Etsy, Inc. (NASDAQ:ETSY) 2022 Annual Meeting of Stockholders Conference June 15, 2022 9:00 AM ET
Company Participants
Josh Silverman – CEO
Fred Wilson – Chairman
Jill Simeone – Chief Legal Officer and Corporate Secretary
Deb Wasser – VP, IR and ESG
Josh Silverman
Good morning. And welcome to Etsy’s Annual Meeting of Stockholders. Thank you for joining us today. I’m Josh Silverman, CEO and a member of the Board of Directors. I’m thrilled to be here.
Fred Wilson
Hi, everyone. This is Fred Wilson, Chairman of the Board. I’d also like to extend a warm welcome to our stockholders and acknowledge the other members of our Board of Directors here today. Andy Ballard, Marla Blow, Gary Briggs, Michele Burns, Jonathan Klein, Melissa Reiff, and Peggy Smyth.
I’d like to say a few brief words on behalf of Etsy Board of Directors and the entire Etsy team before turning it over to Josh.
2021 was another record-breaking year for Etsy. On behalf of the Etsy Board of Directors and the entire Etsy team, we are proud of the contributions we made to grow this special company to deliver tremendous financial performance, continue to gain market share and achieve success, both for the core Etsy marketplace, as well as our expanded house of brands that now includes Reverb, Depop and Elo7.
Throughout the year, while our global community continued to face unprecedented challenges from the COVID-19 pandemic, supply chain disruptions, inflationary pressure, political and social unrest and other factors, Etsy again rose to the occasion. We believe that continued strength of our 2021 performance reflects that we have something truly special to offer the world, a unique ability to meet rapidly changing buyer needs in a way that no one else can, our core mission to Keep Commerce Human is the foundation for all that we do. You can see it reflected in our business model, which helps drive economic empowerment for creative micro-entrepreneurs, as well as in our fully integrated financial and ESG reporting. We are leading by example to show that being a good corporate citizen and a successful business go hand in hand.
We are proud of the contributions we made to grow this special company to seek new heights of success and to do our part to help the communities we serve. Throughout 2021, we worked closely to ensure Etsy meets its commitments to a broad range of stakeholders including our employees, our buyers and sellers, our global communities and you, our stockholders.
I’ll now hand the meeting over to Josh.
Josh Silverman
From Etsy executive team, we also have Rachel Glaser, Chief Financial Officer; and Jill Simeone, Chief Legal Officer and Corporate Secretary, here with us today. Debt Wasser, Vice President of Investor Relations and ESG is also joining us today for the Q&A period. In addition, Nikki Gowan from PricewaterhouseCoopers, Etsy’s independent auditor is here today. During the Q&A period, she’ll be available to answer questions.
Tony Carideo from Broadridge is also participating. He’s acting as our Inspector of Elections for today’s meeting. I’ll now turn the meeting over to Jill, who’s acting as Secretary and we’ll cover some formalities.
Jill Simeone
Thanks, Josh and good morning, everyone. We will begin today’s meeting with a presentation of the proposals described in our proxy statement, followed by a brief management presentation, preliminary voting results and Q&A. As a reminder, our remarks and the management presentation and responses to questions today may include forward-looking statements. Forward-looking statements involve risks and uncertainties, certain of which are described in our SEC filings, including our first quarter Form 10-Quarter, and our actual results may differ materially.
Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also, information presented today includes certain non-GAAP financial measures for which a reconciliation to GAAP is included in the slide presentation available on the Annual Meeting portal.
As a reminder, the polls are now open, and you can vote online through the Annual Meeting portal. Anytime until I announce that the polls are closed. I’ve received affirmation that notice that this meeting was properly given as of April 22, 2022, to our stockholders.
I’ve also been informed by Broadridge that a quorum is present, and that this meeting is duly convened and can proceed. The agenda and rules of conduct for the meeting are posted on the Annual Meeting portal. We ask that you follow these rules to help the meeting run smoothly. We will address appropriate questions during the Q&A portion of the meeting. If you have a question, please submit it by entering it into the textbox on the Annual Meeting portal. Per the rules of conduct, please include your name and affiliation, if any.
Only stockholders of record and their proxy holders may submit questions or comments. Please be respectful of your fellow stockholders and meeting participants. Please limit remarks to one brief question or comment that is relevant to the annual meeting and/or Etsy’s business. And we may group questions by topic with a representative question read aloud and answered.
We’ll now move to the proposal. The polls have been open for voting since the start of the meeting at 9 a.m. Eastern Time.
The first item of business today is the election of directors. The Board of Directors recommends that stockholders elect the following nominees as Class I directors, Andy Ballard, Jonathan Klein, and Peggy Smyth.
The second item of business is the approval on an advisory basis of executive compensation. The Board recommends that the stockholders approve the compensation of our named executive officers.
The third item of business is the ratification of the appointment of PricewaterhouseCoopers as Etsy’s independent registered public accounting firm for 2022. The board recommends that the stockholders approve the ratification.
If you have already voted, there is no need to vote now, unless you would like to change your vote. If you have not voted and you’d like to, please click the Vote Now button located at the center of the screen, directly below the media player. You will need the control number that you use to join the meeting. We’ll pause for a moment to give anyone who hasn’t yet voted a chance to vote.
The polls are now closed.
Josh Silverman
2021 was another record-breaking year for Etsy. While the pandemic introduced millions of people to Etsy for the first time, shoppers have loved the experience they’ve had with Etsy and are coming back for more, even in a world of greatly expanded choice. We’re incredibly proud of our four year performance with consolidated GMS of $13.5 billion, up 29.6% year-over-year on a currency neutral basis. Consolidated revenue grew 35% year-over-year and our adjusted EBITDA margin was a very strong 31%.
Since 2019, our marketplace has been transformed. We’ve grown from 46 million buyers to 90 million buyers, 2.5 million sellers to 5.3 million sellers, 65 million listings to 100 million listings, 8 million buyers who shop on Etsy six or more days a year and spend $200 or more and the number of repeat buyers has more than doubled. And last July, we added two new marketplaces Depop and Elo7, which now, including Reverb and Etsy, create a house of brands that stands for creativity, community and special. We are just getting started applying the successful Etsy playbook to these marketplaces.
In 2019, we laid out a long-term goal to have the Etsy marketplace outgrow e-commerce, and you can see that over the past two years, we have done that very substantially. While 2021 was not the return to normalcy that many of us had hoped for, it did indeed offer greatly expanded options for consumers’ time and money compared with 2020, and many more places online and off, where you could shop. Yet Etsy continued to gain market share. We believe that Etsy offers the world a true alternative to commoditized shopping, that buyers and sellers value this alternative and we are in the early days of expanding our share of wallet.
We grew that market share by bringing new buyers to the Etsy marketplace, reaching a record high of 90 million active buyers and encouraging our existing buyers to shop more frequently. We reactivated nearly as many buyers in 2021 as we did in 2020, and new buyers grew by 84% in 2021, when compared with the pre-pandemic level of 2019. And the pandemic cohort has been sticky. 53% of all active buyers who made a purchase on the Etsy marketplace in 2020 made another purchase in 2021, and 37% of new buyers in 2020 made a purchase in 2021. 2021 frequency metrics also improved, with 49% of active buyers making two or more purchases, up from 48% in 2020 and 41% in 2019.
We’ve always said that frequency is a challenging metric to move, so we’re especially proud of the cross functional efforts that drove these results. We believe that there are several factors, inspiration, efficiency and reliability that will contribute to making Etsy the go-to e-commerce destination for many more consumers.
This slide captures some of the many ways we are engaging with buyers along their Etsy journey to keep them revisiting and repurchasing, and you can expect to see much more of these work streams in 2022.
Search and discovery made some big leaps forward in 2021, and we’ve only just begun to make the Etsy marketplace feel more made-for-you. We introduced XWalk, a new large scale real-time graph retrieval engine and are continuing to narrow the semantic gap by relying less on listing taxonomy and more on buyer interests. We are also continuing to drive search improvements in 2022, and we are investing in building out the discovery journey on Etsy, with so much more to come for those seeking inspiration on our marketplace.
We continue to make Etsy even more human, in many ways. For example, seller videos, which are very visible example of how we drive human connections and engagement on and off the marketplace, topped 13 million by year’s end and reached 15 million by the end of the first quarter of 2022.
Etsy’s dramatic growth has also necessitated that we invest and improve in many other, often less visible ways to connect our approximately 90 million buyers with over 5 million sellers. We have made meaningful improvements to our member support and trust and safety processes, with a combination of people and technology to help make these experiences more joyful, safe and streamlined. We are significantly increasing our investments in these areas in 2022 as well, as we believe effectively managing complex, very human, peer to peer interactions at scale is a big differentiator for Etsy.
Reliability was a major focus area in 2021, and we made great strides. We improved delivery transparency and provided buyers with more clarity and certainty around their Etsy purchases. And just a couple of weeks ago, we announced our plans to build even more trust for your Etsy purchases and to protect, both buyers and sellers through a new Etsy Purchase Protection Program.
Etsy marketplace sellers continued to thrive, growing in total number and the success of their shops. For the full year, active sellers grew by 28% and more than doubled on a two-year basis. Even more importantly, our annual seller cohorts retained more GMS in subsequent years on the platform. We also saw continued strong growth year-over-year in active sellers into the first quarter of this year.
We’re continuing to innovate in areas that matter to our global seller community, such as improvements to the onboarding experience, particularly for international sellers and investing in our seller app. Last year, we created a new program called Star Sellers, which represents a badging approach so that buyers can recognize sellers who provide great customer support.
We see so much opportunity to continue to raise top of mind awareness and consideration for Etsy, among those who already shop on Etsy and those who don’t. We’ve become a top 10 marketplace for buyers in most of our core international markets and are reaching new audiences in the U.S. And we’ve made significant progress staying more top of mind in order to bring existing buyers back more frequency.
Starting at the bottom of the funnel, we’ve improved our performance marketing feeds and offsite ads. In the middle of the funnel, we’ve had great engagement with our social content. And at the top of the funnel, our brand campaigns cut through the noise and drove brand awareness higher in our top three markets, the U.S., the UK and Germany. It’s been an unprecedented couple of years for Etsy. And through it all, you can say that one of the only real certainties has been uncertainty. You might even say it’s the new normal.
We believe that over the past five years our team has demonstrated its agility and adaptability and our business model has shown resilience through many types of macro conditions. In Q1, we rose to the occasion once again to deliver solid results in a challenging quarter, maintaining almost all of the gains reported during the extremely strong year-ago period. Our consolidated GMS was $3.3 billion, up 3.5% year-over-year, or approximately 5% on a constant currency basis with the Etsy marketplace GMS down about 2% as we compare to the exceptionally strong growth of the prior year. Consolidated revenue grew 5.2% and our adjusted EBITDA margin was 27.5%.
We’re emerging from an unprecedented time and within that, Etsy had unprecedented growth. We expect that this year is going to be unpredictable for us. There are certainly many moving parts, both tailwinds and headwinds, which are difficult to forecast. People continue to be nervous about global events in the economy and will have to fight harder for consumer’s time and money, yet we have ample reason to remain very optimistic.
We’ve got a world class team with the creativity and conviction to invest with purpose on behalf of our seller community. We truly believe we offer something different across every brand in our house and that the size of the prize for Etsy is enormous.
And with that, I’ll turn it back to Jill to announce the preliminary voting results.
Jill Simeone
Our preliminary results indicate that Andy Ballard, Jonathan Klein and Peggy Smyth have been elected to the Board. The compensation of our named executive officers has been approved on an advisory basis. And the ratification of the appointment of PwC as our independent registered public accounting firm for 2022 has been approved. We expect to report the final vote results that are certified by our Inspector of Elections in a filing with the SEC within four business days.
Deb?
Question-and-Answer Session
Deb Wasser
Josh Silverman
Thanks everyone. The meeting is now adjourned.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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