ETSY INC (Form: 10-Q, Received: 08/05/2021 06:07:33)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 10-Q

__________________________________


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended	June 30, 2021

	OR

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to

Commission File Number 001-36911

__________________________________

ETSY, INC.

(Exact name of registrant as specified in its charter)

__________________________________


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)

(718) 880-3660

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding as of July 30, 2021 was 126,576,797.

Table of Contents

Part I - Financial Information

Item 1.

Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II - Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signatures

Unless the context otherwise requires, we use the terms “Etsy,” the “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q (“Quarterly Report”) to refer to Etsy, Inc. and, where appropriate, our consolidated subsidiaries.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating and Financial Metrics” for the definitions of the following terms used in this Quarterly Report: “active buyer,” “active seller,” “Adjusted EBITDA,” “GMS,” “international GMS,” “mobile GMS,” and “currency-neutral GMS growth.”

Etsy has used, and intends to continue using, its investor relations website and the Etsy News Blog (blog.etsy.com/news) to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website and the Etsy News Blog in addition to following our press releases, SEC filings, and public conference calls and webcasts.

Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information relating to our opportunity; the impact of our “Right to Win” strategy and levers for growth, marketing, and product initiatives and investments on our business and operating results, including future gross merchandise sales (“GMS”) and revenue growth; the impact of our Offsite Ads offering on our future financial performance; our plans for acquisitions and strategic investments, our “House of Brands” strategy, and their potential impact on our growth and results of operations; our intended environmental, social, and ecological impacts; and the uncertain impacts that the COVID-19 pandemic or its abatement may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows, on changes in overall levels of consumer spending, on e-commerce generally, and on volatility in the global economy. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as “aim,” “anticipate,” “believe,” “could,” “enable,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” “would” or similar expressions and derivative forms and/or negatives of those terms.

Forward-looking statements are not guarantees of performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Those risks include those described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. Given these uncertainties, you should read this Quarterly Report in its entirety and not place undue reliance on any forward-looking statements in this Quarterly Report.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and, although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Moreover, we operate in a competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements made in this Quarterly Report. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic may amplify many of these risks.

Forward-looking statements represent our beliefs and assumptions only as of the date of this Quarterly Report. We disclaim any obligation to update forward-looking statements.

Summary Risk Factors

Our business is subject to numerous risks. The following summary highlights some of the risks we are exposed to in the normal course of our business activities. This summary is not complete and the risks summarized below are not the only risks we face. You should review and consider carefully the risks and uncertainties described in more detail in the “Risk Factors” section of this Quarterly Report which includes a more complete discussion of the risks summarized below as well as a discussion of other risks related to our business and an investment in our common stock.

Financial Performance and Operational Risks Related to Our Business

•We have experienced rapid growth, and we may not have the infrastructure, human resources, or operational resources to sustain continued growth at our recent pace.

•The COVID-19 pandemic is unprecedented and has impacted, and the pandemic and its abatement may continue to impact, our GMS, and could impact our results of operations in numerous ways that remain volatile and unpredictable.

•Our quarterly operating results may fluctuate, which could cause our stock price to decline. The price of our common stock has been and will likely continue to be volatile and declines in the price of our common stock could subject us to litigation.

•We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.

•Our business could suffer if we experience a technology disruption that results in a loss of information, if personal data or sensitive information about users or employees is misused or disclosed, or if we or our third-party providers are unable to protect against technology vulnerabilities, service interruptions, security breaches, or other cyber incidents.

•The trustworthiness of our marketplaces and the connections within our communities are important to our success. Our business, financial performance, and growth depend on our ability to attract and retain active and engaged communities of buyers and sellers. If we are unable to retain our existing buyers and sellers and activate new ones, our financial performance could decline.

•Our business depends on continued and unimpeded access to third party services, platforms, and infrastructure that we rely upon to maintain and scale our platforms.

•We have experienced rapid domestic and global growth, and we may be subject to expanded and potentially uninsured risk, making it more difficult for us to maintain profitability in the future.

•Our business could be adversely affected by economic downturns, natural disasters, political crises, geopolitical changes or other macroeconomic conditions which have in the past and may in the future negatively impact our business and financial performance.

•Our ability to attract and hire a diverse pipeline of talent and retain key employees is important to our success. If we experience significant attrition or turnover it could impact our ability to grow our business.

Strategic Risks Related to Our Business and Industry

•We face intense competition and may not be able to compete effectively.

•If we are not able to keep pace with technological changes, and enhance current and develop new offerings to respond to the changing needs of sellers and buyers, our business may be harmed.

•If the widely adopted mobile, social, search and advertising solutions that we, our sellers and our buyers rely on as part of our key offering are no longer available or effective, or if access to these major platforms is limited, the use of our marketplaces could decline.

•If we do not demonstrate progress against our Impact strategy or if our Impact strategy is not perceived to be adequate, our reputation could be harmed. We could also damage our reputation and the value of our brands if we fail to demonstrate that our commitment to our Impact strategy enhances our overall financial performance.

•Expanding our operations outside of the United States is part of our strategy, and the growth of our business could be harmed if our international expansion efforts do not succeed.

•Our recent acquisitions of Depop Limited (“Depop”) and Elo7 Serviços de Informática S.A. (“Elo7”) may create strains on our management, technology and operational resources and may prove to be costlier and take longer to integrate than we anticipate.

•We may expand our business through additional acquisitions of other businesses or assets or strategic partnerships and investments, which may divert management’s attention and/or prove to be unsuccessful.

•We have a significant amount of convertible debt that may be settled in cash and may incur additional debt in the future.

Regulatory, Compliance, and Legal Risks

•Compliance and protection under evolving global legal and regulatory requirements including privacy and data protection laws, tax laws, product liability laws, antitrust laws, intellectual property and counterfeiting regulations, may materially impact our time, resources, and ability to grow our business.

•Expanding our operations in Latin America and India may expose us to additional risks.

•We may be involved in litigation and regulatory matters that are expensive and time consuming and that may require changes to our strategy, the features of our platforms and how our business operates.

•We may be subject to intellectual property or other claims, which, even if untrue, could damage our brands, require us to pay significant damages, and could limit our ability to use certain technologies or business strategies in the future.

Other Risks

•Future sales and issuances of our common stock, or rights to purchase common stock, including upon conversion of our convertible notes, could result in additional dilution to our stockholders and could cause the price of our common stock to decline.

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Part I - Financial Information

Item 1. Consolidated Financial Statements (Unaudited).

Etsy, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share amounts)


	As of June 30, 2021		As of December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	2,053,882	$	1,244,099
Short-term investments	430,727		425,119
Accounts receivable, net of expected credit losses of $11,420 and $9,757 as of June 30, 2021 and December 31, 2020, respectively	20,283		22,605
Prepaid and other current assets	49,693		56,152


Funds receivable and seller accounts	136,395		146,806
Total current assets	2,690,980		1,894,781
Restricted cash	5,341		5,341
Property and equipment, net of accumulated depreciation and amortization of $136,382 and $158,771 as of June 30, 2021 and December 31, 2020, respectively	105,814		112,495

Goodwill	140,045		140,810
Intangible assets, net of accumulated amortization of $33,133 and $25,705 as of June 30, 2021 and December 31, 2020, respectively	178,854		187,449
Deferred tax assets	46,106		115
Long-term investments	102,801		39,094
Other assets	20,475		24,404
Total assets	$	3,290,416	$	2,404,489
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,752	$	40,883
Accrued expenses	209,823		232,352
Finance lease obligations—current	8,691		8,537
Funds payable and amounts due to sellers	136,395		146,806
Deferred revenue	12,312		11,264
Other current liabilities	13,027		14,822
Total current liabilities	407,000		454,664
Finance lease obligations—net of current portion	40,969		44,979


Deferred tax liabilities	33		58,481

Long-term debt, net	2,273,331		1,062,299
Other liabilities	38,330		41,642
Total liabilities	2,759,663		1,662,065
Commitments and contingencies (Note 8)









Stockholders’ equity:
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 126,522,519 and 125,835,931 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)	127		126
Preferred stock ($0.001 par value, 25,000,000 shares authorized as of June 30, 2021 and December 31, 2020)	—		—
Additional paid-in capital	590,232		883,166
Accumulated deficit	(56,970)		(146,819)
Accumulated other comprehensive (loss) income	(2,636)		5,951
Total stockholders’ equity	530,753		742,424
Total liabilities and stockholders’ equity	$	3,290,416	$	2,404,489

The accompanying notes are an integral part of these consolidated financial statements.

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Etsy, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue	$	528,900	$	428,737	$	1,079,546	$	656,792
Cost of revenue	148,969		111,381		291,886		193,797
Gross profit	379,931		317,356		787,660		462,995
Operating expenses:
Marketing	167,474		114,707		318,678		163,212
Product development	61,753		45,233		115,459		83,015
General and administrative	61,599		38,276		113,781		72,263
Total operating expenses	290,826		198,216		547,918		318,490
Income from operations	89,105		119,140		239,742		144,505
Other (expense) income:

Interest expense	(1,882)		(10,026)		(3,567)		(19,993)
Interest and other income	803		1,732		1,782		5,345

Foreign exchange (loss) gain	(2,272)		1,470		5,525		(7,848)
Total other (expense) income	(3,351)		(6,824)		3,740		(22,496)
Income before income taxes	85,754		112,316		243,482		122,009
Benefit (provision) for income taxes	12,500		(15,891)		(1,462)		(13,062)
Net income	$	98,254	$	96,425	$	242,020	$	108,947
Net income per share attributable to common stockholders:
Basic	$	0.77	$	0.81	$	1.91	$	0.92
Diluted	$	0.68	$	0.75	$	1.68	$	0.88
Weighted-average common shares outstanding:
Basic	126,977,990		118,865,885		126,659,372		118,483,712
Diluted	144,867,491		134,408,041		144,857,500		133,238,316

The accompanying notes are an integral part of these consolidated financial statements.

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Etsy, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	98,254	$	96,425	$	242,020	$	108,947
Other comprehensive income (loss):
Cumulative translation adjustment	2,714		2,538		(8,350)		(133)
Unrealized gains (losses) on marketable securities, net of tax expense (benefit) of $5, $142, $(75) and $347, respectively	18		462		(237)		1,133
Total other comprehensive income (loss)	2,732		3,000		(8,587)		1,000
Comprehensive income	$	100,986	$	99,425	$	233,433	$	109,947

The accompanying notes are an integral part of these consolidated financial statements.

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Etsy, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(In thousands, except share amounts)


						Three Months Ended June 30, 2021
	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Loss	Total

													Shares		Amount
Balance as of March 31, 2021						126,785,568	$	127	$	664,240	$	24,775	$	(5,368)	$	683,774

Stock-based compensation						—	—		28,381		—		—		28,381
Exercise of vested options						122,502	—		4,107		—		—		4,107

Purchase of capped calls, net of taxes						—	—		(64,673)		—		—		(64,673)
Settlement of convertible senior notes, net of taxes						360,059	—		(131)		—		—		(131)

Vesting of restricted stock units, net of shares withheld						311,905	1		(41,692)		—		—		(41,691)

Stock repurchase						(1,057,515)	(1)		—		(179,999)		—		(180,000)
Other comprehensive income						—	—		—		—		2,732		2,732
Net income						—	—		—		98,254		—		98,254

Balance as of June 30, 2021						126,522,519	$	127	$	590,232	$	(56,970)	$	(2,636)	$	530,753


						Six Months Ended June 30, 2021
	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Total

													Shares		Amount
Balance as of December 31, 2020						125,835,931	$	126	$	883,166	$	(146,819)	$	5,951	$	742,424
Cumulative effect of adoption of accounting standard changes						—	—		(228,738)		27,828		—		(200,910)
Stock-based compensation						—	—		49,357		—		—		49,357
Exercise of vested options						339,795	—		8,037		—		—		8,037
Purchase of capped calls, net of taxes						—	—		(64,673)		—		—		(64,673)
Settlement of convertible senior notes, net of taxes						985,081	1		(423)		—		—		(422)

Vesting of restricted stock units, net of shares withheld						419,227	1		(56,494)		—		—		(56,493)
Stock repurchase						(1,057,515)	(1)		—		(179,999)		—		(180,000)

Other comprehensive loss						—	—		—		—		(8,587)		(8,587)
Net income						—	—		—		242,020		—		242,020
Balance as of June 30, 2021						126,522,519	$	127	$	590,232	$	(56,970)	$	(2,636)	$	530,753

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Etsy, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(In thousands, except share amounts)


						Three Months Ended June 30, 2020
	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total

													Shares		Amount
Balance as of March 31, 2020						118,376,782	$	118	$	657,311	$	(239,883)	$	(10,699)	$	406,847
Stock-based compensation						—	—		16,975		—		—		16,975
Exercise of vested options						510,113	1		7,280		—		—		7,281




Vesting of restricted stock units, net of shares withheld						253,742	—		(6,353)		—		—		(6,353)


Other comprehensive income						—	—		—		—		3,000		3,000
Net income						—	—		—		96,425		—		96,425

Balance as of June 30, 2020						119,140,637	$	119	$	675,213	$	(143,458)	$	(7,699)	$	524,175


						Six Months Ended June 30, 2020
	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total

													Shares		Amount
Balance as of December 31, 2019						118,342,772	$	119	$	642,628	$	(227,414)	$	(8,699)	$	406,634
Stock-based compensation						—	—		30,960		—		—		30,960
Exercise of vested options						957,999	1		12,176		—		—		12,177


Vesting of restricted stock units, net of shares withheld						382,972	—		(10,551)		—		—		(10,551)
Stock repurchase						(543,106)	(1)		—		(24,991)		—		(24,992)

Other comprehensive income						—	—		—		—		1,000		1,000
Net income						—	—		—		108,947		—		108,947
Balance as of June 30, 2020						119,140,637	$	119	$	675,213	$	(143,458)	$	(7,699)	$	524,175

The accompanying notes are an integral part of these consolidated financial statements.

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Etsy, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net income	$	242,020	$	108,947
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	47,791		30,536

Depreciation and amortization expense	26,065		29,334
Provision for expected credit losses	9,890		5,904
Foreign exchange (gain) loss	(3,306)		10,394
Non-cash interest expense	613		17,026

Deferred (benefit) provision for income taxes	(21,128)		7,389





Other non-cash expense, net	2,280		1,845


Changes in operating assets and liabilities:
Current assets	6,599		(51,975)


Non-current assets	3,756		4,994
Current liabilities	(41,225)		90,707



Non-current liabilities	(3,193)		(5,006)
Net cash provided by operating activities	270,162		250,095
Cash flows from investing activities


Purchases of property and equipment	(1,917)		(209)
Development of internal-use software	(7,084)		(2,043)
Purchases of marketable securities	(268,972)		(181,198)
Sales and maturities of marketable securities	197,770		206,182

Net cash (used in) provided by investing activities	(80,203)		22,732
Cash flows from financing activities
Payment of tax obligations on vested equity awards	(56,493)		(10,551)
Repurchase of stock	(180,000)		(24,992)

Proceeds from exercise of stock options	8,037		12,177

Proceeds from issuance of convertible senior notes	1,000,000		—
Payment of debt issuance costs	(12,566)		(14)
Purchase of capped calls	(85,000)		—
Settlement of convertible senior notes	(43,853)		—
Payments on finance lease obligations	(4,887)		(4,927)



Other financing, net	72		(10,196)
Net cash provided by (used in) financing activities	625,310		(38,503)
Effect of exchange rate changes on cash	(5,486)		(93)
Net increase in cash, cash equivalents, and restricted cash	809,783		234,231
Cash, cash equivalents, and restricted cash at beginning of period	1,249,440		448,634
Cash, cash equivalents, and restricted cash at end of period	$	2,059,223	$	682,865

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Etsy, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown above:


	Six Months Ended June 30,
	2021		2020
Beginning balance:
Cash and cash equivalents	$	1,244,099	$	443,293
Restricted cash	5,341		5,341
Total cash, cash equivalents, and restricted cash	$	1,249,440	$	448,634

Ending balance:
Cash and cash equivalents	$	2,053,882	$	677,524
Restricted cash	5,341		5,341
Total cash, cash equivalents, and restricted cash	$	2,059,223	$	682,865

The accompanying notes are an integral part of these consolidated financial statements.

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Etsy, Inc.

Notes to Consolidated Financial Statements

Note 1—Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

Etsy, Inc. (the “Company” or “Etsy”) operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers. The Company’s primary marketplace, Etsy.com, is the global marketplace for unique and creative goods. The Company generates revenue primarily from transaction, listing, and payments processing fees, and on-site advertising and shipping label services.

Basis of Consolidation

The consolidated financial statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The Company has condensed or omitted certain information and notes normally included in complete annual financial statements prepared in accordance with GAAP. These unaudited interim consolidated financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2021 (the “Annual Report”). In the opinion of management, all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for the periods presented have been reflected in the consolidated financial statements. The results of operations of any interim period are not necessarily indicative of the results of operations for the full annual period or any future period due to seasonal and other factors.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates and judgments. The accounting estimates that require management’s most subjective judgments include: stock-based compensation; income taxes, including the estimate of the annual effective tax rate at interim periods and evaluation of uncertain tax positions; and valuation of goodwill and intangible assets. As of June 30, 2021, the effects of the COVID-19 pandemic and its abatement on the Company’s business, results of operations, and financial condition continue to evolve. As a result, many of the Company’s estimates and judgments required increased judgment and carry a higher degree of variability and volatility. As additional information becomes available, the Company’s estimates may change materially in future periods.

Stock-Based Compensation

Service based stock options, service based restricted stock units (“RSUs”), and performance based restricted stock units (“PBRSUs”) are awarded to employees, officers, and members of the Company’s Board of Directors. The PBRSUs include financial performance based restricted stock units (“Financial PBRSUs”) and total shareholder return performance based restricted stock units (“TSR PBRSUs”), both of which have performance and service vesting requirements. The Company recognizes forfeitures as they occur.

The fair value of stock options and RSUs is measured using the closing price of the Company’s common stock on Nasdaq on the grant date. Additionally, the fair value of the Financial PBRSUs is determined using a probability assessment and the fair value of the TSR PBRSUs with market conditions are determined using a Monte-Carlo simulation model.

For PBRSUs, the Company recognizes stock-based compensation expenses on a straight-line basis over the longer of the derived, explicit, or implicit service period. As of interim and annual reporting periods, the Financial PBRSUs stock-based compensation expense is adjusted based on expected achievement of performance targets, while TSR PBRSUs stock-based compensation expense is not adjusted.

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Etsy, Inc.

Notes to Consolidated Financial Statements

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models previously required under GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features through equity. Without an initial allocation of proceeds to the conversion option, the debt will likely have a lower discount, thereby resulting in less non-cash interest expense through accretion. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This update permits the use of either the modified retrospective or fully retrospective method of transition.

The Company early adopted this standard, effective as of January 1, 2021, on a modified retrospective basis. The adoption of this standard had a material effect on the Company’s consolidated financial statements. The most significant effects related to the 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), 0.125% Convertible Senior Notes due 2026 (the “2019 Notes”), and 0% Convertible Senior Notes due 2023 (the “2018 Notes” and together with the 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), the 2020 Notes, and the 2019 Notes, the “Notes”), and included derecognition of the unamortized debt discount, which was recorded as a direct deduction from the Notes, resulting in an increase in long-term debt, net of approximately $264 million; derecognition of the equity component, which represents the value of the conversion option on the issuance date of the Notes outstanding, resulting in a reduction in additional paid-in capital of approximately $229 million, net of taxes; derecognition of deferred tax liabilities of approximately $63 million; and reversal of the cumulative debt discount recognized as interest expense in the Company’s Consolidated Statements of Operations since the date of issuance of each of the Notes to the period ending December 31, 2020, resulting in a decrease of accumulated deficit of approximately $28 million, net of taxes. The Company also had a reduction in interest expense due to the adoption of ASU 2020-06 as the debt discount has been derecognized and, effective January 1, 2021, there is no amortization of the debt discount. The Company did not incur any impact to liquidity or cash flows. When calculating net income per share of common stock attributable to common stockholders, the Company uses the if-converted method as required under ASU 2020-06 to determine the dilutive effect of the Notes.

Note 2—Revenue

The following table summarizes revenue disaggregated by Marketplace revenue and optional Services revenue for the periods presented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Marketplace revenue	$	395,463	$	332,031	$	809,105	$	487,952
Services revenue	133,437		96,706		270,441		168,840
Revenue	$	528,900	$	428,737	$	1,079,546	$	656,792

Contract balances

Deferred revenues

The amount of revenue recognized in the six months ended June 30, 2021 that was included in the deferred balance at January 1, 2021 was $11.3 million.

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Etsy, Inc.

Notes to Consolidated Financial Statements

Note 3—Income Taxes

The Company’s provision or benefit from income taxes in interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment. The estimate of the annual effective income tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year.

The Company’s quarterly tax provision, and its quarterly estimate of the annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting its income or loss before tax and the mix of jurisdictions to which they relate, taxable income or loss in each jurisdiction, changes in its stock price, audit-related developments, acquisitions, changes in its deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, the effective tax rate can be more or less volatile based on the amount of income or loss before tax. For example, the impact of discrete items and non-deductible expenses on the effective tax rate is greater when income before income taxes is lower.

For the six months ended June 30, 2021, the Company’s effective income tax rate was 0.6% representing an income tax provision recorded on net income before tax. The effective tax rate for the six months ended June 30, 2021 was lower than the U.S. statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation, the impact from foreign operations that are subject to lower tax rates, and a benefit related to a research and development tax credit, partially offset by state income taxes.

Although management believes its tax positions and related provisions reflected in the consolidated financial statements are fully supportable, it recognizes that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law and closing of statute of limitations. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in the provision for income taxes.

The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination, may result in additional taxes or penalties against the Company. If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on the Company’s tax provision.

The amount of unrecognized tax benefits included in the Consolidated Balance Sheets increased $1.7 million in the six months ended June 30, 2021, from $23.7 million as of December 31, 2020 to $25.4 million as of June 30, 2021. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $24.5 million as of June 30, 2021. Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. Given the number of years remaining subject to examination and the number of matters being examined, at this time, the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense.

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Etsy, Inc.

Notes to Consolidated Financial Statements

Note 4—Net Income Per Share

The following table presents the method used when calculating the impact of the Company’s Notes on earnings per share for the periods presented:

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

2021 Notes

If-Converted

N/A

If-Converted

N/A

2020 Notes

If-Converted

N/A

If-Converted

N/A

2019 Notes

If-Converted

Treasury Stock

If-Converted

Treasury Stock

2018 Notes

If-Converted

The Notes were dilutive for the three and six months ended June 30, 2021.

The following table presents the calculation of basic and diluted net income per share for the periods presented (in thousands, except share and per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Numerator:


Net income attributable to common stockholders—basic	$	98,254	$	96,425	$	242,020	$	108,947

Add back interest expense, net of tax attributable to assumed conversion of convertible senior notes	934		3,969		1,718		7,891


Net income attributable to common stockholders—diluted	$	99,188	$	100,394	$	243,738	$	116,838

Denominator:
Weighted-average common shares outstanding—basic	126,977,990		118,865,885		126,659,372		118,483,712

Dilutive effect of assumed conversion of options to purchase common stock	4,164,254		4,279,288		4,284,047		4,149,229
Dilutive effect of assumed conversion of restricted stock units	1,734,872		1,750,875		2,026,843		1,093,382
Dilutive effect of assumed conversion of convertible senior notes	11,990,375		9,511,993		11,887,238		9,511,993

Weighted-average common shares outstanding—diluted	144,867,491		134,408,041		144,857,500		133,238,316

Net income per share attributable to common stockholders—basic	$	0.77	$	0.81	$	1.91	$	0.92
Net income per share attributable to common stockholders—diluted	$	0.68	$	0.75	$	1.68	$	0.88

The following potential common shares were excluded from the calculation of diluted net income per share attributable to common stockholders because their effect would have been anti-dilutive for the periods presented:


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Stock options	176,858	410,409	105,322	777,412
Restricted stock units	690,062	42,361	388,099	1,166,627


Convertible senior notes	—	7,412,600	—	7,412,600

Total anti-dilutive securities	866,920	7,865,370	493,421	9,356,639

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Etsy, Inc.

Notes to Consolidated Financial Statements

Note 5—Fair Value Measurements

The Company has characterized its investments in marketable securities, based on the priority of the inputs used to value the investments, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), and lowest priority to unobservable inputs (Level 3). If the inputs used to measure the investments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the investment. Investments recorded in the accompanying Consolidated Balance Sheets are categorized based on the inputs to valuation techniques as follows:

Level 1—These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the Company has the ability to access.

Level 2—These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3—These are financial instruments where values are derived from techniques in which one or more significant inputs are unobservable. The Company did not have any Level 3 instruments as of June 30, 2021 and December 31, 2020.

Short- and long-term investments and certain cash equivalents consist of investments in debt securities that are available-for-sale. The following table sets forth the cost, gross unrealized losses, gross unrealized gains, and fair values of the Company’s investments as of the dates indicated (in thousands):


	Cost		Gross Unrealized Holding Loss		Gross Unrealized Holding Gain		Fair Value		Cash and Cash Equivalents		Short-term Investments		Long-term Investments
June 30, 2021
Cash	$	162,196	$	—	$	—	$	162,196	$	162,196	$	—	$	—
Level 1

U.S. Government and agency securities	269,020		—		130		269,150		—		269,150		—
Money market funds	1,891,686		—		—		1,891,686		1,891,686		—		—
	2,160,706		—		130		2,160,836		1,891,686		269,150		—
Level 2
Certificate of deposit	27,953		—		11		27,964		—		27,964		—
Commercial paper	46,744		—		17		46,761		—		46,761		—
Corporate bonds	189,653		(99)		99		189,653		—		86,852		102,801
	264,350		(99)		127		264,378		—		161,577		102,801
	$	2,587,252	$	(99)	$	257	$	2,587,410	$	2,053,882	$	430,727	$	102,801
December 31, 2020
Cash	$	346,136	$	—	$	—	$	346,136	$	346,136	$	—	$	—
Level 1
U.S. Government and agency securities	410,371		(3)		358		410,726		—		376,089		34,637
Money market funds (1)	920,643		—		—		920,643		881,465		—		—
	1,331,014		(3)		358		1,331,369		881,465		376,089		34,637
Level 2
Certificate of deposit	12,746		—		5		12,751		6,000		6,751		—
Commercial paper	14,494		—		4		14,498		10,498		4,000		—
Corporate bonds	42,632		(7)		111		42,736		—		38,279		4,457
	69,872		(7)		120		69,985		16,498		49,030		4,457
	$	1,747,022	$	(10)	$	478	$	1,747,490	$	1,244,099	$	425,119	$	39,094

(1)$39.2 million of money market funds were classified as funds receivable and seller accounts as of December 31, 2020.

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Etsy, Inc.

Notes to Consolidated Financial Statements

The Company evaluates fair value for each individual security in the investment portfolio. All investments in an unrealized loss position have been in an unrealized loss position for less than 12 months as of June 30, 2021.

The Company typically invests in short- and long-term instruments, including fixed-income funds and U.S. Government and agency securities aligned with the Company’s investment strategy. The maturities of the Company’s non-current marketable debt securities generally range from greater than 12 and up to 37 months.

Disclosure of Fair Values

The Company’s financial instruments that are not measured at fair value in the Consolidated Balance Sheets include the Notes, see “Note 7—Debt.” The Company estimates the fair value of the Notes through inputs that are observable in the market, classified as Level 2 as described above. The following table presents the carrying value and estimated fair value of the Notes as of the dates indicated (in thousands):


	As of June 30, 2021				As of December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
2021 Notes	$	986,779	$	1,102,700	$	—	$	—
2020 Notes (1)	642,641		836,875		511,733		536,126
2019 Notes (1)	643,842		1,557,910		514,035		566,399
2018 Notes (1)	69		394		39,166		42,157
	$	2,273,331	$	3,497,879	$	1,064,934	$	1,144,682

(1)Upon adoption of ASU 2020-06 as of January 1, 2021, the carrying value of the Notes increased due to the derecognition of the unamortized debt discount, as described in “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements.” The increase in the carrying value of the 2018 Notes was offset by the conversion of $43.8 million of the 2018 Notes in the six months ended June 30, 2021 (see “Note 7—Debt”).

The carrying value of other financial instruments, including cash, accounts receivable, accounts payable, funds receivable and seller accounts, and funds payable and amounts due to sellers approximate fair value due to the immediate or short-term maturity associated with these instruments.

Note 6—Accrued Expenses

Accrued expenses consisted of the following as of the dates indicated (in thousands):


	As of June 30, 2021		As of December 31, 2020
Pass-through marketplace tax collection obligation	$	91,353	$	109,662
Vendor accruals	69,407		73,437
Employee compensation-related liabilities	28,579		43,879
Income tax payable	20,484		5,374
Total accrued expenses	$	209,823	$	232,352

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Etsy, Inc.

Notes to Consolidated Financial Statements

Note 7—Debt

2021 Convertible Debt

In June 2021, the Company issued $1.0 billion aggregate principal amount of the 2021 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The net proceeds from the sale of the 2021 Notes were approximately $986.7 million after deducting the initial purchasers’ discount and offering expenses and before the 2021 Capped Call Transactions, as described below, and the repurchase of stock, as described in “Note 9—Stockholders’ Equity.”

The 2021 Notes are convertible into shares of the Company’s common stock based upon an initial conversion rate of 4.0518 shares of the Company’s common stock per $1,000 principal amount of 2021 Notes (equivalent to an initial conversion price of approximately $246.80 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s common stock. Based on the terms of the 2021 Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the 2021 Notes in cash and, therefore, the 2021 Notes are classified as long-term debt as of June 30, 2021.

The 2021 Notes will mature on June 15, 2028, unless earlier converted, redeemed, or repurchased. Prior to the close of business on the business day immediately preceding February 15, 2028, holders may convert all or a portion of their 2021 Notes only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2021 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if the Company calls the 2021 Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the 2021 Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events. On and after February 15, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2021 Notes at any time, regardless of the foregoing circumstances.

The Company may redeem all or any portion of the 2021 Notes, at the Company’s option, subject to partial redemption limitations, on or after June 20, 2025, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If a fundamental change occurs prior to the maturity date, holders may require the Company to repurchase all or a portion of their 2021 Notes for cash at a price equal to 100% of the principal amount of the 2021 Notes to be repurchased. Holders of 2021 Notes who convert their 2021 Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the 2021 Notes. As of June 30, 2021, none of the conditions permitting the holders of the 2021 Notes to early convert have been met.

In accounting for the issuance of the 2021 Notes, the Company recorded the 2021 Notes as a liability at face value. Transaction costs attributable to the liability were recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheet and are amortized to interest expense over the term of the 2021 Notes.

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Etsy, Inc.

Notes to Consolidated Financial Statements

2021 Capped Call Transactions

The Company used $85.0 million of the net proceeds from the 2021 Notes to enter into privately negotiated capped call instruments (“2021 Capped Call Transactions”) with certain financial institutions. The 2021 Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the 2021 Notes upon conversion of the 2021 Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the 2021 Capped Call Transactions with such reduction and/or offset subject to a cap. The 2021 Capped Call Transactions have an initial cap price of $340.42 per share of the Company’s common stock, which represents a premium of 100% over the last reported sale price of the Company’s common stock on June 8, 2021, and is subject to certain adjustments under the terms of the 2021 Capped Call Transactions. Collectively, the 2021 Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the 2021 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2021 Notes.

The 2021 Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company’s stock. The premiums paid for the 2021 Capped Call Transactions have been included as a net reduction to additional paid-in capital within stockholders’ equity.

2020 Convertible Debt

In August 2020, the Company issued $650.0 million aggregate principal amount of the 2020 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The net proceeds from the sale of the 2020 Notes were approximately $639.5 million after deducting the offering expenses. The 2020 Notes are convertible into shares of the Company’s common stock based upon an initial conversion rate of 5.0007 shares of the Company’s common stock per $1,000 principal amount of 2020 Notes (equivalent to an initial conversion price of approximately $199.97 per share). The Company used $74.7 million of the net proceeds from the 2020 Notes offering to enter into separate capped call instruments (“2020 Capped Call Transactions”) with the initial purchasers and/or their respective affiliates.

During any calendar quarter preceding May 1, 2027 in which the closing price of the Company’s common stock exceeds 130% of the applicable conversion price of the 2020 Notes on at least 20 of the last 30 consecutive trading days of the quarter, holders may, in the immediate quarter following, convert all or a portion of their 2020 Notes. Based on the daily closing prices of the Company’s stock during the quarter ended June 30, 2021, holders of the 2020 Notes are not eligible to convert their 2020 Notes during the third quarter of 2021. Based on the terms of the 2020 Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the 2020 Notes in cash and, therefore, the 2020 Notes are classified as long-term debt as of June 30, 2021.

2019 Convertible Debt

In September 2019, the Company issued $650.0 million aggregate principal amount of the 2019 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The net proceeds from the sale of the 2019 Notes were $639.5 million after deducting the initial purchasers’ discount and offering expenses. The 2019 Notes are convertible based upon an initial conversion rate of 11.4040 shares of the Company’s common stock per $1,000 principal amount of 2019 Notes (equivalent to an initial conversion price of approximately $87.69 per share). The Company used $76.2 million of the net proceeds from the 2019 Notes offering to enter into separate capped call instruments (“2019 Capped Call Transactions”) with the initial purchasers and/or their respective affiliates.

During any calendar quarter preceding June 1, 2026 in which the closing price of the Company’s common stock exceeds 130% of the applicable conversion price of the 2019 Notes on at least 20 of the last 30 consecutive trading days of the quarter, holders may, in the immediate quarter following, convert all or a portion of their 2019 Notes. Based on the daily closing prices of the Company’s stock during the quarter ended June 30, 2021, holders of the 2019 Notes are eligible to convert their 2019 Notes during the third quarter of 2021. Based on the terms of the 2019 Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the 2019 Notes in cash and, therefore, the 2019 Notes are classified as long-term debt as of June 30, 2021.

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Etsy, Inc.

Notes to Consolidated Financial Statements

2018 Convertible Debt

In March 2018, the Company issued $345.0 million aggregate principal amount of the 2018 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The net proceeds from the sale of the 2018 Notes were $335.0 million after deducting the initial purchasers’ discount and offering expenses. The 2018 Notes are convertible based upon an initial conversion rate of 27.5691 shares of the Company’s common stock per $1,000 principal amount of 2018 Notes (equivalent to an initial conversion price of approximately $36.27 per share). The Company used $34.2 million of the net proceeds from the 2018 Notes offering to enter into separate capped call instruments (“2018 Capped Call Transactions”) with the initial purchasers and/or their respective affiliates.

During the third quarter of 2020, the Company paid $137.2 million in cash and issued approximately 7.3 million shares of Etsy’s common stock to repurchase $301.1 million aggregate principal amount of its outstanding 2018 Notes through privately negotiated transactions. Concurrently, the Company repurchased 1.3 million shares of Etsy’s common stock for $166.2 million, in order to effectively complete the partial repurchase of 2018 Notes principal value in cash, and the conversion premium in shares. The equity component impact associated with the conversion premium on the 2018 Notes was a net increase to additional paid-in capital of $143.2 million. This transaction was accounted for as an extinguishment of debt and recorded in accordance with the applicable accounting standard in the year ended December 31, 2020. The Company recognized a non-cash loss on extinguishment of $16.9 million. This loss was calculated by comparing the carrying value of the debt component with the fair value of a similar liability that does not have an associated convertible feature immediately prior to extinguishment as well as writing off any remaining unamortized deferred debt issuance costs at the time of extinguishment.

During the six months ended June 30, 2021, the Company paid $43.8 million in cash and issued approximately 1.0 million shares of Etsy’s common stock to settle conversion notices of $43.8 million aggregate principal amount of the outstanding 2018 Notes. The debt conversion transactions were accounted for in accordance with ASU 2020-06, which was adopted in the first quarter of 2021. See “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” for additional information.

During any calendar quarter preceding November 1, 2022 in which the closing price of the Company’s common stock exceeds 130% of the applicable conversion price of the 2018 Notes on at least 20 of the last 30 consecutive trading days of the quarter, holders may, in the immediate quarter following, convert all or a portion of their 2018 Notes. Based on the daily closing prices of the Company’s stock during the quarter ended June 30, 2021, holders of the remaining 2018 Notes are eligible to convert their 2018 Notes during the third quarter of 2021. Based on the terms of the 2018 Notes, when a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the 2018 Notes in cash and, therefore, the remaining 2018 Notes are classified as long-term debt as of June 30, 2021.

The following table presents the outstanding principal amount and carrying value of the Notes as of the dates indicated (in thousands):


	As of June 30, 2021
	2021 Notes		2020 Notes		2019 Notes		2018 Notes		Total
Principal	$	1,000,000	$	650,000	$	649,996	$	70	$	2,300,066
Unamortized debt issuance costs	13,221		7,359		6,154		1		26,735
Net carrying value (1)	$	986,779	$	642,641	$	643,842	$	69	$	2,273,331


	As of December 31, 2020
	2021 Notes		2020 Notes		2019 Notes		2018 Notes		Total
Principal	$	—	$	650,000	$	650,000	$	43,915	$	1,343,915
Unamortized debt discount (1)	—		130,308		129,224		4,286		263,818
Unamortized debt issuance costs	—		7,959		6,741		463		15,163
Net carrying value	$	—	$	511,733	$	514,035	$	39,166	$	1,064,934

(1) Upon adoption of ASU 2020-06 as of January 1, 2021, the unamortized debt discount balance was derecognized, as described in “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements.”

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Etsy, Inc.

Notes to Consolidated Financial Statements

The annual effective interest rate for the 2021 Notes, 2020 Notes, 2019 Notes, and 2018 Notes was approximately 0.4%, 0.3%, 0.3%, and 0.4%, respectively. Interest expense related to each of the Notes for the periods presented below was as follows (in thousands):


	Three Months Ended June 30, 2021
	2021 Notes		2020 Notes		2019 Notes		2018 Notes		Total


Total interest expense (1)	$	218	$	501	$	496	$	12	$	1,227

	Three Months Ended June 30, 2020
	2021 Notes		2020 Notes		2019 Notes		2018 Notes		Total
Coupon interest and amortization of debt issuance costs	$	—	$	—	$	459	$	387	$	846
Amortization of debt discount	—		—		4,873		3,582		8,455
Total interest expense	$	—	$	—	$	5,332	$	3,969	$	9,301


	Six Months Ended June 30, 2021
	2021 Notes		2020 Notes		2019 Notes		2018 Notes		Total


Total interest expense (1)	$	218	$	1,003	$	992	$	44	$	2,257

	Six Months Ended June 30, 2020
	2021 Notes		2020 Notes		2019 Notes		2018 Notes		Total
Coupon interest and amortization of debt issuance costs	$	—	$	—	$	915	$	769	$	1,684
Amortization of debt discount	—		—		9,701		7,122		16,823
Total interest expense	$	—	$	—	$	10,616	$	7,891	$	18,507

(1) Total interest expense for the three and six months ended June 30, 2021 consisted of coupon interest and amortization of debt issuance costs, as there is no amortization of the debt discount in the current year due to the adoption of ASU 2020-06 as of January 1, 2021, as described in “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements.”

The estimated fair value of each of the Notes was determined through inputs that are observable in the market, and are classified as Level 2. See “Note 5—Fair Value Measurements” for more information regarding the fair value of the Notes.

The Notes are general unsecured obligations of the Company. The Notes rank senior in right of payment to all of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment with all of the Company’s liabilities that are not so subordinated; are effectively junior to any of the Company’s secured indebtedness; and are structurally junior to all indebtedness and liabilities (including trade payables) of the Company’s subsidiaries.

2019 Credit Agreement

On February 25, 2019, the Company entered into a $200.0 million senior secured revolving credit facility pursuant to a Credit Agreement (the “2019 Credit Agreement”) with lenders party thereto from time to time, and Citibank N.A., as administrative Agent. The 2019 Credit Agreement will mature in February 2024. The 2019 Credit Agreement includes a letter of credit sublimit of $30.0 million and a swingline loan sublimit of $10.0 million.

Borrowings under the 2019 Credit Agreement (other than swingline loans) bear interest, at the Company’s option, at (i) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, and (c) an adjusted LIBOR rate for a one-month interest period plus 1.00%, in each case plus a margin ranging from 0.25% to 0.875% or (ii) an adjusted LIBOR rate plus a margin ranging from 1.25% to 1.875%. Swingline loans under the 2019 Credit Agreement bear interest at the same base rate (plus the margin applicable to borrowings bearing interest at the base rate). These margins are determined based on the senior secured net leverage ratio (defined as secured funded debt, net of unrestricted cash up to $100 million, to EBITDA) for the preceding four fiscal quarter period. The Company is also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee, ranging from 0.20% to 0.35% depending on the Company’s senior secured net leverage ratio, and fees associated with letters of credit.

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Etsy, Inc.

Notes to Consolidated Financial Statements

The Company capitalized $1.4 million of debt issuance costs in connection with the 2019 Credit Agreement. Total unamortized debt issuance costs related to the 2019 Credit Agreement were $0.7 million and $0.9 million as of June 30, 2021 and December 31, 2020, respectively. Non-cash interest expense related to debt issuance costs on the 2019 Credit Agreement for both the three months ended June 30, 2021 and 2020 and both the six months ended June 30, 2021 and 2020 was $0.1 million. At June 30, 2021 and December 31, 2020, the Company did not have any borrowings under the 2019 Credit Agreement and was in compliance with all financial covenants.

Note 8—Commitments and Contingencies

In June 2021, the Company issued the 2021 Notes, see “Note 7—Debt” for more information. Additionally, in June 2021 the Company entered into a 5-year contractual commitment for cloud-based services with an aggregate future minimum payment obligation of $525.0 million, which includes escalating commitments each contract year. Commitments did not materially change during the six months ended June 30, 2021 except for this activity.

Legal Proceedings

From time to time in the normal course of business, various other claims and litigation have been asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability for damages. Any claims or litigation could have an adverse effect on the Company’s results of operations, cash flows, or business and financial condition in the period the claims or litigation are resolved. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business.

Note 9—Stockholders’ Equity

In December 2020, the Board of Directors approved a stock repurchase program that enables the Company to repurchase up to $250 million of its common stock. The program does not have a time limit and may be modified, suspended, or terminated at any time by the Board of Directors. The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, stock price, trading volume, and general market conditions, along with Etsy’s working capital requirements, general business conditions, and other factors.

Under the stock repurchase program, the Company may purchase shares of its common stock through various means, including open market transactions, privately negotiated transactions, tender offers, or any combination thereof. In addition, open market repurchases of common stock could be made pursuant to trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit common stock to be repurchased at a time that the Company might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. For the three and six months ended June 30, 2021, the Company did not repurchase common stock under the stock repurchase program, and the remaining amount authorized as of June 30, 2021 is $250 million.

In June 2021 the Company repurchased approximately 1.1 million shares of its common stock for approximately $180.0 million concurrently with the issuance of the 2021 Notes, see “Note 7—Debt.” This repurchase was separate from the stock repurchase plan approved by the Board of Directors in December 2020.

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Etsy, Inc.

Notes to Consolidated Financial Statements

Note 10—Stock-Based Compensation

During the three and six months ended June 30, 2021, the Company granted stock options and RSUs, including Financial PBRSUs and TSR PBRSUs, under its 2015 Equity Incentive Plan (“2015 Plan”) and, pursuant to the evergreen increase provision of the 2015 Plan, 6,291,797 additional shares were added to the total number of shares available for issuance under the 2015 Plan effective as of January 4, 2021. At June 30, 2021, 44,040,744 shares were authorized under the 2015 Plan and 30,433,955 shares were available for future grant.

Beginning in the second quarter of 2021, the Company updated certain assumptions used to determine the fair value of its stock options under the Black-Scholes option-pricing model, including the expected volatility and expected term assumptions. Given Etsy’s sufficient trading history as of the second quarter of 2021, the Company calculates expected volatility based solely on the historical volatility of Etsy’s stock price observations over a period equivalent to the expected term of the stock option grants. Prior to the second quarter of 2021, the Company estimated expected volatility by taking the average historical price volatility for Etsy and certain industry peers. Further, given that the Company has sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of its stock options, beginning in the second quarter, the Company estimates its expected term using historical option exercise behavior and expected post-vest cancellation data, averaged with an assumption that recently granted options will be exercised ratably from vesting to the expiration of the stock option. Prior to the second quarter of 2021, the Company used the simplified method to calculate the expected term for awards issued to employees or members of the Company’s Board of Directors. These updated assumptions will be applied prospectively to option awards granted in or after the second quarter of 2021. The Company does not expect these changes to have a material impact on the Consolidated Statements of Operations.

The fair value of options granted in the periods presented below using the Black-Scholes pricing model has been based on the following assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Volatility	56.1%	41.3% - 41.7%	43.4% - 56.1%	38.9% - 41.7%
Risk-free interest rate	0.8%	0.4% - 0.5%	0.8% - 1.1%	0.4% - 1.7%
Expected term (in years)	4.86	5.52 - 6.16	4.86 - 6.15	5.52 - 6.16

The following table summarizes the activity for the Company’s options during the six months ended June 30, 2021 (in thousands, except share and per share amounts):


	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2020	5,099,952	$	20.97	6.81	$	800,453
Granted	184,648	220.13
Exercised	(339,795)	23.65
Forfeited/Canceled	(26,500)	45.41
Outstanding at June 30, 2021	4,918,305	28.13		6.42	877,144
Total exercisable at June 30, 2021	3,935,329	15.17		5.91	750,331

The following table summarizes the weighted-average grant date fair value of options granted, intrinsic value of options exercised, and fair value of awards vested during the three and six months ended June 30, 2021 and 2020 (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Weighted-average grant date fair value of options granted	$	78.48	$	28.97	$	94.78	$	17.72
Intrinsic value of options exercised	18,888		32,034		63,242		52,458
Fair value of awards vested	26,759		19,022		35,736		26,408

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Etsy, Inc.

Notes to Consolidated Financial Statements

The total unrecognized compensation expense at June 30, 2021 related to the Company’s options was $30.0 million, which will be recognized over an estimated weighted-average amortization period of 3.00 years.

During the first quarter of 2021, service based RSUs, Financial PBRSUs, and TSR PBRSUs were awarded at fixed dollar amounts. The target number of shares underlying the awards was determined based on Etsy’s 30-day average share price leading up to and including the grant date.

For the Financial PBRSUs, the number of RSUs received will depend on the achievement of financial metrics relative to the approved performance targets. Depending on the actual financial metrics achieved relative to the target financial metrics, the number of PBRSUs issued could range from 0% to 200% of the target amount. For the TSR PBRSUs, the number of RSUs received will depend on the Company’s total shareholder return relative to that of the Nasdaq Composite Index over a three-year measurement period.

The target number of RSUs will be divided into two tranches, with each tranche corresponding to 50% of the target RSUs. The first tranche will vest in full on the third anniversary of the grant date and the second tranche will vest on the fourth anniversary of the grant date, subject to the Compensation Committee’s approval of the level of achievement against the approved performance targets.

The following table summarizes the activity for the Company’s unvested RSUs, which includes Financial PBRSUs and TSR PBRSUs, during the six months ended June 30, 2021:


	Shares	Weighted-Average Grant Date Fair Value
Unvested at December 31, 2020	3,085,987	$	50.28
Granted	948,686	222.27
Vested	(697,751)	40.88
Forfeited/Canceled	(149,540)	71.40
Unvested at June 30, 2021	3,187,382	102.54

The total unrecognized compensation expense at June 30, 2021 related to the Company’s unvested RSUs, including the Financial PBRSUs and TSR PBRSUs, was $294.9 million, which will be recognized over an estimated weighted-average amortization period of 3.20 years.

Stock-based compensation expense included in the Consolidated Statements of Operations for the periods presented below is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	3,041	$	1,907	$	5,398	$	3,527
Marketing	2,170		1,357		3,537		2,581
Product development	13,459		8,472		23,243		15,273
General and administrative	8,770		4,989		15,613		9,155
Stock-based compensation expense	$	27,440	$	16,725	$	47,791	$	30,536

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Etsy, Inc.

Notes to Consolidated Financial Statements

Note 11—Subsequent Events

On July 2, 2021, the Company acquired Elo7 Serviços de Informática S.A. (“Elo7”), a privately held marketplace for unique, handmade items, for approximately $217 million subject to certain adjustments for Elo7’s working capital, transaction expenses, cash and indebtedness, and reduced by the value of certain equity awards of Etsy to be granted to Elo7 employees in connection with the transaction.

On July 12, 2021, the Company acquired Depop Limited (“Depop”), an online global peer-to-peer fashion resale marketplace, for approximately $1.625 billion consisting primarily of cash and subject to certain adjustments for Depop's working capital, transaction expenses, cash and indebtedness, and certain deferred and unvested equity to be issued and granted to Depop management and employees in connection with the transaction.

Given the timing of the completion of these acquisitions, the Company is unable to provide preliminary asset valuation and other required acquisition-related disclosures in this quarterly report on Form 10-Q. The Company plans to provide preliminary asset valuation and other required acquisition-related disclosures in its quarterly report on Form 10-Q for the quarter ending September 30, 2021.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021 (the “Annual Report”). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, “Risk Factors.” For more information regarding key factors affecting our performance, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting our Performance” in our Annual Report, which we incorporate by reference.

Overview

Business

Etsy, Inc., founded in 2005 and headquartered in Brooklyn, NY, operates a “House of Brands,” two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. These marketplaces share a mission to “Keep Commerce Human,” and we’re committed to using the power of business to strengthen communities and empower people. Our primary marketplace, Etsy.com, is the global destination for unique and creative goods. Buyers come to Etsy to be inspired and delighted by items that are crafted and curated by creative entrepreneurs. For sellers, we offer a range of tools and services that address key business needs.

Alongside our core Etsy marketplace, our “House of Brands” consist of Reverb, our musical instrument marketplace, and our recent acquisitions in July 2021 — Depop, our fashion resale marketplace, and Elo7, the Brazil-based marketplace for handmade and unique items. Each of our marketplaces operates independently, while benefiting from shared expertise in product, marketing, technology, and customer support.

Reverb is included in all financial and other metrics discussed in this report, unless otherwise noted. Depop and Elo7, which were acquired after the end of the second quarter, are not included in the historical financial and other metrics discussed in this report.

The Etsy marketplace connects creative artisans and entrepreneurs with thoughtful consumers looking for items that are intended to be special, reflect their sense of style, or represent a meaningful occasion. Our sellers are the heart and soul of Etsy, and our technology platform allows our sellers to turn their creative passions into economic opportunity. We have a seller-aligned business model: we make money when our sellers make money. We offer Etsy.com sellers a marketplace with millions of buyers along with a range of seller tools and services that are specifically designed to help our creative entrepreneurs generate more sales and scale their businesses.

We are focused on attracting potential buyers to the Etsy marketplace for everyday items that have meaning and those “special” purchase occasions that happen throughout the year. We are focused on deepening our engagement with our existing buyers by inspiring purchases across our many retail categories and special occasions. Purchases for use in the everyday include handmade or vintage clothing, accessories, household items, or furniture that the buyer wants to reflect her sense of style. Special purchase occasions can occur many times throughout the year and include shopping for occasions that reflects an individual’s unique style; gifting that demonstrates thought and care; and celebrations that express creativity and fun. Buyers tell us that they come to Etsy.com because Etsy sellers offer items that they can’t find anywhere else.

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Our revenue is diversified, generated from a mix of marketplace activities and other optional services we provide to sellers.

Marketplace revenue is comprised of the fees a seller pays us for marketplace activities. Marketplace activities primarily include listing an item for sale; completing transactions between a buyer and a seller, which includes, beginning in the second quarter of 2020, an additional transaction fee related to offsite advertising; and using our payments services to process payments, including foreign currency transactions. Etsy.com fees include the $0.20 listing fee for each item listed (for up to four months); the 5% transaction fee that an Etsy seller pays for each completed transaction, inclusive of shipping fees charged; where applicable, an additional transaction fee of 12% or 15% related to offsite advertising; and fees for Etsy Payments, our payment processing product.

Services revenue is comprised of the fees a seller pays us for our optional other services (“Services”). Services primarily include on-site advertising services, which allow sellers to pay for prominent placement of their listings in search results; and shipping labels, which allow sellers in the United States, Canada, United Kingdom, Australia, and, commencing in the second quarter of 2021, India to purchase discounted shipping labels.

Our primary strategy is focused on growing the Etsy marketplace in our seven core geographies and building a sustainable competitive advantage around four elements of our business that we believe differentiate us from our competitors, or what we call our “Right to Win.” The foundation of Etsy’s competitive advantage is our collection of our sellers’ unique items, which, we believe, when combined with best-in-class search and discovery, human connections, and a trusted brand, will enable us to continue to stand out among other e-commerce platforms and marketplaces. Our investments in product, marketing, and talent will be focused on capitalizing on these four elements of our business. Ultimately, the goal of our long-term strategy is to drive more new buyers to the Etsy marketplace, give existing buyers reasons to come back more often, encourage buyers to spend more per order, and fuel success for our sellers. While current macroeconomic conditions have had a dramatic effect on the global economy and on our business, these impacts have led us to reaffirm and strengthen our commitment to our long-term strategy.

We see a number of similarities between the levers of growth for Etsy and for our acquired marketplaces, Reverb, Depop, and Elo7. These include improving search and discovery, making selling and buying easier, and building global brands and user communities.

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Second Quarter 2021 Financial Highlights

As of June 30, 2021, our marketplaces connected 5.2 million active sellers and 90.5 million active buyers in nearly every country in the world. In the three and six months ended June 30, 2021, sellers generated GMS of $3.0 billion and $6.2 billion, respectively, of which approximately 63% in each period came from purchases made on mobile devices. We are a global company and approximately 41% of our GMS in both the three and six months ended June 30, 2021 came from transactions where either a seller or a buyer was located outside of the United States.

Total revenue was $528.9 million and $1.1 billion in the three and six months ended June 30, 2021, respectively, driven by strong growth in both Marketplace and Services revenue. In the three and six months ended June 30, 2021, we recorded net income of $98.3 million and $242.0 million, respectively, and non-GAAP Adjusted EBITDA of $139.5 million and $323.5 million, respectively. 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 $2.5 billion as of June 30, 2021. As of June 30, 2021, Etsy had outstanding $1.0 billion aggregate principal amount of 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026 (the “2019 Notes”), and $0.1 million aggregate principal amount of 0% Convertible Senior Notes due 2023 (the “2018 Notes” and together with the 2021 Notes, 2020 Notes, and the 2019 Notes, the “Notes”). Additionally, Etsy has the ability to draw down on its $200.0 million senior secured revolving credit facility. In the six months ended June 30, 2021, Etsy had positive operating cash flows of $270.2 million.

Acquisitions

On July 2, 2021, we completed our acquisition of Elo7 Serviços de Informática S.A. (“Elo7”), a top 10 e-commerce marketplace in Brazil focused on unique, handmade items for approximately $217 million, subject to certain adjustments for Elo7's working capital, transaction expenses, cash and indebtedness, and reduced by the value of certain equity awards of Etsy to be granted to Elo7 employees in connection with the transaction. We see significant potential in Brazil's e-commerce sector, which is still in early stages of development and fueled by one of the largest economies in the world. We believe having a well known local brand will help Etsy, Inc. to better capitalize on this opportunity.

On July 12, 2021, we completed our acquisition of Depop Limited (“Depop”), an online global peer-to-peer fashion resale marketplace for approximately $1.625 billion, consisting primarily of cash and subject to certain adjustments for Depop's working capital, transaction expenses, cash and indebtedness, and certain deferred and unvested equity to be issued and granted to Depop management and employees in connection with the transaction. We believe Depop extends our market opportunity in the high frequency apparel sector, specifically in the fast-growing resale space, and deepens our reach into the Gen Z consumer.

Convertible Debt

In June 2021, we issued the 2021 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The initial conversion price of the 2021 Notes represented a premium of approximately 45% over the closing price of our common stock on June 8, 2021, the date the 2021 Notes offering was priced. The net proceeds from the sale of the 2021 Notes were $986.7 million after deducting the offering expenses. The 2021 Notes will mature on June 15, 2028, unless earlier converted, redeemed, or repurchased.

We used $85.0 million of the net proceeds from the 2021 Notes offering to enter into separate capped call instruments (“2021 Capped Call Transactions”) with certain financial institutions. The 2021 Capped Call Transactions effectively limit the premium for conversion of the 2021 Notes to 100% and are generally expected to reduce potential dilution to our common stock upon any conversion of the 2021 Notes and/or offset any payments we make upon conversion.

In addition, we repurchased approximately 1.1 million shares of our common stock for approximately $180.0 million concurrently with the issuance of the 2021 Notes.

We intend to use the remainder of the net proceeds from the 2021 Notes for general corporate purposes. For more information on the 2021 Notes and 2021 Capped Call Transactions, see “Note 7—Debt” in the Notes to Consolidated Financial Statements.

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Quarterly Operating Highlights

Select highlights of our second quarter operating performance and business initiatives are outlined below:


			Product: Our primary focus in 2021 is to improve customer experiences across the Etsy marketplace to engage and retain the millions of buyers that we acquired over the past year. These are just a few of our initiatives during the second quarter, aligned with our Right to Win strategy, that are focused on driving frequency and engagement.

•We continued to improve our search capabilities by leveraging the engagement of buyers and sellers and the vast amount of data on our platform to create “XWalk,” a large-scale, real-time graph retrieval engine that provides more relevant search results and narrows the semantic gap- boosting conversion and repeat purchase rate for buyers.

•We made additional progress in the discovery experience, further unlocking the value of our sellers’ unique collection of items by redesigning our home and landing pages using machine learning, personalization, and recommendations in a way that made content more engaging and compelling to buyers.

•We improved our ranking capabilities for Etsy Ads with refined algorithms and new machine learning based models designed to expand seller returns, provide more relevant inventory for buyers, and increase click through rates and revenue for Etsy.

•We created a new seller program that defines what success looks like, by celebrating and rewarding our top-rated sellers, defining standards, and giving them motivation, support, and agency to improve their Etsy businesses. This “Star Seller” program was officially introduced to our seller community on July 28, 2021.

•Internationally, we introduced “local pricing,” which is a way for sellers to set a specific price for the origin country of their listing, allowing a seller to more efficiently incorporate the cost of shipping into the item price, and enabling pricing strategies that can help a seller grow both domestic and export sales.


			Marketing: We significantly increased our investments in marketing and continued to optimize spend across all channels. Upper funnel marketing spend, including television and digital video, was 23% of our overall marketing spend, or approximately $35 million in the second quarter.

•In television and digital video, we rolled out new TV campaigns in the United States, United Kingdom, and Germany. Campaigns feature localized creative designed for the growth opportunity identified in each market. “Why Buy Boring?” aims to make Etsy top-of-mind among consumers in the United States and the United Kingdom, and “Etsy Has It” is designed to drive brand awareness in Germany.

◦These campaigns continued to drive meaningful improvement in Etsy brand metrics such as prompted and unprompted awareness, an acceleration in Etsy App downloads, and we believe contributed to an uptick in new shop openings in all three geographies.

•We further adopted organic social strategies which are showing strong traction and increased buyer engagement including: user generated content and seller videos, as well as creator collaborations focused on supporting independent makers from under-represented communities. To date, we’ve seen our influencer collections deliver above average order value and strong awareness, engagement, and frequency.

•We redesigned our marketing emails to feature more accessible and responsive designs, and created new campaigns that utilized our improved CRM capabilities and App Push notifications to promote flash sales, remind buyers of favorite shops, and send updates to lapsed Etsy app users.

•We launched Etsy coupons, a highly targeted approach to driving engagement among select buyers. These are Etsy-funded promotions that buyers can redeem when purchasing any item from a shop using Etsy Payments.

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			Impact Pillars: We continued to make progress on our Impact strategy that reflects the positive economic, social, and ecological impact we want to have on the world while advancing and complementing our business strategy. Here are some highlights:

•In connection with our goal to be Net Zero by 2030, we introduced a “Shop Local” signal, a conversion-boosting initiative that provides buyers with faster delivery times while reducing shipping emissions.

•We continue to highlight underrepresented communities on our marketplace. For example, during the quarter we launched our first-ever marketing campaign highlighting our Etsy.com community of Asian American Pacific Islander sellers. In addition, we supported our Etsy.com LGBTQIA+ community in a campaign that saw high buyer engagement and drove an average of $1,800 in GMS per featured seller.

•Etsy was ranked number 20 on the 2021 Purpose Power Index of Most Purposeful Brands. Survey respondents considered companies to have an honest intention to improve the lives of people and their communities while staying committed to changing the world for the better for all of its stakeholders.

•To support India’s most vulnerable communities during the COVID-19 wave that has had a devastating impact, Etsy provided direct support to organizations delivering much needed aid.

•In February 2021 we launched a program that allows buyers in the U.S. to round up their order total to the nearest dollar and donate the difference to nonprofits that work to dismantle barriers to creative entrepreneurship. To date this program has collected over 3 million donations, well on our way to achieving our 2021 goal to raise $2 million.


			Reverb is focused on these four areas in 2021- increased personalization, selling more new gear, international growth, and improving the customer experience, with the following second quarter highlights:

•We launched a premium advertising product to drive awareness and purchase intent by integrating relevant promoted content in the core buyer experiences. This product makes it easier for gear manufacturers to promote their inventory directly to a large, targeted set of buyers on Reverb.

•We launched personalized recommendations and expanded the rollout of “Gear Collections,” which now includes over 175,000 items from players across Reverb. This capability not only helps us learn more about buyers and personalize their experience, it also helps players understand how much their gear is worth and consider selling it.

•We formed a new international product team and delivered our first global-specific feature enhancements.

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Key Operating and Financial Metrics

We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:


	Three Months Ended June 30,						% Growth (Decline) Y/Y		Six Months Ended June 30,						% Growth (Decline) Y/Y
	2021			2020					2021			2020

	(in thousands, except percentages)
GMS	$	3,041,490		$	2,688,783		13.1	%	$	6,184,662		$	4,042,074		53.0	%
Revenue	$	528,900		$	428,737		23.4	%	$	1,079,546		$	656,792		64.4	%
Marketplace revenue	$	395,463		$	332,031		19.1	%	$	809,105		$	487,952		65.8	%
Services revenue	$	133,437		$	96,706		38.0	%	$	270,441		$	168,840		60.2	%
Gross profit	$	379,931		$	317,356		19.7	%	$	787,660		$	462,995		70.1	%
Operating expenses	$	290,826		$	198,216		46.7	%	$	547,918		$	318,490		72.0	%
Net income	$	98,254		$	96,425		1.9	%	$	242,020		$	108,947		122.1	%
Adjusted EBITDA (Non-GAAP)	$	139,474		$	150,628		(7.4)	%	$	323,542		$	205,684		57.3	%
Adjusted EBITDA margin (Non-GAAP)	26		%	35		%	(900)	bps	30		%	31		%	(100)	bps

Active sellers (1)	5,233			3,140			66.7	%	5,233			3,140			66.7	%
Active buyers	90,490			60,274			50.1	%	90,490			60,274			50.1	%

Percent mobile GMS	63		%	61		%	200	bps	63		%	60		%	300	bps
Percent international GMS	41		%	32		%	900	bps	41		%	33		%	800	bps

(1) See “Active Sellers” definition below.

GMS

Gross merchandise sales (“GMS”) is the dollar value of items sold in our marketplaces within the applicable period, excluding shipping fees and net of refunds associated with canceled transactions. GMS does not represent revenue earned by us. GMS is largely driven by transactions in our marketplaces and is not directly impacted by Services activity. However, because our revenue and cost of revenue depend significantly on the dollar value of items sold in our marketplace, we believe that GMS is an indicator of the success of our sellers, the satisfaction of our buyers, and the health, scale, and growth of our business. We track “Paid GMS” for the Etsy marketplace and define it as Etsy.com GMS that is attributable to our performance marketing efforts, which excludes most of our marketing investments focused on brand awareness like TV and digital video.

GMS increased $352.7 million to $3.0 billion and increased $2.1 billion to $6.2 billion in the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020, respectively. Supporting this growth in GMS was an increase in active sellers, driven by strong growth in both international and U.S. sellers, and an increase in active buyers as compared to June 30, 2020. As of June 30, 2021, habitual buyers, or Etsy buyers who have spent $200 or more and made purchases on six or more days in the previous 12 months, grew to 7.9 million, an increase of 115% compared to June 30, 2020. Additionally, we experienced the following (decline)/growth in both new buyer and existing buyer GMS in the periods presented:


	Three Months Ended June 30,
	2021				2020

	% (Decline) Growth Y/Y		% of GMS		% Growth Y/Y		% of GMS
New Buyer GMS	(14)	%	14	%	162	%	18	%
Existing Buyer GMS	19	%	86	%	142	%	82	%

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	Six Months Ended June 30,
		2021			2020

			% Growth Y/Y		% of GMS		% Growth Y/Y		% of GMS
New Buyer GMS			26	%	14	%	94	%	17	%
Existing Buyer GMS			59	%	86	%	90	%	83	%

It is difficult to predict how our business will be impacted as the COVID-19 pandemic, including recent and any future variants, runs its course and eventually abates. Our growth rate decelerated in the second quarter of 2021 as compared to the extraordinary growth experienced one year ago driven by the shift of global consumers to purchase online. Our growth rate may continue to decrease as we proceed through 2021 as compared to the significant growth experienced in the back half of 2020 due to a combination of reasons including: macroeconomic factors such as retail businesses reopening, increased consumer spending on travel and other discretionary items, the waning impact of U.S. and other government economic stimulus programs, continued contraction of mask sales, and a deceleration of new buyers, as anticipated, which may be offset to some extent by incremental GMS from our recent acquisitions.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents our net income adjusted to exclude: interest and other non-operating expense, net; (benefit) provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); and acquisition-related expenses. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue. See “Non-GAAP Financial Measures” for more information regarding our use of Adjusted EBITDA and Adjusted EBITDA margin, including their limitations as a financial measure, and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

Active Sellers

An active seller is a seller who has incurred at least one charge from us in the last 12 months. Charges include Marketplace and Services revenue fees, discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Business.” A seller is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple seller accounts and can count as a distinct active seller in each of our marketplaces. As part of our commitment to integrity and transparency, we continuously monitor the criteria for disqualifying a seller as an active seller. Commencing in the first quarter of 2021, we expanded our disqualifying criteria, but did not apply such criteria to prior periods as the impact of such criteria was immaterial to such periods. We succeed when sellers succeed, so we view the number of active sellers as a key indicator of the awareness of our brand, the reach of our platform, the potential for growth in GMS and revenue, and the health of our business.

Active Buyers

An active buyer is a buyer who has made at least one purchase in the last 12 months. A buyer is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple buyer accounts and can count as a distinct active buyer in each of our marketplaces. We generate revenue when buyers order items from sellers, so we view the number of active buyers as a key indicator of our potential for growth in GMS and revenue, the reach of our platform, awareness of our brand, the engagement and loyalty of buyers, and the health of our business.

Mobile GMS

Mobile GMS is GMS that results from a transaction completed on a mobile device, such as a tablet or a smartphone. Mobile GMS excludes orders initiated on mobile devices but ultimately completed on a desktop. When calculating the percentage of mobile GMS, we do not take into account refunds associated with canceled transactions. We believe that mobile GMS indicates our success in converting mobile activity into mobile purchases and demonstrates our ability to grow GMS and revenue.

During both the three and six months ended June 30, 2021, mobile GMS increased as a percentage of total GMS to approximately 63%, up from approximately 61% and 60% for the three and six months ended June 30, 2020, respectively.

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International GMS

International GMS is GMS from transactions where either the billing address for the seller or the shipping address for the buyer at the time of sale is outside of the United States. When calculating percent international GMS, we do not take into account refunds associated with canceled transactions. We believe that international GMS shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.

For both the three and six months ended June 30, 2021, international GMS increased as a percentage of total GMS to approximately 41%, up from approximately 32% and 33% for the three and six months ended June 30, 2020, respectively. International GMS increased approximately 45% and 90%, respectively, in the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, respectively, or 36% and 79%, respectively, on a currency-neutral basis, driven by our fastest growing international trade route, international domestic, which is GMS generated between a non-U.S. buyer and a non-U.S. seller both in the same country. International domestic GMS grew approximately 54% and 130%, respectively in the three and six months ended June 30, 2021 compared with the three and six months ended June 30, 2020, respectively.

Currency-Neutral GMS Growth

We calculate currency-neutral GMS growth by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.

As reported and currency-neutral GMS growth for the periods presented below is as follows:


	Quarter-to-Date Period Ended						Year-to-Date Period Ended
	As Reported		Currency-Neutral		FX Impact		As Reported		Currency-Neutral		FX Impact
June 30, 2021	13.1	%	10.2	%	2.9	%	53.0	%	49.5	%	3.5	%
March 31, 2021	132.3	%	127.5	%	4.8	%	132.3	%	127.5	%	4.8	%
December 31, 2020	117.7	%	115.2	%	2.5	%	106.7	%	105.7	%	1.0	%
September 30, 2020	119.4	%	117.4	%	2.0	%	101.1	%	100.9	%	0.2	%
June 30, 2020	145.6	%	146.7	%	(1.1)	%	90.8	%	91.6	%	(0.8)	%

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Results of Operations

The following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results. In addition, we completed our acquisitions of Depop and Elo7 in July 2021, and they will be included in our results of operations starting in the third quarter of 2021. The acquisitions are expected to provide modest incremental revenue and be modestly dilutive to our adjusted EBITDA margin. For more information regarding the components of our results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Our Results of Operations” in the Annual Report, which we incorporate by reference.


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

	(in thousands)
Revenue:
Marketplace	$	395,463		$	332,031		$	809,105		$	487,952
Services	133,437			96,706			270,441			168,840
Total revenue	528,900			428,737			1,079,546			656,792
Cost of revenue	148,969			111,381			291,886			193,797
Gross profit	379,931			317,356			787,660			462,995
Operating expenses:
Marketing	167,474			114,707			318,678			163,212
Product development	61,753			45,233			115,459			83,015
General and administrative	61,599			38,276			113,781			72,263
Total operating expenses	290,826			198,216			547,918			318,490
Income from operations	89,105			119,140			239,742			144,505
Other (expense) income, net	(3,351)			(6,824)			3,740			(22,496)
Income before income taxes	85,754			112,316			243,482			122,009
Benefit (provision) for income taxes	12,500			(15,891)			(1,462)			(13,062)
Net income	$	98,254		$	96,425		$	242,020		$	108,947

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue:
Marketplace	74.8		%	77.4		%	74.9		%	74.3		%
Services	25.2			22.6			25.1			25.7
Total revenue	100.0			100.0			100.0			100.0
Cost of revenue	28.2			26.0			27.0			29.5
Gross profit	71.8			74.0			73.0			70.5
Operating expenses:
Marketing	31.7			26.8			29.5			24.8
Product development	11.7			10.6			10.7			12.6
General and administrative	11.6			8.9			10.5			11.0
Total operating expenses	55.0			46.2			50.8			48.5
Income from operations	16.8			27.8			22.2			22.0
Other (expense) income, net	(0.6)			(1.6)			0.3			(3.4)
Income before income taxes	16.2			26.2			22.6			18.6
Benefit (provision) for income taxes	2.4			(3.7)			(0.1)			(2.0)
Net income	18.6		%	22.5		%	22.4		%	16.6		%

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Comparison of Three Months Ended June 30, 2021 and 2020

Revenue


	Three Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Revenue:
Marketplace	$	395,463		$	332,031		$	63,432	19.1	%
Percentage of total revenue	74.8		%	77.4		%
Services	$	133,437		$	96,706		$	36,731	38.0	%
Percentage of total revenue	25.2		%	22.6		%
Total revenue	$	528,900		$	428,737		$	100,163	23.4	%

Revenue increased $100.2 million to $528.9 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, of which 74.8% consisted of Marketplace revenue and 25.2% consisted of Services revenue.

Marketplace revenue increased $63.4 million to $395.5 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. This growth was substantially all due to an increase in the volume of GMS on our Etsy and Reverb marketplaces for the three months ended June 30, 2021 to a total of $3.0 billion, and the balance was due to pricing related to our Offsite Ads transaction fee, which was introduced in May 2020. A significant majority of the growth in volume of GMS was driven by the Etsy marketplace. The balance was due to Reverb, whose revenue consisted principally of Marketplace revenue.

Within the increase in volume of GMS, payments revenue grew 18.9%, transaction fee revenue increased 15.4%, and listing fee revenue increased 12.8% year-over-year. The share of Etsy.com GMS processed through our Etsy Payments platform was 92% in the three months ended June 30, 2021, in line with the three months ended June 30, 2020.

Services revenue increased $36.7 million to $133.4 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The growth in Services revenue was primarily driven by an increase of 44.0% in on-site advertising revenue (primarily through our renamed Etsy Ads product), mainly due to higher click volume.

Cost of Revenue


	Three Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Cost of revenue	$	148,969		$	111,381		$	37,588	33.7	%
Percentage of total revenue	28.2		%	26.0		%

Cost of revenue increased $37.6 million to $149.0 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily driven by increased costs related to overall volume increases on our Etsy and Reverb marketplaces, including payments fees and cloud-related hosting and bandwidth costs. The increase was also due to an increase in outsourced customer support expenses as well as increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount.

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Operating Expenses

We had 1,598 total employees on June 30, 2021, compared with 1,292 total employees on June 30, 2020 and 1,414 on December 31, 2020.

Marketing


	Three Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Marketing	$	167,474		$	114,707		$	52,767	46.0	%
Percentage of total revenue	31.7		%	26.8		%

Marketing expenses increased $52.8 million to $167.5 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily a result of increased spend in digital marketing, and, to a lesser extent, television ad campaigns. The increase in digital marketing expense was largely due to increased site traffic and the shift to our Offsite Ads offering beginning in May 2020. Paid GMS was 19% of overall GMS in the three months ended June 30, 2021, compared to 21% in the three months ended June 30, 2020, which is a result of our dynamic marketing investments that adjust based on anticipated return on investment.

Product development


	Three Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Product development	$	61,753		$	45,233		$	16,520	36.5	%
Percentage of total revenue	11.7		%	10.6		%

Product development expenses increased $16.5 million to $61.8 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily a result of increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount.

General and administrative


	Three Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
General and administrative	$	61,599		$	38,276		$	23,323	60.9	%
Percentage of total revenue	11.6		%	8.9		%

General and administrative expenses increased $23.3 million to $61.6 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily due to acquisition-related expenses associated with the Depop and Elo7 acquisitions which closed in July 2021. We expect to record additional acquisition-related expenses associated with our acquisitions of Depop and Elo7 in the third quarter of 2021. General and administrative expenses increased to a lesser extent due to employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount and performance based restricted stock units, which were granted for the first time in 2021.

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Other Expense, net


	Three Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Other expense, net:


Interest expense	$	(1,882)		$	(10,026)		$	8,144	(81.2)	%
Percentage of total revenue	(0.4)		%	(2.3)		%
Interest and other income	$	803		$	1,732		$	(929)	(53.6)	%
Percentage of total revenue	0.2		%	0.4		%


Foreign exchange (loss) gain	$	(2,272)		$	1,470		$	(3,742)	(254.6)	%
Percentage of total revenue	(0.4)		%	0.3		%
Other expense, net	$	(3,351)		$	(6,824)		$	3,473	(50.9)	%
Percentage of total revenue	(0.6)		%	(1.6)		%

Other expense, net was $3.4 million in the three months ended June 30, 2021, which decreased $3.5 million from $6.8 million in the three months ended June 30, 2020. The decrease was primarily driven by a decrease in interest expense as a result of the adoption of Accounting Standards Update (“ASU”) 2020-06 in the first quarter of 2021 which resulted in no further amortization of the debt discount related to the Notes due to its derecognition. For more information on the adoption of ASU 2020-06, see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” in the Notes to Consolidated Financial Statements. This was partially offset by an increase resulting from unfavorable changes in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates in the current year versus favorable changes in the exchange rates for the same currencies in the prior year which impact our intercompany and other non-functional currency cash balances, resulting in a foreign exchange loss in the current quarter versus a foreign exchange gain in the prior quarter.

Benefit (Provision) for Income Taxes


	Three Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Benefit (provision) for income taxes	$	12,500		$	(15,891)		$	28,391	(178.7)	%
Percentage of total revenue	2.4		%	(3.7)		%

Our income tax benefit and provision for the three months ended June 30, 2021 and 2020 was $12.5 million and $15.9 million, respectively.

The primary drivers of our income tax benefit for the three months ended June 30, 2021 were tax benefits from employee stock-based compensation of $19.9 million and a benefit related to research and development tax credits of $2.8 million, partially offset by tax expense of $13.5 million on income before income taxes.

The primary driver of our income tax provision for the three months ended June 30, 2020 was tax expense of $20.0 million on income before income taxes, partially offset by tax benefits from employee stock-based compensation of $5.9 million.

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Comparison of Six Months Ended June 30, 2021 and 2020

Revenue


	Six Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Revenue:
Marketplace	$	809,105		$	487,952		$	321,153	65.8	%
Percentage of total revenue	74.9		%	74.3		%
Services	$	270,441		$	168,840		$	101,601	60.2	%
Percentage of total revenue	25.1		%	25.7		%
Total revenue	$	1,079,546		$	656,792		$	422,754	64.4	%

Revenue increased $422.8 million to $1.1 billion in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, of which 74.9% consisted of Marketplace revenue and 25.1% consisted of Services revenue.

Marketplace revenue increased $321.2 million to $809.1 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This growth was substantially all due to an increase in the volume of GMS on our Etsy and Reverb marketplaces for the six months ended June 30, 2021 to a total of $6.2 billion, and the balance was due to pricing related to our Offsite Ads transaction fee, which was introduced in May 2020. A significant majority of the growth in volume of GMS was driven by the Etsy marketplace. The balance was due to Reverb, whose revenue consisted principally of Marketplace revenue.

Within the increase in volume of GMS, transaction fee revenue increased 57.9%, payments revenue increased 63.6%, and listing fee revenue increased 41.4% year-over-year. The share of Etsy.com GMS processed through our Etsy Payments platform was 92% in the six months ended June 30, 2021, up from 91% in the six months ended June 30, 2020, primarily due to the transition of sellers in eligible countries to the platform.

Services revenue increased $101.6 million to $270.4 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The growth in Services revenue was primarily driven by an increase of 65.1% in on-site advertising revenue, which represented a significant majority of the overall Services revenue increase, and, to a lesser extent, an increase in shipping label revenue of 35.1% from the prior year. The increase in advertising revenue was primarily due to higher click volume on Etsy Ads, partially offset by a decrease in revenue related to the Google Shopping portion of our formerly unified on-site and offsite advertising platform. The increase in shipping label revenue was primarily driven by an increase in label volume, the majority of which is driven by the increase in GMS.

Cost of Revenue


	Six Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Cost of revenue	$	291,886		$	193,797		$	98,089	50.6	%
Percentage of total revenue	27.0		%	29.5		%

Cost of revenue increased $98.1 million to $291.9 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by increased costs related to overall volume increases on our Etsy and Reverb marketplaces, including payments fees and cloud-related hosting and bandwidth costs. The increase was also due to increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount, as well as an increase in outsourced customer support expenses. These increases were partially offset by a decrease in costs related to the Google Shopping portion of our formerly unified on-site and offsite advertising platform. We gained leverage as cost of revenue did not increase as fast as revenue.

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Operating Expenses

Marketing


	Six Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Marketing	$	318,678		$	163,212		$	155,466	95.3	%
Percentage of total revenue	29.5		%	24.8		%

Marketing expenses increased $155.5 million to $318.7 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily as a result of increased spend in digital marketing, and, to a lesser extent, television ad campaigns. The increase in digital marketing expense was largely due to the shift to our Offsite Ads offering beginning in May 2020 and increased site traffic. Paid GMS was 20% of overall GMS in the six months ended June 30, 2021, up from paid GMS of 19% in the six months ended June 30, 2020, which is primarily a result of the launch of Offsite Ads.

Product development


	Six Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Product development	$	115,459		$	83,015		$	32,444	39.1	%
Percentage of total revenue	10.7		%	12.6		%

Product development expenses increased $32.4 million to $115.5 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily as a result of increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount. Additionally, we gained leverage as product development expenses did not increase as fast as revenue.

General and administrative


	Six Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
General and administrative	$	113,781		$	72,263		$	41,518	57.5	%
Percentage of total revenue	10.5		%	11.0		%

General and administrative expenses increased $41.5 million to $113.8 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount and performance based restricted stock units, which were granted for the first time in 2021. In addition, the increase was driven by acquisition-related expenses associated with the Depop and Elo7 acquisitions, which closed in July 2021. General and administrative expenses increased to a lesser extent due to increased digital service tax expenses and bad debt expense, driven by business growth. Additionally, we gained leverage as general and administrative expenses did not increase as fast as revenue.

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Other Income (Expense), net


	Six Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Other income (expense), net:


Interest expense	$	(3,567)		$	(19,993)		$	16,426	(82.2)	%
Percentage of total revenue	(0.3)		%	(3.0)		%
Interest and other income	$	1,782		$	5,345		$	(3,563)	(66.7)	%
Percentage of total revenue	0.2		%	0.8		%


Foreign exchange gain (loss)	$	5,525		$	(7,848)		$	13,373	(170.4)	%
Percentage of total revenue	0.5		%	(1.2)		%
Other income (expense), net	$	3,740		$	(22,496)		$	26,236	(116.6)	%
Percentage of total revenue	0.3		%	(3.4)		%

Other income, net was $3.7 million in the six months ended June 30, 2021, which increased $26.2 million from other expense, net of $22.5 million in the six months ended June 30, 2020. The increase was primarily driven by a decrease in interest expense as a result of the adoption of ASU 2020-06 in the first quarter of 2021 as there was no further amortization of the debt discount related to the Notes due to its derecognition. For more information on the adoption of ASU 2020-06, see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” in the Notes to Consolidated Financial Statements. In addition, the increase was driven by favorable changes in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates in the current year versus unfavorable changes in the exchange rates for the same currencies in the prior year which impact our intercompany and other non-functional currency cash balances, resulting in a foreign exchange gain in the current period versus a foreign exchange loss in the prior period.

Provision for Income Taxes


	Six Months Ended June 30,						Change
	2021			2020			$		%

	(in thousands, except percentages)
Provision for income taxes	$	(1,462)		$	(13,062)		$	11,600	(88.8)	%
Percentage of total revenue	(0.1)		%	(2.0)		%

Our income tax provision for the six months ended June 30, 2021 and 2020 was $1.5 million and $13.1 million, respectively.

The primary driver of our income tax provision for the six months ended June 30, 2021 was tax expense of $41.4 million on income before income taxes, partially offset by tax benefits from employee stock-based compensation of $33.2 million and a benefit related to research and development tax credits of $6.6 million.

The primary driver of our income tax provision for the six months ended June 30, 2020 was tax expense of $21.3 million on income before income taxes, partially offset by tax benefits from employee stock-based compensation of $10.3 million.

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Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA Margin

In this Quarterly Report, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net income adjusted to exclude: interest and other non-operating expense, net; (benefit) provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); and acquisition-related expenses. We also provide Adjusted EBITDA margin, a non-GAAP financial measure that presents Adjusted EBITDA divided by revenue. Below is a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

We have included Adjusted EBITDA and Adjusted EBITDA margin because they are key measures used by our management and Board of Directors to evaluate our operating performance and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans, determine incentive compensation, and assess the health of our business. As our Adjusted EBITDA increases, we are able to invest more in our platforms.

We believe that Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business as they remove the impact of certain non-cash items and certain variable charges.

Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•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.

Because of these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA margin alongside other financial performance measures, including net income, revenue, and our other GAAP results.

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The following table reflects the reconciliation of net income to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for each of the periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

	(in thousands, except percentages)
Net income	$	98,254		$	96,425		$	242,020		$	108,947
Excluding:
Interest and other non-operating expense, net (1)	1,079			8,294			1,785			14,648
(Benefit) provision for income taxes (2)	(12,500)			15,891			1,462			13,062
Depreciation and amortization	12,985			14,171			26,065			29,334
Stock-based compensation expense (3)	27,440			16,725			47,791			30,536


Foreign exchange loss (gain) (4)	2,272			(1,470)			(5,525)			7,848
Acquisition-related expenses (5)	9,944			592			9,944			1,309


Adjusted EBITDA	$	139,474		$	150,628		$	323,542		$	205,684
Divided by:
Revenue	$	528,900		$	428,737		$	1,079,546		$	656,792
Adjusted EBITDA margin	26		%	35		%	30		%	31		%

(1)Included in interest and other non-operating expense, net is primarily non-cash interest expense, including amortization of debt issuance costs, related to our convertible debt offerings, which were entered into in March 2018, September 2019, August 2020, and June 2021. The adoption of ASU 2020-06 in the first quarter of 2021 resulted in a decrease in non-cash interest expense related to the Notes as there was no amortization of the debt discount due to its derecognition. For more information on the adoption of ASU 2020-06, see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” in the Notes to Consolidated Financial Statements.

(2)See “Results of Operations—Benefit (Provision) for Income Taxes” for more information on the fluctuation in (benefit) provision for income taxes in the three and six months ended June 30, 2021 and 2020.

(3)See “Note 10—Stock-Based Compensation” in the Notes to Consolidated Financial Statements for disclosure of stock-based compensation expense included in the Consolidated Statements of Operations by financial statement line item classification.

(4)See “Results of Operations—Other (Expense) Income, net” for more information on the fluctuation in foreign exchange loss (gain) for the three and six months ended June 30, 2021 and 2020.

(5)Acquisition-related expenses for the three and six months ended June 30, 2021 related to our acquisitions of Depop and Elo7. For further information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Acquisitions.” Acquisition-related expenses for the three and six months ended June 30, 2020 related to our acquisition of Reverb.

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Liquidity and Capital Resources

Cash, cash equivalents, and short-term investments were $2.5 billion as of June 30, 2021. Additionally, we have $102.8 million in long-term investments that we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $200.0 million senior secured revolving credit facility. In the six months ended June 30, 2021, we had positive operating cash flows of $270.2 million and we expect to generate additional cash flow from operations in the remainder of 2021. We believe that this capital structure, as well as the nature and framework of our business will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.

The following table shows our cash and cash equivalents, and short- and long-term investments, and net working capital as of the date indicated:


	As of June 30, 2021
	(in thousands)
Cash and cash equivalents	$	2,053,882
Short-term investments	430,727
Long-term investments	102,801
Total cash and cash equivalents, and short- and long-term investments	$	2,587,410


Net working capital	$	2,283,980

As of June 30, 2021, a majority of our cash and cash equivalents, which were primarily held in cash deposits and money market funds, were held in the United States for future investments, working capital funding, and general corporate purposes. We fund our international operations from our funds held in the United States on an as-needed basis.

We invest in short- and long-term instruments, including fixed-income funds and U.S. Government and agency securities aligned with our investment strategy. These investments are intended to allow us to preserve our principal, maintain the ability to meet our liquidity needs, deliver positive yields across a balanced portfolio, and continue to provide us with direct fiduciary control. In accordance with our investment policy, all investments have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.

Sources of Liquidity

As of June 30, 2021 we had four outstanding series of convertible senior notes. Based on the terms of the Notes, we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received. Based on the daily closing prices of our stock during the quarter ended June 30, 2021, holders of the 2019 Notes and 2018 Notes are eligible to convert their Notes during the third quarter of 2021 and holders of the 2021 Notes and 2020 Notes are not eligible to convert their Notes during the third quarter of 2021.

During the six months ended June 30, 2021, we paid $43.8 million in cash and issued approximately 1.0 million shares of Etsy’s common stock to settle conversion notices of $43.8 million aggregate principal amount of the outstanding 2018 Notes.

We have the ability to draw down on a $200.0 million senior secured revolving credit facility (the “2019 Credit Agreement”). At June 30, 2021, we did not have any borrowings under the 2019 Credit Agreement.

For more information on the Notes and the 2019 Credit Agreement see “Note 7—Debt” in the Notes to Consolidated Financial Statements.

We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, after giving effect to the funding of our acquisitions of Depop and Elo7 from existing cash and investment balances, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. While this belief is based on our current expectations and assumptions in light of current macroeconomic conditions, our future capital requirements and the adequacy of available funds will depend on many factors, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report.

Acquisitions

On July 2, 2021, we acquired Elo7 for approximately $217 million, subject to certain adjustments for Elo7's working capital, transaction expenses, cash and indebtedness, and reduced by the value of certain equity awards of Etsy to be granted to Elo7 employees in connection with the transaction. On July 12, 2021, we acquired Depop for approximately $1.625 billion, consisting primarily of cash and subject to certain adjustments for Depop's working capital, transaction expenses, cash and indebtedness, and certain deferred and unvested equity to be issued and granted to Depop management and employees in connection with the transaction.

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Historical Cash Flows


	Six Months Ended June 30,
	2021		2020

	(in thousands)
Cash provided by (used in):
Operating activities	$	270,162	$	250,095
Investing activities	(80,203)		22,732
Financing activities	625,310		(38,503)

Net Cash Provided by Operating Activities

Our cash flows from operations are largely dependent on the amount of revenue generated on our platforms, as well as associated cost of revenue and other operating expenses. Our primary source of cash from operating activities is cash collections from our customers. Net cash provided by operating activities in each period presented has been influenced by changes in working capital.

Net cash provided by operating activities was $270.2 million in the six months ended June 30, 2021, primarily driven by cash net income of $304.2 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $34.1 million in cash, primarily driven by timing of payment of payables in the period.

Net cash provided by operating activities was $250.1 million in the six months ended June 30, 2020, primarily driven by cash net income of $211.4 million, as a result of revenue generated on our platforms and changes in our operating assets and liabilities that provided $38.7 million in cash, driven by timing of payment of payables in the period.

Net Cash (Used in) Provided by Investing Activities

Our primary investing activities consist of sales and purchases of short- and long-term marketable securities and capital expenditures, including investments in capitalized website development and internal-use software and purchases of property and equipment to support our overall business growth.

Net cash used in investing activities was $80.2 million in the six months ended June 30, 2021. This was primarily attributable to net purchases of marketable securities of $71.2 million. In addition, investing activities included $9.0 million in capital expenditures, including $7.1 million for website development and internal-use software as we continued to invest in projects adding new features and functionality to our platform.

Net cash provided by investing activities was $22.7 million in the six months ended June 30, 2020. This was primarily attributable to net sales of marketable securities of $25.0 million. This was partially offset by $2.3 million in capital expenditures, including $2.0 million for website development and internal-use software.

Net Cash Provided by (Used in) Financing Activities

Our primary financing activities include proceeds from the issuance of convertible notes, settlement of convertible senior notes, repurchases of common stock, payments related to capped call transactions, payment of tax obligations on vested equity awards, proceeds from exercise of stock options, payments of debt issuance costs, and payments on finance lease obligations.

Net cash provided by financing activities was $625.3 million in the six months ended June 30, 2021. This was primarily attributable to proceeds from issuance of the 2021 Notes of $1.0 billion and proceeds from the exercise of stock options of $8.0 million, partially offset by stock repurchases of $180.0 million, payments of $85.0 million for the 2021 Capped Call Transactions, payment of tax obligations on vested equity awards of $56.5 million, the conversion of $43.9 million of the Notes, and payment of debt issuance costs of $12.6 million.

Net cash used in financing activities was $38.5 million in the six months ended June 30, 2020. This was primarily attributable to the January 2020 stock repurchase of $25.0 million, payment of tax obligations on vested equity awards of $10.6 million, and payments on finance lease obligations of $4.9 million, partially offset by proceeds from the exercise of stock options of $12.2 million.

Off Balance Sheet Arrangements

As of June 30, 2021, we had no off balance sheet arrangements.

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Contractual Obligations

In June 2021, we issued the 2021 Notes, see “Note 7—Debt” in the Notes to Consolidated Financial Statements for more information. Additionally, in June 2021 we entered into a 5-year contractual commitment for cloud-based services with an aggregate future minimum payment obligation of $525.0 million, which includes escalating commitments each contract year. As of June 30, 2021, there were no other material changes in commitments under contractual obligations, compared to the contractual obligations disclosed in our Annual Report.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. The future effects of the ongoing COVID-19 pandemic on our results of operations, cash flows, and financial position are unclear; however we believe we have used reasonable estimates and assumptions in preparing the consolidated financial statements. Our actual results could differ from these estimates.

Except for changes resulting from updates to expected volatility and expected term assumptions used to determine the fair value of our stock options under the Black-Scholes option-pricing model, see “Note 10—Stock-Based Compensation” in the Notes to Consolidated Financial Statements, and the issuance of performance based restricted stock units and the adoption of ASU 2020-06 during the first quarter of 2021, see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, there have been no significant changes to our critical accounting policies and estimates included in our Annual Report.

Recent Accounting Pronouncements

For information regarding our recently adopted accounting pronouncements, please refer to “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” in the Notes to Consolidated Financial Statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Management believes there are no material changes to our quantitative and qualitative disclosures about market risks during the six months ended June 30, 2021, compared to those disclosed in the Annual Report.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. “Disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2021 at the reasonable assurance level.

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) of the Exchange Act during the second quarter of 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - Other Information

Item 1. Legal Proceedings.

See “Note 8—Commitments and Contingencies—Legal Proceedings” in the Notes to Consolidated Financial Statements.

Item 1A. Risk Factors.

Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, our Consolidated Financial Statements and related notes, and the other information in this Quarterly Report on Form 10-Q. If any of these risks actually occur, our business, financial condition, results of operations, and prospects could be adversely affected. As a result, the price of our securities could decline and you could lose part or all of your investment. In addition, factors other than those discussed below or in other of our reports filed with or furnished to the SEC also could adversely affect our business, financial condition or results of operations. We cannot assure you that the risk factors described below or elsewhere in our reports address all potential risks that we may face. These risk factors also serve to describe factors which may cause our results to differ materially from those described in forward-looking statements included herein or in other documents or statements that make reference to this Quarterly Report. See “Note Regarding Forward-Looking Statements.”

Operational Risks Related to Our Business

We have experienced rapid growth, and we may not have the infrastructure, human resources, or operational resources to sustain continued growth at our recent pace.

We have experienced rapid growth in our business, in the number of buyers and sellers, and purchase frequency over the past year. Our revenue growth may not be sustainable. While our GMS and revenue grew in the second quarter of 2021 as compared to the second quarter of 2020, our Adjusted EBITDA in the second quarter of 2021 was lower than in the second quarter of 2020 and our rate of GMS and revenue growth decelerated and may continue to decelerate as the COVID-19 pandemic runs its course and eventually abates, retail businesses reopen, and as the prior year comparison periods reflect our significant growth during the last nine months of 2020 and the first quarter of 2021. Even if our revenue continues to grow on a period over prior year period basis, we may not be able to maintain profitability in the future. In addition, our costs may increase as we continue to invest in the development of our marketplaces, including our services and technological enhancements, and increase our marketing efforts, expand our operations, and hire additional employees. Further, the growth of our business places significant demands on our management team and pressure to expand our operational, compliance, payments, and financial infrastructure. For example, we may need to continue to develop and improve our operational, financial, compliance, payments, and management controls and enhance our reporting systems and procedures to support our current and future growth.

Our rapid growth has and may continue to make us a more attractive target to bad actors and fraudsters targeting our marketplaces and our communities, civil litigants, and those seeking to enforce questionable intellectual property rights. Our increased visibility may also lead to attempts to misrepresent or mischaracterize us or our marketplaces, such as on social media, or via individual or coordinated campaigns. This may lead to increased risks that shift more quickly than our policies, enforcement mechanisms, and systems can react. We may not be successful in defending against these types of claims which, if successful, could damage our brands and our business. Even if we are successful in defending against these types of claims, we may be required to spend significant resources in those efforts which may distract our management and otherwise negatively impact our results of operations.

If we do not manage our growth effectively, the increases in our operating expenses could outpace any increases in our revenue and our business could be harmed. In addition, our revenue may decline and our revenue growth rate may continue to decelerate for a number of reasons, including the abatement of COVID-19 pandemic and other factors described elsewhere in these Risk Factors. For further information about the rate of revenue and GMS growth, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenue.” You should not rely on growth rates of prior periods as an indication of our future performance.

The COVID-19 pandemic is unprecedented and has impacted, and may continue to impact, our GMS, key metrics, and results of operations in numerous ways that remain volatile and unpredictable.

We expect that COVID-19 and its economic and social impacts will continue to affect our business in 2021. While the rollout of COVID-19 vaccines has begun, the timing and speed of vaccination rollouts and lifting of shelter in place requirements and movement restrictions varies from location to location, is evolving, and to varying degrees across locations remains unknown. We continue to experience the uncertainty caused by the COVID-19 pandemic, including by the spread of variant strains of COVID-19, and its potential impact on the global economy, e-commerce at large, and global macroeconomic conditions that impact consumer spending. In addition, the COVID-19 pandemic and related government and private sector responsive actions have affected the broader economies and financial markets, and have at points adversely affected, and could again adversely

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affect demand for products sold in our marketplaces. It is impossible to predict all the effects and the ultimate impact of the COVID-19 pandemic, as the situation continues to evolve. The COVID-19 pandemic has also disrupted the global supply chain and the preventative and protective measures currently in place, or which may be instituted or re-instituted in the future, such as quarantines, closures and movement restrictions, may interfere with the ability of our sellers to deliver products to our buyers. If delivery services are delayed or shut down, our GMS and revenue could be negatively impacted.

Our results of operations may be materially affected by adverse conditions in the capital markets and the economy generally, both in the United States and internationally. Uncertainty in the economy could adversely impact consumer purchases of discretionary items across all of our product categories, and demand for products available in our marketplaces may be reduced. Our results of operations have also been positively impacted by several trends related to the COVID-19 pandemic, including the shift from offline to online shopping, fast moving dynamics in the e-commerce space, retail business closures, stimulus checks, and emerging categories such as face masks. However, we have seen demand for certain items, like handmade masks, diminish significantly with the rollout of the vaccine, and as medical grade masks become widely available. It is also difficult to predict how our business might be impacted by changing consumer spending patterns when the pandemic abates. As pandemic-related restrictions on movement ease, competition may intensify as buyers return to traditional brick and mortar retail stores. Additionally, our sales may decline if pent-up demand for other discretionary spending replaces demand for online shopping. Other factors that could affect consumers’ willingness to make discretionary purchases include, among others: levels of employment, interest and core inflation rates, tax rates, housing costs, the availability of consumer credit, consumer confidence in future economic conditions, and stimulus checks. In the event of a prolonged economic downturn or acute recession, consumer spending habits could be adversely affected, and we could experience lower than expected GMS, revenue, net income, and Adjusted EBITDA.

As a result of the COVID-19 pandemic, our employees continue to work remotely, and it is possible that this could have a negative impact on the execution of our business plans and operations. If a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The increase in remote working for employees, vendors, or contractors may also result in increased consumer privacy, IT security, and fraud concerns. Further, as certain businesses return to on-site operations, we may experience disruptions if our employees or third-party service providers’ employees become ill despite the availability of vaccines, and are unable to perform their duties. This may impact our operations, internet, or mobile networks, or the operations of one or more of our third-party service providers.

The uncertainty around the duration of business disruptions and the timing of vaccine rollouts, herd immunity and the lifting of remaining shelter in place restrictions in the United States and other areas of the world and consumers’ responses to these developments may adversely impact the national and/or global economy and negatively impact consumer discretionary spending, even in the e-commerce space, which experienced growth during the pandemic. The full extent of COVID-19’s impact on our operations, key metrics, and financial performance depends on future developments that are uncertain and unpredictable, including the timing of vaccine rollouts and herd immunity in various locations, the timing of further relaxation or elimination of movement and travel restrictions, the occurrence of virus mutations and variants, the pandemic’s impact on capital and financial markets, and any new information that may emerge concerning the virus, vaccines, and containment, all of which may vary across regions. Any of these factors could have a material adverse impact on our business, financial condition, operating results, and ability to execute and capitalize on our strategies.

Our quarterly operating results may fluctuate, which could cause our stock price to decline.

Our quarterly operating results, as well as our key metrics, may fluctuate for a variety of reasons, many of which are beyond our control, including:

•fluctuations in GMS or revenue, including as a result of adverse market conditions due to the COVID-19 pandemic and the re-opening of traditional brick and mortar retail and other options for discretionary spending as and when restrictions on movement are loosened further or entirely removed, the impact or the waning of the impact of any government stimulus package, 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;

•the success of our marketing efforts;

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•the success of our acquired businesses, such as Depop and Elo7, each of which we acquired in July 2021, and Reverb, which we acquired in 2019;

•our ability to integrate Depop and Elo7 and implement our “House of Brands” strategy;

•adverse economic and market conditions, including those related to the current COVID-19 pandemic, currency fluctuations, rapidly rising inflation, 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 platforms;

•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.

Fluctuations in our quarterly operating results, key metrics, and the price of our common stock may be particularly pronounced in the current economic environment due to the uncertainty caused by, and the unprecedented nature of, the current COVID-19 pandemic, consumer spending patterns, and the impacts of the reopening of the offline economy and lessening or elimination of restrictions on movement. Fluctuations in our quarterly operating results and key metrics may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. Fluctuations in our results could also cause a number of other problems. For example, analysts or investors might change their models for valuing our common stock, we could experience short-term liquidity issues, our ability to retain or attract key personnel may diminish, and other unanticipated issues may arise.

We believe that our quarterly operating results and key metrics may vary in the future and that period-to-period comparisons of our operating results may not be meaningful. For example, our overall historical growth rate and the impacts of the COVID-19 pandemic may have overshadowed the effect of seasonal variations on our historical operating results. These seasonal effects may become more pronounced over time, which could also cause our operating results and key metrics to fluctuate. You should not rely on quarter-to-quarter comparisons of our results of operations as an indication of future performance.

We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which would cause our stock price to decline.

From time to time, we release earnings guidance in our quarterly and annual earnings conference calls, quarterly and annual earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. For example, we historically have provided annual guidance, but we withdrew our 2020 annual guidance on April 2, 2020 given the economic uncertainty caused by the COVID-19 pandemic and have been providing only quarterly guidance since.

On August 4, 2021, we provided guidance for the third quarter of 2021. This guidance includes forward-looking statements based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies relating to our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. Some of those key assumptions include the impact of the COVID-19 pandemic and its duration, particularly as vaccines become widely rolled-out and restrictions on movement are lifted, future consumer spending patterns, and the associated economic uncertainty on our business. These assumptions are inherently difficult to predict, particularly in the long term. In addition, we completed the acquisition of Elo7 on July 2, 2021 and Depop on July 12, 2021. While all guidance is necessarily speculative in nature, guidance relating to the anticipated results of operations of a recently acquired business is inherently more speculative in nature than other guidance as management will, necessarily, be less familiar with the business, procedures, and operations of the recently acquired business. It can be expected that some or all of the assumptions regarding Depop and Elo7 underlying any guidance furnished by us will not materialize or will vary significantly from actual results. We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges. Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our actual business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of our control, including due to the global economic uncertainty and financial market conditions caused by the ongoing COVID-19 pandemic, and the impacts of reduced movement or the removal of restrictions on movement, which could adversely affect our business and future operating results. There are no comparable recent events that provide insights on the probable effects of the COVID-19 pandemic or its abatement, and, as a result, the ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. We are relying on the reports and models of economic and medical experts in making assumptions relating to the duration of this crisis, resumption of freedom of movement in various regions and predictions as to timing and pace of any future economic recovery. If these models are incorrect or incomplete, or if we fail to accurately predict the full impact that the COVID-19 pandemic or its abatement will have on all aspects of our business or the duration of those impacts, the guidance and other forward-looking statements we provide

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may also be incorrect or incomplete. Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, the price of our common stock could decline.

Given the uncertainty surrounding the impacts and duration of COVID-19, the efficacy of a vaccine, and the timing and impact of the easing of restrictions on movement, we may continue to provide more limited quarterly guidance, as we did in 2020 and the first two quarters of 2021. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from our guidance and the variations may be material. In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.

Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this Risk Factors section in this report could result in the actual operating results being different from our guidance, and the differences may be adverse and material.

If we experience a technology disruption or failure that results in a loss of information, if personal data or sensitive information about members of our communities or employees is misused or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber incidents, ransomware, security incidents, or security breaches, then members of our communities may curtail use of our platforms, we may be exposed to liability or incur additional expenses, and our reputation could suffer.

Like all online services, we are vulnerable to power outages, telecommunications failures, and catastrophic events, as well as computer viruses, break-ins, phishing attacks, denial-of-service attacks, ransomware, and other cyber incidents. Any of these occurrences could lead to interruptions or shutdowns of one or more of our platforms, loss of data, or unauthorized disclosure of personal or financial information of our members or employees. As we grow our business, expand internationally, and gain greater public visibility, we may face a higher risk of being targeted by cyber attacks. Although we have integrated a variety of recovery systems, security protocols, network protection mechanisms and other security measures into our systems, networks and physical facilities, which are designed to protect against, detect and minimize security breaches, including security testing, encryption of sensitive information, and authentication technology, we cannot assure you that such measures will be adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences, particularly given the increasingly sophisticated tools and methods used by hackers, organized cyber criminals, and cyber terrorists.

In addition, we have experienced in the past, and may experience in the future, technology disruptions, cyber incidents, and security breaches, including intentional, inadvertent, or social engineering breaches occurring through our employees or employees of our third-party service providers. As in the past, if our employees or employees of our third-party service providers fail to comply with our internal security policies and practices, member or employee data may be improperly accessed, used, or disclosed.

Our security and access controls for our systems may not be adequate, which may heighten the risk of a cyber attack or security breach. Among other things, our applications, systems, networks, software and physical facilities could have material vulnerabilities, be breached or the personal or confidential information that we store could be otherwise compromised due to employee error or malfeasance, if, for example, third parties attempt to fraudulently induce our employees or our members to disclose information or user names and/or passwords, or otherwise compromise the security of our networks, systems and/or physical facilities. As in the past, employees or service providers may inadvertently misconfigure resources or misdirect certain communications in manners that may lead to security incidents on which we must then expend effort and expenses to correct.

As we have moved to a fully remote work environment due to the COVID-19 pandemic, and as the industry generally moves to online remote infrastructure for core work, we and our partners may be more vulnerable to cyber attacks. Cyber attacks could also result in the theft of our intellectual property or user data.

A successful cyber attack could occur and persist for an extended period of time before being detected. Because the techniques used by hackers change frequently, we may be unable to anticipate these techniques or implement adequate preventive measures. In addition, because any investigation of a cybersecurity incident would be inherently unpredictable, the extent of a particular cybersecurity incident and the path of investigating the incident may not be immediately clear. It may take a significant amount of time before an investigation can be completed and full and reliable information about the incident is known. While an investigation is ongoing, we may not necessarily know the extent of the harm or how best to remediate it, certain errors or actions could be repeated or compounded before they are discovered and remediated, and communication to the public, regulators, members of our communities, and other stakeholders may be inaccurate, any or all of which could further increase the costs and consequences of a cybersecurity incident. Applicable rules regarding how to respond, notice to users and reporting to regulators vary by jurisdiction, and may subject Etsy to additional liability and reputational harm.

Our production systems rely on internal technology, along with cloud services and software provided by our third-party service providers. In the event of a cyber-incident, even partial unavailability of our production systems could impair our ability to serve

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our customers, manage transactions, or operate our marketplaces. We have implemented disaster recovery mechanisms, including systems to back up key data and production systems, but these systems may be inadequate or incomplete. For example, these disaster recovery systems may be susceptible to cyber-incidents if not sufficiently separated from primary systems, not comprehensive, or not at a scale sufficient to replace our primary systems. Insufficient production and disaster recovery systems could, in the event of a cyber-incident, harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces.

The costs and effort to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity, and other harm to our business and our competitive position. We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which could have an adverse effect on our business.

Cyber attacks aimed at disrupting our and our third-party service providers’ services have occurred regularly in the past, and we expect they will continue to occur in the future. If we or our third-party service providers experience security breaches that result in marketplace performance or availability problems or the loss, compromise, or unauthorized disclosure of personal data or other sensitive information, or if we fail to respond appropriately to any security breaches that we may experience, people may become unwilling to provide us the information necessary to set up an account with us. Existing sellers and buyers may stop listing new items for sale, decrease their purchases, or close their accounts altogether. We could also face damage to our reputation, potential liability, regulatory investigations in multiple jurisdictions, and costly remediation efforts and litigation, which may not be adequately covered by, and which may impact our future access to, insurance. Any of these results could harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces.

We are also reliant on the security practices of our third party service providers, which may be outside of our direct control. Additionally, some of our third party service providers, such as identity verification and payment processing providers, regularly have access to payment card information and other confidential and sensitive member data. We may have contractual and regulatory obligations to supervise the security and privacy practices of our third-party service providers. Despite our best efforts, if these third parties fail to adhere to adequate security practices, or, as in the past, experience a cyber incident or attack such as a breach of their networks, our members’ data may be rendered unavailable, improperly accessed, used, or disclosed. More generally, our third-party service providers may not have adequate security and privacy controls, may not properly exercise their compliance, regulatory or notification requirements, including as to personal data, or may not have the resources to properly respond to an incident. Many of our service providers have moved to a remote work environment and may, as a result, be more vulnerable to cyber attacks.

Our software is highly complex and may contain undetected errors.

The software underlying our platforms is highly interconnected and complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after the code has been released. We rely heavily on a software engineering practice known as “continuous deployment,” meaning that we typically release software code many times per day. This practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platforms, which can impact the user experience and functionality of our marketplaces. Additionally, due to the interconnected nature of the software underlying our platforms, updates to parts of our code, third party code, and APIs, on which we rely and that maintain the functionality of our marketplaces and business, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platforms that negatively impact the user experience and functionality of our marketplaces. In some cases, such as our mobile apps, errors may only be correctable through updates distributed through slower, third party mechanisms, such as app stores, and may need to comply with third party policies and procedures to be made available, which may add additional delays due to app review and user delay in updating their mobile apps. In addition, our systems are increasingly reliant on machine learning systems, which are complex and may have errors or inadequacies that are not easily detectable. These systems may inadvertently reduce the efficiency of our systems, or may cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies, or otherwise are inconsistent with our brands, guiding principles, and mission. Any errors or vulnerabilities discovered in our code after release could also result in damage to our reputation, loss of members of our communities, loss of revenue, or liability for damages, any of which could adversely affect our growth prospects and our business.

We rely on Google Cloud for a substantial portion of the computing, storage, data processing, networking, and other services for Etsy.com.

Google Cloud Platform provides a distributed computing infrastructure as a service platform for business operations, and we have migrated Etsy.com’s primary production environment and data centers to Google Cloud, increasing our reliance on cloud infrastructure. Any transition of the cloud services currently provided by Google Cloud to another cloud provider would be difficult to implement and will cause us to incur significant time and expense. Our products and services are in significant part reliant on continued access to, and the continued stability, reliability, and flexibility of Google Cloud. Any significant disruption of, or interference with, our use of Google Cloud would negatively impact our operations, and our business would be seriously harmed. In addition, if hosting costs increase over time and if we require more computing or storage capacity, our costs could

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increase disproportionately. If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. Reverb, Depop, and Elo7 rely on Amazon Web Services for some business operations, and those marketplaces are thus subject to analogous risks.

The trustworthiness of our marketplaces and the connections within our communities are important to our success. Our business, financial performance, and growth depend on our ability to attract and retain active and engaged communities of buyers and sellers. If we are unable to retain our existing buyers and sellers and activate new ones, our financial performance could decline.

We are focused on ensuring that our marketplaces embody our mission and values, and that we deliver trust and reliability throughout the buyer and seller experiences. Our reputation and brands depend, in part, upon our ability to maintain trustworthy marketplaces, and also upon our sellers, the quality of their offerings, their adherence to our policies, and their ability to deliver a trusted purchasing experience. We view the trustworthiness and reliability of our marketplaces, as well as the connections we foster in our buyer/seller communities, to be cornerstones of our business and key to our success. Many things could undermine these cornerstones, such as:

•complaints or negative publicity about us, our platforms, 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, privacy or data security incidents, website outages, payment disruptions or other incidents that impact the reliability of our platforms;

•lack of awareness of our policies or confusion about how they are applied;

•changes to our policies that members of our communities 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, updates, and experiments that could deteriorate member trust;

•a failure to enforce our policies effectively, consistently, 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 communities; or

•a failure to operate our business in a way that is consistent with our guiding principles and mission.

Creating trusted brands is one of the key elements of our strategy. In particular, we are focused on enhancing the customer experience for both sellers and buyers. We continue to evolve our offerings and invest to improve our customer experience on our marketplaces. If our efforts are unsuccessful, or if our customer service platforms or our trust and safety program fails to meet our requirements, legal requirements, or our customers’ requirements, we may need to quickly invest significant additional resources. If we are unable to do so, our ability to maintain trustworthy marketplaces, attract buyers and sellers, and maintain our trusted brands, could be harmed.

Our business, financial performance and growth depends on our ability to attract and retain active and engaged communities of buyers and sellers.

Our financial performance has been and will continue to be significantly determined by our success in attracting and retaining active buyers and active sellers. For example, our revenue is driven by the number of active buyers and buyer engagement, as well as the number of active sellers and seller engagement. If we are not successful in encouraging buyers to return to us and purchase items in our marketplaces more frequently and sellers to list items for sale and use our services, our financial performance may be negatively impacted.

Our GMS and revenue is concentrated in our most active buyers and sellers. The pandemic fueled an unprecedented increase in the growth of new buyers and reactivated lapsed buyers, although we have seen the growth rate decline on a year over year basis. We have also seen a higher than recent historic growth rate of new sellers. If we lose a significant number of those buyers, or sellers, due to the abatement of pandemic restrictions or otherwise, our financial performance and growth could be harmed.

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Even if we are able to attract new buyers and sellers to replace the ones that we lose, we may not be able to do so at 2020 levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave our marketplaces. If we are unable to retain existing buyers and sellers and attract new buyers and sellers who contribute to active communities, our business, financial performance, and growth could be harmed.

Additionally, the demand for the goods listed in our marketplaces is dependent on consumer preferences which can change quickly and may differ across generations and cultures, or due to other macro events. If demand for the goods that our sellers offer declines, we may not be able to attract and retain our buyers and our business could be harmed. A shift in trends away from socially-conscious consumerism or unique or vintage goods, could also make it more difficult to attract new buyers and sellers. Our growth would also be harmed if the shift from brick and mortar retail to e-commerce does not continue, or reverses when the COVID-19 pandemic abates and as restrictions on movement are further lifted. We believe that many new buyers and sellers find us by word of mouth and other non-paid referrals from existing buyers and sellers. If existing buyers do not find our platforms appealing, whether because of a negative experience, lack of competitive shipping costs, delayed shipping times, inadequate customer service, lack of buyer-friendly features, declining interest in the nature of the goods offered by our sellers, or other factors, they may make fewer purchases and they may stop referring others to us. Likewise, if existing sellers are dissatisfied with their experience on our platforms, or feel they have more attractive alternatives, they may stop listing items in our marketplaces and using our services and may stop referring others to us. Under any of these circumstances, we may have difficulty attracting new buyers and sellers without incurring additional expense.

We rely on our sellers to provide a fulfilling experience to our buyers.

A small portion of buyers complain to us about their experience on our platforms. As a pure marketplace, our sellers manage their shops, most policies, products and product descriptions, shipping and returns. As a result, we may not have the ability to control important aspects of buyers’ experiences on our platforms. For example, buyers may report that they have not received the items that they purchased, that the items received were not as represented by a seller, or that a seller has not been responsive to their questions. Similarly, we occasionally identify sellers who are unable to fulfill orders in a time frame or manner consistent with buyer expectations. Trending sellers may experience an influx of orders that may be beyond their ability to fulfill in a timely manner. For example, a subset of sellers who offered cloth masks during 2020 may have experienced periods of high activity beyond their ability to fulfill as a small business. While we have procedures designed to mitigate spikes in orders, we cannot guarantee those procedures will be effective.

Negative publicity and sentiment generated as a result of these types of complaints, or any associated enforcement action taken against sellers, could reduce our ability to attract and retain our sellers and buyers or damage our reputation. We take action against sellers who we are aware may have violated our policies. However, our actions may be insufficient, may not be timely, and may not be effective in creating a good purchase experience for our buyers.

As our marketplaces grow, our controls over fraud and policy violations are important to maintaining user trust, but they may not be adequate and may not be sufficient to keep up with quickly-shifting techniques used by those attempting to undertake fraudulent activity on our platforms. While we regularly update our processes for handling complaints and detecting policy violations, these processes are by their nature imperfect in a dynamic, quickly growing marketplace, and include risk to us, our sellers, and our buyers from both under-enforcement and over-enforcement.

A perception that our levels of responsiveness and support for our sellers and buyers are inadequate could have similar results. In some situations, we may choose to reimburse our buyers for their purchases to help avoid harm to our reputation. While we take steps such as requiring reserves, including to cover such reimbursements, from some sellers based on indicia they may not be able to fulfill orders, we may not be able to recover the funds we expend for those reimbursements. When we do recover funds used to reimburse buyers from sellers, it may increase general seller dissatisfaction and reduce their desire to continue selling using our platforms. Although we are focused on enhancing customer service, our efforts may be unsuccessful and our sellers and buyers may be disappointed in their experience and not return.

Anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers. Service interruptions and delivery delays may be caused by events that are beyond the control of our sellers, such as interruptions in order or payment processing, interruptions in sellers’ supply chain, transportation disruptions, natural disasters, inclement weather, terrorism, public health crises, or political unrest. For example, a small number of countries continue to experience delays in shipping due to the COVID-19 pandemic but the spread of the Delta or other variants could cause shipping delays to become more widespread. If buyers have a negative purchase experience, whether due to delay or other reasons, our reputation could be damaged.

Our business depends on third party services and technology which we utilize to maintain and scale the technology underlying our platforms and our business operations.

Our business operations are dependent upon a number of third-party service providers, such as cloud service providers, marketing platforms and providers, payments and shipping providers, and contingent labor teams, and network and mobile

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infrastructure providers. Any disruption in their services, any failure on their part to deliver their services in accordance with our scale and expectations, or any failure on our part to maintain appropriate oversight on these third-party providers during the course of our engagement with them, could significantly harm our business.

We are unable to exercise significant oversight over some of these providers, which increases our vulnerability to their financial conditions and to problems with the services they provide, such as technical failures, deprecation of key services, privacy or security concerns. Our efforts to update our infrastructure or supply chain may not be successful as we may not sufficiently distribute our risk across providers or geographies or our efforts to do so may take longer than anticipated. If we experience failures in our technology infrastructure or supply chain or do not expand our technology infrastructure or supply chain successfully, then our ability to run our marketplaces could be significantly impacted, which could harm our business.

Our business depends on continued and unimpeded access to third party services, platforms and infrastructure that we rely upon to maintain and scale our platforms.

Our sellers and buyers rely on access to the internet or mobile networks to access our marketplaces. Internet service providers may choose to disrupt or degrade access to our platforms or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our mobile apps.

Internet service providers or mobile network operators could also attempt to charge us for providing access to our platforms. In addition, we could face discriminatory or anticompetitive practices that could impede both our and our sellers’ growth prospects, increase our costs, and harm our business.

Outside of the United States, it is possible that governments of one or more countries may seek to censor content available on our platforms or may even attempt to block access to our platforms. If we are restricted from operating in one or more countries, our ability to attract and retain sellers and buyers may be adversely affected and we may not be able to grow our business as we anticipate.

In addition, our sellers rely on continued and unimpeded access to postal services and shipping carriers to deliver their goods reliably and timely to buyers. As a result of the COVID-19 pandemic and other factors, our sellers have experienced increased delays in delivery of their goods. If these shipping delays continue or worsen, or if shipping rates increase significantly, our sellers may have increased costs, and/or our buyers may have a poor purchasing experience and may lose trust in our marketplaces, which could negatively impact our business, financial performance, and growth.

Our payments systems have both operational and compliance risks, including in-house execution risk, dependency on third-party providers, and a complex landscape of evolving laws, regulations, rules, and standards.

Buyers on our Etsy and Reverb marketplaces primarily pay for purchases using our payments services, i.e., Etsy Payments and Reverb Payments (only available in the United States), or PayPal, and in the United States, may pay in installments with Klarna. Our marketplaces utilize various third party payment processors: International buyers pay for purchases on Reverb using Ayden; buyers on Depop use Stripe or PayPal; and buyers on Elo7 use MoIP. In the United States and other countries where our payments services are available, our sellers accept various forms of payments such as credit cards, debit cards, gift cards, PayPal, Google Wallet, and Apple Pay. We plan to invest ongoing internal resources into our payments tools and infrastructure to maintain existing availability, expand into additional markets, and offer new payment methods and tools to our buyers and sellers. If we fail to invest adequate resources into our payments platforms, or if our investment efforts are unsuccessful or unreliable, our payments services may not function properly, keep pace with competitive offerings, or comply with applicable laws and regulatory requirements, any of which could negatively impact their usage and our marketplaces, as well as our trusted brands, which, in turn, could adversely affect our GMS and results of operations.

We rely upon third-party service providers to perform key components of our payments platforms, including payments processing and payments disbursing, compliance, currency exchange, identity verification, sanctions screening, and fraud analysis. If these service providers do not perform adequately, or if our relationships with these service providers were to change or terminate, it could negatively affect our sellers’ ability to receive orders or payments, our buyers’ ability to complete purchases, and our ability to operate our payments program, including maintaining certain compliance measures, including fraud prevention and detection tools. This could decrease revenue, increase costs, lead to potential legal liability, and negatively impact our brands and business. If we (or a third-party payment processor) suffer a security breach affecting payment card information, we could be subjected to fines, penalties and assessments arising out of the major card brands’ rules and regulations, contractual indemnification obligations or other obligations contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards as payment for our services and our sellers’ goods and services.

In addition, we and our third-party service providers may experience service outages from time to time that negatively impact payments on our platforms. We have in the past experienced, and may in the future experience, such payments-related service outages and, if we are unable to promptly remedy or provide an alternative payment solution, our business could be harmed. In addition, if our third-party providers increase the fees they charge us, our operating expenses, or those of our sellers, could increase, and it could negatively impact our sellers’ businesses or our business.

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Further, our ability to expand our payments services into additional countries is dependent upon the third-party providers we use to support these services. As we expand the availability of our payments services to additional markets or offer new payment methods to our sellers and buyers in the future, we, along with our sellers, may become subject to additional and evolving regulations, compliance requirements, and may be exposed to heightened fraud risk, which could lead to an increase in our operating expenses.

Various laws and regulations govern payments, and these laws are complex, evolving, and subject to change and vary across different jurisdictions in the United States and globally. Moreover, even in regions where such laws have been harmonized, regulatory interpretations of such laws may differ. As a result, we are required to spend significant time and effort determining whether various licensing and registration laws relating to payments apply to us as our business strategy and operations evolve. Any failure or claim of our failure to comply, or any failure by our third-party service providers to comply, could cost us substantial resources, result in liabilities, cause us significant reputational damage, or force us to stop offering our payments services in certain markets. Additionally, changes in payment regulation may occur that could render our payments systems non-compliant and/or less profitable.

Further, through our agreements with our third-party payments service providers, we are and could be subject to evolving rules and certification requirements (including the Payment Card Industry Data Security Standard), or other contractual requirements that may materially negatively impact our payments business. Failure to comply with these rules and requirements could impact our ability to meet our contractual obligations with our third-party payment processors and could result in potential fines or negatively impact our relationship with our third-party payments processors.

We are also subject to rules governing electronic funds transfers. Any change in these rules and requirements, including as a result of a change in our designation by major payment card providers, could make it difficult or impossible for us to comply and could require a change in our business operations. In addition, similar to a potential increase in costs from third-party providers described above, any increased costs associated with compliance with payment card association rules or payment card provider rules could lead to increased fees for us or our sellers, which may negatively impact payments on our platforms, usage of our payments services, and our marketplaces.

Our business could be adversely affected by economic downturns, natural disasters, public health crises such as the COVID-19 pandemic, political crises, geopolitical changes or other similar events.

Macroeconomic conditions may adversely affect our business. If general economic conditions deteriorate in the United States or other markets where we operate, consumer discretionary spending may decline and demand for the goods and services available on our platforms may be reduced. This would cause our Marketplace and Services revenue to decline and adversely impact our business. For example, the ongoing COVID-19 pandemic has caused significant uncertainty and volatility in the global economy, and we have seen significant and rapid shifts in consumer purchasing behavior as this pandemic has evolved, particularly as it relates to items sought on Etsy. It is difficult to predict how our business might be impacted by changing consumer spending patterns.

If recent trends supporting self-employment, and the desire for supplemental income were to reverse, the number of sellers offering their goods in our marketplaces and the number of goods listed in our marketplaces could decline. In addition, currency exchange rates may directly and indirectly impact our business. If the U.S. dollar strengthens or weakens against foreign currencies, particularly if there is short term volatility, our foreign currency denominated GMS and revenue, when translated into U.S. dollars, could fluctuate significantly. Currency exchange rates may also dampen demand for cross-border purchases, which could impact GMS and revenue. For the six months ended June 30, 2021, approximately 75% of our GMS was denominated in U.S. dollars.

Any events causing significant disruption or distraction to the public or to our workforce, such as natural disasters and other adverse weather and climate conditions, public health crises, political instability or crises, terrorist attacks, war, social unrest, or other unexpected events, could disrupt our operations, internet, or mobile networks, or the operations of one or more of our third-party service providers. These events, if they occur, may impact buyer demand for discretionary goods, impact sellers’ ability to run their businesses on our marketplaces and ship their goods, and impact our ability to execute on our strategy, any of which could negatively impact our business and financial performance.

Further expansion outside of the United States will subject us to risks associated with operations abroad.

Doing business outside of the United States subjects us to increased risks and burdens such as:

•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, product liability, consumer protection, online platform liability, e-commerce marketplace regulation, labor and employment laws, and taxation of income, goods, and services);

•conforming to local business or cultural norms;

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•barriers to international trade, such as tariffs, customs, or other taxes, or, when applicable, cross-border limits placed on U.S. technology companies;

•uncertainties on the continuing impact of pandemic-related quarantines, closures, delayed or shut down delivery services, and movement restrictions on operations, and geopolitical events such as natural disasters, pandemics, terrorism, and acts of war;

•varying levels of internet, e-commerce, and mobile technology adoption and infrastructure;

•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 of the U.S. Treasury Department, and similar laws and regulations in other jurisdictions;

•our ability to enforce contracts, our terms of use and policies, and intellectual property rights in jurisdictions outside the United States;

•fluctuations of foreign exchange rates; and

•uncertainties and instability in U.K. and E.U. markets caused by ongoing negotiations of cross-border service agreements triggered by Brexit.

Our sellers face similar risks in conducting their businesses across borders. Even if we are successful in managing the risks of conducting our business across borders, if our sellers are not, our business could be adversely affected.

Our ability to recruit and retain a diverse group of employees is important to our success.

Our ability to attract, retain, and motivate a diverse group of employees, including our management team, is important to our success. We strive to attract, retain, and motivate our employees, from our office administrators to our engineers, to our management team, who share our dedication to our communities and our mission to “Keep Commerce Human.” We cannot guarantee we will continue to attract and retain the number or caliber of employees we need to maintain our competitive position, particularly in the uncertainty of the current macroeconomic environment. We may not meet our impact goal of building diverse and inclusive workforces that are broadly representative of their communities.

Some of the challenges we face in attracting and retaining employees include:

•skepticism regarding our ability to accelerate GMS growth in the future;

•continuing ability to offer competitive compensation and benefits;

•evolving expectations regarding the ability to work remotely;

•enhancing engagement levels among existing employees and supporting their work-life balance;

•attracting high quality talent in a timely fashion;

•retaining qualified employees who support our mission and guiding principles, including employees of recently acquired companies such as Depop and Elo7, and continuing to do so in a remote or hybrid work environment;

•continuing to find promotion opportunities to retain key employees for leadership positions;

•hiring employees in multiple locations globally, and building a diverse equitable and inclusive workforce; and

•responding to competitive pressures and changing business conditions in ways that do not divert us from our guiding principles.

Filling key strategic roles, including engineering and product management, particularly in New York City, San Francisco, Dublin, and Chicago, is challenging and may be challenging in London, Sao Paulo, and Mexico City as well, as competition for engineering talent continues to increase rapidly. Qualified individuals are limited and in high demand, and we may incur significant costs to attract, develop, retain and motivate them. Even if we were to offer higher compensation and other benefits, people with suitable technical skills may choose not to join us or to continue to work for us. In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. If the

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perceived value of our stock awards declines, particularly in this volatile macroeconomic environment, it may adversely affect our ability to recruit and retain highly skilled employees.

Our employees are currently almost fully remote. As stay-at-home orders and movement restrictions are lifted and we contemplate reopening our offices, we are planning to migrate towards a hybrid work model where some of our employees may remain fully remote and others may return to our offices two or more days a week. If our needs are not aligned with our employees’ preferences, it may adversely affect our ability to recruit and retain employees. If we do move to a more remote work model, it may negatively impact our company culture.

In general, our employees, including our management team, work for us on an at-will basis. The unexpected loss of or failure to retain one or more of our key employees, such as our Chief Executive Officer, Chief Financial Officer, or Chief Technology Officer, or unsuccessful succession planning, could adversely affect our business. Further, if members of our management and other key personnel in critical functions across our organization are unable to perform their duties, we may not be able to execute on our business strategy and/or our operations may be negatively impacted. Other companies, including our competitors, may be successful in recruiting and hiring our employees, and it may be difficult for us to find suitable replacements on a timely basis or on competitive terms.

If we experience increased voluntary attrition in the future, and/or if we are unable to attract and retain qualified employees in a timely fashion, particularly in critical areas of operations such as engineering, we may not achieve our strategic goals and our business and operations could be harmed.

We may be unable to adequately protect our intellectual property.

Our intellectual property is an essential asset of our business. To establish and protect our intellectual property rights, we rely on a combination of copyright, trademark, and patent laws, as well as confidentiality procedures and contractual provisions. We also rely on trade secret protection for parts of our technology and intellectual property. The efforts we have taken to protect our intellectual property may not be sufficient or effective. We generally do not elect to register our copyrights, relying instead on the laws protecting unregistered intellectual property, which may not be sufficient. We rely on both registered and unregistered trademarks, which may not always be comprehensive in scope. In addition, our copyrights and trademarks, whether or not registered, and patents may be held invalid or unenforceable if challenged, and may be of limited territorial reach. While we have obtained or applied for patent protection with respect to some of our intellectual property, patent filings may not be adequate alone to protect our intellectual property, and may not be sufficiently broad to protect our proprietary technologies. From time to time we acquire intellectual property from third parties, but these acquired assets, like our internally developed intellectual property, may be held invalid, be unenforceable, or may otherwise not be effective in protecting our platforms.

In addition, we may not be effective in policing unauthorized use of our intellectual property and authorized uses may not have the intended effect. Even if we do detect violations, we may need to engage in litigation or licensing to enforce our intellectual property rights. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are unenforceable. The legal framework surrounding protection of intellectual property changes frequently throughout the world, particularly as to technologies used in e-commerce, and these changes may impact our ability to protect our intellectual property and defend against third party claims. If we are unable to cost-effectively protect our intellectual property rights, then our business could be harmed.

We may experience fluctuations in our tax obligations and effective tax rate.

We are subject to a variety of taxes and tax collection obligations in the United States and in numerous other foreign jurisdictions. We record tax expense, including indirect taxes, based on current tax payments and our estimates of future tax payments, which may include reserves for estimates of probable or likely settlements of tax audits. We may recognize additional tax expense and be subject to additional tax liabilities, including tax collection obligations, due to changes in tax law, such as digital services taxes, or online sales taxes. In 2021, the administration of President Joseph R. Biden, released the Greenbook that proposed several significant modifications to key provisions, as well as introduced new provisions, to the U.S. internal revenue code. Although it is uncertain if some or all of the identified provisions will be enacted, a change in U.S. tax law may materially and adversely impact our income tax liability, provision for income taxes, and effective tax rate. We may also be subject to increased requirements for marketplaces to report, collect, remit, and hold liability for their customers’ direct and indirect tax obligations, or as a result of changes to regulations, administrative practices, outcomes of court cases, and changes to the global tax framework. Our effective tax rate and cash taxes paid in a given financial statement period may be adversely impacted by results of our business operations including changes in the mix of revenue among different jurisdictions, acquisitions, investments, entry into new geographies, the relative amount of foreign earnings, changes in foreign currency exchanges rates, changes in our stock price, intercompany transactions, changes to accounting rules, expectation of future profits, changes in our deferred tax assets and liabilities and our assessment of their realizability, and changes to our ownership or capital structure. Fluctuations in our tax obligations and effective tax rate could adversely affect our business.

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In the ordinary course of our business, there are numerous transactions and calculations for which the ultimate tax determination is uncertain. Although we believe that our tax positions and related provisions reflected in the financial statements are fully supportable, we recognize that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law, and closing of statute of limitations. To the extent that the ultimate results differ from our original or adjusted estimates, our effective tax rate can be adversely affected.

The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by us. In addition, tax authorities periodically review income tax returns filed by us and can raise issues regarding its filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which we operate. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination, may result in additional taxes or penalties against us. If the ultimate result of these audits differs from original or adjusted estimates, they could have a material impact on our effective tax rate and tax liabilities.

At any one time, multiple tax years could be subject to audit by various taxing jurisdictions. As a result, we could be subject to higher than anticipated tax liabilities as well as ongoing variability in our quarterly tax rates as audits close and exposures are re-evaluated.

The terms of our debt instruments may restrict our ability to pursue our business strategies.

We do not currently have any obligations outstanding under our credit facility. While the indentures governing our outstanding convertible notes do not include material restrictions on our ability to pursue our business strategy, our credit facility requires us to comply with, and future debt instruments may require us to comply with, various covenants that limit our ability to take actions such as:

•disposing of assets;

•completing mergers or acquisitions;

•incurring additional indebtedness;

•encumbering our properties or assets;

•paying dividends, making other distributions or repurchasing our common stock;

•making specified investments; and

•engaging in transactions with our affiliates.

These restrictions could limit our ability to pursue our business strategies. If we default under our credit facility and if the default is not cured or waived, the lenders could terminate their commitments to lend to us and cause any amounts outstanding to be payable immediately. Such a default could also result in cross defaults under other debt instruments. Moreover, any such default would limit our ability to obtain additional financing, which may have an adverse effect on our cash flow and liquidity.

Our insurance may not cover or mitigate all the risks facing our business.

While we have insurance coverage for most aspects of our business risk, this insurance coverage may be incomplete or inadequate, or in some cases may not be available. Our business has evolving risks that may be unpredictable. For certain risks we face, we may be required to, or may elect to, self-insure or rely on insurance held by third parties, legal defenses and immunities, indemnification agreements or limits on liability, which may be insufficient.

For example, we may not have adequate insurance coverage related to the actions of sellers on our platforms. In evolving areas such as platform products liability, recent decisions such as McMillan v. Amazon in Texas, and Loomis v. Amazon and Bolger v. Amazon in California, suggest that different jurisdictions may take differing positions on the scope of e-commerce platform liability for seller products. In some circumstances, a platform might be held liable for violations of applicable legal regimes by sellers and their products, such as intellectual property laws, privacy and security laws, product regulation, or consumer protection laws. Court decisions and regulatory changes in these areas may shift quickly, both in the United States and worldwide, and our insurance may be inadequate or unavailable to protect us from existing or newly developing legal risks. Finally, while some sellers on our platforms may be insured for some or all of these risks, many small businesses do not carry any or sufficient insurance, and, even if a seller is insured, the insurance may not cover the relevant loss.

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These factors may lead to increased costs for insurance, our increased liability, increased liability or requirements on sellers on our platforms, changes to our marketplaces or business model, or other damage to our brands and reputation.

Strategic Risks Related to Our Business and Industry

We face intense competition and may not be able to compete effectively.

Operating e-commerce marketplaces is highly competitive and we expect competition to increase in the future. To be successful, we need to attract and retain sellers and buyers. As a result, we face competition from a wide range of online and offline competitors.

We compete for sellers with marketplaces, retailers, and companies that sell software and services to small businesses. For example, in addition to listing her goods for sale on the Etsy marketplace, a seller can list her goods with online retailers, such as Amazon, eBay, Google, or Alibaba, or sell her goods through local consignment and vintage stores and other venues or marketplaces, including through commerce channels on social networks like Facebook, Instagram, and TikTok. She may also sell wholesale directly to traditional retailers, including large national retailers, who discover her goods in our marketplaces or otherwise. We similarly compete for sellers on our other marketplaces, Depop, Reverb, and Elo7, which sellers may list their goods with online retailers such as Vinted, ThredUp, or Poshmark, in the case of Depop, Sweetwater, in the case of Reverb, or MercadoLibre, in the case of Elo7, among others, or sell through other venues, marketplaces, retailers, or commerce channels.

We also compete with companies that sell software and services to small businesses, enabling a seller to sell from her own website or otherwise run her business independently of our platforms, or enabling her to sell through multiple channels, such as BigCommerce, Wix, and Shopify.

We compete to attract, engage, and retain sellers based on many factors, including:

•the value and awareness of our brands;

•effectiveness of our marketing;

•the global scale of our marketplaces and the breadth of our online presence;

•our tools, education, and services, which support a seller in running her business;

•the number and engagement of buyers;

•our policies and fees;

•the ability of a seller to scale her business;

•the effectiveness of our mobile apps;

•the strength of our communities; and

•our mission.

In addition, we compete with retailers for the attention of buyers. A buyer has the choice of shopping with any online or offline retailer, including large e-commerce marketplaces, such as Amazon, eBay, or Alibaba, national retail chains, such as West Elm, Walmart, or Target, local consignment and vintage stores, social commerce channels like Instagram or Facebook, event-driven platforms and vertical experiences like Zola and Wayfair, resale commerce and streaming video commerce sites and apps, and other venues or marketplaces. Many of these competitors offer low-cost or free shipping, fast shipping times, favorable return policies, and other features that may be difficult or impossible for our sellers to match. As pandemic-related restrictions on movement continue to ease, competition may intensify as buyers return to traditional brick and mortar retail stores.

We compete to attract, engage, and retain buyers based on many factors, including:

•the breadth and quality of items that sellers list in our marketplaces;

•the ease of finding items;

•the value and awareness of our brands;

•the person-to-person commerce experience;

•customer service;

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•our reputation for trustworthiness;

•the effectiveness of our mobile apps;

•the availability of timely, fair, and free shipping offered by sellers to buyers;

•ease of payment;

•localization and experiences targeted based on regional preferences, and

•the availability and reliability of our platforms.

Many of our competitors and potential competitors have longer operating histories, greater resources, better name recognition, or more customers than we do. They may invest more to develop and promote their services than we do, and they may offer lower fees to sellers than we do. Large, widely adopted platforms may benefit from significant user bases, access to user or industry-wide data, the ability to unilaterally set policies and standards, and control over complementary services such as fulfillment, advertising or on-platform apps or e-commerce transactions. To the extent Etsy and our sellers may rely on these competitors’ services, they may unintentionally reduce our ability to service our users, our ability to obtain analytics or information to optimize advertising or intentionally seek to disintermediate Etsy.

We believe that it is, and that it should continue to be, relatively easy for new businesses to create online commerce offerings or tools or services that enable entrepreneurship. However, as the technology space is increasingly subject to regulation, there is a risk that legislation, and regulatory or competition inquiries, even if focused on large, widely adopted platforms, may inadvertently impede smaller platforms and small businesses, including us and our sellers. For example, legislation and inquiries may result in obligations with which only large platforms are situated to comply. If legislation or regulatory inquiries, even if focused on other entities, requires us to expend significant resources in response or results in the imposition of new obligations, our business and results of operations could be adversely affected.

Local companies or more established companies based in markets where we operate outside of the United States may also have a better understanding of local customs, providing them a competitive advantage. For example, in certain markets outside the United States, we compete with smaller, but similar, local online marketplaces with a focus on unique goods that are attempting to attract sellers and buyers in those markets.

If we are unable to compete successfully, or if competing successfully requires us to expend significant resources in response to our competitors’ actions, our business and results of operations could be adversely affected.

Depop’s growth and profitability depends on its ability to attract new buyers and sellers, expand internationally and to compete effectively in new and existing markets.

Depop provides an online platform for resale of used and vintage apparel and accessories. To grow GMS and profitability, Depop must grow its active seller and buyer communities in the United States and the United Kingdom, expand into new geographies, and compete effectively in the increasingly competitive resale sector.

The markets for resale and secondhand items are highly competitive. In addition, Depop competes with vendors of new and secondhand items, including branded goods stores, local, national, and global department stores, traditional brick-and-mortar consignment and thrift stores, specialty retailers, direct-to-consumer retailers, discount chains, independent retail stores, the online offerings of traditional retail competitors, and resale sellers specializing in niche or narrow categories, as well as online marketplaces that may offer the same or similar goods and services that Depop offers. Competitors offering secondhand apparel include other online marketplaces, such as eBay, Vinted, ThredUp, Poshmark, and The RealReal; large online and traditional retailers such as Amazon, H&M, Kohl’s, and Walmart; and off-price retailers, such as Burlington Stores, Ross Stores, and The TJX Companies. We believe Depop’s ability to compete depends on many factors, many of which are beyond its control, including:

•attracting and retaining active buyers and sellers and increasing the volume of secondhand items they buy and sell;

•sellers offering a broad selection of desirable and high-quality secondhand items on Depop’s marketplace;

•continuing appeal of secondhand fashion to Gen Z and other demographics;

•growing favorable brand recognition in new and existing markets;

•the speed and cost at which Depop sellers ship purchased items to buyers; and

•the ease with which Depop buyers and sellers can purchase, supply, and return secondhand items.

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As resale markets continue to evolve and expand, we anticipate competition in this sector to increase. Moreover, consumer preferences may change, or growth in consumer demand for used items may decelerate or even decrease, and buyers may not purchase through Depop’s marketplace as frequently or spend as much with Depop sellers as they have historically. Relatedly, an inability to attract and retain buyers could harm our ability to attract and retain sellers, who may decide to resell their items through alternative platforms or marketplaces.

If we are not able to keep pace with technological changes and enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers, our business, financial performance, and growth may be harmed.

Our industry is characterized by rapidly changing technology, new service and product introductions, and changing customer demands and preferences, and we are not able to predict the effect of these changes on our business. The technologies that we currently use to support our platforms may become inadequate or obsolete, and the cost of incorporating new technologies into our products and services may be substantial. Our sellers and buyers, however, may not be satisfied with our enhancements or new offerings or may perceive that these offerings do not respond to their needs or create value for them. Additionally, as we invest in and experiment with new offerings or changes to our platforms, our sellers and buyers may find these changes to be disruptive and may perceive them negatively. In addition, developing new services and features is complex, and the timetable for public launch is difficult to predict and may vary from our historical experience. As a result, the introduction of new offerings may occur after anticipated release dates, or they may be introduced as pilot programs, which may not be continued for various reasons. In addition, new offerings may not be successful due to defects or errors, negative publicity, or our failure to market them effectively.

New offerings may not drive GMS or revenue growth, may require substantial investment and planning, and may bring us more directly into competition with companies that are better established or have greater resources than we do.

If we do not continue to cost-effectively develop new offerings that satisfy sellers and buyers, then our competitive position and growth prospects may be harmed. In addition, new offerings may not drive the GMS or revenue that we anticipate, may have lower margins than we anticipate or than existing offerings, and our revenue from the new offerings may not be enough to offset the cost of developing and maintaining them, which could adversely affect our business, financial performance, and growth.

If the widely adopted mobile, social, search, and/or advertising solutions that we, our sellers and our buyers rely on as part of our key offering are no longer available or effective, or if access to these major platforms is limited, the use of our marketplaces could decline.

We are dependent on widely-adopted third party platforms to reach our customers, such as popular mobile, social, search, and advertising offerings. If we are not able to deliver a rewarding experience on these platforms, or if our or our sellers’ access to these platforms is limited, or if these large platforms implement features that compete with us or our sellers, then our products and marketing efforts may suffer, and our sellers’ ability to manage and scale their business may be harmed. In addition, we may not be able to deliver a rewarding experience, we may have limited access to, or we may be unable to invest significant time and resources towards, integration with and offering our services through new or updated devices, operating system versions, social networks, or search platforms (including Internet of Things (“IoT”) based or voice based platforms). If our solutions and integrations are ineffective or unavailable, then our products and marketing efforts may suffer, and our sellers’ ability to manage and scale their business may be harmed. As a consequence, our sellers may choose to sell elsewhere, and our business may suffer.

Conversion rates differ between web, mobile web, and mobile app traffic. If visits to our platforms from sources with lower conversion rates (such as mobile web for the Etsy.com marketplace) were to increase as a percentage of overall visits, it could adversely impact our conversion rate and reduce GMS on our platforms which could adversely affect our business, financial performance, and growth.

The success of our marketplaces could also be harmed by factors outside our control, such as actions taken by providers of mobile and desktop operating systems, social networks, or search and advertising platforms, including:

•policy changes that interfere with, add tolls to, or otherwise limit our ability to provide users with a full experience of our platforms, such as for our mobile apps or social network presence;

•unfavorable treatment received by our platforms, especially as compared to competing platforms, such as the placement of our mobile apps in a mobile app download store;

•increased costs to distribute or use our platforms via mobile apps, social networks, or established search and advertising systems;

•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;

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•changes to social networks that degrade the e-commerce functionality, features, or marketing of us or our sellers’ shops and products; or

•implementation and interpretation of regulatory or industry standards by these widely adopted platforms that, as a side effect, degrade the e-commerce functionality, features, or marketing of us or our sellers’ shops and products.

If sellers and buyers encounter difficulty accessing or using our marketplaces through these widely adopted access providers, our business, financial performance, and growth may be adversely affected.

Expanding our operations outside of the United States is part of our strategy and the growth of our business could be harmed if our expansion efforts do not succeed.

We are focused on growing our business both inside and outside of the United States. Although we have a significant number of sellers and buyers outside of the United States, we are a U.S.-based company with less experience developing local markets internationally and may not execute our strategy successfully. Operating outside of the United States also requires significant management attention, including managing operations and people over diverse geographic areas with varying cultural norms and customs, and adapting our platforms and business operations to local markets.

Our ability to grow our international operations may also be adversely affected by any circumstances that reduce or hinder cross-border trade. For example, the shipping of goods cross-border is typically more expensive and slower than domestic shipping and often involves complex customs and duty inspections and the dependency of national postal carrier systems. If jurisdictions become increasingly fragmented, with additional regulation of small sellers and platforms, tariffs and customs that increase the cost or complexity of cross-border trade, whether on the seller’s sourcing of materials or between the seller and buyer, our business could be adversely impacted. In addition, varying quarantines, closures, delayed or terminated delivery services, and movement restrictions related to the ongoing COVID-19 pandemic may interfere with our international growth strategy.

Our success outside the United States also depends upon our ability to attract sellers and buyers from the same countries in order to enable the growth of local markets. An inability to develop our communities globally or to otherwise grow our business outside of the United States in a cost-effective manner could adversely affect our GMS, revenue, and operating results.

Competition is also likely to intensify outside of the United States, both where we operate now and where we plan to expand. Local companies based outside the United States may have a substantial competitive advantage because of their greater understanding of, and focus on, their local markets, along with regulations that may favor local companies. Some of our competitors may also be able to develop and grow internationally more quickly than we will.

Despite our execution efforts, the goods that sellers list on our Etsy and Reverb marketplaces may not appeal to non-U.S. consumers in the same way as they do to consumers in the United States. In addition, non-U.S. buyers are not as familiar with the Etsy and Reverb brands as buyers in the United States and may not perceive us as relevant or trustworthy. Also, visits to our Etsy and Reverb marketplaces from buyers outside the United States may not convert into sales as often as visits from within the United States, including due to the impact of the strong U.S. dollar relative to other currencies and the fact that most of the goods listed on these platforms are denominated in U.S. dollars. Similarly, non-U.K. consumers may be less familiar with Depop, or find the listed items less appealing, than consumers in the United Kingdom and non-Brazilian consumers may be less familiar with Elo7, or find the listed items less appealing, than consumers in Brazil.

Continued international expansion may also require significant financial investment. For example, Etsy has made initial investments to explore growth opportunities in India, a dynamic market where we have limited operating experience and acquired Elo7 which extends Etsy’s reach in Latin America. To facilitate continued international expansion, we plan to invest in seller and buyer acquisition marketing, enhancing our machine translation and machine learning to help sellers and buyers connect even if they do not speak the same language, forming relationships with third-party service providers, supporting operations in multiple countries, and potentially acquiring additional companies based outside the United States and integrating those companies with our operations. Our investment outside of the United States may be more costly than we expect or unsuccessful.

Our recent acquisitions of Depop and Elo7 may create strains on our management, technology and operational resources and may prove to be costlier and take longer to integrate than we anticipate which may ultimately reduce or eliminate the benefits to Etsy of the acquisitions.

We expect that our acquisitions of Depop and Elo7 will continue to require significant attention and resources from our management team and workforce, including our technology, operations, accounting, and human resource units. Devoting resources to the integration of Depop and Elo7 means that these resources will be redeployed to varying degrees from their normal day-to-day activities supporting existing Etsy functions. This could impair our effectiveness and efficiency in serving existing Etsy sellers and buyers and may have an adverse impact on our financial condition or results of operations. For example, to the extent our products and marketing teams are involved in supporting Depop and Elo7, they may be unable to devote

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sufficient time to product and marketing efforts relating to the Etsy.com and Reverb marketplaces which may materially impact our business, growth, or results of operations.

We incurred substantial transaction fees and costs in connection with our acquisitions of Depop and Elo7 and may experience difficulty in realizing the expected benefits of the acquisitions.

We incurred significant non-recurring expenses in connection with our acquisition of Depop and, to a lesser extent, our acquisition of Elo7, including legal, accounting, filing, financial advisory, and integration planning and other expenses. Additionally, while we intend to operate Depop and Elo7 as stand-alone marketplaces, we may continue to incur significant expenses as we invest to grow their respective businesses and implement public company compliance policies and procedures (including effective internal control over financial reporting and disclosure controls and procedures, as well as information privacy controls).

Also, the success of the Depop and Elo7 acquisitions will depend, in part, on our ability to apply Etsy’s technological, marketing, and operational expertise to help scale their growth in a profitable, efficient, and effective manner, including maintaining relationships with their respective sellers, buyers, and third party service providers. Because our business and the Depop and Elo7 businesses differ in certain respects, we may not be able to manage these businesses smoothly or successfully and may experience difficulty in realizing the expected benefits of the acquisitions.

Potential difficulties that may be encountered include the following:

•the loss of key employees;

•challenges in executing on Depop’s and Elo7’s business plans; and

•potential unknown liabilities, unforeseen expenses, and other complexities associated with integrating Depop and Elo7 into and managing our “House of Brands.”

If we are unable to successfully integrate Depop and Elo7 into our “House of Brands” strategy, we may be unable to realize the benefits we expect to achieve as a result of these acquisitions. As a result, our business, growth and/or results of operations could be adversely affected.

We may have limited redress with respect to claims under the Depop and Elo7 acquisition agreements.

The agreements pursuant to which we acquired Depop and Elo7 contain representations, warranties, and covenants that are customary for transactions of their nature, as well as limitations on the obligations and liabilities of the former equityholders of Depop and Elo7, as applicable, including in the case of the Depop acquisition, no recourse directly against Depop’s former shareholders for a breach of the business-related representations and warranties. In connection with the Depop acquisition, we have obtained customary representation and warranty insurance to insure against losses that may arise from breaches of certain representation and warranties included in the Depop acquisition agreement, which policy is itself subject to specified limitations and exclusions. There can be no assurance that, in the event of a claim made in connection with the Depop acquisition, the policy would cover the relevant losses, nor can there be any assurance that the proceeds that are recoverable under the policy (if any), in the case of the Depop acquisition, or the proceeds that are recoverable from the indemnity escrow, in the case of the Elo7 acquisition, would be sufficient to compensate us for any losses incurred. Therefore, we may have no or limited recourse with respect to claims for breach of the representations, warranties, covenants, or other provisions contained in the Depop and Elo7 acquisition agreements which could adversely affect our financial condition and results of operations.

The due diligence undertaken by us in connection with the Depop and Elo7 acquisitions may not have revealed all relevant considerations or liabilities of Depop and/or Elo7, which could have an adverse effect on our financial condition or results of operations.

Although we conducted due diligence in connection with our acquisitions of Depop and Elo7, we cannot assure you that this due diligence revealed all relevant facts necessary to fully evaluate Depop and Elo7. Furthermore, the information provided during due diligence may have been incomplete, inadequate, or inaccurate. As part of each due diligence process and our evaluation of the relevant opportunity, we also made subjective judgments regarding the results of operations, financial condition, and prospects of Depop and Elo7. If the due diligence investigation failed to correctly or completely identify material issues and liabilities that may be present in Depop or Elo7, or if we considered certain risks to be commercially acceptable relative to the respective opportunity, we may incur substantial, unexpected, or greater than anticipated expense should such issues, liabilities, or risks materialize. In addition, we may be subject to significant, previously undisclosed liabilities of Depop and Elo7 that were not identified during due diligence and that could contribute to poor financial or operational performance and have an adverse effect on our financial condition and results of operations.

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We may expand our business through additional acquisitions of other businesses or assets or strategic partnerships and investments, which may divert management’s attention and/or prove to be unsuccessful.

We have acquired a number of businesses in the past, including our recent acquisitions of Depop and Elo7 in July 2021, and may acquire additional businesses or technologies, or enter into strategic partnerships, in the future. We may not realize the anticipated benefits of our acquisitions or any partnerships, and possible future acquisitions or relationships may disrupt our business and divert management’s time and attention. Acquisitions also may require us to spend a substantial portion of our available cash, issue stock, incur debt or other liabilities, amortize expenses related to intangible assets, or incur write-offs of goodwill or other assets. In addition, integrating an acquired business or technology is risky. Any future acquisitions or partnerships may result in unforeseen operational difficulties and expenditures associated with:

•integrating new businesses and technologies into our infrastructure;

•clearing any required regulatory review that may be complex, costly, time consuming, or place additional requirements on the business;

•implementing growth initiatives;

•integrating administrative functions;

•hiring, retaining, and integrating key employees;

•supporting and enhancing morale and culture;

•retaining key customers, merchants, vendors, and other key business partners;

•maintaining or developing controls, procedures, and policies (including effective internal control over financial reporting and disclosure controls and procedures, as well as information privacy controls); and

•assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, intellectual property infringement, commercial disputes, cyber attacks, taxes, and other matters.

We also may issue additional equity securities in connection with an acquisition or partnership, which could cause dilution to our stockholders. Finally, acquisitions or partnerships could be viewed negatively by analysts, investors, or the members of our communities.

Our marketing efforts to help grow our business may not be effective.

Maintaining and promoting awareness of our marketplaces and services is important to our ability to attract and retain sellers and buyers. One of the key parts of our strategy for the Etsy marketplace is to bring more new buyers to the marketplace and create more habitual buyers by inspiring more frequent purchases across multiple categories and purchase occasions. We continue to iterate on and invest in our marketing strategies, which may not succeed for a variety of reasons, including our inability to execute and implement our plans.

Our marketing efforts currently include search engine optimization, search engine marketing, affiliate marketing, display advertising, as well as social media, mobile push notifications, and email marketing. If we fail to scale and deliver an effective return on investment in any of these marketing efforts, it may harm our business. We also engage with celebrities and influencers as part of our marketing efforts, and our perceived affiliation with these individuals could cause us brand or reputational damage in the event they undertake actions inconsistent with our brands and values.

Additionally, we invest significantly in brand advertising via channels such as television and digital video advertising. If we do not produce effective content or purchase effective air time and placement for that content, it could fail to deliver a return on our investment, and damage our brands and/or business. Many of our marketing efforts include our sellers and products from their shops selected via automated systems. These automated systems may not always operate effectively. While both our manual and automated systems have tools and procedures designed to account for our and our partners’ policies, despite our best efforts, we may inadvertently include in our marketing efforts sellers or their products inconsistent with our policies, brands and values, which could result in failure to deliver a return on our investment, media or regulatory scrutiny, and damage to our brands and/or business.

We obtain a significant number of visits via search engines such as Google. Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search, alter analytics or search engine optimization data available to us or make other changes to the way results are displayed, which can negatively affect the placement of links to our marketplaces and reduce the number of visits or otherwise negatively impact our marketing efforts.

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We also obtain a significant number of visits from social media platforms such as Facebook, Instagram, and Pinterest. Search engines, social networks, and other third parties typically require compliance with their policies and procedures, which may be subject to change or new interpretation with limited ability to negotiate, which could negatively impact our marketing capabilities (including marketing services for our sellers), GMS, and revenue. Etsy-provided controls for users to limit third party advertising features, the growing use of online ad-blocking software and technological changes to browsers and mobile operating systems, may impact the effectiveness of our marketing efforts because we may reach a smaller audience, fail to bring more buyers, or fail to increase frequency of visits to our platforms. In addition, ongoing legal and regulatory changes in the data privacy sphere, such as the E.U. General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018 (“CCPA”), the California Privacy Rights Act of 2020 (“CPRA”), and additional laws being passed or considered in U.S. States and countries throughout the world may impact the scope and effectiveness of marketing and advertising services generally, including those used on our platforms.

We also obtain a significant number of visits through email marketing. If we are unable to successfully deliver emails to our sellers and buyers, if our email subscription tools do not function correctly, or if our sellers and buyers do not open our emails, whether by choice, because those emails are marked as low priority or spam, or for other reasons, our business could be adversely affected. As e-commerce, search, and social networking, as well as related regulatory regimes, evolve, we must continue to evolve our marketing tactics and technology accordingly and, if we are unable to do so, our business could be adversely affected.

Some providers of consumer devices, mobile or desktop operating systems, and web browsers have implemented, or have announced plans to implement, ways to block tracking technologies which, if widely adopted, could also result in online tracking methods becoming significantly less effective. Similarly, our vendors, particularly those providing advertising and analytics products and services have, and may continue to, modify their products and services based on legal and technical changes relating to privacy in ways that could reduce the efficiency of our marketing efforts and our access to data about use of our platforms. Any reduction in our ability to make effective use of such technologies could harm our ability to personalize the experience of buyers, increase our costs, and limit our ability to attract and retain our sellers and buyers on cost-effective terms. As a result, our business and results of operations could be adversely affected.

Enforcement of our marketplace policies may negatively impact our brands, reputation, and/or our financial performance.

We maintain and enforce policies that outline expectations for users while they engage with our services, whether as a seller, a buyer, or a third party and expect to maintain and enforce similar policies at Depop and Elo7 once we have integrated Depop and Elo7 into our marketplace policy program. Additionally, we prohibit a range of items on our marketplaces, including (but not limited to): drugs, alcohol, tobacco, weapons, endangered animal products, hazardous materials, recalled items, highly-regulated items, items violating intellectual property rights of others, illegal products, pornography, items from federally-sanctioned jurisdictions, hateful content, and items that promote or glorify violence.

We enforce these policies in order to uphold the safety and integrity of our marketplaces, engender trust in the use of our services, and encourage positive connections among members of our communities. We strive to enforce these policies in a consistent and principled manner that is transparent and explicable to stakeholders. However, even with a principled and objective approach, policy enforcement is a combination of human and technological review. As a result, there could be errors, it could be subject to different, inconsistent, or conflicting regional consensus or regulatory standards in different jurisdictions, or it could be perceived to be arbitrary, unclear, or inconsistent. Similarly, the tools and processes in place with respect to Etsy’s recently acquired marketplaces, Elo7 and Depop, are not as sophisticated or mature as those used by Etsy. Shortcomings and errors in our ability to enforce our policies across our marketplaces could lead to negative public perception, distrust from our members, or lack of confidence in the use of our services, and could negatively impact the reputation of our brands. In particular, certain enforcement decisions, even those we deem necessary for the health and safety of our marketplaces, may be received negatively by stakeholders or the public, such as:

•we may choose to limit or prohibit the sale of items in our marketplaces based on our policies, even though we could benefit financially from the sale of those items;

•from time to time, we may revise our policies in ways that we believe will enhance trust in our platforms, even though the changes may be perceived unfavorably, such as updates to the way we define handmade.

We are subject to risks related to our environmental, social and governance activities and disclosures.

We have developed an Impact strategy that focuses on leveraging Etsy’s core business to generate value for our communities and stakeholders through positive economic, social, and ecological efforts (our “ESG metrics”). Our Impact strategy aims to create more economic opportunity for our stakeholders, ensure equitable access to the opportunities we create, and build long-term resilience by fostering responsible resource use and reducing our carbon footprint. We have also elected to publicly share these ESG metrics and include them in our Annual Report on Form 10-K, and, as a result, our business may face heightened scrutiny for these activities. See “Business—Our Impact Strategy and Progress.” While selected metrics receive limited assurance

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from an independent third party, this is inherently a less rigorous process than reasonable assurance sought in connection with a financial statement audit and such review process may not identify errors and may not protect us from potential liability under the securities laws.

If we do not demonstrate progress against our Impact strategy or if our Impact strategy is not perceived to be adequate, our reputation could be harmed. We could also damage our reputation and the value of our brands if we fail to act responsibly in the areas in which we report and demonstrate that our commitment to our Impact strategy enhances our overall financial performance.

Any harm to our reputation resulting from setting these metrics or our failure or perceived failure to meet such metrics could impact employee engagement and retention, the willingness of our buyers and sellers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.

If we are unable to successfully execute on our business strategy or if our strategy proves to be ineffective, our business, financial performance, and growth could be adversely affected.

Our ability to execute our strategy, including our “House of Brands” strategy, is dependent on a number of factors, including the ability of our senior management team and key team leaders to execute the strategy, our ability to iterate in a rapidly evolving e-commerce landscape, maintain our pace of product experiments coupled with the success of such initiatives, our ability to meet the changing needs of our sellers and buyers, and the ability of our employees to perform at a high level. If we are unable to execute our strategy, if our strategy does not drive the growth that we anticipate, if the public perception is that we are not executing on our strategy, or if our market opportunity is not as large as we have estimated, it could adversely affect our business, financial performance, and growth.

We may need additional capital, which may not be available to us on acceptable terms or at all.

We believe that our existing cash and cash equivalents and short-term investments (including the proceeds from the 2021 Notes offering), together with cash generated from operations, after giving effect to the funding of our acquisitions of Depop and Elo7 from existing cash and investment balances, will be enough to meet our anticipated cash needs for at least the next 12 months. However, we may require additional cash resources due to changes in business conditions or other developments, such as acquisitions or investments we may decide to pursue. We may seek to borrow funds under our credit facility or sell additional equity or debt securities. The sale of additional equity or convertible debt securities could result in dilution to our existing stockholders. Any debt financing that we may secure in the future could result in additional operating and financial covenants that would limit or restrict our ability to take certain actions, such as incurring additional debt, making capital expenditures, repurchasing our stock, or declaring dividends. It is also possible that financing may not be available to us in amounts or on terms acceptable to us, if at all. Weakness and volatility in capital markets and the economy in general could limit our access to capital markets and increase our costs of borrowing.

We have a significant amount of debt and may incur additional debt in the future. We may not have sufficient cash flow from our business to pay our substantial debt when due.

Our ability to pay our debt when due or to refinance our indebtedness, including the 0% Convertible Senior Notes due 2023 we issued in March 2018 (the “2018 Notes”), the 0.125% Convertible Senior Notes due 2026 we issued in September 2019 (the “2019 Notes”), the 0.125% Convertible Senior Notes due 2027 we issued in August 2020 (the “2020 Notes”) and the 0.25% Convertible Senior Notes due 2028 we issued in June 2021 (the “2021 Notes” and together with the 2018 Notes, the 2019 Notes, and the 2020 Notes, the “Notes”), depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. In addition, any required repurchase of the Notes for cash as a result of a fundamental change would lower our current cash on hand such that we would not have those funds available for use in our business or could require us to obtain additional financing to fund the repurchase. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Based on the daily closing prices of our stock during the quarter ended June 30, 2021, holders of the 2018 Notes and the 2019 Notes are eligible to convert their 2018 Notes and 2019 Notes, as applicable, during the third quarter of 2021. See “Note 7—Debt” in the Notes to Consolidated Financial Statements for more information on the 2018 Notes and 2019 Notes.

In addition, we and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. If, for example, we incur additional debt, secure existing or future debt, or recapitalize our debt, these actions may diminish our ability to make payments on our substantial debt when due.

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Regulatory, Compliance, and Legal Risks

Failure to deal effectively with constantly evolving fraud or other illegal activity could harm our business.

We have adopted policies and procedures that are intended to ensure compliance with law, including, for example anti-corruption, anti-money laundering, export control, and trade sanctions requirements, and we have measures in place to detect and limit the occurrence of fraudulent and other illegal activity in our marketplaces, however, those policies, procedures, and measures may not always be effective. Further, the measures that we use to detect and limit the occurrence of fraudulent and other illegal activity must be dynamic and require significant investment and resources, particularly as our marketplaces increase in public visibility and size. Bad actors constantly apply continually evolving technologies and ways to commit fraud and other illegal activity, and regulations requiring marketplaces to detect and limit these activities are increasing. Our measures may not always keep up with these changes. If we fail to limit the impact of illegal activity in our marketplaces, we could be subject to penalties, fines, other enforcement actions and/or significant expenses and our business, reputation, financial performance, and growth could be adversely affected.

We rely upon third-party service providers to perform certain compliance services. If we or our service providers do not perform adequately, our compliance tools may not be effective, which could increase our expenses, lead to potential legal liability, and negatively impact our business.

Our brands may be harmed if third parties or members of our communities use or attempt to use our marketplaces as part of their illegal or unethical business practices.

Our emphasis on our mission and guiding principles makes our reputation particularly sensitive to allegations of illegal or unethical business practices by our sellers or other members of our communities. Our seller policies promote legal and ethical business practices. Etsy expects sellers to work only with manufacturers who comply with all applicable laws, who do not use child or involuntary labor, who do not discriminate, and who promote sustainability and humane working conditions. We also expect our suppliers to comply with our Supplier Code of Conduct. We expect that once we fully integrate Depop and Elo7 into our supply chain management program, Depop and Elo7 suppliers will also be subject to the Supplier Code of Conduct. Although we seek to influence, we do not directly control our sellers, suppliers, or other members of our communities or their business practices, and cannot ensure that they comply with our policies. If members of our communities engage in illegal or unethical business practices, or are perceived to do so, we may receive negative publicity and our reputation may be harmed.

We may be subject to claims that items listed by sellers in our marketplaces are counterfeit, infringing, illegal, harmful or otherwise violate our policies.

We frequently receive communications alleging that items listed in our marketplaces infringe upon third-party copyrights, trademarks, patents, or other intellectual property rights. We have intellectual property complaint and take-down procedures in place to address these communications, and we believe such procedures are important to promote confidence in our marketplaces, along with both proactive and reactive anti-counterfeiting measures that we use and continue to develop. We follow these procedures to review complaints and relevant facts to determine the appropriate action, which may include removal of the item from our marketplaces and, in certain cases, closing the shops of sellers who violate our policies.

Our procedures may not effectively reduce or eliminate our liability. For example, on the Etsy marketplace we use a combination of automatic and manual tools and depend upon human review in many circumstances. Our tools and procedures may be subject to error or enforcement failures and may not be adequately staffed, and we may be subject to an increasing number of erroneous or fraudulent demands to remove content. In addition, we may be subject to civil or criminal liability for activities carried out by sellers on our platforms, especially outside the United States where laws may offer less protection for intermediaries and platforms than the United States.

Under current U.S. copyright laws such as the Digital Millennium Copyright Act § 512 et. seq., we benefit from statutory safe harbor provisions that protect us from copyright liability for content posted on our platforms by sellers and buyers, and we rely upon user content platform protections under 47 U.S.C. § 230 (commonly referred to as CDA § 230), that limits most non-intellectual property law claims against Etsy based upon content posted by users on our platforms. However, trademark and patent laws do not include similar statutory provisions, and limits on platform liability for these forms of intellectual property are primarily based upon court decisions. Similarly, laws related to product liability vary by jurisdiction, and the liability of marketplace platforms for products and services of sellers, while traditionally limited, is subject to increasing debate in courts, legislatures, and with regulators. These safe harbors and court rulings, including analogous ones in other state and international jurisdictions, may change unfavorably. Moreover, changes focused on actions by very large platforms that perform retailer-like functions may directly or indirectly also impact us, our sellers, buyers and vendors.

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Proposed laws in Europe and the United States may change the scope of platform liability, and ongoing case law developments may unpredictably increase our liability as platforms for user activity. In that event, we may be held directly or secondarily liable for the intellectual property infringement, product compliance deficiencies, consumer protection deficiencies, privacy and data protection incidents, or regulatory issues of our sellers, including potentially for their conduct over which we have no control or influence.

Regardless of the validity of any claims made against us, we may incur significant costs and efforts to defend against or settle them. If a governmental authority determines that we have aided and abetted the infringement or sale of counterfeit, harmful or unlawful goods or if legal changes result in us potentially being liable for actions by sellers on our platforms, we could face regulatory, civil, or criminal penalties. As in the past, claims by third-party rights owners could require us to pay damages or refrain from permitting any further listing of the relevant items. These types of claims could seek substantial damages or force us to modify our business practices, which could lower our revenue, increase our costs, or make our platforms less user-friendly. These claims, or legal and regulatory changes, could require the removal of non-infringing, lawful or completely unrelated content, which could negatively impact our business and our ability to retain sellers. Moreover, public perception that unlicensed, counterfeit, harmful or unlawful items are commonly offered by sellers in our marketplaces, even if factually incorrect, could result in negative publicity and damage to our reputation.

We may be involved in litigation and regulatory matters that are expensive and time consuming and that may require changes to our strategy, the features of our platforms and/or how our business operates.

In addition to intellectual property claims, we may become involved in other litigation matters, including consumer protection, product liability, security and privacy, commercial, or shareholder derivative lawsuits, either individually or, where available, on a class-action basis. We may become subject to heightened regulatory scrutiny, inquiries, or investigations, including with respect to our sellers, vendors or third parties, relating to broad, industry-wide concerns, such as antitrust, product liability, and privacy, that could lead to increased expenses or reputational damage. For example, while we have stated on our Etsy marketplace platform that items offered by sellers on Etsy, such as masks and hand sanitizers, are not medical-grade, and that our sellers cannot make substantive medical or health claims, we may nevertheless be subject to claims based in whole or in part on the actions of sellers in violation of that directive.

Under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of current and former directors, officers, and underwriters. Any lawsuit or regulatory action to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits or regulatory actions, even if non-meritorious, on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.

We limit certain claims against us under our Terms of Use, including through requirements for arbitration, limits on class actions, limitations of liability, venue selection, and indemnification requirements. These requirements may be subject to differing interpretations and legal frameworks in different U.S. federal, state, and foreign jurisdiction courts, and may have reduced or no enforceability in some jurisdictions. If these claim limitations are unavailable to us, it could significantly increase our costs, require significant resources across multiple jurisdictions, result in complex or inconsistent decisions, and subject us to forum shopping by third parties seeking jurisdictions amenable to their claims.

Actions brought against us may result in lawsuits, enforcement actions, injunctions, settlements, damages, fines, or penalties, which could have a material adverse effect on our financial condition or results of operations or require changes to our business. Although we establish accruals for our litigation and regulatory matters in accordance with applicable accounting guidance when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable, there may be a material exposure to loss in excess of any amounts accrued, or in excess of any loss contingencies disclosed as reasonably possible. Such loss contingencies may not be probable and reasonably estimable until the proceedings have progressed significantly, which could take several years and occur close to resolution of the matter.

Expanding and evolving regulations in the areas of privacy and user data protection could create technological, economic and complex cross-border business impediments to our business and those of our sellers.

We collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, and share personal information, confidential information and other potentially protected information necessary to provide our service, to operate our business, for legal and marketing purposes, and for other business-related purposes.

Data protection has become a significant issue in the United States, countries in the European Union, and in many other countries in which we operate. In addition to the actual and potential changes in law described elsewhere in these Risk Factors, global developments in privacy and data security regulations are changing some of the ways we, our sellers, our vendors and other third parties collect, use, and share personal information and other proprietary or confidential information. Compliance with these changing regulations have necessitated some specific product changes for our non-U.S. activities, and required additional compliance obligations for us and for our relationships with sellers, vendors, and other third parties.

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In the European Union, the GDPR contains strict requirements for processing the personally identifiable information of individuals residing in the European Economic Area (“EEA”), Switzerland and (in a form frozen as of December 31, 2020 and as further separately domestically amended), the United Kingdom. The GDPR seeks to harmonize the data protection regulations throughout these jurisdictions. The regulation contains numerous requirements and changes from previous E.U. law, including more robust obligations on data processors, greater rights for data subjects (requiring potentially significant changes to both our technology and operations), security and accountability obligations, and significantly heavier documentation and record-keeping requirements for data protection compliance programs. Specifically, the GDPR introduced numerous privacy-related changes for companies operating in the European Union, including greater control over personal data by data subjects (e.g., the “right to be forgotten”), increased data portability, access, and redress rights for E.U. consumers, data breach notification requirements, increased rules for online and email marketing, compliance requirements related to our sellers, vendors and third parties, and stronger regulatory enforcement regimes. The GDPR is subject to changing interpretations due to decisions of data protection authorities, courts, and related legislative efforts both E.U.-wide and in particular jurisdictions. The GDPR requirements apply to some third-party transactions (such as commercial contracts with partners and vendors) and to transfers of information between us and our subsidiaries, including user and employee information. GDPR requirements may also apply, depending on interpretation of its reach, to some users in our worldwide communities of sellers. We may experience difficulty retaining or obtaining new E.U. sellers, or current and new sellers may limit their selling into the European Union, due to the legal requirements, compliance cost, potential risk exposure, and uncertainty for them in respect of their own compliance obligations with respect to GDPR. In addition, although our sellers are independent businesses, it is possible that a privacy authority could deem us jointly and severally liable for actions of our sellers or vendors, which would increase our potential liability exposure and costs of compliance, which could negatively impact our business. We could face potential liability, regulatory investigation, and costly litigation, which may not be adequately covered by insurance.

In the United States, rules and regulations governing data privacy and security include those promulgated under the authority of the Federal Trade Commission Act, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, California’s CCPA (effective January 1, 2020) and CPRA (effective January 1, 2023), and other state and federal laws relating to privacy, consumer protection, and data security. The CCPA and CPRA introduce new requirements regarding the handling of personal information of California consumers and households, including compliance and record keeping obligations, the right to request access to and deletion of their personal information, and the right to opt out of the sale of their personal information and provides a private right of action and statutory damages for data breaches.

Other jurisdictions in the United States are beginning to expand existing regulations, or propose laws similar to the CCPA. If more stringent privacy legislation arises in the United States, it could increase our potential liability and adversely affect our business, results of operations, and financial condition. Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, and strict limitations to the processing of personal information, which could increase the cost and complexity of delivering our services and operating our business. In the past year, for example, Brazil enacted the General Data Protection Law, New Zealand enacted the New Zealand Privacy Act, China released its draft Personal Information Protection Law, and Canada introduced the Digital Charter Implementation Act.

GDPR, CCPA, and similar laws coming into effect in other jurisdictions may continue to change the data protection landscape globally, may be potentially inconsistent or incompatible, and could result in potentially significant operational costs for internal compliance and risk to our business. Some of these requirements may introduce friction into the buying and selling experience on our platforms and may impact the scope and effectiveness of our marketing efforts, which could negatively impact our business and future outlook. Beyond GDPR and CCPA/CPRA, individual jurisdictions continue to pass laws related to data protection, such as data privacy and data breach notification, resulting in a diverse set of requirements across states, countries, and regions. Non-compliance with these laws could result in proceedings against us by one or more data protection authorities, other public authorities, third parties, or individuals. Under GDPR alone, noncompliance could result in fines of up to 20 million Euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater. We may not be entirely successful in our compliance efforts due to various factors either within our control (such as limited internal resource allocation) or outside our control (such as a lack of vendor cooperation, new regulatory interpretations, or lack of regulatory guidance in respect of certain GDPR requirements).

In addition, E.U. data protection laws, including the GDPR, also generally prohibit the transfer of personal information from Europe to the United States and most other countries unless the recipient country has been deemed to have adequate privacy protections in place to protect the personal information. Parties transferring protected personal data to jurisdictions deemed inadequate must establish a legal basis for, and implement specific safeguards for, such intra-party or inter-party transfers. A recent judgment of the Court of Justice of the European Union found a common basis for such transfers, the E.U.-U.S. Privacy Shield, insufficient, and a parallel arrangement with Switzerland may similarly be deemed insufficient. While Etsy did not rely upon Privacy Shield for cross-border transfers, Reverb previously had done so. While effective solutions may be available to permit these transfers, such as Standard Contractual Clauses (“SCCs”), continuing changes to the rules related to cross-border transfers may nonetheless impede Etsy and its subsidiaries’ ability to effectively transfer data between jurisdictions with parties such as partners, vendors and users, or may make such transfers of personal data more costly. In particular, another recent decision and related European Commission guidance and updates to the SCCs may impose additional obligations on companies seeking to rely on the SCCs and may require significant expense and resources associated with compliance. For example, transfers with the United Kingdom might be deemed inadequate after its departure from the European Union and European

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Economic Area and require substantial expense and resources to comply with based upon adequacy mechanisms such as SCCs. Transfers by us or our vendors of personal information from Europe pursuant to SCCs may not comply with E.U. data protection law, may increase our exposure to the GDPR’s heightened sanctions for violations of its cross-border data transfer restrictions, and may result in lower sales on our platforms because of difficulty of establishing a lawful basis for personal information transfers out of Europe.

We also publish privacy policies and other documentation regarding our collection, processing, use, and disclosure of personal data. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance, such as if our employees or vendors fail to comply with our published policies and documentation. Such failures can subject us to potential international, local, state, and federal action under both data protection and consumer protection laws. We are or may also be subject to the terms of our own and third party external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks and contractual obligations to third parties related to privacy, information security, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with data protection laws, or other obligations.

Our sellers and vendors may be subject to similar privacy requirements, which may significantly increase costs and resources dedicated to their compliance with such requirements. We have varying contractual and other legal obligations to notify relevant stakeholders of security breaches related to us or, in some cases, our third-party service providers. Many jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data in some circumstances. In addition, our agreements with certain stakeholders may require us to notify them in the event of such a security breach. Such mandatory disclosures, even if only related to actions of a third-party vendor, are costly, could lead to negative publicity, may cause members of our communities to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach, and may cause us to breach customer contracts. Our contracts, our representations or industry standards, to varying extents, require us to use industry-standard or reasonable measures to safeguard sensitive personal information or confidential information. A cyber incident or security breach could lead to claims by members of our communities, or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or members of our communities could end their relationships with us. There can be no assurance that any indemnifications, limitations of liability or other remedies in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.

We may not have adequate insurance coverage for security incidents or breaches, including fines, judgments, settlements, penalties, costs, attorney fees, and other impacts that arise out of incidents or breaches. If the impacts of a security incident or breach, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, is of a type not subject to insurance, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage, cyber coverage, and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss. Our risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of proprietary and sensitive data.

Expanding our operations in Latin America and India may expose us to additional risks.

We recently acquired Elo7 which currently operates principally in Brazil and we additionally recently opened offices in Mexico and India. Each of these jurisdictions has legal framework, regulatory environment, and culture that differs materially from those of North America and Europe where our operations have historically been located. In addition, the timing and impact of the COVID-19 pandemic has been materially different from jurisdiction to jurisdiction and COVID-19 levels currently remain very high in Brazil and India. If we are unable to manage these risks, it could adversely affect our business, financial performance, and growth. Further, the success of our Elo7 marketplace may be adversely affected by macroeconomic, social, and political conditions prevailing in Brazil and Latin America. Decreases in the growth rate, periods of negative growth, increases in inflation, persistent deflation, changes in law, regulation, policy, or future judicial rulings and interpretations of policies involving exchange and capital controls and other matters such as (but not limited to) currency depreciation, foreign exchange regulations, inflation, interest rates, taxation, employment and labor laws, banking laws, and regulations and other political, economic, or regulatory developments in or affecting Brazil and/or other parts of Latin America may affect the overall business environment and may, in turn, adversely impact Elo7’s financial condition and results of operations in the future or create obstacles to the successful integration of Elo7 into Etsy.

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Our business and our sellers and buyers may be subject to evolving sales and other tax regimes in various jurisdictions, which may harm our business.

The application of indirect taxes, such as sales and use tax, value-added tax, provincial tax, goods and services tax, business tax, withholding tax, digital service tax, gross receipt tax, and tax information reporting obligations to businesses like ours and to our sellers and buyers is a complex and evolving issue. Significant judgment is required to evaluate applicable tax obligations and as a result amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear when and how new and existing statutes might apply to our business or to our sellers’ businesses. In some cases it may be difficult or impossible for us to validate information provided to us by our sellers on which we must rely to ascertain any obligations that may apply to us related to our sellers’ businesses, given the intricate nature of these regulations as they apply to particular products or services and that many of the products and services sold in our marketplace are unique or handmade. If we are found to be deficient in how we have addressed our tax obligations, our business could be adversely impacted.

Various jurisdictions (including the U.S. states and E.U. member states) are seeking to, or have recently imposed additional reporting, record-keeping, indirect tax collection and remittance obligations, or revenue-based taxes on businesses like ours that facilitate online commerce. For example, the recently enacted American Rescue Plan Act of 2021 included a provision which significantly increases the number of sellers for whom we must report payment transactions. If requirements like these become applicable in additional jurisdictions, our business, collectively with our sellers’ businesses, could be harmed. For example, taxing authorities in many U.S. states and in other countries have targeted e-commerce platforms as a means to calculate, collect, and remit indirect taxes for transactions taking place over the internet, and have enacted laws and others are considering similar legislation. Such changes to current law or new legislation could adversely affect our business if the requirement of tax to be charged on items sold on our marketplaces causes our marketplaces to be less attractive to current and prospective buyers, which could materially impact our business and our sellers’ businesses. This legislation could also require us or our sellers to incur substantial costs in order to comply, including costs associated with tax calculation, collection, remittance, and audit requirements, which could make selling on our marketplaces less attractive. Additionally, the European Union, certain member states, and other countries have proposed or enacted taxes on online advertising and marketplace service revenues. Our results of operations and cash flows could be adversely effected by additional taxes of this nature imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to provide information about our buyers, sellers, and other third parties for tax reporting purposes to various authorities. In some cases, we also may not have sufficient notice to enable us to build solutions and adopt processes to properly comply with new reporting or collection obligations by the applicable effective date.

Our business is subject to a large number of U.S. and non-U.S. laws, many of which are evolving.

We are subject to a variety of laws and regulations in the United States and around the world, including those relating to traditional businesses, such as employment laws and taxation, and laws and regulations focused on e-commerce and online marketplaces, such as online payments, privacy, anti-spam, data security and protection, online platform liability, marketplace seller regulation, intellectual property, product liability, and consumer protection. In light of our international operations, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption, and export control laws. In some cases, non-U.S. privacy, data security, consumer protection, e-commerce, and other laws and regulations are more detailed or comprehensive than those in the United States and, in some countries, are actively enforced.

These laws and regulations are continuously evolving, and compliance is costly and can require changes to our business practices and significant management time and effort. In some jurisdictions, these laws and regulations may be subject to attempts to apply such domestic rules world-wide against Etsy or its subsidiaries, and occasionally may subject us to inconsistent obligations across jurisdictions.

Additionally, it is not always clear how existing laws apply to online marketplaces as many of these laws do not address the unique issues raised by online marketplaces or e-commerce. For example, as described elsewhere in these Risk Factors, laws relating to privacy are evolving differently in different jurisdictions. Federal, state, and non-U.S. governmental authorities, as well as courts interpreting the laws, continue to evaluate and assess the privacy requirements that are applicable to Etsy and its marketplaces.

New platform liability laws, potential amendments to existing laws, and ongoing regulatory and judicial interpretation of these laws imparting liability for conduct by users of a platform may create costs and uncertainty for both Etsy and sellers on our platforms. This may even be the case for new laws or regulations focused on other technology areas or other third parties that nonetheless indirectly or unintentionally impact us, our sellers or our vendors. For example, the European Union’s recent e-Copyright in the Digital Single Market Directive and Platform to Business Regulation, and pending Digital Services Act (DSA) and Digital Markets Act (DMA), may impact us directly, as well as impacting our sellers and vendors. In addition, there have been various Congressional efforts to restrict the scope of the protections available to online platforms for third party user content under intellectual property laws such as the Digital Millennium Copyright Act § 512 et. seq., or user content platform protections under 47 U.S.C. § 230 (commonly referred to as CDA § 230) and our current protections from liability for third-party content in

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the United States could significantly decrease or change. We could incur significant costs investigating and defending such claims and, if we are found liable, significant damages.

We also operate under an increasing number of regulatory regimes protecting us and our sellers and buyers worldwide, such as intellectual property and anti-counterfeiting laws, payments and taxation, competition, marketplace platform regulation, hate speech laws, and general commerce regulation. For example, upcoming regulations may impose significant verification, certification or ongoing compliance hurdles on both us and our sellers. These laws, and court or regulatory interpretations of these laws, may shift quickly in the United States and worldwide. We may not have the resources or scale to effectively adapt to and comply with any changes to these regulatory regimes which may limit our ability to take advantage of the protections these regimes offer. In addition, some of these changes may be at least partially inconsistent with how our platforms operate, especially if they are adopted in the context of, or in a manner best suited for, larger platforms, which may make it harder for us to utilize these regimes to protect our marketplaces. If we are unable to cost-effectively protect our platforms, sellers and buyers under these regulatory regimes, such as if the regulations place requirements on our sellers that they find difficult or impossible to comply with, limit the functions or features our marketplaces can offer, or require us to take actions at a scale inconsistent with the size, investment, and operation of our marketplaces, our business could be harmed.

Existing and future laws and regulations enacted by federal, state, or non-U.S. governments or the inconsistent enforcement of such laws and regulations could impede the growth of e-commerce or online marketplaces, which could have a negative impact on our business and operations. Examples include data localization requirements, limitation on marketplace scope or ownership, intellectual property intermediary liability rules, regulation of online speech, limits on network neutrality, and rules related to security, privacy, or national security, which may impede us, our users, or our vendors. We could also face regulatory challenges or be subject to allegations of discriminatory or anti-competitive practices that could impede both our and our sellers’ growth prospects, increase our costs, and harm our business. We may be subject to regulatory requests for information or testimony related to regulatory challenges of third parties, such as our competitors or our vendors, which could cause us to incur significant costs and expend significant resources in response, and could impact our relationship with those third parties.

We strive to comply with all applicable laws, but they may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction. Despite our efforts, we may not have fully complied in the past and may not fully comply in the future, particularly where the applicable regulatory regimes have not been broadly interpreted. If we become liable under laws or regulations applicable to us, we could be required to pay significant fines and penalties, our reputation may be harmed, and we may be forced to change the way we operate. That could require us to incur significant expenses or to discontinue certain services, which could negatively affect our business.

Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could result in other liabilities for us and could harm our business. Our ability to rely on insurance, or indemnification and other contractual remedies to limit these liabilities, may be insufficient or unavailable in some cases. Furthermore, the circumstances in which we may be held liable for the acts, omissions, or responsibilities of our sellers is uncertain, complex, and evolving. For example, certain laws have recently been enacted seeking to hold marketplaces like ours responsible for certain compliance obligations for which sellers have traditionally been responsible. If an increasing number of such laws are passed, the resulting compliance costs and potential liability risk could negatively impact our business.

We may be subject to intellectual property claims, which, even if untrue, could be extremely costly to defend, damage our brands, require us to pay significant damages, and limit our ability to use certain technologies in the future.

Companies in the internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. We periodically receive communications that claim we have infringed, misappropriated, or misused others’ intellectual property rights. To the extent we gain greater public recognition and scale worldwide, we may face a higher risk of being the subject of intellectual property claims. Third parties may have intellectual property rights that they claim cover significant aspects of our technologies or business methods and prevent us from expanding our offerings. Third parties may also allege a company is secondarily liable for intellectual property infringement, or that it is a joint infringer with another party, including claims that Etsy is liable, either directly, indirectly, or vicariously, for infringement claims against sellers using Etsy’s platforms, our vendors, or other third parties, and that statutory, judicial, or other immunities and defenses do not protect us. Any intellectual property claim against us, with or without merit, could be time consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters. For claims against us, insurance may be insufficient or unavailable, and for claims related to actions of third parties, either indemnification or remedies against those parties may be insufficient or unavailable.

Some of our competitors have extensive portfolios of issued patents. Many potential litigants, including some of our competitors, patent holding companies, and other intellectual property rights holders, have the ability to dedicate substantial resources to enforcing their perceived intellectual property rights. Any claims successfully brought directly against us, or implicating us as part of an action against third parties, such as our sellers or vendors, could subject us to significant liability for damages, and we may be required to stop using technology or other intellectual property alleged to be in violation of a third party’s rights in one or more jurisdictions where we do business. We also might be required to seek a license for third-party

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intellectual property. Even if a license is available, we could be required to pay significant royalties or submit to unreasonable terms, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, which could require significant time and expense. If we cannot license or develop technology for any allegedly infringing aspect of our business, we would be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.

We are subject to the terms of open source licenses because our platforms incorporate, and we contribute to, open source software, potentially impairing our ability to adequately protect our intellectual property.

The software powering our platforms incorporates software covered by open source licenses. In addition, we regularly contribute source code to open source software projects and release internal software projects under open source licenses, and we anticipate doing so in the future. The terms of many open source licenses relied upon by us and the internet and technology industries have been interpreted by only a few court decisions and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our marketplaces. Under certain open source licenses, if certain conditions were met, we could be required to publicly release aspects of the source code of our software or to make our software available under open source licenses.

To avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software. In addition, use of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platforms, and availability of patches or fixes may not be consistent or quickly available, as it may be subject to the continued community engagement in a particular open source project. Additionally, because any software source code we contribute to open source projects is publicly available, while we may benefit from the contributions of others, our ability to protect our intellectual property rights in such software source code may be limited or lost entirely, and we will be unable to prevent our competitors or others from using such contributed software source code. Similarly, we may be subject to third party intellectual property claims as a user of or contributor to such open source software. Any of these risks could be difficult to eliminate or manage and, if not addressed, could adversely affect our business, financial performance, and growth.

There remains pronounced legal, economic and implementation uncertainty surrounding the United Kingdom’s departure from the European Union, which may be a source of instability in international markets, create significant currency fluctuations, adversely affect our operations in the United Kingdom, and pose additional risks to our business, revenue and financial condition.

On January 1, 2021, the United Kingdom left the E.U. single market and customs union (“Brexit”). While the United Kingdom and the European Union have agreed to the terms of the United Kingdom’s departure in a trade agreement, there remains a continued lack of clarity about future U.K. laws and regulations as the United Kingdom determines which E.U. rules and regulations to replace or replicate, including financial and banking laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, privacy and information security laws, payments regulations, environmental, health, and safety laws and regulations, immigration laws, and employment laws, all of which could decrease foreign direct investment in the United Kingdom, increase costs and depress economic activity. Additionally, under the terms of the United Kingdom’s departure, the European Union retains the right to impose tariffs if the United Kingdom violates certain “level playing field” standards relating to working conditions and environmental requirements. The long-term effects of Brexit will depend on how U.K. laws and relationships evolve, as well as the United Kingdom’s adherence to the “level playing field” standards, and how that impacts its ability to negotiate favorable trade agreements with other countries.

The United Kingdom is one of our core markets. We continue to monitor post-Brexit developments so that we may adjust our business and operations as appropriate with the goal of continuing to provide services to our U.K. and E.U. buyers and sellers. A failure by the United Kingdom and the European Union to smoothly implement the trade agreement or to negotiate favorable arrangements governing cross-border services and trade, and ongoing uncertainty with respect to potential divergent regulatory standards, however, could significantly increase friction on cross-border trade involving U.K. buyers and sellers or reduce the number of sellers on our platforms offering products between the United Kingdom and the European Union. It may also result in additional operational, financial, regulatory, and compliance costs to us as well as decreased revenue, all of which could adversely affect our business.

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If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy of our financial reports.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting. It also requires our independent registered public accounting firm to attest to our evaluation of our internal controls over financial reporting. Although our management has determined, and our independent registered public accounting firm has attested, that our internal control over financial reporting was effective as of December 31, 2020, we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal controls in the future.

If we have a material weakness in our internal control over financial reporting in the future, we may not detect errors on a timely basis. If we have difficulty implementing and maintaining effective internal control over financial reporting at businesses that we may acquire, or if we identify a material weakness in our internal control over financial reporting in the future, it could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements. We could be required to implement expensive and time consuming remedial measures. Further, if there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal controls, such as Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in the accuracy and completeness of our financial reports and that could cause the price of our common stock to decline. We could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.

In addition, our internal control over financial reporting will not prevent or detect all errors and fraud, and individuals, including employees and contractors, could circumvent such controls. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

Other Risks

The price of our common stock has been and will likely continue to be volatile and declines in the price of common stock could subject us to litigation.

The price of our common stock has been and is likely to continue to be volatile. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities litigation. We have experienced securities class action lawsuits in the past and may experience more such litigation following future periods of volatility or declines in our stock price. Any securities litigation could result in substantial costs and divert our management’s attention and resources, which could adversely affect our business.

For example, since January 1, 2020, our common stock’s daily closing price on Nasdaq has ranged from a low of $31.69 to a high of $244.58 through July 30, 2021. The price of our common stock may fluctuate significantly for numerous reasons, many of which are beyond our control, such as:

•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;

•entry into or exit from stock market indices;

•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;

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•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 communities;

•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 operating performance of other similar companies;

•changes in legal requirements relating to our business; and

•any other factors discussed in this Quarterly Report.

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the price of our common stock could decline for reasons unrelated to our business, financial performance, or growth. Stock prices of many internet and technology companies have historically been highly volatile.

Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution to our stockholders and could cause the price of our common stock to decline.

We may issue additional common stock, convertible securities, or other equity in the future, including as a result of conversion of the outstanding Notes. We also issue common stock to our employees, directors, and other service providers pursuant to our equity incentive plans. Such issuances could be dilutive to investors and could cause the price of our common stock to decline. New investors in such issuances could also receive rights senior to those of current stockholders.

The conversion of some or all of the Notes would dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of the Notes. Each series of Notes is convertible at the option of their holders prior to their scheduled maturity in the event the conditional conversion features of such series of Notes are triggered. Based on the daily closing prices of our stock during the quarter ended June 30, 2021, holders of the 2018 Notes and the 2019 Notes are eligible to convert their 2018 Notes and 2019 Notes, as applicable, during the third quarter of 2021. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely cash to converting holders of such Notes, we could be required to deliver to them a significant number of shares of our common stock, increasing the number of outstanding shares of our common stock. The issuance of such shares of common stock and any sales in the public market of the common stock issuable upon such conversion of the Notes could adversely affect prevailing market prices of our common stock. See “Note 7—Debt” in the Notes to Consolidated Financial Statements for more information on the Notes.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

Our business could be negatively affected as a result of actions of activist stockholders.

The actions of activist stockholders could adversely affect our business. Specifically, responding to common actions of an activist stockholder, such as requests for special meetings, potential nominations of candidates for election to our Board of Directors, requests to pursue a strategic combination, or other transaction or other special requests, could disrupt our operations, be costly and time-consuming, or divert the attention of our management and employees. In addition, perceived uncertainties as to our future direction in relation to the actions of an activist stockholder may result in the loss of potential business opportunities or the perception that we are unstable as a company, which may make it more difficult to attract and

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retain qualified employees. Our ability to continue to commit to our mission, guiding principles, and culture may also be questioned, which could impact our ability to attract and retain buyers and sellers. Actions of an activist stockholder may also cause fluctuations in our stock price based on speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Our stock repurchases are discretionary and even if effected, they may not achieve the desired objectives.

Our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $250 million of our common stock. In addition, in connection with issuance of the 2021 Notes, our Board of Directors approved the repurchase of $180.0 million of our common stock and we used approximately $180.0 million of the net proceeds from the offering to repurchase approximately 1.1 million shares of our common stock at a purchase price equal to $170.21 (the last reported sale price per share of our common stock on June 8, 2021). There can be no assurance that either the June 2021 stock repurchases or any repurchases pursuant to our stock repurchase program will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased such shares. In addition, there is no guarantee that our stock repurchases in the past or in the future will be able to successfully mitigate the dilutive effect of recent and future employee stock option exercises and restricted stock vesting or of any issuance of common stock in connection with the conversion of Notes. The amounts and timing of the repurchases may also be influenced by general market conditions and the prevailing price and trading volumes of our common stock. If our financial condition deteriorates or we decide to use our cash for other purposes, we may suspend repurchase activity at any time.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, could limit attempts to make changes in our management and could depress the price of our common stock.

Provisions in our certificate of incorporation and bylaws and the Delaware General Corporation Law may have the effect of delaying or preventing a change in control of our company or limiting changes in our management. Among other things, these provisions:

•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.

These provisions may delay or prevent attempts by our stockholders to replace members of our management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, Section 203 of the Delaware General Corporation Law may delay or prevent a change in control of our company by imposing certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock. Anti-takeover provisions could depress the price of our common stock by acting to delay or prevent a change in control of our company.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities.

The table below provides information with respect to repurchases of shares of our common stock during the three months ended June 30, 2021.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)		Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (in thousands)(3)
April 1 - 30, 2021 (1)	182,178	$	208.20	$	—	$	250,000
May 1 - 31, 2021 (1)	11,308	198.79		—		250,000
June 1 - 30, 2021 (1) (2)	1,066,777	170.15		—		250,000
Total	1,260,263	175.91		$	—	250,000

(1)The total number of shares purchased includes 202,748 shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units.

(2)In June 2021, we repurchased approximately 1.1 million shares of our common stock for approximately $180.0 million. This repurchase was separate from the stock repurchase plan approved by the Board of Directors in December 2020 and discussed in footnote 3 below. For more information see “Note 9—Stockholders’ Equity” in the Notes to Consolidated Financial Statements.

(3)In December 2020, our Board of Directors approved a new stock repurchase program for the repurchase of up to $250 million of our common stock. The stock repurchase program has no expiration date. No purchases were made pursuant to this program in the second quarter of 2021.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit
Number

Incorporated by Reference

Filed

Herewith

Form

File No.

Filing Date

2.1*

A greement for the S ale and P urch ase of the Share C apital of D epop L imited

4.1

Indenture, dated as of June 11, 2021, by and between Etsy, Inc. and U.S. Bank National Association, as Trustee.

8-K

001-36911

4.1

6/11/2021

4.2

Form of Note, representing Etsy, Inc.’s 0.25% Convertible Senior Notes due 2028 (included as Exhibit A to the Indenture filed as Exhibit 4.1).

8-K

001-36911

4.2

6/11/2021

10.1

Form of Confirmation for 2021 Capped Call Transactions

8-K

001-36911

99.1

6/11/2021

31.1

Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1†

Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350

32.2†

Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Schema Linkbase Document

101.CAL

XBRL Taxonomy Calculation Linkbase Document

101.DEF

XBRL Taxonomy Definition Linkbase Document

101.LAB

XBRL Taxonomy Labels Linkbase Document

101.PRE

XBRL Taxonomy Presentation Linkbase Document

104

Cover Page Interactive Data File - the cover page interactive data is embedded within the Inline XBRL document

* Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

† 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.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


ETSY, INC.
Date: August 4, 2021			/s/ Merilee Buckley
			Merilee Buckley Chief Accounting Officer
			(Principal Accounting Officer)

Exhibit 2.1


CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. INFORMATION THAT WAS OMITTED HAS BEEN NOTED IN THIS DOCUMENT WITH A PLACEHOLDER IDENTIFIED BY THE MARK “[***]”. NOTE: THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT HAVE BEEN MADE SOLELY FOR THE BENEFIT OF THE PARTIES THERETO AND SHOULD NOT BE RELIED ON BY ANY OTHER PERSON. IN ADDITION, SUCH REPRESENTATIONS AND WARRANTIES: (I) HAVE BEEN QUALIFIED BY DISCLOSURE SCHEDULES, (II) ARE SUBJECT TO THE MATERIALITY STANDARDS SET FORTH HEREIN, WHICH MAY DIFFER FROM WHAT MAY BE CONSIDERED TO BE MATERIAL BY INVESTORS, AND (III) WERE MADE ONLY AS OF THE DATE OF THE AGREEMENT OR SUCH OTHER DATE AS SPECIFIED THEREIN. ACCORDINGLY, INVESTORS AND SECURITY HOLDERS SHOULD NOT RELY ON THE REPRESENTATIONS AND WARRANTIES AS CHARACTERIZATIONS OF THE ACTUAL STATE OF FACTS. MOREOVER, INFORMATION CONCERNING THE SUBJECT MATTER OF THE REPRESENTATIONS AND WARRANTIES MAY CHANGE AFTER THE DATE OF THE AGREEMENT, WHICH SUBSEQUENT INFORMATION MAY OR MAY NOT BE FULLY REFLECTED IN THE COMPANY’S DISCLOSURES.

AGREEMENT FOR THE SALE AND PURCHASE OF THE SHARE CAPITAL OF DEPOP LIMITED
DATED 2 JUNE 2021
THE INSTITUTIONAL SELLERS and THE SENIOR MANAGERS and THE OTHER SELLERS and ETSY IRELAND HOLDING UNLIMITED COMPANY and ETSY, INC.


Allen & Overy LLP

CONTENTS

Clause Page


1. Interpretation			1
2. Sale and Purchase			2
3. Condition Precedent			3
4. Completion			6
5. Initial Consideration			7
6. Adjustment to Initial Consideration			9
7. Deferred Consideration			10
8. Senior Manager Loans			13
9. Locked Box			13
10. Guarantees and Indemnities			14
11. Sellers’ Warranties			14
12. Purchaser’s Warranties and Undertakings			16
13. Post-Completion			17
14. Books and Records			19
15. Guarantee and Indemnity			19
16. Announcements and Confidentiality			20
17. Notices			21
18. Further Assurances			22
19. Assignments			23
20. Payments			23
21. Seller Representatives			24
22. General			25
23. Whole Agreement			25
24. Governing Law			26
25. Dispute Resolution			26
26. Language			27

Schedule


1.	The Sellers	28
	Part 1 The Institutional Sellers	28
	Part 2 The Senior Managers	29
	Part 3 The Other Sellers	30
	Part 4 Senior Managers’ Options	31
2.	The Company	32
3.	The Subsidiaries	33
4.	[Not Used]	34
5.	Properties	35
6.	Tax Covenant	36
7.	Warranties	41
8.	Warranty Claims	69
9.	Pre-Completion	74
10.	Options	78
11.	Completion	80
	Part 1 Sellers' Obligations	81
	Part 2 Purchaser's Obligations	82
	Part 3 Completion Statement	84
	Part 4 Specific Policies to be Used in Preparing the Completion Statement	87
12.	Independent Accountants	90
13.	Interpretation	92

Signatories		104

Agreed Form Documents:

Accounts

Announcement

Completion Power of Attorney

Deed of Accession

Pro Forma Consideration Calculation Spreadsheet

Key Employee Transfer Letters

Management Accounts


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

THIS AGREEMENT is made on 2 June 2021

BETWEEN:

(1)THE PERSONS whose names and addresses are set out in Part 1 of Schedule 1 (each an Institutional Seller and together the Institutional Sellers); and

(2)THE PERSONS whose names and addresses are set out in Part 2 of Schedule 1 (each a Senior Manager, together the Senior Managers);

(3)THE PERSONS whose names and addresses are set out in Part 3 of Schedule 1 (each an Other Seller, and together with the Institutional Sellers and the Senior Managers, the Sellers); and

(4)ETSY IRELAND HOLDING UNLIMITED COMPANY (registered number 615705) a company incorporated under the laws of Ireland whose principal office is at 66/67 Great Strand Street, Dublin 1, Ireland (the Purchaser); and

(5)ETSY, INC., a Delaware corporation whose principal office is at 117 Adams Street, Brooklyn, NY 11201, United States of America (the Purchaser’s Parent).

BACKGROUND:

(A)Each Seller is legally and beneficially entitled to sell the Securities set opposite such Seller's name in columns D to K of the ‘Dali Payout Model’ sheet of the Pro Forma Consideration Calculation Spreadsheet and each Seller will, immediately prior to Completion, be entitled to sell the number of Ordinary Shares set out in column AL of the ‘Dali Payout Model’ sheet of the Pro Forma Consideration Calculation Spreadsheet.

(B)The Sellers wish to sell and the Purchaser wishes to purchase all of the issued Securities in the Company as at Completion, comprising the Securities set opposite each Seller’s name in column AL of the ‘Dali Payout Model’ sheet of the Pro Forma Consideration Calculation Spreadsheet free from any Encumbrance and together with all rights attaching to them including the right to receive all distributions and dividends declared, paid, made or accruing from the HSR Satisfaction Date (as defined herein), on the terms and subject to the conditions set out in this agreement.

(C)The Purchaser's Parent is the ultimate holding company of the Purchaser and will guarantee the performance by the Purchaser of its obligations set out in this agreement.

IT IS AGREED as follows:

1.INTERPRETATION

1.1 In addition to terms defined elsewhere in this agreement, the definitions and other provisions in Schedule 13 apply throughout this agreement, unless the contrary intention appears.

1.2 In this agreement, unless the contrary intention appears, a reference to a clause, subclause or schedule is a reference to a clause, subclause or schedule of or to this agreement. The schedules form part of this agreement.

1.3 The headings in this agreement do not affect its interpretation.


			1


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

2. SALE AND PURCHASE

2.1Subject to the Conditions being satisfied and on the terms of this agreement each of the Sellers shall sell and the Purchaser shall purchase the full legal and beneficial ownership in the Securities set opposite such Seller's name in column AL of the ‘Dali Payout Model’ sheet of the Pro Forma Consideration Calculation Spreadsheet, in each case with full title guarantee, free from all Encumbrances and together with all rights attaching to them as at the time of Completion.

2.2The consideration for the sale of the Securities shall be determined in accordance with Clauses 5, 6 and Schedule 12.

2.3 Each Seller:

(a)covenants (in respect of his, her or its holding of Securities only) with the Purchaser that he, she or it has (and will have at Completion) the right to sell and transfer to the Purchaser the full legal and beneficial interest in the Securities held by him, her or it at Completion including those set opposite such Seller's name in column AL of the ‘Dali Payout Model’ sheet of the Pro Forma Consideration Calculation Spreadsheet, on the terms set out in this agreement; and

(b)waives (and shall procure the waiver by its nominee(s) of) all rights of pre-emption (and any other rights which may otherwise operate to restrict delay or otherwise hinder transfer) which he, she or it (or such nominee(s)) may have (whether under the Company's constitutional documents, shareholders’ agreement or otherwise), including any rights created after the date of this agreement and on or before Completion, in respect of the transfer to the Purchaser or its nominee(s) of the Securities or any of them on the terms set out in this agreement.

2.4The Purchaser shall not be obliged to complete the purchase of any of the Securities unless the Sellers complete the sale of all the Securities simultaneously, but completion of the purchase of some of the Securities will not affect the rights of the Purchaser with respect to the purchase of the others.

2.5Until but excluding the date falling 10 days prior to Completion, the Senior Managers shall use their respective reasonable endeavours to procure that each person that is or will be a beneficial owner of Securities as at the time of Completion (other than the original parties to this agreement) has executed and delivered to the Company a Deed of Accession, whereby that person becomes a party to this agreement in the capacity of an Other Seller in relation to all of the Securities beneficially owned by him, her or it at the time of Completion. Upon the execution and delivery to the Company of each Deed of Accession, the acceding party shall be bound by, and shall have the benefit of, this agreement in the capacity of a Seller with effect from the date upon which such Deed of Accession has been executed and delivered to the Company.

2.6If, by the date falling 10 days prior to Completion, a person that is or will be a beneficial owner of Securities as at the time of Completion (other than the original parties to this agreement and any person that has executed and delivered to the Company a Deed of Accession) has failed to execute and deliver to the Company a Deed of Accession, the Sellers shall immediately invoke, and shall comply in full with the provisions of, article 11 of the Articles, including by procuring the delivery by the Company to that person of a Compulsory Purchase Notice in a form reasonably satisfactory to the Purchaser, so as to cause to be transferred to the Purchaser, at Completion, all of the issued Securities beneficially owned by that person as at the time of Completion. Nothing in this


			2


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

agreement shall prevent the Sellers or the Company from delivery a Compulsory Purchase Notice in a form reasonably satisfactory to the Purchaser or from invoking and from complying in full with the provisions of article 11 of the Articles at any time, so as to cause to be transferred to the Purchaser, at Completion, all of the Securities beneficially owned by those persons that are not original parties to this agreement.

2.7The relevant Other Sellers and the Institutional Sellers shall submit to the Company an irrevocable request for the conversion for each of the Preferred Shares and B Shares held by each of them respectively to be converted into and re-designated as Ordinary Shares, in accordance with article 3.2 of the Articles, and with such conversion and re-designation to automatically take place immediately prior to Completion.

2.8The Senior Managers will procure that the Securities resulting from the exercise of any of their Options set out in columns J to L (vested EMI), O (vested non-qualifying) and M to N (vested CSOP) of Part 4 of Schedule 1 are delivered to the Purchaser on Completion with full title guarantee and free from all Encumbrances; and to the extent necessary or desirable, each of the Institutional Sellers shall exercise its rights as a shareholder of the Company to give effect to this Clause 2.8.

2.9The provisions of Schedule 10 will apply in respect of the Options, and the parties will cooperate in good faith from the date of this agreement in order to ensure that such provisions are put into effect. The Senior Managers will exercise their respective rights as shareholders and, as appropriate, officers of the Company to procure that the Company and/or the board of directors of the Company (as appropriate), takes all of the actions required to be taken by the Company under Schedule 10. The Purchaser’s Parent will exercise its rights as shareholder of the Purchaser to procure that the Purchaser takes all of the actions required to be taken by the Purchaser under Schedule 10.

2.10The Purchaser hereby makes an offer to the holders of Securities, on the bona fide arm’s length terms and subject to the Conditions of this agreement, to acquire all of their respective Securities.

3. CONDITION PRECEDENT

3.1The sale and purchase of the Securities is conditional on:

(a)all applicable filings having been made under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations made thereunder (the HSR Act) and all applicable waiting periods (including any extensions thereof) under the HSR Act having expired, lapsed or been terminated as appropriate, in each case in connection with the proposed acquisition of the Securities by the Purchaser or any matter arising from or relating to that proposed acquisition (the HSR Condition); and

(b)either:

(i)following submission of a CMA Briefing Paper:

(A) the CMA communicating to the Purchaser that it has no further questions in respect of the proposed acquisition of the Securities by the Purchaser; and

(B) the CMA not having: (I) requested submission of a Merger Notice; or (II) given notice to either party that it is commencing a Phase 1 Investigation; or (III) indicated that the statutory review period in which the CMA has to decide whether


			3


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

to make a reference under Section 34ZA of the Enterprise Act 2002 (as amended) has begun; or (IV) requested documents or attendance by witness under Section 109 of the Enterprise Act 2002 (as amended), which may indicate it is considering commencing the aforementioned review period; or

(ii)the CMA deciding, following a Phase 1 Investigation, that it does not intend to make a Phase 2 Reference

(3.1(b), the CMA Condition and together with the HSR Condition, the Conditions).

3.2Subject to Clause 3.3 below, the Purchaser shall, and shall procure that each other member of the Purchaser’s Group shall, use their best endeavours, respectively, to procure that the Conditions are satisfied as soon as practicable after the date of this agreement and in any event on or before the date falling nine months after the date of this agreement, or such other date as the Purchaser and the Seller Representatives may agree in writing (the Long Stop Date), including by making all filings required to be made by it in connection with the satisfaction of the Conditions, in consultation with the Sellers (subject to clause 3.7), as soon as reasonably possible and practicable, taking into account any waiting periods and statutory expiration of such waiting periods, approvals, consents, clearances and decisions referenced in Clause 3.1 and shall notify the Seller Representatives in writing promptly and in any event within two Business Days after any of the Conditions has been fulfilled.

3.3Notwithstanding the provisions of Clause 3.2 above, nothing in this agreement shall mean the Purchaser or any member of the Purchaser’s Group is obliged to offer, accept or agree to any conditions, obligations or undertakings to secure the satisfaction of the Conditions that would require the sale, divestiture, license or other disposition of any assets or businesses or, after Completion, other action in each case that would be adverse to the Purchaser Group or the Company.

3.4Without prejudice to the generality of the provisions of Clause 3.2, the Purchaser shall file, and the Senior Managers will exercise their respective rights as shareholders and, as appropriate officers of the Company, to procure that the Company shall file: (i) as promptly as possible, and in any event within 10 Business Days after the date of this agreement, any Notification and Report Forms and related material required to be filed with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the HSR Act with respect to the proposed acquisition of the Securities by the Purchaser or any matter arising from or relating to that proposed acquisition; and (ii) as promptly as possible, and in any event within 5 Business Days after the date of this agreement, the CMA Briefing Paper with the CMA.

3.5Until Completion, the Senior Managers shall (so far as concerns themselves), and shall use all reasonable endeavours to exercise their respective rights as shareholders and, as appropriate, officers of the Company, to procure that the Company shall (so far as concerns the Company), in each case subject to Clause 3.6:

(a)cooperate with the Purchaser in connection with providing, or procuring the provision of, all information, documents or assistance reasonably required for any filing or submission


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made to any regulatory authority (each a Regulatory Authority) for the purpose of procuring fulfilment of any Condition;

(b)respond as promptly as practicable to any request from any Regulatory Authority for information, documents or other materials in connection with any filing or submission made for the purpose of procuring fulfilment of any Condition;

(c)promptly notify the Purchaser of any material written or oral communication with or from any Regulatory Authority in connection with any filing or submission made for the purpose of procuring fulfilment of any Condition (in the case of written communications, providing the Purchaser with copies thereof and in the case of oral communications, a written summary thereof) and, when reasonably practicable, provide the Purchaser with the opportunity to review and comment in advance, and take into account any of the Purchaser’s substantive comments as are reasonable in connection with any material written or oral submission proposed to be made to any Regulatory Authority in connection with any filing or submission made for the purpose of procuring fulfilment of any Condition, and, when reasonably practicable, provide the Purchaser (or, where appropriate, the Purchaser’s counsel) with the opportunity to participate in any meetings or hearings (including, for the avoidance of doubt, that take place by electronic means) in relation to any such filing or submission, in each case as permitted by the HSR Act, the Enterprise Act 2002 (as amended) or any other applicable law;

(d)permit or make available its representatives (or, where appropriate, his, her or its counsel) to attend meetings or hearings (including, for the avoidance of doubt, that take place by electronic means) and participate in substantive discussions with any Regulatory Authority for the purpose of procuring fulfilment of any Condition; and

(e)promptly notify the Purchaser of any development which in his, her or its good faith opinion would be likely to frustrate, or delay the fulfilment of, the Conditions.

3.6Without prejudice to the generality of the provisions of Clause 3.2, the Purchaser shall not, and shall procure that its affiliates shall not, enter into any transaction, or any contract or other agreement, whether oral or written, to effect any transaction (including any merger or acquisition) that could reasonably be expected to make it more difficult, or to increase the time required, to procure fulfilment of the Conditions.

3.7Without prejudice to the generality of the provisions of Clause 3.2, the Purchaser shall, and shall procure that each other member of the Purchaser’s Group shall:

(a)cooperate with the relevant Sellers and the Company in connection with providing, or procuring the provision of, all information, documents or assistance reasonably required for any filing or submission made to any Regulatory Authority for the purpose of procuring fulfilment of any Condition;

(c)promptly notify the Seller Representatives of any material written or oral communication with or from any Regulatory Authority in connection with any filing or submission made for the purpose of procuring fulfilment of any Condition (in the case of written


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

communications, providing the Seller Representatives with copies thereof and in the case of oral communications, a written summary thereof) and provide the Seller Representatives with sufficient opportunity to review and comment in advance, and take into account any of the Seller Representatives’ substantive comments as are reasonable in connection with, any material written or oral submission to be made to any Regulatory Authority in connection with any filing or submission made for the purpose of procuring fulfilment of the Conditions, and, when reasonably practicable, provide the Seller Representatives (or, where appropriate, the Seller Representatives’ counsel) with the opportunity to participate in any meetings or hearings (including, for the avoidance of doubt, that take place by electronic means) in relation to any such filing or submission, in each case as permitted by the HSR Act, the Enterprise Act 2002 (as amended) or any other applicable law;

(d)unless requested to do so by the Federal Trade Commission and the Antitrust Division of the United States Department of Justice, not “pull and refile” any filing made under the HSR Act, or otherwise enter into any agreement with any Regulatory Authority to extend the time of the regulatory review, without prior written consent of the Seller Representatives, such consent not to be unreasonably withheld, conditioned or delayed; and

(e)promptly notify the Seller Representatives of any development which in its good faith opinion would be likely to frustrate, or delay the fulfilment of, any Condition.

3.8In the event that any information or document to be provided to the Purchaser or to any Regulatory Authority pursuant to the preceding sub-Clauses 3.5(a) to 3.7(e) contains (in the opinion of the relevant Seller or the Company (as applicable), acting reasonably) commercially sensitive information or business secrets of that Seller or of the Company, the parties shall make customary arrangements for the provision of such information or documents to the Purchaser’s external counsel on an external counsel-only basis, together, if requested, with redacted versions of the same that exclude any commercially sensitive information or business secrets.

3.9If either of the Conditions becomes incapable of satisfaction on or before the Long Stop Date, then by written notice to the Purchaser or the Seller Representatives (as applicable) either the Purchaser or the Sellers may elect to terminate this agreement and the provisions of Clause 3.11 shall apply.

3.10If the Conditions have not been satisfied or waived, in accordance with Clause 3.2, by (and including) the Long Stop Date, this agreement will terminate and the provisions of Clause 3.11 shall apply.

3.11If this agreement is terminated in accordance with Clauses 3.9 or 3.10:

(a)except for this Clause 3.11, Clauses 1, 15, 16, 19, 20, 21, 22.2, 22.3, 22.4, 22.5, 22.6, 22.7, 23, 24 and 26 and the provisions of Schedule 13 (the Surviving Provisions), all the provisions of this agreement shall lapse and cease to have effect; but

(b)neither the lapsing of those provisions nor their ceasing to have effect shall affect any accrued rights or liabilities of any party in respect of any breach or non-performance of


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any obligation under this agreement falling due for performance prior to such lapse and cessation.

4. COMPLETION

4.1Completion shall take place at the offices of the Purchaser's UK Solicitors at 9.00 a.m. on the fifth Business Day after the Unconditional Date, unless the Unconditional Date falls more than three Business Days prior to 1 July 2021 in which case Completion shall take place on 1 July 2021 (or at such other place, at such other time and/or on such other date as the Seller Representatives and the Purchaser may agree).

4.2The provisions of Schedule 9 (Pre-Completion) shall apply.

4.3At Completion:

(a)the Sellers shall observe and perform the provisions of Part 1 of Schedule 11; and

(b)the Purchaser shall observe and perform the provisions of Part 2 of Schedule 11.

4.4All documents and items delivered at Completion pursuant to Clauses 4.3(a), 4.3(b) and Schedule 11 shall be held by the recipient to the order of the person delivering the same until such time as Completion shall be deemed to have taken place. Simultaneously with:

(a)delivery of all documents and items and completion of all actions required to be delivered or completed at Completion in accordance with Clauses 4.3(a), 4.3(b) and Schedule 11 (or waiver of the delivery of it by the person entitled to receive the relevant document or item); and

(b)payment by the Purchaser of an electronic funds transfer of the Initial Cash Consideration in accordance with Clause 5.3 and Part 2 of Schedule 11,

the documents and items delivered in accordance with Clauses 4.3(a), 4.3(b) and Schedule 11 shall cease to be held to the order of the person delivering them and Completion shall be deemed to have taken place.

4.5The date on which Completion is required to take place in accordance with Clause 4.1 is referred to in this agreement as the Scheduled Completion Date and such expression shall include any later date set for Completion in accordance with Clause 4.6.

4.6If for any reason the Sellers (or any of them) or the Purchaser (as the case may be, the Defaulting Party) fails to comply with any of its or their respective obligations under Clauses 4.1 and 4.3 and Schedule 11 (whether or not such failure by the Defaulting Party would amount to a repudiatory breach), the Purchaser (if the Sellers (or any of them) are the Defaulting Party), or the Seller Representatives (if the Purchaser is the Defaulting Party) (as the case may be, the Non-Defaulting Party) may elect (in addition and without prejudice to all other rights and remedies available to them) by notice to the Defaulting Party:

(a)to complete the sale and purchase of the Securities so far as practicable (without limiting its other rights and remedies);

(b)subject to Completion having first been deferred for a period of at least 5 Business Days pursuant to Clause 4.6(c) below and the parties having used reasonable endeavours to


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effect Completion during such period, to terminate this agreement, in which case the provisions of Clause 4.8 shall apply; or

(c)or to fix a new time and date for Completion (being not more than 20 Business Days after the Scheduled Completion Date or any later date set for Completion in accordance with this Clause), in which case the provisions of Clause 4.4 and Schedule 11 shall apply to Completion as so postponed.

4.7If the Defaulting Party is the Sellers (or any of them) the notice referred to at Clause 4.6(c) shall be issued by the Purchaser to the Seller Representatives.

4.8If the Non-Defaulting Party elects to terminate this agreement under Clause 4.6(b):

(a)except for this Clause 4.8 and the Surviving Provisions, all the provisions of this agreement shall lapse and cease to have effect; and

(b)neither the lapsing of those provisions nor their ceasing to have effect shall affect any accrued rights or liabilities of any party in respect of any breach or non-performance of any obligation under this agreement falling due for performance prior to such lapse and cessation.

4.9Schedule 6 (Tax Covenant) shall have effect from Completion.

5. INITIAL CONSIDERATION

5.1The aggregate consideration for the Securities shall be an amount equal to the Aggregate Consideration (subject to adjustment as provided in this agreement).

5.2At Completion, the Purchaser shall, in accordance with Clause 5.3, pay to the Sellers (or, in respect of the Optionholder Consideration, the Company on behalf of the relevant Optionholders) an amount equal to $1,625,000,000,

(a)less the Estimated Net Debt;

(b)less the Estimated Transaction Expenses; and

(c)either:

(i)if the Estimated Working Capital is greater (or less negative) than the Target Working Capital, plus the absolute amount equal to the amount by which the Estimated Working Capital is greater (or less negative) than the Target Working Capital; or

(ii)if the Estimated Working Capital is less (or more negative) than the Target Working Capital, less the absolute amount equal to the amount by which the Estimated Working Capital is less (or more negative) than the Target Working Capital; and

(d)less $10,000,000 (the Holdback Amount),

(such amount (a) to (d), the Initial Consideration).


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

5.3Subject to Clause 7, the Initial Consideration shall be satisfied by the payment of cash at Completion apportioned to the Sellers as set out in the ‘Dali Payout Model’ tab of the Final Consideration Calculation Spreadsheet.

5.4Each Senior Manager agrees to the deferred payment of a proportion of the Initial Consideration to which he or she is otherwise entitled at Completion, pursuant to this agreement, in accordance with Clause 7.

5.5Not less than three Business Days before the Scheduled Completion Date, the Seller Representatives shall:

(a)give notice to the Purchaser of the Estimated Net Debt, the Estimated Working Capital; and

(b)give notice to the Purchaser of the Estimated Transaction Expenses.

5.6The Senior Managers shall, in preparing the Estimated Net Debt, Estimated Working Capital and Estimated Transaction Expenses, acting in good faith use reasonable endeavours to supply the Purchaser and the Purchaser’s advisers with such explanations and information as the Purchaser may reasonably request in order to understand , and provide comments with respect to, the amount of Estimated Net Debt, the Estimated Working Capital and the Estimated Transaction Expenses, in accordance with Clause 5.5 and the Senior Managers shall consider in good faith any comments made by the Purchaser in finalising such figures.

5.7Not less than three Business Days before the Scheduled Completion Date, the Seller Representatives shall provide the Purchaser with a final schedule (the Final Consideration Calculation Spreadsheet), in the form of the Pro Forma Consideration Calculation Spreadsheet setting out:

(a)the proportion of the Initial Cash Consideration each Seller is entitled to at Completion;

(b)the Initial Cash Consideration to be paid to each Seller subject to any applicable deductions or withholdings in respect of Tax and social security contributions, and the aggregate exercise price payable in respect of any Options held by him, her or it (as applicable) under the cashless exercise facility as set out in Schedule 10;

(c)the value at the date of grant of all Etsy RSUs granted or to be granted under Schedule 10 in respect of:

(i)unvested options granted on or before the date of this agreement under the CSOP and the EMI Plan;

(ii)Options granted after the date of this agreement; and

(iii)Promised Options that have not yet been granted; and

(d)the Per Share Initial Consideration payable to each of the Sellers,

in each case applying the same principles used in the Pro Forma Consideration Calculation Spreadsheet.


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5.8At Completion, each Optionholder Seller hereby irrevocably and unconditionally authorises and directs:

(a)the Purchaser to withhold from the portion of the Initial Consideration payable to them an amount equal to their respective Optionholder Consideration, and to pay such amount to the Company on their behalf; and

(b)the Company to withhold from the Optionholder Consideration paid to it on their behalf in accordance with Clause 5.8(a) an amount equal to:

(i)the aggregate exercise price in respect of any Options being exercised in accordance with Schedule 10, being in full and final settlement of the Optionholders’ obligation to pay to the Company under the terms of their respective Options any amounts by way of exercise price; and

(ii)where applicable (and strictly in accordance with Schedule 10), any income tax and social security obligations (including, where legally permissible, in respect of employer’s National Insurance contributions) arising on the exercise of any Options in relation to which the requirements of Schedule 5 or Schedule 4 to ITEPA 2003 are not met, and to pay an amount equal to such income tax and social security obligations to the relevant Tax Authority.

5.9As soon as is practicable after Completion the Purchaser shall procure that the Company pay to:

(a)each Optionholder Seller their Optionholder Consideration less any deductions made pursuant to Clause 5.8; and

(b)the relevant Tax Authority within any relevant time limits any income tax and social security obligations deducted pursuant to Clause 5.8.


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

6. ADJUSTMENT TO INITIAL CONSIDERATION

6.1After Completion, the Completion Statement shall be prepared, and agreed or determined, in accordance with Schedule 12.

6.2The Aggregate Consideration shall be determined once the Completion Statement has been agreed or determined in accordance with Schedule 12, as follows:

(a)if the Actual Net Debt exceeds the Estimated Net Debt, the Initial Consideration shall be reduced by the amount by which the Actual Net Debt exceeds the Estimated Net Debt;

(b)if the Actual Net Debt is less than the Estimated Net Debt, the Initial Consideration shall be increased by the amount by which the Actual Net Debt is less than the Estimated Net Debt;

(c)if the Adjustment Actual Working Capital is less than the Adjustment Estimated Working Capital, the Initial Consideration shall be reduced by the amount by which the Adjustment Actual Working Capital is less than the Adjustment Estimated Working Capital;

(d)if the Adjustment Actual Working Capital exceeds the Adjustment Estimated Working Capital, the Initial Consideration shall be increased by the amount by which the Adjustment Actual Working Capital exceeds the Adjustment Estimated Working Capital;

(e)if the Actual Transaction Expenses are less than the Estimated Transaction Expenses, the Initial Consideration shall be increased by the amount by which the Actual Transaction Expenses are less the Estimated Transaction Expenses; and

(f)if the Actual Transaction Expenses exceed the Estimated Transaction Expenses, the Initial Consideration shall be reduced by the amount by which the Actual Transaction Expenses exceed the Estimated Transaction Expenses.

6.3If as a result of such an adjustment:

(a)the Aggregate Consideration (so adjusted) is greater than the sum of the Initial Consideration and the Holdback Amount, then the Purchaser shall make a payment to the Sellers of an amount equal to the sum of: (i) the Holdback Amount: and (ii) the lower of: (X) the amount by which the Aggregate Consideration (so adjusted) is greater than the sum of the Initial Consideration and the Holdback Amount; and (Y) the Holdback Amount, and in respect of such payment each Seller shall be entitled to the percentage of that amount set against its name in the Final Consideration Calculation Spreadsheet; or

(b)the Aggregate Consideration (so adjusted) is equal to the sum of the Initial Consideration and the Holdback Amount, then the Purchaser shall make a payment to the Sellers of an amount equal to the Holdback Amount, and in respect of such payment each Seller shall be entitled to the percentage of that amount set against its name in the Final Consideration Calculation Spreadsheet; or

(c)the Aggregate Consideration (so adjusted) is greater than the Initial Consideration but less than the sum of the Initial Consideration and the Holdback Amount, then the Purchaser shall make a payment to the Sellers of an amount equal to the amount by which the Aggregate Consideration (so adjusted) is greater than the Initial Consideration but less


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than the sum of the Initial Consideration and the Holdback Amount, and in respect of such payment each Seller shall be entitled to the proportion of that amount set against its name in the Final Consideration Calculation Spreadsheet; or

(d)the Aggregate Consideration (so adjusted) is equal to or less than the Initial Consideration, then no payment hereunder shall be required.

6.4Any payment under Clause 6.3 shall be made within five Business Days following the day on which the Completion Statement is agreed or determined in accordance with Schedule 12, by electronic funds transfer to the client account of the Sellers’ Solicitors.

7. DEFERRED CONSIDERATION

7.1In consideration for the transactions contemplated by this agreement, each Senior Manager severally agrees to the deferred payment of a proportion of the Initial Consideration to which he or she is otherwise entitled pursuant to this agreement, in accordance with this Clause 7.

7.2Deferred Consideration Amount means, in respect of:

(a)[***], an amount equal to 33% of [***] Post-Tax Consideration;

(b)[***], an amount equal to 25% of [***] Post-Tax Consideration;

(c)[***], an amount equal to 25% of [***] Post-Tax Consideration;

(d)[***], an amount equal to 25% of [***] Post-Tax Consideration;

(e)[***], an amount equal to 25% of [***] Post-Tax Consideration; and

(f)[***], an amount equal to 25% of [***] Post-Tax Considerations.

7.3Subject to the provisions of Clauses 7.7, and 7.9, each Senior Manager hereby agrees that his or her Deferred Consideration Amount will be held back from his or her portion of the Initial Consideration payable on Completion and applied by the Purchaser on his or her behalf to fund the issuance of new Etsy Shares to such Senior Manager at the prevailing Issue Price on the relevant Deferred Payment Date (the Deferred Consideration Etsy Shares) (with any fractional entitlement to a Deferred Consideration Etsy Share being cashed out) within 3 Business Days of the relevant Deferred Payment Date in the following proportions:


Deferred Payment Date			Proportion of Deferred Consideration Amount to be paid
First anniversary of Completion			33 1/3 %
18 months after the date of Completion			16 ⅔ %
Second anniversary of Completion			16 ⅔ %
30 months after the date of Completion			16 ⅔ %
Third anniversary of Completion			16 ⅔ %

7.4If: (i) the Etsy Shares trade ex dividend at any point during the period for calculating the Issue Price, or subsequently, but before the date of issuance of the relevant Deferred Consideration Etsy


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Shares; and (ii) the Deferred Consideration Etsy Shares, when issued, will not be entitled to participate in the relevant dividend, then, in addition to issuing the relevant number of Deferred Consideration Etsy Shares, the Purchaser’s Parent shall pay to the relevant Senior Manager an amount in cash equal to the amount of the dividend that would have been payable with respect to the Deferred Consideration Etsy Shares issued to him or her, had they been entitled to participate in the relevant dividend.

7.5The Deferred Consideration Etsy Shares issued in accordance with Clause 7.3 or Clause 7.8 shall be validly issued, fully paid and non-assessable, and free and clear of all Encumbrances (other than those arising under this agreement, applicable to securities laws or the Purchaser’s Parent’s Organizational Documents). The Deferred Consideration Etsy Shares delivered in accordance with Clause 7.3 or Clause 7.8 shall be freely transferable under U.S. federal securities laws or validly registered under U.S. federal securities laws, so as to permit transfer of the Deferred Consideration Etsy Shares on an unrestricted basis from the date of their issuance or delivery and will be issued without any legend or restriction on transfer.

7.6If and when issued, the Deferred Consideration Etsy Shares shall rank pari passu with the existing Etsy Shares, including the right to receive all dividends declared with a record date on or after the their date of issue.

7.7The parties agree and acknowledge that if at any time during the three years from Completion (the Determination Period) a Senior Manager becomes a Leaver for Cause, the Purchaser and the Purchaser’s Parent shall immediately and without notice, cease to have an obligation to pay, and the relevant Senior Manager shall cease to have a right to receive, any Deferred Consideration Amount payable to him or her pursuant to this agreement which accrues on or after at the date that such Senior Manager becomes a Leaver for Cause.

7.8The parties agree and acknowledge that if at any time during the Determination Period a Senior Manager becomes a Leaver for Good Reason, the Purchaser shall, within three Business Days following the date on which the Purchaser’s Parent receives notice that such Senior Manager is a Leaver for Good Reason (the Good Leaver Payment Date), procure that new Etsy Shares are issued to such Senior Manager (at the prevailing Issue Price on the Good Leaver Payment Date) equal in value to that part of the Deferred Consideration Amount payable to such Senior Manager pursuant to this agreement that has not already been applied to fund the issuance of Deferred Consideration Etsy Shares in accordance with this Clause 7. Such issue shall be in full satisfaction and discharge of the payment obligations of the Purchaser in respect of the Deferred Consideration Amount payable to such Senior Manager pursuant to this agreement.

7.9If (i) a Change of Control occurs in relation to the Purchaser’s Parent; or (ii) Etsy Shares cease to be admitted to trading on at least one U.S. national securities exchange; or (iii) it is or becomes unlawful or impossible for any reason for the Deferred Consideration Etsy Shares to be issued in accordance with this Clause 7; (iv) the Deferred Consideration Etsy Shares to be issued on the applicable Deferred Payment Date would result in the aggregate Deferred Consideration Etsy Shares issuable under this Clause 7 to exceed 19.9% of Purchaser Parent's common stock outstanding (within the meaning of Section 5635 of the Nasdaq listing rules) or otherwise cause the issuance to violate the applicable listing rules of Nasdaq or any other exchange on which the shares of Purchaser Parent may then be listed; or (v) Deferred Consideration Etsy Shares are required to be, but have not been, issued in accordance with this Clause 7, then, in relation to each Senior Manager, the Deferred Consideration Amount (to the extent not already applied to fund the


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issuance of Deferred Consideration Etsy Shares in accordance with this Clause 7) shall become immediately due and payable in cash.

7.10The parties acknowledge and agree that the Deferred Consideration Amount is payable solely in consideration for the sale of the Senior Managers’ Shares in accordance with this agreement.

7.11Each Senior Manager warrants that he or she: (i) is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act; (ii) is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities including, to the extent applicable, the Deferred Consideration Etsy Shares; (iii) with the assistance of such Senior Manager’s own professional advisors, to the extent that such Senior Manager has deemed appropriate, has made his or her own legal, tax, accounting and financial evaluation of the merits and risks of an investment in the Deferred Consideration Etsy Shares and has considered the suitability of the Deferred Consideration Etsy Shares as an investment in light of his or her own circumstances and financial condition and such Senior Manager is able to bear the risks associated with an investment in the Deferred Consideration Etsy Shares; (iv) is acquiring, if and when issued, the Deferred Consideration Etsy Shares for his or her own account, not as a nominee or agent, for investment only, and not with a view to the resale or distribution thereof, and with no present intention of selling, granting any participation in, or otherwise distributing any of such shares; (v) does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer, grant participations in or distribute to such person or to any third person such shares; and (vi) will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any such shares except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder. Each Senior Manager understands that his or her acquisition of the Deferred Consideration Etsy Shares, as applicable, will not be registered under the Securities Act, or registered or qualified under any state securities laws in reliance on specific exemptions therefrom, which exemptions depend upon, among other things, the bona fide nature of such Senior Manager’s investment intent and accuracy of such Senior Manager’s representations as expressed herein. Each Senior Manager understands that the Deferred Consideration Etsy Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, and such Deferred Consideration Etsy Shares


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may not be resold without registration under the Securities Act and qualification by state authorities, or if an exemption from such registration and qualification requirements is available.

7.12This Clause 7 shall be binding on, and enure to the benefit of, the parties to this agreement and their respective personal representatives, successors and permitted assigns, and references to any party shall include that party’s personal representatives, successors and permitted assigns.

8. SENIOR MANAGER LOANS

8.1At Completion, each Senior Manager Borrower shall pay to the Purchaser (on behalf of the Company) an amount equal to the Senior Manager Loan Amount.

8.2Each of the Senior Manager Borrowers hereby severally agrees to set off their respective Senior Manager Loan Amount against the amount payable by the Purchaser to that Senior Manager Borrower at Completion.

9. LOCKED BOX

9.1Each of the Sellers (in respect of itself only) severally covenants to the Purchaser that in the period (if any) from the HSR Satisfaction Date up to and including the date of Completion:

(a)neither it, nor any of its affiliates or any other person connected with it, will receive or benefit from any amount of Leakage; and

(b)no arrangement or agreement will be made or entered into that will result in it, any of its affiliates or any other person connected with it, receiving any Leakage,

provided that references to persons connected with a Seller in this Clause 9.1 and Clause 9.2 shall also include, if a person is a partner of or investor, shareholder or unit holder in that Seller or a connected person of that Seller and a payment is made to such person in such capacity, that person to the extent of and in relation to that payment.

9.2In the event of any Leakage which is prohibited by Clause 9.1, and subject to Completion having occurred, the relevant Seller severally covenants to the Purchaser to pay to the Purchaser (or to its order) on demand by the Purchaser an amount in cash equal to (without double counting) the aggregate of the amount or value of such Leakage received by it, its affiliate or by any persons connected with it or in respect of which it or any person connected with it has benefited.

9.3The liability of the Sellers pursuant to Clause 9.1 shall terminate on the date falling 6 months after Completion unless prior to such date the Purchaser has notified the Sellers of a claim in relation to breach by the Sellers of the undertaking set out in Clause 9.1, setting out the amount of such Leakage together with reasonable evidence thereof (provided that, in respect of Taxation on Leakage, the Purchaser shall be required only to set out a reasonable estimate of the amount of such Taxation on Leakage), in which case, in relation to any relevant breaches notified, the Sellers shall remain liable until any relevant claims in respect of this Clause 9 have been satisfied, settled or withdrawn; and provided that the liability of the Seller in respect of any such claim shall terminate unless proceedings in respect of that claim have been commenced by being both properly issued and validly served within 6 months after Completion.

9.4The Sellers shall, in good faith, use reasonable endeavours to procure that all reasonable enquires made by the Purchaser and the Purchaser’s Advisers in respect of the accounting records of the Group for the period from Completion for the purposes of the Purchaser making its assessment of


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any Leakage pursuant to Clause 9.3 are addressed in a timely manner and shall, where practicable to do so, provide any additional information reasonably requested by the Purchaser in respect of such enquiries; provided, however, that no Seller shall be required to provide any information that is commercially sensitive or legally privileged or in respect of which it owes a duty of confidentiality to a third party.

9.5For all purposes of this agreement:

(a)any Leakage falling within limb (i) of the definition of Leakage shall be the responsibility of those Sellers that are liable in respect of the underlying Leakage in paragraphs (a) to (h) of the definition of Leakage that gave rise to such Leakage; and

(b)any Leakage falling under limb (g) of the definition of Leakage, to the extent not actually received by or benefiting any particular Seller or its affiliates or persons connected with it, shall be the responsibility of all of the Sellers pro rata to the Aggregate Consideration received by each of them under this Agreement.

9.6A claim by the Purchaser under Clause 9.2 shall be the Purchaser’s sole remedy in respect of any breach of Clause 9.1 and/or any matter or thing constituting Leakage.

9.7If, before Completion, a Seller’s liability under Clause 9.2 in respect of the occurrence of any Leakage is quantified and has been agreed in writing between that Seller and the Purchaser for the purpose of (and specifically referring to) this Clause 9.7, then (and only then) shall the amount of that Leakage so agreed in writing be set off against the Initial Consideration payable to that Seller at Completion and the Seller’s liability under Clause 9.2 in respect of that occurrence of Leakage shall accordingly be discharged to that extent.

10. GUARANTEES AND INDEMNITIES

10.1Each Seller shall, so far as it is reasonably able by the exercise of its rights as a shareholder and/or director or officer of the Company severally procure that on Completion each Group Company is released from all guarantees and indemnities given by that Group Company in respect of any liability or obligation of that Seller or any person connected with that Seller.

10.2The Purchaser shall use reasonable endeavours to procure that as from Completion each Seller is released from all guarantees and indemnities which have been given by that Seller in respect of any liability or obligation of any Group Company and of which full and accurate particulars are set out in the Disclosure Letter, and pending such release the Purchaser shall indemnify that Seller against all liabilities under those guarantees and indemnities.

11. SELLERS’ WARRANTIES

11.1Each Seller severally warrants to the Purchaser (in respect of himself, herself or itself only) that, subject to the other provisions of this Clause 11 (as applicable), each of the Fundamental Warranties is as at the date of this agreement, and will immediately before Completion (by reference to the facts and circumstances then subsisting) be true, accurate and not misleading.

11.2Each Senior Manager severally warrants to the Purchaser that, to the best of his or her knowledge, information and belief and subject to the other provisions of this Clause 11 (as applicable):

(a)each of the Fundamental Business Warranties is as at the date of this agreement, and will immediately before Completion (by reference to the facts and circumstances then


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

subsisting and on the basis that any express or implied reference in any such Fundamental Business Warranty to “the date of this agreement” is to be considered as a reference to the time immediately before Completion), be true and accurate and not misleading; and

(b)each of the Business Warranties and Tax Warranties is as at the date of this agreement true, accurate and not misleading.

11.3For the purpose of Clause 11.2, the knowledge, information and belief of the Senior Managers shall be construed as referring only to the actual knowledge, information and belief of the Senior Managers having made reasonable enquiry of each other and of the Depop Deal Team and no other person’s knowledge, awareness or belief shall be imputed to any Senior Manager.

11.4Each of the Warranties is separate and independent and, except as expressly provided to the contrary in this agreement, is not limited:

(a)by reference to any other Warranty; or

(b)by any other provision of this agreement.

11.5None of the Warranties shall be treated as qualified by any actual, imputed or constructive knowledge on the part of any member of the Purchaser's Group or any agent or adviser of any such member and no such knowledge shall prejudice any Warranty Claim or operate so as to reduce any amount recoverable.

11.6The Senior Managers shall as soon as reasonably practicable (and in any event before Completion) give notice to the Purchaser of any fact, matter or circumstance (a) which becomes known to any of them after the date of this agreement and before Completion or (b) arising after the date of this agreement and before Completion, which such Senior Manager is actually aware results in any of the Fundamental Warranties or Fundamental Business Warranties being untrue or inaccurate as at the date of this agreement or when deemed to be repeated immediately before Completion. Any failure on the part of a Senior Manager to provide any such notice shall not result in any increase in liability of that Senior Manager over and above any liability arising under this agreement. Any notice given under this Clause 11.6 in relation to any matter or circumstance shall not prevent the Purchaser from making any Warranty Claim arising from that matter or circumstance.

11.7The Senior Managers may deliver one supplementary Disclosure Letter to the Purchaser no less than three Business Day before the Scheduled Completion Date, disclosing any facts, matters or circumstances arising between the date of this agreement and the date on which such supplementary Disclosure Letter is delivered that would result in any of the Fundamental Business Warranties being untrue or inaccurate when deemed to be repeated immediately before Completion (by reference to the facts and circumstances then subsisting) (the Supplemental Disclosure Letter).

11.8If before satisfaction of the HSR Condition it comes to the notice of the Purchaser that one or more of the Warranties is as at the date of this agreement (or will, in the case of the Fundamental Business Warranties only, when deemed pursuant to this agreement to be repeated immediately before Completion) be, untrue or inaccurate in any material respect (other than by reason of any fact, matter or circumstance that has been Disclosed as at the date of this agreement), such that:

(a)notwithstanding the provisions of Schedule 8 (except paragraphs 1.1(a), 1.1(c), 1.2 and 8 of Schedule 8), the damages recoverable by the Purchaser from the relevant Sellers in


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respect of that breach (together with all other breaches arising from the same or substantially similar facts, matters or circumstances) would exceed $200,000,000; and

(b)the facts, matters or circumstances giving rise to that breach have had a Material Adverse Effect on the financial condition or business of the Group taken as a whole (as presently carried on),

and such breach is not capable of remedy, the Purchaser may terminate this agreement, by giving notice in writing to the Seller Representatives; provided, however, that the termination right hereunder may not be exercised after the HSR Satisfaction Date.

11.9If the Purchaser elects, under Clause 11.8, to terminate this agreement:

(a)the Purchaser’s right to terminate the agreement shall be the Purchaser’s sole remedy in relation to the relevant matter or circumstance and the Purchaser shall have no claim against any Seller (and the Sellers shall have no liability to the Purchaser) arising out of or in connection with this agreement or any other Transaction Document;

except for this Clause 11.9 and the Surviving Provisions, all the provisions of this agreement shall lapse and cease to have effect.

11.10If the Purchaser (or after Completion, any of the Group Companies) becomes aware of any fact, matter or circumstance that could reasonably be expected to give rise to any Warranty Claim, the Purchaser shall give notice to the Seller Representatives specifying the fact, matter or circumstance giving rise to that potential Warranty Claim in reasonable detail (to the extent known), the Purchaser’s good faith estimate of the amount of that Warranty Claim, and such other facts as the Purchaser deems necessary, as soon as reasonably practicable after it becomes aware of that potential Warranty Claim. Any failure by the Purchaser to give notice as contemplated by this sub-Clause shall not, for the avoidance of doubt, prevent the Purchaser from making any Warranty Claim except as expressly provided in paragraph 3 of Schedule 8.

11.11The Warranties, any Warranty Claim and any Tax Covenant Claim shall be subject to the limitations and other provisions set out in Schedule 8.

11.12Nothing in the Disclosure Letter, or Supplemental Disclosure Letter (if applicable) shall qualify or limit the liability of the Sellers in relation to any of the Fundamental Warranties.

11.13Nothing in Schedule 8 or the Disclosure Letter shall qualify or limit the liability of a Seller in relation to that Seller’s own fraud, dishonesty or wilful concealment.

11.14Clause 11.12 and 11.13 apply notwithstanding Clause 11.11.

11.15Without prejudice to the Purchaser’s rights under Schedule 6 (Tax Covenant), the Purchaser confirms to the Sellers that, apart from the information Disclosed, it is not aware of a breach of any Warranty as at the date of this agreement. For the purpose of this Clause, the awareness of


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the Purchaser shall be construed as referring only to the actual awareness of the Purchaser’s Deal Team and no other person’s knowledge, awareness or belief shall be imputed to the Purchaser.

12. PURCHASER’S WARRANTIES AND UNDERTAKINGS

12.1Each of the Purchaser and the Purchaser’s Parent warrants (in respect of itself only) to the Sellers that each of the following statements is true, accurate and not misleading as at the date of this agreement and that they will be true, accurate and not misleading at Completion:

(a)it is acting as principal in relation to the Transaction and not as agent or broker for, or in concert with, any other person;

(b)it is a corporation validly existing under the laws of its jurisdiction of incorporation and has been in continuous existence since its incorporation;

(c)it has the power to execute and deliver this agreement, and each of the other Transaction Documents to which it is or will be a party, and to perform its obligations under each of them and has taken all action necessary to authorise such execution and delivery and the performance of such obligations;

(d)this agreement constitutes, and each of the other Transaction Documents to which it is or will be a party will, when executed, constitute, legal, valid and binding obligations of it in accordance with their respective terms;

(e)the execution and delivery by it of this agreement and of each of the Transaction Documents to which it is or will be a party and the performance of its obligations under each of them do not conflict with or constitute a default under any provisions of its constitutional documents or corporate documents;

(f)save for those required to satisfy the Conditions, all authorisations from, and notices or filings with, any Government Agency that are necessary to enable it to execute, deliver and perform its obligations under this agreement and each of the other Transaction Documents to which it is or will be a party have been obtained or made (as the case may be) and are in full force and effect and all conditions of each such authorisation have been complied with;

(g) it is not insolvent (within the meaning of the Insolvency Act 1986) or unable to pay its debts and has not stopped paying its debts as they fall due and is not subject to any insolvency or similar proceedings in any jurisdiction.

12.2Without prejudice to Clause 23, the Purchaser undertakes to the Seller Representatives (for the benefit of the Institutional Sellers, the Senior Managers, each Group Company and each officer and employee of each Group Company) that (in the absence of fraud, dishonesty or wilful concealment on the part of that person) it:

(a)has no rights against; and

(b)will not make any claim against,

any employee or officer of a Group Company on whom it may have relied before agreeing to any term of, or entering into, this agreement or any other Transaction Document. This Clause 12.2


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may be enforced by any employee or officer of a Group Company against the Purchaser under the Contracts (Rights of Third Parties) Act 1999. The provisions of this Clause 12.2 may be varied, waived or terminated by agreement in writing between the Seller Representatives and the Purchaser without the consent of any employee or officer of a Group Company.

13. POST-COMPLETION

Protective Covenants

13.1Each Senior Manager covenants with the Purchaser and each Group Company that he, she or it shall not:

(a)for a period of three years after Completion be concerned in any business carrying on business in competition with any of the businesses carried on by the Company at Completion; or

(b)for a period of three years after Completion and except on behalf of a Group Company, act in competition with the Company, canvass or solicit orders for goods of a similar type to those being manufactured or dealt in or for services similar to those being provided by any Group Company at Completion from any person who is at Completion or has been at any time within the year prior to Completion a customer of a Group Company; or

(c)for a period of three years after Completion:

(i)solicit or entice, or attempt to solicit or entice, any person who is at Completion a Key Employee of a Group Company to leave the employment of that Group Company; or

(ii)employ or attempt to employ any person who is at Completion a Key Employee of a Group Company;

(d)for a period of three years after Completion induce or attempt to induce any person, who is at Completion or has been at any time within the year prior to Completion a supplier of goods or services to a Group Company, to cease to supply, or to restrict or vary the terms of supply, to that Group Company; or

(e)for a period of three years after Completion and except for and on behalf of a Group Company, make use of or (except as required by law or any competent regulatory body) disclose or divulge to any third party any information of a secret or confidential nature relating to, or to the business or affairs of, any Group Company, which shall include information concerning customer details, prices and quantities; or

(f)after Completion and except for and on behalf of a Group Company, use or (insofar as it can reasonably do so) allow to be used (except by the Group Companies) any trade name


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used by a Group Company at Completion or any other name intended or likely to be confused with such a trade name.

13.2For the purposes of this Clause:

(a)a person is concerned in a business if he, she or it carries on the business as principal or agent or if:

(i)he, she or it is a partner, director, employee, consultant or agent in, of or to any person who carries on the business; or

(ii)he, she or it has any direct or indirect financial interest (as shareholder or otherwise) in any person who carries on the business; or

(iii)he, she or it is a partner, director, employee, consultant or agent in, of or to any person who has a direct or indirect financial interest (as shareholder or otherwise) in any person who carries on the business,

disregarding any financial interest of a person in securities which are held for investment purposes only or are listed or traded on any generally recognised market if that person, the Senior Managers and any person connected with that person or any Senior Manager (the Investors) are together interested in securities which amount to less than 5% of the issued securities of that class and which, in all circumstances, carry less than 5% of the voting rights (if any) attaching to the issued securities of that class, and provided that none of the Investors is involved in the management of the business of the issuer of the relevant securities or of any person connected with it otherwise than by the exercise of voting rights attaching to securities; and

(b)references to the Company or a Group Company include its successors in business.

13.3Each of the restrictions in each paragraph or sub-Clause above shall be enforceable independently of each of the others and its validity shall not be affected if any of the others is invalid.

13.4If any of those restrictions is void but would be valid if some part of the restriction were deleted, the restriction in question shall apply with such modification as may be necessary to make it valid.

13.5The Senior Managers acknowledge that the above provisions of this Clause are no more extensive than is reasonable to protect the Purchaser as the purchaser of the Securities.

13.6The covenants in this Clause may with the prior written consent of the Purchaser be enforced by any Group Company against the Senior Managers under the Contracts (Rights of Third Parties) Act 1999. The provisions of this Clause may be varied or terminated by agreement between the Senior Managers and the Purchaser (and the Purchaser may also release or compromise in whole


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or in part any liability in respect of rights or claims contemplated by this Clause) without the consent of any Group Company.

14. BOOKS AND RECORDS

14.1For a period of six years from Completion or, in the case of books and records relating to Taxation and if longer than six years, until the expiry of the applicable statutory limitation period for each matter to which the relevant books and records relate:

(a)the Purchaser shall, and shall procure that each Group Company shall, preserve all books and records held by it and relating to the period before Completion; and

(b)the Purchaser shall make available to the Sellers the books and records of the Group Companies to the extent they relate to the period before Completion and which are reasonably required by a Seller or any member of that Seller’s Group for legal, regulatory, Taxation, financial reporting, accounting or other reasonably appropriate purposes. Such access to these books and records shall be granted upon reasonable written notice by the Sellers to the Purchaser and, subject to there being no material disruption to the business of the Group Company, the Purchaser shall procure that such books and records are made available to the Sellers for inspection (during working hours) and, where reasonably required for the purpose of dealing with such affairs, copying (at the Sellers’ expense).

15. GUARANTEE AND INDEMNITY

15.1In consideration of each Seller entering into this agreement, the Purchaser’s Parent:

(a)guarantees to each Seller the due and punctual performance, observance and discharge by the Purchaser of all the Guaranteed Obligations if and when they become performable or due;

(b)agrees that if the Purchaser defaults in the payment when due of any amount that is a Guaranteed Obligation the Purchaser’s Parent shall, immediately on demand by the relevant Seller, pay that amount to the Seller in the manner prescribed by this agreement (or (as the case may be) any agreement entered into pursuant to or in connection with it) as if it were the Purchaser; and

(c)as a separate and independent obligation, agrees as principal debtor and primary obligor to indemnify the Sellers against all losses and damages sustained by it or them flowing arising or resulting from any non-payment, non-performance or default of any kind by the Purchaser in respect of the Guaranteed Obligations, or any of the Guaranteed Obligations not being recoverable for any reason (other than as provided for in the Transaction Documents).

15.2The guarantee in this Clause 15 is and shall at all times be a continuing security and shall cover the ultimate balance from time to time payable by the Purchaser to the relevant Seller in respect of the Guaranteed Obligations, irrespective of any intermediate payment or discharge in full or in part of the Guaranteed Obligations.

15.3The liability of the Purchaser’s Parent under the guarantee in this Clause 15 shall not be reduced, discharged or otherwise adversely affected by:


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(a)any act, omission, matter or thing which would have discharged or affected the liability of the Purchaser’s Parent had it been a principal obligor instead of a guarantor or indemnifier; or

(b)anything done or omitted by any person which, but for this provision, might operate or exonerate or discharge the Purchaser’s Parent or otherwise reduce or extinguish its liability under the guarantee in this Clause 15.

15.4The Purchaser’s Parent waives any right it may have to require the relevant Seller (or any trustee or agent on its behalf) to proceed against or enforce any other right or claim for payment against any person before claiming from the Purchaser’s Parent under this Clause 15.

15.5Until all of the Guaranteed Obligations have been irrevocably paid and discharged in full, and unless the relevant Seller otherwise directs in writing, the Purchaser’s Parent shall not exercise any security or other rights it may have by reason of performing its obligations under this Clause 15, whether such rights arise by way of set-off, counterclaim, subrogation, indemnity or otherwise.

15.6The guarantee in this Clause 15 shall be in addition to and independent of all other security which the relevant Seller may hold from time to time in respect of the discharge and performance of the Guaranteed Obligations.

16. ANNOUNCEMENTS AND CONFIDENTIALITY

16.1Subject to Clauses 16.3 and 16.4, each Seller shall (and shall procure that each member of such Seller’s Group, if applicable), and, in respect of the period up to Completion, exercising their rights as a shareholder, director or employee, procure that each Group Company, and each such person's advisers and connected persons, shall) and the Purchaser shall (and shall procure that each member of the Purchaser's Group, and, in respect of the period from Completion, each Group Company, and each such person's advisers and connected persons, shall):

(a)not make any announcement concerning the sale and purchase of the Securities; and

(b)keep confidential the provisions and subject matter of, and the negotiations relating to, each Transaction Document.

16.2The provisions of Clause 16.1 shall apply before, on and after Completion.

16.3Nothing in Clause 16.1 prevents any announcement being made or any confidential information being disclosed:

(a)where such announcement is in the Agreed Form or the confidential information disclosed comprises only information set out in an announcement in the Agreed Form; or

(b)with the written approval of the Purchaser and the Seller Representatives, which in the case of any announcement shall not be unreasonably withheld or unreasonably delayed; or

(c)to the extent required by law, any court of competent jurisdiction, any Tax Authority or any competent regulatory body or the rules of any stock exchange on which securities of a Seller or any member of that Seller’s Group are listed or admitted to trading, but if a person is so required to make any announcement or to disclose any confidential information, the relevant party shall promptly notify the other parties, where practicable


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

and lawful to do so, before the announcement is made or disclosure occurs (as the case may be) and shall co-operate with the other parties regarding the timing and content of such announcement or disclosure (as the case may be) or any action which the other parties may reasonably elect to take to challenge the validity of such requirement.

16.4Nothing in Clause 16.1 prevents any confidential information being disclosed to the extent:

(a)required to enable any person to enforce its rights under any Transaction Document or for the purpose of any judicial proceedings;

(b)that the information is disclosed on a strictly confidential basis by a person to its professional advisers, auditors, insurers or bankers and, in the case of the Purchaser to any provider of finance or potential provider of finance to the Purchaser’s Group or any person connected with the Purchaser, to a potential acquirer of securities issued by a member of the Purchaser’s Group, or to a security trustee or agent acting on behalf of one or several banks or other financial institutions which have entered into, or may enter into, any financing agreements with the Purchaser;

(c)that the information is disclosed by a Seller on a strictly confidential and need to know basis to another member of such Seller's Group or by the Purchaser on a strictly confidential and need to know basis to another member of the Purchaser's Group;

(d)required for the purposes of managing the Tax affairs of either (i) any Seller or its Group, or (ii) the Purchaser, the Company or the Purchaser’s Group;

(e)that, in the case of an Institutional Seller, disclosure is made to an existing investor or bona fide potential investor, directly or indirectly, in that Institutional Seller or in any entity, fund or account that is managed, advised or operated: (x) by that Institutional Seller or an affiliate of that Institutional Seller; or (y) by the same person that is the manager, adviser or operator of or to that Institutional Seller, or any affiliate of any such person; on the basis that such person has entered into a confidentiality arrangement in respect of such confidential information that is no less stringent than an Institutional Seller would put in place in respect of its own confidential information; or

(f)that the information is in or comes into the public domain other than in breach of this Clause 16.

16.5With effect from the date of this agreement, the confidentiality agreement dated 10 February 2021 between the Company and the Purchaser’s Parent (the “NDA”) shall be terminated and the Purchaser’s Parent shall be released from its obligations under that agreement; provided, however, that if Completion does not occur and this agreement is terminated, then the provisions of clauses 1, 2, 3. 5.2, 6 and 7 of the NDA shall be deemed to be reinstated on the date of such termination and shall continue in full force and effect in accordance with their terms.

17. NOTICES

17.1Any notice or other communication to be given under this agreement must be in writing (which does include email but does not include any other Electronic Communication) and must be


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

delivered or sent by post and email to the party to whom it is to be given at its address appearing in this agreement as follows:

(a)to the Seller Representatives at the address specified against their or its relevant name in this agreement: with a copy to:

Jonathan Wood of Weil, Gotshal & Manges (London) LLP

email: jonathan.wood@weil.com

(b)to the Purchaser at:

66/67 Great Strand Street, Dublin 1, Ireland

email: ***

with a copy to: Etsy, Inc, 117 Adams St, Brooklyn, NY 11201, United States, marked for the attention of the Chief Legal Officer

with a copy to: William.Samengo-Turner@AllenOvery.com and kmyers@fenwick.com

(c)to the Purchaser’s Parent at:

117 Adams St, Brooklyn, NY 11201, United States

email: ***,

marked for the attention of the Chief Legal Officer,

with a copy to: William.Samengo-Turner@AllenOvery.com and kmyers@fenwick.com

or at any such other address or email address of which it shall have given notice for this purpose to the other parties under this Clause 17.1. Any notice or other communication sent by post shall be sent by prepaid recorded delivery post.


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

17.2Any notice or other communication shall be deemed to have been given:

(a)if delivered, on the date of delivery; or

(b)if sent by email, on the first to occur of:

(i)receipt by the send of an email acknowledgment from the recipient’s information system showing that the notice has been delivered to the stated email address;

(ii)the time that the notice enters an information system which is under the control of the recipient; and

(iii)the time that the notice is first opened or read by an employee or officer of the recipient;

provided that in each case where deliver occurs after 6.00 p.m. on a Business Day or on a day which is not a Business Day, service shall be deemed to occur at 9.00 a.m. on the next following Business Day.

17.3In proving the giving of a notice or other communication, it shall be sufficient to prove that delivery was made or that the envelope containing the communication was properly addressed and posted by prepaid recorded delivery post or by prepaid airmail, or that the email was properly addressed and transmitted, as the case may be.

17.4This Clause 17 shall not apply in relation to the service of any claim form, notice, order, judgment or other document relating to or in connection with any proceedings, suit or action arising out of or in connection with this agreement.

18. FURTHER ASSURANCES

18.1On or after Completion each party shall, at its own cost and expense, execute and do (or procure to be executed and done by any other necessary party) all such deeds, documents, acts and things as any party may from time to time reasonably require in order to vest any of the Securities in the Purchaser or its assignee or as otherwise may be necessary to give full effect to the Transaction Documents; provided, however, that nothing in this Clause 18 shall require a Seller to assume any obligation or incur any liability (including contingent liability) that is not expressly set out in this agreement or in any other Transaction Document.

18.2In relation to each Group Company, the Sellers shall exercise their respective rights as shareholders and, as appropriate officers of the Company, to procure the convening of all meetings, the giving of all waivers and consents and the passing of all resolutions as are reasonably necessary under statute, its constitutional documents or any agreement or obligation affecting it to give effect to the Transaction Documents.

18.3Each Seller undertakes that it shall at or prior to Completion execute and deliver to the Purchaser a Completion Power of Attorney.

19. ASSIGNMENTS

19.1The Purchaser may assign the benefit of this agreement to any other member of the Purchaser's Group for the time being or to any lender to or holder of debt securities issued by the Purchaser or


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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

any other member of the Purchaser's Group for the time being or any agent of such lender or holder and if it does so:

(a)the assignee may enforce the obligations on the part of the Sellers under this agreement (including the Warranties) as if it had been named in this agreement as the Purchaser;

(b)as between the Sellers and the Purchaser, the Sellers may nevertheless enforce this agreement against the Purchaser as if the assignment had not occurred; and

(c)the assignment shall not in any way operate so as to increase the liability of the Purchaser or the Sellers (or any of them) under or in connection with this agreement; and

(d)if the benefit of this agreement is assigned to another member of the Purchaser's Group for the time being and the assignee ceases to be a member of the Purchaser's Group for the time being, the Purchaser shall procure that the benefit of this agreement is re-assigned to the Purchaser or assigned to another member of the Purchaser's Group for the time being.

19.2Except as permitted by this Clause, none of the rights or obligations under this agreement may be assigned or transferred without the prior written consent of the Seller Representatives and the Purchaser.

20. PAYMENTS

20.1Unless otherwise expressly stated (or as otherwise agreed in the case of a given payment), each payment to be made under this agreement or any other Transaction Documents shall be made in US Dollars by transfer of the relevant amount into the relevant account on the date (and, if applicable, at or before the time) the payment is due for value on that date and in immediately available funds. The relevant account for a given payment is:

(a)if that payment is to an Institutional Seller, such account of the relevant Institutional Seller shall, not less than three Business Days before the date that payment is due, have specified by giving notice to the Purchaser for the purpose of that payment;

(b)if that payment is to a Seller other than an Institutional Seller, the account of the paying agent appointed by such Sellers, details of which shall be provided by the Seller Representatives to the Purchaser not less than three Business Days before the date that payment is due; and

(c) if that payment is to the Purchaser, such account as the Purchaser shall, not less than three Business Days before the date that payment is due, have specified by giving notice to the Seller Representatives for the purpose of that payment.

20.2All sums payable under this agreement shall be paid without any deduction or withholding of any nature, unless expressly permitted by a provision of this agreement or required by law.

20.3Subject to Clause 20.4 below, if any Seller, the Purchaser or the Purchaser’s Parent is required by law to make a deduction or withholding in respect of any sum payable under this agreement, such payor shall (where such deduction or withholding has not already been taken into account in determining the amount thereof), at the same time as the sum which is the subject of the deduction or withholding is payable, make a payment to the payee of such additional amount as shall be


			27


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

required to ensure that the net amount received by the payee will equal the full amount which would have been received by it had no such deduction or withholding been required to be made.

20.4If the Purchaser is required by law to make a deduction or withholding in respect of any part of the consideration payable for the shares under this agreement or any Transaction Document, it shall be entitled to do so and shall only be under an obligation to make an additional payment under Clause 20.3 if the deduction or withholding is a Purchaser-Linked Deduction. For the purposes of this Clause 19.4, a Purchaser-Linked Deduction means any deduction or withholding which arises as a result of a connection of the Purchaser with the jurisdiction imposing it other than such a connection resulting solely from this agreement or any transaction occurring pursuant to this agreement.

20.5The Purchaser shall bear all stamp duties, stamp duty land tax, notarial fees, sales taxes, transfer taxes or other similar Tax payable in connection with the transactions contemplated by this agreement and the Transaction Documents and shall be responsible for arranging the payment of any such Tax.

20.6Each Seller (other than an Institutional Seller) agrees with the Seller Representatives that he, she or it will provide any paying agent appointed to receive and distribute the proceeds of sale, with such information concerning himself, herself or itself as that paying agent may reasonably require to comply with regulatory requirements and/or its internal policies.

21. SELLER REPRESENTATIVES

21.1The Seller Representatives shall be entitled to exercise the powers and authorities expressly conferred on them by this agreement, and the Purchaser shall be entitled to rely absolutely on, and act in accordance with (without any liability to any party for having relied on acted thereon) the exercise of such powers and authorities conferred on the Seller Representatives, as if the relevant Seller is exercising such powers and authorities.

21.2The Seller Representatives shall not be liable to any other Seller for any act or omission in connection with the exercise by the Seller Representatives (in that capacity) of the powers and authorities expressly conferred on them by this agreement, except in the case of his fraud or dishonesty. The Seller Representatives may act upon any instrument or written communication believed by the Seller Representatives to be genuine and to be signed and presented by or on behalf of the proper person(s). Each of the Sellers hereby undertakes to indemnify and keep indemnified and hold harmless the Seller Representatives from all losses, costs, damages, expenses (including professional fees) and any other liabilities that may be incurred by the Seller Representatives (in that capacity) as a result of the exercise by the Seller Representatives of the powers and authorities expressly conferred on them by this agreement provided that the Seller Representatives shall not be entitled to indemnification for and in respect of any matter where his, her or its actions or inactions are fraudulent or dishonest.

21.3The Purchaser shall have no liability whatsoever in respect of any fees, costs, charges or other expenses of or incurred by the Seller Representatives (in that capacity).

22. GENERAL

22.1Each of the obligations, Warranties and undertakings set out in this agreement (excluding any obligation which is fully performed at Completion) shall continue in force (in accordance with its terms) after Completion, and shall not be affected by the waiver of any Condition or any notice given by the Purchaser to the Seller Representatives in respect of any Condition.


			28


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

22.2The Purchaser may release or compromise in whole or in part the liability of any of the Sellers under this agreement or grant any time or indulgence to that Seller without affecting the liability of any other Seller.

22.3Any consent or authority given by the Seller Representative in connection with this agreement, in accordance with the powers and authorities expressly conferred on them by this agreement shall bind all the Sellers.

22.4Except as otherwise expressly provided in this agreement each party shall pay the costs and expenses incurred by it in connection with the entering into and completion of this agreement.

22.5This agreement may be executed in any number of counterparts, all of which, taken together, shall constitute one and the same agreement, and any party (including any duly authorised representative of a party) may enter into this agreement by executing a counterpart.

22.6The rights of each party under this agreement:

(a)may be exercised as often as necessary;

(b)except as otherwise expressly provided in this agreement, are to the full extent permitted by law cumulative and not exclusive of rights and remedies provided by law; and

(c)may be waived only in writing and specifically.

Delay in exercising or non-exercise of any such right is not a waiver of that right.

22.7Except as otherwise expressly stated in this agreement, a person who is not a party to this agreement may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999.

23. WHOLE AGREEMENT

23.1This agreement and the other Transaction Documents contain the whole agreement between the parties relating to the transactions contemplated by the Transaction Documents and supersede all previous agreements, whether oral or in writing, between the parties relating to these transactions. Except as required by statute, no terms shall be implied (whether by custom, usage or otherwise) into this agreement.

23.2Each party:

(a)acknowledges that in agreeing to enter into this agreement and the other Transaction Documents, it has not relied on any express or implied representation, warranty, collateral contract, statement or other assurance (except those set out in this the Transaction Documents) made by or on behalf of any other party before the entering into of this agreement;

(b)agrees that its only remedy in respect of those representations, warranties, statements, assurances and warranties that are set out in this agreement will be for breach of contract


			29


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

(including equitable remedies for breach of contract) in accordance with the terms of this agreement; and

(c)waives all rights and remedies which, but for this Clause 23.2, might otherwise be available to it in respect of any such express or implied representation, warranty, collateral contract or other assurance.

23.3Nothing in this Clause limits or excludes any liability for fraud.

24. GOVERNING LAW

This agreement, and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law. Any dispute, claim, difference or controversy arising out of, relating to or having any connection with this agreement including any dispute as to its existence, validity, interpretation, performance, breach or termination or the consequences of its nullity and any dispute relating to any non-contractual obligations arising out of or in connection with it (a Dispute) shall be governed by and determined in accordance with English law.

25. DISPUTE RESOLUTION

25.1Arbitration

(a)Any Dispute shall be referred to and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (for the purpose of this Clause, the Rules). For the avoidance of doubt, the provisions of Part 3 of Schedule 12 shall apply in


			30


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

lation to any Dispute concerning the preparation or finalisation of the Completion Statement.

(b)The Rules are incorporated by reference into this Clause 25 and capitalised terms used in this Clause 25 which are not otherwise defined in this agreement have the meaning given to them in the Rules.

(c)The number of arbitrators shall be three. The arbitrators nominated by the parties shall jointly nominate the third arbitrator who, subject to confirmation by the Court, will act as president of the arbitral tribunal.

(d)The seat or legal place of arbitration shall be London.

(e)The language used in the arbitral proceedings shall be English.

(f)Service by the Secretariat of any Request for Arbitration made pursuant to this Clause 25 shall be at the address given for the sending of notices under this agreement at Clause 17.

(g)The Emergency Arbitrator Provisions shall not apply.

(h)Nothing in this Clause 24 shall prevent any party from applying at any time to the courts of England and Wales for injunctive or other interim relief.

25.2Service of Process

(a)Each Seller irrevocably appoints the person set opposite that Seller’s name in Schedule 1as its agent in England for service of process.

(b)The Purchaser and the Purchaser’s Parent each irrevocably appoint Etsy UK Ltd of 1 Bartholomew Lane, London, United Kingdom, EC2N 2AX as its agent in England for service of process.

(c)If any person appointed as process agent under this Clause is unable for any reason to so act, the appointing party must immediately appoint another agent.

(d)Each party agrees that failure by a process agent to notify it of any process will not invalidate the relevant proceedings.

(e)This Clause does not affect any other method of service allowed by law.

26. LANGUAGE

The language of this agreement and the transactions envisaged by it is English and all notices to be given in connection with this agreement must be in English. All demands, requests, statements, certificates or other documents or communications to be provided in connection with this agreement and the transactions envisaged by it must be in English or accompanied by a certified English translation; in this case the English translation prevails unless the document or communication is a statutory or other official document or communication.

AS WITNESS this agreement has been signed by the parties (or their duly authorised representatives) on the date stated at the beginning of this agreement.


			31


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Schedule 1

THE SELLERS

Part 1

THE INSTITUTIONAL SELLERS

[***]


			32


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Part 2

THE SENIOR MANAGERS

[***]


			33


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Part 3

THE OTHER SELLERS

[***]


			34


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Part 4

SENIOR MANAGERS’ OPTIONS

[***]


			35


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Schedule 2

THE COMPANY


Company name:			Depop Limited

[***]


			36


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Schedule 3

THE SUBSIDIARIES

[***]


			37


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Schedule 4

[NOT USED]


			38


Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Schedule 5

PROPERTIES

[***]


			39

Schedule 6

TAX COVENANT

1.INTERPRETATION

1.1 In this Schedule:

Accounts Relief means any Relief (other than a right to a repayment of Taxation) which:

(a) has been taken into account in computing (and so reducing) any provision for deferred tax which appears in the Completion Statement or in eliminating such a provision that would otherwise have appeared; or

(b) has been taken into account in the Completion Statement as an asset;

Actual Tax Liability means a liability to make a payment of, or on account of, Taxation;

Deemed Tax Liability means:

(a) the loss, unavailability or cancellation of, or a reduction in the amount of, any Accounts Relief as a result of any Event or Events occurring on or before Completion (except as a result of the use or set off of the relevant Accounts Relief), in which case the amount of the Deemed Tax Liability shall be the amount of Taxation which (on the basis of the rates prevailing on the date of this Schedule) would have been saved if that Accounts Relief were not lost, unavailable, cancelled or reduced and had been fully used or set off; and

(b) the use or set off of any Purchaser's Relief in circumstances where, but for that use or set off, an Actual Tax Liability would have arisen in respect of which the Sellers would have been liable under paragraph 2, disregarding any applicable financial limitations, in which case the amount of the Deemed Tax Liability shall be the amount of the Actual Tax Liability in respect of which the Sellers would have been liable under paragraph 2 but for such use or set off; and

(c) the amount of any repayment of Taxation to a Group Company to the extent that the right to that repayment has been taken into account in the Completion Statement as an asset but is unavailable, lost, reduced or cancelled;

Event means any transaction, event, circumstance, expiry of any time period, act or omission (or any transaction, event, circumstance, expiry of any time period, act or omission deemed to occur for Taxation purposes), and references to an Event or Events occurring on or before Completion shall include an Event or Events deemed for Taxation purposes to occur on or before Completion;

Purchaser's Group means the Purchaser and those companies (other than the Group Companies) which may be treated for relevant Taxation purposes as being, or as having at any time been, either a member of the same group of companies as the Purchaser or otherwise associated with the Purchaser;

Purchaser's Relief means:

(a) Relief arising to a Group Company:

(i) as a result of an Event or Events occurring (or deemed to occur) after Completion; or

(ii) in respect of a period beginning on or after Completion (including, for the avoidance of doubt, tax depreciation arising to any Group Company in any such period as a result of


			40

expenditure incurred before Completion, but excluding any Relief arising as a result of an Event or Events which took place wholly before Completion and that is or are reflected in the Completion Statement);

(b) an Accounts Relief;

(d) a repayment of Taxation which is taken into account in the Completion Statement as an asset;

Relevant Accounting Change means any change after Completion of the date to which the Company makes up its accounts, or in the bases, methods or policies of accounting of the Purchaser or the Company other than a change which is necessary in order to correct a failure before Completion to comply with accounting standards with which a Group Company was required to comply;

Relevant Change of Law means a change in legislation announced after Completion, or a change in the interpretation of legislation on the basis of case law made after Completion (whether relating to Taxation, the rate of Taxation or otherwise) or any amendment to or the withdrawal of any practice previously published by a Taxation Authority, in either case occurring after Completion, whether or not that change, amendment or withdrawal purports to be effective retrospectively in whole or in part;

Relevant Voluntary Act means a voluntary act or omission carried out or effected by the Purchaser or any member of the Purchaser's Group or any Group Company after Completion, excluding any act or omission which:

(a) is in the ordinary course of business as carried on by the relevant Group Company at Completion ; or

(b) is required in order to comply with a legal commitment of the relevant Group Company that existed on or before Completion; or

(c) is required to comply with any law, or any regulatory, financial reporting or accounting practice or requirement that existed on or before Completion; or

(d) is made at the prior written request of the Sellers (including pursuant to its rights under this Schedule); or

(e) could not reasonably have been avoided;

Relief means any loss, allowance, credit, relief, deduction, exemption or set off in respect of, or taken into account, or capable of being taken into account, in the calculation of a liability to, Taxation or any right to a repayment of Taxation;

Sellers' Relief means a Relief arising to a Group Company other than a Purchaser's Relief, excluding (for the avoidance of doubt) any Relief where and to the extent that that Relief is taken into account in computing (and so reducing) any provision or reserve for current Taxation which appears in the Completion Statement or in eliminating any such provision or reserve that would otherwise have appeared in the Completion Statement and in determining whether a Sellers’ Relief is available to reduce or in fact reduces a liability to Taxation, it shall be assumed that the relevant Group Company uses other reliefs in priority to any such Sellers’ Relief;

Tax Claim means:

(a) any notice, enquiry, demand, assessment, determination, letter or other document issued, or other action taken, by or on behalf of a Taxation Authority, from which it appears that the Purchaser or a


			41

Group Company may incur a liability or increased liability to Taxation, or may suffer the unavailability, loss, reduction or cancellation of a Relief; or

(b) any return, amended return, computation or any other documents required for the purposes of Taxation; and

Tax Liability means an Actual Tax Liability or a Deemed Tax Liability.

1.2 In this Schedule, any reference to:

profits includes income, profits or gains of any description and from any source;

profits earned includes profits earned, accrued or received (or treated as, or deemed to be, earned, accrued or received for Taxation purposes);

profits earned on, after or before a certain date or in respect of a certain period includes profits treated as, or deemed to be, earned on, after or before that date or in respect of that period for Taxation purposes;

a numbered paragraph is a reference to the relevant numbered paragraph of this Schedule; and

the date on which an Actual Tax Liability is due refers to the last date on which the relevant payment can be made without any liability for interest or penalties for late payment arising in respect of it.

1.3 In this Schedule, any reference to a numbered paragraph is a reference to the corresponding paragraph of this Schedule.

2. COVENANT

2.1 The Sellers covenant with the Purchaser, subject to the following provisions of this Schedule, to pay to the Purchaser an amount equal to:

(a) any Actual Tax Liability of any Group Company (or of the Purchaser, or member of any Purchaser’s Group, to the extent that the liability relates to any Group Company) which arises:

(i) as a result of any Event or Events occurring on or before Completion (other than an Actual Tax Liability arising in respect of profits earned after Completion as a result of any such Event or Events); or

(ii) in respect of any profits earned accrued or received on or before Completion or in respect of any period ending on or before Completion;

(b) any Actual Tax Liability of the Company or any member of the Purchaser's Group which arises as a result of the acquisition of securities (or an interest in securities) by an employee or former employee, or by any person in connection with the employment of any such employee or former employee by the Company, in each case pursuant to, or in connection with, a right granted, or promise given, on or before Completion;

(d) any Actual Tax Liability of any Group Company or any member of the Purchaser's Group which:

(i) arises as a result of any failure by any Relevant Person to discharge a liability that it has to pay, account for or discharge any Taxation; or


			42

(ii) arises directly or primarily in consequence of or by reference to anything done by a Relevant Person,

and in each case would not have arisen but for: (A) the relationship, on or at any time before Completion, of the Company with, or the membership by any Group Company of the same group for VAT purposes at any time as, that Relevant Person, or (B) the acquisition of any asset by the Company from, that Relevant Person, and for the purposes of this paragraph 2.1(d) Relevant Person means any person, except the a Group Company or a member of the Purchaser's Group; and

(e) any costs or expenses reasonably and properly incurred by the Purchaser or any Group Company in connection with:

(i) any Tax Liability referred to in this paragraph 2.1 (including such costs or expenses so incurred in taking any action to avoid, eliminate, resist or settle any such item); or

(ii) successfully taking any action under this Schedule,

whether or not the Purchaser or any Group Company is or may be entitled to claim reimbursement in respect of the matter from any person and whether or not the liability, cost or expense is or has been discharged.

3. EXCLUSIONS

3.1 The covenants contained in paragraph 2.1 shall not apply to a Tax Liability, and there shall be no claim under the Tax Warranties in respect of that Tax Liability, if and to the extent that:

(a) provision or reserve in respect of the Tax Liability (excluding any provision or reserve made in respect of deferred Taxation) has been made in the Completion Statement; or

(b) the Tax Liability is a liability that was paid or discharged before Completion and such payment or discharge was reflected in the Completion Statement; or

(i) interest, penalties or a fine arising from a failure to discharge an Actual Tax Liability within a reasonable time after the Sellers have made a payment in respect of that Actual Tax Liability under paragraph 4; or

(ii) interest attributable to a period after Completion on, or a penalty or fine incurred after Completion in connection with, an amount to which the covenants contained in paragraph 2 do not apply by virtue of paragraph 3.1(a); or

(d) the Tax Liability would not have arisen but for a Relevant Change of Law or a Relevant Accounting Change; or

(e) the Tax Liability would not have arisen but for a Relevant Voluntary Act, in circumstances where any member of the Purchaser's Group or the Company knew or ought reasonably to have known that the Relevant Voluntary Act would give rise to the Tax Liability; or

(f) the Tax Liability is an Actual Tax Liability and any Seller's Relief is available to reduce or eliminate and in fact reduces or eliminates a cash tax payment required to be made in respect of that Actual Tax Liability;

(g) the Tax Liability has been made good without cost to any member of the Purchaser's Group or the Company (including, but not limited to, under clause 9 of this agreement); or


			43

(h) the Tax Liability arises as a result of the failure or omission of a Group Company or any member of the Purchaser's Group to make any valid claim, election, surrender or disclaimer, to give any valid notice or consent or to do any other thing under any enactment or regulation relating to Taxation after Completion where the making, giving or doing of that claim, election, surrender, disclaimer, notice, consent or other thing was taken into account in computing the provisions for Taxation in the Completion Statement except where this occurs as a result of a legal requirement or at the request of any Seller; or

(i) the Tax Liability arises as a result of any claim, election, surrender, revocation, amendment, withdrawal or disclaimer made or notice or consent given after Completion by a Group Company or any member of the Purchaser's Group under any enactment or regulation relating to Taxation other than any claim, election, surrender, revocation, amendment, withdrawal, disclaimer, notice or consent:

(i) which is assumed to have been made, given or done in computing the amount of any allowance, provision or reserve in the Completion Statement; or

(ii) which the relevant Group Company was legally committed to make, to give or to do under a commitment that existed on or before Completion; or

(j) the Tax Liability arises in the ordinary course of business of the relevant Group Company between the HSR Satisfaction Date and Completion; or

(k) the Tax Liability constitutes Permitted Leakage.

3.2 The covenants contained in paragraph 2.1 shall not apply to any cost or expense within paragraph 2.1(e) if and to the extent that, as a result of the exclusions contained in this paragraph 3, those covenants do not apply to the Tax Liability to which that cost or expense relates.

4. PAYMENT

4.1 Subject to paragraph 5, any payment due under paragraph 2 shall be made: (i) within five Business Days after the date on which written demand of the amount due is received by the Sellers from the Purchaser; or (ii) if later, if the payment relates to:

(a) an Actual Tax Liability which has not at the date of that demand become due, on the date five Business Days before the date on which payment is due in respect of that Actual Tax Liability;

(b) a Deemed Tax Liability that is the use or set off of any Purchaser's Relief in circumstances where an Actual Tax Liability would otherwise have arisen, on the date two Business Days before the date on which that Actual Tax Liability would have been due but for the use or set-off of the relevant Purchaser's Relief; and

(c) the unavailability, loss, reduction or cancellation of a right to a repayment of Taxation falling within paragraph (c) of the definition of Deemed Tax Liability, the date on which the repayment would have been made had it not been for that unavailability, loss, reduction or cancellation.

5. NO SELLER LIABILITY

For the avoidance of doubt and notwithstanding anything to the contrary in this agreement, the maximum aggregate liability of the Sellers for any claim brought under paragraph 2 of this Schedule 6 shall not exceed $1.00.


			44

Schedule 7

WARRANTIES

1. GENERAL

1.1 Recitals and schedules

(a) The particulars relating to each Seller set out in the recitals and Schedule 1 to this agreement are true and accurate.

(b) The particulars relating to the Properties set out in Schedule 5 to this agreement are true and accurate.

(c) The particulars relating to the Group Companies set out in Schedule 2 and Schedule 3 are true, accurate and complete in all material respects.

1.2 Constitutional documents, statutory books and returns

(a) The copy of the memorandum and articles of association (or the equivalent constitutional documents) of each Group Company which is Disclosed in the Data Room at folder 6 is accurate and complete in all material respects

(b) The register of members and other statutory books and registers of each Group Company have been properly kept, are accurate and complete in all material respects and no Group Company has received any written notice or allegation that any of them is incorrect or should be rectified.

(c) All returns, particulars and resolutions which a Group Company is required by applicable law to file with or deliver to any Government Agency (including the Registrar of Companies (England and Wales)) under applicable laws have been correctly made up and duly filed or delivered.

(d) Each Group Company is a company validly existing under the laws of its jurisdiction of incorporation and has been in continuous existence since its incorporation.

1.3 Ownership of the Shares

(a) Each Seller is entitled to procure the transfer of the full legal and beneficial ownership in the Securities set out against the name of such Seller in Schedule 1 to the Purchaser, free from any Encumbrance and on the terms and subject to the conditions set out in this agreement.

(b) The Shares, as set out at Schedule 2, constitute the whole of the issued and allotted share capital of the Company and all of the Securities are free from any Encumbrance, fully paid up and have been validly issued in accordance with applicable laws.

(c) The shares, details of which are set out opposite “issued capital” under a Subsidiary’s name in Schedule 3, constitute the entire issued and allotted share capital of each Subsidiary, are legally and beneficially owned by the Company and all such shares are free from any Encumbrance, are fully paid up and have been validly issued in accordance with applicable laws.

(d) No person is presently or in the future entitled to require any Group Company to issue (and no Group Company has issued) any share or loan capital or call for the conversion, registration, sale, transfer or repayment of any share or loan capital or an interest in the capital of the Company under any option, agreement or other arrangement (including conversion rights and rights of pre-emption).


			45

(e) There is no agreement or commitment to give or create any Encumbrance over the Securities and no person has claimed to be entitled to any such Encumbrance.

(f) No Group Company holds any treasury shares.

(g) No Group Company is under any obligation to register any security interest under the Securities Act and nor is any Group Company under any obligation to register any security interest under any other applicable law.

1.4 Subsidiaries, associations and branches

(a) No Group Company holds or beneficially owns or has agreed to acquire any securities of any other company, trust or entity other than another Group Company.

(b) No Group Company has any interest in, or has agreed to acquire, any share capital or other security or interest of any other body corporate other than the Subsidiaries, nor has any interest in or has agreed to become a member of any partnership (whether incorporated or unincorporated) or other unincorporated association, joint venture or consortium (other than recognised trade associations).

1.5 Ownership of assets

(a) At the Accounts Date all the material assets included in the Accounts were owned by the relevant Group Company (other than assets disposed of in the ordinary course of business) and full and accurate particulars of all material fixed assets acquired or agreed to be acquired by any Group Company since the Accounts Date (other than assets acquired in the ordinary course of business) have been Disclosed in the Data Room at folder 4.2.

(b) Except for current assets offered for sale or sold in the ordinary course of trading, no Group Company has, since the Accounts Date disposed of any of the material assets: (i) included in the Accounts or; (ii) acquired or agreed to be acquired since the Accounts Date.

(d) The assets of each Group Company comprise all the assets reasonably necessary for the continuation of its business as carried on at the date of this agreement.

1.6 Compliance with statutes

(a) No Group Company, nor any of the officers, agents or employees of any Group Company (during the course of his or her duties) has in the last six years done or omitted to do anything which is a material contravention of any statute, order, regulation or the like which has resulted or may result in any fine, penalty or other liability or sanction on the part of any Group Company.

(b) Each Group Company complies in all material respects with the terms and conditions of all licences (including statutory licences), authorisations, permits, permissions, accreditations, exemptions, consents or other approvals (Licences) necessary to own and operate its assets and to carry on its business as it does at present, and no circumstances exist which may result in the termination, revocation, suspension or modification of any of those Licences or that may prejudice the renewal of any of them.

1.7 Money laundering laws

Each Group Company is not and has not in the last five years (i) engaged in any activity, practice and/or conduct which would constitute an offence under the laws of any jurisdiction in which the


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Group conducts business that prohibit money laundering (including the UK Proceeds of Crime Act 2002 and the U.S. Money Laundering Control Act of 1986) (collectively, Money Laundering Laws) or (ii) been the subject of any written notification of any actual or pending investigation, action, suit or proceeding by or before any court or Government Agency, or regulatory body involving any Group Company with respect to Money Laundering Laws and no such actions, suits or proceedings are threatened.

1.8 Prohibited payments

(a) In this paragraph Third Parties means consultants, agents, representatives, distributors, contractors, sub-contractors, associates, joint venture partners, local partners or other individuals or entities who perform or have performed services for or on behalf of any Group Company.

(b) No Group Company, nor, any director, officer, employee or Third Party of a Group Company, in each case in his or her capacity as such, has in the last five years (i) violated (or is presently in violation of) any provision of the U.S. Foreign Corrupt Practices Act of 1977 (as amended) and/or the UK Bribery Act 2010 (ABAC Laws), (ii) violated (or is presently in violation of) any applicable anti-bribery and anti-corruption laws or regulations of any jurisdiction in which the Group conducts business, including (whether in connection with or arising from) the OECD Convention Combating Bribery of Foreign Public Officials in International Business Transactions or otherwise; or (iii) made, offered to make, promised to make or authorised the payment or giving of, or requested, agreed to receive or accepted, directly or indirectly, any bribe, influence payment, facilitation payment, kickback or other unlawful payment or gift of money or anything of value prohibited under any applicable law or regulation (being a Prohibited Payment).

(c) The Group has put in place and maintains adequate compliance policies, procedures and systems to detect and prevent any Prohibited Payment and/or violations of ABAC Laws.

(d) No Group Company, nor any director, officer, employee or Third Party of a Group Company has engaged in any activity, practice or conduct (or failure to act) which would constitute an offence under the UK Bribery Act 2010 if such activity, practice or conduct (or failure to act) were carried out in the United Kingdom.

(e) No Group Company, nor any director, officer, employee or Third Party of a Group Company (during the course of his or her duties) is, or has in the last five years been engaged in, or been subject to any litigation, arbitration, settlement, alternative dispute resolution proceedings or proceedings (including criminal proceedings) or investigations (including with or by any Government Agency or regulatory body) with regard to any bribery or corruption issue which may have a material adverse effect on the business of the Group (ABAC Actions). No such ABAC Actions are pending or threatened.

1.9 Sanctions

(a) In this paragraph:

(i) Restricted Person means a person or entity that is (i) listed or referred to on, or owned or majority-controlled by a person or entity listed or referred to on , or acting on behalf of a person or entity listed or referred to on, any Sanctions List; (ii) located in, incorporated under the laws of, or acting on behalf of a person or entity located in or organised under the laws of, any country or territory that is the target of and/or subject to any comprehensive country- or territory-wide Sanctions (being, as at the date of this agreement, the Crimea region, Cuba, Iran, North Korea, Sudan and Syria); or (iii) otherwise a target of Sanctions;

(ii) Sanctions means the economic, financial and trade embargoes and sanctions laws, regulations, rules and/or restrictive measures administered, enacted or enforced from time to time (in each case having


			47

the force of law) by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the United States Department of State, any other U.S. government entity, the United Nations Security Council, any United Nations Security Council Sanctions Committee, the European Union, any Member State of the European Union, the United Kingdom, and Australia, and/or any other applicable government, public or regulatory authority or body (including but not limited to HM Treasury);

(iii) Sanctions List means the "Specially Designated Nationals and Blocked Persons" list maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the Consolidated List of Persons and Entities subject to Financial Sanctions maintained by the European Commission or any similar list maintained by, or public announcement of Sanctions designation made by, the United States Department of State or any other U.S. government entity, the United Nations Security Council, any United Nations Security Council Sanctions Committee, the European Union, any Member State of the European Union, the United Kingdom, and Australia and/or any other applicable government, public or regulatory authority or body (including but not limited to HM Treasury), in each case as amended, substituted or replaced from time to time;

(b) In the last five years, no Group Company nor any of their directors, officers, employees or agents:

(i) has violated (or is presently in violation of) any applicable Sanctions; or

(ii) has been (or is presently considered) a Restricted Person;

(iii) is, or has been, owned (in whole or in part) or controlled (directly or indirectly) by, a Restricted Person; and/or

(iv) has engaged, or is engaging, in any transaction or behaviour which may give rise to a liability under or in connection with applicable Sanctions.

(c) No Group Company, nor any of their directors, officers, employees or agents, has been, in the period of five years prior to the date of this agreement, engaged in or been subject to any litigation, arbitration, settlement, alternative dispute resolution proceedings or proceedings (including criminal proceedings) or investigations (including with or by any Government Agency or regulatory body) (Sanctions Actions) concerning or relating to any Sanctions and/or Restricted Persons. No such Sanctions Actions are pending or threatened.

(d) The Group has in place and maintains adequate compliance policies, procedures and systems to detect and prevent violations of applicable Sanctions and/or prevent it (and/or any of its directors, officers or employees) from being designated and/or listed as a Restricted Person.

(e) None of the assets and/or financial or commercial interests of the Group Companies are, or have been, subject to any freeze, prohibition, restriction or block under or pursuant to any Sanctions.

1.10 Insider contracts

(a) No Group Company is a party to any contract or arrangement in which any of the Sellers or any person connected with any of the Sellers is interested, directly or indirectly, nor has there been any such contract or arrangement at any time during the three years ending on the date of this agreement (in each case, except for such arrangements that have been entered into the ordinary course of business on arm’s length terms).

(b) No Group Company is a party to, nor have the profits or financial position of any Group Company during the three financial periods ended on the Accounts Date been affected by, any contract or arrangement which is not on arm's length terms.


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1.11 Litigation

(a) Save as claimant in proceedings for the collection of debts arising in the ordinary course of business, no Group Company is engaged in any litigation, arbitration or alternative dispute resolution proceedings and there are no such proceedings pending or threatened by or against any Group Company.

(b) There are no facts or circumstances which are likely to give rise to any litigation, arbitration or alternative dispute resolution proceedings by or against any Group Company.

(c) No Group Company is the subject of any investigation, inquiry, enforcement proceedings or process by any governmental or regulatory body nor are there any facts or circumstances which are likely to give rise to any such investigation, inquiry, proceedings or process.

(d) No Group Company has been affected by any existing or pending judgments or rulings, orders or decrees of any court or Government Agency or any expert determination or arbitral award.

1.12 Occupational Health and Safety Matters

(a) In this paragraph:

(i) Occupational, Health and Safety Laws means all or any applicable laws, common laws, statutes, subordinate legislation, regulations, legally binding codes of practice or guidance, European laws, directives, regulations, decisions of the European Court, by-laws, orders, notices, instructions, demands, decrees, injunctions, decisions, resolutions or judgments to the extent applicable to any Group Company, in each case as in force from time to time and having the force of law which has as a purpose or effects the protection of the occupational, health, safety or welfare of any person.

(b) Each Group Company has been for the past five years and is currently in compliance in all material respects with all applicable Occupational, Health and Safety Laws.

(c) No Group Company is aware of or has received any notice or other communication from which it appears that any Group Company has been, is or may be in violation of any Occupational, Health and Safety Law.

(d) The Group has in place and maintains adequate compliance policies, procedures and systems to detect and prevent violations of applicable Occupational, Health and Safety Laws.

1.13 Insolvency

(a) No Group Company is insolvent under the laws of any relevant jurisdiction or unable to pay its debts as they fall due, or has stopped or suspended payment of its debt.

(b) No meeting has been convened at which a resolution is to be proposed, no resolution has been passed, no petition has been presented and no order has been made for the winding up of any Group Company and no provisional liquidator has been appointed to any Group Company.

(c) No Group Company has initiated any negotiations with any creditors regarding composition, compromise, assignment, or arrangement, and no Group Company has, by reason of actual or anticipated financial difficulties, commenced negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

(d) No liquidator, monitor, receiver, administrator, compulsory manager or other similar officer has been appointed in respect of a Group Company, or in respect of the whole or any part of the assets or undertaking of any Group Company.


			49

(e) No administration order has been made, and no petition or application has been presented for such an order in respect of any Group Company.

(g) No voluntary arrangement under section 1 of the Insolvency Act has been proposed or approved in respect of any Group Company and no steps have been taken to obtain a moratorium under schedule A1 of the Insolvency Act in respect of any Group Company.

1.14 Capacity and consequences of sale

(a) Each Institutional Seller is validly existing under the laws of its jurisdiction of incorporation.

(b) Each Seller has the power, and each Institutional Seller has the power, capacity and authority to execute and deliver this agreement and each of the other Transaction Documents to which it is or will be a party and to perform its obligations under each of them and has taken all action necessary to authorise such execution and delivery and the performance of such obligations.

(c) This agreement constitutes and each of the other Transaction Documents to which it is or will be a party will, when executed, constitute legal, valid and binding obligations on such Seller in accordance with their respective terms.

(d) The execution and delivery by each Seller of this agreement and of each of the Transaction Documents to which it is or will be a party and the performance of the obligations of each Seller under each of them do not:

(i) conflict with or constitute a default under any provisions of the constitutional documents or corporate documents of any Seller or any Group Company; or

(ii) result in the creation or imposition of any Encumbrance on any of the Securities.

(e) Other than as contemplated by this agreement, all authorisations from and notices or filings with, any Government Agency that are necessary to enable each Seller to execute, deliver and perform its obligations under this agreement and each of the other Transaction Documents to which it is or will be a party have been obtained or made (as the case may be) and are in full force and effect and all conditions of each such authorisation have been complied with.

(f) No person is entitled to any brokerage, finder's, financial adviser or other similar fee or commission in connection with the transactions contemplated by this agreement, except to the extent that such fees or commissions are payable by a Seller.

2. ACCOUNTS AND FINANCIAL

2.1 Accuracy of Accounts

(a) The Accounts:

(i) have been prepared in accordance with applicable GAAP, the Companies Act 2006 and applicable statutes and regulations; and

(ii) give a true and fair view of the assets and liabilities of the Group as at the Accounts Date and of the profit or loss of the Group for the financial year ended on the Accounts Date.

2.2 Accounting methodology

The Accounts have been prepared, unless otherwise expressly stated therein, on a basis consistent with the basis applied in preparing the Company’s audited accounts for the immediately preceding financial year.


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2.3 Books and records

(a) All accounts, books, ledgers and other financial records of each Group Company:

(i) have been properly maintained and contain accurate records of all matters required to be entered in them by the Companies Act 2006 and all other applicable laws; and

(ii) give a true and fair view of the matters which reasonably ought to appear in them.

2.4 Position since Accounts Date

(a) Since the Accounts Date:

(i) each Group Company has conducted its business in all material respects in the ordinary and usual course, consistent with past practice and without material interruption;

(ii) no Group Company has materially departed from its normal course of trading; and

(iii) there has been no material deterioration in the turnover of the Group taken as a whole.

2.5 Management Accounts

(a) The Management Accounts:

(i) have been prepared with reasonable care, having regard to the purpose for which they have been prepared, on bases consistent with those adopted in the preparation of the Accounts of the Group prepared over the 12 months; and

(ii) are fair and not misleading, having regard to the purpose for which they were drawn up, and do not materially misstate the assets, liabilities of the Group as at the date to which they have been prepared, nor the profit or loss of the Group for the period for which they were prepared.

2.6 Capital commitments

Except in the ordinary course of trading, since the Accounts Date no Group Company has entered into nor agreed to enter into any capital commitments exceeding an aggregate of £50,000.

2.7 Dividends and distributions

(a) No dividend or other distribution of profits or assets has been or agreed to be declared, made or paid by the Company since the Accounts Date.

(b) All dividends or other distributions of profits or assets declared, made or paid in the last three years by each Group Company have been declared, made and paid in accordance with applicable laws and its constitutional documents.

2.8 Continuation of facilities

In relation to each agreement, trust deed, instrument or arrangement under which any Group Company has outstanding any loan capital, has outstanding any money borrowed or raised (including money raised by acceptances or debt factoring) or has any liability (whether present or future, actual or contingent) in respect of any guarantee or indemnity:

(a) full and accurate particulars of it, and a copy of all documents relating to it, are Disclosed in the Data Room at folder 9 and folder 15;


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(b) there has not been any contravention of, or non-compliance with, any of its terms or conditions;

(d) there has not been any alteration to its terms and conditions;

(e) no Group Company has done anything which might affect or prejudice its continuation;

(f) it is not dependent on the guarantee of, or on any security provided by, a third party; and

(g) it is not terminable, and no amount is or may become repayable under it, by reason of the sale of the Securities.

2.9 Derivative transactions

No Group Company has outstanding any obligations in respect of a derivative transaction including any foreign exchange transaction.

2.10 Government grants

During the three years ending on the date of this agreement, no Group Company has been subject to any arrangement for receipt or repayment of any grant, subsidy or financial assistance from any governmental department or other body.

2.11 Loans

(a) No Group Company has lent any money which has not been repaid to it and does not own the benefit of any debt (whether present or future, actual or contingent) other than debts owing to it in the ordinary course of its business.

(b) No Group Company has outstanding any loan capital or any money borrowed or raised (other than normal trade credits in the ordinary course of business).

3. COMMERCIAL

3.1 Material contracts

(a) The Data Room contains true and accurate copies of all Material Contracts to which any Group Company is a party at the date of this agreement.

(b) Each Material Contract is in full force and effect, is valid and binding and there exists no grounds upon which it may be terminated, avoided, rescinded, disclaimed, materially amended or repudiated by any party.

(c) No Group Company has sent or received written notice to (or intention to) avoid, terminate, repudiate, rescind, disclaim or materially amend the terms of a Material Contract in the last 3 years.

(d) No Group Company has received written notice of any claim for material breach of any Material Contract in the last 3 years, and no Group Company is in material breach of any Material Contract to which it is party.

(e) There is no outstanding bid, tender, proposal or offer given or made by any Group Company on or before the date of this agreement which is capable of giving rise to a contract or arrangement which involves expenditure by the Group of £500,000 or more in aggregate in any rolling 12-month period over the term of such contract or arrangement merely by a unilateral act of another person.

3.2 Acquisitions and disposals


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(a) Details of any acquisitions or disposals of any business, shares, or any material asset made in the three year period immediately prior to the date of this agreement with an enterprise value of £500,000 or above (the “Acquisitions” and each an “Acquisition”) by any Group Company (including the acquisition or disposal of any member or former Group Company) together with all material documentation relating thereto are included in the Data Room.

(b) All consideration and deferred, adjustable or contingent consideration in connection with the sale or disposal of any business, shares, or any material asset has been paid and no deferred, adjustable or contingent consideration remains outstanding or may become payable by the Group in respect of any sale or disposal of any business, shares, or any material asset.

(c) No Group Company has any outstanding obligation to acquire or dispose of any business, shares, or any material asset nor any outstanding obligations or responsibilities in relation to any of the Acquisitions.

(d) No fact, matter or circumstance exists which gives, or could reasonably be expected to give, rise to claim against or by a Group Company under any agreement in relation to the Acquisitions.

3.3 Agencies etc.

(a) Except as Disclosed in the Data Room at folder 8, no Group Company is a party to any agency or distributorship agreement or arrangement under which any Group Company is required to pay to the counterparty more than £100,000 (or the local equivalent) in any calendar year or under which the counterparty is required to pay to any Group Company more than £100,000 (or the local equivalent) in any calendar year.

3.4 Anti-competitive arrangements

(a) No Group Company is now, and has not during the last three years been, a party to any agreement or concerted practice or involved in any business conduct which infringes, or is otherwise void or unenforceable in whole or in part pursuant to, any anti-trust or similar legislation in any jurisdiction in which it carries on business or has assets or sales (including, where relevant, Articles 101 and 102 of the Treaty on the Functioning of the European Union and/or the Competition Act 1998 and Section 1 and Section 2 of the U.S. Sherman Act) and has not, pursuant to any such legislation, given any undertaking, applied for negative clearance, exemption, guidance or approval, had an order, notice or direction made against it or received any complaint, civil investigative demand, subpoena request for information or statement of objections from or corresponded with any court, authority or private party.

(b) No Group Company has during the last 10 years been in receipt of any state aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union.

3.5 Confidential information

No Group Company has at any time (except (A) in the normal and proper course of a Group Company's day-to-day business and subject to an obligation of confidentiality or (B) to a Group Company's professional advisers) disclosed to any person other than the Purchaser or the Purchaser's Advisers:

(a) any of the secret or confidential information of any Group Company, including any confidential financial information, plan, statistics, document, file, client list, marketing information, records or papers; or

(b) any other information relating to any Group Company's business or affairs the disclosure of which might reasonably cause material loss or damage to or adversely affect the Group (taken as a whole); or


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3.6 Intellectual property

(a) The operation of the business of each Group Company , including (i) the design, development, manufacturing, reproduction, marketing, licensing, sale, offer for sale, importation, distribution, provision and/or use of any Company Product and/or Technology owned by the Group Company, and (ii) the Group Company’s use of any product, device, process or service used in the business as previously conducted or currently conducted and as proposed to be conducted by the Company has not, and do not infringe or misappropriate any Intellectual Property Right of any third party and in the three year period ended on the date of this agreement, no claim has been made against any Group Company in respect of such infringement or misappropriation.

(b) Full and accurate particulars of all registered Intellectual Property Rights (including applications to register the same) owned by any Group Company are Disclosed in the Data Room at folder 11. Each such Intellectual Property Right is legally and beneficially owned, free from any Encumbrance, solely by the Group Company identified in the particulars as its owner.

(c) Full and accurate particulars of or, in the case of a document, a copy of all material licences and other agreements relating to any Intellectual Property Right to which any Group Company is a party (whether as licensor or licensee) or which relate to any Intellectual Property Right owned by any Group Company, in each case under which any Group Company is required to pay to the counterparty more than £100,000 (or the local equivalent) in any calendar year or under which the counterparty is required to pay to any Group Company more than £100,000 (or the local equivalent) in any calendar year are Disclosed in the Data Room at folder 8. No Group Company is in breach of any such agreement and no third party is in breach of any such agreement.

(d) All the Intellectual Property Rights referred to in sub-paragraph 3.6(b) and all the agreements referred to in sub-paragraph 3.6(c) are valid and subsisting and all registration, maintenance and renewal fees currently due in connection with such Intellectual Property Rights referred to in sub-paragraph 3.6(b) have been paid.

(e) All documents, recordation and certificates in connection with the trademarks of the Company currently required to be filed have been filed with the relevant patent, copyright, trademark or other authorities in the United Kingdom or foreign jurisdictions, as the case may be for the purposes of prosecuting and maintaining the Company’s registered trademarks and recording the Company’s and each Group Company’s ownership interests therein, and nothing has been done or omitted to be done by any third party, which would jeopardise the validity or subsistence of any of such registered trademarks.

(f) Each Group Company owns or has licensed to it all Intellectual Property Rights it uses to carry on its business as such business has been carried on during the three years prior to the date of this agreement. None of such Intellectual Property Rights nor any Group Company's ability to use any of such Intellectual Property Rights will be affected by the acquisition of the Company by the Purchaser.

(g) In the three year period ended on the date of this agreement there has been no unauthorised use by any person of any Intellectual Property Right or confidential information of any Group Company. In the three year period ended on the date of this agreement, no Group Company has made a claim against a third party for infringement or misappropriation of any Intellectual Property Right owned by such Group Company.

(h) No Group Company has granted any options, licenses or agreements of any kind relating to any Intellectual Property Right referred to in subparagraph 3.6(b) above, outside of nonexclusive licenses granted by a Group Company in the ordinary course of business consistent with past practice to contractors (solely for the purposes of receiving the services of such contractors), or on the Group Company’s standard unmodified standard form of end user agreement (a copy of which is available at [***]) Data Room, a copy of which is included in the documents appended to Schedule 3 of the Disclosure Letter.

(i) Each Group Company has secured from all:


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(i) founders, current and former consultants, advisors, employees and independent contractors who independently or jointly contributed to or participated in the conception, reduction to practice, creation or development of any Technology for the Group Company which is material to such Group Company; and

(ii) named inventors of patents and patent applications owned or purported to be owned by the Group Company (any person described in sub-paragraph (i) or (ii), an “Author”),

unencumbered and unrestricted exclusive ownership of, all of the Authors’ right, title and interest in and to such Technology, and the Company has obtained the waiver of all non-assignable rights. The Company has Disclosed in the Data Room at folder 3.4 copies of all forms of such disclosure and assignment documents currently and historically used by each Group Company.

(j) No Group Company has disclosed, delivered or licensed to any person or agreed or obligated itself to disclose, deliver or license to any person, nor has there been any unauthorised or inadvertent disclosure of, any Source Code of any Intellectual Property Rights referred to in subparagraph 3.6(b) or Company Products (the Company Source Code), other than disclosures to employees, contractors and consultants (i) involved in the development of Company Products and (ii) subject to a written confidentiality agreement.

(k) No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time, or both) would reasonably be expected to, result in the disclosure, delivery or license by any Group Company of any Company Source Code, other than disclosures to employees and consultants involved in the development of Company Products. Without limiting the foregoing, neither the execution nor performance of this agreement or any Transaction Document will result in a release from escrow or other delivery to a third party of any Company Source Code.

(l) The Company has Disclosed in the Data Room details of all Open Source Materials used in the company Products and the conduct of the business, describing the manner in which such Open Source Materials were used and identifying the licenses under which such Open Source Materials are used. Each Group Company is in compliance with the terms and conditions of all licenses for the Open Source Materials.

(m) No Group Company has used Open Source Materials, in such a way that, creates, or purports to create, obligations for the Group Company with respect to any Technology owned by such Group Company and material to such Group Company or grant, or purport to grant, to any third party any rights or immunities under any Intellectual Property Rights owned by the Group Company (including using any Open Source Materials that require, as a condition of use, modification and/or distribution of such Open Source Materials that other software incorporated into, derived from or distributed with such Open Source Materials be (A) disclosed or distributed in source code form, (B) be licensed for the purpose of making derivative works or (C) be redistributable at no charge).

3.7 Insurance

(a) To the extent that any Group Company is required, or has at any time before the date of this agreement been required, to be insured against any risk, that Group Company is (or was as the case may be) insured against that risk in the amount required.

(b) A copy of each of the insurance policies effected in whole or in part for the benefit of any Group Company are Disclosed in the Data Room at folder 8.4.

(c) All such insurance policies are currently in full force and effect and nothing has been done or omitted to be done (including any failure to report on a timely basis any matter or circumstance to the insurer concerned) which could make any such policy void or voidable in whole or in part and there is no claim outstanding under any such policy.


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3.8 Records

All material records of each Group Company are recorded, stored, maintained, operated or otherwise held exclusively by one or more Group Company and are not wholly or partly dependent on any facilities or means (including any electronic, mechanical or photographic process, computerised or otherwise) which are not under the exclusive ownership and control of one or more Group Company.

3.9 Data protection

For the purposes of this paragraph, Data Protection Law means all statutes, enacting instruments, common law, regulations, directives, codes of practice, legally binding guidance notes and recommendations, decisions (whether in the United Kingdom, the European Union, the United States (including applicable Federal and state laws), Australia or elsewhere) concerning the protection and/or processing of personal data (which for the purpose of this paragraph, includes personal data as defined under the General Data Protection Regulation (2016/679) ("GDPR") as well as personal information as defined in the Australian Privacy Act 1988 (Cth))..

(a) Each Group Company has complied with all relevant requirements of Data Protection Law, including:

(i) the data protection principles (including (as applicable) maintaining and implementing relevant data protection policies and training programmes);

(ii) the requirement to undertake data protection and privacy impact assessments (as applicable);

(iii) the requirement to report personal data breaches to the UK Information Commissioner, the Office of the Australian Commissioner, or any other supervisory authority in any other jurisdiction and to affected individuals, as the case may be, and has complied with all directions issued by the UK Information Commissioner, the Office of the Australian Commissioner or any other supervisory authority; and

(iv) the requirement, where applicable, to implement appropriate safeguards in relation to international transfers of personal data, and to ensure an equivalent level of protection for that personal data as provided under Data Protection Law.

(b) Each Group Company has put in place a data breach response plan (including maintaining a record of personal data breaches) that enables each Group Company to comply with the related requirements of the Data Protection Law.

(c) Each Group Company has entered into data processing agreements that are compliant with Data Protection Law with all relevant material suppliers or other third parties who receive personal data from the respective Group Company and who process personal data information on the behalf of the respective Group Company. No data processor or Group Company (or any of its suppliers or other third parties) is in breach of any data processing agreement.

(d) Each Group Company has Disclosed all relevant information with regard to its data processing agreements and privacy statements in the Data Room at folders 12 and 21. All personal data processed by each Group Company was collected in accordance with all applicable laws (including Data Protection Law).

(e) No Group Company undertakes any activity involving the making of automated-decisions about individuals, based on the processing of personal data, including profiling.

(f) In the three year period ended on the date of this agreement, no Group Company has received any notice (including any notice of complaint) or allegation from either the UK Information Commissioner, the Office of the Australian Information Commissioner or from any other supervisory authority in any other jurisdiction, a controller or an individual alleging non-compliance with any Data Protection Law, or


			56

requiring a Group Company to cease processing personal data, including any international transfer of personal data or disclosure of personal data, or requiring a Group Company to provide any undertaking to any supervisory authority in any jurisdiction, and if a Group Company has received such notice (including any notice of complaint) or allegation of non-compliance with any Data Protection Law from a supervisory authority, such notice or allegation of non-compliance has been resolved in accordance the directions of the applicable supervisory authority and all applicable Data Protection Laws.

(g) In the three year period ended on the date of this agreement, no individual has claimed or has the right to claim compensation from any Group Company under any Data Protection Law.

(h) There has been no personal data breach affecting any Group Company in the three year period ended on the date of this agreement, including personal data breaches adversely affecting personal data processed by any third party in the provision of services to any Group Company.

3.10 Powers of attorney

No Group Company has granted any power of attorney or similar authority which remains in force (other than any authority to its directors, officers and employees to enter into routine trading contracts in the normal course of their duties).

3.11 Systems compliance

(a) For the purposes of this paragraph, Systems means all the software, hardware, network and telecommunications equipment and internet-related information technology that are material to any Group Company in connection with the operation of its business as currently conducted.

(b) Full and accurate particulars of or, in the case of a document, a copy of all material agreements relating to the Systems to which any Group Company is a party under which any Group Company is required to pay to the counterparty more than £100,000 (or the local equivalent) in any calendar year or under which the counterparty is required to pay to any Group Company more than £100,000 (or the local equivalent) in any calendar year are Disclosed in the Data Room at folder 8. No Group Company nor any third party is in material breach of any such agreement.

(c) A Group Company is the exclusive owner and has direct control of and/or is validly licensed or otherwise authorised to use the Systems. The Systems and each Group Company's ability to use all or any part of the Systems will not be affected by the acquisition of the Group Companies by the Purchaser.

(d) The Systems comprise all computer systems (including computer processors, associated and peripheral equipment, computer programs, systems software and technical and other documentation relating to any computer system) required by any Group Company in the continuance of its business in the ordinary course to the same extent as carried on in the period of three years prior to the date of this agreement.

(e) The Systems have the benefit of the maintenance agreements of which full and accurate particulars of or, in the case of a document, a copy of which is Disclosed in the Data Room at folder 2 and have been maintained in accordance with the manufacturer's instructions. There have been no security breaches, breakdowns, malfunctions, data loss, failures or other defects in the Systems in the three year period ended on the date of this agreement which have had a material adverse effect on the operations of a Group Company.

(f) Full and accurate particulars of or, in the case of a document, a copy of each Group Company's disaster recovery plans and security arrangements are Disclosed in the Data Room at folder 2, and such disaster recovery plans and security arrangements are tested at least once a year, and have been proven to be adequate.

(g) A Group Company has in its possession, or has all necessary rights to obtain, the source code and all related technical and other information required to enable its appropriately skilled employees or those of a third


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party to maintain and support the bespoke software exclusive to the Group Companies comprised in the Systems.

(h) Full and accurate particulars of each Group Company’s websites are Disclosed in the Data Room at folder 11.7. No Group Company has in the three year period ended on the date of this agreement received any written notice that the operation of, or content of, any of its websites fails to comply with any applicable laws.

(i) Each Group Company is either the owner or licensee of the Intellectual Property Rights relating to the design, layout of its websites and all software relating to the operation, functionality and performance of those websites.

3.12 Cybersecurity

(a) For the purposes of this paragraph, Incident means any incident that adversely affects or threatens the security, confidentiality, integrity, or availability of any system, infrastructure, communications network, device or data, including denial of service attacks, infection with malware (including ransomware, spyware, worms, trojans and viruses), hacking, breach of confidence or electronic theft (including in each case by any current or ex-employee), “man in the middle” attacks or similar incidents.

(b) There has been no downtime of any System in the three years immediately preceding the date of this agreement which has had a material adverse effect on the operations of a Group Company, other than for scheduled maintenance in the ordinary course of business.

(c) There has been no Incident materially affecting any System, device or data owned or controlled by any Group Company, or circumstances that may have given rise to an Incident materially affecting any System, device or data owned or controlled by any Group Company, in each case in the three years immediately preceding the date of this agreement.

(d) There has been no Incident affecting any information technology system, device or data used by any third party in the provision of services to any Group Company, in the three years immediately preceding the date of this agreement which has had a material adverse effect on the operations of the Group taken as a whole.

(e) No Group Company is the subject of any investigation, inquiry, enforcement proceedings or process by any governmental, administrative, or regulatory body in relation to any Incident.

(f) No email address of any Group Company has been used (whether successfully or unsuccessfully) by any person in any phishing, spoofing, or pharming scheme or any other scheme involving a third party falsely representing that it is the Group Company.

(g) No Group Company, nor any of the officers, directors, or employees of any Group Company (during the course of their duties), has done or omitted to do anything which is a contravention of any cybersecurity statute, order, regulation or the like which has resulted or may result in any fine, penalty or other liability or sanction on the part of any Group Company.

(h) Each Group Company has disclosed details of all of its policies and procedures applicable to the monitoring, prevention, detection and management of any Incident and no Group Company nor any of the officers, directors, agents or employees of any Group Company (during the course of their duties) has done or omitted to do anything which is a contravention of any of those policies and procedures.

4. TAXATION

4.1 Compliance

(a) Each Group Company:


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(i) has within applicable time limits (or, where relevant, for the requisite periods) submitted all Tax returns to the relevant Tax Authority it is legally required to submit and all such returns are accurate and complete in all material respects;

(ii) has kept and maintained, and has within its possession or control, all records, invoices, information and documentation which: (i) it is required by law to have kept or maintained in relation to Tax; or (ii) which would be required to enable the Tax position of that Group Company to be calculated accurately as at the date of this agreement (including what the Tax consequences for that Group Company would be if it were on the date of this agreement to dispose of or discharge any of its assets or liabilities); or (iii) would be needed to substantiate any claim made or position that it has taken in relation to Tax;

(iii) has complied in all material respects with all written notices served on it by any Tax Authority;

(b) Correct and complete copies of all material Tax returns submitted by each Group Company have been included in the Data Room.

(d) Since the Accounts Date, no event has occurred which has given rise to a liability to Tax for a Group Company or which would have given rise to such a liability but for the availability of any loss, allowance, set-off, repayment, deduction, credit or other relief, other than a liability to Tax arising in the ordinary course of the business of the relevant Group Company.

(e) Each Group Company has paid, and accounted in full for, all Tax for which it has become liable to pay or for which it has become liable to account and which (in each case) has fallen due and has made all withholdings, deductions and retentions in relation to Tax as it has been obliged to make.

(f) No Group Company is or has been liable to pay, and there are no circumstances by reason of which any Group Company is likely to become liable to pay, a penalty, surcharge, fine or interest in connection with Tax, in each case exceeding £1,000.

(g) Each Group Company has made and submitted each claim, disclaimer, election, notice and consent assumed to have been made for the purposes of the Accounts. Each such claim, disclaimer, election, notice or consent was validly made and is not likely to be disputed or withdrawn.

(h) All claims made by any Group Company for any payable tax credit have been validly made and have been paid in full by the relevant Tax Authority.

(i) The amount of Tax chargeable on any Group Company during the statutory limitation period in each relevant jurisdiction has not been affected by any concession, agreement or (formal or informal) arrangement with any Tax Authority, and no Group Company is, pursuant to any arrangement with a Tax Authority, subject to a special regime in respect of Tax, in each case other than a concession, agreement, regime or arrangement available to companies generally or otherwise based on legislation or published practice or concession of a Tax Authority.

(j) No Group Company has entered into: (i) any arrangement with a Tax Authority for the deferred payment of any liability to Tax; (ii) any arrangement with a Tax Authority to waive any statute of limitation in respect of Tax or any extension of time with respect to a Tax assessment or deficiency; (iii) any transaction or arrangement for which consent or clearance was required by law to be obtained from a Tax Authority but such Group Company failed to obtain such consent or clearance; or (iv) any transaction or arrangement for which it obtained a consent or clearance from a Tax Authority but: (A) obtained that consent or clearance on an invalid basis or (B) did not enter into the transaction or arrangement within the terms of that consent or clearance or in the manner disclosed to the Tax Authority.


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(k) No Group Company is, or has in the last six years been, involved in any dispute or non-routine audit or investigation in relation to Tax with a Tax Authority, or is likely to become involved in such a dispute, audit or investigation.

4.2 International

(a) Each Group Company is and has at all times been resident in its country of incorporation for all relevant Tax purposes and is not and has not been treated as resident in any other jurisdiction for any Tax purpose.

(b) No Group Company has or has had any taxable branch, agency or permanent establishment, or is or has been under an obligation to file any Tax return, in each case outside its country of incorporation.

(c) No Group Company is: (i) a ‘controlled foreign corporation’ as defined in section 957 of the Code; or (ii) a ‘passive foreign investment company’ within the meaning of section 1297 of the Code.

4.3 Groups of companies

(a) No Group Company has, or has at any time in the last six years had, any of its Tax affairs dealt with on a consolidated basis or formed a fiscal unity or entered into any Tax allocation or sharing arrangement (including any arrangement under which Tax losses or Tax reliefs are surrendered or claimed or agreed to be surrendered or claimed) in respect of its profits, gains or losses or those of any other company, except as Disclosed in the Data Room at folder 5 (which gives full details of any such arrangement that any Group Company has entered into, including details of: (i) any liability which any Group Company has assumed under the relevant arrangements; and (ii) any actual or contingent obligation or right it has under the relevant arrangements to make or receive any payment in respect of any period commencing (or likely to commence) before Completion).

4.4 Trading Losses

There has been no major change in the nature or conduct of a trade by a Group Company which would cause the disallowance of the carry forward of losses available to a Group Company under sections 673 to 676 or sections 677 to 692 of the CTA 2010 and no claim under the provisions of section 37 of the CTA 2010 (as extended by section 39 of the CTA 2010) has been made for carry back of any losses.

4.5 Secondary liabilities

(a) No Group Company is liable to pay, reimburse or indemnify any person (including a Tax Authority) an amount in respect of a Tax liability which is the primary liability of any other person (or is a joint and several liability and is properly attributable to any other person except another Group Company) and which arose as a result of a transaction, event, act or omission occurring (or deemed for Tax purposes to have occurred) on or before the date of this agreement or by reference to any profits earned on or before the date of this agreement, including any liability for the Taxes of any person under Reg. §1.1502-6 of the United States Treasury Regulations (or any similar provision of state or local law).

(b) No Group Company has entered into any transactions that fall under s.455, s.459, s.460 or s.1064 of CTA 2010.

4.6 Transfer Pricing

(a) No transactions or arrangements involving a Group Company have taken place or are in existence in respect of which the Tax treatment of a Group Company is likely to be adjusted under transfer pricing legislation as a result of such transaction or arrangement (or any provision in respect of such transaction or arrangement) not being on arm’s length terms.


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4.7 Tax avoidance

(a) No Group Company has participated in any transaction, scheme or arrangement where the purposes or a main purpose of such participation was the avoidance or evasion of a liability to Tax.

(b) No Group Company has entered into arrangements which are notifiable to a Tax Authority under Part 7 of the Finance Act 2004 (or similar legislation applying to other Tax, whether of the United Kingdom or elsewhere) and no Group Company is or has been a "promoter" in respect of any "notifiable proposal" or "notifiable arrangements" as such terms are defined in Part 7 of the Finance Act 2004.

(c) The Data Room contains, at folder 5 details of any disclosure made by a Group Company, or, so far as the seller is aware, any intermediary which acts on behalf of it in order to comply with Council Directive 2011/16/EU on administrative cooperation in the field of taxation, as amended from time to time (or any legislation implementing this directive in its jurisdiction of incorporation or any jurisdiction in which it has a permanent establishment) relation to any transaction which the Group Company was a party to.

4.8 Documentary and transfer taxes

All documents which establish or are necessary to prove the rights or title of any Group Company to any of its assets, or in the enforcement of which any Group Company may be interested, have been duly stamped.

4.9 Value Added Tax

(a) Each Group Company is duly registered for the purposes of VAT in its country of incorporation and has prescribed accounting periods. Each Group Company has complied with all statutory provisions, rules, regulations, orders and directions concerning VAT in all relevant jurisdictions (including, for the avoidance of doubt, in any jurisdiction in which such Group Company makes any sales).

(b) No Group Company is or has been treated for VAT purposes as a member of any group of companies (other than a group of which the only members are, and have ever been, Group Companies).

(c) No Group Company has made any exempt supplies and there are no circumstances by reason of which there might not be a full entitlement to credit for all VAT chargeable on supplies and acquisitions received and imports made (or agreed or deemed to be received or made) by it.

(d) No act or transaction has been effected in consequence of which a Group Company is or may be held liable to account in a representative capacity to any Tax Authority for any VAT arising from supplies made by another person.

4.10 Completion

No charge to Tax will arise on any Group Company solely as a result (whether alone or in conjunction with any other event or circumstance) of the entering into and/or the satisfaction of any condition to this agreement and/or to completion of this agreement.

4.11 CFA 2017

Each Group Company has in place such prevention procedures as it is reasonable in all the circumstances to expect it to have in connection with the offences set out in Part 3 of the Criminal Finances Act 2017 (corporate offences of failure to prevent facilitation of tax evasion), taking account of applicable guidance published pursuant to section 47 of that Act.


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4.12 Digital Services Tax

No Group Company has become liable to pay, become liable to account for any amount in respect of, or has become liable to register or file any returns in respect of, Digital Services Tax.

4.13 United States Taxation

(a) No Group Company that is a Subsidiary incorporated in the United States will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after Completion as a result of any:

(i) change in method of accounting for a taxable period ending on or prior to Completion;

(ii) use of an improper method of accounting for a taxable period ending on or prior to Completion;

(iii) “closing agreement” as described in section 7121 of the Code (or any corresponding or similar provision of state, local, or non-U.S. income Tax law) executed on or prior to Completion;

(iv) instalment sale or open transaction disposition made on or prior to Completion;

(v) prepaid amount received on or prior to Completion; or

(vi) election under section 108(i) of the Code.

(b) No Group Company that is a Subsidiary incorporated in the United States has distributed stock, or has had its stock distributed, in a transaction that was purported or intended to be governed in whole or in part by sections 355 or 361 of the Code.

(c) No Group Company that is a Subsidiary incorporated in the United States is or has been a party to any “reportable transaction,” as defined in section 6707A(c)(1) of the Code and section 1.6011-4(b) of the United States Treasury Regulations.

(d) No Group Company incorporated in the United States has been a United States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii).

5. PROPERTIES

In relation to each Property:

(a) a true and complete copy of the relevant lease or licence agreement has been Disclosed in the Data Room at folder 15;

(b) a Group Company is the current tenant or licensee of the Property;

(c) the Properties are the only properties occupied or used by a Group Company as at the date of this agreement and no Group Company owns any other real property or any interest or right in real property;

(d) no written notices of any material breach (that are still outstanding) have, in the last three years, been given or received by the Company under the relevant lease or licence agreement;

(e) there is no material breach subsisting in respect of the tenant’s covenants in the lease or licence agreements in respect of the Properties and no Group Company is involved in any outstanding dispute with the relevant landlord;


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(f) the Group has the right pursuant to the relevant lease terms to use each Property in accordance with its current use. No Group Company has, in the last three years, received written notice (that is still outstanding) from a third party disputing such Group Company's right to use any of the Properties for the current use; and

(g) no Group Company has any contingent liability in respect of any property assets other than the Properties.

6. EMPLOYEES, PENSIONS AND INCENTIVES

6.1 Interpretation: Employment

(a) In paragraphs 6.1 to 6.4 of this schedule:

Emoluments Date means 30 April 2021;

Relevant Period means, unless otherwise expressly provided, the three years ending on the date of this agreement;

Representative Body means any association, trade union, works council or any other body or persons representing any of the workers of any Group Company;

trade dispute and trade union have the same meanings as in the Trade Union and Labour Relations (Consolidation) Act 1992; and

worker has the same meaning as in section 230 of the Employment Rights Act 1996 but includes any director and any other officer of any Group Company whether or not he is a worker (as so defined),

and any reference to a contract of employment includes any other contract as referred to in section 230 of the Employment Rights Act 1996 and, in relation to a director or other officer, includes the terms on which he holds the directorship or other office, and any reference to employ or employment has a corresponding meaning.

(b) Accurate particulars of or, in the case of a document, a copy of the following are contained in the Data Room at folder 3:

(i) the contracts of employment of each Key Employee and each Employee earning a gross annual base salary of more than £120,000 (or local equivalent);

(ii) all bonus schemes or bonus arrangements available to each Employee (including any other incentive entitlement equivalent or eligibility) and any material benefits that any Group Company is bound to provide to them or their dependents, whether now or in the future;

(iii) a copy of the standard terms of employment used by each Group Company and a representative sample of those offer letters, or employment agreements that materially differ from the applicable Group Company’s standard form;

(iv) any arrangement or practice of any Group Company regarding redundancy, termination or severance payments in respect of Employees, whether contractual, customary or discretionary, above the statutory payment;

(c) each loan or other financial assistance provided to any Employee, or past or prospective Employee, of any Group Company which is outstanding.

(d) There is no term of employment for any Key Employee which provides that a change of control, direct or indirect, of any Group Company entitles such Key Employee to treat the change of control as amounting to a


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breach of their employment contract or entitling such Key Employee to any payment, additional period of notice or other benefit whatsoever or entitling such Key Employee to treat themselves as redundant or otherwise dismissed or released from any obligation or that would result in the acceleration of the time of payment, vesting or funding of any benefit or remuneration for any such Key Employee.

(e) Each contract between a Group Company and a Key Employee is terminable, in accordance with its terms, on not more than six months’ notice from the Group Company.

(f) None of the Key Employees have given or been given written notice to terminate their employment.

(g) No offer of employment or engagement where the annual gross base salary of the individual would be GBP 120,000 (or local equivalent) or more has been made by any Group Company which is outstanding for acceptance, or which has been accepted but not yet commenced.

6.2 Particulars disclosed: Employment

(a) Full and accurate anonymised particulars of or, in the case of a document, a copy of the following are Disclosed in the Data Room at folder 3:

(i) all the workers of each Group Company, each person who has accepted an offer of employment made by any Group Company but whose employment has not yet started and of each worker who has given, or has been given, notice of termination of his employment;

(ii) the standard form terms and conditions used by the Group to employ or offer employment to the persons referred to in (i) above and a representative sample of any non-standard terms so used;

(iii) the rate of their annual salaries/wages as at the Emoluments Date;

(iv) each agreement for the secondment to any Group Company of any person;

(v) each agreement for the provision of any consultancy service or the service of personnel (other than the Employees) to any Group Company;

(vi) each material written employment practice or policy operated in relation to any Group Company's workers or any group of them;

(vii) the constitution of each Representative Body and a statement of whether and, if so, to what extent each Representative Body is recognised, or has in the Relevant Period claimed recognition, by any Group Company for any purpose; and

(viii) any collective agreement, dismissal procedures agreement or union membership agreement to which any Group Company is a party or which is applicable to any Group Company and any proceedings against any Group Company brought by any Employee or former employee or any Group Company before any court or tribunal, including under or by virtue of the provisions of the Trade Union and Labour Relations (Consolidation) Act 1992.

(b) Except in respect of reimbursement of out-of-pocket expenses and normal accruals of emoluments after the Accounts Date and payment of salaries/wages for the current pay period and holiday pay for the current holiday year, no material sum is owing to any worker of any Group Company.

(c) Since the Emoluments Date no material change has been made in the rate of annual salaries/wages of any worker of any Group Company.

(d) There has been no misuse or unauthorised disclosure of confidential information by any former employee or former contractor that has had or is likely to have a material adverse effect upon the business of the Group.


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6.3 Workers

(a) Except as agreed with the Purchaser, no commitment by any Group Company has been communicated to any person regarding any change to his or her terms of employment or working conditions or regarding the continuance, introduction, increase or improvement of salary/wages or any other material employment benefit and no negotiations have commenced for any such matter.

(b) All holiday pay for periods of holiday taken by the Employees under Regulations 13 and 13A of the Working Time Regulations 1998 has been correctly calculated and paid by the relevant Group Company.

(c) All subsisting contracts of employment (and all agreements with any workers of any Group Company) to which any Group Company is a party are terminable by it on three months' notice or less without compensation (other than compensation pursuant to the Employment Rights Act l996 or other applicable statutory employment laws in any jurisdiction).

(d) There is no term of employment for any worker of any Group Company which provides that a change of control (whether direct or indirect) of any Group Company entitles the worker to treat the change of control as amounting to a breach of their employment contract or entitling them to any payment, additional period of notice or other benefit whatsoever or entitling them to treat themselves as redundant or otherwise dismissed or released from any obligation, or that would result in the acceleration of the time of payment, vesting or funding of any benefit or remuneration for the worker.

6.4 Disputes, investigations, transfers and collective redundancies

(a) No material claim, dispute, administrative process, enquiry or investigation in relation to any of the Group Company’s workers or former workers has been made or threatened against any Group Company or against any person whom any Group Company is or may be liable to compensate or indemnify.

(b) There are no material disciplinary or grievance proceedings which have not yet been completed and there are no appeals pending in relation to any material disciplinary or grievance decisions, in either case relating to any of the Group Company’s workers or employees.

(c) No Group Company employee or worker has been absent (other than on holiday or maternity or other family leave) for a period of more than eight consecutive weeks at any time during the 12 months preceding the date of this agreement.

(d) Each Group Company has complied in all material respects with all of its obligations (including but not limited to social security contributions and health and safety obligations) to or in respect of all its workers, employees, applicants for employment, former employees or former workers arising out of or in connection with their terms and conditions of employment or engagement and/or with any relevant requirement whether under any applicable law or otherwise including any judgments, decisions, orders and awards made in respect of any of them.

(e) Each Group Company employee and worker who requires permission to work in the jurisdiction in which they work has such permission.

(f) No enquiry or investigation affecting any Group Company has been made or threatened by any governmental, statutory or regulatory authority including the Equality and Human Rights Commission, the Office of the Information Commissioner, the Financial Conduct Authority or any health and safety enforcement body in respect of any act, event, omission or other matter arising out of or in connection with:

(i) any application for employment by any person; or

(ii) the employment (including terms of employment, working conditions, benefits and practices) or termination of employment of any person,


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and there are no circumstances which may give rise to any such enquiry or investigation.

(g) There is not, and during the Relevant Period there has not been, any industrial action affecting any Group Company and there are no circumstances which are likely to give rise to any such industrial action.

(h) No trade unions or other body representing any Group Company’s employees or workers is recognised to any extent for the purpose of collective bargaining or other negotiating purposes.

(i) No worker of any Group Company is, or has within the Relevant Period been, involved in any criminal proceedings relating to the business of any Group Company and there are no circumstances which are likely to give rise to any such proceedings.

(j) There are no circumstances which are likely to give rise to any Group Company becoming a party to any such agreement or becoming involved in any such proceedings as is mentioned in paragraph 6.2(a)(viii).

(k) During the Relevant Period no Group Company has given notice of any redundancies to the Secretary of State or started consultations with any Representative Body under Chapter II of Part IV of the Trade Union and Labour Relations (Consolidation) Act 1992 and no Group Company has failed to comply with any obligation under that Act during the Relevant Period.

(l) During the Relevant Period no Group Company has been a party to a relevant transfer for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 and no Group Company has failed to comply with any obligation under those Regulations.

(m) Each Group Company is and has been in compliance in all material respects with the WARN Act, or any similar state law in the USA. In the past two years:

(i) no Group Company has effectuated a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business;

(ii) there has not, in such case in the USA, occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of any Group Company; and

(n) no Group Company has engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state law in the USA.

6.5 Compliance: Superannuation

Any Pension Scheme operating in Australia is a complying superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth)), the trustee of which is not, and is not connected to a Group Company. No Group Company is an employer sponsor of any Pension Scheme operating in Australia.

6.6 Interpretation: Pensions

(a) In paragraphs 6.6 to 6.10 of this schedule:

Benefit means any pension, lump sum, gratuity, indemnity, deferred compensation, payment of medical expenses or other benefit of a similar nature, given or to be given on retirement, death, ill-health, disability, accident or in anticipation of or after leaving employment for any reason or in connection with any change in the nature of the employment of the employee concerned;

Pension Scheme means each of the following pension schemes:


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•The People’s Pension Scheme governed by a deed dated 25 October 2013 as amended (the UK TPP Scheme);

•the Sequoia One 401(k) Plan governed by a deed dated 1 July 2018 as amended (the US 401k Scheme); and

•the QuickSuper superannuation plan operating in Australia.

6.7 Particulars disclosed: Pensions

(a) All material documents governing each occupational Pension Scheme other than a master trust authorised under the Pensions Schemes Act 2017 (including complete copies of the rules currently governing each such Pension Scheme, and the terms of each such Pension Scheme) and in relation to each Pension Scheme the particulars of the benefits provided by and any enhancement of benefit or special benefit for or in respect of any current or former employee, director or other officer of any Group Company) are contained in the Data Room at folder 3.

(b) All information Disclosed in the Data Room at folder 3 (or otherwise made available to the Purchaser or its professional advisers) in connection with each Pension Scheme is complete and accurate in all material respects and not misleading.

(c) Except pursuant to the Pension Schemes no Group Company has paid, provided or contributed towards, and no Group Company is under any legally enforceable obligation or commitment to pay, provide or contribute towards, any Benefit or scheme providing a Benefit for or in respect of any present or past employee (or any spouse, child or dependant of any present or past employee) of any Group Company or any other company or of any predecessor in business of any Group Company or any other company or any other costs or expenses in respect of the provision of any Benefits.

(d) Apart from any earnings-related death-in-service benefits identified in the relevant Pension Scheme’s documents, each Pension Scheme provides only money purchase benefits for the beneficiaries of that Pension Scheme and neither any Group Company nor any Seller nor the trustees or managers/administrators of that Scheme has given any promise or assurance (oral or written) to any beneficiary that his benefits under that Pension Scheme will be calculated wholly or partly by reference to any person's remuneration or equate (approximately or exactly) to any particular amount.

(e) No Group Company is or has ever been an employer in relation to any occupational pension scheme to which sections 38 to 56 of the Pensions Act 2004 applies or is or has ever been an associate of or connected with (within the meaning of sections 38 and 51 of the Pensions Act 2004) any such person.

(f) No employee or former employee has been employed by a Group Company as a result of a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 1981 or 2006, where that person was, prior to the transfer, a member of an occupational pension scheme that provided any benefits other than on old age, invalidity or death.

(g) Completion of the transactions contemplated by this agreement will not cause an increase in the amount of any Benefit to or in respect of any current or former employee, director or other officer of any Group Company or accelerate the vesting, timing, funding or payment of any such Benefit.

6.8 Contribution and insurance: Pensions

(a) All due contributions and expenses in respect of each Pension Scheme in relation to Employees of any Group Company have been paid to that Pension Scheme (in the case of contributions) or to the person to whom they are due (in the case of expenses) on the due dates as required by the relevant Pension Scheme, any applicable contract, legislation and any applicable code of practice issued by the pensions regulator or supervisory authorities in that jurisdiction.


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(b) In relation to each Pension Scheme, each contract of insurance and each contract with a service provider entered into by the trustees (or managers/administrators) of that Pension Scheme, any Seller or any Group Company has been complied with by all parties in all material respects, and each such contract of insurance is enforceable and there is no ground on which the relevant insurer might avoid liability under it. All premiums and other amounts payable under all such contracts have been paid.

6.9 Disputes: Pensions

(a) No claim in relation to any Pension Scheme (other than routine claims for benefits) has been made or threatened against any Group Company, or the trustee or managers/ administrators of any Pension Scheme in relation to employees or former employees of the Group, or any person whom any Group Company is or may be liable to compensate or indemnify (including any complaint under any Pension Scheme's internal dispute resolution procedure).

(b) No notice, direction, enquiry or investigation affecting any Group Company or any Pension Scheme has been issued, made or threatened by the relevant taxation, social security and supervisory authorities in the relevant country or state in respect of any act, event, omission or other matter arising out of or in connection with or otherwise affecting any Pension Scheme and there are no circumstances which may give rise to any such notice, direction, enquiry or investigation.

(c) No Group Company has given any indemnity to any person in connection with any Pension Scheme or any other occupational pension scheme except as set out in the relevant scheme documents.

6.10 Compliance: Pensions

Each Pension Scheme has at all times been operated in accordance with, and the trustees or managers/administrators of each Pension Scheme and all of the Group Companies participating in each Pension Scheme have observed and performed all their obligations under, the relevant Pension Scheme’s documentation and rules, all relevant codes of practice, the requirements of the relevant taxation, social security and supervisory authorities in the relevant country or state and applicable laws. None of the trustees or managers/administrators of any Pension Scheme have been suspended or prohibited from acting as a trustee or manager/administrator under any applicable contract, legislation or code of practice issued by the pensions regulator in the jurisdiction.

6.11 Interpretation: Incentives

(a) In paragraphs 6.11 to 6.14 of this schedule:

Employee has the same meaning as in section 230 of the Employment Rights Act 1996 but includes any director and any other officer of any Group Company whether or not he has entered into or works or worked under a contract of employment;

Share Plan means an incentive plan involving securities or which are securities-based in which any Employees of any Group Company can participate, including share option plans, long term incentive plans, restricted share plans, deferred bonus plans, joint share ownership plans and phantom plans, and ad hoc securities based arrangements.

6.12 Particulars disclosed: Incentives

Full and accurate particulars of or, in the case of a document, a copy of the following are Disclosed in the Data Room at folders 7, 7.3 and 7.8:

(a) the rules of the Share Plan and any other agreements setting out the terms of share awards;

(b) all awards made to Employees of a Group Company under any Share Plan including:


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(i) the Share Plan under which the award was made;

(ii) confirmation of the company whose shares are subject to the award;

(iii) the date of grant;

(iv) the number of shares subject to the award; and

(v) any exercise price payable by the Employee concerned (or confirmation that there is none);

(c) any Class 1 National Insurance elections and elections made in relation to restricted securities under Chapter 2 of Part 7 of the ITEPA 2003;

(d) any agreements to recharge the costs of securities awards or options to a Group Company; and

(e) all material documentation relating to any employee benefit trusts operated in conjunction with any Share Plan, including funding arrangements and numbers of shares held in any trust.

6.13 Operation of incentive arrangements

Each Share Plan has at all times been operated by the relevant Group Company in accordance with its terms, and there is no ground on which the tax-advantaged status of any HMRC tax-advantaged Share Plan may be withdrawn or cease to apply.

6.14 Disputes: Incentives

(a) No claim in relation to any of the Share Plans has been made or threatened against any Group Company or against any person whom any Group Company is or may be liable to compensate or indemnify.

(b) No Group Company has given any written indemnity to any person in connection with any of the Share Plans.

6.15 US Benefit Plans

(a) US Employee Plans means

(i) all “employee benefit plans” within the meaning of Section 3(3) of ERISA;

(ii) each loan to a US Employee;

(iii) all pension, retirement, supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit, dependent care, life insurance or accident insurance plans, programs or arrangements;

(iv) all bonus, profit sharing, savings, deferred compensation or incentive plans (including cash incentive plans), programs or arrangements;

(v) all other fringe or employee benefit plans, programs or arrangements; and

(vi) all employment, individual consulting, retention, change of control or executive compensation or severance agreements, in each case, written or otherwise, formal or informal, as to which any unsatisfied obligations of a Group Company remains for the benefit of, or relating to, any present or former US Employee.

(b) Accurate particulars or, in the case of a document, a copy of all material US Employee Plans are Disclosed in the Data Room at folder 3.


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(c) No Group Company sponsors or maintains any self-funded US Employee Plans, including any plan to which a stop-loss policy applies.

(d) Any US Employee Plan intended to be qualified under Section 401(a) of the Code has obtained from the United States Internal Revenue Service a favourable determination letter as to its qualified status under the Code, and nothing has occurred since the issuance of each such letter that would reasonably be expected to cause the loss of the tax-qualified status of any US Employee Plan subject to Section 401(a) of the Code.

(e) Each trust established in connection with any US Employee Plan that is intended to be exempt from United States federal income taxation under Section 501(a) of the Code is so exempt, and no fact or event has occurred that would reasonably be expected to adversely affect the exempt status of any such trust.

(f) None of the US Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person other than as required under COBRA, or similar state law and the Group Companies have complied in all material respects with the requirements of COBRA.

(g) There has been no “prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code and not exempt under Section 408 of ERISA and regulatory guidance thereunder) with respect to any US Employee Plan.

(h) Each US Employee Plan has, in all material respects, been maintained and administered in accordance with its terms and in compliance with the requirements prescribed by all applicable statutes, rules and regulations (including ERISA and the Code).

(i) All contributions required to be made by any Group Company to any US Employee Plan have been made on or before their due dates or properly accrued.

(j) No US Employee Plan is subject to, and no Group Company has incurred or reasonably expects to incur any liability under, Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA.

(k) With respect to each US Employee Plan subject to ERISA as either an employee pension benefit plan within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of Section 3(1) of ERISA, each Group Company (i) has prepared in good faith and timely filed all requisite governmental reports (which were true, correct and complete as of the date filed), including any required audit reports, and (ii) have properly and timely filed and distributed or posted all notices and reports to employees required to be filed, distributed or posted with respect to each such US Employee Plan.

(l) No suit, administrative proceeding, action, litigation or claim has been brought, or is threatened in writing, against or with respect to any such US Employee Plan, including any audit or inquiry by the IRS or the United States Department of Labor.

(m) With respect to each US Employee Plan, during the two years ending on the date of this agreement:

(i) no material breaches of fiduciary duty or other failures to act or comply in connection with the administration or investment of the assets of such US Employee Plan have occurred;

(ii) no lien has been imposed under the Code, ERISA or any other applicable law; and

(iii) no Group Company has made any filing in respect of such US Employee Plan under the United States Employee Plans Compliance Resolution System, the United States Department of Labor Delinquent Filer Program or any other voluntary correction program.

(n) No US Employee Plan is maintained through a human resources and benefits outsourcing entity or professional employer organization.


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(o) No Group Company is a party to, or has made any contribution to or otherwise incurred any obligation under, or has any liability (actual or contingent) with respect to, any “multiemployer plan” as such term is defined in Section 3(37) of ERISA, any “multiple employer welfare arrangement” as such term is defined in Section 3(40) of ERISA or any “multiple employer plan” as such term is defined in Section 413(c) of the Code.

(p) No amount paid or payable by any Group Company in connection with the sale and purchase of the Shares, whether alone or in combination with another event, will be an “excess parachute payment” within the meaning of Section 280G of the Code or Section 4999 of the Code or will not be deductible by the payor thereof by reason of Section 280G of the Code. No Group Company has an obligation to gross up any excise taxes under Section 280G or Section 4999 of the Code.

(q) Each “nonqualified deferred compensation plans” (within the meaning of Section 409A of the Code) to which any Group Company is a party complies in all material respects with the requirements of paragraphs (2), (3) and (4) of Section 409A(a) of the Code by its terms and has been operated in accordance with such requirements in all material respects. No Group Company is obligated to gross up any taxes under Section 409A of the Code. No event has occurred that would be treated by Section 409A(b) of the Code as a transfer of property for purposes of Section 83 of the Code.


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Schedule 8

WARRANTY CLAIMS

1. EXCLUSIONS

1.1 No Seller shall be liable in respect of a Warranty Claim (other than a Fundamental Warranty Claim) to the extent that the matter or circumstance giving rise to that claim:

(a) was taken into account in the Accounts by way of allowance, provision or reserve, a note constituting fair disclosure of that matter or circumstance, or a statement in any report forming part of the Accounts constituting fair disclosure of that matter or circumstance;

(b) is, or arises directly or indirectly from any fact, matter or circumstance Disclosed in the Disclosure Letter, in the Supplemental Disclosure Letter, or in the Data Room; or

(c) is specifically taken into account in the Completion Statement or otherwise specifically taken into account in calculating the Aggregate Consideration.

1.2 No Seller shall be liable in respect of a Warranty Claim (other than a Fundamental Warranty Claim) to the extent that the relevant claim would not have arisen but for:

(a) the passing or coming into force of, or any change in, legislation rule or regulation, or any change in the interpretation of the law, or the withdrawal of any extra-statutory concession or ruling or practice of any Government Agency announced or made after the date of this agreement (whether or not the change or withdrawal purports to be effective retrospectively in whole or in part); or

(b) a change after Completion in the accounting policies or practices adopted by any Group Company; or

(c) any act or omission of a Group Company or a Seller (or their respective employees, agents or officers) on or before Completion carried out at the written request of, or with the written consent of, the Purchaser, or any act or omission of the Purchaser or the Company after Completion.

1.3 The Sellers shall have no liability in respect of a Warranty Claim to the extent that the Purchaser has recovered any amount under any other Warranty, or otherwise under or in connection with this agreement or any other Transaction Document in respect of, the same loss.

2. AGGREGATE LIMIT

2.1 The maximum aggregate liability of each Seller in respect of any and all Fundamental Warranty Claims shall not exceed the aggregate amount of Aggregate Consideration received by such Seller under this agreement (excluding any Deferred Consideration except to the extent actually received by the relevant Seller). For the avoidance of doubt, any deemed reduction in the Aggregate Consideration pursuant to paragraph 5 of this schedule shall not be taken into account in determining the maximum aggregate liability of the Sellers under this subparagraph.

2.2 The maximum aggregate liability of the Sellers determined under subparagraph 2.1:

(a) shall, subject to paragraph 2.3, be increased by the amount of any interest payable by any Seller in respect of any payment not made when due under this agreement; and

(b) shall be reinstated to the extent of any amount received by any Seller under paragraph 9 of this agreement.


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2.3 The maximum aggregate liability of each Seller in respect of any and all Warranty Claims (other than a Fundamental Warranty Claim) and any and all Tax Covenant Claims (including interest, legal or professional fees and disbursements, and other costs and expenses) shall not exceed $1.00.

3. TIME LIMITS

The liability of the Sellers in respect of the Warranties and the Tax Covenant shall terminate:

(a) on the seventh anniversary of Completion in respect of Tax Warranty Claims and Tax Covenant Claims;

(b) on the third anniversary of Completion in respect of all Fundamental Warranty Claims; and

except in respect of any Warranty Claim of which notice has been given to the relevant Sellers pursuant to Clause 11.10 before the relevant date specified above. The liability of the Sellers in respect of any Warranty Claim shall in any event terminate (and no new Warranty Claim may be made in respect of the same fact, matter or circumstance) if proceedings in respect of it have not been commenced by being both properly issued and validly served within 6 months after the giving of notice of that Warranty Claim pursuant to Clause 11.10.

4. WAIVER OF RIGHTS

4.1 In the absence of fraud, fraudulent misrepresentation, dishonesty or wilful concealment on the part of that person, each Seller agrees with the Purchaser (for the benefit of the Purchaser, each Group Company and each officer and employee of a Group Company):

(a) that the giving by any Group Company and/or any of their respective officers or employees to the Sellers (or any of them) of any information or opinion in connection with the Warranties or the Disclosure Letter or otherwise in relation to the business or affairs of any Group Company or in connection with the negotiation and preparation of the Transaction Documents shall not be deemed to be a representation, warranty or guarantee to the Sellers or any of them as to the accuracy of such information or opinion;

(b) that he, she or it hereby irrevocably releases, waives, forfeits or extinguishes any right or claim which he may have against any Group Company and/or any of their respective officers or employees for any error, omission or misrepresentation in any such information or opinion.

(b) The provisions of this paragraph 4 may with the prior written consent of the Purchaser be enforced by any Group Company or any Employee of the Purchaser or a Group Company against the Sellers under the Contracts (Rights of Third Parties) Act 1999 but may be varied, waived or terminated by agreement between the Seller Representatives and the Purchaser (and the Purchaser may also release or compromise in whole or in part any liability in respect of rights or claims contemplated by this subparagraph) without the consent of any Group Company, or any such employee.

4.2 If the Purchaser makes a Warranty Claim, each Seller agrees with the Purchaser and each of the Purchaser's Advisers, in the absence of fraud, fraudulent misrepresentation, dishonesty or wilful concealment on the part of the relevant Purchaser’s Adviser, to waive any rights or claims which they or it may have to recover a contribution from, or otherwise against, the Purchaser's Advisers in respect of such claim. This subparagraph may be enforced by each of the Purchaser's Advisers against the Sellers under the Contracts (Rights of Third Parties) Act 1999.


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5. REDUCTION IN CONSIDERATION

Any payment made by the Sellers under this agreement shall, to the maximum extent possible, be deemed to be a reduction in the Aggregate Consideration.

6. W&I INSURANCE

6.1 Notwithstanding any other provision of this agreement (other than sub-paragraphs 2.1 and 2.2 of this schedule), any other Transaction Document or any other matter or thing but subject to Clause 11.13:

(a) the Purchaser agrees that it will not be entitled to make, will not make, and irrevocably waives any right it may have to make any Warranty Claim or Tax Covenant Claim against the Sellers or any of them except to the extent of $1.00 in aggregate and then only if and to the extent required to permit or facilitate a claim by the Purchaser under the W&I Insurance Policy against the W&I Insurer, but only on the basis that the Sellers will have no liability whatsoever for any such claim;

(b) the Purchaser's sole recourse in respect of all and any Warranty Claims (other than a Fundamental Warranty Claim) and any and all Tax Covenant Claims shall, except to the extent of $1.00 in aggregate and subject to the preceding paragraph, be under the W&I Insurance Policy; and

(c) any inability of the Purchaser to pursue or obtain any remedy in respect of any Warranty Claim (other than a Fundamental Warranty Claim) or Tax Covenant Claim under the W&I Insurance Policy, whether due to policy terms, exceptions or exclusions, validity (including if the W&I Insurance Policy is invalid due to the insolvency, breach or default of any person), creditworthiness or for any other reason, shall not affect or in any way increase the liability of the Sellers under this agreement and the Sellers shall bear no responsibility for such exceptions or exclusions under any and all circumstances.

6.2 The Purchaser agrees that it will comply with all terms of the W&I Insurance Policy.

6.3 The Purchaser acknowledges that:

(a) the liability of the underwriters under the W&I Insurance Policy shall be subject to the limitations and exclusions expressly set out therein and the Sellers shall bear no responsibility for such limitations and exclusions under any and all circumstances; and

(b) the Sellers have entered into this agreement in reliance of the fact that the Purchaser will obtain the W&I Insurance Policy.

6.4 If there is any conflict or other inconsistency between this paragraph 6 and any other provision of this agreement or any other Transaction Document (other than sub-paragraphs 2.1 and 2.2), this paragraph 6 shall prevail.

7. CONDUCT OF THIRD PARTY CLAIMS

7.1 If a Warranty Claim or Tax Covenant Claim arises as a result of, or in connection with, a liability or alleged liability of a Company to a third party (a Third Party Claim), then until such time as any final compromise, agreement, expert determination or non-appealable decision of a court or tribunal of competent jurisdiction is made in respect of the Third Party Claim or the Third Party Claim is otherwise finally disposed of:

(a) each Senior Manager shall make available to the Purchaser and the relevant Group Company all such information as the Purchaser may reasonably request for assessing, contesting, disputing, defending, compromising or appealing the Third Party Claim, shall give the Purchaser and the relevant Group


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Company reasonable access to its books and records for such purpose during normal business hours on any Business Day and on reasonable notice to such Senior Manager and shall:

(i) co-operate in the preparation, review and signing of any witness statements and exhibits thereto which the Purchaser may reasonably request; and

(ii) if the Purchaser so reasonably requests, attend (at the cost and expense of the Purchaser) any relevant proceedings as a witness to give evidence and prepare appropriately for such attendance; and

(b) the Purchaser shall, and shall procure that the relevant Company shall, provide the Senior Managers and Seller Representatives with reasonable information as to the progress of the Third Party Claim on request.

7.2 Nothing in this paragraph 7 shall require the provision by any person of any information to the extent such provision would contravene any applicable law or regulation or would breach any obligation of confidentiality owed to any third party or such information is commercially sensitive or legally privileged.

7.3 The covenants in this paragraph 7 may with the prior written consent of the Purchaser be enforced by any Company against the Senior Managers under the Contracts (Rights of Third Parties) Act 1999. The provisions of this paragraph 7 may be varied or terminated by agreement between the Senior Managers and the Purchaser (and the Purchaser may also release or compromise in whole or in part any liability in respect of rights or claims contemplated by this paragraph 7) without the consent of any Company.

7.4 The provisions of this paragraph 7 shall be subject to any rights of the W&I Insurer under the W&I Insurance Policy in relation to the conduct of the relevant Third Party Claim such rights shall not modify or affect the obligations of any Senior Manager under this paragraph 7.

8. MITIGATION

Nothing in this agreement shall be deemed to relieve the Purchaser from any common law duty to take reasonable steps to mitigate any loss or damage suffered or incurred by it as a result of any of the Warranties being untrue or inaccurate.

9. RECOVERY FROM THIRD PARTIES

If:

(a) any Seller makes a payment in respect of a Fundamental Warranty Claim (the amount of such payment, to the extent it does not comprise interest on a late payment, being the Damages Payment);

(b) any Group Company or the Purchaser receives any sum, other than from such Seller, which would not have been received but for the matter or circumstance giving rise to the relevant Fundamental Warranty Claim (the Third Party Sum);

(d) the aggregate of the Third Party Sum and the Damages Payment exceeds the amount required to compensate the Purchaser or the Group Company concerned (as the case may be) in full for the matter or circumstance which gave rise to the relevant Fundamental Warranty Claim (such excess being the Excess Recovery),


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the Purchaser shall, promptly following receipt of the Third Party Sum by it or the Group Company concerned, repay to that Seller an amount equal to the lower of (i) the Excess Recovery and (ii) the Damages Payment, after deducting (in either case) all costs incurred by the Purchaser or any Group Company in recovering the Third Party Sum and any and all Taxation payable (or that would have been payable but for the use of a Purchaser’s Relief (as defined in Schedule 6 (Tax Covenant)) by the Purchaser or any Group Company on its receipt.


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Schedule 9

PRE-COMPLETION

1. ACCESS

Until Completion the Senior Managers shall use reasonable endeavours to:

(a) upon reasonable advance written request, procure that the Purchaser, its agents and representatives are given reasonable access to the Group’s head office and to the material books and records of the Group Companies during normal business hours, on any business day and on reasonable notice to the Sellers Representative;

(b) provide such information regarding the business and/or affairs of the Group Companies as the Purchaser may reasonably require; and

(c) not, and shall procure that no Group Company shall, enter into, continue or solicit discussions or negotiations with, or provide any information to or otherwise assist, any third party who may be interested in acquiring the Securities (or any of them) or the whole or any material part of the undertaking, business or assets of any Group Company (including any shares in the capital of any Subsidiary).

2. CONDUCT OF BUSINESS

Until Completion the Senior Managers shall exercise their powers as shareholders and, as relevant, officers of the Company so as to procure that, except with the written consent of the Purchaser (such consent not to be unreasonably withheld, unreasonably conditioned or unreasonably delayed and to be deemed given if the Purchaser does not object in writing to a written request for consent within five (5) Business Days of receipt thereof) or as permitted by paragraph 3 of this schedule, the business of the Group Companies is carried on in the ordinary course and that no Group Company shall:

(a) incur any item of capital expenditure exceeding £100,000; or

(b) sell, transfer or dispose of, or grant any option to acquire, any material part of its business, undertaking or assets whether by a single transaction or series of transactions, related or not, involving consideration, expenditure or liabilities in excess of £100,000;

(d) make any amendment to its articles of association or equivalent constitutional documents;

(e) make any material change in the nature or organisation of its business, or discontinue or cease to operate all or a material part of its business;

(f) enter into any contract or commitment otherwise than on arm’s length terms;

(g) enter into any contract or commitment with any Seller (or any person connected with any of the Sellers);

(h) settle any litigation or arbitration proceeding, other than debt collection in the ordinary course of business;

(i) borrow any money (except borrowings from its bankers not exceeding £100,000); or


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(j) grant any lease or third party right in respect of any of the Properties or transfer or otherwise dispose of any of the Properties; or

(k) make or prepay any loan (other than season ticket / travel loans consistent with past practice) and loans between Group Companies; or

(l) enter into any leasing, hire purchase or similar agreement or arrangement amounts exceeding £100,000 individually (other than entry into a lease of the new office premises at [***] on terms that do not differ in any material respect from those Disclosed); or

(m) knowingly fail to observe and perform any term or condition of, or waive any right under, any contract or arrangement which would, in each case, have a material adverse effect on the Group taken as a whole;

(n) knowingly contravene any statute, law, order or regulation applicable to it; or

(o) terminate, revoke, suspend, or modify any licence or consent held by it; or

(p) grant any power of attorney; or

(q) declare, make or pay any dividend or other distribution; or

(r) grant any Options or other rights to subscribe for Securities to any employee of a Group Company or enter into any agreement or arrangement to grant such Options, other than (in each case) any Options Disclosed in the Data Room at folder 7.1.2.4;

(s) give any guarantee or indemnity in respect of the obligations of a person other than a Group Company; or

(t) make any material change in the terms and conditions of employment of, any of its directors, or of any of its employees or consultants generally other than in the ordinary course of business and consistent with past practice; or

(u) employ any person or terminate (except for good cause) the employment of any person, in each case that has a basic annual salary of at least £120,000; or

(v) enter into or offer to enter into or amend, terminate or waive the terms and conditions of, or any right under, any employment or consulting arrangement (including but not limited to promotions, pay increases, emoluments, benefits or pensions arrangements) of any employee of a Group Company (other than: (i) as a result of a termination for cause or otherwise as a result of a breach by such employee; or (ii) [***] up to an aggregate amount of [***] which [***] and which have been Disclosed)); or

(w) introduce or award any incentive, bonus, pension, gratuity or similar scheme for the benefit of any employee(s) or consultant(s) of a Group Company;

(x) make, or announce to any person any proposal to make, any material change or material addition to any Benefit (as defined in paragraph 6.6(a) of Schedule 7) of or in respect of any of its directors, employees, former directors or former employees (or any dependant of any such person) or to any Pension Scheme (as defined in that paragraph) other than any change required by law or proposed change of which full and accurate particulars are set out in the Disclosure Letter; or

(y) grant or create, or announce to any person any proposal to grant or create, any material additional Benefit (as so defined) or knowingly take any action or allow any action to be taken in relation to a Pension Scheme (as so defined) other than in the ordinary course of administering such Pension


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Scheme, or knowingly omit to take any action necessary or prudent for the ordinary proper operation of a Pension Scheme; or

(z) permit any of its insurances to lapse or knowingly do anything which would make any policy of insurance void or voidable; or

(aa) create, issue, purchase or redeem any class of share or loan capital; or

(bb) pass any resolution of its shareholders or any class of shareholders, whether in general meeting or otherwise; or

(cc) form any subsidiary or acquire shares in any company or participate in, or terminate any participation in, any partnership or joint venture; or

(dd) issue any warning or restrictions notice under Schedule 1B (enforcement of disclosure requirements) of the Companies Act 2006 in respect of any shares or voting rights, or any right to appoint or remove any member of the board of directors; or

(ee) agree, conditionally or otherwise, to do any of the foregoing;

(ff) change its accounting policies, principles or practices unless required by applicable law or the accounting framework applicable to the relevant Group Company; or

(gg) knowingly carry out any business or affairs or acquire any assets or take any action in any jurisdiction that results in completion of this agreement, the Transaction Documents or the transactions envisaged therein requiring any Government Agency consent, approval or clearance that would not have been required but for the carrying out of such business or affairs, such acquisition or such action; or

(hh) knowingly change its residence for Taxation purposes to a jurisdiction other than its jurisdiction of incorporation or start to trade through a permanent establishment or other taxable presence in any jurisdiction other than its jurisdiction of incorporation; or

(ii) make, alter or revoke any material claim or material election for any Taxation purpose except if and to the extent that the making, alteration or revocation of such claim or election has been reflected in the Accounts or, in the case of the making of any claim or election, the making of that claim or election is in the ordinary course and consistent with past practice; or

(jj) take any voluntary action or voluntary omission which results in a Group Company becoming a member of or ceasing to belong to, or any change in the terms on which a Group Company belongs to, a consolidation, group, unity, loss-sharing arrangement or similar arrangement for any Taxation purpose.

Any request for the Purchaser’s consent pursuant to this paragraph 1 shall be sent to Ritesh Ramchandani by email at [***] (with a copy, receipt of which shall not constitute a request for consent, to William.Samengo-Turner@AllenOvery.com and kmyers@fenwick.com). Ritesh Ramchandani is irrevocably authorised by the Purchaser to grant such consents on behalf of the Purchaser and the Sellers are entitled to rely on such consent given by Ritesh Ramchandani without further inquiry.

3. INSTITUTIONAL SELLERS

The Institutional Sellers undertake to the Purchaser not to grant any consent pursuant to any rights they may have with respect to the Group pursuant to the Articles, any shareholders’ agreement or otherwise in respect of any of the matters specified in paragraph 1(c) and paragraph 2 above without the prior written consent of the Purchaser unless (x) paragraph 4 below applies in respect of such matter or (y) the Purchaser’s consent is


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deemed to have been given pursuant to paragraph 2 above, or the Purchaser’s consent has been unreasonably withheld, unreasonably conditioned or unreasonably delayed. Until Completion, each Senior Manager and Institutional Seller undertakes to the Purchaser on a several basis (and not on a joint or joint and several basis) that it shall not exercise its rights as a shareholder, and that, in the case of the Seller Representative, it shall procure (so far as it is able) that no director shall exercise its rights as a director of the Company, to procure that a Group Company takes any of the actions or steps referred to in paragraph 1(c) and paragraph 2 above without the prior written consent of the Purchaser unless (x) paragraph 4 below applies in respect of such matter or (y) the Purchaser’s consent is deemed to have been given pursuant to paragraph 2 above, or the Purchaser’s consent has been unreasonably withheld, unreasonably conditioned or unreasonably delayed.

4. PERMITTED ACTIONS

Notwithstanding anything to the contrary in this agreement, no Senior Manager or Group Company or any of their respective officers or employees shall: (i) be prevented from undertaking or agreeing to effect; (ii) be required to obtain the prior consent of the Purchaser in relation to; or (iii) incur any liability as a result of undertaking or agreeing to effect, any of the following on or prior to Completion:

(a) any action (or omission to act) which is required by or to comply with law, court order, regulation or published (or otherwise publicly announced) advice, directions or rules from any Government Agency which is applicable to that Senior Manager or to any Group Company;

(b) the implementation of any transaction or the taking of any action permitted or provided for by any Transaction Document;

(c) the completion or performance of any obligations required, or the taking of any action permitted or provided for, pursuant to any contract or arrangement entered into by any Group Company prior to the date of this agreement and which is Disclosed;

(d) the grant of options or awards in respect of Shares to persons who are offered employment by the Group before Completion;

(e) any matter, action or step undertaken by any Group Company in good faith in an emergency or disaster situation (including any unforeseen epidemic or pandemic, or the material escalation or worsening of the COVID 19 pandemic or the imposition of renewed or additional restrictions by Governmental Agencies in response thereto) with the intention of minimising any adverse effect of such situation in relation to that Group Company.


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Schedule 10

OPTIONS

1. Parties Agreement.

The Parties agree that the following provisions will apply in respect of the Options outstanding immediately before Completion under the Company Option Plans and the Promised Options, and will co-operate (including exercising all rights a Party may have as a holder of Securities or a director or officer of a Group Company) with a view to ensuring that these provisions are put into effect.

2. Company’s obligations.

No later than ten Business Days after the date of this agreement, the Sellers shall procure that the Company writes to each Optionholder in the Company Option Plans in terms reasonably satisfactory to the Purchaser setting out the impact of the acquisition of the Shares in the Company by the Purchaser and describing the treatment applicable to their respective Options as set out in this Schedule 10 and setting out any action required by each Optionholder with respect to their Options. The Company will make the amendments to the Company Option Plans necessary or desirable in order to put the provisions in this Schedule 10 into effect and to ensure that as at Completion, no person will hold any option or other right to subscribe for Securities under the Company Option Plans or otherwise.

3. Treatment of specific Options

3.1 Vested Options

Options which are outstanding immediately before Completion under the EMI Plan and the CSOP may be exercised to the extent that they are vested. They will be exercised immediately before and conditional on Completion using a cashless exercise facility made available to the Optionholders by the Company. The Optionholders will, as part of the exercise process, agree to sell the Shares received on exercise of their Options to the Purchaser free of all Encumbrances subject to and on the terms of this agreement, and will give authority to the Directors of the Company by way of a power of attorney to enter into this agreement on their behalf and take any action necessary or desirable to complete the sale of their Shares. The Initial Consideration payable by the Purchaser on the purchase of such Shares will be paid to the Company on the Optionholder’s behalf. The Company will ensure that: (i) the applicable exercise price; and (ii) any appropriate deductions of or on account of any tax and social security obligations (including, where legally permissible, in respect of employer’s National Insurance contributions) arising on exercise of any Options in relation to which the requirements of Schedule 5 or Schedule 4 (respectively) to ITEPA 2003 are not met, will be made. Vested Options will lapse on Completion to the extent not exercised before Completion. The Parties agree that, with the exception of the Non-Qualifying CSOP Options and those Options granted under the EMI Plan which are designated as having been granted under the “Non-EMI Depop ESOP” in the Option Holder Ledger Report dated 22 May and Disclosed in the Data Room at folder 7.1.2.5, all the Options meet the requirements of either Schedule 5 or Schedule 4 to ITEPA 2003, and, accordingly, no deductions of or on account of any tax and social security obligations will be made.

3.2 Unvested Options that were granted before 30 June 2021

Save as set out in paragraph 3.3 and subject to paragraph 3.4 of this Schedule 10, this paragraph 3.2 applies to:

(i) each Option outstanding immediately before Completion, which is held by a Continuing Employee, to the extent that it has not vested at Completion; and

(ii) each Option which has been promised to an Employee or prospective employee who has commenced employment before 30 June 2021 (an “Employee Promised Option”).


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Each Option described in (i) will lapse at Completion.

As soon as reasonably practicable after Completion, the Purchaser’s Parent will grant awards of Etsy RSUs to each such Continuing Employee and in respect of each Employee Promised Option, with an economic value equal to the economic value of the unvested part of the Option that it replaces, based on the Per Share Initial Consideration and the volume-weighted average price of common stock of the Purchaser’s Parent over the ten trading days ending two trading days before Completion. Each such Etsy RSU will be granted under the Etsy, Inc. 2015 Equity Incentive Plan but with the same vesting schedule, and on the basis that it will have vested to the same extent, as the Option that it replaces as at Completion. Each Option held by an employee who is not a Continuing Employee or who was granted Options on or after 30 June 2021 will lapse for no consideration at Completion to the extent that it has not vested.

3.3 Options granted in January 2019, May 2019, February 2020 or April 2020 to persons resident for tax purposes in the U.S.

Options granted in January 2019, May 2019, February 2020 or April 2020 to persons resident for tax purposes in the U.S. will be cancelled in full on Completion (whether vested or unvested) for a payment made by the Purchaser equal to the amount of the Per Share Initial Consideration less the exercise price of the relevant Option multiplied by the number of Shares subject to the Option. The Company will ensure that appropriate deductions of or on account of any tax and social security obligations arising on exercise of the Options will be made. Each such Option held by an employee who is not a Continuing Employee will lapse for no consideration at Completion to the extent that it has not vested.

3.4 Options promised to Employees or prospective employees who have not commenced employment before 30 June 2021

Each Option which has been promised to an Employee or prospective Employee who has not commenced employment before 30 June 2021 will be satisfied by the grant by the Purchaser’s Parent of Etsy RSUs. Each grant of Etsy RSUs will have an economic value equal to the economic value of the Shares that would have been subject to the Promised Option, based on the Per Share Initial Consideration and the volume-weighted average price of common stock of the Purchaser during the ten trading days ending two trading days before Completion. Each Etsy RSU will be granted under the Etsy, Inc. 2015 Equity Incentive Plan but with the same vesting schedule as the Promised Option that it replaces.


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Schedule 11

COMPLETION


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Part 1

SELLERS' OBLIGATIONS

At Completion, the Sellers shall procure:

(a) the delivery to the Purchaser of:

(i) duly executed transfers in favour of the Purchaser or its nominee(s) of their respective Shares;

(ii) the original share certificate(s) representing their Shares (or an express indemnity in a form satisfactory to the Purchaser, and not a replacement certificate, in the case of any found to be missing);

(iii) a duly executed deed of termination in respect of the Depop Shareholders’ Agreement;

(iv) a Completion Power of Attorney, duly executed for or on behalf of each Seller;

(v) a counterpart to the Key Employee Transfer Letters duly executed by the Key Employees;

(vi) the resignations of all the directors (except those who are Senior Managers) and the secretary of each Group Company, in each case acknowledging that he or she has not claim against the relevant Group Companies, whether for loss of office or otherwise;

(vii) a copy of the resolutions of the board of directors of each Institutional Seller authorising the execution of this agreement, and each of the other Transaction Documents to which it is or will be a party;

(viii) the Supplemental Disclosure Letter, if required, duly executed by the Senior Managers;

(ix) the Management Accounts, duly executed by the Company;

(x) copies of the minutes of the meetings referred to in paragraph (b) below;

(b) that a board meeting of each Group Company is held, or written resolutions of the directors are duly passed, at or pursuant to which it is resolved that:

(i) all Preferred Shares and B Shares are converted and redesignated as Ordinary Shares, in accordance with the Articles, conditional only on Completion occurring;

(ii) amending the rules of the Company Option Plans, as necessary to allow for a cashless exercise of options and, in respect of the EMI Plan, to provide that the exercise period under that plan shall end prior to Completion such that no options shall remain outstanding after Completion;

(iii) such persons as the Purchaser nominates (and who are eligible and have consented to be appointed) are appointed as additional directors of that Group Company; and

(iv) in respect of the Company, the transfers referred to in paragraph (a) above (subject only to their being duly stamped) are approved for registration.


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Part 2

PURCHASER'S OBLIGATIONS

Subject to the Sellers having done or procured to be done those things set out in Part 1 of this schedule, at Completion the Purchaser shall:

(a) make a payment to the bank account of each Institutional Seller (the details of which, including account bank, account number, sort code, SWIFT, IBAN and payment reference will be notified by each Institutional Seller to the Purchaser at least 5 Business Days prior to Completion) of an amount equal to the Initial Cash Consideration apportioned to each Institutional Seller as set out in the Final Consideration Calculation Spreadsheet (after any set-off pursuant to Clause 9.7);

(b) make a payment to the bank account of the paying agent appointed in respect of all of the Sellers excluding the Institutional Sellers ((the details of which, including account bank, account number, sort code, SWIFT, IBAN and payment reference will be notified by the Seller Representatives to the Purchaser at least five Business Days prior to Completion) of an amount equal to the Initial Cash Consideration apportioned to such Sellers as set out in the Final Consideration Calculation Spreadsheet (after any set-off pursuant to Clause 9.7), it being agreed and understood that the Purchaser shall not be concerned, and shall have no liability in respect of the allocation of the Initial Cash Consideration among the Sellers;

(c) deliver to the Sellers a copy of the resolutions of the board of directors (or a duly constituted committee of the board) of the Purchaser authorising the execution of this agreement, and each of the other Transaction Documents to which it is or is to be a party; and

(d) deliver to the Sellers a counterpart to the Key Employee Transfer Letters duly executed by the Purchaser.


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Part 3

COMPLETION STATEMENT

1.PREPARATION OF DRAFT COMPLETION STATEMENT

To enable the Actual Net Debt and the Actual Working Capital to be ascertained, as soon as reasonably practicable and by no later than 45 Business Days following Completion, and subject to the Purchaser complying with paragraph 4 of this Part 1, the Senior Managers shall prepare and, following approval of the same in writing by the Seller Representatives, the delivery to the Purchaser of a draft completion statement setting out the Net Debt and Working Capital of the Group Companies, and the calculation thereof, as at 11.59pm on the HSR Satisfaction Date (respectively the draft Completion Statement and the Effective Time). The draft Completion Statement shall be prepared substantially in the form set out in tabs ‘Detailed B-Sheet’ and ‘Group NWC’ of the Pro Forma Consideration Calculation Spreadsheet and shall be prepared in accordance with the following:

(a) the specific accounting policies, principles, practices, rules, categorisations, procedures, estimation techniques, methods and bases set out in Part 2 of this schedule;

(b) to the extent not covered by sub-paragraph 1(a) above, the same accounting policies, principles, practices, rules, categorisations, procedures, estimation techniques, methods and bases that were actually used by the Group Companies in the preparation of the Accounts as at the Accounts Date (including in relation to the exercise of accounting discretion, estimation methodology and judgement); and

For the avoidance of doubt, the accounting policies etc. set out in sub-paragraph 1(a) of this schedule shall take priority over those policies etc. described in sub-paragraph 1(b) and 1(c) of this Part 1, and the accounting policies etc. described in sub-paragraph 1(b) shall take priority over those accounting policies etc. described in sub-paragraph 1(c).

2.NOTIFICATION OF DISPUTED ITEMS

Within 30 Business Days of delivery to the Purchaser of the draft Completion Statement, the Purchaser shall give a notice to the Seller Representatives of any item or items it wishes to dispute together with the reasons for such dispute and a list of proposed adjustments. If, by the expiry of such period of 30 Business Days, no such notice has been given to the Seller Representatives, or the Purchaser has given notice to the Seller Representatives that there are no items that it wishes to dispute, the draft Completion Statement shall constitute the final Completion Statement for the purposes of this agreement. Any item not disputed in any such notice will be deemed to be agreed by the Purchaser and be final and binding on the Parties.

3.RESOLUTION OF DISPUTED ITEMS AND FINALISATION OF THE COMPLETION STATEMENT

If, in accordance with paragraph 2 of this Part 1, notice is given by the Purchaser to the Seller Representatives as to any item or items in dispute:

(a) the Seller Representatives and the Purchaser shall, in good faith, attempt to agree in writing the item or items disputed;


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(b) if any such item or items are not agreed in writing within 20 Business Days of the delivery to the Seller Representative of the dispute notice referred to in paragraph 2 of this Part 1, the item or items remaining in dispute shall be determined by the Independent Accountants or otherwise on such terms as may be agreed in writing between the Purchaser, the Seller Representatives and the Independent Accountant; and

(c) the draft Completion Statement, adjusted to take account of each item in dispute (of which notice has been given in accordance with paragraph 2 of this Part 1), as agreed in writing between the Purchaser and the Seller Representatives, or as determined by the Independent Accountants (as the case may be), shall constitute the final Completion Statement for the purposes of this agreement.

4.PROVISION OF INFORMATION

The Purchaser shall, and shall procure that the Group Companies shall, provide the Senior Managers and the Seller Representatives with all access to premises, information, assistance (including assistance from employees of the Purchaser and the Group Companies) and access to (including the ability to take copies of) books and records of account, documents, files, working papers and information stored electronically which they may reasonably require for the purposes of this schedule.


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Part 4

SPECIFIC POLICIES TO BE USED IN PREPARING THE COMPLETION STATEMENT

(a) The Completion Statement shall be drawn up as at the Effective Time and by reference to the consolidated general ledgers of the Group Companies.

(b) The Completion Statement shall be prepared on the basis that the Effective Time represents a financial period end and that customary financial year-end closing processes and adjustments in accordance with those applied by the Group in preparation of the Accounts (acknowledging that share based compensation expense is not included in the Accounts) shall be performed, which includes but is not limited to detailed analysis of prepayments and accruals and appropriate cut-off procedures. A full reconciliation shall be performed of intragroup amounts between the Group Companies and any unreconciled intragroup balances shall be written off in the receiving entity and any investment held by one entity in another Group Company shall be written off.

(c) The Completion Statement shall be prepared on a “going concern” basis, except as expressly required elsewhere in this Part 2 of Schedule 12.

(d) The provisions of this Schedule shall be interpreted so as to avoid double counting (whether positive or negative) of any item to be included in the Completion Statement, and no item shall be excluded from the Completion Statement solely on the grounds of immateriality.

(e) The Completion Statement shall not take into account information and events occurring on or after the date on which the draft Completion Statement is delivered to the Purchaser.

(f) Save as specifically and expressly referred to in any of the policies or treatments set out in this Part 2 of Schedule 12:

(i) the post-Completion intentions of the Purchaser in relation to the Group Companies shall not be taken into account in the Completion Statement; and

(ii) no charge, provision, reserve, and/or write off in respect of any assets, costs, liabilities and/or charges arising solely from the change in ownership of the Group shall be reflected in the Completion Statement, other than Transaction Expenses and subject to paragraphs (k) and (n) of this Part 2 of Schedule 12.

(g) The Completion Statement shall not take account of the funds flow or cash flows arising on or as a consequence of Completion.

(h) The Completion Statement shall be expressed in USD. Amounts in other currencies shall be translated into USD at the closing mid-point rate on the Completion Date, as published in the London edition of the Financial Times on the day immediately following the Effective Time.

(i) The Completion Statement, Working Capital and Net Debt shall exclude all fixed assets, whether tangible or intangible (including computer equipment, fixtures, fittings and equipment and leasehold improvements) and provide that no assets that were previously classified as fixed assets and non-current assets in the Accounts (or assets acquired after the Accounts Date of a similar nature to such assets), will be reclassified as current assets.

(j) Actual Net Debt shall include an asset in respect of rental deposits (only in relation to Property 1, Property 2 and Property 3 (as defined in Schedule 5)).


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(k) Actual Working Capital shall include a liability for any severance costs or other non-ordinary course payment obligations for which any Group Company is liable to any employee’s, influencers and/or freelancers of the Group Companies at the Effective Time (whether payable before or after the Effective Time).

(l) The Completion Statement shall include full provision for all Taxation as at the Effective Time which will be calculated as if Completion were at the end of a tax reporting period, save that any liability in respect of marketplace facilitator tax shall be addressed in accordance with paragraph (m) and (t) only. A liability for corporation tax shall be included in Actual Net Debt and all other taxes shall be included in Actual Working Capital subject to paragraphs (m)and (r) of this Part 2 of Schedule 12.

(m) Actual Net Debt shall include Taxation as follows:

(i) including a liability for all marketplace facilitator tax that has been collected and remains payable by the Group Companies at the Effective Time in those US States in which a Group Company is registered for US sales tax as at the Effective Time and, in each case, relates to the period after the date of any such registration. For the avoidance of doubt, this does not include any amount related to the Special Adjustment Amount (paragraph (t));

(ii) including a liability in relation to underpayment of Australian goods and service taxes as at the Effective Time including any penalties (at 25% of the liability in relation to the underpayment of Australian goods and services taxes) or interest levied by the Australian Tax Office unless paid prior to Completion;

(iii) a liability in respect of employees’ section 409A tax arising in relation to US stock options granted to US employees, including for the avoidance of doubt any related penalties (including in respect of failing to withhold);

(iv) a liability for employer’s national insurance contributions arising on the exercise of unapproved options where written consent has not been provided by the option holder to bear the cost of the employer’s national insurance contributions plus Apprenticeship Levy; and

(v) including a liability in relation to income tax and national insurance contributions, and associated interest, arising as at the Effective Time in relation to off payroll workers that are deemed employees by HMRC.

(n) Actual Net Debt shall include a liability no less than [***] in relation to dilapidations at Property 1, Property 2 and Property 3 (as defined in Schedule 5).

(o) Actual Net Debt shall include a liability for transaction related bonuses and any other payments of a similar nature to members of the Group Companies senior management (including any employer payroll related Taxes associated therewith), to the extent payable by the Group Companies after the Effective Time.

(p) Actual Working Capital shall include a liability for any third party advisory costs of a Group Company associated with the implementation or novation of the share-based payment scheme when the options in the Group Companies are replaced with options in the Purchaser.

(q) Actual Net Debt shall include full provision in respect of any unpaid dividends or other distributions declared or approved prior to the Effective Time not otherwise waived by the relevant Sellers prior to the Effective Time in accordance with this agreement.

(r) Actual Working Capital, Actual Net Debt and the Completion Statement shall exclude any amounts in relation to deferred taxation assets and deferred taxation liabilities.


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(s) Actual Working Capital, Actual Net Debt and the Completion Statement shall exclude any asset in respect of any amount owed to the Group Company by the Seller or its affiliates or related parties, except to the extent amounts have been received in cash related to such balances prior to the Effective Time.

(t) Actual Net Debt shall include a liability for the Specified Adjustment Amount of $15,000,000.

(u) Actual Net Debt shall include a positive amount in respect of the amount of to be withheld by the Company in accordance with Clause 5.8(b).


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Schedule 12

INDEPENDENT ACCOUNTANTS

1. If and whenever any item in dispute falls to be referred, in accordance with the relevant provision of this agreement, to Independent Accountants for determination, it shall be referred to such firm of chartered accountants:

(a) as the Seller Representative and the Purchaser may agree in writing within ten Business Days after the expiry of the period allowed by the relevant provision of this agreement for the Sellers and the Purchaser to reach agreement over the relevant item in dispute; or

(b) failing such agreement, as shall be nominated for this purpose by the President of the Institute of Chartered Accountants in England and Wales (the ICAEW) for the time being on the joint application of the Sellers and the Purchaser made by way of written notice by either the Seller Representative or the Purchaser or, where either the Seller Representative or the Purchaser refuses to make a joint application, on the application of either the Seller Representative or the Purchaser following the grant of an order by a court of competent jurisdiction for such nomination to be made by the ICAEW.

2. The Seller Representative and the Purchaser shall co-operate in good faith to do everything necessary to procure the effective appointment of the Independent Accountants. The Seller Representative and the Purchaser shall agree terms of engagement with the Independent Accountants as soon as reasonably practicable after the Independent Accountants are nominated and shall not withhold or delay their consent to such terms if they are reasonable and consistent with the provisions of this agreement. The Seller Representative and the Purchaser shall counter-sign the terms of appointment as soon as they are agreed.

3. The Independent Accountants shall act on the following basis:

(a) the Independent Accountants shall act as experts and not as arbitrators;

(b) the item or items in dispute pursuant to paragraph 2 of Part 1 of Schedule 12 and, if applicable, any other item or items in the draft Completion Statement which the Purchaser in its sole discretion reasonably considers to be impacted by the notification of disputed items, shall be notified to the Independent Accountants in writing by the Seller Representative and/or the Purchaser within 10 Business Days of the Independent Accountants' appointment;

(c) their terms of reference shall be as set out in this schedule, and the Independent Accountant’s determination shall be made in accordance with this agreement;

(d) the Independent Accountants shall limit their review only to the items remaining in dispute and in reviewing any such items, the Independent Accountants may not assign a value to any such item that is greater than the greatest value or less than the smallest value for such item claimed by either party;

(e) the Independent Accountants shall decide the procedure to be followed in the determination, so long as not inconsistent with any provision in this agreement;

(f) the Seller Representative and the Purchaser shall each provide and the Purchaser shall procure that the Group Companies shall provide the Independent Accountants promptly with all access to premises, information, assistance (including assistance from employees) and access to books and records of account, documents, files, working papers and information stored electronically which they reasonably require, and the Independent Accountants shall be entitled (to the extent they consider it appropriate) to base their determination on such information and on the accounting and other records of the Group Companies;


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(g) the determination of the Independent Accountants shall (in the absence of fraud or manifest error) be final and binding on the parties, and in the event of manifest error, the Independent Accountant should rectify such error and the corrected determination becomes final and binding; and

(h) the costs of the determination, including fees and expenses of the Independent Accountants, shall be borne equally as between the Sellers on the one hand and the Purchaser on the other hand.


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Schedule 13

INTERPRETATION

1.In this agreement:

Affiliate means:

a)in the case of a person which is a body corporate, any subsidiary undertaking or parent undertaking of that person and any subsidiary undertaking of any such parent undertaking or any entity which manages and/or advises any such entity or which is managed and/or advised by such entity, in each case from time to time;

b)in the case of a person which is an individual, any spouse, co-habitee and/or lineal descendants by blood or adoption or any person or persons acting in its or their capacity as trustee or trustees of a trust of which such individual is the settlor;

c)in the case of a person which is a limited partnership, the partners of the person or their nominees or a nominee or trustee for the person, or any investors in a fund which holds interests, directly or indirectly, in the limited partnership or any entity which manages and/or advises any such entity; and

d)any affiliate (within the meaning of paragraphs (a) to (c) above) of any person referred to in paragraphs (a) to (c) above,

but (i) no Group Company and no portfolio company of an Institutional Seller (or any of its affiliates) shall be deemed to be an affiliate of an Institutional Seller (and vice versa));

Accounts means the consolidated unaudited financial statements of the Group for the year ended on the Accounts Date (including the unaudited balance sheets of the Group as at that date and the unaudited profit and loss accounts for that period) and the notes and directors' reports relating to them, a copy of each of which is in the Agreed Form;

Accounts Date means 31 December 2020;

Actual Net Debt means the actual amount of Net Debt of the Group Companies at the Effective Time, as calculated in accordance with paragraph 1 of Part 1 of Schedule 12 and Part 2 of Schedule 12 and set out in the Completion Statement, and agreed and determined in accordance with Part 1 of Schedule 12;

Actual Transaction Expenses means the actual amount of Transaction Expenses as at the HSR Satisfaction Date, as calculated after Completion in accordance with Schedule 12 and set out in the Completion Statement;

Actual Working Capital means the actual amount of Working Capital of the Group Companies at the Effective Time, as calculated in accordance with paragraph 1 of Part 1 of Schedule 12 and Part 2 of Schedule 12 and set out in the Completion Statement and agreed and determined in accordance with Part 1 of Schedule 12;

Adjustment Actual Working Capital means the amount equal to the Actual Working Capital less the Converted Target Working Capital;

Adjustment Estimated Working Capital means the amount equal to the Estimated Working Capital less the Converted Target Working Capital;


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Agreed Form means, in relation to any document, the form of that document which has been initialled or expressly identified in writing (including my email) for the purpose of identification by the Sellers’ Solicitors and the Purchaser's UK Solicitors or otherwise by or on behalf of the Sellers and the Purchaser with such changes as the Sellers and the Purchaser may agree in writing before Completion;

Aggregate Consideration means the consideration for the sale of the Shares determined in accordance with this Agreement;

Articles means the articles of association of Depop Limited from time to time;

Author has the meaning given to it at paragraph 3.6(i) of Schedule 7;

B Shares has the meaning given in the Articles;

Business Day means a day (other than a Saturday or Sunday) on which banks are generally open in London or New York for normal business;

Business Warranties means all Warranties except the Fundamental Warranties, the Fundamental Business Warranties and the Tax Warranties;

Cash means the aggregate (without double counting) of: (a) cash in hand or credited to any account with any banking, financial, acceptance credit, lending or other similar institution or organisation (and any accrued and outstanding interest thereon) of the Group Company as at the Effective Time, which is in each case available to be lent, spent, or otherwise used in the operations and financing of the Group as set out in the Completion Statement and (b) including those items required to be included in Cash in accordance with Part 2 of Schedule 12, and including the positive line items included within the calculation of “Net Debt” of tab ‘Detailed B-Sheet’ of the Pro Forma Consideration Calculation Spreadsheet in each case as calculated in accordance with the provisions of paragraph 1 of Part 1 of Schedule 12 and Part 2 of Schedule 12, as agreed and determined in accordance with Part 1 of Schedule 12;

Cause means a cessation of employment which occurs as a result of:

(a) resignation, other than:

(i)in response to a repudiatory breach by the Purchaser, a member of the Purchaser’s Group or the relevant Group Company employer; or

(ii)for a reason set out in parts (b) and/or (c) of the definition of Good Reason;

(b) dismissal for reasons of fraud, embezzlement wilful misconduct, gross negligence or conviction of a criminal offence (other than an offence under any road traffic legislation for which a fine or non-custodial penalty is imposed);

(d) any other reason justifying summary dismissal under the common law of England and Wales (other than a reason relating to ill-health, injury or disability or a reason relating to the loss, withdrawal and/or expiry of any work permit, visa or other permission to work in a particular country);

Change of Control, in relation to the Purchaser’s Parent, occurs on the date that (i) any person (which shall include any group of persons acting in concert) becomes the beneficial owner of stock in the Purchaser’s Parent that, taken together with stock already beneficially owned by such person, constitutes more than 50% of the total fair market value or total voting power of the outstanding stock of the Company (including, for the avoidance of doubt, any acquisition or cancellation of stock by the Company or by any of its subsidiaries, or any other transaction including any change in the rights attaching to any securities, as a result of which the


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percentage interest of that person in the total fair market value or total voting power of the outstanding stock of the Purchaser’s Parent increases to more than 50%); and/or (ii) any merger, organization, business combination or consolidation of the Purchaser’s Parent or one or more of its subsidiaries with or into any other company is consummated, other than a merger, reorganisation, business combination or consolidation which would result in the holders of the voting securities of the Purchaser’s Parent outstanding immediately prior thereto holding securities that represent immediately after such merger, reorganisation, business combination or consolidation more than 50% of the combined voting power of the voting securities of the Purchaser’s Parent or the surviving company or the parent of such surviving company;

CMA means the UK Competition and Markets Authority;

CMA Briefing Paper means the briefing paper to be submitted to the CMA in relation to the proposed acquisition of the Securities by the Purchaser;

COBRA means the United States Consolidated Omnibus Budget Reconciliation Act of 1985, as amended;

the Code means the Internal Revenue Code of 1986, as amended;

Company means Depop Limited;

Company Products means all products or services produced, marketed, licensed, sold, distributed or performed by or on behalf of a Group Company, including, without limitation, the Depop marketplace operated by the Group Companies through the Group Companies’ websites and mobile applications.;

Company Option Plans means, collectively, each share option plan, programme or arrangement of the Company under which the option to acquire Securities has been granted to any person, including (but not limited to) the EMI Plan and the CSOP, in each case, including any appendixes or amendments thereto;

Company Source Code has the meaning given at paragraph 3.6(j) of Schedule 7;

Completion means completion of the sale and purchase of the Securities in accordance with this agreement or the date thereof, as the case may be;

Completion Power of Attorney means a power of attorney in the Agreed Form under which the Purchaser shall be appointed to be such Seller’s attorney with full power, pending registration of the Purchaser or its nominee as the legal holder of the Securities to exercise all or any rights, powers and privileges of ownership which are capable of exercise by such Seller in the capacity of registered holder of the relevant Securities;

Completion Statement means the statement to be prepared in accordance with Schedule 12 and in the form set out in the tab ‘Detailed B-Sheet’ as set out in Part 3 of Schedule 12;

Conditions has the meaning given at Clause 3.1;

Converted Target Working Capital means the Target Working Capital as translated into USD at the closing mid-point rate three Business Days prior to the Scheduled Completion Date, as published in the London edition of the Financial Times on such date;

Continuing Employee means an Employee who will not continue to provide services to the Group or the Purchaser’s Group immediately following Completion;

CSOP means the Depop Limited Schedule 4 Company Share Option Plan adopted on 23 October 2019;

CTA 2010 means the Corporation Tax Act 2010;

Damages Payment has the meaning given at paragraph 9 of Schedule 8;


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Data Room means the electronic data room hosted by Merrill Datasite and maintained by the Sellers as at 28 May 2021, and as contained on a USB drive titled "Project Popcorn" provided by the Sellers' Solicitors to the Purchaser’s Solicitors on behalf of the Purchaser on or around 30 May 2021;

Deed of Accession means the deed of accession to this agreement, in the Agreed Form;

Defaulting Party has the meaning given in Clause 4.6;

Deferred Consideration Amount has the meaning given to it in Clause 7.2;

Deferred Consideration Etsy Shares has the meaning given to it in Clause 7.3;

Deferred Payment Date has the meaning given in Clause 7.3

Depop Deal Team means those persons identified as such in the Disclosure Letter;

Depop Shareholders’ Agreement means the shareholders agreement in respect of the Company between, among others, the Institutional Shareholders and the Senior Managers, dated 3 June 2019, as amended from time to time;

Digital Services Tax means the digital services tax on digital services revenues chargeable under or pursuant to Part 2 of, and Schedules 8 to 10 to, the Finance Act 2020, or any other tax of an equivalent or similar nature, whether imposed in the United Kingdom or elsewhere;

Disclosure Letter means the letter of that name of the same date as this agreement from the Senior Managers to the Purchaser;

Disclosed means fairly disclosed (with sufficient details to enable a reasonable purchaser in the position of the Purchaser to identify the nature and scope of the matter disclosed);

Effective Time means 11.59pm on the HSR Satisfaction Date;

Electronic Communication means an electronic communication as defined in the Electronic Communications Act 2000;

Encumbrance means any security interest, mortgage, charge (fixed or floating), pledge, lien, option, right to acquire, right of pre-emption, “put” or “call” rights, exchangeable or convertible securities, assignment by way of security or trust arrangement for the purpose of providing security or other security interest of any kind (including any retention arrangement), or any agreement to create any of the foregoing;

EMI Plan means the Depop Limited Share Option Scheme established on 20 May 2014;

Employee means a person employed by the Company;

ERISA means the Employee Retirement Income Security Act of 1974, as amended;

Estimated Net Debt means the Sellers’ good faith estimate of the amount of the Actual Net Debt at the Effective Time as notified by the Seller Representatives in accordance with clause 5.5;

Estimated Transaction Expenses means the Sellers’ good faith estimate of the amount of the Transaction Expenses as at the Effective Time, as notified by the Seller Representatives in accordance with Clause 5;

Estimated Working Capital means the Sellers’ good faith estimate of the amount of Working Capital as at the Effective Time as notified by the Seller Representatives in accordance with clause 5.5;


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Etsy RSUs means stick units representing shares of common stock of the Purchaser’s Parent granted under the Etsy, Inc. 2015 Equity Incentive Plan;

Etsy Shares means the common stock, par value $0.001, of Purchaser’s Parent;

Excess Recovery has the meaning given at paragraph 9 of Schedule 9;

Family Member in relation to an individual means his or her spouse, civil partner or child (including step-children and adopted children);

Final Consideration Calculation Spreadsheet has the meaning given in Clause 5.7;

Fundamental Warranties means the Warranties set out at paragraphs 1.1(a), 1.3(a), 1.14(a), 1.14(b), 1.14(c), 1.14(d), and 1.14(e) of Schedule 7;

Fundamental Warranty Claim means a claim by the Purchaser the basis of which is that a Fundamental Warranty is, or is alleged to be, untrue, inaccurate or misleading;

Fundamental Business Warranties means the Warranties set out at paragraphs 1.6, 1.11, 3.1(b), 3.6(b) and 3.12(c) of Schedule 7;

GAAP means the Financial Reporting Standard 102 issued by the Financial Reporting Council (“FRC”), applicable Abstracts issued by the FRC, the requirements of applicable law, and applicable pronouncements by the Conduct Committee of the FRC;

Good Reason means the termination of a Senior Manager’s continuous employment by the Purchaser, a member of the Purchaser’s Group or the relevant Group Company employer as a result of:

(a) death;

(b) having suffered a physical or mental deterioration (in each case, which is sufficiently serious permanently or indefinitely to prevent the relevant person from continuing his or her employment);

(c) becoming a full time carer for a Family Member who has suffered a physical or mental deterioration (in each case, which is of a sufficiently serious and long-term nature to justify the relevant person discontinuing his or her employment);

(d) wrongful or unfair dismissal;

(e) any other reason not constituting Cause.

Good Leaver Payment Date has the meaning given to it at Clause 7.8;

Government Agency means any government, any department, officer or minister of any government and any governmental, semi-governmental, administrative, fiscal, judicial or quasi-judicial agency, authority, board, commission, tribunal or entity;

Group means the Company and its Subsidiaries;

Group Companies means the Company and the Subsidiaries and Group Company means any of them;

Guaranteed Obligations means all present and future obligations and liabilities of the Purchaser under this agreement or any Transaction Document, or arising from any termination of this agreement or any Transaction Document, including all money and liabilities of any nature from time to time due, owing or incurred by the Purchaser under this agreement or arising from any termination of this agreement;


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HM Revenue and Customs means Her Majesty's Revenue and Customs (or, where applicable, a person or persons which previously had responsibility for any function for which Her Majesty's Revenue and Customs has responsibility);

HSR Satisfaction Date means the date on which the HSR Condition is duly satisfied;

holding company has the meaning given in section 1159 of the Companies Act 2006;

Independent Accountants means such independent firm of internationally recognised chartered accountants or a boutique speciality firm with an active practice in the UK focused on post-merger and acquisition purchaser price resolution, as may be appointed under paragraph 1 of Part 3 of Schedule 12;

Initial Cash Consideration means that part of the consideration for the sale of the Shares set out in Clause 5 as is payable in cash;

Initial Consideration means that part of the consideration for the sale of the Shares set out in Clause 5;

Insolvency Act means the Insolvency Act 1986;

Intellectual Property Rights means (i) copyright, patents, database rights domain names, and rights in trade marks, designs, know-how and confidential information (whether registered or unregistered), (ii) applications for registration, and rights to apply for registration, of any of the foregoing rights and (iii) all other intellectual property rights and equivalent or similar forms of protection existing anywhere in the world;

Issue Price means, in respect of Etsy Shares, the 10-Day VWAP;

ITEPA 2003 means the Income Tax (Earnings and Pensions) Act 2003;

Key Employees means [***] and [***];

Key Employee Transfer Letters means:

(a) the transfer letters for each of the Senior Managers in the Agreed Form dated on or around the date of this agreement, duly executed by the Purchaser and the Senior Managers; and

(b) the transfer letters for each of the Key Employees (other than the Senior Managers) in the Agreed Form, duly executed by the Purchaser and such Key Employees prior to or at Completion;

Leakage means (other than to the extent occurring between Group Companies):

(a) any dividend (in cash or in kind) or distribution declared, paid or made (whether actual or deemed) by a Group Company to, or at the direction of, any Seller;

(b) any payments made (or future benefits granted) to (or assets, rights or benefits transferred or surrendered to, or liabilities assumed, indemnified, guaranteed, secured or incurred to or for the benefit of) any Seller, any of their Affiliates or any person connected with a Seller, by any Group Company;

(c) any payments made or agreed to be made by any Group Company to, or at the direction of or for the benefit of, any Seller or any person connected with such Seller, in respect of any share capital or other securities of any Group Company being issued, redeemed, purchased or repaid, or any other return of capital;


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(d) the waiver, deferral or discount by any Group Company of any liability or obligation owed to such Group Company by any Seller, or any person connected with such Seller (other than a Group Company);

(e) the purchase by any Group Company from any Seller, or any person connected with such Seller, of any assets;

(f) the transfer by any Group Company to any Seller or any affiliate of any Seller or any connected person of a Seller of any assets;

(g) any payment by a Group Company of, or obligation on a Group Company to pay or incur, any costs, professional fees, expenses or transaction bonuses (other than [***] of up to [***] in aggregate) to any person (including, but not limited to, any consulting, advisory, management fee or commission) in connection with the transactions contemplated by this agreement or as result of Completion or any disposal of the Securities, including, but not limited to, any costs, professional fees and expenses relating to any preparatory work carried out on behalf of any of the Sellers;

(h) any agreement or arrangement made or entered into by any Group Company to do or give effect to any matter referred to in (a) to (g) above; or

(i) any amount in respect of Taxation referable to, or arising in connection with, any of the matters referred to in paragraphs (a) to (h) which is incurred (or which would have been incurred but for the use of any Relief (as defined in Schedule 6)) by a Group Company, excluding any recoverable VAT that is actually recovered by a Group Company,

but excludes Permitted Leakage, and Leakage shall be calculated net of any reduction in Tax payable, or repayment of Tax received, by a Group Company as a result of the Leakage or matter giving rise to it. For the avoidance of doubt, any payments made by a Group Company pursuant to the lease arrangements provided for in the documents in folder 15.1.1 of the Data Room shall not constitute Leakage to or for the benefit of Red Circle Investments S.R.L.;

Leaver means any Senior Manager who shall become a Leaver immediately upon the earliest of (a) the Senior Manager giving notice that he or she will cease to be an employee of a Group Company or any member of the Purchaser’s Group, or (b) otherwise ceasing to be, an employee of a Group Company or any member of the Purchaser’s Group;

Long Stop Date has the meaning given in Clause 3.2;

Losses means losses, costs, damages, liabilities, charges, expenses and penalties;

Management Accounts means the unaudited management accounts (including the profit and loss statement and the related accounting trial balance) of the Group for the period of 4 months ended 30 April 2021, in the Agreed Form;

Material Adverse Effect means, for the purposes of Clause 11.8(b) only, any change, effect, event, occurrence, state of facts, circumstance or development that, individually or in the aggregate, has had, or will have a material adverse effect on the business, financial condition or results of operations of the Group, taken as a whole; provided, however, that any such change or effect caused by or resulting from any of the following shall not be considered, and shall not be taken into account in determining the existence of, a “Material Adverse Effect”: (i) any fact, matter or circumstance that has been Disclosed (other than a matter Disclosed in the Supplemental Disclosure Letter, if any, or otherwise Disclosed after the date of this agreement and before Completion); (ii) the announcement, pendency or consummation of the transactions contemplated by this agreement, or the execution or announcement of this agreement or the performance of obligations hereunder; (iii) conditions affecting the global economy or the financial, credit, commodities or capital markets as a whole, or generally affecting the industries in which the Group conducts its business;;


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(iv) any change in or adoption of, any applicable laws or GAAP; (v) the engagement by the United Kingdom in hostilities or the escalation thereof, whether or not pursuant to the declaration of a national emergency or war, or the occurrence or the escalation of any military or terrorist attack upon the United Kingdom; (vi) earthquakes, hurricanes, tornadoes, floods or other natural disasters; (vii) the failure by the Group to meet any revenue or earnings projections, forecasts or predictions (it being understood that the underlying causes of any such decline, change, decrease or failure may, if they are not otherwise excluded from the definition of Material Adverse Effect, be taken into account in determining whether a Material Adverse Effect has occurred); (viii) any action taken by, or with the prior written consent of, the Purchaser with respect to the transactions contemplated by this agreement or with respect to the Group; (ix) compliance with the terms of, or the taking of any action required or permitted by, this agreement; (x) the effect of any epidemic, pandemic or disease outbreak (including the COVID-19 pandemic or any measures taken by Governmental Agencies in response thereto,) which occurs after the date of this agreement; or (xi) any such change or effect that is caused by any delay in consummating Completion as a result of any violation or breach by the Purchaser of any covenant, agreement, representation or warranty contained in this agreement which has prevented the satisfaction of the Conditions, provided, however, that with respect to each of paragraph (ii) through (v) and (ix) any change, effect, event, occurrence, state of facts, circumstance or development referred to above shall be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such change, effect, event, occurrence, state of facts, circumstance or development has a disproportionate effect on the Group, taken as a whole, compared to other participants in the industries in which such companies primarily conduct their businesses;

Material Contract means (i) any contract under which any Group Company is required to pay to the counterparty more than £500,000 (or the local equivalent) in any calendar year or under which the counterparty is required to pay to any Group Company more than £500,000 (or the local equivalent) in any calendar year; and/or (ii) the contracts contained or scheduled in Data Room folder 8.1;

Merger Notice means a notice to the CMA in the prescribed form as contemplated by Section 96 of the Enterprise Act 2002 (as amended);

Money Laundering Laws has the meaning given at paragraph 1.7 of Schedule 7;

Net Debt means the net (without double counting) of: (a) amounts outstanding under third party loans and any other indebtedness for borrowed money or any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, all obligations under finance leases, all obligations in respect of acceptances issued or created, all liabilities secured by a lien on any property, any liabilities in respect of financial derivative liabilities, all guarantee obligations, including all accrued but unpaid interest and other charges (including prepayment fees, breakage costs, hedge termination costs or any other charges or costs which arise on or as a consequence of Completion) including the Specified Adjustment Amount and those items required to be included in Net Debt in accordance with Part 2 of Schedule 12 and including the negative line items included within the calculation of “Net Debt” tab ‘Detailed B-Sheet’ of the Pro Forma Consideration Calculation Spreadsheet less (b) Cash, in each case as calculated in accordance with provisions of Part 1 of Schedule 12 and Part 2 of Schedule 12 and as set out in the Completion Statement and agreed and determined in accordance with Part 1 of Schedule 12;

Non-Defaulting Party has the meaning given in Clause 4.6;

Non-Qualifying CSOP Options means (i) any Options granted under the CSOP after 1 January 2021, and (ii) those Options granted under the CSOP to [***] on 14 February 2020;

Open Source Materials means software or other material that is distributed as “free software,” “open source software” or under similar licensing or distribution terms (including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL) the Sun Industry Standards License (SISL) and the Apache License);


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Option Exercise Notice means the exercise notice entered into by each Optionholder prior to Completion by way of a deed poll, in the Agreed Form;

Optionholder Consideration means that part of the Initial Consideration which is payable to an Optionholder Seller in consideration for the sale of any Shares that were issued to such Optionholder on the exercise of any Options in accordance with Schedule 10;

Optionholders means the holders of the Options and Optionholder shall mean any one of them;

Optionholder Seller means each Optionholder that is selling Shares pursuant to this agreement which were issued as a result of the exercise of Options in accordance with Schedule 10;

Options means the options over Ordinary Shares granted under the CSOP, the EMI Plan or otherwise, in each case which are outstanding immediately prior to Completion;

Ordinary Shares has the meaning given to it in the Articles;

Other Seller has the meaning given in on page 1 of this agreement;

Per Share Initial Consideration means:

(a) the Initial Consideration; less

(b) £1, payable in respect of any deferred shares; plus

(c) the aggregate exercise price that would have been payable to exercise all of the Options that will lapse and in respect of which the Purchaser’s Parent will grant Etsy RSUs or a cash payment will be made in accordance with paragraphs 3.2, 3.3 and 3.4 of Schedule 10;

with the result of (a) plus (b) above divided by the aggregate of: (i) the total number of Shares in issue immediately prior to Completion, other than any deferred shares; and (ii) the total number of Shares subject to the Options that will lapse and in respect of which the Purchaser’s Parent will grant Etsy RSUs or a cash payment will be made in accordance with paras 3.2 and 3.3 of Schedule 10;

Permitted Leakage means:

(a) in relation to Sellers (other than Institutional Sellers): (i) the payments of base salary and bonus payments in the ordinary course of business not linked to the Transaction, excluding any discretionary payments which are not customarily paid annually; (iii) the provision of all other emoluments, pensions and benefits and reimbursement of expenses, in accordance with the terms of service contracts Disclosed to the Purchaser prior to the date of this agreement, together with any income tax and social security contributions arising as a result;

(b) any matter undertaken at the written request of the Purchaser and acknowledged as Permitted Leakage;

(c) any matter that has been has been or will be taken into account in calculating the Actual Net Debt, Actual Working Capital or Actual Transaction Expenses or which is a Specified Adjustment Amount;

(d) any matter that is specifically required or specifically permitted under the Transaction Documents, together with any amount in respect of Taxation arising as a result;


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(e) any matter in respect of which the Purchaser is entitled to indemnification or compensation under any other provision of this agreement, in each case only to the extent actually indemnified or compensated; and

(f) the grant of any Promised Option;

Post-Tax Consideration means that portion of the Aggregate Consideration payable to a Senior Manager, less any Tax incurred by such Senior Manager (including, for the avoidance of doubt, any secondary (employer’s) Class 1 National Insurance contributions which the Senior Manager has agreed to bear) as a result of:

(a) the sale of his or her Shares pursuant to this agreement;

(b) the vesting or exercise of any options related to any Shares sold pursuant to this agreement; or

as calculated in accordance with the Final Consideration Calculation Spreadsheet.

Phase 1 Investigation means an investigation by the CMA to enable it to determine whether to make a reference under Section 33 of the Enterprise Act 2002 (as amended);

Phase 2 Reference means a reference pursuant to Section 33 of the Enterprise Act 2002 (as amended) to the chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013;

Preferred Shares has the meaning given in the Articles;

Pro Forma Consideration Calculation Spreadsheet means all the tabs within the excel file in the Agreed Form as delivered electronically by the Sellers to the Purchaser on the date of this agreement. For the avoidance of doubt the accounting policies and principles set out in Schedule 12 and the definitions in Schedule 13 of this agreement shall take precedence over the form of the Completion Statement and the Pro Forma Consideration Calculation Spreadsheet. Save as expressly contemplated in this agreement, the numbers in the Pro Forma Consideration Calculation Spreadsheet are purely indicative and prepared as at 27 May 2021;

Prohibited Payment has the meaning given at paragraph 1.8 of Schedule 7;

Promised Options means those Options which the Company may grant after the date of this agreement, as Disclosed in the Data Room at folder 7.1.2.4;

Properties means the properties shortly described in Schedule 5 and includes every part of each of them and Property means any of them;

Purchaser's Accountants means Deloitte LLP ;

Purchaser's Advisers means the Purchaser's UK Solicitors, the Purchaser’s US Legal Counsel, the Purchaser's Accountants and Deloitte Tax LLP;

Purchaser's Deal Team means those persons identified as such in the Disclosure Letter for the purposes of Clause 11.15;

Purchaser's Group means the Purchaser and all its subsidiary undertakings, all its parent undertakings and all the other subsidiary undertakings of each of its parent undertakings (other than the Group Companies);


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Purchaser's Parent's Charter means the Certificate of Incorporation of the Purchaser’s Parent, as amended from time to time;

Purchaser's Parent's Bylaws means the Bylaws of the Purchaser’s Parent, as amended from time to time;

Purchaser's Parent's Organizational Documents means collectively, the Purchaser’s Parent’s Charter and the Purchaser’s Parent’s Bylaws;

Purchaser's UK Solicitors means Allen & Overy LLP of One Bishops Square, London E1 6AD;

Purchaser's US Legal Counsel means Fenwick & West LLP of 902 Broadway, Suite #14, New York, NY 10010, United States;

Scheduled Completion Date has the meaning given at Clause 4.5;

Securities means the Ordinary Shares, the Preferred Shares, and the B Shares;

Securities Act means Securities Act of 1933, as amended;

Seller's Group means in relation to an Institutional Seller, that Seller and all its subsidiary undertakings, all its parent undertakings and all the other subsidiary undertakings of each of its parent undertakings (other than the Group Companies);

Seller Representatives means: (i) each Institutional Seller, in respect of itself only; and (ii), in respect of all other Sellers, Maria Raga and Francois Callens, acting jointly;

Sellers’ Solicitors means Weil Gotshal & Manges (London) LLP of 110 Fetter Lane, Holborn, London EC4A 1AY;

Senior Managers means [***] and [***], each a Senior Manager;

Senior Manager Borrower means each of [***] and [***];

Senior Manager Loan Amount means, in respect of each Senior Manager Borrower, the advance (including interest) due and repayable by such Senior Manager Borrower pursuant to the Senior Manager Loan to which he or she is a party;

Senior Manager Loan means each of

(1)the manager loan agreement between the Company and [***], dated 9 September 2019;

(2)the manager loan agreement between the Company and [***], dated 6 June 2019;

(3)the manager loan agreement between the Company and [***], dated 6 June 2019; and

(4)the manager loan agreement between the Company and [***], dated 23 July 2020,

(together the Senior Manager Loans)

Shares means all the issued and to be issued shares in the capital of the Company;

Source Code means any software source code or database specifications or designs, or any material proprietary information or algorithm contained in or relating to any software source code or database specifications or designs of any Intellectual Property Rights;


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Specified Adjustment Amount means the specific net debt item of $15,000,000 agreed between the parties, further details of which were confirmed on behalf of the Purchaser and the Seller by email between their respective legal counsel on the date of this agreement;

Subsidiaries means all the companies of which details are set out in Schedule 3, and Subsidiary means any of them;

subsidiary has the meaning given in section 1159 of the Companies Act 2006;

subsidiary undertaking and parent undertaking have the meanings given in section 1162 of the Companies Act 2006;

Supplemental Disclosure Letter has the meaning given in 11.7;

Tax Covenant Claim means a claim under the Tax Covenant in Schedule 6;

Tax Warranties means the statements set out in paragraphs 4 and 6.11 – 6.15 of Schedule 7;

Tax Warranty Claim means a claim by the Purchaser the basis of which is that a Tax Warranty is, or is alleged to be, untrue, inaccurate or misleading;

Target Working Capital means [***];

Taxation means all forms of taxation, duties, imposts and levies, whether of the United Kingdom or elsewhere, including income tax (including income tax or amounts equivalent to or in respect of income tax required to be deducted or withheld from or accounted for in respect of any payment), corporation tax, advance corporation tax, capital gains tax, inheritance tax, VAT, environmental tax, Digital Services Tax, gross receipts, payroll, sales, use, employment, franchise, withholding, real property, personal property, sales, use, escheat and unclaimed property, customs and other import or export duties, excise duties, stamp duty, stamp duty reserve tax, stamp duty land tax, payroll or employment taxes, national insurance, social security, apprenticeship levy or other similar contributions, and any interest, surcharge, penalty or fine in relation thereto;

Tax Authority means HM Revenue and Customs or any other taxing or other authority (whether within or outside the United Kingdom) competent to impose, administer or collect any Taxation;

Technology means any and all of the following: works of authorship, computer programs, Source Code and executable code, whether embodied in software, firmware or otherwise, assemblers, applets, compilers, user interfaces, application programming interfaces, protocols, architectures, documentation, annotations, comments, designs, files, records, schematics, models, data, data structures, databases, data compilations and collections, inventions (whether or not patentable), invention disclosures, discoveries, improvements, technology, proprietary and confidential ideas and information, tools, concepts, techniques, methods, processes, formulae, patterns, algorithms and specifications, customer lists and supplier lists and any and all instantiations or embodiments of the foregoing or any Intellectual Property Rights in any form and embodied in any media;

Transaction Expenses means any unpaid professional fees, professional expenses or charges or other disbursements of professional and other advisers to the extent payable or that will become payable in connection with or as a result of the transactions contemplated by this agreement by any Group Company, as set out in the Completion Statement, in each case including unrecoverable VAT thereon;

Transaction Documents means: this agreement; the Disclosure Letter; the Key Employee Transfer Letters; and each Option Exercise Notice;

Unconditional Date means the date on which the Conditions are satisfied;


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US Employees means those employees employed by Depop Inc.;

US Employee Plans has the meaning given at paragraph 6.15(a) of Schedule 7;

VAT means value-added tax chargeable under or pursuant to the VATA 1994 or Council Directive 2006/112/EC or any other tax of a similar nature whether imposed in the United Kingdom, a member state of the European Union or elsewhere;

VATA 1994 means the Value Added Tax Act 1994;

W&I Insurer means Liberty Mutual Insurance Europe SE (LMIE);

W&I Insurance Policy means the warranty and indemnity insurance policy of the Purchaser to be incepted with the W&I Insurer in relation to this agreement;

WARN ACT means the United States Worker Adjustment Retraining Notification Act of 1988, as amended;

Warranties means the statements set out in Schedule 7;

Warranty Claim means a claim by the Purchaser the basis of which is that a Warranty is, or is alleged to be, untrue, inaccurate or misleading;

Working Capital means the total of the aggregate of current assets of the Group Companies (excluding Cash, investments, IT equipment, deferred tax but including those items required to be included in Working Capital in accordance with Part 2 of Schedule 12), less the aggregate amount of liabilities of the Group Companies (excluding Net Debt and Transaction Expenses but including those items required to be included in Working Capital in accordance with Part 2 of Schedule 12 and including the line items included within the calculation of ‘Definitional NWC’ in row 47 of the tab ‘Group NWC’ of the Pro Forma Consideration Calculation Spreadsheet in each case as calculated in accordance with provisions of Part 1 of Schedule 12 and Part 2 of Schedule 12;

10-Day VWAP means the volume weighted average price of an Etsy Share traded on the Nasdaq Capital Market (or, if the Etsy Shares are no longer traded on the Nasdaq Capital Market, then the relevant U.S. national securities exchange on which they are traded) for the 10 trading days ending on the trading day immediately preceding the Deferred Payment Date or Good Leaver Payment Date, as applicable;

2.In this agreement, except to the extent the contrary intention appears, any reference, express or implied, to an enactment (which includes any legislation in any jurisdiction) includes:

a.that enactment as amended, extended or applied by or under any other enactment (before, on or after the date of this agreement);

b.any enactment which that enactment re-enacts (with or without modification); and

c.any subordinate legislation (including regulations) made (before, on or after the date of this agreement) under that enactment, including (where applicable) that enactment as amended, extended or applied as described in subparagraph (a), or under any enactment which it re-enacts as described in subparagraph (b).

3.In this agreement:

(a) words denoting persons include bodies corporate and unincorporated associations of persons;

(b) references to an individual/a natural person include his estate and personal representatives;


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(c) subject to Clause 19, references to a party to this agreement include the successors or assigns (immediate or otherwise) of that party;

(d) a person shall be deemed connected with another if that person is connected with that other within the meaning of section 1122 of the CTA 2010 (provided, however, that a portfolio company of an Institutional Seller (or any of its affiliates) shall be deemed not to be connected with that Institutional Seller (and vice versa));

(e) the words including and include shall mean including without limitation and include without limitation, respectively;

(f) the phrases “to the extent” and “to the extent that” are used to indicate an element of degree and are not synonymous with the word “if”;

(g) any reference importing a gender includes the other genders;

(h) any reference to a time of day is to London time;

(i) any reference to £ is to pound sterling and any reference to $ or USD is to United States dollars;

(j) any reference to writing includes typing, email, printing, lithography, photography and facsimile but excludes any other form of Electronic Communication;

(k) any reference to a document is to that document as amended, varied or novated from time to time otherwise than in breach of this agreement or that document;

(l) any reference to a company includes any company, corporation or other body corporate wheresoever incorporated.

4.If there is any conflict or inconsistency between a term in the body of this agreement and a term in any of the schedules or any other document referred to or otherwise incorporated into this agreement, the term in the body of this agreement shall take precedence, unless the relevant schedule or other document which is referred to or otherwise incorporated into this agreement expressly provides that the term in it is to take precedence over the term in the body of this agreement.

5.The eiusdem generis rule does not apply to this agreement. Accordingly, specific words indicating a type, class or category of thing shall not restrict the meaning of general words following such specific words, such as general words introduced by the word other or a similar expression. Similarly, general words followed by specific words shall not be restricted in meaning to the type, class or category of thing indicated by such specific words.

6.A reference in this agreement to any English legal term for any action, remedy, method or form of judicial proceeding, legal document, court or any other legal concept or matter shall be deemed to include a reference to the corresponding or most similar legal term in any jurisdiction other than England, if such jurisdiction is relevant to the transactions contemplated by this agreement or the terms of this agreement.


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SIGNATORIES

PURCHASER

EXECUTED by ) /s/ Merilee Buckley

ETSY IRELAND HOLDING ) Merilee Buckley

UNLIMITED COMPANY ) Director

PURCHASER’S PARENT

EXECUTED by ) /s/ Josh Silverman

ETSY, INC. ) Josh Silverman ) CEO

[***]

[Project Popcorn – Signature page to SPA]

EXHIBIT 31.1

CERTIFICATION

I, Josh Silverman, certify that:

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:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Josh Silverman____________

Josh Silverman
President and Chief Executive Officer (Principal Executive Officer)

Date: August 4, 2021

EXHIBIT 31.2

CERTIFICATION

I, Rachel Glaser, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Rachel Glaser________

Rachel Glaser

Chief Financial Officer

(Principal Financial Officer)

Date: August 4, 2021

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Josh Silverman, certify that the Quarterly Report of Etsy, Inc. on Form 10-Q for the quarterly period ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Etsy, Inc.

/s/ Josh Silverman____________

Josh Silverman

President and Chief Executive Officer (Principal Executive Officer)

Date: August 4, 2021

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Rachel Glaser, certify that the Quarterly Report of Etsy, Inc. on Form 10-Q for the quarterly period ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Etsy, Inc.

/s/ Rachel Glaser________

Rachel Glaser

Chief Financial Officer

(Principal Financial Officer)

Date: August 4, 2021