10-K: Etsy's 2024 Annual Report: GMS Declines Amid Strategic Shifts and Investments

• Etsy's 2024 annual report highlights a challenging year with a decline in Gross Merchandise Sales (GMS) to $12.6 billion.
• Etsy marketplace GMS was $10.9 billion, while Reverb and Depop generated approximately $917.9 million and $788.9 million in GMS, respectively.
• The company's revenue increased to $2.8 billion, driven by growth in both Services and Marketplace revenue.
• Etsy reported a net income of $303.3 million and an Adjusted EBITDA of $781.5 million.
• The number of active sellers decreased to 8.1 million, while active buyers also saw a slight decrease to 95.5 million.
• Etsy is focused on building a sustainable competitive advantage, growing its core geographies, and leveraging its marketplace playbook across its House of Brands.
• The company is expanding its focus beyond core geographies and making strategic investments in select geographies where they perceive growth opportunities.
• Etsy's capital allocation strategy focuses on organic growth, acquisitions, and mitigating dilution through stock repurchase programs, with a new $1 billion program approved in October 2024.
• The company is committed to achieving Net Zero emissions through science-based targets and has made progress in reducing its Scope 1, 2, and 3 greenhouse gas emissions.
• Etsy is focused on ensuring equal access to employment, engagement, and development to drive equitable outcomes and has expanded its workforce data to include sexual orientation, disability status, veteran status, and parental status.

Score: 6

Explanation: The document presents a mixed sentiment. While revenue and Adjusted EBITDA increased, GMS declined, and active sellers and buyers decreased. The company is taking steps to address the challenges and invest in future growth, but the overall tone is cautiously optimistic.

• Revenue increased by 2.2% to $2.8 billion.
• Adjusted EBITDA increased by 3.6% to $781.5 million.
• The company is committed to achieving Net Zero emissions through science-based targets and has made progress in reducing its Scope 1, 2, and 3 greenhouse gas emissions.
• Etsy achieved a score of 100 on Disability:IN's Disability Equality Index for the second year in a row.
• The company spent $43 million with diverse-owned suppliers in 2024.

• Gross Merchandise Sales (GMS) declined by 4.4% in 2024 to $12.6 billion.
• Active sellers decreased by 10% to 8.1 million, while active buyers decreased by 1.1% to 95.5 million.
• The company has incurred impairment charges for goodwill and other long-lived tangible and intangible assets, and may incur further impairment charges in the future.

• Fluctuations in quarterly operating results due to macroeconomic conditions and other factors.
• Failure to meet publicly announced guidance or other expectations.
• Inability to retain existing buyers and sellers and activate new ones.
• Technology disruptions, security breaches, or privacy incidents.
• Intense competition from other online and offline retailers.
• Failure to keep pace with technological changes and enhance current offerings.
• Unsuccessful expansion of operations outside of the United States.
• Failure to deal effectively with fraud or other illegal activity.
• Compliance with evolving global legal and regulatory requirements.
• Potential intellectual property claims and litigation.

Etsy believes the e-commerce industry continues to have significant tailwinds in terms of its long-term growth opportunity, and that this overall growth bodes well for Etsy. Global e-commerce revenue in our core markets is estimated to grow by a compounded annual growth rate of 8% through 2028, and Etsy believes it has significant potential to grow within this context.

• Etsy's mission to Keep Commerce Human is rooted in our belief that, although automation and commoditization are parts of modern life, human creativity cannot be automated and human connection cannot be commoditized.
• We believe consumers increasingly expect more from the businesses they support, and companies that prioritize people, the planet, and profit will be best positioned to succeed over the long term.
• We are committed to sustainable growth by aligning our mission with our business strategy, fostering economic impact through entrepreneurship.

The announcement comes amid a challenging macroeconomic environment for discretionary spending, with increased competition in the e-commerce sector. Etsy is positioning itself as a destination for unique, personalized alternatives to mass-produced goods.

• Etsy's GMS underperformed the e-commerce sector at large, which experienced growth in 2024.
• Reverb performed slightly better than the musical instrument industry overall.
• Depop grew GMS by 31.6% year-over-year, making it the fastest-growing U.S. online apparel marketplace.
• Etsy estimates that the online market size across all relevant retail categories for the Etsy marketplace within our historical core geographic markets represents an approximately $550 billion market opportunity, and an approximately $2 trillion market opportunity when offline sales are included.
• The global secondhand apparel market (including resale and thrifting) is forecasted to grow approximately three times faster on average than the broader global apparel market through 2028, reaching an estimated $350 billion.

• Shareholders: May experience fluctuations in stock price due to market conditions and company performance.
• Employees: May be affected by workforce reductions and changes in compensation and benefits.
• Customers: May benefit from improvements in search and discovery, customer support, and trust and safety.
• Sellers: May benefit from tools and services to help them grow their businesses, but may also face increased fees and compliance requirements.
• Suppliers: May be subject to environmental and social standards and supplier diversity initiatives.

• Continue to focus on increasing buyer frequency and growing average order value.
• Continue to invest in innovative ways to leverage advanced AI, Gen AI, and ML technologies to enhance customer experiences.
• Continue to refine marketing strategy to reinforce brand promise with Etsy buyers and optimize investments through a full-funnel approach.
• Continue to expand proactive listing reviews and enforcement of Creativity Standards to protect the integrity of the marketplace.
• Continue to enhance Member Support offerings by making it easier for buyers to access support.
• Continue to provide sellers with valuable insights, programs, and educational resources to support their growth.

• 2011: Depop founded.
• 2013: Reverb marketplace launched.
• April 16, 2015: Etsy common stock listed on the Nasdaq Global Select Market.
• September 2019: Etsy issued $650 million aggregate principal amount of the 2019 Notes.
• August 2020: Etsy issued $650 million aggregate principal amount of the 2020 Notes.
• June 2021: Etsy issued $1.0 billion aggregate principal amount of the 2021 Notes.
• April 11, 2022: Etsy marketplace transaction fee increased from 5% to 6.5%.
• September 30, 2022: Etsy recorded non-cash impairment charges of $897.9 million and $147.1 million to write-off goodwill in full for Depop and Elo7, respectively.
• August 10, 2023: Etsy completed the sale of Elo7.
• October 30, 2024: Etsy's Board of Directors approved a new stock repurchase program authorizing repurchases of up to an additional $1 billion of its common stock.
• December 31, 2024: End of fiscal year 2024.
• February 14, 2025: David Rosenblatt appointed to Etsy's Board of Directors, effective March 10, 2025.