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EI

ETSY INC (ETSY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record revenue of $852.2M (+1.2% y/y) and strong profitability, with adjusted EBITDA of $250.6M and margin of 29.4% despite consolidated GMS falling 6.8% y/y; take rate expanded to 22.8% on strength in Etsy Ads and payments .
  • The Etsy marketplace GMS was $3.3B (-8.6% y/y) amid consumer discretionary pressure, a shortened holiday season, and a highly promotional retail environment; buyer frequency and habitual buyers weakened, while lapsed buyer reactivations hit a record .
  • Versus prior guidance for Q4 2024, take rate and adjusted EBITDA margin both came in above outlook; Q1 2025 guidance calls for GMS to decline at a rate similar to Q4, take rate ~23%, and adjusted EBITDA margin ~25–26% .
  • Management emphasized a strategic pivot toward differentiation via quality, discovery, and AI/LLMs, plus a rebalanced near-term conversion focus; early Gifting and app initiatives are encouraging, and Depop remains a growth tailwind .
  • S&P Global consensus estimates were unavailable for this period due to access limitations; comparisons to Wall Street consensus cannot be provided for Q4 2024 and Q1 2025 guidance.

What Went Well and What Went Wrong

What Went Well

  • Record quarterly revenue ($852.2M) and record quarterly adjusted EBITDA ($250.6M); take rate expansion to 22.8% driven by Etsy Ads and payments, with adjusted EBITDA margin of 29.4% above outlook .
  • Operational improvements: lower fraud reduced variable cost of revenue, driving gross margin leverage; app investments and discovery-led experiences advancing with LLM-enabled quality scoring .
  • Depop momentum: Q4 GMS highest since acquisition; full-year GMS +31.6% with ~60% U.S. growth, contributing to consolidated performance .

Quote: “Improved ad relevancy and optimized bidding… delivered attractive return on ad spend to sellers… consolidated fourth quarter take rate of 22.8%, ahead of our outlook” .

What Went Wrong

  • Core Etsy marketplace GMS declined 8.6% y/y; consolidated GMS down 6.8% y/y amid discretionary category weakness and shortened holiday season; habitual buyers fell 9.5% y/y .
  • Buyer frequency pressure: GMS per active buyer fell to $121 (-3.5% y/y); active buyers declined to 89.6M for the Etsy marketplace .
  • Non-U.S. buyer GMS underperformed U.S. buyer GMS in Q4; macro environment internationally remained unfavorable .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$647.8 $662.4 $852.2
Diluted EPS ($USD)$0.41 $0.45 $1.03
Net Income ($USD Millions)$53.0 $57.4 $129.9
Net Income Margin (%)8.2% 8.7% 15.2%
Adjusted EBITDA ($USD Millions)$179.4 $183.6 $250.6
Adjusted EBITDA Margin (%)27.7% 27.7% 29.4%
Consolidated GMS ($USD Billions)$2.95 $2.92 $3.74
Take Rate (%)22.0% 22.7% 22.8%
Etsy Marketplace GMS ($USD Billions)$2.5 $2.5 $3.3

Segment revenue breakdown:

MetricQ2 2024Q3 2024Q4 2024
Marketplace Revenue ($USD Millions)$470.4 $476.1 $607.3
Services Revenue ($USD Millions)$177.4 $186.3 $244.9

KPIs (Etsy marketplace where noted):

KPIQ2 2024Q3 2024Q4 2024
Active Buyers (Millions)91.5 91.2 89.6
Habitual Buyers (Millions)6.9 6.8 6.4
GMS per Active Buyer (TTM, $)$124 $123 $121
Reactivated Lapsed Buyers (Millions, quarter)6.4 6.4 9.8
New Buyers (Millions, quarter)5.6 5.3 6.9

Estimates vs. Actuals (Q4 2024):

MetricConsensusActualBeat/Miss
Revenue ($USD Millions)N/A$852.2 N/A
Diluted EPS ($USD)N/A$1.03 N/A

Note: S&P Global consensus estimates were unavailable for Q4 2024 due to access limitations; estimate comparisons cannot be provided.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/OutcomeChange
GMS YoYQ4 2024Decline low–mid single digits y/y -6.8% y/y actual In line to slightly worse vs midpoint
Take RateQ4 202422.3% 22.8% actual Above guidance
Adjusted EBITDA MarginQ4 202428–29% 29.4% actual Above guidance
GMS YoYQ1 2025—Decline similar to Q4 (-6.8% y/y reference) New guidance
Take RateQ1 2025—~23% New guidance
Adjusted EBITDA MarginQ1 2025—~25–26% New guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/Technology & QualityML in ads ranking; search diversity; “Creativity Standards” groundwork Search Visibility Page; reduced identical images; deeper quality attributes in search LLM-driven quality score; craftsmanship detection; discovery-forward app experiences Accelerating AI/LLM integration to elevate quality and discovery
Marketing Mix & EfficiencyManaging paid search in-house; building loyalty beta Pullback on brand spend; higher paid social; marketing as % of revenue up Shift from linear to CTV/paid social; ROI-driven scaling; owned channels via ML Mix shift toward performance and owned channels, ROI focus
Gifting & PersonalizationGift Mode global; features added; gifting GMS +4.1% y/y Gifting outpaced sitewide; record association with gifting Gifting outperformed; personalization and loyalty program to drive frequency Sustained focus; expanding to personalization
App PenetrationDeepened app investments Prompts to shift mobile web users to app App at >40% GMS; ~$1B GMS opportunity from higher app penetration Increasing push to app to improve conversion/frequency
Tariffs/Macro/Supply Chain—Discretionary softness, competitive environment Less reliance on China; de minimis/tariffs monitored; resilience via local seller sourcing Monitoring policy risk; Etsy relatively insulated vs peers
Regional TrendsEtsy marketplace ex-U.S. 48% (Q2) New reporting view; non-U.S. buyer GMS underperformed U.S. buyers 75% of Q4 GMS; non-U.S. 25% U.S. relatively stronger; international lagging
R&D/Product DevelopmentBuilding features and trust & safety Quality/Creativity Standards; app investments Rebalance to near-term conversion squads; continue long-term differentiation Shift back to faster GMS impact while maintaining LT initiatives

Management Commentary

  • CEO: “We temporarily shifted… away from near-term conversion… to create holistically better customer experiences focused on quality, reliability and making our app a place for discovery” (opportunity cost “at least a few hundred million dollars” in GMS) .
  • CEO: “Our ability to identify and elevate the stuff that’s most unique… is at the knee of the curve right now” leveraging LLMs for quality and personalization .
  • CFO: “Consolidated fourth quarter take rate of 22.8%, ahead of our outlook… adjusted EBITDA margin was 29.4%… improvement was gross margin leverage where a lower rate of fraudulent activity led to a meaningful decrease in variable cost of revenue” .
  • CFO: “Etsy ended the year with $1.2B in cash/cash equivalents and short- and long-term investments… repurchased ~$260M in Q4” .
  • CEO on positioning: Etsy will lean into differentiation rather than compete on price/speed; elevate artisanal/high-quality items, with app-led discovery and browsable experiences .

Q&A Highlights

  • Marketing ROI and mix: Shift from linear TV to CTV/YouTube; mid-funnel opportunities tied to browsable surfaces; bottom-funnel PLA optimization via ML; spend remains ROI-driven .
  • Path to improved GMS: Expect improvement after Q1 as comps ease and conversion squads reaccelerate near-term GMS while LT foundations contribute over time .
  • Seller base and take rate: Purposeful friction and setup fee reduced low-quality onboarding; take rate sustained/expanded through value-added optional services (Ads, payments); Etsy Ads neutral-to-positive for GMS .
  • Tariffs/de minimis: Etsy’s lower China exposure could be a near-term benefit; broad European tariff regimes would need monitoring; platform resilient due to localized seller sourcing .
  • Habitual buyers & loyalty: Declines reflect fewer life-event purchases and lower frequency; early loyalty beta shows free shipping benefit and higher engagement; unit economics under evaluation .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 revenue and EPS was unavailable due to access limitations; estimate comparisons cannot be provided for this period.
  • Relative to company-issued outlook, Q4 take rate (22.8%) and adjusted EBITDA margin (29.4%) were above guidance ranges, while GMS decline was in the low-to-mid single-digit band (actual -6.8% y/y) .

Key Takeaways for Investors

  • Margin/quality story intact: Take rate expansion and fraud reduction drove gross margin leverage and margin beat; Services revenue and Etsy Ads remain key levers .
  • Near-term GMS still pressured: Expect Q1 2025 GMS decline similar to Q4, with improvement later in 2025 as comps ease and conversion squads ramp .
  • Strategic differentiation via AI/LLMs: LLM-enabled quality scoring and discovery are central to driving frequency and personalization—potential medium-term catalysts .
  • App penetration opportunity: Management sees up to ~$1B GMS opportunity from driving more usage to the app; ongoing prompts and UX revamp support this thesis .
  • Subsidiaries tailwind: Depop’s strong growth offsets core marketplace headwinds; watch for continued execution and U.S. share gains in re-commerce .
  • International lag: Non-U.S. buyer GMS underperformance highlights macro headwinds; U.S. remains the anchor (75% of Q4 buyer GMS) .
  • Capital return: ~$260M repurchased in Q4; $1B remaining authorization provides flexibility while maintaining $1.2B liquidity .