|
270,409
|
|
(1)
|
Other current liabilities and other liabilities are primarily related to non-income tax related contingency reserves, which are wholly offset by an indemnification asset of $5.5 million and a deferred tax asset.
|
|
Three Months Ended
March 31, 2019 |
||
Revenue
|
$
|
181,159
|
|
Net income
|
28,017
|
|
|
As of March 31, 2020
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
300,279
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300,279
|
|
Commercial paper
|
—
|
|
|
6,291
|
|
|
—
|
|
|
6,291
|
|
||||
|
300,279
|
|
|
6,291
|
|
|
—
|
|
|
306,570
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
26,079
|
|
|
—
|
|
|
26,079
|
|
||||
Certificates of deposit
|
—
|
|
|
23,933
|
|
|
—
|
|
|
23,933
|
|
||||
Corporate bonds
|
—
|
|
|
110,948
|
|
|
—
|
|
|
110,948
|
|
||||
U.S. Government and agency securities
|
200,680
|
|
|
—
|
|
|
—
|
|
|
200,680
|
|
||||
|
200,680
|
|
|
160,960
|
|
|
—
|
|
|
361,640
|
|
||||
Funds receivable and seller accounts:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
19,783
|
|
|
—
|
|
|
—
|
|
|
19,783
|
|
||||
|
19,783
|
|
|
—
|
|
|
—
|
|
|
19,783
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
—
|
|
|
2,001
|
|
|
—
|
|
|
2,001
|
|
||||
Corporate bonds
|
—
|
|
|
16,633
|
|
|
—
|
|
|
16,633
|
|
||||
U.S. Government and agency securities
|
75,446
|
|
|
—
|
|
|
—
|
|
|
75,446
|
|
||||
|
75,446
|
|
|
18,634
|
|
|
—
|
|
|
94,080
|
|
||||
|
$
|
596,188
|
|
|
$
|
185,885
|
|
|
$
|
—
|
|
|
$
|
782,073
|
|
|
As of December 31, 2019
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
228,859
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
228,859
|
|
Certificate of deposit
|
—
|
|
|
2,959
|
|
|
—
|
|
|
2,959
|
|
||||
Commercial paper
|
—
|
|
|
5,794
|
|
|
—
|
|
|
5,794
|
|
||||
|
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
|
|
|
Cost
|
|
Gross
Unrealized Holding Loss |
|
Gross
Unrealized Holding Gain |
|
Fair Value
|
||||||||
March 31, 2020
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
6,292
|
|
|
$
|
(2
|
)
|
|
$
|
1
|
|
|
$
|
6,291
|
|
|
6,292
|
|
|
(2
|
)
|
|
1
|
|
|
6,291
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
26,059
|
|
|
(12
|
)
|
|
32
|
|
|
26,079
|
|
||||
Certificates of deposit
|
23,913
|
|
|
(25
|
)
|
|
45
|
|
|
23,933
|
|
||||
Corporate bonds
|
111,362
|
|
|
(439
|
)
|
|
25
|
|
|
110,948
|
|
||||
U.S. Government and agency securities
|
199,228
|
|
|
—
|
|
|
1,452
|
|
|
200,680
|
|
||||
|
360,562
|
|
|
(476
|
)
|
|
1,554
|
|
|
361,640
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
2,044
|
|
|
(43
|
)
|
|
—
|
|
|
2,001
|
|
||||
Corporate bonds
|
17,028
|
|
|
(397
|
)
|
|
2
|
|
|
16,633
|
|
||||
U.S. Government and agency securities
|
74,997
|
|
|
(12
|
)
|
|
461
|
|
|
75,446
|
|
||||
|
94,069
|
|
|
(452
|
)
|
|
463
|
|
|
94,080
|
|
||||
|
$
|
460,923
|
|
|
$
|
(930
|
)
|
|
$
|
2,018
|
|
|
$
|
462,011
|
|
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
|
|
||||
Certificates 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
|
|
|
As of March 31,
2020 |
|
As of December 31,
2019 |
||||
Sales and use tax payable
|
$
|
29,289
|
|
|
$
|
39,250
|
|
Vendor accruals
|
24,452
|
|
|
25,760
|
|
||
Payroll-related liabilities
|
8,935
|
|
|
3,774
|
|
||
Accrued bonus
|
6,209
|
|
|
19,561
|
|
||
Total accrued expenses
|
$
|
68,885
|
|
|
$
|
88,345
|
|
|
Shares Repurchased
|
|
Average Price Paid per Share (1)
|
|
Value of Shares Repurchased (1)
|
|
Remaining Amount Authorized
|
|||||||
Balance as of December 31, 2019
|
1,924,294
|
|
|
$
|
50.65
|
|
|
$
|
97,500
|
|
|
$
|
102,500
|
|
Repurchases of common stock for the three months ended:
|
|
|
|
|
|
|
|
|||||||
March 31, 2020
|
543,106
|
|
|
46.02
|
|
|
25,000
|
|
|
(25,000
|
)
|
|||
Balance as of Balance as of March 31, 2020
|
2,467,400
|
|
|
$
|
49.63
|
|
|
$
|
122,500
|
|
|
$
|
77,500
|
|
|
Three Months Ended
March 31, |
||
|
2020
|
|
2019
|
Volatility
|
39.5%
|
|
39.5%
|
Risk-free interest rate
|
0.6% - 1.7%
|
|
2.5%
|
Expected term (in years)
|
6.15
|
|
6.15
|
Dividend rate
|
—%
|
|
—%
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contract Term (in years)
|
|
Aggregate Intrinsic Value
|
|||||
Outstanding at December 31, 2019
|
6,294,919
|
|
|
$
|
16.26
|
|
|
|
|
|
||
Granted
|
590,601
|
|
|
42.56
|
|
|
|
|
|
|||
Exercised
|
(447,886
|
)
|
|
10.93
|
|
|
|
|
|
|||
Forfeited/Canceled
|
(535
|
)
|
|
69.89
|
|
|
|
|
|
|||
Outstanding at March 31, 2020
|
6,437,099
|
|
|
19.04
|
|
|
7.40
|
|
$
|
139,464
|
|
|
Total exercisable at March 31, 2020
|
3,708,091
|
|
|
12.38
|
|
|
6.86
|
|
97,817
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Weighted-average grant date fair value of options granted
|
$
|
16.68
|
|
|
$
|
29.55
|
|
Intrinsic value of options exercised
|
20,425
|
|
|
28,523
|
|
||
Fair value of awards vested
|
7,385
|
|
|
6,083
|
|
|
Shares
|
|
Weighted-Average
Grant Date Fair Value |
|||
Unvested at December 31, 2019
|
2,960,413
|
|
|
$
|
40.61
|
|
Granted
|
1,348,762
|
|
|
43.01
|
|
|
Vested
|
(218,793
|
)
|
|
26.55
|
|
|
Forfeited/Canceled
|
(76,535
|
)
|
|
40.21
|
|
|
Unvested at March 31, 2020
|
4,013,847
|
|
|
42.18
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Cost of revenue
|
$
|
1,620
|
|
|
$
|
1,099
|
|
Marketing
|
1,224
|
|
|
631
|
|
||
Product development
|
6,801
|
|
|
3,520
|
|
||
General and administrative
|
4,166
|
|
|
2,832
|
|
||
Stock-based compensation expense
|
$
|
13,811
|
|
|
$
|
8,082
|
|
•
|
Etsy assembled a COVID-19 task force in January, and moved to a fully remote workforce for both Etsy and Reverb by early March. Despite this shift in working environment, we were able to maintain high experiment velocity and minimal business disruption.
|
•
|
In living up to our mission to “Keep Commerce Human,” we introduced several initiatives during the first quarter to support our seller community during this challenging time. These included waiving fees for our new Offsite Ads service, extending our free trial into May; a one-month grace period to give sellers extra time to pay their bills; a seller guide to managing an Etsy shop during COVID-19; and 24/7 member support to address any questions with their businesses, delivery times, and shipping issues.
|
•
|
We adjusted our marketing strategies and spend for the Etsy marketplace during the first quarter to respond quickly to the changing macro dynamics. Performance marketing spend adjusts naturally with demand, and we pivoted brand and above-the-line spend, as well as messaging, to focus on “finding joy in the everyday” and supporting small and independent businesses. This included the launch of our #StandWithSmall campaign across all of our owned and paid channels in the beginning of April.
|
•
|
Both Etsy and Reverb have a highly variable cost structure with minimal capital expenditure requirements and costs that are variable with revenue. That said, we looked for ways to tighten spending in light of the changing macro situation. For example, during the quarter we limited hiring to only focus on roles critical to growth. Overall, actions we took during the first quarter to reduce spending represented annualized savings of approximately $2 to $3 million.
|
•
|
As we work to provide Etsy.com sellers with tools and support to make it easy for them to offer free and fair shipping, we have partnered with a third party in order to support lower costs and stable logistics for U.S. sellers to ship to international buyers. In order to continue growing buyer awareness on free shipping, we launched a more celebratory and visible free shipping nudge to listing pages. Additionally, during the first quarter we implemented a “quick to ship” badge to alert buyers of items that are ready to ship within four days, which led to an improvement in conversion rate.
|
•
|
We continued to utilize our marketing efforts to drive new and existing buyers to Etsy.com. We launched an updated television campaign in January with a new approach to ad length, which iterates on our holiday campaign, continuing to highlight that Etsy.com is the destination for all things special, for moments big and small. We anticipate that our ongoing marketing investments will continue to help drive GMS in 2020.
|
•
|
We made additional improvements to our mobile web, collapsing the item information section on the listing page, allowing for buyers to more easily find items that interest them. We also made mobile app improvements, aimed to allow better viewing of listing images in order to help buyers gain confidence in their purchases. Additionally, we
|
•
|
We made progress simplifying our marketing tools for sellers to enable them to more easily invest in their growth. In the first quarter of 2020, we announced that we will be iterating on our advertising offerings to help sellers more effectively drive traffic to their listings. At the end of the first quarter seller listings were migrated to our new Offsite Ads service. Etsy will pay the upfront costs to promote Etsy sellers’ listings on multiple internet platforms without any upfront costs for sellers. When a shopper clicks on an online offsite ad featuring a seller’s listing and purchases from their shop, the seller will pay Etsy an advertising fee on that order - only when they make a sale. The Etsy Ads service will now be a dedicated on-site advertising program for sellers to promote their listings to shoppers on Etsy.
|
•
|
As of March 31, 2020, our marketplaces connected 2.8 million active sellers and 47.7 million active buyers, in nearly every country in the world. In the three months ended March 31, 2020, sellers generated GMS of $1.4 billion of which approximately 58% came from purchases made on mobile devices. We are a global company and approximately 36% of our GMS in the three months ended March 31, 2020 came from transactions where either a seller or a buyer was located outside of the United States.
|
•
|
Total revenue was $228.1 million in the three months ended March 31, 2020, driven by growth in both Marketplace and Services revenue. In the three months ended March 31, 2020, we recorded net income of $12.5 million, and non-GAAP Adjusted EBITDA of $55.1 million. See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP.
|
•
|
Cash, cash equivalents, and short-term investments were $804.0 million as of March 31, 2020. Etsy has $345.0 million aggregate principal amount of 0% Convertible Senior Notes due 2023 and $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026. Additionally, Etsy has the ability to draw down on its $200.0 million senior secured revolving credit facility. In the three months ended March 31, 2020, Etsy had positive operating cash flows of $29.7 million. In light of the macroeconomic situation related to COVID-19, our Board of Directors has decided to temporarily pause share repurchases.
|
|
Three Months Ended
March 31, |
|
% Growth (Decline)
Y/Y
|
|||||||
|
2020
|
|
2019
|
|
||||||
|
|
|
|
|
|
|||||
|
(in thousands, except percentages)
|
|||||||||
GMS (1)
|
$
|
1,353,291
|
|
|
$
|
1,024,028
|
|
|
32.2
|
%
|
Revenue
|
$
|
228,055
|
|
|
$
|
169,339
|
|
|
34.7
|
%
|
Marketplace revenue
|
$
|
155,921
|
|
|
$
|
127,168
|
|
|
22.6
|
%
|
Services revenue
|
$
|
72,134
|
|
|
$
|
42,171
|
|
|
71.1
|
%
|
Net income
|
$
|
12,522
|
|
|
$
|
31,579
|
|
|
(60.3
|
)%
|
Adjusted EBITDA (Non-GAAP)
|
$
|
55,056
|
|
|
$
|
49,867
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|||||
Active sellers
|
2,814
|
|
|
2,227
|
|
|
26.4
|
%
|
||
Active buyers
|
47,748
|
|
|
41,029
|
|
|
16.4
|
%
|
||
Percent mobile GMS
|
58
|
%
|
|
58
|
%
|
|
—
|
bps
|
||
Percent international GMS
|
36
|
%
|
|
38
|
%
|
|
(200
|
) bps
|
(1)
|
GMS for the three months ended March 31, 2020, includes Reverb’s GMS of $168.3 million. Etsy.com GMS for the three months ended March 31, 2020 was $1.2 billion.
|
|
Quarter-to-Date Period Ended
|
|
Year-to-Date Period Ended
|
||||||||||||||
|
As Reported
|
|
Currency-Neutral
|
|
FX Impact
|
|
As Reported
|
|
Currency-Neutral
|
|
FX Impact
|
||||||
March 31, 2020
|
32.2
|
%
|
|
32.6
|
%
|
|
(0.4
|
)%
|
|
32.2
|
%
|
|
32.6
|
%
|
|
(0.4
|
)%
|
December 31, 2019
|
32.8
|
%
|
|
33.0
|
%
|
|
(0.2
|
)%
|
|
26.5
|
%
|
|
27.5
|
%
|
|
(1.0
|
)%
|
September 30, 2019
|
30.1
|
%
|
|
31.1
|
%
|
|
(1.0
|
)%
|
|
23.6
|
%
|
|
26.1
|
%
|
|
(2.5
|
)%
|
June 30, 2019
|
21.4
|
%
|
|
22.8
|
%
|
|
(1.4
|
)%
|
|
20.2
|
%
|
|
21.7
|
%
|
|
(1.5
|
)%
|
March 31, 2019
|
18.9
|
%
|
|
20.6
|
%
|
|
(1.7
|
)%
|
|
18.9
|
%
|
|
20.6
|
%
|
|
(1.7
|
)%
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Revenue:
|
|
|
|
||||
Marketplace
|
$
|
155,921
|
|
|
$
|
127,168
|
|
Services
|
72,134
|
|
|
42,171
|
|
||
Total revenue
|
228,055
|
|
|
169,339
|
|
||
Cost of revenue
|
82,416
|
|
|
52,658
|
|
||
Gross profit
|
145,639
|
|
|
116,681
|
|
||
Operating expenses:
|
|
|
|
||||
Marketing
|
48,505
|
|
|
35,444
|
|
||
Product development
|
37,782
|
|
|
24,947
|
|
||
General and administrative
|
33,987
|
|
|
24,647
|
|
||
Total operating expenses
|
120,274
|
|
|
85,038
|
|
||
Income from operations
|
25,365
|
|
|
31,643
|
|
||
Other expense, net
|
(15,672
|
)
|
|
(206
|
)
|
||
Income before income taxes
|
9,693
|
|
|
31,437
|
|
||
Benefit for income taxes
|
2,829
|
|
|
142
|
|
||
Net income
|
$
|
12,522
|
|
|
$
|
31,579
|
|
|
|
|
|
||||
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
Revenue:
|
|
|
|
||||
Marketplace
|
68.4
|
%
|
|
75.1
|
%
|
||
Services
|
31.6
|
|
|
24.9
|
|
||
Total revenue
|
100.0
|
|
|
100.0
|
|
||
Cost of revenue
|
36.1
|
|
|
31.1
|
|
||
Gross profit
|
63.9
|
|
|
68.9
|
|
||
Operating expenses:
|
|
|
|
||||
Marketing
|
21.3
|
|
|
20.9
|
|
||
Product development
|
16.6
|
|
|
14.7
|
|
||
General and administrative
|
14.9
|
|
|
14.6
|
|
||
Total operating expenses
|
52.7
|
|
|
50.2
|
|
||
Income from operations
|
11.1
|
|
|
18.7
|
|
||
Other expense, net
|
(6.9
|
)
|
|
(0.1
|
)
|
||
Income before income taxes
|
4.3
|
|
|
18.6
|
|
||
Benefit for income taxes
|
1.2
|
|
|
0.1
|
|
||
Net income
|
5.5
|
%
|
|
18.6
|
%
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Marketplace
|
$
|
155,921
|
|
|
$
|
127,168
|
|
|
$
|
28,753
|
|
|
22.6
|
%
|
Percentage of total revenue
|
68.4
|
%
|
|
75.1
|
%
|
|
|
|
|
|||||
Services
|
$
|
72,134
|
|
|
$
|
42,171
|
|
|
$
|
29,963
|
|
|
71.1
|
%
|
Percentage of total revenue
|
31.6
|
%
|
|
24.9
|
%
|
|
|
|
|
|||||
Total revenue
|
$
|
228,055
|
|
|
$
|
169,339
|
|
|
$
|
58,716
|
|
|
34.7
|
%
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Cost of revenue
|
$
|
82,416
|
|
|
$
|
52,658
|
|
|
$
|
29,758
|
|
|
56.5
|
%
|
Percentage of total revenue
|
36.1
|
%
|
|
31.1
|
%
|
|
|
|
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
$
|
(9,967
|
)
|
|
$
|
(4,653
|
)
|
|
$
|
(5,314
|
)
|
|
114.2
|
%
|
Percentage of total revenue
|
(4.4
|
)%
|
|
(2.7
|
)%
|
|
|
|
|
|||||
Interest and other income
|
$
|
3,613
|
|
|
$
|
3,385
|
|
|
$
|
228
|
|
|
6.7
|
%
|
Percentage of total revenue
|
1.6
|
%
|
|
2.0
|
%
|
|
|
|
|
|||||
Foreign exchange (loss) gain
|
$
|
(9,318
|
)
|
|
$
|
1,062
|
|
|
$
|
(10,380
|
)
|
|
(977.4
|
)%
|
Percentage of total revenue
|
(4.1
|
)%
|
|
0.6
|
%
|
|
|
|
|
|||||
Other expense, net
|
$
|
(15,672
|
)
|
|
$
|
(206
|
)
|
|
$
|
(15,466
|
)
|
|
7,507.8
|
%
|
Percentage of total revenue
|
(6.9
|
)%
|
|
(0.1
|
)%
|
|
|
|
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
|
|
|
|
|
|
|
|
|||||||
|
(in thousands, except percentages)
|
|||||||||||||
Benefit for income taxes
|
$
|
2,829
|
|
|
$
|
142
|
|
|
$
|
2,687
|
|
|
1,892.3
|
%
|
Percentage of total revenue
|
1.2
|
%
|
|
0.1
|
%
|
|
|
|
|
•
|
Adjusted EBITDA does not reflect other non-operating expenses, net of other non-operating income, including net interest expense;
|
•
|
Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
•
|
Adjusted EBITDA does not consider the impact of stock-based compensation expense;
|
•
|
Adjusted EBITDA does not consider the impact of foreign exchange loss (gain);
|
•
|
Adjusted EBITDA does not reflect acquisition-related expenses; and
|
•
|
other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Net income
|
$
|
12,522
|
|
|
$
|
31,579
|
|
Excluding:
|
|
|
|
||||
Interest and other non-operating expense, net (1)
|
6,354
|
|
|
1,268
|
|
||
Benefit for income taxes (2)
|
(2,829
|
)
|
|
(142
|
)
|
||
Depreciation and amortization (3)
|
15,163
|
|
|
10,142
|
|
||
Stock-based compensation expense (4)
|
13,811
|
|
|
8,082
|
|
||
Foreign exchange loss (gain) (5)
|
9,318
|
|
|
(1,062
|
)
|
||
Acquisition-related expenses (6)
|
717
|
|
|
—
|
|
||
Adjusted EBITDA
|
$
|
55,056
|
|
|
$
|
49,867
|
|
(1)
|
Included in interest and other non-operating expense, net is non-cash interest expense, including amortization of debt issuance costs, related to our convertible debt offerings, which were entered into in March 2018 and September 2019.
|
(2)
|
See “Results of Operations—Benefit for Income Taxes” for more information on the fluctuation in benefit for income taxes in the three months ended March 31, 2020 and 2019.
|
(3)
|
Included in depreciation and amortization, is depreciation expense related to our headquarters lease, which is accounted for as a finance lease. Additionally, the three months ended March 31, 2020 includes amortization expense related to acquired intangible assets and developed technology related to the acquisition of Reverb in the third quarter of 2019.
|
(4)
|
Stock-based compensation expense included in the Consolidated Statements of Operations is as follows:
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Cost of revenue
|
$
|
1,620
|
|
|
$
|
1,099
|
|
Marketing
|
1,224
|
|
|
631
|
|
||
Product development
|
6,801
|
|
|
3,520
|
|
||
General and administrative
|
4,166
|
|
|
2,832
|
|
||
Stock-based compensation expense
|
$
|
13,811
|
|
|
$
|
8,082
|
|
(5)
|
Foreign exchange loss (gain) is primarily driven by the change in U.S. Dollar, Euro, and Pound Sterling exchange rates on our intercompany and other non-functional currency cash balances as we decided to hold more foreign currencies than usual due to current macroeconomic trends to ensure our ability to pay our sellers. We have taken steps to reduce the volatility in foreign exchange gains or losses on intercompany balances.
|
(6)
|
Acquisition-related expenses are expenses related to our acquisition of Reverb. For further information, see “Note 5—Business Combinations” in the Notes to Consolidated Financial Statements.
|
|
As of
March 31, 2020 |
||
|
(in thousands)
|
||
Cash and cash equivalents
|
$
|
442,354
|
|
Short-term investments
|
361,640
|
|
|
Long-term investments
|
94,080
|
|
|
Total cash and cash equivalents, and short- and long-term investments
|
$
|
898,074
|
|
Accounts receivable, net
|
$
|
11,712
|
|
Net working capital
|
748,103
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
|
(in thousands)
|
||||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
29,664
|
|
|
$
|
31,458
|
|
Investing activities
|
6,093
|
|
|
(22,004
|
)
|
||
Financing activities
|
(32,678
|
)
|
|
(29,307
|
)
|
•
|
fluctuations in GMS or revenue, including as a result of adverse market conditions due to the COVID-19 pandemic, 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 launched in April 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 those related to the current COVID-19 pandemic, 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 on the part of our sellers to fulfill their orders in accordance with our policies, their own shop-specific policies, or buyer expectations;
|
•
|
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 Quarterly Report, as well as how those results and metrics compare to analyst and investor expectations;
|
•
|
forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections or changes in our financial guidance or projections;
|
•
|
failure of analysts to initiate or maintain coverage of our company, changes in their estimates of our operating results or changes in recommendations by analysts that follow our common stock or a negative view of our financial guidance or projections and our failure to meet or exceed the estimates of such analysts;
|
•
|
announcements of new services or enhancements, 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, particularly during the current COVID-19 pandemic, currency fluctuations, and market conditions in our industry and those affecting members of our community;
|
•
|
the trading activity of our largest stockholders;
|
•
|
the number of shares of our common stock that are available for public trading;
|
•
|
litigation or other claims against us;
|
•
|
stockholder activism;
|
•
|
the performance of the equity markets in general and in our industry;
|
•
|
the operating performance of other similar companies;
|
•
|
changes in legal requirements relating to our business; and
|
•
|
any other factors discussed in this Quarterly Report.
|
•
|
provide for a classified board of directors so that not all members of our Board of Directors are elected at one time;
|
•
|
permit our Board of Directors to establish the number of directors and fill any vacancies and newly created directorships;
|
•
|
provide that directors may only be removed for cause;
|
•
|
require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;
|
•
|
authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;
|
•
|
eliminate the ability of our stockholders to call special meetings of stockholders;
|
•
|
prohibit stockholder action by written consent, which means all stockholder actions must be taken at a meeting of our stockholders;
|
•
|
provide that our Board of Directors is expressly authorized to amend or repeal any provision of our bylaws; 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) |
||||||
January 1 - 31, 2020 (1)
|
610,774
|
|
|
$
|
45.84
|
|
|
543,106
|
|
|
$
|
77,500
|
|
February 1 - 29, 2020 (1)
|
7,273
|
|
|
48.81
|
|
|
—
|
|
|
77,500
|
|
||
March 1 - 31, 2020 (1)
|
14,622
|
|
|
57.81
|
|
|
—
|
|
|
77,500
|
|
||
Total
|
632,669
|
|
|
46.15
|
|
|
543,106
|
|
|
77,500
|
|
(1)
|
The total number of shares purchased includes 89,563 shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units.
|
(2)
|
Average price paid per share excludes broker commissions.
|
(3)
|
In November 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. In light of the macroeconomic situation related to COVID-19, our Board of Directors has decided to temporarily pause share repurchases.
|
(4)
|
All of these shares were purchased pursuant to a 10b5-1 trading plan.
|
Exhibit
Number
|
|
|
Incorporated by Reference
|
|
|
Filed
Herewith
|
|
|||||||||||||||||
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|||||||||||||
|
8-K
|
|
001-36911
|
|
2.01
|
|
7/22/2019
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
10-K
|
|
001-36911
|
|
10.12.1
|
|
2/26/2020
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||||
101.INS
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.SCH
|
XBRL Taxonomy Schema Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.CAL
|
XBRL Taxonomy Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.DEF
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.LAB
|
XBRL Taxonomy Labels Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document’
|
|
|
|
|
|
|
|
|
|
X
|
|
||||||||||||
104
|
Cover Page Interactive Data File - the cover page interactive data is embedded within the Inline XBRL document
|
|
|
|
|
|
|
|
|
|
X
|
|
ETSY, INC.
|
|
Date: May 7, 2020
|
/s/ Rachel Glaser
|
|
Rachel Glaser
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
•
|
Etsy’s annual strategic planning process and advise on strategic matters (based on strategy designed and determined by the full Executive Team and Board of Directors)
|
•
|
The Member Operations function
|
•
|
The People and Workplace function
|
•
|
Business and Corporate development
|
•
|
In the event of an involuntary termination following a change in control- twelve months of severance and up to twelve months of company-paid COBRA coverage, and a 100% acceleration factor for all outstanding equity awards issued to you.
|
•
|
In the event of an involuntary termination not related to a change in control - six months of severance and up to six months of company-paid COBRA coverage.
|
•
|
You confirm that you have no legal obligations that would prohibit you from working for Etsy. For example, you have not signed a non-compete agreement with your current or former employer that would prevent you from working for Etsy.
|
•
|
You agree not to use, rely upon, or share any confidential information of your former employer while working for Etsy.
|
•
|
You agree that during your employment with Etsy (and otherwise as described in your CPIA), you will not engage in any other employment, consulting, or business activity that would create a conflict with your position with Etsy.
|
(a)
|
your ability to work for Etsy and perform your job duties without violating any commitments you may have agreed to in the past or that you are otherwise subject to,
|
(b)
|
Etsy’s ownership of any ideas you come up with or technologies you develop while working for Etsy,
|
(c)
|
the need to keep confidential and protect certain information about Etsy and its members and employees both while working for Etsy and after you leave the company, and
|
(d)
|
your willingness not to compete with Etsy or take certain actions that could hurt Etsy’s legitimate interests while you are working for Etsy and for a short period of time afterward.
|
ETSY, INC.
|
EMPLOYEE
|
|
By: /s/ Josh Silverman
|
Name: Raina Moskowitz
|
|
Name: Josh Silverman
|
Signature: /s/ Raina Moskowitz
|
|
Title: CEO
|
Date: March 8, 2018
Email:
|
|
|
|
|
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|