Hi, everyone, and welcome to Etsy's fourth quarter and full year 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 our new CFO, Lanny Baker, who joined us at the start of the year. Once we are finished with the presentation, Josh and Lanny 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 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. 2024 was a challenging year for Etsy, Inc. One where we underperformed to the far higher standards we hold for ourselves as the market leader for special. We're disappointed as we know you are, and we're working with tremendous urgency and focus to inflect the trajectory of the Etsy marketplace's GMS performance. I'm excited to tell you more about how our refreshed executive leadership team, combined with a clear strategic plan, will build upon the fundamental improvements we made to the Etsy customer experiences in 2024 to lean into our core differentiation even more, all with the goal to return to meaningful GMS growth. To recap our full year performance, consolidated GMS was down 4% from 2023 to $12.6 billion. Strong execution enabled take rate expansion in a win-win way that provides value to our community, resulting in record revenue of $2.8 billion, up about 2% year over year. We exceeded our commitment to deliver strong profitability with adjusted EBITDA of $782 million and margins of 27.8%. Recent ecommerce growth has been skewed towards those that offer low prices and fast delivery, and that's a game we're unlikely to win. We also recognize that consumers are shopping and spending their time differently with more competition than ever for Mindshare. So during 2024, we challenged ourselves to zoom out, and we made some considered pivots to focus on where we can win to make Etsy truly better on the whole. We temporarily shifted our way of working to be less focused on near-term conversion driving experimentation in favor of creating holistically better customer experiences focused on quality, reliability, and making our app a place for discovery. While this resulted in real opportunity cost to GMS, to the tune of at least a few hundred million dollars last year, we believe it will be well worth it, as we're now building on this improved foundation for 2025 and beyond. Etsy truly has something different and valuable to offer the world. That's certainly what we hear from so many of our buyers. We want more people to think of us more often and to come to us to be inspired and to have fun to bring Etsy front and center in their consideration set. So while others focus on cheap and fast, we're focusing on creativity, self-expression, and elevating artisanal items. And while others rely on mass production and complex supply chains, we are empowering our nimble and unique seller base to thrive. Let me walk through how the foundation we laid in 2024 to make Etsy the starting point for special will help us to move faster in 2025. First, by dialing up Etsy's differentiation. We've often said that our selection of over 100 million unique creative goods is what truly sets us apart. It's our job to showcase the very best that Etsy sellers have to offer. Last year, we introduced a quality score by adding indicators of high caliber listings into our search algorithms—factors like positive reviews and on-time shipping. This is helping us move from showing you listings you're most likely to buy to surfacing ones you'll truly love. By also providing sellers with actionable insights on ways they can improve their listings and customer service, such that they'll rank higher in search, this work is having the intended effect, creating a race to the top dynamic. Sellers took millions of actions to improve their listings, and we're observing a higher propensity for sellers to get better reviews, indicating that customers are having better purchase experiences when they visit Etsy. In 2025, we aim to make the quality score more dynamic and robust. For example, we're looking at how we might tackle higher order questions such as how unique the item is, or is it priced competitively? We're even testing an LLM that identifies the skills and level of craftsmanship that goes into an item. There's no army of humans we could have hired to answer these types of questions before the advent of Gen.ai and advanced LLMs. As you know, frequency has been a challenging metric for us to move. We've made some progress over the years, but we're focused on doing much more to fuel purchase frequency as a key lever for growth. Our 2024 work on gifting is a great example of how we built a dramatically better shopping experience to serve a frequent purchase occasion where special really matters. It made a difference. 2024 gifting GMS outperformed sitewide GMS and gifting grew as a percentage of overall GMS. We made shopping for gifts on Etsy easier through meaningful, targeted product improvements, expanded our gift card offerings, and evolved our marketing to drive awareness for gifting moments all year long. Gifting will remain an always-on focus for Etsy, ingrained within our core discovery flow. In 2025, we'll highlight key gifting moments like birthdays, anniversaries, and baby showers to drive consideration and engagement. This year, we'll pull from the gifting playbook to capitalize on another quintessential Etsy cross-category purchase occasion: personalized items, which fits squarely into our place for special wheelhouse. Similar to gifting, Etsy's already known for being a great destination for personalized goods. About a third of buyers come to us looking for personalized items, spending across many categories and price points. Personalized or customized items make up roughly a third of our GMS today, and we're already experiencing strong growth in some subcategories, like personalized party decor and personalized apparel. Which both grew double digits in 2024. Today, the personalization process on Etsy can be clunky and often very manual. So this year, our roadmap includes improvements to seller tools and buyer functionality. Last fall's introduction of Etsy Insider, a loyalty program designed for occasional shoppers, was also targeted at growing consideration and frequency. While still in closed beta mode, we've seen encouraging results on members' purchase frequency. They appear to value the free shipping benefit and are meaningfully more engaged with Etsy's direct marketing content than nonmembers. We'll continue to test, iterate, and learn as we move through 2025, particularly focused on building a successful, scalable economic model. But so far so good. We're excited to see early proof points that Insider could be part of an Etsy ecosystem where our loyal customers come back to us more frequently without us having to invest marketing dollars to reengage them. In 2024, you saw us evolve our marketing approach to attract, retain, and engage millions of consumers around the world. This year, we'll focus even more heavily on efficiency and meeting our customers where they are. For example, we'll dial back on linear TV and dial up our presence on connected TV and paid social. The system we built last year to more efficiently segment product listing ads will now incorporate ML models to further improve our ability to showcase quality and drive more sales. We also have big plans to expand the relevance and reach of our owned channels, specifically push and email, again using ML to get better at sending buyers the right nudge on the right channel at the right time. The other major way that we're anchoring being the starting point for special is by powering discovery and inspiration. Building a stickier ecosystem to keep buyers engaged, starting with the Buy on Etsy app. The app is our highest converting channel and accounts for just over 40% of our marketplace GMS, yet only makes up about 25% of total visits today. We estimate that getting Etsy's app penetration in line with our peers represents up to a billion dollar GMS opportunity. Last year, we optimized screen real estate by consolidating picked up thread content that's based on past missions, prototyped discovery-driven surfaces, and enhanced ML models with richer buying signals. We're now launching an entirely revamped navigation featuring our all-new shop tab, which leans heavily into discovery with browsable, inspiration-rich content designed to better showcase the incredible possibilities that Etsy has to offer. Why are we so focused on powering discovery and inspiration? It's really the start of a fundamental shift in how we interact and engage with our buyers, creating a powerful flywheel designed to elevate the entire Etsy experience. As our surfaces become more browsable and engaging, we can capture an order of magnitude more data about our buyers' interests, inclinations, and habits, both collectively and individually. For example, what did you hover on? What did you swipe past quickly? Which images did you choose to enlarge? Historically, we've been focused on spear phishing, optimizing to quickly get you to what you want and then show you similar things. The signals we get from spear phishing are powerful and show high intent. Like what did you favorite and what did you actually buy? But they're quite scarce compared to what we can learn from browsing behaviors. By gathering more about what sparks your interest, we'll be better positioned to delight you when you're ready to buy. With discovery-forward surfaces, we're dramatically expanding the signals we collect. This richer data fuels our ability to build even more powerful models, leveraging the revolutionary power of LLMs to better predict buyer preferences and understand their intent with unprecedented accuracy. This then leads to the core of the flywheel, creating more personalized experiences like window shopping in a store curated just for you. That's the experience we envision for our evolved surfaces, driven by the insights from our powerful models. As the flywheel spins, these personalized experiences become even more refined and engaging. A critical offshoot of this flywheel is the ability to create more tailored marketing. By leveraging these vast datasets and powerful LLMs, we expect to be able to generate more effective and personalized marketing strategies across all channels, from email and CRM to push notifications, landing buyers on our highly browsable experiences. All of this reflects a fundamental shift in how we're working to get consumers to come and return to Etsy's evolving and ever more personalized and resonant surfaces. Everything we're working on is in service of better buyer experiences and helping our sellers to grow. It's important to highlight that in today's highly commoditized world of ecommerce, Etsy sellers and their items are the foundation of what makes us special. In fact, in our recent seller census results, which you'll find in our 10-K, show that nine out of ten Etsy sellers are one-person businesses. Nearly all work from home. Eight out of ten are women. And half sell exclusively on Etsy. As intended and expected, our new seller setup fee combined with enhanced trust and safety efforts resulted in a decline in active seller last year. However, the result is a healthier seller base evidenced by the higher percentage who are making sales, demonstrating our commitment to their success. And we have a lot more in store in 2025. Turning to Depop, which represented a strong growth tailwind in 2024, with GMS up nearly 32% year over year to $789 million. Depop's fourth quarter represented the highest year-over-year GMS growth since our acquisition. Depop's full-year GMS growth in the US was outstanding, up about 60% year over year, making Depop the fastest-growing US fashion resale player. We've captured a winning formula, blending cultural apparel trends with the individuality and self-expression that resonates with the younger generation, all while enhancing the product to more effectively match buyer intent with seller supply. Depop offers great prices for buyers and sellers at a time when that matters a lot. Etsy's new president and chief growth officer, Kruthi Patel, is working to fill her Depop CEO seat while transitioning back to Etsy. Reverb's GMS was down 2.6% year over year, landing at about $918 million for 2024. Reverb continues to perform slightly better than the musical instrument industry. The team has done an admirable job navigating through challenging industry headwinds, leveraging their tremendous differentiated inventory, and building a thriving circular economy for music gear, all while improving profitability. Reverb leaned into wallet-friendly options, like with the launch of the Reverb outlet, contributing to double-digit percentage growth in that segment in 2024. 2025 marks Etsy's twentieth anniversary, our etsiversary. For the past two decades, Etsy has been the home for creativity and self-expression. As I look ahead to what's in store, I feel deep conviction in the power of our brand, Etsy's millions of incredible sellers, and our strong team. Starting with Kruthi, who brings vast experience building and scaling critical growth strategies and a deep commitment to Etsy's mission and community of passionate buyers and sellers. I've long admired Kruthi's customer-centric approach to leadership, and I'm excited about where she'll make her mark. Lanny's only seven weeks into the CFO job, and I'm thrilled with our choice. His critical thinking, deep toolkit of marketplace operational and financial expertise, and tremendous fit with our culture have made him an ideal partner. Brad Miner, who we elevated to chief marketing officer, is seamlessly evolving our marketing strategies in 2025. We kicked off our CTO search with two strong internal leaders sharing the seat on an interim basis. They and the rest of our team are optimistically charging forward to make Etsy better and to keep commerce human.

Thank you, Josh. Thanks to everyone for joining our fourth quarter call. Before I dive into the results, let me start by saying how excited I am to be here. As a student of digital marketplaces, I have always admired Etsy's brand, business model, and leadership team. I am a habitual Etsy shopper myself, ever since my first purchase of a handmade leather computer bag nearly ten years ago. I am thrilled to join Etsy at this pivotal time. This company has a history of sharp strategic execution. From 2017 to early 2020, Josh and the team led a transformation to establish Etsy's demand-centric business model, which drove a reinvigorated growth and a stair step in profitability. Then from 2020 to 2024, Etsy successfully navigated another extraordinary period with seamless execution, exiting the pandemic, maintaining much greater consumer scale and take rate efficiency. Right now, accelerating advancements in ML and AI are redefining the technological landscape and creating new opportunities for those poised and driven to take advantage. Etsy's strong track record, our brand, scale, and talented team, I strongly believe we are well positioned to harness new technologies and make Etsy ever more clearly differentiated, a vastly better place to shop, and to drive growth in the long term. Etsy delivered approximately $3.7 billion in consolidated GMS in the fourth quarter, down 6.8% year over year. GMS in the core Etsy marketplace declined 8.6% year over year, leading to softer than anticipated consolidated GMS. As discussed earlier, this was partially driven by our decision to prioritize longer-term initiatives over shorter-term growth. Combined with a shorter holiday shopping period, I do want to highlight Depop's strong top-line performance, which Josh mentioned, as it represented a very nice tailwind to Q4 consolidated GMS. Although consolidated GMS declined in the fourth quarter, consolidated revenue increased 1.2% year over year to a record $852 million. Adjusted EBITDA grew to an all-time quarterly high of $251 million, up 6% from the prior year. Within that revenue performance, consolidated marketplace revenue declined 1.4% due to lower GMS, which pressured transaction revenue partially offset by higher consolidated payment revenue as well as revenue from the new seller onboarding fee. Services revenue was once again a key contributor to performance, increasing 8.1% year over year. The take rate bridge on the left shows Etsy ads as a primary driver of this strength, where improved ad relevancy and optimized bidding are giving us the ability to deploy more of sellers' budgets and deliver attractive return on ad spend to sellers in the process. All in all, Etsy delivered a consolidated fourth quarter take rate of 22.8%, ahead of our outlook, driven by the aforementioned contributions, solid take rate expansion in Etsy ads, consolidated payments expansion, including for both Etsy and Depop, and incremental revenue from the seller onboarding fee. The fourth quarter consolidated adjusted EBITDA margin was 29.4%, above the outlook of 28 to 29%, roughly 140 basis points higher than last year. The primary source of that improvement was gross margin leverage at the Etsy marketplace, where a lower rate of fraudulent activity led to a meaningful decrease in the variable cost of revenue in the quarter. I think it's encouraging to see Etsy deliver healthy bottom line performance in what was a challenging quarter for GMS. During the fourth quarter, consolidated product development spend decreased 5% year over year to $111 million. We gained leverage on a full-year basis with consolidated product development spend as a percentage of revenue declining to 15.8% in 2024 compared to 17.1% in the prior year, primarily reflecting the reorganization undertaken in late 2023. Fourth quarter consolidated marketing spend increased 9% year over year to $285 million which drove total marketing spend as a percentage of revenue to 33.5% in Q4. The company pulled back a bit on brand spend versus the prior year, increased investment in paid social, while continuing to execute across other performance channels. For the full year, consolidated marketing spend increased 13% year over year, and consolidated marketing spend as a percentage of revenue increased to 30.5%. Turning to Etsy marketplace buyer metrics. As a longtime observer, I'm frankly in awe of the way Etsy has driven buyers over time. While Etsy obviously had an outsized influx of buyers during the pandemic, the ability to continuously find new buyer channels, reactivate large pools of lapsed buyers, and create stickiness with existing buyers is no small feat and provides enormous value to our sellers. To that point, the Etsy marketplace ended the year with nearly 90 million buyers, still close to record levels. One of the silver linings in 2024 was the continued reactivation of lapsed buyers—nearly 29 million for the year and nearly 10 million in the fourth quarter alone. Mid-funnel and other paid social marketing channels are working well as a tap on the shoulder reminding buyers to come back to Etsy. While fourth quarter new buyer acquisition declined year over year, Etsy acquired 7 million buyers globally and 24 million for the year, who had never shopped on the marketplace before. In terms of geographic performance, in our appendix slides and the 10-Ks, you will see that we have transitioned to a new view of US versus non-US GMS performance. This updated disclosure is based solely on where the buyer is located rather than our prior definition, which took into consideration the location of both the buyer and the seller. US buyers represented 74% of full-year GMS in 2024 and 75% in the fourth quarter. Non-US buyers accounted for 26% and 25%, respectively. Looking forward, we believe this view will provide a clearer picture of our success in attracting international buyers and growing non-US buyer GMS over time.

In the fourth quarter, on a year-over-year basis, non-US buyer GMS underperformed US buyer GMS, underscoring the unfavorable macro environment in many of Etsy's marketplaces in international geographies. Our GMS per active buyer, which is a trailing twelve-month figure, was $121, three and a half percent year over year. In a continuation of the trend throughout 2024, lower household income buyers underperformed relative to higher household income buyers. While Etsy's top categories experienced softness in the fourth quarter, we saw growth in some subcategories, like personalized clothing and vintage jewelry. These are classic examples of what buyers come to us for. These nuggets give us conviction in the work that Josh described earlier to highlight purchase occasions and to deepen item attributes, which is meant to unlock new and exciting buyer discovery journeys within our many millions of items. Moving now to the balance sheet, as of December 31st, Etsy had $1.2 billion in cash, cash equivalents, and short and long-term investments. During the fourth quarter, Etsy repurchased a total of $260 million in stock. At year-end, we had an additional $1 billion available under our board authorization. Etsy generated over $780 million in adjusted EBITDA in 2024, converting approximately 90% of that to free cash flow, a portion of which the company deployed to reduce the outstanding share count by 12.2 million shares over the course of the year. Turning to our outlook and starting with the first quarter of 2025, we currently anticipate that first quarter consolidated GMS will decline at a rate similar to the year-over-year performance reported for the fourth quarter of 2024. In a typical first quarter, we would expect to gain significant benefit from GMS attributable to prior year product launches, and that's less of a factor this year due to the shift in our product investment strategy last year. We've seen some bright spots in the quarter so far, including encouraging Valentine's Day and related gifting performance. Collectively, our subsidiaries are expected to provide a tailwind to consolidated GMS growth in the first quarter. We expect Q1 2025 take rate to be approximately 23%, due to the benefit of ad product improvements, payments expansion, and the seller onboarding fee we initiated in 2024. We currently anticipate our first quarter 2025 consolidated adjusted EBITDA margin will be approximately 25 to 26%. While we aren't ready to provide a specific consolidated GMS outlook for the full year, I wanna point out a few factors that we believe should position the Etsy marketplace for improved GMS performance beyond the first quarter. First and most obviously, the comparisons get easier in the second half of the year. Second, we expect to move beyond the opportunity cost phase of our 2024 product development shift, with the benefits of investments in our foundation and in the Etsy shopping experience emerging over time. Third, our 2025 product development plan is rebalanced to accelerate the velocity of product experimentation that has historically driven incremental near-term GMS impacts while we continue to push forward the longer-term priorities we've discussed. Given our desire to fund an ambitious product development pipeline, including some incremental hiring in AI and ML, we're planning for modest deleverage in consolidated product development spending this year. Meanwhile, it's our current intention to keep consolidated marketing spend as a percentage of revenue fairly constant on a year-over-year basis in 2025. We'll be making certain spending reallocations and remaining very ROI driven, seeking efficiencies to drive GMS. Putting those pieces together with Etsy marketplace GMS positioned to improve as we move through 2025, we would expect adjusted EBITDA margins to be stronger in the second half of the year than in the first half, consistent with what we've seen in prior years. We are committed to maintaining strong bottom line performance and generating healthy free cash flow while also investing in the things which will further differentiate Etsy, which will build our opportunity and drive long term growth. Thank you all for your time today. It's truly a pleasure to be here, and I'm excited to help Etsy get to this next phase of growth and success. With that, I'll now turn the call over to the operator.

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Thank you so much for taking the question. I wanted to follow up on the key learnings from your marketing initiatives in 2024 and how they inform the shifts in where you plan on spending marketing dollars by channel in 2025. And the second part of it would just be teasing out how to think about the return profile of that spend. As I think Lanny comments right there at the end imply a little bit more variability of return on marketing as you get into the second half of 2025. Thanks so much.

Yeah. Great. Thank you for the question. I'm gonna walk through the funnel, if I may, on that. So at the top of the funnel with more brand campaigns, we're really following our customers where they are, shifting away from linear TV towards more things like direct TV, connected TV, and platforms like YouTube, TV, places like that. In the mid-funnel, I think there's a huge opportunity for us. And what we mean by that is people who, for example, are planning a wedding, having a baby, moving home, but haven't yet figured out the very, very specific item that they need to buy. I think that is a huge opportunity for us and really ties into the more browsable surfaces that I talked about in the recorded call. So we made investments in that in 2024 where we're really starting to lean in and learn how to make those profitable channels. As you know, we call it R&D. We lean into channels, and we test what creative's gonna work and what feed strategy and what landing page. As those things become ROI positive, we're able to lean more and more into them. So that work, we kicked off a lot of R&D on that in 2024 that's gonna continue in 2025 that I think is really important. It really does tie to the more browsable surfaces as better landing pages. At the bottom of the funnel, which is where most of our spend is, we're making a lot of investments in better ML to be able to help places like Google and Facebook know which items to surface. That really ties very well to the quality initiatives we've been talking about for some time to make sure that the items we're paying to promote in places like Google and Facebook are actually the best of Etsy that represent Etsy the best and are most likely to convert. It turns out that we can add a lot of value even to their tech based on what we know using better AI and ML. So I see an opportunity to optimize even further in the PLA side of the business and then move up the consideration funnel in the mid-funnel and the upper funnel so people think to come to Etsy earlier. I think over time, that can create a really fundamental shift in customer behavior for Etsy that is gonna be very positive for us.

Eric, can you ask a little bit about our expectations for the full year on marketing spending? And as we said, we plan to keep marketing spending right now about at the same range as a proportion of revenue, as a percentage of revenue as we did last year. But we run our marketing very much to an ROI. If we as we're able to improve the ROI, we can step up the marketing spending, and we'll do that as we've done in the past. So your question about variability this year, we've told you where we expect it to be for the full year. We'll be working hard to drive improvements in ROI. As we do, we'll be able to spend more.

Great. Thank you.

Awesome. Thank you guys for taking the questions. So I have two, and Lanny, it's great seeing you again. So maybe Josh this may be a little repetitive with your prepared remarks, but I think it's important to double click on it. But beyond the first quarter, what are the two or three main factors you believe should position the Etsy marketplace for improved GMS performance and would you anticipate a return to GMS growth by year-end, which is lab one of the key questions a lot of people have. And then I guess, Lanny, can you the active seller count was down 10%. Maybe can you talk about the type of merchants you've been losing there? How much of a priority is growth in that metric? And can you maybe get back to positive GMS growth without growth in active sellers? Thank you.

So, I'll take the first question. We haven't given a full year guide, but we did say we have reason for optimism that things will improve after the first quarter. Let me talk about at least two reasons why I believe that to be true. First, as we talked about a lot last year, we made some intentional pivots to shift many of our product development squads away from their traditional work on near-term GMS driving conversion to shift to more holistic tracks of work that really uplift and differentiate the Etsy customer experience. We think that's been very important and foundational. We think we felt the opportunity cost of at least a few hundred million dollars of GMS that would have been producing, driving growth through the fourth quarter and actually into the first quarter and beyond. Normally in the first quarter of the year, we're feeling the tailwinds from the GMS driving work that the team had been doing in the prior few quarters. Since the teams last year were focused, for much of the year on these more holistic experiences, that means we're not feeling that tailwind right now. But we do feel like these more holistic experiences ought to be yielding GMS benefits over time as customers have better experiences. For example, one of the things I shared in the call is a higher percentage of purchases are resulting in five-star reviews. Right now because we're putting our very best sellers and their very best items in front of our buyers. We feel like that ought to be yielding benefit. As we now are entering 2025, we're shifting some of our product development efforts back to these very intentional near-term GMS driving work that we've historically been very good at. So we'll have a more balanced approach through 2025. Those teams are just starting in their tracks of work, you know, January first, they just started returning their focus to the more traditional near-term GMS driving work. We think as we move through the year, we have a track record of seeing those kinds of efforts be very productive. That's why we think that the work we did last year is good. We think it positions us to see improvements as we move past the first quarter.

And quickly, on your question about seller count, one thing we've seen is that the percentage of sellers who have made a sale successfully has grown as the volume of sellers has come down a little bit. That reflects some purposeful friction that we've put in the seller sign up and seller acquisition process to make sure that the sellers on the market really have the will and the skill to be successful in the Etsy marketplace. From a growth perspective, we think that the variety, the depth, and the breadth of the selection that Etsy has got is ample and sufficient to drive and support really good GMS growth in the long term. It's incumbent upon us to bring that selection forward to consumers, anticipating what they're looking for, bringing them back for those incremental shopping moments, as Josh described earlier. So as we're looking forward, I think we feel really good about the breadth of our selection, and it's all about us elevating that and bringing buyers back to that great selection that's on the marketplace.

Great. Thanks for the question. Josh, you gave some really helpful color on priorities in 2025, but you also talked about ecommerce platforms that are getting shared at this point as those that compete either on price or speed of delivery. I guess as you look out to, you know, 2025, you expect that the priorities that you're making in terms of product can, you know, drive incremental GMS in a way that offsets these consumer level headwinds? Do you have enough in your toolkit or do you need sort of the market to improve?

Mean, certainly, it won't hurt for consumers to feel more confidence and feel like they are not trying to pinch every single penny. You know, for those who are saying, hey. The economy actually looks pretty good. All the data looks pretty good. I think we just went through an election, which was kind of a referendum on how do people feel about the economy, and I don't think they feel great about it. So having more consumer confidence would no doubt help. That said, we're very focused on doing what we can do within power, and I do think we have a lot of agency here. I think trying to compete in the race to the bottom of who can sell it cheaper and ship it faster, Etsy is just not well positioned for that. That's not what we're about, and I don't think it's great for our brand. I do think that really leaning into what makes Etsy different, the great product at fair prices that are gonna really delight you, not something that ends up in a landfill three minutes after you buy it, I think is more meaningful now than ever. In fact, as we look at there's a whole world that's looking at supply chains right now. We're having all kinds of conversations I'm sure we'll get a question about tariffs at some point in this call. We're all thinking about where we fit in the global supply chain, and I think this is a moment for Etsy to be saying, hey. There's a chance to be part of something really different. There's a chance to own something that really matters. So really what we're really focused on is elevating the best of Etsy. Our ability to do that is much greater all of a sudden with the advent of LLMs, understanding what the highest quality items are, what are the most artisanal items, which items appear to be valued, you know, priced appropriately to the market, who are the sellers that actually do the very best job serving our customers, and really lifting those people up, then creating more browsable spaces on the site, where even if you didn't come looking for jewelry, for example, you were looking for home furnishings when you arrived. But we're showing you, hey, Etsy's got amazing demi-fine jewelry. Demi-fine jewelry is an area where we compete super well. That's gonna be, you know, a ring that's maybe a hundred to three hundred dollars. For items like that, you're gonna find much better product, better quality, and better price than what you can find at the mall. So we have a lot of opportunities to compete. We just need to really put our best foot forward, and that's where we've been making some foundational investments that I think really position us well for that.

Perfect. Thank you for taking my questions and, Lanny. Congrats on joining the company. First, did you have any thoughts or insights into how the competitive backdrop kind of and adds this strategic framework could change or when or if the minimum exemption is actually repealed? I think, Josh related to that, can we spend a minute talking about tariffs and the impact of the platform?

Yes. Absolutely. The short answer is it really depends because we're seeing all kinds of proposals, and it's very difficult right now to know which tariffs on which countries, whether the de minimis threshold will be allowed or not in those regimes. It's really hard to know. Etsy has much less dependence on products coming in from China, vast less dependence on products coming in from China than most of our competitors. So I think to the extent that we see tariffs that are very focused on China, or other friction of products coming in from China, I think at least in the near term, Etsy is a net beneficiary. From that, I think it does speak to the resilience of our platform. Beyond that, we shared about 75% of purchase activity from the US, about 25% of that comes in from its imports, people from the US importing primarily from Europe. If there were broad-based European tariff regimes, that could create more friction for our buyers. It's a little hard to know, depending on how broad the tariff regimes are, how much friction there will be for generally relatively low value packages. Most of our items would fall under most de minimis thresholds. So we're tracking it very carefully. We're keeping a very close eye. We're doing whatever work we can do to anticipate and prepare for come what may. In general, though, I think Etsy will be more resilient than many of our competitors in these situations, and I think it speaks to the resilience of our platform in general, that we've been through a lot of global shocks of one kind or another, and this is where cottage industry can really come to the rescue. Our sellers buy most of their raw materials from their own within sixty miles of their home. I think that might turn out to be very useful for us.

Terrific. Thanks very much for the question. So maybe digging into the point about the Etsy ads driving the higher take rates. We can certainly see that in the numbers. It doesn't appear to be driving GMS, at least on a net basis. Am I misreading this? I guess just generally speaking, thinking about overall take rates, would you consider maybe lowering a bit to help drive some of that GMS?

Great question. So the Etsy ads are actually neutral or better to GMS. We tend not to ramp things up if they are harmful to GMS. The standard is it's got to be for the buyer experience. It's got to be that the ads are as good as the organic. So not always the case, and it depends on releases that the Etsy ads benefits we've seen aren't like one big bang release. There have been a number of things that they've done. But in general, I would say they're at least neutral and sometimes beneficial. The Etsy ads team is actually gold-based on GMS and take rate, so their gold is based on producing a, you know, an experience that drives more sales for our sellers. In terms of taking the take rate down, you know, it doesn't appear to us right now that that is a hindrance. In fact, you know, we see a huge abundance of really high-quality listings on the site. We're proud of the fact that most of the fees we charge are optional. So there's twenty cents to list an item that's been stable since we launched Etsy twenty years ago. There's a 6.5% commission, which we think is pretty fair. Payments fee, which is very competitive with any other payments platform you'd use. Everything else is optional. Our sellers are opting in when we create value-added services, be it shipping labels or Etsy ads. We think we've done a good job of making this a real win-win. In fact, if you look at the take rate expansion over 2024 and even over 2023, those were all us making the experience better in a way that our sellers opted in. So we think we've made the pie better. They were real win-win experiences, and the notion that the take rate always has to be a zero-sum game, I'm not sure is true. I think we've done a pretty good job of demonstrating that we can make the pie bigger for everyone.

We expect to be able to sustain the take rate that the advances we've made over the last twelve months. Our first quarter outlook is that the take rate should be around 23%, which is up a little bit from where it was in the fourth quarter. As Josh said, we believe it's Etsy's efforts to bring value to those additional services that are appreciated by the sellers that support the take rate where it is today and where it could go in the future.

Morning, everyone. Josh, maybe just to focus on the habitual buyer base and the repeat buyer base. It intuitively makes a lot of sense what's happening with the seller base. So maybe can you just help us understand, sort of what factors are driving the shrinkage of the habitual buyer base then, you know, as you sort of explore the loyalty program development process, what needs, right? Does the habitual buyer or repeat buyer really want from Etsy you think about improving the value proposition of the loyalty program over time?

Yeah. So there's, broadly speaking, two categories I would say in the habitual buyer. There are people who are going through a life event like a wedding, or having a baby where they suddenly have a lot of purchases that are very relevant for Etsy, and we'll see them pop up and be, you know, very high purchasers, and then they typically don't go away. They just buy less in the next year, and we see waves of that happening when wedding sizes get smaller. We've had fewer weddings, for example. You see a little bit of headwinds from that. When I say we, I mean the market has had fewer weddings. We went through a wedding boom, and weddings are not quite where they were at the moment. But the other thing we're seeing is people who just figured out that Etsy is a place they can go for all kinds of things and they start their shopping at Etsy. We really want, when we talk about these discovery experiences, more browsable experiences, to help more people to realize that they can start their shopping missions at Etsy much earlier. What we find with those habituals is that they really know how Etsy search works. If you sit next to them, they know the right words to put into Etsy search to get to the right stuff. They’re very creative, and they speak merch. What we're trying to do is create experiences that allow people that don't speak merch, that don't know how to talk to our search engine, to be able to have a really fun and engaging experience as well and be able to search and swim in the joy of all the fun stuff that's Etsy without needing to be an expert. Over time, I think that can lead to a lot more frequency for us.

Thank you.

Great. Thank you very much. Good morning. I appreciate you taking my questions. We're getting some questions this morning just about why 2025 will be different than 2024. Because the messaging was fairly similar, you know, at this point last year that, you know, as we progressed throughout the year, things will just get better. I guess, what gives you confidence that this year will be a little bit better? And then maybe a quick one on that, you know, one billion of incremental GMS from the app. You know, improvements that you're talking about. Yeah. I guess, could you maybe walk through that a little bit, Josh? Thank you.

Yeah. On the first one, you'll recall that in the spring and summer we started to change our messaging and actually say that we thought that the most important thing for Etsy to do was to create holistically more different experiences and really lean into the differentiation of Etsy, elevate quality and reduce sameness, things like that. Which we didn't think was gonna have a near-term benefit. While you're right that in the first quarter, we said we expect product to contribute and drive growth, we actually evolved our messaging from that. We said in the spring and summer, hey, we decided to shift our efforts to things that we don't have near-term benefit but will set up Etsy much better in the medium and long term. We think that had an opportunity cost last year of at least a few hundred million dollars felt particularly in the back half of the year. That would have also normally been providing a tailwind for us in Q1, which we aren't feeling from that, understandably. As we head into this year, we have actually shifted some of our product resource back to that near-term conversion driving work that historically has been very beneficial for us while continuing investment in things that continue the work around quality and differentiation that we think is gonna drive frequency and loyalty to Etsy over the medium term. We think having that more balanced portfolio is gonna be very helpful. Lanny also ticked through a couple of other things that we think will be helpful in the recorded part of the call. For example, the fact that the comps get a bit easier as we move through the year. So we're gonna keep focusing on the things we can control, which is really setting up Etsy as the best possible alternative to all of the really cheap and commoditized stuff out there. The more we do to set up Etsy as something that's truly better and different than that, I think that is a very big prize. We have our eyes on that prize and really focused on building towards that much better future. And then, you know, there are really important fundamental investments made last year in things like gifting that I think will contribute more as we move through this year. We had, as we said, Valentine's Day and gifting around that was encouraging. I think you'll see the benefits of that foundation work we did last year set us up for potential improvement later on this year. So this is one of the factors that we're pointing toward.

The second part of the question from Mark was on the app.

So we've been, as you know, also speaking of opportunity cost, taking people who land on mobile web and saying, hey, you really should be on the app. We feel some friction from that. That's intentional friction, but there's gonna be some conversion rate loss that comes from that. We're trying to be thoughtful and balanced, not reckless about it, very data-driven about it. But we are seeing an increase in app downloads as we had in the through the beginning of this year that we think is encouraging. We're gonna keep leaning into that work and, over time, getting much more of our usage to shift to the app we think is gonna be really great for long-term health of our customers and Etsy business.

Great. Thanks so much for taking my questions. When you compare the insights from your foundational investments so far and think about how to position Etsy's marketplace for a return to growth, talk about which areas of improvement to the consumer experience that you expect to contribute most meaningfully to that recovery? And maybe as part of that, can you just provide some examples of the areas of investments that you'll focus more on to generate more near-term GMS wins?

Yeah. Let me start with the near term, and then I'll go to the medium term if that's okay. On the near term, there's a couple tracks of work that this, you know, the conversion driving team, and one of the changes we've made is instead of having every squad try to build a better experience for the medium term while also growth hacking, conversion driving wins for the short term, we've actually separated and said these are squads that are specifically dedicated to conversion-driving near-term GMS, and these are squads that are building newer surfaces and we think improved experiences for the medium term. You could think about it as value capture and value creation squads, and I think just having differentiation of mission is gonna help. But having those squads that are very focused on near-term GMS, we've launched a whole bunch of new surfaces, and as the work that we did in the last half of last year, there's now an opportunity to go into those new surfaces we've launched and actually improve them for conversion. So I think there's, you know, we'll see some benefit from that. Also, tactically, when I think about things that are likely to pay off this year, applying a lot more machine learning to our feeds, to our lower funnel marketing, I think can drive meaningful efficiency gains there that we would, to the extent they're ROI positive, reinvest in growth. Those are some examples of things that I think in the near term can be very helpful. In the medium term, I want to talk about browsing, and I want to talk about quality. On the browsing side, historically, our recommendations have been based off of very high intent signals, like what did you buy, what did you favorite, and what did you add to cart. Those three signals have been most of what powers recommendations on Etsy. Those are very high intent signals. They tell us a lot about you, but they happen very rarely. Most customers have only a few purchases, add to carts, favorites, so we don't end up having a lot of data to work from, and it can end up being a very rearview mirror-like experience on Etsy. By creating more browsable surfaces, where you're just scrolling past interesting stuff, we can gather much more data about a much broader set of customers. This data tells us things like what style do you have, what types of inventory interests you? It probably starts to tell us things like, do you own a pet? Or do you have a child in the house? What types of categories interest you? So when you come back and search on Etsy, we can apply all of that because we know so much more about you to make that experience much more tailored to you. We can take Etsy and turn it into a really personalized experience. This is not work that's never been done before. We have a lot to learn from folks like TikTok and Instagram and Pinterest and others on this but there's been a lot published on how to do this well that we think we can learn from and really accelerate our growth. In doing that, I think we can also move up the funnel. What our customers tell us is I love Etsy; I just didn't have a need. What they mean by that is I go to Etsy when I've looked everywhere else and I couldn't find it. Then I go to Etsy. For sure, we have it. But we have so much more for you too. Instead of being the last place you go when you can't find it anywhere else, we wanna be engaging you regularly, in fun, inspirational experiences so that when you're ready to buy something, we already have you there. We don't have to spend as much to get you back. For many retailers, I think that would be a pipe dream. The idea that people are gonna come and spend time just to be inspired or to discover, but for Etsy, it's a natural. We are the home of creativity. We are the home of self-expression. We have so much interesting content from interesting creators that I think on Etsy, it's actually a very natural fit, and our customers think it's a very natural fit. We have a lot of opportunity there, and we're just beginning. I'm incredibly excited. The other area I'm super excited about is quality. Really understanding what the best of Etsy is. That's obviously in the eye of the beholder thing, but LLMs start to give us insight into the beholder. What are your tastes? What does look like quality to you? What does appear more artisanal? Not just appear, but this LLM that I spoke about in the recorded part of the call, for example, can look at a picture and say what are the specific skills required to make this product? The wood is joined in a way that requires a very high level of craftsmanship. This is a particularly artisanal product. That kind of thing wouldn't have been possible even three years ago. I think our ability to identify and elevate the most unique and interesting items on Etsy is at the knee of a curve right now, and I'm really excited to see what that can yield.

Think we're actually out of time. Thank you guys so much. Thanks, operator.

Appreciate all the interest. Thank you all very much.