All right, well, good morning, and welcome, everyone, to Needham's third annual Consumer Tech and E-commerce Conference. My name is Anna Andreeva. I'm a senior analyst here at Needham covering e-commerce and global brands. Next up, we're very excited to have the management team from Etsy. From the company, we have Josh Silverman, CEO, as well as Rachel Glaser, CFO. Welcome, guys. Thanks for having us. Nice to be here. Absolutely, and, almost Happy Thanksgiving. May I do a quick PSA to point everybody to our safe harbor, which can be found on our investor relations website? And that's it. I'll turn it over to you. Perfect. Thank you so much, Rachel, for that. We're gonna kick this off with Josh. Can you start off talking about some of the learnings to accelerate growth and profitability at Etsy when you first joined the business back in 2017? And how does that relate to the challenges and the opportunities that the business is facing today? There were a lot of doubters, right, of the platform back then as there are now. What is their, what is your answer to them? Yeah. So thanks for having us, appreciate it. And I will say, I personally, and I think we are very highly motivated to prove the doubters wrong. It is very motivating, and I believe we can and will. You know, in 2017, a lot of people doubted Etsy. They thought we were about as big as we could be. We were doing about $2 billion of GMS, and they said, "Gosh, that's... We think that's about as big as you can be. You've fully, you know, tapped out on the opportunity." And today, here we are, many, many times bigger than that, and we're proud of that. How did we do that? Through really picking the vital few. What are the fewest things that matter to drive growth? Then assigning each squad one customer problem with one financial metric and a high degree of urgency. So every squad at Etsy has to report out every month on how they've moved the needle on making a customer experience better in a way that's unlocked real GMS or revenue or cost savings for the team. And that level of urgency and accountability has caused our customer experience to get a lot better over the years, to the point where when the pandemic happened, you know, I think Etsy was very well positioned to provide a great service for people. And, you know, if I look at where we are today versus just pre-pandemic, you know, Etsy, just before the pandemic, had about 45 million Active Buyers. Today, we have over 90 million Active Buyers. Even with the macro headwinds we have today in discretionary products, those buyers spend on average 20% more today than they did before the pandemic. So we had a lot of execution, internal execution opportunities we could fix in 2017. The challenges today, I think, are more external and macro, and even as we think we're holding share within our categories, that's obviously not good enough. We are obviously not satisfied with that, and we have tremendous urgency and feel tremendous responsibility to be growing sales faster on behalf of our sellers and to do it profitably, to continue to focus on efficiency and urgency. And we see great opportunities to continue to make the customer experience better, disrupt brand barriers, and grow this company with discipline and do it profitably. That's perfect. You've talked about driving frequency and conversion, really for some time, and the key things that you talk about at Etsy are quality, value, and that reliability of consideration. How do you expect those three focus areas to disrupt buyer perceptions, drive that consideration, and ultimately re-accelerate GMS as you look at the business in the next 9-12 months? And how do you measure the ultimate success? Yeah. Well, we measure ultimate success by driving GMS to grow profitably, because that's really the size of the pie. Our sellers and buyers succeeding is measured by GMS, and of course, we always care about doing that profitably, and we've always been focused on profitable growth. We've never been a growth-at-all-cost company. So how do we disrupt brand barriers to do that? Well, you talked about consideration, and we've made huge progress in awareness. So before the pandemic, I would often have to say, "I work for Etsy, and Etsy is a company that has handmade products," and yet today, most people are aware of what Etsy is. Unaided awareness on Etsy is quite high, and if you ask anyone about Etsy, you're gonna hear the same three words from almost everyone: "I love Etsy." And yet, they don't think of us in many of their relevant purchase occasions. So our opportunity has moved from awareness to consideration, and in order to win in consideration, there's some brand barriers we need to disrupt around value, quality, and convenience. In particular, they think, "Because it was made just for me, it must cost more." And in this environment in particular, when everyone is so cost-focused and under pressure, that's something that we need to disrupt. Quality is a concern, "What if I don't like it?" And convenience, "Since it's made by another person who's shipping it from their home, what if it doesn't arrive on time? What if it doesn't arrive fast enough?" We see big opportunities in each of these buckets to continue to make progress, and in doing so, to disrupt brand barriers. When I think about value, for example. With 6 million buyers and over 120 million things for sale, many of our sellers have inventory that they're willing to put on sale. And so our opportunity to highlight that and show buyers that there is great value on Etsy, and that you can buy things that are made just for you and get a great deal, we think is very important and very timely. So, for example, the Deals Tab we just launched in the Buy on Etsy App is a great example of highlighting that, and it's early days, but proving to be very popular. On quality, we've made so much progress making the Etsy search engine more relevant, but we still have such an abundance of items that really highlighting the few that are the best quality for you relative to your tastes, we think continues to be a really big opportunity, along with showing a more diverse set of ideas. And then on reliability, we've made tremendous gains in making sure that items arrive on time, that sellers communicate effectively with buyers, making sure there's transparent refund policies, having a really good, Etsy Purchase Protection program. So the good news is that when people shop on Etsy, the experience goes very well the vast majority of the time. Now, we just need for perception to catch up with reality, and doing things like launching this holiday season, it arrives on time or your money back, is intended to really disrupt that brand barrier around convenience. So we think we're making a ton of progress, and we think we can do a lot to, in disrupting brand barriers, unlock a ton more frequency. Okay, terrific. No, that's, that's, that's perfect and very helpful. You mentioned the importance of communicating and disrupting that value prop, and promotions lately have become a big part of that. And we certainly on the team get a lot of questions about those. Can you talk about some of the learnings from the third quarter and specifically the Etsy-funded type of a promotions? What kind of a metrics are you watching that are beneficial as a result? And curious, you talked on the call about the $5 off 25 purchase performing better than the $10 off 40. Just curious of why you think that was? Yeah. So first of all, this is an incredibly promotional environment right now, and it's a big focus for everyone. And Etsy, it's important that Etsy continues to double down on what makes Etsy, Etsy. We are keeping commerce human. We are not a blue light special company that's going to be about the cheapest, cheapest way to get, to get everything. But it is important that we demonstrate that there is great value on Etsy, and so having promotions is a way to communicate that that there's value available on Etsy. The vast majority of promotions on Etsy are seller-funded. That's the way it is today, and we think it's likely to be the way it is for some time. But experimenting with Etsy, also doing some Etsy-funded promotions, we think can have value. We ran a $5 off 25 promotion in the third quarter, and that actually worked really well and generated significant ROI. And I think the idea that it pushed people to make a purchase that they might not have otherwise made, pushed them to maybe buy something a little bit more expensive, was also really helpful. We then launched in October a $10 off 40, and what we saw is, while it drove sales in the day or two that we were running the promotion, it really pulled forward sales from future dates as much as it drove new incremental sales. It did, by the way, work pretty well in a few international markets, but wasn't ROI positive in the U.S. and the U.K. And so, you know, the important thing is these are quite small dollars in the grand scheme of things for Etsy, and we are a very test-and-learn company, and we're very ROI focused. So, you know, we're always looking at doing small tests at a relatively low risk, learning from that, and then building out our toolkit so that we have an ever broader toolkit. But, you know, most promotions on Etsy, the vast majority are funded by sellers, and our primary focus is really highlighting the things that are already on sale from sellers and teaching our sellers when to put things on sale, for how much to put things on sale, and then highlighting those things that are really compelling. That's really where we're spending most of our time and energy. In fact, in the third quarter alone, the squads that are working on seller promotions generated about $100 million of annualized incremental GMS from the product launches that they did, highlighting those promotions. Yeah, no, that's, that's great, and that's definitely a significant number. And it, it sounds like, the seller-funded is, you know, generally Etsy's approach. Just curious, how do you decide between Etsy and, seller-funded, when you approach the promotions? And is there a risk, you think, down the road, that you are potentially getting a more discount-focused customer now, and when things normalize, there's gonna be a difficulty for that customer to come back at full price? Yeah. So, great questions. On the we don't really need to decide either/or, that it should be either seller-funded or Etsy. We always have seller-funded, you know, sellers on our site continuously have items they're willing to put it on sale, and our job is really to coach or provide them with insights into how to use sales very effectively. For example, you know, many sellers put things on sale for 10% off, and what we're finding right now is that's really a waste. It's not enough to drive an incremental sale, so all they're doing is giving up margin. So we're really trying to share that insight and coach our sellers, that if you're gonna put something on sale, you should put it on sale at a meaningful discount. Then providing more visibility for the items that are really compellingly priced, and that's where things like the Deals Tab and BOE... you know, is proving in early days to be quite popular, and so giving a place for things that are really well-priced to shine. If there's an icing on the cake of Etsy running a, you know, an Etsy-funded promotion, the advantage there is it's something we can really promote site-wide. We can promote off of our site in a really compelling way, and so it's an icing on the cake, but I wouldn't expect that to be a primary lever in the near future. To your point about attracting customers that are only discount-focused, you know, we think that's a really important insight, and Etsy staying true to Etsy. Promotions are important in this environment as a tool in the toolkit, but it's not the primary reason you shop on Etsy. You shop on Etsy because you wanna buy something that you care about, that's made with quality, that's made just for you, and that's made to last, and we think that there will always be demand for that. And the more people shop on places that are really, you know, cheap, commoditized, and will end up in a landfill two minutes after you buy them, the more they're gonna crave the alternative, and we think Etsy is better positioned than anyone to be the alternative. We do see people out there right now who appear to be spending a lot of money to acquire customers that may not be very loyal, that would dump them in a heartbeat for someone who's willing to sell the same product for five cents cheaper. That's not a game we intend to play, and I wonder about the long-term profitability of people that are playing that game. We're very focused on acquiring customers who value Etsy for what it is. We think there's a lot of them out there. We think there's a lot of purchase occasions for which that's what matters, and we think over the medium term, we have a very big opportunity to be the best alternative to these cheap, commoditized players. Okay, that makes sense, and that's perfect. Thank you for that. Switching gears to Rachel. So some investors we talked to do think that Etsy could be doing a better job of cutting costs in this tough macro. So do you see additional opportunities to pull back on spending, and how do you balance between profitability and investing in some of the product and marketing initiatives? Especially as you start thinking about 2024, do you guys still expect to continue to hire? Thanks for the question, Anna. Josh has said at least three times, as I've counted, you know, we keep a lens of growing, you know, striving for profitable growth, not just growth at all costs. Couple of points that give evidence of that, you know, we've maintained our revenue per headcount is well above our peers at our scale, and we've kept our adjusted EBITDA margins very strong during this time. We've also given outsized growth over the past five years, and we've maintained that growth. Our CAGR since 2019 is actually over 25%. And we're really maintaining all of our gains. So we think those are some good proof points about our ability to successfully grow and remain profitable. We've done some restructurings at our subsidiaries. So first, everybody has seen that we divested Elo7, small, but that was a chunk of expense off our books. And both Reverb and Depop have done some cost optimization, which included reductions in force, so that's been very recent. As we plan for Etsy Core, as we plan for 2024, we're really focused on, as we always do, prioritizing the vital few. So that sometimes means moving some initiatives to the top of the list and reprioritizing the resources that get the most important things done first. We've also recently frozen all of our hiring, and we've cut a significant number of the open roles, and we're looking carefully at all of our costs as we build our 2024 plan. So just to conclude that whole sentence, we maintain our efforts to be a growth... We're not a growth at all costs company and really focused on being as efficient as possible while also gaining share in our very enormous TAM. That makes sense. Yes, definitely the ROI-focused approach is loud and clear from Etsy. Could you remind us what's implied in the fourth quarter GMS guide, the high end versus the low end, and what were you seeing in the business quarter to date as of three weeks ago? Yes, happy to. So at the midpoint of the guidance we gave on November first, we said that Q4 GMS would be down low-single-digits if trends stayed the same as we had been seeing in October. And at the high end, we said that if trends were to improve, we could be flat to slightly up in the fourth quarter, and if trends were to worsen, they could be down mid-single-digits year-over-year. What we were seeing towards the end of September through October, very similar to overall e-commerce trends, was our guidance, our GMS growth had turned slightly negative as consumer discretionary product spending headwinds actually worsened, and most e-commerce peers guided for a challenging holiday season. So we're seeing very consistent pressure on consumer discretionary spend, particularly consumer discretionary spend. Not so much on services and not so much on essentials, but on the discretionary part of it, we're hearing the same story over and over again. Couple of other notes on what the guidance implied was that it assumes currency exchange rates remain unchanged at the current levels, and we also included a small headwind related to the Elo7 divestiture. ... Makes sense. On the EBITDA guide, implies a bigger sequential decline than what you delivered last year on a sequential basis. Can you talk about what's driving that? Yeah. So I think the guide implies about a 210 basis point quarter-over-quarter sequential decline, Q3 to Q4, which is a little bit larger than last year. That indicates we are leaning a little bit more heavily into marketing, particularly the above-the-line marketing, which oftentimes has a longer payback period. We've also seen some pressure on performance marketing spends, performance marketing CPCs, so we've shifted the mix a little bit to weight more heavily towards above-the-line, but at the same time, not take our foot off the pedal of performance marketing, so that drives costs up slightly, modestly. We've actually, that's offset by some good leverage in employee compensation and some leverage from divesting Elo7. Sure. Makes sense. Back to Josh. You mentioned on the call, and you mentioned, I think, just recently now, the competition from the fast fashion players, you know, Temu and SHEIN, especially, is coming out more and more now. Can you address how Etsy is seeing that competition, and what are you doing differently to respond to those entrants? Yeah, I mean, what our data shows, what the credit card data seems to imply is that they are growing very quickly, of course, and they're taking share pretty broadly across lots of e-commerce players, including Etsy, but not disproportionately Etsy. That our data is not suggesting that we are being disproportionately impacted. They're taking share roughly, you know, on a proportional basis across many players. And, you know, where I think it's impacting us more is that they have come in very heavy, in particular, in Google PLAs and Meta, and especially in the long tail of the auctions, where Etsy and only a few other players are competing. And it's not obvious that they have a focus on ROI at the moment, and we very much do. So we are unprepared to pay for a CPC unless we think it drives an ROI. So it may be that we're able to spend less or on performance marketing than we otherwise would. I don't know how long folks can spend on marketing without an eye on ROI, but that's not a game we play. So as Rachel said, you know, ATL is a big channel, and we've seen it be performed very well for us in the past. We definitely measure the ROI of ATL. And the good news with ATL is we can lean in if it works, and if it doesn't work, you can pull back without pouring cement. So we're gonna continue to play our game. We're gonna continue to compete. I do think competition makes you better. It sharpens your focus. Etsy does something very, very different than Temu, SHEIN, or, or others. We're about keeping commerce human, and I think the more people get very disposable products, the more they crave an alternative to that. You know, one example of, like, sharpening our focus and competition, we talked a couple of earnings calls ago about democratizing ML. Mm-hmm. And, you know, we were able to launch a filter on Etsy that identified and pulled off any item that's on Etsy that's also on Temu. We created and launched that filter within a matter of days. And, you know, we're very focused on suppressing visibility of items that are not handmade, because that, you know, the Etsy brand is about things that are made just for you, made by the maker. And we think being even more Etsy is the right answer to commoditize commerce. We think that opportunity is huge, and we're very focused on driving profitable growth to get there. This may be a difficult question to answer, but I guess what gives you the confidence that the recent weakness that Etsy has been experiencing is more macro driven? Well, you know, first, when we look at virtually every retail and e-commerce competitor we have, they're all saying the exact same thing, which is that essentials are growing, particularly deeply discounted essentials. Food and travel are growing, but discretionary products are under a ton of pressure and facing a lot of headwinds. So we see that validated. We have credit card and other data, which suggests that we are maintaining and even gaining share in our categories versus our pure play competitors, and at least holding share even when you put the mass e-commerce players in. One of the things we observe is that, you know, our comps are more challenging in many ways, because our 2021 and 2022 were much stronger than most of our players. Just to put some specifics around that, Etsy's four-year CAGR, so our CAGR since the pandemic, is 24%. eBay's is -3%, Wayfair's is 6%, Amazon Online Stores is 13%. So, we have been able to maintain our pandemic share, much, much better than most. We are not satisfied with maintaining share. We are very focused on growing share. And so we're obsessively focused on the things we can control right now, and there's a lot we can control. We can make the Etsy buying experience even better in the ways I've discussed. We can disrupt brand barriers around Etsy, and so we are acting boldly and with urgency to do all of those things and make sure that we continue to grow through this environment and frankly, any environment we can, and to do so with discipline. ... You had mentioned, driving consideration as a really big focus for the business. As you look out to 2024 and what probably will be another year of tough discretionary demand, what are the couple of things that Etsy is focused on the most to really drive that improvement in the business? There's some very specific areas where we can really drive consideration, where Etsy is uniquely great. For example, gifting. Gifting is a very big market, and we think Etsy has a right to really win in gifting in a way that no one else does. We think it's actually quite a big opportunity, and we're very focused on winning there. We're very focused on disrupting brand barriers around convenience and reliability. Will it arrive on time? Will it arrive quickly? Will shipping be affordably priced? What happens if I don't like it? These are all things we've made tons of progress. We have a lot more opportunity to go, and we think in doing so, we can unlock a lot of frequency. And then, as I said, helping people understand that special doesn't need to cost more, and that we have great value on Etsy. Making sure that the very highest quality, that we continue to create a race to the top around quality, so that we're able to really spotlight the best quality items at great prices. Okay. All right, perfect. I wanted to spend some time on the buyer insight. The number of buyers continues to grow nicely on the platform, and this is to Rachel. Can you talk about the buyers that were acquired during the pandemic? How are they behaving currently? Has that churn now stabilized? Yeah, so every year in our 10-K, we release our buyer and seller census data. So in 2022, our 2021 cohort year, year one spending was double that of our 2019 cohort in year one. So 2020, which was a pandemic year, the cohort was showing stronger GMS retention than 2017. So by and large, the cohorts we gained during the pandemic, we can say, are at least as strong or stronger than the pre-pandemic years. In 2022, we retained so much of the GMS gains that we achieved in dollar value, despite having a really challenging year. So while the pandemic positively inflicted all cohorts, and we have seen nice retention, we expect the impact of stimulus and staying at home to continue to fade, particularly given the current macro headwinds. So GMS, we've talked about this on the past few calls. We've noticed that GMS from buyers with household incomes less than $100,000 have been under more pressure across all cohorts, and we've actually, during the pandemic, attracted a lower household income than we had before the pandemic, and they're not churning. So it's really encouraging that our Q3 cohort data, active buyers grew for the third consecutive quarter to new all-time highs, and buyer additions were up 6% year-over-year. And the GMS per buyer trend line has improved sequentially, with habitual buyers being flat sequentially, and the GMS per buyer is up over 20% since before the pandemic. So even though it's modestly improving, it's still significantly higher than before the pandemic. Okay, perfect. On international, a really nice growth in the third quarter, accelerated to high single digits and, U.K., back to growth, and, Germany and France, where Etsy has been investing, also performing, pretty nicely. Can you talk about what drove that, and are you seeing improvement in GMS per buyer internationally? I think you've talked about that metric being lower than in the U.S., and how do you think about GMS per buyer overseas, scaling to the levels that you see in the U.S. or- Yeah. Yeah, I'm going to talk about international. Just one second. I just want to double back to the household income data, because there's an important divergence between the lower household income data and the household incomes that were over $100,000. So household incomes below $100,000, we are actually seeing declining GMS, but the household incomes over $100,000 actually growing, and then even more so for household incomes over $200,000, even though that's a small percentage of our total, they actually were growing over 20%. So I just wanted to get that. And we've said it on the call, but I just wanted to reiterate it here. And then on international, so U.S. is by far our largest market. It's a more mature market, but still very underpenetrated relative to the number of women in the U.S. that have shopped on Etsy in the last year, or the number of men that have shopped on Etsy at all. So we still see lots of room to grow. It's the U.S. market's been under pressure the last two years, but we still see such significant opportunity to grow. In fact, Q3 had modest year-over-year U.S. buyer growth for the first time in quite a number of quarters. Our Q3 GMS, excluding U.S. domestic, also known as international, was actually up 7% year-over-year for core Etsy. We didn't see international GMS per buyer improvement, but we see higher new buyer mix, so they need time, more time to mature. As we add these new buyers internationally, they haven't had time to get to their repeat purchases. Overall, international GMS per buyer is a little bit lower. We were really pleased with growth in the U.K., despite the U.K. having significant headwinds. UK is now three times larger than 2019, and the GMS, the year-over-year GMS trends turned positive in Q3 for U.K. Germany is now four times larger than in 2019. They had, Germany had solid Q3 year-over-year GMS growth. It's now a top 10 e-commerce site. We've built up the inventory there. We've invested in product, shipping, payments, and we've started to be able to spend performance and brand marketing spend there. And the rest of the world has also had solid Q3 year-over-year GMS growth, notably France, and we've had strength in our non-core Western European countries that responding really well to a very small amount of performance marketing spend that we spend in the same way we do in other markets in an ROI positive way. But it's had a nice elasticity as far as attention and traffic and conversion in those markets. We've got pretty low penetration rates in the next 15 markets beyond the U.S. and the U.K., which gives us a lot of cause for hope. Okay, terrific. We got a lot of questions on the take rate in the business. Can you talk about how do you think about opportunities to expand from here? And what is your philosophy to invest, you know, some of that upside into the business? And I guess, are you seeing any signs of concern that the sellers may leave the platform because of the higher rates? Ooh, there's so much in that answer, and I'm just conscious of the time. So yes, take rate, we guided to 20.8% for the fourth quarter, which was just about 10 basis points below Q3, which is seasonally consistent with how take rate trends in the fourth quarter. We live by the philosophy of fair exchange of value, so rather than say there's a specific number we would never cross or that we'd need to cross, we are always looking at if we're gonna make any changes in fees or services, what value are we giving them for those changes? So we've been able to bring take rate up almost every year, only twice because of an outright pricing change, and both those times we reinvested over 80% of the incremental revenue back in the marketplace so that it was a win for sellers, a win for Etsy, win for buyers. So we're really thoughtful about where we can add value to increase the pie for everybody. The example we talked about on the last call is that about 93% or 94% of all of our GMS flows through Etsy Payments today. That means there's 6%-7% that hasn't been getting, you know, we don't get the the service fee or the transaction fee on Etsy Payments in about 6%-7% of our GMS, and so we're expanding to bring on that last mile of people coming through Etsy Payments. That's just a handy example of expansion of an existing service. We'll continue to look at are there new services that we can offer, or is there more pricing to take that would benefit the sellers in a way that we can, you know, grow something that supports them and give it back to them in the form of more marketing, more service. So that's our philosophy on Take Rate. We're not the lowest Take Rate, nor are we the highest. You can look at other companies' rate cards and see there's, you know, a number of services we don't provide our sellers today, and those are, you know, the places to kind of think about where we would go if we wanted to grow take rate. Perfect. Perfect, thank you for that. And just in the last minute, I think that we have remaining, to Josh, on the capital allocation priorities in the business. You bought back almost 4 million shares the past quarter. I think that's the highest number in recent history for Etsy. How do you think about capital allocation going forward? Well, we're fortunate to have a really capital-efficient business. It's a really capital-light model, and it's a model that produces great free cash flow in good times and bad. So, returning capital to shareholders is something we're very open to, and, you know, you've seen us do it all along. We're proud of the fact that I think we have fewer shares outstanding today than six years ago when Rachel and I joined this business. And so that's, you know, something we'll keep an eye on because we know it's something that shareholders like. And, you know, our focus continues to be on the core business, and so we're very focused on investing profitably to grow the core. We think there's a big opportunity there as well. Can I just add one sentence on that? Is that we return about 90% of our EBITDA converts to free cash flow, and our EBITDA is, you know, continues to be strong. The guidance we gave for the fourth quarter was 26%-27% margins, but without our subsidiaries, that puts Etsy very close to 30% margins in the core. Highly cash generative, low capital requirements, strong free cash flow. Terrific. Well, this is a perfect way to end. Thank you to the Etsy team, and Happy Thanksgiving to everyone. Happy Thanksgiving. Thanks, Anna.