Q Financial Results. May 8, 2018

Transcription

1 Q Financial Results May 8, 2018

2 Forward-looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. Forwardlooking statements include statements related to our business strategy, market size, financial guidance and key drivers thereof, the impact of our focus areas and key initiatives, our product launch roadmap and potential future growth. Forward-looking statements include all statements that are not historical facts. In some cases, forwardlooking statements can be identified by terms such as anticipates, believes, could, estimates, expects, may, plans, will, intends, or similar expressions and the negatives of those words. Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include: (1) our history of operating losses; (2) the fluctuation of our quarterly operating results; (3) our ability to implement our business strategy; (4) our ability to attract and retain an active and engaged community of Etsy sellers and Etsy buyers; (5) macroeconomic events that are outside of our control; (6) our ability to recruit and retain employees; (7) the importance to our success of the trustworthiness of our marketplace and the connections within our community; (8) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of Etsy sellers and Etsy buyers; (9) the effectiveness of our marketing efforts; (10) the effectiveness of our mobile solutions for Etsy sellers and Etsy buyers; (11) our ability to expand our business in our core geographic markets; (12) regulation in the area of privacy and protection of user data; (13) our dependence on third-party payment providers; and (14) the potential misuse or disclosure of sensitive information about our members and the potential for cyber-attacks. These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2017, and subsequent reports that we file. Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements. This presentation is a high-level summary of our Q financial results. For more information please refer to our press release dated May 8, 2018 and filings with the SEC 2

3 Q1 Key Accomplishments and Highlights 1 Accelerated GMS and Revenue Growth with stable margins 2 Improved buyer experience driving conversion rate gains 3 Created efficiencies from key foundational investments 4 Executed a $345 Million Convertible Debt Offering 5 Repurchased approximately $70 Million of Etsy shares 6 Raised 2018 guidance for GMS, Revenue and Adjusted EBITDA Margin 3

4 Our Strategy Continues to Yield Strong Financial Results GMS $861M +19.8% Y/Y Revenue $121M +24.8% Y/Y Net Income $13M $0.10 EPS 1 Adjusted EBITDA* $26M 21.9% margin +17.6% Y/Y (FX adj.) GMS Growth Revenue Growth Adj. EBITDA Margin* 14.2% 11.8% 13.2% 17.8% 19.8% FX-Neutral GMS 17.6% 18.4% 19.1% 21.5% 23.6% 24.8% 10.0% 12.5% 21.4% 25.6% 21.9% 1Q17 2Q17** 3Q17 4Q17 1Q18 FX-Neutral GMS As-Reported GMS 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 *Reconciliation of non-gaap financial measures is contained in the Appendix. **Revised to reflect the correction of an immaterial error 1 EPS reflects diluted earnings per share, basic EPS is $0.11 4

5 Etsy s Virtuous Marketing Cycle Improved experience Higher LTV enables more marketing spend Leads to a higher conversion rate for new and repeat buyers Leads to a higher LTV 5

6 2018 Balanced Portfolio of Investments Foundational Immediate Longer Term ~20% ~60% ~20% Examples: Help Center Google Cloud Technical Debt Examples: Search & Discovery Trust & Reliability Marketing Capabilities Seller Tools and Services Examples: Discovery Machine Learning Engagement Focused on foundational investments, incremental growth initiatives and longer term projects 6

7 Foundational Investments Support our Product Roadmap More agile development infrastructure to maintain velocity Streamlined code base to improve page load times Focus on improved operational efficiency and use of resources Enhanced experience for buyers and sellers Faster processing speed and page load times More nimble capacity utilization Data and privacy transparency, accountability and security for our community 7

8 Delivering on our Four Key Initiatives Trust & Reliability Search & Discovery Seller Tools & Services Marketing Capabilities We estimate product enhancements launched in Q1 will generate over $75M in annualized GMS 8

9 Search & Discovery: Helps Buyers Find Special Context Specific Ranking Promoted Listings for a wedding dress search without CSR Promoted Listings for a wedding dress search with CSR 9

10 Trust & Reliability: Relieves Friction in the Buying Process Guest Checkout Scarcity Signals New Structured Return Policy Free Shipping Filters Scarcity Badges 10

11 Marketing Capabilities: Unique Inventory Made With Love 11

12 Seller Tools & Services: Enable our Sellers to Drive Growth Targeted Offers Custom Orders 12

13 Q1 Results Highlight Improvements in the Product Experience GMS Growth (y/y) Consecutive quarters of accelerated growth Revenue Growth (y/y) Consecutive quarters of accelerated growth Adj. EBITDA Margin* Solid Adjusted EBITDA margin 14.2% 11.8% 13.2% 17.8% 19.8% FX-Neutral GMS 17.6% 18.4% 19.1% 21.5% 23.6% 24.8% 10.0% 12.5% 21.4% 25.6% 21.9% 1Q17 2Q17** 3Q17 4Q17 1Q18 FX-Neutral GMS As-Reported GMS 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 Focused on initiatives that we believe have the highest probability of driving growth *Reconciliation of non-gaap financial measures is contained in the Appendix. **Revised to reflect the correction of an immaterial error 13

14 New Revenue Categories: Marketplace & Services $33M, up 35.0% Marketplace Services $88M, up 24.7% Services Revenue (optional) Promoted Listings Etsy Shipping Labels Pattern by Etsy 27% 73% Marketplace Revenue (Required) Listing Fee $0.20 listing fee per item Transaction Fee 3.5% transaction fee on goods sold Etsy Payments 3-4% + a flat fee charged in local currency 2.5% - 5% fee for foreign currency transactions 14

15 Condensed Consolidated Statement of Operations 1Q18 1Q17 (in thousands) Revenue $120,912 $96,891 Cost of revenue 41,295 34,659 Gross profit 79,617 62,232 Marketing 26,194 23,454 Product development 20,721 18,116 General and administrative 18,904 22,763 Operating expenses 65,819 64,333 Income (loss) from operations 13,798-2,101 Other (expense) income, net (817) 628 Net income (loss) $12,967 ($421) Net income (loss) per share diluted $0.10 $

16 Convertible Debt Transaction Launch Date: March 8, 2018 Issue: Convertible Senior Notes due 2023 Offering Size: $300 million Greenshoe: $45 million Ranking: Senior unsecured Maturity: 5 years Coupon: 0% Conversion Premium: 37.5% Concurrent Stock Repurchase: $42 million, 1.6 million shares Use of Proceeds: Capped call transactions, general corporate purposes Leveraging the strength of our balance sheet for long-term growth investments 16

17 Full Year 2018 Guidance 2018 Original Guidance Revised Guidance 1 GMS Growth 14-16% 16-18% ~$3.7B - $3.8B ~$3.8B - $3.84B Revenue Growth 21-23% 22-24% ~$534M - $543M ~$538M - $547M Adjusted EBITDA Margin* 20-22% 21-23% ~$108M - $118M** ~$114M - $125M** * Reconciliation of non-gaap financial measures is contained in the Appendix. ** Based on the mid-point of 2018 revenue guidance 1 Original guidance issued on 2/27/2018 and revised guidance issued on 5/8/

18 Appendix 18

19 Condensed Consolidated Balance Sheets 1Q18 4Q17 (in thousands) Cash and cash equivalents $533,855 $315,442 Short-term investments 67,526 25,108 Property and equipment, net 116, ,617 Accounts receivable, net 31,292 33,677 Other assets 121, ,739 Total assets $870,165 $605,583 Accounts payable $8,094 $13,622 Facility financing obligation 60,041 60,049 Long-term debt, net 265,415 - Other liabilities 152, ,018 Total liabilities 485, ,689 Total stockholders equity 384, ,894 Total liabilities and stockholders equity $870,165 $605,583 19

20 Reconciliation of Quarterly Net Income (Loss) to Adj. EBITDA 1Q18 1Q17 (in thousands) Net income (loss) $12,967 ($421) Excluding: Interest and other non-operating expense, net 2,667 2,152 Provision (benefit) for income taxes 14 (1,052) Depreciation and amortization 6,320 6,938 Stock-based compensation expense 5,740 4,043 Stock-based compensation expense-acquisitions Foreign exchange gain (1,850) (2,780) Restructuring and other exit costs (income) (151) Adjusted EBITDA $26,421 $9,722 Etsy is not able, at this time, to provide GAAP targets for net income margin for 2018 because of the unreasonable effort of estimating certain non-cash items that are excluded from non-gaap Adjusted EBITDA margin, including, for example, provision or benefit for income taxes and foreign exchange gain or loss, the effect of which may be significant. 20