Hi, everyone, and welcome to Etsy's second quarter 2024 earnings conference call. I'm Deb Wasser, VP of Investor Relations. Today's prepared remarks have been prerecorded. Joining me today are Josh Silverman, CEO, and Rachel Glaser, CFO. Once we are finished with the presentations, we will take questions from our publishing sell-side analysts on video. Please keep in mind that our remarks today include forward-looking statements related to our financial guidance, our business, and our operating results, as noted in the slide deck posted to our website for your reference. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties, some of which are described in today's earnings release and our most recent Form 10-Q, and which will be updated in future periodic reports that we file with the SEC. Any forward-looking statements that we may make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also, during the call, we'll present both GAAP and non-GAAP financial measures, which are reconciled to GAAP financial measures in today's earnings press release or slide deck posted on our IR website, along with the replay of this call. With that, I'll turn it over to Josh. Thanks, Deb, and good afternoon, everyone. We're pleased that Etsy's consolidated results came in at the high end or ahead of our guidance. GMS was $2.9 billion, down about 2.1% year-over-year on a consolidated basis. Revenue grew 3% to $648 million, and we posted a very healthy adjusted EBITDA margin of approximately 28%. Etsy marketplace GMS was down about 3.2% year-over-year, a 210 basis point improvement from our Q1 performance of negative 5.3. Etsy marketplace's record high level of approximately 92 million active buyers held up very well in another challenging quarter for our type of goods. While we continue to face stiff macro headwinds, we're making meaningful improvements to the customer experience, which we believe are beginning to inflect the curve along our journey to get Etsy back to growth. We also announced today that Rachel is planning to retire. She's been a strategic partner and a key to the tremendous success Etsy's achieved since 2017. I believe every CFO wants to be measured on results, and Rachel has so much to be proud of in that regard. Beyond the numbers, Rachel leads with optimism and heart, helping craft our culture and our team's operational excellence. She's built a strong team, and I'm grateful she chose Etsy to serve as the culmination of her impressive career. Our entire community will continue to benefit from the impact she's made. We're going to have some more time together, and we'll stay focused on driving Etsy's success. You'll all have ample time to chat with her over the coming months as we launch a search for her successor, and of course, we'll share updates with you at the appropriate time. As a reminder, our key focus for 2024 is to continue to build consideration for Etsy, to help buyers think of us more often by making it easier to find the best stuff, driving association that there are great deals on Etsy, and making shopping on Etsy more convenient. We're working to make Etsy more of a go-to shopping destination, and in particular, to really lean into what makes Etsy different and special, and we're making excellent progress in our bold initiatives to do just that. As you know, we've evolved our way of working in 2024 to shift some of our focus from building incrementally better customer experiences to investing in the creation of more big bang, truly engaging experiences and moments on-site and off. Since 2017, Etsy's operating model has been quite unique in that teams were tasked to bank GMS in a very disciplined way to drive valuable incremental improvements to the customer experience. This worked extremely well for us, and I believe has been a key contributor to our remarkable success, including being able to maintain a very large part of our extraordinary pandemic gains. Given our much larger scale and the increasingly crowded and promotional e-commerce landscape, we're now allocating a significant portion of our efforts to bold, integrated initiatives that combine product improvements and marketing in novel ways. We're working backwards from what great customer experiences look like and are laser-focused on driving buyer engagement, not just conversion. I'm really excited to update you about how this new way of working is driving the success of several key 2024 initiatives, including in gifting, our work to highlight quality on Etsy, plans for our new Etsy Insider loyalty program, and work to make our Etsy app the center of our customer experience. Starting with gifting, which is proving to be a winning theme, better on-site gifting experiences, combined with clear and engaging marketing initiatives for seasonal and evergreen gifting, and specific campaigns for product innovations, such as our new Gift teaser video messages, worked together to deliver excellent second quarter performance in this strategic investment area. Sitewide GMS for purchases identified as gifts grew 4% on a year-over-year basis and significantly outperformed the overall Etsy marketplace. Further, Etsy's gifting performance surpassed that of the pure-play competitors we've been tracking for benchmarking purposes, and our U.S. Mother's Day, Father's Day, and graduation performance meaningfully outpaced the NRF's forecasted performance for these events. Video gift teaser messages weren't our only product innovation in the second quarter. We launched gift lists and reminders, allowing you to track ideas you have for a loved one's special event, and then, of course, reminding you to make the purchase. New occasion pages, curated for things like anniversaries, birthdays, and so on. In addition to GMS growth, we're utilizing monthly U.S. buyer surveys to gauge the impact of our gifting strategies, and this data shows a significant year-over-year increase in prompted consideration of Etsy for gifts.... We're also tracking an increase in perceptions that Etsy makes it easy to find a great gift. Of course, gifting initiatives will remain front and center as we move into the all-important holiday season. Moving on to bold initiatives we're making in quality to ensure we highlight the very best of Etsy, differentiating ourself in a sea of commoditized merchandise. We stand for keeping commerce human, and we have an enormous conviction that doing this in a way that no one else can, is our most important competitive advantage, and that these initiatives represent a tremendous unlock for buyer consideration. We mentioned on our last call that we're using large language models and GenAI techniques to better understand both the shopping mission you're on, as well as our sellers' inventory, along these four key focus areas: suppressing and removing items that violate our policy, upranking better quality listings in search and recommendations, and better curating and organizing our marketplace. I'm extremely proud to report on the fantastic progress our search team is making to move beyond our historical focus on solving for relevancy in search, when you know what you want and can't find it anywhere else, to new initiatives meant to also highlight the best of Etsy and feature the incredible diversity and uniqueness of our sellers' merchandise. In the past, our search algorithms ranked each listing individually based on likelihood to convert, which often resulted in buyers seeing far too many similar items rather than a more holistic set. Here's some powerful data. We've roughly cut in half the percentage of searches where a high percentage of listings seen on page one are from a single seller. We reduced the percentage of searches that have two or more listings that may appear identical by over 70%. We're incredibly excited about what this might mean for future visitation, as buyers see a more diverse and higher quality set of listings each time they visit Etsy. In addition to helping buyers, these initiatives also support our sellers, given how important it is that we nurture the best of Etsy across our seller base. Our latest search experiments resulted in approximately 70% of shops having more visibility in search, with the share of search impressions from small and medium shops increasing by nearly 30%. Later this summer, we'll empower sellers by giving them more agency and actionable insights than ever before into factors like listing quality and completeness that can impact how they show up in search. Connected to this work, and to further allow our sellers' unique items to shine, we've made some bold changes to our marketplace to reinforce who Etsy is, so that everyone who comes to Etsy understands why we're different and special. We know that people love what Etsy represents, as a marketplace that offers original items made by real people, and that being a place that supports small businesses and offers original goods are Etsy's top drivers for consideration and relevance. Yet in the past, the label handmade was the default, applied to any listing which wasn't vintage or craft supply. Even while our policies allow for the inclusion of items that were designed or personalized by the seller, but not made with their own hands. This lack of distinction could be confusing for both buyers and sellers. So on July ninth, we announced a series of updates to our listing labels to be clearer about why items belong on Etsy, and elevating the role of the seller in the making process. We've labeled virtually all of Etsy's listings along four Creativity Standards: one, physical items made by a seller by hand or using personal or computerized tools. Two, items designed by a seller using their own designs, yet produced by a production partner. Three, handpicked items, which can include vintage items, items from nature, and certain collections of items that a seller personally curated for sale. And four, items sourced by a seller, specifically in the categories of craft supplies or party supplies, along with items that are personalized by the seller. We've already seen lots of love from our sellers related to these new standards, with overall high engagement and positive sentiment in our community spaces. Many sellers even amplified the news and shared the campaign on their social media channels. In the spirit of moving boldly, as we make these meaningful changes to highlight the quality, diversity, and differentiation of our sellers' most unique inventory and feature the seller's role in the creation of each item, we simultaneously launched a 360-degree marketing campaign, touching owned, earned, and paid channels, to reinforce Etsy's quality, originality, and humanity. When you shop many of our competitors, you don't know who or where you're buying from. With Etsy, the sweater is stitched by Jessica, the glassware is handmade by Chad, and the table is built by Tiffany. Our new social creative tells a deeper story on the role of our sellers and their love for their craft. We've created dozens of assets that range in style based on the audience, platform, and goal. Here's our new hero brand spot for TV, streaming, and YouTube, which shines a spotlight on what makes our sellers so magical. What does a robot know about love? How to translate that leap inside the human heart into something we can see and hold. The fingerprints we leave behind show how determined we are to give the world a piece of ourselves. Etsy. ... The team and I couldn't be more excited about the changes we've made and how we're telling the world about them. Note that this is just one, albeit large, step in our quality journey, with much more to come. I firmly believe that we will look back at this initiative as one of the most important factors which reignited Etsy's growth. We mentioned last quarter that we're making significant investments in our app to engage our existing active buyers, capture more new buyers, and help encourage more engagement and browsing, which we believe will, in turn, convert into loyalty and sales. Our app continues to lead both desktop and mobile web in terms of GMS growth, and represented about 42% of the GMS in the second quarter, providing an excellent opportunity for low-cost, native traffic acquisition, particularly given it's our highest converting platform. We've launched and are leaning into optimizing our app store position, running paid ads for app downloads, featuring app download prompts on our mobile website, and utilizing our owned channels in CRM. We're working to make the Etsy app our marquee customer experience, shifting most buyer usage to the app rather than mobile web or desktop, and drive frequency and engagement with lower-intent shoppers who come just looking for ideas and inspiration, while continuing to convert buyers who are on a clear shopping mission. And speaking of frequency and engagement, I'm excited to unveil some details of our new buyer loyalty program, another bold move for Etsy in 2024. Etsy Insider will be launched invitation only to a highly targeted group of occasional U.S. buyers in beta form in mid-September. We've accomplished a lot so far, including many rounds of research and competitive audits to inform our program and rollout. We've focused on developing key benefits for buyers that highlight both the emotional and the rational characteristics of Etsy's unique value proposition, and are in the process of finalizing our pricing strategy for launch. Our beta program is buyer fee-based and will include free U.S. domestic shipping on millions of items, item discounts, first access merchandise, and more. We'll test, learn, and iterate, and are optimistic that over time, Etsy Insider can be a needle mover, driver of buyer frequency, and Etsy love. I've said before that I believe Etsy has more to gain from advances in AI than most of our e-commerce peers, especially given the incredible breadth and uniqueness of our sellers' inventory, and we've been investing to unlock this value across almost every area of our business. This slide highlights 20+ use cases in product development alone. We're fortunate to be building upon a strong base, with many years of investment in leading-edge ML and data infrastructure, talent, and systems, allowing us to move quickly. A key foundation of the discovery and engagement work I've discussed today has been powered by our investments in AI. For example, to better curate merchandise to improve the buyer experience and drive GMS. We're making it easier for buyers to find quality listings for mid-priced jewelry, known as demi-fine, by having human experts determine what jewelry attributes are most important to a buyer's search, think material, gold purity, or hot trends, then utilizing GenAI to infer those attributes to create new search discovery modules and pathways, and incorporate this into on-site experiences, such as landing pages. While this search is very much in progress, these better on-site shopping experiences, combined with targeted marketing initiatives, such as tailored social media content, CRM efforts, and improved data feed curation for paid and organic search, contributed to a 9% year-over-year increase in GMS for demi-fine jewelry in the quarter. I'm really proud of the strides our team is making so far in 2024. We're confident we're working on the areas that will meaningfully impact Etsy in the months and years to come. We're leaning in more than ever to what makes Etsy, Etsy. We're nowhere near being as big or as successful as I believe we can be, nowhere near achieving our full potential. This is inspiring and motivating to us all. I'll now turn the call over to Rachel. Thanks, Josh, and thank you for joining our call. My commentary today will cover consolidated financial results, key drivers of performance, and Etsy marketplace standalone results where appropriate. As a reminder, we divested Elo7 on August 10th, 2023, so please take that into consideration when you compare year-over-year consolidated results. Etsy's second quarter 2024 consolidated GMS was $2.9 billion, down approximately 2.1% year-over-year, with a 20 basis point FX headwind. Revenue increased by 3% year-over-year to $648 million, and adjusted EBITDA was $179 million, representing a healthy 27.7% margin, up 130 basis points year-over-year and ahead of our guidance. Note that Elo7's divestiture resulted in small headwinds to GMS and revenue growth in the quarter that was modestly accretive to our consolidated adjusted EBITDA margin. The Etsy marketplace GMS continued to face ongoing headwinds from tough macroeconomic environment, yet results came in a bit better than we had anticipated, with the $2.5 billion in Etsy marketplace GMS representing a 3.2% decline on a year-over-year basis, and better than the 5.3% decline in the first quarter. In addition, strong Depop performance contributed a nice tailwind to consolidated GMS. I'll cover Etsy marketplace GMS performance in more detail later. Our consolidated year-over-year revenue growth of 3% can be attributed to solid growth in our marketplace revenue, which increased 3.8% year-over-year, primarily driven by payments and Offsite Ads. We continued to drive Etsy Payments expansion, with penetration of our payments platform now at about 98% of Etsy marketplace GMS. We saw a nominal revenue increase from our new seller onboarding fee, which was rolled out in additional regions at the beginning of the second quarter. When combined with stronger trust and safety efforts, this new fee is helping to reduce fraudulent onboarding, protecting both our marketplace and existing sellers. Consolidated services revenue grew by 1%, led by higher Depop shipping label and ads revenue, as Depop continued to drive shipping label adoption and improve the visibility of boosted ads on their marketplace. For the core Etsy marketplace, ads revenue growth moderated during the quarter as we comped Q2 of 2023, which featured strong growth from significant product optimization efforts. Nevertheless, Etsy Ads still saw modest year-over-year take rate expansion as we unlocked value for our sellers by refining our retrieval engines and ranking models to improve ad relevance. All in all, our consolidated take rate improved to 22%, above our guidance of approximately 21.6% and above the 20.9% reported in the same period last year. This strong performance is primarily the result of previously mentioned marketplace revenue growth. Our second quarter consolidated Adjusted EBITDA margin was about 28%, ahead of our guidance and up 130 basis points from last year. We gained leverage year over year on employee costs and cost of revenue, which was partially offset by a higher level of performance marketing investment this quarter. Just a quick note, you may have noticed in our PR that our second quarter net income was impacted by a non-income tax expense for digital services tax ruling in Canada, effective the end of June and retroactive to 2022. While this did not have an impact on our adjusted EBITDA results, it did impact our GAAP G&A and consolidated net income. We continued to drive leverage within consolidated product development spend, which decreased 6% year-over-year to $114 million during the second quarter, primarily due to decreased employee compensation expense connected with our 2023 workforce reductions. You can see from the chart on the right that revenue per headcount for the Etsy marketplace continues to grow on a year-over-year basis and remains well above many of our peers, even those of significantly larger size and scale. Second quarter consolidated marketing spend increased 10% year-over-year to $183 million. Most of this increase can be attributed to the Etsy marketplace, where we leaned into ROI-positive channels and expanded into mid-funnel and newer performance channels, particularly within paid social, which is the second-largest performance channel behind PLA. The chart on the left shows how we have leaned further into paid social in the first half of this year, and we expect this trend will continue in the second half. Keep in mind that we believe that as we shift our mix towards paid social, this will support buyer retention and frequency more than new buyer acquisition, since a lot of our paid social advertising is retargeting existing buyers, and you see that reflected in the buyer metrics I'll outline shortly. In the second quarter, we also comped a period of lower investment in the prior year when testing across our performance channels temporarily reduced spend. As a reminder, revenue from our off-site ads program offsets more than a third of our performance marketing spend. Consolidated brand spend declined 26% year over year and 42% sequentially as we pulled back in this area following our significant Q1 2024 marketing investment to support the launch of Gift Mode. Let's move now to our Etsy marketplace second quarter 2024 GMS and buyer metrics. We believe that the improved year-over-year GMS performance we saw versus our first quarter results can be attributed to two factors. First, about a third of the sequential acceleration can be attributed to tailwinds from the Easter holiday timing shift, which we noted was a headwind to our Q1 results. Second, we believe the initiatives we've been investing in this year drove the remaining portion of the sequential improvement, demonstrated in part by stronger Mother's and Father's Day purchases, year-over-year, despite ongoing macro pressure on consumer discretionary product spending. From a geographic perspective, our GMS, excluding U.S. domestic, declined slightly on a year-over-year basis, but improved about 100 basis points sequentially. We also saw some improved performance in a few of our categories, which, as you may recall, were all down on a year-over-year basis in Q1. You can see here that Paper and Party Supplies was flat year-over-year, and Toys and Games grew. In addition, year-over-year trends improved in Q2 2024 versus Q1 2024 in five of six categories. We are pleased to report that Etsy marketplace active buyers of approximately 91.5 million demonstrated continued resilience, growing 1% on a year-over-year basis and remaining roughly flat to the last quarter. Drilling down a bit, buyer metrics were a bit of a mixed bag. We reactivated over 6 million lapsed buyers in the quarter, up 8% year-over-year, and we added over 5 million new buyers. While this metric is down 9% year-over-year, the decline moderated sequentially. Collectively, we added approximately 12 million new and reactivated buyers. Habitual buyers decreased by 3% year-over-year. However, our retention rate of habitual buyers was slightly better on a year-over-year basis. Lastly, GMS per active buyer was down 3.2% in the quarter to $124, continuing to show signs of stabilization on a sequential basis. In totality, we believe these metrics continue to indicate that Etsy remains highly relevant to tens of millions of consumers who come to us despite tight discretionary budgets, albeit spending a bit less, because we fill a need like no one else. Depop continues to be a source of growth and opportunity in the recommerce apparel sector. They delivered very strong year-over-year GMS growth, driven once again by the U.S. market. Depop removed selling fees for sellers based in the U.S. effective July fifteenth, and introduced a small buyer marketplace fee, a change designed to empower sellers to earn more from their wardrobes, offer improved value and choice for buyers, and make it easier for people to take their first steps into second-hand. The evolved fee structure follows similar changes made in the U.K. market earlier this year. Turning to Reverb, they continue to outpace the performance of the musical instrument sector and gain share by highlighting affordable music gear across the experience. For example, Reverb launched the Reverb Outlet in June, which showcases new and like-new music gear sold at discounts of 20% or more from trusted and authorized retailers and brands. As of June 30th, we had $1.1 billion in cash, cash equivalents, and short- and long-term investments. During the second quarter, we repurchased a total of $150 million in stock under our $1 billion June 2023 board-authorized repurchase program, of which approximately $416 million remained available as of June 30th. Our capital-light business model allowed us to deliver strong free cash flow this quarter of approximately $141 million. We also continued to convert approximately 90% of our adjusted EBITDA to free cash flow on a trailing 12-month basis. And you can see here how we have continued our commitment to return a significant portion of our free cash flow to shareholders through share repurchases into 2024. Turning to our outlook, we are pleased to have already seen a modest acceleration in consolidated GMS from the first quarter to the second quarter of 2024, ahead of what we expected in May. Our guidance is that third quarter consolidated GMS will decline in the low single-digit range on a year-over-year basis. As you know, consumer discretionary product spending trends remain volatile, with mixed signals about the health of the U.S. consumer. So this guidance is based upon current expectations that the macro conditions which impact our business don't get worse from here. Q3 2024 consolidated take rate is currently estimated to be similar to the second quarter and remain relatively stable for the rest of the year, and consolidated adjusted EBITDA margin will be approximately 27%. The sequential pressure on Q3 adjusted EBITDA margin can primarily be attributed to three factors: A shift in timing of the cost of creative for our new seller-focused brand campaign, which moved from the second quarter into the third quarter. Two, continuing to lead into more exploratory marketing channels for the Etsy marketplace, including unlocking paid social. And third, some select incremental hiring to support our app investments. We continue to expect that our full year 2024 consolidated adjusted EBITDA margin will be at least at the level of our 2023 performance, as seasonal volume and cost efficiencies should benefit our fourth quarter margin this year. The Etsy marketplace also historically has a larger share of revenue and Adjusted EBITDA in Q4 relative to our subsidiaries, who are expected to continue to be about 300 basis points of headwind to the consolidated results. In closing, I want to comment about my plans to retire from Etsy. It has been a privilege, an honor, and a joy to be Etsy's Chief Financial Officer. I could not be prouder of everything we have accomplished over the last seven years. Working alongside this accomplished executive team has been a capstone to my career, and I want to especially acknowledge Josh, who for the past seven years has been equal parts partner, mentor, and friend, and who I know will be an important part of my life in the years ahead. Perhaps most importantly, enough can't be said about the spectacular finance team we have at Etsy. I truly stand on the shoulders of a world-class organization, and I am confident they will carry on without missing a beat once I have moved on. I'm excited to help identify and transition my responsibilities to a successor, and after that, I'll look forward to continuing board service, including in my current role on the New York Times board, serving as their audit committee chair. My husband and I are looking forward to more travel and maybe a little more downtime, but be assured, I will remain a habitual Etsy buyer and a huge champion of the company. I'm confident Etsy can continue our ambitious strategy for sustainable, profitable growth and advance our mission of keeping commerce human. It's bittersweet to be saying these words, but know my colleagues will deliver outstanding product and experiences for our buyers and sellers. Thank you for your time today. I will now turn the call over to the operator to take your questions. ...At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will receive a message on your screen asking to be promoted to a panelist. Please accept, and once your name has been called, you may unmute your video and audio and ask your question. If you do not accept, we will move on to the next analyst. As a reminder, we are allowing one question. If you have a follow-up question, you may raise your hand to rejoin the queue. We will now wait one moment to allow the queue to form. Thank you. Our first question will come from Jason Helfstein with Oppenheimer. You may now unmute your audio and video and ask your question. Hi. Hi, Jason. Hi. Hi. So before I ask the question, I want to say, this is probably our third rodeo, so maybe there'll be a fourth? I think going back to, was it Homestore.com or- Move. You're thinking of Move. No, but it was, before it was Move, it was Homestore, right? Oh, yeah. Anyway, so it's definitely been a blast over the years. Thanks, Jason. So, question, Josh, I wanna dig into the new seller classification program. Yeah. When do you think you'll be able to tell if, ultimately, when it improves buyer conversion, which then ultimately, presumably gives you confidence to lean more into marketing and kind of just get the flywheel going? So that's just a timing question. Yeah. Second, any thoughts on getting your sellers to raise their prices? Thanks. On the first one, I actually not sure it'll raise conversion. I hope it'll raise frequency. So our search engine right now is really optimized for conversion, which is why we have historically shown you, for example, multiple very similar variants of an item. If, if the black box algorithm thinks the most likely thing you're going to buy is this, it might show you 8 variants of roughly the same thing. And if that's actually what you wanted, for the 2% or 3% of people who are really ready to buy that thing, that was a great experience, and it drives conversion. But what about the other 97% who really weren't necessarily ready to buy? We would be much better served to show them a broader variety of things so that they understand everything we have on offer, whether they're going to buy this session or come back more often. So I think what we're going to end up with now, dramatic improvements in the diversity of items we're showing on Etsy, the diversity of sellers we're showing on Etsy, I think is going to drive a lot more people to say, "Wow, there's a lot more stuff for sale than I realized. There's more categories of items for sale than I realized," and they're going to come back more often. That's what I'm really excited about. In terms of getting sellers to raise their prices, you know, we're a marketplace, and sellers set their own prices, and we're not telling them how to price. We do give them market information to help them price. I think the more we can do to emphasize the humanity of Etsy and the Etsy seller, the artisanal craft role that was played, the more we can give the seller her rightful pricing power. So you should expect to see in Etsy, in the quarters to come, us doing more and more to center the seller, her role in the making process, things like video of her actually making the thing. So you really understand how artisanal the item is. And that, I think, is gonna really support our sellers and their pricing power, and I'm excited about it. Just, and just to add a note to the frequency comment you made, because you asked about when it can get the flywheel going again. Increased frequency obviously drives up lifetime value, so we can actually get the marketing flywheel going that way. So, more frequency is a good thing. Yeah. Thanks, Jason. Thank you. Okay, operator, next question. Our next question comes from Jian Li with Evercore. You may unmute your audio and your video and ask your question. Okay, I think that's me. Yes. All right, guys. Yeah, first, congrats, Rachel, on a really good run here. I just have a question on the shape of GMS growth recovery, sort of the back half of the year. How... I guess, like, a couple of things. Like, how has macro changed versus three months ago? You know, has it gotten better or worse versus where you stood three months ago? And, you know, why wouldn't we expect GMS recovery to continue sequentially, given that you're leaning more into marketing in Q3 and all these product initiatives in the back half? I can start with the macro that we're seeing. You know, I'd say it's been sort of tough sledding, but pretty volatile. So it's we've seen, we've seen, when we look at external data, we see things going in a positive direction. We see things going in a negative direction. What we've experienced Q2, Q1 to Q2, it's probably about the same amount of pressure, and the guidance that we gave says we expect about the same for the rest of the year. If it were to get worse, that would influence the forecast that we have. There's a lot of other mind share events that are going on in addition to macro. So we had an attempted presidential assassination. We had a pretty volatile, you know, pretty exciting and volatile Democratic competition going on right now. We have Olympics. We have, I think, Wimbledon, World Cup, and one other European soccer going all at the same time. And those things, in addition to macro, tend to influence our outcomes. We've always talked about what we call the CNN effect, so influence our outcomes. So we're, you know, fighting against those things that go one direction, but in the meantime, we're really planning for a great Q4, particularly with investments in quality, as Josh just talked about, and Gift Mode, which keeps getting better and better with new product launches, getting ready for the holiday season. So there's a lot to be excited about, just cautious with this environment. Okay, thanks, Jian. Operator, next question. Our next question will come from Nathan Feather with Morgan Stanley. You may now unmute your audio and video and ask your question. Hey, everyone, and congrats, Rachel. It's been great working with you. Thanks, Nathan. A few quick questions on the new loyalty program going into beta. So first off, who's the primary customer you're targeting here? Is it primarily that repeat customer that maybe isn't habitual yet, but you think you could bring them over the line? And then can you talk through how you're thinking about pricing that program and the goals from a profitability perspective? Thank you. Great question. Yes, so all great questions. So the target customer is people who shop only occasionally on Etsy. Think people who shop three or four times a year. And the idea is by having a paid loyalty program, once you're paying, you want to get value out of it. So the idea is, can we take those people and turn them into people who, every time they're shopping for something, think, "Let me start on Etsy, start all of my shopping missions on Etsy, or many of my shopping missions on Etsy." We're particularly excited to test what would happen if shipping costs went away. And I want to be clear, Etsy's funding this. We're not asking the seller to fund this, and this, you know, obviously, the fees we'll charge to the buyers will help fund it, but, but that's gonna be a very interesting experiment. And then we're also leaning a lot into emotional rewards, so think deals and drops, you know, special value and new product releases for customers. We think all of this, we can create something very exciting. We don't have specific pricing that we're ready to announce yet, but we're thinking, you know, in the range of the cost of a latte per month kind of things. We know people are very value conscious right now. And again, we're not targeting our most loyal, most habitual buyers who already come to Etsy to shop for many, many of their missions. We're targeting more occasional shoppers and seeing if we can upgrade them. So we think something in the range of the cost of a latte is probably about right. Just Josh said it in his prepared remarks, but it's a, it's an invitation-only beta right now, so it's a very limited group of people, and then we'll learn and iterate from there. You asked about profitability. Obviously, everything we do, we want to be profitable in time. I think in the beginning, you know, we're gonna test and learn on this one, and I think the program. I would expect the program to evolve. You know, I spent 4.5 years at American Express, which not only runs a massive loyalty program of its own, Membership Rewards, but it partners with Delta and Starwood and so many other loyalty programs in a really deep way. So I've had a chance to look at the loyalty market, you know, for a long time, and typically, these programs evolve, and you learn a lot about how to make the economics work. I expect we're gonna be on a bit of a learning curve here. I'm really excited about that, and I'm quite optimistic about what this can be in the future. Great. Thank you. And, yeah, we don't get invited 'cause we're habitual. Well, and I think it's a de minimis impact to margins in 2024, so. Yes. Thank you. Great. It looks like we have the next, Operator. You want to just introduce the next one? Our next question comes from Shweta Khajuria with Wolfe Research. You may unmute your audio and your video and ask your question. Hello, thank you for taking my questions. Rachel, it's sad to see you go, and I wish you all the best. Thank you. At least from my side, definitely we'll miss you. Thank you. Two questions, please. One is, just at a high level, if you could, you know, talk about, Josh, what do you think is the most exciting as you think about all these different initiatives and everything that you're launching for 2025? There is a lot of concern around consumer spend pulling back around, competition, et cetera. So what would you say to those who are doubting that there could be positive growth in next, for next year? And then second is on the -- a follow-up on your on the prior question, actually. How, why did you decide on this strategy now on the subscription? And what was the reason for launching it now? Thank you. Great. Thanks, Shweta, and congrats on your new gig. It's nice to see you. Okay, two questions. The first is, economic outlook, and what am I excited about, and why should we be excited for 2025? I guess I'd start with, you know, if you ask five economists their opinion on 2025, you're gonna get six opinions. So we're trying to control what we can control, and, we can control having an amazing and highly differentiated customer experience. So in a world where, you know, it may feel like we're swimming upstream in the economy, I think, first, we're maintaining our position when swimming upstream, and I think we're getting a lot stronger for it, which is gonna position us even better. And most importantly, we're not gonna get pulled downstream. We're not gonna be part of that race to the bottom. We're leaning into what makes Etsy even more Etsy. We're leaning into differentiation, and I'm so excited about you asking me about the things we're doing in gifting. We're seeing some green shoots here that are really encouraging. The performance in Mother's Day, then Father's Day, then graduation. I'm encouraged that strategy, you know, is showing some encouraging green shoots. I am really excited about the quality work that we're doing. When we say, you know, 50% fewer searches have a high preponderance from one seller, 70% fewer searches have, you know, multiple items that appear to be largely identical, I think that what that can do to the customer experience over time. We've done a ton in the past to suppress items that violate our policy. Now we're really focused on elevating the highest quality items on Etsy. Soon, we'll be launching to our sellers a dashboard showing them how we score the quality of their items and the quality of their service level, creating even more of a race to the top for sellers, so they have agency over how to rank higher in search, and that makes the buyer experience only better and better. I am super excited about elevating the very best of Etsy, letting our sellers shine, helping our buyers understand the role that the seller made in that process, and really differentiating Etsy. I think it's an exciting path, and I'm really encouraged by the early start we're on right now. Shweta, we're, you know, we're not giving 2025 guidance here, so your, the other part of your question was, do we see growth next year? We did show data on this call that talked about the categories where we've seen. Last quarter, we were down in every one of our major categories, along with many other competitors in each of those verticals. This quarter, we saw improvement in all of those categories except for one, and two of them are actually flat and positive. So we're starting to see the green shoots that we want to see in the categories that are most important to us. I think there was a second question from Shweta, which was, why loyalty now? Oh, why loyalty now? Yeah. You know, consideration is a huge focus for us. People love the experience when they're on Etsy, but they only think of us. They only. Very often, I think a way to think of Etsy is we're the place to go when you can't find it anywhere else, and we've been amazing at that, and we've gotten better and better at that. And you know what? If you want it and you know what you want, we have it at Etsy, and we've gotten great at showing you it. And for a few years, there was a period of time when you couldn't find almost anything anywhere else, and we were the beneficiary. Since that time, we've done, I think, a remarkable job replacing almost all of that GMS with other GMS here at Etsy. But we want to move from being the place to go when you can't find it anywhere else at the end of your process to the beginning of your process. We want you to start at Etsy. I'm planning a wedding. I just had a baby. I'm redecorating my home. At the very beginning, we want you to start on Etsy, and we know we have so much opportunity there, and we've not been great there. We think we have an opportunity to become really great there, and I think that LLMs are going to really help organize this enormous corpus of listings we have to be understandable by humans, help to navigate it, and make it a great starting point. So a loyalty program is a way of saying, "Hey, join our loyalty program and start your commerce missions. We want you to pay a little bit of money every month, and now that you've made that commitment, we want you to think every time you're buying something online, why don't you start that mission on Etsy?" We tested paid and free together, and if you launch them together, they tend to cannibalize. The free tends to cannibalize the paid. So we thought better to start with paid. Not saying we would never do a free, I'm saying we're going to evolve, we're going to test. But our consumer research suggested if you're going to test, best to start with a paid program. Great. Thank you. Operator, next question. Our next question will come from John Colantuoni with Jefferies. You may now unmute your audio and video and ask your question. Hi, thanks for the question. I just wanted to ask one on marketing. So on the performance marketing side, up 31%, I think that's the biggest increase since 2020. You know, given that that is currently significantly faster than the trajectory of GMS, just talk about what gives you confidence that once you recalibrate the trajectory of performance marketing to better balance growth and profitability, that you won't see a big pullback in GMS? Thanks. Yeah. Can I start with, first of all, last year in Q2, we did pull back on marketing spend because we were running, incrementality tests during that quarter. So the base was sort of not a normal base, so that's one of the reasons for the, the growth in this year's Q2 marketing, performance marketing spend. We also spent a bit of time talking about, we've been able to, and we've done this throughout, to test our way into new channels, and we will test, for a while, until we can optimize to get them ROI positive, and we've been very happy and excited to see that, on paid social and paid social video. Those are new channels for us, and we've been able to bring them up to be ROI positive, and we showed a chart that shows that they're an increasing percentage of our total performance marketing spend. And that's not instead of PLAs and other existing channels, that's in addition. So we feel confident in those investments as well. And then, the other thing that we're testing is more markets outside of the U.S., where we've seen really positive growth in some of those countries that are non-core to our top six. And so that's some of those are in the phase of, you know, incubating them and optimizing them to get them ROI positive, and some of them are actually producing at this point. Do you want to take the second part of his question? The second part, John, was how do we have confidence that those are, I guess, not be dilutive to margins over time? Yeah, I mean, we always have a lot of discipline on... When we invest a dollar, are we getting, you know, a meaningful return back all the way down the marginal return curve? What I'm encouraged by right now is we're starting to make progress on paid social, and I think that's really helpful for us, and it's an area that we want to lean in. And when I talk about going from the place to go after you've looked everywhere else, and you already know exactly what you want, that's really a PLA, right? I know exactly what I'm looking for, and I've searched for it in Google. To a much higher level use case, like I'm generally planning a wedding, Meta, YouTube, these places are much better at these very high-level, generalized use cases. The better we can get at targeting those users and then having a landing experience that's highly organized, that takes you from mid-funnel consideration all the way down to, "Here's the really, the few items that make the most sense for you," all the way down to, "Here's what you're going to want to buy," I think that unlocks a whole new opportunity for us. So I'm encouraged by the progress we're making in paid social. We're always going to have a strong eye for ROI. The other work that we're doing on quality, for example, on loyalty, on app-centric, is really to make sure that once we've engaged you, we're really pushing to engage you in the app and then get you to come back again and again and build that frequency loop, and that's going to be another big unlock for us. Just one last note is that we did reiterate that we expect our full-year margins to be at least as high as last year's margins. So, we have confidence in the way the marketing dollars are going to flow for the rest of the year for us to be able to achieve those margins. Great. Okay, fantastic. Next question, operator. Our next question will come from Rick Patel with Raymond James. You may now unmute your audio and video and ask your question. Hey, guys, nice to see you. Rachel, congrats on an amazing career. I'm sad for us, but really happy for you and your next chapter. Thanks, Rick. Can you talk about your efforts to emphasize value on the marketplace? How are you working with sellers to communicate the importance of offering sharper price points and discounts? And secondly, how do you execute that in terms of making sure you put the right deals in front of the right buyers? Yeah. So, you know, the efforts we've had in place in the past continue in terms of having a robust toolkit for sellers, so they can put their items on sale. They can offer, you know, a discount to a returning customer. If you've left an item in checkout, they can offer you a coupon to get you to come back and close. And we see sellers continue to use and adopt those tools. We have, you know, for example, as part of the loyalty program, Deals and Drops, we're going to be highlighting, like, things that we think are really cool value and really special value. We want to lean more into discovery on Etsy, where we just highlight things we think are cool, and we don't put all the effort on the buyer to have to have the keyword in mind already and search for it. But the main thing I want to emphasize in this call is we're investing a lot more in the differentiation of Etsy. Who's the human behind the item, and what was her role in the process? And really elevating that. And I think there's a big opportunity in our user experience for us in the coming quarters to do a much better job centering the seller and her role. And in doing that, I think it can really emphasize how special this item is, how artisanal this item is, and give her more pricing power for the value that she deserves. That's an area that we want to lean into as well. I think it's important. Another good example you might want to do is just it was on the prerecord for the demi-fine. Oh, yeah. Yeah. So, you know, look, if we look at our jewelry category, jewelry under $10 is under a lot of pressure right now. There was a period of time when malls were closed, and so you couldn't buy jewelry many other places, and Etsy sold a lot of jewelry under $10. But jewelry under $10 might have $5 of shipping. It's not obvious that, you know, buying it on Etsy is going to be the place where we're going to shine. And I'm not saying there isn't wonderful jewelry under $10 on Etsy, there is. We have wonderful sellers who sell that, but demi-fine jewelry of, let's say, value between $100 and $200, we have amazing value there, and those items are growing quite nicely. For example, engagement rings on Etsy, you can buy a beautiful engagement ring made just for you, often to your specifications, for a price that's a fraction of what you'd pay in the mall. That's an area where we have real competitive differentiation. We have a real right to win, and we want to make sure that those sellers really get elevated and get a chance to shine. So we're leaning in a lot more there. It's another place, actually, to talk about LLMs. One of the challenges is we have such a diverse set of inventory there, that getting all the attributes for all of those items labeled accurately has historically been a challenge for us. That's a task LLMs are doing quite well. So we've asked LLMs to go after our whole jewelry category and tell us what's the material, what's the carat, what's the, you know, the weight, of it, and it's doing quite a nice job, and then allow us to do things like filter. What are the filters a customer would expect? How do we apply those attributes and create a more organized shopping experience, starting in jewelry? And we're seeing LLMs there have a very nice effect. Great. Thank you. Operator, next question. Our next question will come from Chris Kuntarich with UBS. You may now unmute your audio and ask your question. Great, thanks for taking the question. Could you just talk about sustaining the '23 EBITDA margin for 2024? Is this really just a 2024 dynamic, or is there really a willingness to revisit this against a different backdrop? And then, Josh, can we really zero in on the app? Who's using the app today? How does engagement maybe differ from buyers that were pre-COVID versus new buyers? 42% of GMS is a very material amount. Just any color you can kind of share on that. Thanks. Well... So, What we love about our model is that we have a very variable cost base relative to our fixed costs. So when we drive much higher GMS and revenue, a large percentage of that flows through to EBITDA. And we demonstrated that for many quarters when we were in the, you know, the peak of our pandemic wins, that we were showing tremendous flow through to the bottom line. And since then, we've, you know, continued to maintain the Etsy standalone margins. Most of the contraction we've seen has come from the addition of our subsidiaries. So we've really kept both those things steady, the amount of contraction from our subsidiaries and the amount of Etsy margin. And we've been doing that in spite of flat to down GMS and, you know, modest increases in revenue. So what we expect going into the last part of this year is we expect to see, you know, we have a traditionally higher fourth quarter GMS in revenue because of holiday sales. So that happens against the backdrop of this relatively high variable cost base. So we've seen, we see higher flow through to bottom line during that period of time, and we see some things working in our favor versus last year, where last year, for instance, we had the sequential from Q3 into Q4 on above-the-line spend. There was a bigger increase than we're expecting this year. Last year, we saw higher costs of revenue related to fraud that we don't expect to see this year. We've been working really hard on things like that in our trust and safety organization to make sure that we keep those costs as low as possible while also keeping our marketplace safe. So we feel very comfortable about the level of our margins. We are a very productive and very lean organization. We showed a slide in this deck that showed revenue per headcount. When we've been asked in the past about, you know, why not reduce your costs even further to expand margins, we think if we did that, it would be at the cost of GMS and revenue, because we are such a lean organization, and we manage every single head in our product and engineering organizations for an ROI positive result. So we feel pretty good about how we're managing our cost base and the profitability that we're delivering. Yeah. I mean, we haven't given forward guidance. I don't want to. We're not going to give forward guidance. This is a team that has always cared about efficiency, has always cared about productivity. Every quarter and every year has been a quarter and a year of efficiency for this team. There's never been a year when we said, "Screw it, we don't care." And we want to make sure we're investing appropriately for the future. The margins in the core business are 30%. You can't find a marketplace of our size and scale with a margin anywhere close to that. And when you look at revenue per headcount, you've got to start looking at businesses that are multiples of ours, getting all of the fixed cost leverage that they get to get to, comps like ours. So I think it's a real testament to how much we have always cared about efficiency, and we want to make sure we're investing appropriately for the very large opportunity that we feel we have. And we're always thinking carefully about how to balance that to make the value grow as much as we possibly can for all of our stakeholders. Do you want to squeeze in the quick answer to Chris's second question, which- Oh, yeah. About the app? Yeah, yeah. Who's using it, and... Absolutely. So, it's about 42% of our GMS now. It's growing quarter-over-quarter. It's about 45% of our active users that have downloaded the app. But when a user downloads the app, they start visiting us a lot more often, and their lifetime value goes up. In fact, the most lifetime value accretive thing you can do with a user is get them to download the app. It skews a little more young, app users, but otherwise, you know, we had thought for a long time that the only people who are willing to use the app are our most habitual users. We've been finding lately that many first-time users are downloading the app before they've even bought anything. So I think consumer behavior has really changed, and we have an opportunity to make the onboarding and the app the first place and the centerpiece of your app experience, where historically it's been a place that people have only been wanting to migrate once they've shopped on Etsy several times. I think that's very exciting for us. Okay, we are almost at time, but I'm going to let the operator. Let's get one more question in. Our final question will come from Michael Morton with MoffettNathanson. You may unmute your audio and ask your question. Perfect. Thank you. Congrats again, Rachel. I hope you enjoy the time. Two quick questions, if I can, and one, Rachel, to follow up on your comment about fraud. You've highlighted that as a gross margin headwind, I believe, in the 10-K. So I was wondering if you could maybe quantify like, the effectiveness, right, of the onboarding speed bump and how that's been a lift to gross margins and if it's something that we should expect going forward. And then my second question, I think, may be geared more towards Josh, and that's just talking maybe a little bit about the limiting factors for on-site ads. You've spoken that some sellers try to give you more money than you can allocate. Service revenue growth has decelerated, granted, against tough comps, but just trying to think about the opportunity to grow that as a percentage of GMS, or if we're at some type of structural limitation to the ad load. Thank you again for those two questions. Yeah. On the fraud, I think, first of all, I'll say I don't think we're ever done, and I think all large marketplaces and all, you know, businesses that have subscription models or, you know, take credit cards in any way, they're all experiencing the same thing. So we've, I think we've done a very effective job of getting our fraud rate, which mostly results in us refunding buyers because a seller has promised to ship something that was fraudulent, but they never ship. Sometimes it results in chargebacks or other things. So the rate was very high in Q4 of last year. What we learned is that these fraudsters lay in wait for the Q4 season, and then it becomes rampant. So we're, you know, I think, a lot more savvy than we were last year, and we've done multiple things. Seller onboarding fee was one of many things, and I think it's been modestly helpful. Did we give a stat? I'm sorry, I don't remember, on the impact of the seller onboarding to- I don't know. But it's been modestly, you know, additive to revenue, but that's not the main reason we did it. It was really to create that speed bump for sellers onboarding. But we've done many other things in a whole portfolio of getting very sophisticated in fraud, and it's allowed us to reduce the reserves that we put in place for fraud. You know, what our fraud forecasts are have come down. So, you know, we think we're in great shape for Q4, and you know, all hands on deck and eyes wide open for what may be coming. On Etsy Ads, the rate of ad growth slowed, but actually, take rate still modestly expanded as a result of Etsy Ads. I continue to think there's a lot of opportunity in Etsy Ads. As we've shared before, most of the sellers big enough to be using Etsy Ads are, some of them are giving us more budget than we can use. Some of them are giving us less budget than we can use. Nudging some of them to give us bigger budget is a lever. The biggest lever continues to be picking the right ad to put in front of the right buyer, because that's the win, win, win. It makes the buyer experience better, it keeps the seller ROAS high, and that's something we're always very focused on, making sure the sellers get money, get value for money on this in-advertising investment. And obviously, it's great for shareholders. So we continue to get better at showing the right ad to the right buyer, and that's where we're gonna continue to drive take rate up from the Etsy Ads product. And I think there is still plenty of room for us to continue. Just as our search engine keeps getting better, it's very related to the ads search engine, which is also gonna continue to get better. Great. Thank you. We went over by a few minutes, so I think we're gonna call it, so. I just want to close by saying again, Rachel, it's been a wonderful partnership. I know we're not done. We'll continue working together until the next CFO is seated. But, as I told you privately, you have left large, small shoes to fill, and I'm really grateful for it. Thank you, and likewise, it's been just a joy to be here. She'll be here for a while, and I'll see you all. Yeah. Thank you all. Thank you. Take care. Good night. Thank you.