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What changed in ETSY INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ETSY INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+949 added−937 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in ETSY INC's 2023 10-K

949 paragraphs added · 937 removed · 651 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

265 edited+210 added−179 removed53 unchanged
Biggest changeONLY Board Overall Leadership Tech Engineering Other Business Roles 2020 2021 2022 2020† 2021† 2022† 2020† 2021† 2022† 2020† 2021† 2022† 2020† 2021† 2022† 2020† 2021† 2022† American Indian or Alaska Native —% —% —% 0.2% 0.1% 0.2% 0.7% —% —% 0.1% 0.2% 0.2% —% 0.3% 0.2% 0.2% —% 0.1% Asian —% —% —% 17.5% 18.9% 18.7% 14.4% 15.6% 14.1% 25.6% 24.7% 24.0% 22.6% 24.2% 24.5% 8% 9.8% 10.2% Black/ African American 12.5% 22% 22% 5.9% 6.1% 7.1% 5.8% 6.1% 6.2% 5% 5.4% 5.6% 5.5% 5.6% 4.8% 7.2% 7.2% 9.5% Hispanic —% —% —% 6.1% 6.3% 7.3% 2.2% 3.3% 4% 4.6% 5% 5.7% 5.5% 5.6% 5.9% 8% 8.5% 9.9% Two or More Races —% —% —% 3.4% 3.7% 3.5% 3.6% 2.2% 2.2% 4.2% 3.9% 3.6% 4.4% 4.4% 3.9% 2.5% 3.1% 3.2% White 87.5% 78% 78% 63.0% 61.2% 60.2% 71.9% 70% 71.8% 56.4% 57% 58.1% 57.5% 55.6% 57.3% 70.6% 67.8% 63.8% Not Declared —% —% —% 3.8% 3.7% 3% 1.4% 2.8% 1.8% 4% 3.8% 2.8% 4.6% 4.4% 3.4% 3.3% 3.6% 3.3% AGE METRICS - GLOBAL* 2020† 2021† 2022† n 24 years and younger n 30-34 years n 40-49 years n 25-29 years n 35-39 years n 50+ years *Age Not Declared was .2% in 2020 and 2021, and .1% in 2022. † Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period.
Biggest changeONLY Board Overall Leadership Tech Engineering Other Business Roles 2021 2022 2023 2021† 2022† 2023† 2021† 2022† 2023† 2021† 2022† 2023† 2021† 2022† 2023† 2021† 2022† 2023† American Indian or Alaska Native —% —% —% 0.1 % 0.2 % 0.1 % — % — % — % 0.2 % 0.2 % 0.1 % 0.3 % 0.2 % 0.1 % — % 0.1 % 0.2 % Asian —% —% —% 18.9 % 18.7 % 20.5 % 15.6 % 14.1 % 15.8 % 24.7 % 24.0 % 25.6 % 24.2 % 24.5 % 25.4 % 9.8 % 10.2 % 11.3 % Black/ African American 22.2% 22.2% 22.2% 6.1 % 7.1 % 7.3 % 6.1 % 6.2 % 5.5 % 5.4 % 5.6 % 5.9 % 5.6 % 4.8 % 5.1 % 7.2 % 9.5 % 10.2 % Hispanic —% —% —% 6.3 % 7.3 % 7.2 % 3.3 % 4.0 % 3.6 % 5.0 % 5.7 % 5.9 % 5.6 % 5.9 % 5.6 % 8.5 % 9.9 % 9.8 % Two or More Races —% —% —% 3.7 % 3.5 % 3.6 % 2.2 % 2.2 % 1.6 % 3.9 % 3.6 % 3.8 % 4.4 % 3.9 % 4.3 % 3.1 % 3.2 % 3.0 % White 77.8% 77.8% 77.8% 61.2 % 60.2 % 58.5 % 70.0 % 71.8 % 71.5 % 57.0 % 58.1 % 55.8 % 55.6 % 57.3 % 56.2 % 67.8 % 63.8 % 62.7 % Not Declared —% —% —% 3.7 % 3.0 % 2.9 % 2.8 % 1.8 % 2.0 % 3.8 % 2.8 % 2.8 % 4.4 % 3.4 % 3.2 % 3.6 % 3.3 % 2.9 % † Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period.
The unique nature of our sellers’ items requires that we invest in the other three elements of our strategy: search and discovery, human connections, and our trusted brand in order to deliver a best-in-class marketplace experience.
The unique nature of our sellers’ items requires that we invest in the other three elements of our strategy: search and discovery, human connections, and a trusted brand in order to deliver a best-in-class marketplace experience.
We’ve evolved our marketing strategy to reinforce our core brand promise in the minds of Etsy buyers, and we’ve strengthened our capabilities by employing a full-funnel marketing approach, optimizing our investments in each area of the funnel.
We’ve evolved our marketing strategy to reinforce our core brand promise in the minds of Etsy buyers, and strengthened our capabilities by employing a full-funnel marketing approach, optimizing our investments in each area of the funnel.
Resource Efficiency Regulatory policies that promote lower-emission modes of transport support our goals of achieving of achieving net zero, which may improve our reputation, reduce costs from carbon offsets, and help drive revenue growth. Medium-Term Low-Emissions Transport A significant portion of our Scope 3 emissions come from shipping.
Resource Efficiency Regulatory policies that promote lower-emission modes of transport support our goals of achieving net zero, which may improve our reputation, reduce costs from carbon offsets, and help drive revenue growth. Medium-Term Low-Emissions Transport A significant portion of our Scope 3 emissions come from shipping.
For example, the Sustainability Team collaborates with the Advocacy Team to review climate policy proposals at the U.S. federal and state level and in key non-U.S. jurisdictions that might impact Etsy, the Analytics Team to monitor natural disaster impacts on buyers and sellers, and the Sourcing Team to review climate-related risks within our supplier base.
For example, the Sustainability Team collaborates with the Advocacy Team to review climate policy proposals at the U.S. federal and state level and in key non-U.S. jurisdictions that might impact Etsy, with the Analytics Team to monitor natural disaster impacts on buyers and sellers, and with the Sourcing Team to review climate-related risks within our supplier base.
To this end, we track the annual carbon offset costs, offset cost savings from specific emissions reduction activities, and price projections for the voluntary carbon market. Related to natural disasters, we track GMS impacts from FEMA designated natural disasters as well as the percentage of our sellers and buyers in regions exposed to extreme weather events.
To this end, we track the annual carbon offset costs, offset cost savings from specific emissions reduction activities, and carbon offset price projections for the voluntary carbon market. Related to natural disasters, we track GMS impacts from FEMA designated natural disasters as well as the percentage of our sellers and buyers in regions exposed to extreme weather events.
We also share certain workforce metrics, such as our most recent consolidated EEO-1 report, information derived from our annual seller census, our annual Transparency Report, and our external facing policies, including our governance policies and guidelines, privacy policy and marketplace rules on our investor relations website.
We also share certain workforce metrics, such as our most recent consolidated EEO-1 report, information derived from our most recent seller census, our annual Transparency Report, and our external facing policies, including our governance policies and guidelines, privacy policy and marketplace rules on our investor relations website.
We also use internal and external brand protection mechanisms that are intended to protect our brands from misuse by third parties. Government Regulation As with any company operating on the internet, we are subject to a growing number of local, national, and international laws and regulations. These laws are often complex, sometimes contradict other laws, and are frequently changing.
We also use internal and external brand protection mechanisms that are intended to protect our brands from misuse by third-parties. Government Regulation As with any company operating on the internet, we are subject to a growing number of local, national, and international laws and regulations. These laws are often complex, unclear, sometimes contradict other laws, and are frequently changing.
We are especially focused on policies in the United States that aim to improve electrification infrastructure and reduce emissions from heavy- and medium-duty vehicles that are important in e-commerce logistics. Reputation Changing consumer preferences around sustainable shopping present opportunities for us to further differentiate as a values-driven commerce brand.
We are especially focused on policies in the United States that aim to improve electrification infrastructure and reduce emissions from heavy- and medium-duty vehicles that are important in e-commerce logistics. Reputation Changing consumer preferences around sustainable shopping present opportunities for us to differentiate as a values-driven commerce brand.
Laws may be interpreted and enforced in different ways in various locations around the world, posing a significant challenge to our global business. For example, federal and state laws in the United States, E.U. directives, and other national laws govern the processing of payments and consumer protection; other laws define and regulate unfair and deceptive trade practices.
Laws may be interpreted and enforced in different ways in various locations around the world, posing a significant challenge to our global business. For example, federal and state laws in the United States, E.U. laws, and other national laws govern the processing of payments and consumer protection; other laws define and regulate unfair and deceptive trade practices.
Sellers choose to list their collections of unique items on our marketplace because they believe that we are the best place for them to start and grow a creative business and that we have created a community that attracts, supports, and retains some of the world’s most talented makers.
Sellers choose to list their unique items on our marketplace because they believe that we are the best place for them to start and grow a creative business and that we have created a community that attracts, supports, and retains some of the world’s most talented makers.
Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites in this Annual Report are intended to be inactive textual references only.
Information contained on or accessible through our websites or other websites referenced in this Annual Report is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites in this Annual Report are intended to be inactive textual references only.
Transition Policy and Legal/ Tech New laws and regulations could increase direct operational costs to us in the short-term while stricter environmental regulations may place new burdens on our sellers raising their costs in the medium-term. Short and Medium-Term Regulations on Etsy Environmental disclosure regulations are increasing globally.
Transition Policy and Legal/ Tech New laws and regulations could increase direct operational costs to us in the short-term while stricter environmental regulations may place new burdens on our sellers raising their costs in the medium-term. Short and Medium-Term Regulations on Etsy ESG and environmental disclosure regulations are increasing globally.
This allows us to take immediate action while we work toward our Net Zero goal. • In addition, we take action in support of policy solutions that will help to drive carbon reduction from product delivery in the long-term.
This allows us to take immediate action while we work toward our Net Zero goal. • In addition, we take action in support of policy solutions that we believe will help drive carbon reduction from product delivery in the long-term.
Our trusted brand : We will continue to focus on being a reliable brand that inspires trust along the buyer journey — when buyers search, purchase, anticipate, and receive their special items, and all the steps in between.
A trusted brand : We will continue to focus on being a reliable brand that inspires trust along the buyer journey — when buyers search, purchase, anticipate, and receive their special items, and all the steps in between.
We believe that when executed effectively, these elements can create a multiplier effect that will drive future growth. Our sellers’ collection of unique items : The foundation of Etsy.com’s competitive advantage is our sellers’ collection of millions of unique items.
We believe that when executed effectively, these elements can create a multiplier effect that will drive future growth. Our sellers’ unique items : The foundation of Etsy.com’s competitive advantage is our sellers’ millions of unique items.
You can read more about Etsy’s Impact and environmental, social, and governance (“ESG”) strategies beginning on page 21, where we report on metrics aligned with both our self-identified Impact priorities and widely accepted third-party frameworks. About our Company Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world.
You can read more about Etsy’s Impact and environmental, social, and governance (“ESG”) strategies beginning on page 19 , where we report on metrics aligned with both our self-identified Impact priorities and widely accepted third-party frameworks. About our Company Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world.
Our teams continuously re-evaluate content on Etsy.com in the context of emerging trends to determine whether such content violates our House Rules or terms of use, including our Prohibited Items policy. Etsy.com has a zero tolerance approach for items that promote, support, or glorify hate or violence or that perpetuate the spread of harmful misinformation.
Our teams regularly re-evaluate content on Etsy.com in the context of emerging trends to determine whether such content violates our House Rules or terms of use, including our Prohibited Items policy. Etsy.com has a zero tolerance approach for items that promote, support, or glorify hate or violence or that perpetuate the spread of harmful misinformation.
We have various approaches for determining what information we disclose in our ESG reporting, including feedback we receive from the financial community and other stakeholders. In addition, we continue to report our ESG metrics using the relevant Sustainability Accounting Standards Board (“SASB”) sector standards for our industry and Task Force on Climate-Related Financial Disclosures (“TCFD”) frameworks.
We have various approaches for determining what information we disclose in our ESG reporting, including feedback we receive from the financial community and other stakeholders. In addition, we continue to report our ESG metrics using the relevant Sustainability Accounting Standards Board (“SASB”) sector standards for our industry and the Task Force on Climate-Related Financial Disclosures (“TCFD”) framework.
Reverb and Depop use Amazon Web Services (AWS) for their cloud computing needs. • Our Etsy.com cloud migration has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
Reverb and Depop use Amazon Web Services (AWS) for their cloud computing needs. • Our Etsy marketplace cloud migration has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
The survey was conducted through the Culture Amp platform and consisted of 64 rating questions on which employees were asked to indicate their level of agreement with a statement based on a five-point scale from Strongly Agree to Strongly Disagree, and two free-text questions to which employees were asked to write out a response for Etsy.com.
The survey was conducted through the Culture Amp platform and consisted of 64 rating questions on which employees were asked to indicate their level of agreement with a statement based on a five-point scale from Strongly Agree to Strongly Disagree, and two free-text questions to which employees were asked to write out a response for Etsy marketplace.
We conduct regular reviews, audits, and conversations to confirm suppliers are upholding agreed upon practices and to identify further areas where we can engage with suppliers.
We conduct regular reviews and conversations to confirm suppliers are upholding agreed upon practices and to identify further areas where we can engage with suppliers.
Oversight of climate risk at Etsy.com is supported by the Risk Steering Committee, a cross-functional management team which includes our CEO and CFO. This Committee meets at least quarterly to review and discuss the significant risks facing Etsy.com and its deliberations inform the risk management-related topics elevated to the Board of Directors.
Oversight of climate risk at Etsy is supported by the Risk Steering Committee, a cross-functional management team which includes our CEO and CFO. This Committee meets at least quarterly to review and discuss the significant risks facing Etsy and its deliberations inform the risk management-related topics elevated to the Board of Directors and the Board Committees.
We aim to drive positive impact in our supply chain by investing in strong relationships with our suppliers. We engage on priority impact areas, such as supplier diversity, greenhouse gas emissions, fair wages, and employee benefits programs, at crucial touch points throughout the supplier lifecycle.
Purchasing Power. We aim to drive positive impact in our supply chain by investing in strong relationships with our suppliers. We engage on priority impact areas, such as supplier diversity, greenhouse gas emissions, fair wages, and employee benefits programs, at crucial touch points throughout the supplier lifecycle.
Processes for integrating climate-related risks into the overall risk management At Etsy.com, climate-related risks are managed as part of ESG risk and are seen as both underlying drivers of other types of risks as well as standalone risks. These risks, as well as their drivers, are monitored by the Sustainability Team. The I&S Sr.
Processes for integrating climate-related risks into the overall risk management At Etsy marketplace, climate-related risks are managed as part of ESG risk and are seen as both underlying drivers of other types of risks as well as standalone risks. These risks, as well as their drivers, are monitored by the Sustainability Team. The I&S Sr.
Given these healthy performance metrics, as well as our validation of performance through multiple third-party methodologies, we anticipate that upper funnel brand marketing strategies will continue to be a growing part of our marketing investment mix over time. Other marketing activities .
Given these healthy performance metrics, as well as our validation of performance through multiple third-party methodologies, we anticipate that upper funnel brand marketing strategies will continue to be a growing part of our marketing investment mix over time.
As a result, we do not yet have a full “Year 2” data set for the 2021 new seller cohort, as sellers who incurred their first listing fee later in 2021 have not yet had two years to age.
As a result, we do not yet have a full “Year 2” data set for the 2022 new seller cohort, as sellers who incurred their first listing fee later in 2022 have not yet had two years to age.
These goals are included as key considerations as we plan for our computing needs, and have been a focus of our sustainability efforts. When transitioning to a cloud computing infrastructure, we selected Google Cloud, a partner that shares our commitment to 100% renewable electricity, for Etsy.com. Their highly efficient data centers have helped us save significant overhead energy.
These goals are included as key considerations as we plan for our computing needs, and have been a focus of our sustainability efforts. When transitioning to a cloud computing infrastructure, we selected Google Cloud, a partner that shares our commitment to 100% renewable electricity, for the Etsy marketplace. Their highly efficient data centers have helped us save significant overhead energy.
We expect to continue to use our required filings with the Securities and Exchange Commission (“SEC”), as well as our Investor Relations website and Etsy News blog, as our primary communications channels for information relating to our Impact strategy and progress.
We use our required filings with the Securities and Exchange Commission (“SEC”), as well as our Investor Relations website and Etsy News blog, as our primary communications channels for information relating to our Impact strategy and progress.
For the subsection of Scope 3 - Category 1, Cloud Computing - Google Cloud (Etsy.com only), we calculated the emissions partly with data provided by Google and partly by our own calculation of their market-based emissions.
For the subsection of Scope 3 - Category 1, Cloud Computing - Google Cloud (Etsy marketplace only), we calculated the emissions partly with data provided by Google and partly by our own calculation of their market-based emissions.
In 2022, Etsy Inc.’s Advocacy team worked with sellers and policymakers around the world to ensure a voice for small business owners in public policy.
In 2023, Etsy, Inc.’s Advocacy team worked with sellers and policymakers around the world to ensure a voice for small business owners in public policy.
This is the average score given by respondents to 4 key engagement questions, all of which are rated on a scale of 1-10.
This is the average score given by respondents to four key engagement questions, all of which are rated on a scale of 1-10.
You can read more about our other marketplaces’ respective policies and procedures by visiting each of their marketplace websites. 10 Table of C ontents Member Support As the Etsy marketplace has scaled, so have our investments in member support.
You can read more about our other marketplaces’ respective policies and procedures by visiting each of their marketplace websites. 10 Table of Contents Member Support As the Etsy marketplace has scaled, so have our investments in member support.
Seller Investments In addition to our Offsite Ads advertising program and our paid services which include Etsy Ads, our on-site advertising platform for sellers, and our shipping labels product, we provide a wide range of insights, tools, programs, and educational resources to give Etsy marketplace sellers the support they need to manage and grow their businesses.
In addition to our Offsite Ads program and paid services which include Etsy Ads, our on-site advertising platform for sellers, and our shipping labels product, we provide a wide range of insights, programs, and educational resources to give Etsy marketplace sellers the support and power they need to manage and grow their businesses.
For Etsy.com computing energy use, our energy usage per site visit (kWh/visit) decreased by 69% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
For Etsy marketplace’s computing energy use, our estimated energy usage per site visit (kWh/visit) decreased by 72% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
Among other things, we invest in our technology and infrastructure, product development, marketing, trust and safety, member support and seller tools and education as we strive to continuously improve our marketplaces for our buyers and sellers. While the discussion below focuses on the primary drivers of the Etsy marketplace, there are similar business drivers at each of our marketplaces.
Among other things, we invest in our technology infrastructure, product development, marketing, trust and safety, member support and helping sellers grow as we strive to continuously improve our marketplaces for our buyers and sellers. While the discussion below focuses on the primary drivers of the Etsy marketplace, there are similar business drivers at each of our marketplaces.
See Part I, Item IA, “Risk Factors — Regulatory, Compliance, and Legal Risks.” 20 Table of C ontents Seasonality Etsy.com sellers experience increased sales and use more Etsy services during the fourth-quarter holiday shopping season. This has resulted in increased GMS and revenue for us during the fourth quarter of each fiscal year.
See Part I, Item IA, “Risk Factors — Regulatory, Compliance, and Legal Risks.” 18 Table of Contents Seasonality Etsy.com sellers experience increased sales and use more Etsy services during the fourth-quarter holiday shopping season. This has resulted in increased GMS and revenue for us during the fourth quarter of each fiscal year.
In 2022, we estimate that our energy consumption in Google Cloud was 6,379 MWh, based on a methodology developed by Etsy and reviewed by industry experts (our “Cloud Jewels methodology”). Quantification of our cloud energy consumption is allowing us to meaningfully explore and activate levers of change to drive further cost and energy efficiencies in our computing footprint.
For 2023, we estimate that our energy consumption in Google Cloud was 6,253 MWh, based on a methodology developed by Etsy and reviewed by industry experts (our “Cloud Jewels methodology”). Quantification of our cloud energy consumption is allowing us to meaningfully explore and activate levers of change to drive further cost and energy efficiencies in our computing footprint.
One member of our Board of Directors is experienced in sustainability accounting practices and is a Sustainability Accounting Standards Board (“SASB”) FSA Credential Holder. Information about Etsy, Inc.’s Board of Directors and its Committees, including their charters and membership, is available in the Governance section of our investor relations website.
One member of our Board of Directors is experienced in sustainability accounting practices and is a Sustainability Accounting Standards Board (“SASB”) FSA Credential Holder. Information about Etsy’s Board of Directors and its Committees, including their charters and membership, is available in the Governance section of our investor relations website.
We believe our Net Zero goal strengthens our position as a trusted brand and contributes to our long-term strategy and makes us more resilient, drives efficiencies, and prepares us for anticipated regulations. What’s more, we believe the benefits of reducing emissions resonate beyond our corporate boundaries, contributing to the overall health of people and planet.
Our Strategy We believe our Net Zero work strengthens our position as a trusted brand, a core pillar of our long-term strategy, and makes us more resilient, drives efficiencies, and prepares us for anticipated regulations. What’s more, we believe the benefits of reducing emissions resonate beyond our corporate boundaries, contributing to the overall health of people and the planet.
Tech employees are defined as those employees who work on Product, Engineering, Analytics, and HR Information and Financial Systems Administration teams. Other Business Roles are defined as those employees who work in roles outside of the Tech definition, inclusive of non-tech Leadership positions.
Tech employees are defined as those employees who work on Product, Engineering, Analytics, and HR Information and Financial Systems Administration teams. Engineering employees are defined as those employees who work within the Engineering Job Family Group. Other Business Roles are defined as those employees who work in roles outside of the Tech definition, inclusive of non-tech Leadership positions.
Etsy also has three cross-functional Impact Working Groups that all meet at least quarterly to manage the implementation of Impact projects and reporting. 40 Table of C ontents Strategy Climate-related risks and opportunities identified & impact on strategy Etsy’s climate strategy is informed by periodic identification and prioritization of climate-related risks and opportunities.
Etsy also has three cross-functional Impact Working Groups that all meet at least quarterly to manage the implementation of Impact projects and reporting. 38 Table of Contents Strategy Climate-related risks and opportunities identified & impact on strategy Etsy’s climate strategy is informed by periodic identification and prioritization of climate-related risks and opportunities.
Discussion of diversity and inclusion strategy and performance See Social section for details starting on page 27.
Discussion of diversity and inclusion strategy and performance See Social section for details starting on page 24 .
We emphasize that the items listed for sale on the Etsy marketplace are brought to life by real people and that buyers can connect directly with sellers in order to ask questions and personalize or customize items to their specifications. 5 Table of C ontents • Connected experience across all devices: We want to engage Etsy buyers wherever they are and provide an enjoyable and accessible shopping experience regardless of the format.
We emphasize that the items listed for sale on the Etsy marketplace are brought to life by real people and that buyers can connect directly with sellers in order to ask questions and personalize or customize items to their specifications. • Connected experience across all devices: We want to engage Etsy buyers wherever they are and provide an enjoyable and accessible shopping experience regardless of the device used.
This project is providing us with renewable attributes to apply to our operations and computing infrastructure, furthering our goals of creating a cleaner internet and reducing our impact on the planet. 36 Table of C ontents Data Privacy and Advertising Standards CG-EC-220a.2 Description of the policies and practices relating to behavioral advertising and user privacy . • We care deeply about privacy and are committed to being upfront about our privacy practices, including how we treat personal information.
This project is providing us with renewable attributes to apply to the energy consumed by our operations and computing infrastructure, furthering our goals of creating a cleaner internet and reducing our impact on the planet. 33 Table of Contents Data Privacy and Advertising Standards CG-EC-220a.2 Description of the policies and practices relating to behavioral advertising and user privacy . • We care deeply about privacy and are committed to being upfront about our privacy practices, including how we treat personal information.
With over a hundred million items listed on Etsy.com that don’t map to a catalog or a stock keeping unit (“SKU”), our challenge is delivering world-class search and discovery technology that surfaces the right unique product to the right buyer at the right time in order to drive sales and buyer satisfaction.
With over 100 million items listed on Etsy.com that do not map to a catalog or a stock keeping unit (“SKU”), our challenge is delivering world-class search and discovery technology that organizes and surfaces the right unique product to the right buyer at the right time in order to drive buyer satisfaction and sales.
Etsy continuously surveys buyers on ‘brand funnel’ metrics such as awareness and loyalty, and, in 2022, we refreshed the questions asked in these surveys to better track the results of our investments. U.S.
Etsy regularly surveys buyers on ‘brand funnel’ metrics such as awareness and loyalty, and, in 2022, we refreshed the questions asked in these surveys to better track the results of our investments.
This section outlines characteristics of the Etsy marketplace seller and buyer cohorts, which we believe is a useful barometer to track our performance over time. Etsy Sellers We believe that our 5.4 million active sellers are the backbone of Etsy’s business and that what matters most to them is our community of approximately 89 million buyers.
This section outlines characteristics of the Etsy marketplace seller and buyer cohorts, which we believe is a useful barometer to track our performance over time. Etsy Sellers We believe that our 7.0 million active sellers are the backbone of Etsy’s business and that what matters most to them is our community of approximately 92.0 million buyers.
We recognize that decarbonization of the transportation sector presents an opportunity for us to achieve ambitious emissions reduction goals and strengthen our reputation. Our Advocacy Team advocates for key national and regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation.
We recognize that decarbonization of the transportation sector presents an opportunity for us to achieve ambitious emissions reduction goals and strengthen our reputation. Our Advocacy Team advocates for national and regional policies that have the potential to accelerate the decarbonization of the transportation sector.
As the Etsy marketplace has experienced significant growth over the last few years, we have increased our investments and resources dedicated to trust and safety. This includes scaling our teams and investing in new tools and advanced technologies to enable these teams to more effectively and efficiently do their jobs.
As the Etsy marketplace has experienced significant growth since 2019, we have increased our investments and resources dedicated to trust and safety. This includes scaling our teams and investing in new tools and advanced technologies to enable these teams to more effectively and efficiently do their jobs.
Our 2022 hardware infrastructure energy footprint does not include Reverb, Depop, or Elo7 as we are not currently able to calculate energy usage from AWS, but we do include the emissions from Reverb and Depop’s hardware infrastructure in our Scope 3 Purchased Goods and Services calculations. • In 2018, Etsy entered into a virtual power purchase agreement for solar energy in Virginia.
Our 2023 hardware infrastructure energy footprint does not include Reverb, Depop, or Elo7 (for the partial year owned) as we are not currently able to calculate energy usage from AWS, but we do include the emissions from Reverb and Depop’s hardware infrastructure in our Scope 3 Purchased Goods and Services calculations. • In 2018, Etsy entered into a virtual power purchase agreement for solar energy generated i n Virginia .
Our SEC reports are also available on the SEC’s website at www.sec.gov free of charge as soon as reasonably practicable after we have filed or furnished them to the SEC. 44 Table of C ontents
Our SEC reports are also available on the SEC’s website at www.sec.gov free of charge as soon as reasonably practicable after we have filed or furnished them to the SEC. 42 Table of Contents
Etsy also periodically makes market-based adjustments to compensation that we apply consistently within and across teams, to ensure pay for internal employees is aligned with that of new hires. 29 Table of C ontents As part of our commitment to fair pay practices, we completed our 2022 Pay Equity analysis, conducted by a third-party consulting firm.
Etsy also periodically makes market-based adjustments to compensation that we apply consistently within and across teams, to ensure pay for internal employees is aligned with that of new hires. As part of our commitment to fair pay practices, we completed our most recent biennial Pay Equity analysis, conducted by a third-party consulting firm, in 2022.
Best-in-class search and discovery : We are focused on continuing to develop a search and discovery experience that unlocks the value of the unique items that can be found on the Etsy marketplace.
Best-in-class search and discovery : We are focused on continuing to develop a search and discovery experience that unlocks the value of the unique items that can be found on the Etsy marketplace by elevating the highest quality listings.
Here are a few key statistics about our marketplaces: • The Etsy, Reverb, Depop, and Elo7 marketplaces collectively connected a total of 7.5 million active sellers to 95.1 million active buyers as of December 31, 2022. • Our top six retail categories on the Etsy marketplace in 2022 were homewares and home furnishings, jewelry and personal accessories, apparel, craft supplies, paper and party supplies, and toys and games.
Here are a few key statistics about our marketplaces: • The Etsy, Reverb, and Depop marketplaces collectively connected a total of 9.0 million active sellers to 96.5 million active buyers as of December 31, 2023. • Our top six retail categories on the Etsy marketplace in 2023 were homewares and home furnishings, jewelry and personal accessories, apparel, craft supplies, paper and party supplies, and toys and games.
Details of these targets including actions taken to achieve them and performance against each can be found on pages 25-27 of this Annual Report. 43 Table of C ontents Available Information We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and file or furnish reports, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, proxy statements, and other information with the SEC.
Details of these targets including actions taken as part of our efforts to achieve them and performance against each can be found on pages 21 - 23 of this Annual Report. 41 Table of Contents Available Information We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and file or furnish reports, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, proxy statements, and other information with the SEC.
The dramatic increase in active buyers during the pandemic also resulted in more lapsed buyers in recent periods than in pre-pandemic periods, providing Etsy with opportunity to reactivate a much larger pool of recently lapsed buyers.
The dramatic increase in active buyers during the pandemic resulted in more lapsed buyers in recent periods than in pre-pandemic periods, providing Etsy with opportunity to reactivate a very large pool of recently lapsed buyers.
This score has been converted into a percentage based on the overall engagement score. 37 Table of C ontents SASB Metrics SASB Code Metric 2020 2021 2022 CG-EC-330a.3 Gender and racial/ethnic group representation for leadership, technical staff and other business functions See Workforce Metrics section for details starting on page 33.
This score has been converted into a percentage based on the overall engagement score. 34 Table of Contents SASB Metrics SASB Code Metric 2021 2022 2023 CG-EC-330a.3 Gender and racial/ethnic group representation for leadership, technical staff and other business functions See Workforce Metrics section for details starting on page 30 .
Etsy buyer surveys indicate that, since the fourth quarter of 2018, prompted awareness is up more than 10%, purchase intent grew over 100%, and visit intent increased over 70% . We are also seeing great movement in our brand funnel metrics in the United Kingdom and Germany.
United States consumer surveys indicate that, since the fourth quarter of 2018, prompted awareness for the Etsy marketplace is up more than 10%, purchase intent grew well over 100%, and visit intent increased nearly 100% . We are also seeing great movement in our brand funnel metrics in the United Kingdom and Germany.
CG-EC-330a.4 Percentage of technical employees who are H-1B visa holders 5.1 % 5.6 % 3.8 % Product Packaging and Distribution CG-EC-410a.1 Total greenhouse gas (“GHG”) footprint of product shipments in metric tons CO 2 e 303,218 † 363,361 † 339,395 † Total greenhouse gas (GHG) footprint of packaging in metric tons CO 2 e 53,489 † 63,645 † 57,911 † CG-EC-410a.2 Discussion of strategies to reduce the environmental impact of product delivery. • The delivery of products sold on our marketplace represents the majority of Etsy’s carbon footprint.
CG-EC-330a.4 Percentage of technical employees who are H-1B visa holders 5.6 % 3.8 % 3.7 % Product Packaging and Distribution Etsy Marketplace, Reverb Etsy Marketplace, Reverb, Depop Etsy Marketplace, Reverb, Depop CG-EC-410a.1 Total greenhouse gas (“GHG”) footprint of product shipments in metric tons CO 2 e 363,361 † 339,395 † 276,559 † Total greenhouse gas (GHG) footprint of packaging in metric tons CO 2 e 63,645 † 57,911 † 56,826 † CG-EC-410a.2 Discussion of strategies to reduce the environmental impact of product delivery. • The delivery of products sold on our marketplaces represents the majority of Etsy’s carbon footprint.
In 2022, we continued the meaningful work to educate our vendor partners who employ contractors on Etsy’s aspirational guidelines for employment practices. We continued a process to survey and evaluate our third-party partners across key practices.
In 2023, we continued to educate our vendor partners who employ contractors who do work for Etsy on Etsy’s aspirational guidelines for employment practices. We continued a process to survey and evaluate our third-party partners across key practices.
We define short-term impacts as those expected to occur within 0-2 years, medium-term impacts as those expected to occur within 2-5 years, and long-term impacts as those expected to occur after 5 or more years. Etsy’s ESG goal-setting process considers these climate-related impacts.
We define short-term impacts as those expected to occur within 0-2 years, medium-term impacts as those expected to occur within 2-5 years, and long-term impacts as those expected to occur after 5 or more years. Etsy, Inc.’s Impact goal-setting process considers these climate-related impacts.
The above tables show the same data in two different views. Each new buyer cohort includes the aggregate GMS from all buyers who made their first purchase on Etsy in the designated year - the table on the left shows retention as a percentage of “Year 1” GMS and the one on the right shows it in dollars.
Each new buyer cohort includes the aggregate GMS from all buyers who made their first purchase on Etsy in the designated year - the table on the left shows retention as a percentage of “Year 1” GMS and the one on the right shows it in dollars.
Since the fourth quarter of 2020, our prompted awareness in the United Kingdom is up over 15% and purchase intent is up over 10%. During the same period in Germany, prompted awareness increased nearly 100% and purchase intent grew nearly 90%.
Since the fourth quarter of 2020, our prompted awareness in the United Kingdom is up nearly 15% and purchase intent is up approximately 30%. During the same period in Germany, prompted awareness and purchase intent both increased over 100%.
Etsy’s Transparency Report also includes details of our Privacy Principles. • Among other things, our Privacy Policy covers the user information that Etsy collects or receives, the choices and control that a user has in relation to this data including based on type and sensitivity by region and worldwide, the purpose for which Etsy uses such information (including first and third-party advertising purposes), our policies relating to our usage and sharing within Etsy, its affiliates and third-party partners, disclosures about third-party partner privacy policy and options, and user controls for sharing and controlling such information with third-parties.
Etsy’s Transparency Report also includes details of our Privacy Principles. • Among other things, our Privacy Policy and Cookies & Similar Technologies Policy cover the user information that Etsy collects or receives, the choices and control that a user has in relation to their data including based on type and sensitivity by region and worldwide, the purpose for which Etsy uses such information (including first and third-party advertising purposes), our policies relating to our usage and sharing within Etsy, its affiliates and third-party partners, disclosures about third-party partner privacy policy and options, and user controls for sharing and controlling such information with third-parties. • Depop and Reverb each have separate policies in place that address similar privacy matters.
Our investments in performance marketing, which we define as paid media spend related to the digital acquisition and re-engagement of buyers, adjusts according to demand and scale based on incremental return.
Performance marketing Our investments in performance marketing, which we define as paid media spend related to the digital acquisition and re-engagement of buyers, adjusts according to demand and scale based on incremental return. We do not set fixed budgets for our marketing team.
We aim to continue improving our data collection and analysis on these topics to improve our understanding of long-term climate-related risks, quantify opportunities and, if necessary, update our strategic planning. Risk Management Processes for identifying and assessing climate-related risks Our climate risk identification and assessment process is integrated into our company-wide risk management. Our Sustainability Team, including the I&S Sr.
We aim to continue improving our data collection and analysis on these topics to improve our understanding of long-term climate-related risks, quantify opportunities and, if necessary, update our strategic planning. 40 Table of Contents Risk Management Processes for identifying and assessing climate-related risks Our climate risk identification and assessment process is integrated into our company-wide risk management.
Etsy’s disclosures are designed to provide comparable and consistent data. We have included below the metrics from SASB’s Consumer Goods Sector – E-Commerce industry standard that are relevant to our business. Unless otherwise noted as relating to Etsy.com, Depop, Reverb, or Elo7, information in this section applies to Etsy, Inc. and all of its subsidiaries.
We have included below the metrics from SASB’s Consumer Goods Sector – E-Commerce industry standard that are relevant to our business. Unless otherwise noted as relating to Etsy marketplace, Reverb, or Depop, information in this section applies to Etsy, Inc. and all of its subsidiaries.
We generate revenue primarily from marketplace activities, including transaction, listing, and payments processing fees, and fees for optional seller services, which include on-site advertising and shipping labels.
We generate revenue primarily from marketplace activities, including transaction (inclusive of offsite advertising), payments processing, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels.
Our two primary types of marketing investments, performance and brand - where we spent approximately $433 million and $145 million, respectively on a consolidated basis in 2022 - are discussed below: Performance marketing.
Our two primary types of marketing investments, performance and brand - where we spent approximately $451 million and $162 million, respectively on a consolidated basis in 2023 - are discussed below.
Members of our Executive Team also serve as executive sponsors for specific Impact goals to help ensure teams stay on track and have the value of executive leadership as plans are executed.
Members of our Executive Team also serve as executive sponsors for specific Impact goals to help ensure teams stay on track and have the value of executive leadership as plans are executed. For more information on our Executive Team’s goals, please see our Proxy Statement.
We achieved a 69% reduction in energy use (kWh per site visit) from computing between 2016 and 2022, despite substantial growth in our business over the same period. • We actively monitor and manage energy consumption from our computing infrastructure for Etsy.com.
We achieved a 72% reduction in energy intensity (kWh per site visit) from computing between 2016 and 2023, despite substantial growth in our business over the same period. • We actively monitor and manage energy consumption from our computing infrastructure for the Etsy marketplace.
When a shopper clicks on an offsite ad featuring a seller’s listing and purchases from the seller’s shop within 30 days of that click, the seller pays Etsy a transaction fee on that order.
The program works as follows: when a shopper clicks on an offsite ad featuring a seller’s listing and purchases from the seller’s shop within 30 days of that click, the seller pays Etsy an additional transaction fee on that sale.
Gender Metrics - Global Board of Directors Overall Leadership Tech Engineering Other Business Roles n Female n Male n Additional Genders n Not Declared † Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period.
Gender Metrics - Global Board of Directors Overall Leadership Tech Engineering Other Business Roles n Female n Male n Additional Genders n Not Declared † Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
These categories represented approximately $10 billion, or 86% of 2022 GMS. • Reverb provides a significant presence in the market for musical instruments, Depop extends our apparel offering into the resale space, and Elo7 expands our geographic opportunity with a local brand in Brazil. • We are a global company, and 44% of our consolidated 2022 GMS was generated when a seller or buyer, or both, were located outside of the United States. • Approximately 67% of our 2022 consolidated GMS came from purchases made on mobile devices, with mobile app being the fastest growing device for the Etsy marketplace. 1 Table of C ontents Our Strategy As illustrated below, our strategy is focused around: • Building a sustainable competitive advantage - our “Right to Win;” • Growing the Etsy marketplace in our seven core geographies; and • Leveraging our marketplace playbook across our “House of Brands.” Building a sustainable competitive advantage - our “Right to Win” Our “Right to Win” is centered on four key elements that we believe make Etsy.com a better place to shop and sell and, which, in turn, will bring more buyers, lead to increased frequency and size of purchases, and build trust in the Etsy marketplace.
These categories represented approximately $10 billion, or 87% of 2023 GMS. • Reverb provides a significant presence in the market for musical instruments, and Depop enhances our apparel offering in the resale space. • We are a global company, and 45% of our consolidated 2023 GMS was generated when a seller or buyer, or both, were located outside of the United States. • Approximately 68% of our 2023 consolidated GMS came from purchases made on mobile devices, with mobile app being the fastest growing device for the Etsy marketplace. 1 Table of Contents Our Strategy As illustrated below, our strategy is focused around: • Building a sustainable competitive advantage for the Etsy marketplace - our “Right to Win;” • Growing the Etsy marketplace in our six core geographies and globally; and • Leveraging our marketplace playbook across our “House of Brands.” Building a sustainable competitive advantage - our “Right to Win” Our “Right to Win” is centered on four key elements that we believe make Etsy.com a better place to shop and sell and, which, in turn, will bring more buyers, lead to increased frequency and size of purchases, and build long-term loyalty to the Etsy marketplace.
Our teams are organized around a collection of initiatives that support a common strategy aligned with our “Right to Win,” with cross-functional teams focused on a single key performance indicator (“KPI”) and set of objectives and key results, all meant to solve key customer friction points.
Our teams are organized around a collection of initiatives that support a common strategy aligned with our “Right to Win,” with cross-functional teams focused on delivering a key customer outcome that we measure by a set of objectives and key results, all meant to solve key customer friction points.
In 2022, we included emissions from Depop in our above calculations. For Scope 3 - Category 1, we utilized publicly available emissions data to derive emissions calculations for several suppliers that may cause this data to not be as comparable year over year.
For Scope 3 - Category 1, we utilized publicly available emissions data to derive emissions calculations for several suppliers that may cause this data to not be as comparable year-over-year.
We also compete with retailers of all shapes and sizes for the attention of our buyers. A buyer has the choice of shopping with any online or offline retailer, whether large marketplaces, national retail chains, local consignment and vintage stores, resale marketplaces, or other venues or marketplaces.
In addition, we compete with retailers of all shapes and sizes for the attention of our buyers. A buyer has the choice of shopping with any online or offline retailer, whether large e-commerce marketplaces, national retail chains, local consignment and vintage stores, the brands represented on social commerce channels, resale marketplaces, or other venues or marketplaces.
Percentage outsourced 100 % 100 % 100 % Hardware Infrastructure Energy & Water Management CG-EC-130a.1 Total energy consumed, MWh (Etsy.com) 5,675 5,362 6,379 Percentage renewable energy (Etsy.com) 100 % 100 % 100 % Percentage grid electricity (Etsy.com) 100 % 100 % 100 % CG-EC-130a.3 Discussion of the integration of environmental considerations into strategic planning for data center needs. • For 2022 we continued to meet our goal to source 100% renewable electricity for our operations which includes our office facilities for Etsy.com, Reverb, and Depop, remote worker electricity usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com, and we have a 2025 goal to reduce the intensity of our energy use by 25% from a 2016 baseline.
Percentage outsourced 100% 100% 100% Hardware Infrastructure Energy & Water Management CG-EC-130a.1 Total energy consumed, MWh (Etsy marketplace) 5,362 6,379 6,253 Percentage renewable energy (Etsy marketplace) 100% 100% 100% Percentage grid electricity (Etsy marketplace) 100% 100% 100% CG-EC-130a.3 Discussion of the integration of environmental considerations into strategic planning for data center needs. • For 2023 we continued to meet our goal to source renewable electricity for our Google Cloud computing for the Etsy marketplace, and we have a 2025 goal to reduce the intensity of our energy use by 25% from a 2016 baseline.
Etsy, Inc.’s Sustainability team, led by the Senior Director of Impact and Sustainability (the “I&S Sr. Director”), oversees Etsy’s sustainability strategy and implementation, which includes climate impacts. The I&S Sr. Director reports to the VP, Strategic Sourcing and Marketplace Initiatives, who reports to the Chief Operations Officer, who is the Executive Sponsor for Etsy’s Impact strategy. The I&S Sr.
Etsy’s Sustainability team, led by the Senior Director of Impact and Sustainability (the “I&S Sr. Director”), oversees Etsy’s sustainability strategy and implementation, which includes climate impacts. The I&S Sr. Director reports to the GM, International and VP, Marketplace Initiatives, who reports to the Chief Operating and Marketing Officer, who is the Executive Sponsor for Etsy’s Impact strategy. The I&S Sr.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur quarterly operating results, as well as our key metrics, may fluctuate for a variety of reasons, many of which are beyond our control, including: • fluctuations in GMS or revenue, including as a result of uncertainty or changing spending patterns resulting from U.S. or global macroeconomic conditions, such as inflation or rising interest rates, recession, geopolitical events, such as the crisis in Ukraine, COVID-19, the seasonality of market transactions, and our sellers’ use of services; 47 Table of C ontents • adverse economic and market conditions, including declines in consumer discretionary spending, currency fluctuations, rapidly rising inflation, supply gluts or shortages, and adverse global events; • uncertainty regarding overall levels of consumer spending and e-commerce generally; • our success in attracting and retaining sellers and buyers; • our ability to convert marketplace visits into sales for our sellers; • the amount and timing of our operating expenses; • our success in executing on our strategy and the impact of any changes in our strategy; • the timing and success of product launches, including new services and features we may introduce; • the success of our marketing efforts; • the success of our “House of Brands” strategy, including Depop and Elo7, each of which we acquired in 2021, and Reverb, which we acquired in 2019; • disruptions or defects in our marketplaces, such as privacy or data security breaches, errors in our software, or other incidents that impact the availability, reliability, or performance of our platforms; • the impact of competitive developments and our response to those developments; • our ability to manage our business and future growth; and • our ability to recruit and retain employees.
Biggest changeOur quarterly operating results, as well as our key metrics, may fluctuate for a variety of reasons, many of which are beyond our control, including: • fluctuations in GMS or revenue, including as a result of uncertainty or changing spending patterns resulting from Macroeconomic Conditions, the seasonality of market transactions, and our sellers’ use of services; • uncertainty regarding overall levels of consumer spending and e-commerce generally; • our success in attracting and retaining sellers and buyers; • our ability to convert marketplace visits into sales for our sellers; • the amount and timing of our operating expenses and the success of any cost-reduction activities; • our success in executing on our strategy and the impact of any changes in our strategy; • the timing and success of product launches, including new services and features we may introduce; • the success of our marketing efforts; • the success of our “House of Brands” strategy; • disruptions or defects in our marketplaces, such as privacy or data security breaches, errors in our software, or other incidents that impact the availability, reliability, or performance of our platforms; • the impact of competitive developments and our response to those developments; • the impact of the Restructuring Plan approved in December 2023; • our ability to manage our business and future growth; and 45 Table of Contents • our ability to recruit and retain employees.
Additionally, changes in payment regulation may occur that could render our payments systems non-compliant and/or less profitable. Further, through our agreements with our third-party payments service providers, we are subject to evolving rules and certification requirements (including, for example, the Payment Card Industry Data Security Standard), or other contractual requirements or expectations that may materially negatively impact our payments business.
Additionally, changes in payment regulation may occur that could render our payments systems non-compliant and/or less profitable. Further, through our agreements with our third-party payments service providers, we are subject to evolving rules and certification requirements (including, for example, the Payment Card Industry Data Security Standard), and other contractual requirements or expectations that may materially negatively impact our payments business.
GDPR, CCPA, and similar laws in other jurisdictions, and future changes to or interpretations of any of these laws, may continue to change the data protection landscape globally, may be potentially inconsistent or incompatible, and could result in potentially significant operational costs for internal compliance and risk to our business.
The GDPR, CCPA, and similar laws in other jurisdictions, and future changes to or interpretations of any of these laws, may continue to change the data protection landscape globally, may be potentially inconsistent or incompatible, and could result in potentially significant operational costs for internal compliance and risk to our business.
We are or may also be subject to the terms of our own and third-party external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks and contractual obligations to third parties related to privacy, information security, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with data protection laws, or other obligations.
We are or may also be subject to the terms of our own and third-party external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks and contractual obligations to third-parties related to privacy and/or information security, including contractual obligations to indemnify and hold harmless third-parties from the costs or consequences of non-compliance with data protection laws, or other obligations.
In addition, use of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software.
In addition, the use of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software.
Additionally, we prohibit a range of items on our marketplaces, including (but not limited to): drugs, alcohol, tobacco, weapons, endangered animal products, hazardous materials, recalled items or those that create an unreasonable risk of harm, highly-regulated items, items violating intellectual property rights of others, illegal products, pornography, items from federally-sanctioned jurisdictions, hateful content, and items that promote or glorify violence.
Additionally, we prohibit a range of items on our marketplaces, including (but not limited to): drugs, alcohol, tobacco, weapons, endangered animal products, hazardous materials, recalled items or those that create an unreasonable risk of harm, highly-regulated items, items violating intellectual property rights of others, illegal products, pornography, items from sanctioned jurisdictions, hateful content, and items that promote or glorify violence.
Our sellers and vendors may have been and may in the future be subject to similar privacy requirements, which may significantly increase costs and resources dedicated to their compliance with such requirements. We have varying contractual and other legal obligations to notify relevant stakeholders of security breaches related to us or, in some cases, our third-party service providers.
Our sellers and vendors may have been and may now and in the future be subject to similar privacy requirements, which may significantly increase costs and resources dedicated to their compliance with such requirements. We have varying contractual and other legal obligations to notify relevant stakeholders of security breaches related to us or, in some cases, our third-party service providers.
If we have difficulty implementing and maintaining effective internal control over financial reporting at the businesses we have acquired or that we may in the future acquire, or if we identify a material weakness in our internal controls over financial reporting in the future, it could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements.
If we have difficulty implementing and maintaining effective internal controls over financial reporting at the businesses we have acquired or that we may in the future acquire, or if we identify a material weakness in our internal controls over financial reporting in the future, it could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements.
If the internal systems and tools or surveys we use to track these metrics under count or over count performance or contain algorithmic or other technical errors, the data we report may not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics, there are inherent challenges in measuring this data.
If the internal systems and tools, processes, or surveys we use to track these metrics under count or over count performance or contain algorithmic or other technical errors, the data we report may not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics, there are inherent challenges in measuring this data.
Intellectual property claims against us, with or without merit, have been and could in the future be time consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters.
Intellectual property claims against us, with or without merit, have been, are, and could in the future be time-consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters.
In addition, the recent increased scrutiny and regulation of marketplace platforms, even though principally focused on other larger platforms, has and may continue to create burdens on both Etsy and its communities of buyers and sellers. This may lead to increased risks that shift more quickly than our policies, enforcement mechanisms, and systems can react.
In addition, the recent increased scrutiny and regulation of marketplace platforms, though principally focused on other larger platforms, has and may continue to create burdens on both Etsy and its communities of buyers and sellers. This may lead to increased risks that shift more quickly than our policies, enforcement mechanisms, and systems can react.
If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. Reverb, Depop, and Elo7 rely on Amazon Web Services for their primary production environment, and those marketplaces are thus subject to analogous risks.
If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. Reverb and Depop rely on Amazon Web Services for their primary production environment, and those marketplaces are thus subject to analogous risks.
Our production systems rely on internal technology, along with cloud services and software provided by our third-party service providers (and other entities in our supply chain). In the event of a cyber-incident, even partial unavailability of our production systems could impair our ability to serve our customers, manage transactions, or operate our marketplaces.
Our production systems rely on internal technology, along with cloud services and software provided by our third-party service providers (and other entities in our supply chain). In the event of a cyber-related incident, even partial unavailability of our production systems could impair our ability to serve our customers, manage transactions, or operate our marketplaces.
To the extent that the ultimate results differ from our original or adjusted estimates, our effective tax rate can be adversely affected. The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate.
To the extent that the ultimate results differ from our original or adjusted estimates, our effective tax rate can be adversely affected. The (provision) benefit for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate.
If general economic conditions deteriorate in the United States or other markets where we operate, consumer discretionary spending may decline and demand for the goods and services available on our platforms may be reduced. This would cause our Marketplace and Services revenue to decline and adversely impact our business.
If general economic conditions deteriorate in the United States or other markets where we operate, consumer discretionary product spending may decline and demand for the goods and services available on our platforms may be reduced. This would cause our Marketplace and Services revenue to decline and adversely impact our business.
Further, the growth of our business places significant demands on our management team and pressure to expand our operational, compliance, payments, and financial infrastructure. For example, we may need to continue to develop and improve our operational, financial, compliance, payments, and management controls and enhance our reporting systems and procedures to support our recent and future growth.
Further, the growth of our business places significant demands on our management team and pressure to expand our operational, compliance, payments, and financial infrastructure. For example, we may need to continue to develop and improve our operational, financial, compliance, payments, and management controls and enhance our reporting systems and procedures to support our recent and any future growth.
However, as the technology space is increasingly subject to regulation, there is a risk that legislation, and regulatory or competition inquiries, even if focused on large, widely adopted platforms, may inadvertently impede smaller platforms and small businesses, including us and our sellers.
However, as the technology space is increasingly subject to regulation, there is a risk that legislation, and regulatory or competition inquiries, even if focused on large, widely adopted platforms, may impede smaller platforms and small businesses, including us and our sellers.
These laws, and court or regulatory interpretations of these laws (including their limitations and safe harbors), may shift quickly in the United States and worldwide. For example, upcoming regulations may impose significant verification, certification or additional compliance obligations on both us and our sellers.
These laws, and court or regulatory interpretations of these laws (including their limitations and safe harbors), may shift quickly in the United States and worldwide. For example, upcoming regulations may impose significant verification, certification, assessments, or additional compliance obligations on both us and our sellers.
We enforce these policies in order to uphold the safety and integrity of our marketplaces, engender trust in the use of our services, and encourage positive connections among members of our communities. We strive to enforce these policies in a consistent and principled manner that is transparent and explicable to stakeholders.
We maintain and enforce these policies in order to uphold the safety and integrity of our marketplaces, engender trust in the use of our services, and encourage positive connections among members of our communities. We strive to enforce these policies in a consistent and principled manner that is transparent and explicable to stakeholders.
We attempt to protect our unregistered intellectual property and confidential information in part through confidentiality, non-disclosure, and invention assignment agreements with employees, advisors, service providers and other third parties who develop intellectual property on our behalf, or with whom we share information.
We attempt to protect our intellectual property and confidential information in part through confidentiality, non-disclosure, and invention assignment agreements with employees, advisors, service providers and other third-parties who develop intellectual property on our behalf, or with whom we share information.
Our internal systems and tools have a number of limitations, and our surveys or data collection methodologies may have errors or could change over time, which could result in unexpected changes to our metrics, including the metrics we publicly disclose.
Our internal systems, tools, and processes have a number of limitations, and our surveys or data collection methodologies may have errors or could change over time, which could result in unexpected changes to our metrics, including the metrics we publicly disclose.
If we experience a technology disruption or failure that results in a loss of information, if personal data or sensitive information about members of our communities or employees is misused or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber incidents, ransomware, security incidents, or other security breaches, then members of our communities may curtail use of our platforms, we may be exposed to liability or incur additional expenses, and our reputation might suffer.
If we experience a technology disruption or failure that results in a loss of information, if personal data or sensitive information about members of our communities or employees is misused or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber-related events, ransomware, security incidents, or other security breaches, then members of our communities may curtail use of our platforms, we may be exposed to liability or incur additional expenses, and our reputation might suffer.
In addition, tax authorities periodically review income tax returns filed by us and can raise issues regarding filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which we operate.
In addition, tax authorities periodically review income tax returns filed by us and raise issues regarding filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which we operate.
These claims, or legal and regulatory changes, could require the removal of non-infringing, lawful or completely unrelated content, which could negatively impact our business and our ability to retain sellers.
These types of claims, or legal and regulatory changes, could require the removal of non-infringing, lawful or completely unrelated content, which could negatively impact our business and our ability to retain sellers.
If we and our sellers are unable to cost-effectively comply with new regulatory regimes, such as if the regulations place requirements on our sellers that they find difficult or impossible to comply with, or require us to take actions at a scale inconsistent with the size, investment, and operation of our marketplaces, our sellers may elect not to ship into, or we may be required to restrict shipping into, the impacted jurisdictions, and our business could be harmed.
If we and our sellers are unable to cost-effectively comply with new regulatory regimes, such as if the regulations place requirements on our sellers that they find difficult or impossible to comply with, or require us to take actions at a scale inconsistent with the size, resources, and operation of our marketplaces, our sellers may elect not to ship into, or we may be required to restrict shipping into, the impacted jurisdictions, and our business could be harmed.
In addition to the actual and potential changes in data protection laws described elsewhere in these Risk Factors, global developments in privacy and data security regulations have changed and may continue to change some of the ways we, our sellers, our vendors and other third parties collect, use, and share personal information and other proprietary or confidential information, and have created and will continue to create additional compliance obligations for us and our sellers, vendors, and other third parties.
In addition to the actual and potential changes in data protection laws described elsewhere in these Risk Factors, global developments in privacy and data security regulation have changed and may continue to change some of the ways we, our sellers, our vendors and other third-parties collect, use, and share personal information and other proprietary or confidential information, and have created and will continue to create additional compliance obligations for us and our sellers, vendors, and other third-parties.
Many things could undermine these cornerstones, such as: • a failure to operate our business in a way that is consistent with our guiding principles and mission; • an inability to gain the trust of prospective buyers; • disruptions or defects in our marketplaces, privacy or data security incidents, website outages, payment disruptions, or other incidents that impact the reliability of our platforms; • lack of awareness of, or adherence to, our policies by our communities or confusion about how they are applied; • a failure to enforce our policies effectively, consistently, and transparently, including, for example, by allowing the repeated widespread listing of prohibited items in our marketplaces; 45 Table of C ontents • changes to our policies or fees that members of our communities perceive as inconsistent with their best interests or our mission, or that are not clearly articulated; • complaints or negative publicity about us, our platforms, or our policies and guidelines, even if factually incorrect or based on isolated incidents; • inadequacies in our House Rules, policies, and other terms of use; • frequent product launches, updates, and experiments that could deteriorate member trust and/or engagement; or • inadequate or unsatisfactory customer service experiences, failure to adequately respond to feedback from our communities, or inability of our sellers to fulfill their orders in accordance with our policies, their own shop-specific policies, or buyer expectations.
Many things could undermine these cornerstones, such as: • a failure to operate our business in a way that is consistent with our guiding principles and mission; • an inability to gain the trust of prospective buyers; • disruptions or defects in our marketplaces, privacy or data security incidents, website outages, payment disruptions, or other incidents that impact the reliability of our platforms; • lack of awareness of, or adherence to, our policies by our communities or confusion about how they are applied; • a failure to enforce our policies effectively, consistently, and transparently, including, for example, by allowing the repeated widespread listing of prohibited items in our marketplaces; 43 Table of Contents • changes to our policies or fees that members of our communities perceive as inconsistent with their best interests or our mission, or that are not clearly articulated; • complaints or negative publicity about us, our platforms, or our policies and guidelines, even if factually incorrect or based on isolated incidents; • inadequacies in our House Rules, policies, and other terms of use; • frequent product launches, updates, and experiments that could deteriorate member trust and/or engagement; or • inadequate or unsatisfactory customer service experiences, failure to adequately respond to feedback from our communities, or inability of our sellers to fulfill their orders in accordance with our policies, their own shop-specific policies, or buyer expectations.
Similarly, we rely on sellers to be responsive to buyers and to fulfill orders to buyers. Anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers.
Similarly, we rely on sellers to be responsive to buyers and to fulfill orders from buyers. Anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers.
In addition, new regulations, laws, policies, and international accords relating to environmental and social matters, including sustainability, climate change, human capital, and diversity, are being developed and formalized in Europe, the United States (both at the federal level and on a state by state basis), and elsewhere, which may entail specific, target-driven frameworks and/or disclosure requirements.
In addition, new regulations, laws, policies, and international accords relating to environmental and social matters, including sustainability, due diligence, climate change, human capital, and diversity, are being developed and formalized in Europe, the United States (both at the federal level and on a state-by-state basis), and elsewhere, which may entail specific, target-driven frameworks and/or disclosure requirements.
As a result, we could be subject to higher than anticipated tax liabilities as well as ongoing variability in our quarterly tax rates as audits close and exposures are re-evaluated. The terms of our debt instruments may restrict our ability to pursue our business strategies. We do not currently have any obligations outstanding under our credit facility.
As a result, we could be subject to higher than anticipated tax liabilities as well as ongoing variability in our quarterly tax rates as audits close and exposures are re-evaluated. The terms of our debt instruments may restrict our ability to pursue our business strategies. We do not currently have any outstanding borrowings under our credit facility.
Any acquisitions or partnerships may result in unforeseen operational difficulties and expenditures associated with: • integrating new businesses and technologies into our infrastructure; • clearing any required regulatory review that may be complex, costly, time consuming, or place additional requirements on the business; • implementing growth initiatives; • integrating administrative functions; • hiring, retaining, and integrating key employees; • supporting and enhancing morale and culture; • retaining key customers, merchants, vendors, and other key business partners; • maintaining or developing controls, procedures, and policies (including effective internal control over financial reporting and disclosure controls and procedures, as well as information privacy controls); and • assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, intellectual property infringement, commercial disputes, cyber attacks, taxes, and other matters.
Any acquisitions or partnerships may result in unforeseen operational difficulties and expenditures associated with: • integrating new businesses and technologies into our infrastructure; • clearing any required regulatory review that may be complex, costly, time-consuming, or place additional requirements on the business; • implementing growth initiatives; • integrating administrative functions; • hiring, retaining, and integrating key employees; • supporting and enhancing morale and culture; • retaining key customers, merchants, vendors, and other key business partners; • maintaining or developing controls, procedures, and policies (including effective internal controls over financial reporting and disclosure controls and procedures, as well as information privacy controls); and 59 Table of Contents • assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, intellectual property infringement, commercial disputes, cyber attacks, taxes, and other matters.
Additionally, due to the interconnected nature of the software underlying our platforms, updates to parts of our code, third-party code, and application programming interfaces, on which we rely and that maintain the functionality of our marketplaces and business, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platforms that negatively impact the user experience, functionality or accessibility of our marketplaces.
Additionally, due to the interconnected nature of the software underlying our platforms, updates to parts of our code, third-party and open source code, and application programming interfaces, on which we rely and that maintain the functionality of our marketplaces and business, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platforms that negatively impact the user experience, functionality or accessibility of our marketplaces.
We have been and may in the future be subject to heightened regulatory scrutiny, inquiries, or investigations, including with respect to our sellers, vendors or third parties, relating to both specific inquiries as well as broad, industry-wide concerns, such as antitrust, product liability, and privacy, that could lead to increased expenses or reputational damage.
We have been, are, and may in the future be subject to heightened regulatory scrutiny, inquiries, or investigations, including with respect to our sellers, vendors or third-parties, relating to both specific inquiries as well as broad, industry-wide concerns, such as antitrust, product liability, and privacy, that could lead to legal liability, increased expenses, or reputational damage.
Applicable rules regarding how to respond, required notices to users, and reporting to regulators vary by jurisdiction, and may subject Etsy to additional liability and reputational harm.
Applicable rules regarding how to respond, required notices to users, and reporting to regulators and investors vary by jurisdiction, and may subject Etsy to additional liability and reputational harm.
For more details on our strategy, see Part I, Item 1, "Business—Overview—Our Strategy." If we are not able to keep pace with technological changes and enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers, our business, financial performance, and growth may be harmed.
For more information on our strategy, see Part I, Item 1, "Business—Overview—Our Strategy." If we are not able to keep pace with technological changes and enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers, our business, financial performance, and growth may be harmed.
We also operate under an increasing number of regulatory regimes which, if certain statutory requirements are met, may protect us and our sellers and buyers worldwide, such as intellectual property and anti-counterfeiting laws, payments and taxation, competition, marketplace platform regulation, hate speech laws, and general commerce regulation.
We also operate under an increasing number of regulatory regimes which, if certain statutory requirements are met, may protect us and our sellers and buyers worldwide, such as intellectual property and anti-counterfeiting laws, payments and taxation laws, competition and marketplace platform regulation, hate speech laws, and general commerce and consumer protection regulation.
While for qualifying orders under Etsy Purchase Protection we cover the reimbursement and not the seller, we also take steps such as requiring reserves, including to cover certain reimbursements that do not relate to qualified orders, from some sellers based on indications they may not be able to fulfill orders and other factors.
While we cover the reimbursement for qualifying orders under Etsy Purchase Protection, we also take steps to cover certain reimbursements that do not relate to qualified orders, such as requiring reserves from some sellers based on indications they may not be able to fulfill orders and other factors.
Additionally, as we invest in and experiment with new offerings or changes to our platforms, our sellers and buyers may find these changes to be disruptive and may perceive them negatively. In addition, developing new services and features is complex, and the timetable for public launch is difficult to predict and may vary from our historical experience.
Additionally, as we invest in and experiment with new offerings or changes to our platforms, our sellers and buyers may find these changes to be disruptive and may perceive them negatively. In addition, developing new services and features is complex, and the timetable for public launch is difficult to predict and may vary from our historic experience.
If, for example, we incur additional debt, secure existing or future debt, or recapitalize our debt, these actions may diminish our ability to make payments on our substantial debt when due. Regulatory, Compliance, and Legal Risks Failure to deal effectively with constantly evolving fraud or other illegal activity could harm our business.
If, for example, we incur additional debt, secure existing or future debt, or recapitalize our debt, these actions may diminish our ability to make payments on our substantial debt when due. Regulatory, Compliance, and Legal Risks Failure to deal effectively with fraud or other illegal activity could harm our business.
Under current U.S. copyright laws such as the Digital Millennium Copyright Act § 512 et. seq., we benefit from statutory safe harbor provisions that protect us from copyright liability for content posted on our platforms by sellers and buyers, and we rely upon user content platform protections under 47 U.S.C. § 230 (commonly referred to as CDA § 230), that limits most non-intellectual property law claims against Etsy based upon content posted by users on our platforms.
Under current U.S. copyright laws such as the Digital Millennium Copyright Act § 512 et. seq., we benefit from statutory safe harbor provisions that protect us from copyright liability for content posted on our platforms by sellers and buyers, and we rely upon user content platform protections under 47 U.S.C. § 230 (commonly referred to as CDA § 230), which limit most non-intellectual property law claims against Etsy based upon content posted by users on our platforms.
Maintaining and promoting awareness of our marketplaces and services is important to our ability to attract and retain sellers and buyers. One of the key parts of our strategy for the Etsy marketplace is to bring new buyers to the marketplace and create more habitual buyers by inspiring more frequent purchases across multiple categories and purchase occasions.
Maintaining and promoting awareness of our marketplaces and services is important to our ability to attract and retain sellers and buyers. One of the key parts of our strategy for the Etsy marketplace is to bring new buyers to the marketplace, reactivate lapsed buyers, and create more habitual buyers by inspiring more frequent purchases across multiple categories and purchase occasions.
The issuance of such shares of common stock and any sales in the public market of the common stock issuable upon such conversion of the Notes could adversely affect prevailing market prices of our common stock. See Part II, Item 8, “Financial Statements and Supplementary Data—Note 12—Debt” for more information on the Notes.
The issuance of such shares of common stock and any sales in the public market of the common stock issuable upon such conversion of the Notes could adversely affect prevailing market prices of our common stock. See Part II, Item 8, “Financial Statements and Supplementary Data—Note 13—Debt” for more information on the Notes.
Some providers of consumer devices, mobile or desktop operating systems, and web browsers have implemented, or have announced plans to implement, ways to block tracking technologies which, if widely adopted, could also result in online tracking methods becoming significantly less effective.
Some providers of consumer devices, mobile or desktop operating systems, and web browsers have implemented, or have announced plans to implement, ways to block cookies and similar online tracking technologies which, if widely adopted, could also result in online tracking methods becoming significantly less effective.
We track certain operational metrics with internal systems and tools and do not independently verify such metrics. Certain of these metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies may adversely affect our business and reputation.
We track certain operational metrics with internal systems and tools or manual processes and do not independently verify such metrics. Certain of these metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies may adversely affect our business and reputation.
Aspects of certain newly enacted state privacy statutes remain unclear, resulting in further legal uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply.
Aspects of certain newly enacted U.S. state privacy statutes remain unclear, resulting in further legal uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply.
Companies in the internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. We periodically receive communications that claim we have infringed, misappropriated, or misused others’ intellectual property rights.
Companies in the internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. We regularly receive communications that claim we have infringed, misappropriated, or misused others’ intellectual property rights.
Any events causing significant disruption or distraction to the public or to our workforce, or impacting overall macroeconomic conditions, such as natural disasters and other adverse weather and climate conditions, public health crises, supply chain disruptions, political instability or crises, terrorist attacks, war, social unrest, or other unexpected events, could disrupt our operations, internet, or mobile networks, or the operations of one or more of our third-party service providers.
Any events causing significant disruption or distraction to the public or to our workforce, or impacting overall macroeconomic conditions, such as natural disasters and other adverse weather and climate conditions, public health crises, supply chain disruptions, political instability or crises, terrorist attacks, war, social unrest, or other unexpected events, could disrupt our operations, or the operations of one or more of our third-party service providers.
In addition, the success of our marketplaces could also be harmed by factors outside our control, such as actions taken by providers of mobile and desktop operating systems, social networks, or search and advertising platforms, including: • policy changes that interfere with, add tolls or costs to, or otherwise limit our ability to provide users with a full experience of our platforms, such as for our mobile apps or social network presence, including policy changes that effectively require us to use the provider’s payment processing or other services for transactions on the provider’s operating system, network or platform; • unfavorable treatment received by our platforms, especially as compared to competing platforms, such as the placement of our mobile apps in a mobile app download store; • increased costs to distribute or use our platforms via mobile apps, social networks, or established search and advertising systems; • changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps, our understanding of the data and usage related to our services, or that give preferential treatment to competitive products; • changes to social networks that degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products; or • implementation and interpretation of regulatory or industry standards by these widely adopted platforms that, as a side effect, degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products.
In addition, the success of our marketplaces has at times and could in the future also be harmed by factors outside our control, such as actions taken by providers of mobile and desktop operating systems, social networks, or search and advertising platforms, including: • policy changes that interfere with, add tolls or costs to, or otherwise limit our ability to provide users with a full experience of our platforms, such as for our mobile apps or social network presence, including policy changes that effectively require us to use the provider’s payment processing or other services for transactions on the provider’s operating system, network, or platform; • unfavorable treatment received by our platforms, especially as compared to competing platforms, such as the placement of our mobile apps in a mobile app download store; • increased costs to distribute or use our platforms via mobile apps, social networks, or established search and advertising systems; • changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps, our understanding of the data and usage related to our services, or that give preferential treatment to competitive products; • changes to social networks that degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products; or 49 Table of Contents • implementation and interpretation of regulatory or industry standards by these widely adopted platforms that, as a side effect, degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products.
Also, visits to our Etsy and Reverb marketplaces from buyers outside the United States may not convert into sales as often as visits from within the United States, including due to the impact of a strong U.S. dollar relative to other currencies and the fact that most of the goods listed on these platforms are denominated in U.S. dollars.
Also, visits to our Etsy and Reverb marketplaces from buyers outside the United States may not convert into sales as often as visits from within the United States, including due to the impact of a strong U.S. dollar relative to other currencies and the fact that most of the goods 58 Table of Contents listed on these platforms are denominated in U.S. dollars.
We have implemented disaster recovery mechanisms, including systems to back up key data and production systems, but these systems may be inadequate or incomplete. For example, these disaster recovery systems may be susceptible to cyber-incidents if insufficiently distributed across locations, not sufficiently separated from primary systems, not comprehensive, or not at a scale sufficient to replace our primary systems.
We have implemented disaster recovery mechanisms, including systems to back up key data and production systems, but these systems may be inadequate or incomplete. For example, these disaster recovery systems may be susceptible to cyber-related events if insufficiently distributed across locations, not sufficiently separated from primary systems, not comprehensive, or not at a scale sufficient to replace our primary systems.
Despite our best efforts, if these third parties fail to adhere to adequate security practices, or, as has occurred from time to time in the past, experience a cyber incident or attack such as a breach of their networks, our members’ data may be rendered unavailable, improperly accessed, used, or disclosed.
Despite our best efforts, if these third-parties fail to adhere to adequate security practices, or, as has occurred from time to time in the past, experience a cyber-related event or attack such as a breach of their networks, our members’ data may be rendered unavailable, improperly accessed, used, or disclosed.
We compete to attract, engage, and retain sellers based on many factors, including: • the value and awareness of our brands; • the effectiveness of our product and marketing investments; • the effectiveness of our scaled member support and trust and safety practices and policies; • the global scale of our marketplaces and the breadth of our online presence; • our tools, education, and services, which support a seller in running her business; • the number and engagement of buyers; • our policies and fees; • the ability of a seller to scale her business; • the effectiveness of our mobile apps; • the strength of our communities; and • our mission.
We compete to attract, engage, and retain sellers based on many factors, including: • the value, awareness, and perception of our brands; • our investments in product and marketing for the benefit or our sellers; • the effectiveness of our scaled member support and trust and safety practices and policies; • the global scale of our marketplaces and the breadth of our online presence; • our tools, education, and services, which support a seller in running her business; • the number and engagement of buyers; • our policies and fees; • the ability of a seller to scale her business; • the effectiveness of our mobile apps; • the strength of our communities; and • our mission.
As in the past, claims by third-party rights owners could require us to pay damages or refrain from permitting any further listing of the relevant items. These types of claims could seek substantial damages or force us to modify our business practices, which could lower our revenue, increase our costs, or make our platforms less user-friendly.
Claims by third-party rights owners could require us to pay damages or refrain from permitting any further listing of the relevant items. These types of claims could seek substantial damages or force us to modify our business practices, which could lower our revenue, increase our costs, or make our platforms less user-friendly.
If we cannot license or develop technology for any allegedly infringing aspect of our business, we could be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.
If we cannot license or develop technology for any allegedly infringing aspect of our business, we could be forced to limit our services and may be unable to compete effectively. Any of these results could harm our business.
Etsy-provided controls for users to limit third-party advertising features, the growing use of online ad-blocking software and technological changes to browsers and mobile operating systems that, for example, limit access to usage information for smaller platforms like Etsy, impact the effectiveness of, or our visibility and insights into, our marketing efforts.
Etsy-provided controls for users to limit third-party advertising features, the growing use of online ad-blocking software and technological changes to browsers and mobile operating systems that, for example, limit access to usage information for advertisers like Etsy, impact the effectiveness of, or our visibility and insights into, our marketing efforts.
Some of the challenges we face in attracting and retaining employees include: • skepticism regarding our ability to accelerate GMS growth in the future; • continuing ability to offer competitive compensation and benefits, including continuing to support the well-being of our employees, as the legal landscape in the United States evolves; • competition for talent in our industry, which could cause payroll costs, including stock-based compensation, to become a larger percentage of our total cost base; • evolving expectations regarding the ability to work remotely; • enhancing engagement levels among existing employees and supporting their work-life balance; • attracting high quality talent in a timely fashion; • retaining qualified employees who support our mission and guiding principles, and continuing to do so in our hybrid work environment; • continuing to find promotion opportunities to retain key employees for leadership positions; • hiring employees in multiple locations globally, and building a diverse, equitable, and inclusive workforce; and • responding to competitive pressures and changing business conditions in ways that do not divert us from our guiding principles.
Some of the challenges we face in attracting and retaining employees include: • skepticism regarding our ability to accelerate GMS growth in the future; • continuing ability to offer competitive compensation and benefits, including stock-based compensation and programs to support the well-being of our employees, as more external scrutiny is placed on stock-based compensation expenses and the legal landscape in the United States evolves; • competition for talent in our industry, which could cause payroll costs, including stock-based compensation, to become a larger percentage of our total cost base; • evolving expectations regarding the ability to work remotely; • enhancing engagement levels among existing employees and supporting their work-life balance; • attracting high quality talent in a timely fashion; • retaining qualified employees who support our mission and guiding principles, and continuing to do so in our hybrid work environment; • continuing to find promotion opportunities to retain key employees for leadership positions; • hiring employees in multiple locations globally, and building a diverse, equitable, and inclusive workforce; and • responding to competitive pressures and changing business conditions in ways that do not divert us from our guiding principles.
If the ultimate result of these audits differs from original or adjusted estimates, they could have a material impact on our effective tax rate and tax liabilities. At any one time, multiple tax years could be subject to audit by various taxing jurisdictions.
If the ultimate result of these audits differs from original or adjusted estimates, they could have a material impact on our effective tax rate and tax liabilities. At any one time, we typically have multiple tax years subject to audit by various taxing jurisdictions.
Lawsuits or other enforcement actions brought against us have resulted in settlements, and may result in injunctions, damages, fines, or penalties, which could have a material adverse effect on our financial condition or results of operations or require changes to our business.
Lawsuits, enforcement actions, and other legal proceedings brought against us have resulted in judgments and settlements, and may result in injunctions, damages, fines, or penalties, which could have a material adverse effect on our financial condition or results of operations or require changes to our business.
While both our manual and automated systems have tools and procedures designed to account for our and our partners’ policies, despite our best efforts, we may inadvertently include in our marketing efforts sellers or their products inconsistent with our policies, brands, and values, which could result in failure to deliver a return on our investment, media or regulatory scrutiny, and damage to our brands and/or business.
While both our manual and automated systems have tools and procedures designed to account for our and our partners’ policies, despite our best efforts, we may inadvertently include in our marketing efforts sellers or their products inconsistent with our policies, brands, and 56 Table of Contents values, which could result in failure to deliver a return on our investment, media or regulatory scrutiny, and damage to our brands and/or business.
Although we establish accruals for our litigation and regulatory matters in accordance with applicable accounting guidance when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable, there may be a material exposure to loss in excess of any amounts accrued, or in excess of any loss contingencies disclosed as reasonably probable, particularly in more uncertain legal or regulatory environments.
Although we establish accruals for our litigation and regulatory matters in accordance with applicable accounting guidance when they present loss contingencies that are both probable and reasonably estimable, there may be a material exposure to loss in excess of any amounts accrued, or in excess of any loss contingencies disclosed as reasonably probable, particularly in more uncertain legal or regulatory environments.
Even if our revenue continues to grow, we may not be able to maintain profitability in the future. Our costs have and may continue to increase as we continue to invest in the development of our marketplaces, including our services and technological enhancements, and as we increase our marketing efforts, expand our operations, and hire additional employees.
Even if our revenue continues to grow, we may not be able to maintain profitability in the future. Our costs have and may continue to increase as we continue to invest in the development of our marketplaces, including our services and technological enhancements, and as we increase our marketing efforts and expand our operations.
For additional information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies—Valuation of Goodwill.” We may expand our business through additional acquisitions of other businesses or assets or strategic partnerships and investments, which may divert management’s attention and/or prove to be unsuccessful.
For additional information, see Part II, Item 8, “Note 7—Goodwill and Intangible Assets” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies—Valuation of Goodwill.” We may expand our business through additional acquisitions of other businesses or assets or strategic partnerships and investments, which may divert management’s attention and/or prove to be unsuccessful.
While we used a portion of the net proceeds from each of the Notes offerings to enter into separate privately negotiated capped call instruments designed to reduce the potential dilution and/or offset a portion of the cash payments due in respect of the Notes, there can be no assurance that the capped call 63 Table of C ontents instruments will pay out in full or at all.
While we used a portion of the net proceeds from each of the Notes offerings to enter into separate privately negotiated capped call instruments designed to reduce the potential dilution and/or offset a portion of the cash payments due in respect of the Notes, there can be no assurance that the capped call instruments will pay out in full or at all.
If we are unable to cost-effectively protect our platforms, sellers and buyers under these regulatory regimes, such as if the regulations place requirements on our sellers that they find difficult or impossible to comply with, limit the functions or features our marketplaces can offer, or require us to take actions at a scale inconsistent with the size, investment, and operation of our marketplaces, our business could be harmed. 69 Table of C ontents We may be subject to intellectual property claims, which, even if untrue, could be extremely costly to defend, damage our brands, require us to pay significant damages, and limit our ability to use certain technologies in the future.
If we are unable to cost-effectively protect our platforms, sellers and buyers under these regulatory regimes, such as if the regulations place requirements on our sellers that they find difficult or impossible to comply with, limit the functions or features our marketplaces can offer, or require us to take actions at a scale inconsistent with the size, investment, and operation of our marketplaces, our business could be harmed. 66 Table of Contents We may be subject to intellectual property claims, which, even if meritless, could be extremely costly to defend, damage our brands, require us to pay significant damages, and limit our ability to use certain technologies in the future.
Insufficient production and disaster recovery systems could, in the event of a cyber-incident, harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces. Cyber attacks aimed at disrupting our and our third-party service providers’ services have occurred regularly in the past, and we expect they will continue to occur in the future.
Insufficient production and disaster recovery systems could, in the event of a cyber-related incident, harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces. Cyber attacks aimed at disrupting our and our third-party service providers’ services regularly occur, and we expect they will continue to occur in the future.
Any harm to our reputation resulting from setting these metrics or our failure or perceived failure to meet such metrics could impact employee engagement and retention, the willingness of our buyers and sellers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.
Any harm to our reputation resulting from setting public goals or our failure or perceived failure to meet such goals could impact employee engagement and retention, the willingness of our buyers and sellers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.
Specifically, responding to common actions of an activist stockholder, such as requests for special meetings, potential nominations of candidates for election to our Board of Directors, requests to pursue a strategic combination, or other transaction or other special requests, could disrupt our 72 Table of C ontents operations, be costly and time-consuming, or divert the attention of our management and employees.
Specifically, responding to common actions of an activist stockholder, such as requests for special meetings, potential nominations of candidates for election to our Board of Directors, requests to pursue a strategic combination, or other transaction or other special requests, could disrupt our operations, be costly and time-consuming, or divert the attention of our management and employees.
Our ability to pay our debt when due or to refinance our indebtedness, including the 0% Convertible Senior Notes due 2023 we issued in March 2018 (the “2018 Notes”), the 0.125% Convertible Senior Notes due 2026 we issued in September 2019 (the “2019 Notes”), the 0.125% Convertible Senior Notes due 2027 we issued in August 2020 (the “2020 Notes”), and the 0.25% Convertible Senior Notes due 2028 we issued in June 2021 (the “2021 Notes” and together with the 2018 Notes , the 2019 Notes , and the 2020 Notes, the “Notes”), depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Our ability to pay our debt when due or to refinance our outstanding indebtedness, including the 0.125% Convertible Senior Notes due 2026 we issued in September 2019 (the “2019 Notes”), the 0.125% Convertible Senior Notes due 2027 we issued in August 2020 (the “2020 Notes”), and the 0.25% Convertible Senior Notes due 2028 we issued in June 2021 (the “2021 Notes” and together with the 2019 Notes and the 2020 Notes, the “Notes”), depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
We rely on our sellers to provide a fulfilling experience to our buyers. A small portion of buyers complain to us about their experience on our platforms. As a pure marketplace, our sellers manage their shops, most policies, products and product descriptions, shipping and returns.
We rely on our sellers to provide a fulfilling experience to our buyers. A small portion of buyers complain to us about their experience on our platforms. As a pure marketplace, our sellers manage their shops, certain shop policies, products and product descriptions, shipping, and returns.
If jurisdictions become increasingly fragmented, with additional regulation of small sellers and platforms, tariffs, certifications, representative 59 Table of C ontents requirements, and customs requirements that increase the cost or complexity of cross-border trade, whether on the seller’s sourcing of materials or between the seller and buyer, our business could be adversely impacted.
If jurisdictions become increasingly fragmented, with additional regulation of small sellers and platforms, tariffs, certifications, representative requirements, and customs requirements that increase the cost or complexity of cross-border trade, whether on the seller’s sourcing of materials or between the seller and buyer, our business could be adversely impacted.
In addition, ongoing legal and regulatory changes in the data privacy sphere in U.S. states and countries throughout the world – and the interpretation of these laws by major search, social, and operating system providers – may impact the scope and effectiveness of marketing and advertising services generally, including those used on our platforms.
In addition, ongoing legal and regulatory changes in the data privacy, social media and technology spheres in U.S. states and countries throughout the world – and the interpretation of these laws by major search, social, and operating system providers – may impact the scope and effectiveness of marketing and advertising services generally, including those used on our platforms.
Even if we are able to attract new buyers and sellers to replace the ones that we lose, we may not be able to do so at comparable levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave our marketplaces.
Even if we are able to attract new buyers and sellers to replace the ones that we lose, we may not be able to do so at comparable levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave, or reduce their activity level on, our marketplaces.
Service interruptions and delivery delays may be caused by events that are beyond the control of our sellers, such as interruptions in order or payment processing, interruptions in sellers’ supply chain, transportation disruptions, customs delays, natural disasters, inclement weather, terrorism, public health crises, or political unrest.
Service interruptions and delivery delays may be caused by events that are beyond the control of our sellers, such as interruptions in order or payment processing, interruptions in sellers’ supply chains, transportation disruptions, customs delays, natural disasters, inclement weather, terrorism, public health crises, political unrest or geopolitical conflict.
In the event we are required to record an additional non-cash impairment charge to our goodwill, other intangibles, and/or long-lived assets, such a non-cash charge could have a material adverse effect on our consolidated statements of operations and balance sheets in the 60 Table of C ontents reporting period in which we record the charge.
In the event we are required to record an additional non-cash impairment charge to our goodwill, other intangibles, and/or long-lived assets, such a non-cash charge could have a material adverse effect on our Consolidated Statements of Operations and Balance Sheets in the reporting period in which we record the charge.
Our performance marketing efforts currently include search engine optimization, search engine marketing, affiliate marketing, and display advertising, as well as social media, mobile push notifications, and email marketing. If we fail to scale and deliver an effective return on investment in any of these marketing efforts, it may harm our business.
Our digital marketing efforts currently include, among others, search engine optimization, search engine marketing, affiliate marketing, and display advertising, as well as social media, mobile push notifications, and email marketing. If we fail to scale and deliver an effective return on investment in any of these marketing efforts, it may harm our business.
These include new obligations to withhold or collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations. For example, non-U.S. jurisdictions have proposed or enacted taxes on online advertising and marketplace service revenues.
These include new obligations to withhold or collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations. For example, several jurisdictions have proposed or enacted taxes on online advertising and marketplace service revenues.
We are subject to the terms of open source licenses because our platforms incorporate, and we contribute to, open source software, potentially impairing our ability to adequately protect our intellectual property. The software powering our platforms incorporates software covered by open source licenses.
We are subject to the terms of open source licenses because our platforms incorporate, and we contribute to, certain open source software, potentially impairing our ability to adequately protect our intellectual property. The software powering our platforms incorporates certain software that is covered by open source licenses.
Any debt financing that we may secure in the future could result in additional operating and financial covenants that would limit or restrict our ability to take certain actions, such as incurring additional debt, making capital expenditures, repurchasing our stock, or declaring dividends.
Any debt financing that we may secure in the future could result in additional operating and financial covenants that would limit or restrict our ability to take certain actions, such as incurring additional debt, making capital expenditures, repurchasing our stock, 60 Table of Contents or declaring dividends.
The application of indirect taxes, such as sales and use tax, value-added tax, provincial tax, goods and services tax, business tax, withholding tax, digital service tax, gross receipt tax, and tax information reporting obligations to businesses like ours and to our sellers and buyers is a complex and evolving issue.
The application of indirect taxes, such as sales and use tax, duties, value-added tax, provincial tax, goods and services tax, business tax, withholding tax, digital service tax, and gross receipt tax, as well as tax information reporting obligations to businesses like ours and to our sellers and buyers is a complex and evolving area.
Failure to comply with these rules or requirements could impact our ability to meet our contractual obligations with our third-party payment processors and could result in potential fines or negatively impact our relationship with our third-party payments processors. We are also subject to rules governing electronic funds transfers.
Failure to comply with these rules or requirements could impact our ability to meet our contractual obligations with our third-party payment processors and could result in potential fines or negatively impact our relationship with our third-party payments processors. 50 Table of Contents We are also subject to rules governing electronic funds transfers.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our headquarters are located in Brooklyn, New York where we occupy approximately 225,000 square feet under a lease that expires in 2039. We use these facilities for our principal administration, technology and development, and engineering activities.
Biggest changeItem 2. Properties. Our headquarter office is located in Brooklyn, New York where we occupy approximately 225,000 square feet under a lease that expires in 2039. We use these facilities for our principal administration, technology and development, and engineering activities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The table below provides information with respect to repurchases of shares of our common stock during the three months ended December 31, 2022: Period Total Number of Shares Purchased(1) Average Price Paid per Share(2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)(4) Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (in thousands)(3) October 1 - 31 761,571 $ 101.76 487,548 $ 401,807 November 1 - 30 483,439 106.77 467,869 351,609 December 1 - 31 405,751 129.80 387,843 301,431 Total 1,650,761 1,343,260 301,431 (1) The total number of shares purchased includes 307,501 shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units (“RSUs”).
Biggest changeIssuer Purchases of Equity Securities The table below provides information with respect to repurchases of shares of our common stock during the three months ended December 31, 2023: Period Total Number of Shares Purchased(1) Average Price Paid per Share(2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)(4) Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (in thousands)(3) October 1 - 31 554,296 $ 64.34 554,296 $ 781,689 November 1 - 30 504,253 66.68 504,253 748,057 December 1 - 31 289,444 81.85 289,444 724,360 Total 1,347,993 1,347,993 (1) The total number of shares purchased does not include shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units (“RSUs”).
The graph assumes $100 was invested at the market close on December 31, 2017 in the common stock of Etsy, Inc. Such returns are based on historical results and are not intended to suggest future performance. The Russell 1000 Index and the S&P 500 Index assume reinvestment of any dividends.
The graph assumes $100 was invested at the market close on December 31, 2018 in the common stock of Etsy, Inc. Such returns are based on historical results and are not intended to suggest future performance. The Russell 1000 Index and the S&P 500 Index assume reinvestment of any dividends.
The timing and exact amount of any common stock repurchases will depend on various factors, including market conditions, common stock trading price, our liquidity and financial performance and legal considerations. 75 Table of C ontents Performance Graph The following graph shows a comparison from December 31, 2017 through December 31, 2022, of the cumulative total returns for our common stock, the Russell 1000 Index, and the S&P 500 Index.
The timing and exact amount of any common stock repurchases will depend on various factors, including market conditions, common stock trading price, our liquidity and financial performance and legal considerations. 73 Table of Contents Performance Graph The following graph shows a comparison from December 31, 2018 through December 31, 2023, of the cumulative total returns for our common stock, the Russell 1000 Index, and the S&P 500 Index.
Holders of Record As of the close of business on February 17, 2023, there were approximately 757 stockholders of record of our common stock.
Holders of Record As of the close of business on February 16, 2024, there were approximately 750 stockholders of record of our common stock.
The number of stockholders of record is based upon the actual number of holders registered on this date and does not include holders of common stock in “street name” by brokers or other entities on behalf of stockholders. Dividend Policy We have never declared or paid cash dividends on our capital stock.
The number of stockholders of record is based upon the actual number of holders registered on this date and does not include holders of common stock in “street name” by brokers or other entities on behalf of stockholders.
Share repurchases may be executed through open market repurchases, privately negotiated transactions or by other means, including repurchase plans designed to comply with Rule 10b5-1 and other derivative, accelerated share repurchase and other structured transactions.
(4) All of these shares were purchased pursuant to a 10b5-1 trading plan. Share repurchases may be executed through open market repurchases, privately negotiated transactions or by other means, including repurchase plans designed to comply with Rule 10b5-1 and other derivative, accelerated share repurchase and other structured transactions.
We intend to retain all available funds and future earnings and do not anticipate paying cash dividends in the foreseeable future.
Dividend Policy We have never declared or paid cash dividends on our capital stock and we do not anticipate paying cash dividends in the foreseeable future.
Removed
(2) Average price paid per share excludes broker commissions. (3) In May 2022, our Board of Directors approved a stock repurchase program for the repurchase of up to $600 million of our common stock. The stock repurchase program has no expiration date. (4) All of these shares were purchased pursuant to a 10b5-1 trading plan.
Added
(2) Average price paid per share excludes broker commissions and excise tax. As of January 1, 2023, our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act.
Added
Any excise tax incurred on share repurchases is recognized as part of the cost basis of the shares acquired in the Consolidated Statements of Stockholders’ Equity (Deficit). (3) In June 2023, our Board of Directors approved a stock repurchase program that authorizes repurchases of up to $1 billion of our common stock. The stock repurchase program has no expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 2021 2020 (in thousands) Revenue: Marketplace $ 1,910,887 $ 1,745,824 $ 1,303,126 Services 655,224 583,290 422,499 Total revenue 2,566,111 2,329,114 1,725,625 Cost of revenue 744,592 654,512 464,745 Gross profit 1,821,519 1,674,602 1,260,880 Operating expenses: Marketing 710,399 654,804 500,756 Product development 412,398 271,535 180,080 General and administrative 312,260 282,531 156,035 Goodwill impairment 1,045,022 — — Total operating expenses 2,480,079 1,208,870 836,871 (Loss) income from operations (658,560) 465,732 424,009 Other (expense) income, net (3,418) 5,922 (58,300) (Loss) income before income taxes (661,978) 471,654 365,709 (Provision) benefit for income taxes (32,310) 21,853 (16,463) Net (loss) income $ (694,288) $ 493,507 $ 349,246 Year Ended December 31, 2022 2021 2020 Revenue: Marketplace 74.5 % 75.0 % 75.5 % Services 25.5 25.0 24.5 Total revenue 100.0 100.0 100.0 Cost of revenue 29.0 28.1 26.9 Gross profit 71.0 71.9 73.1 Operating expenses: Marketing 27.7 28.1 29.0 Product development 16.1 11.7 10.4 General and administrative 12.2 12.1 9.0 Goodwill impairment 40.7 — — Total operating expenses 96.6 51.9 48.5 (Loss) income from operations (25.7) 20.0 24.6 Other (expense) income, net (0.1) 0.3 (3.4) (Loss) income before income taxes (25.8) 20.3 21.2 (Provision) benefit for income taxes (1.3) 0.9 (1.0) Net (loss) income (27.1) % 21.2 % 20.2 % 83 Table of C ontents Comparison of Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2022 2021 $ % 2020 $ % (in thousands, except percentages) Revenue: Marketplace $ 1,910,887 $ 1,745,824 $ 165,063 9.5 % $ 1,303,126 $ 442,698 34.0 % Percentage of total revenue 74.5 % 75.0 % 75.5 % Services $ 655,224 $ 583,290 $ 71,934 12.3 % $ 422,499 $ 160,791 38.1 % Percentage of total revenue 25.5 % 25.0 % 24.5 % Total revenue $ 2,566,111 $ 2,329,114 $ 236,997 10.2 % $ 1,725,625 $ 603,489 35.0 % Revenue increased $237.0 million to $2.6 billion in the year ended December 31, 2022 compared to the year ended December 31, 2021, of which 74.5% consisted of Marketplace revenue and 25.5% consisted of Services revenue.
Biggest changeYear Ended December 31, 2023 2022 2021 (in thousands) Revenue: Marketplace $ 1,997,190 $ 1,910,887 $ 1,745,824 Services 751,187 655,224 583,290 Total revenue 2,748,377 2,566,111 2,329,114 Cost of revenue 828,675 744,592 654,512 Gross profit 1,919,702 1,821,519 1,674,602 Operating expenses: Marketing 759,196 710,399 654,804 Product development 469,332 412,398 271,535 General and administrative 343,242 312,260 282,531 Asset impairment charges 68,091 1,045,022 — Total operating expenses 1,639,861 2,480,079 1,208,870 Income (loss) from operations 279,841 (658,560) 465,732 Other income (expense), net 12,979 (3,418) 5,922 Income (loss) before income taxes 292,820 (661,978) 471,654 Benefit (provision) for income taxes 14,748 (32,310) 21,853 Net income (loss) $ 307,568 $ (694,288) $ 493,507 Year Ended December 31, 2023 2022 2021 Revenue: Marketplace 72.7 % 74.5 % 75.0 % Services 27.3 25.5 25.0 Total revenue 100.0 100.0 100.0 Cost of revenue 30.2 29.0 28.1 Gross profit 69.8 71.0 71.9 Operating expenses: Marketing 27.6 27.7 28.1 Product development 17.1 16.1 11.7 General and administrative 12.5 12.2 12.1 Asset impairment charges 2.5 40.7 — Total operating expenses 59.7 96.6 51.9 Income (loss) from operations 10.2 (25.7) 20.0 Other income (expense), net 0.5 (0.1) 0.3 Income (loss) before income taxes 10.7 (25.8) 20.3 Benefit (provision) for income taxes 0.5 (1.3) 0.9 Net income (loss) 11.2 % (27.1) % 21.2 % 82 Table of Contents Comparison of Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2023 2022 $ % 2021 $ % (in thousands, except percentages) Revenue: Marketplace $ 1,997,190 $ 1,910,887 $ 86,303 4.5 % $ 1,745,824 $ 165,063 9.5 % Percentage of total revenue 72.7 % 74.5 % 75.0 % Services $ 751,187 $ 655,224 $ 95,963 14.6 % $ 583,290 $ 71,934 12.3 % Percentage of total revenue 27.3 % 25.5 % 25.0 % Total revenue $ 2,748,377 $ 2,566,111 $ 182,266 7.1 % $ 2,329,114 $ 236,997 10.2 % Revenue increased $182.3 million to $2.7 billion in the year ended December 31, 2023 compared to the year ended December 31, 2022, of which 72.7% consisted of Marketplace revenue and 27.3% consisted of Services revenue.
(Provision) Benefit for Income Taxes Our effective tax rate and the (provision) benefit for income taxes is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, taxable income and loss in each jurisdiction, changes in our stock price, audit-related developments, acquisitions, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized.
Benefit (Provision) for Income Taxes Our effective tax rate and the benefit (provision) for income taxes is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, taxable income and loss in each jurisdiction, changes in our stock price, audit-related developments, acquisitions, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized.
To the extent that the results differ from our original or adjusted estimates, the effect will be recorded in (provision) benefit for income taxes. The (provision) benefit for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate.
To the extent that the results differ from our original or adjusted estimates, the effect will be recorded in benefit (provision) for income taxes. The benefit (provision) for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate.
We also provide Adjusted EBITDA margin, a non-GAAP financial measure that presents Adjusted EBITDA divided by revenue. Below is a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measure.
We also provide Adjusted EBITDA margin, a non-GAAP financial measure that presents Adjusted EBITDA divided by revenue. Below is a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.
Additionally, commencing in the third quarter of 2021, as part of our integration of the Depop and Elo7 marketplaces into our “House of Brands,” we expanded our definition of active sellers to include any seller who has had a sale in the last 12 months, even if no charge was incurred in connection with the sale.
Commencing in the third quarter of 2021, as part of our integration of the Depop and Elo7 marketplaces into our “House of Brands,” we expanded our definition of active sellers to include any seller who has had a sale in the last 12 months, even if no charge was incurred in connection with the sale.
Services Revenue : Services revenue is comprised of the fees an Etsy marketplace seller pays us for our optional services (“Services”), including: • On-site advertising services (“Etsy Ads”), which allow Etsy marketplace sellers to pay for prominent placement of their listings; and • Shipping labels, which allows Etsy marketplace sellers in the United States, Canada, United Kingdom, Australia, and India to purchase discounted shipping labels.
Services Revenue : Services revenue is comprised of the fees an Etsy marketplace seller pays us for our optional services (“Services”), including: • On-site advertising services (“Etsy Ads”), which allow Etsy marketplace sellers to pay for prominent placement of their listings; and • Shipping labels, which allows Etsy marketplace sellers in the United States, Canada, United Kingdom, and Australia to purchase discounted shipping labels.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Part I, Item 1A, “Risk Factors.” We have omitted discussion of 2020 results where it would be redundant to the discussion previously included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Part I, Item 1A, “Risk Factors.” We have omitted discussion of 2021 results where it would be redundant to the discussion previously included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
As of December 31, 2022, we had outstanding $1.0 billion aggregate principal amount of 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), $649.9 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026 (the “2019 Notes” and together with the 2021 Notes, 2020 Notes, and 0% Convertible Senior Notes due 2023 (the “2018 Notes”), the “Notes”).
As of December 31, 2023, we had outstanding $1.0 billion aggregate principal amount of 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), $649.9 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026 (the “2019 Notes” and together with the 2021 Notes and 2020 Notes, the “Notes”).
In accordance with our investment policy, all investments, other than investments made through our Impact portfolio, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
In accordance with our investment policy, all investments, other than investments made through our Impact Investment Fund, have maturities no longer than 37 months, with the average maturity of these investments maintained at 12 months or less.
Net Cash Used in Investing Activities Our primary investing activities consist of cash paid for the acquisitions of Depop and Elo7, sales and purchases of short- and long-term marketable securities, and capital expenditures, including investments in capitalized website development and internal-use software and purchases of property and equipment to support our overall business growth.
Net Cash Used in Investing Activities Our primary investing activities consist of cash paid for the acquisitions of Depop and Elo7, purchases and sales and maturities of short- and long-term investments, and capital expenditures, including investments in capitalized website development and internal-use software and purchases of property and equipment to support our overall business growth.
Net Cash (Used in) Provided by Financing Activities Our primary financing activities include proceeds from the issuance of convertible senior notes, repurchases of common stock, payment of tax obligations on vested equity awards, settlement of convertible senior notes, proceeds from exercise of stock options, payments of debt issuance costs, and payments on finance lease obligations.
Net Cash (Used in) Provided by Financing Activities Our primary financing activities include proceeds from the issuance of convertible senior notes, repurchases of common stock, payment of tax obligations on vested equity awards, purchase of capped calls, settlement of convertible senior notes, proceeds from exercise of stock options, payments of debt issuance costs, and payments on finance lease obligations.
Marketplace Revenue : Etsy.com marketplace revenue is comprised of the fees an Etsy marketplace seller pays for marketplace activities, including: • The $0.20 listing fee for each item listed (for up to four months); • The transaction fee that an Etsy marketplace seller pays for each completed transaction, inclusive of shipping fees charged, which increased from 5% to 6.5% effective April 11, 2022, and where applicable, an additional transaction fee of 12% or 15% related to offsite advertising (“Offsite Ads”); • A fee for Etsy Payments, our payment processing product, which typically varies between 3.0% and 4.5% of an item’s total sale price, including shipping, plus a flat fee per order, that depends on the country in which a seller’s bank account is located.
Marketplace Revenue : Etsy.com marketplace revenue is comprised of the fees an Etsy marketplace seller pays for marketplace activities, including: • The transaction fee that an Etsy marketplace seller pays for each completed transaction, inclusive of shipping fees charged, which increased from 5% to 6.5% effective April 11, 2022, and where applicable, an additional transaction fee of 12% or 15% related to offsite advertising (“Offsite Ads”); • A fee for Etsy Payments, our payment processing product, which typically varies between 3.0% and 4.5% of an item’s total sale price, including shipping, plus a flat fee per order, that depends on the country in which a seller’s bank account is located.
Operating lease obligations consist of obligations under non-cancelable operating leases, including for a portion of our headquarters in Brooklyn, New York and for a majority of our other office locations, and include imputed interest and tenant improvement allowances.
Operating lease obligations consist of obligations under non-cancelable operating leases, including a portion of our headquarter office located in Brooklyn, New York and for a majority of our other office locations, and include imputed interest and tenant improvement allowances.
Debt obligations consist of the 2021 Notes, 2020 Notes, 2019 Notes, and 2018 Notes, which will mature on June 15, 2028, September 1, 2027, October 1, 2026, and March 1, 2023, respectively, unless earlier converted or repurchased.
Debt obligations consist of the 2021 Notes, 2020 Notes, and 2019 Notes, which will mature on June 15, 2028, September 1, 2027, and October 1, 2026, respectively, unless earlier converted or repurchased.
For benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by the taxing authorities. 91 Table of C ontents The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate audit settlement.
For benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by the taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate audit settlement.
We succeed when sellers succeed, so we view the number of active sellers as a key indicator of consumer awareness of our brands, the reach of our platforms, the potential for growth in GMS and revenue, and the health of our business. 79 Table of C ontents Active Buyers An active buyer is a buyer who has made at least one purchase in the last 12 months.
We succeed when sellers succeed, so we view the number of active sellers as a key indicator of consumer awareness of our brands, the reach of our platforms, the potential for growth in GMS and revenue, and the health of our business. 78 Table of Contents Active Buyers An active buyer is a buyer who has made at least one purchase in the last 12 months.
As of December 31, 2022, habitual buyers, or Etsy.com buyers who have spent $200 or more and made purchases on six or more days in the previous 12 months, decreased to 7.4 million, a decrease of 9% compared to December 31, 2021.
As of December 31, 2023, habitual buyers, or Etsy.com buyers who have spent $200 or more and made purchases on six or more days in the previous 12 months, decreased to 7.1 million, a decrease of 4% compared to December 31, 2022.
If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on our tax provision and results of operations. 82 Table of C ontents Results of Operations The following tables show our results of operations for the periods presented and express the relationship of line items as a percentage of revenue for those periods.
If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on our tax provision and results of operations. 81 Table of Contents Results of Operations The following tables show our results of operations for the periods presented and express the relationship of line items as a percentage of revenue for those periods.
See “Non-GAAP Financial Measures” for more information regarding our use of Adjusted EBITDA and Adjusted EBITDA margin, including their limitations as a financial measure, and for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measure.
Adjusted EBITDA margin is Adjusted EBITDA divided by revenue. See “Non-GAAP Financial Measures” for more information regarding our use of Adjusted EBITDA and Adjusted EBITDA margin, including their limitations as a financial measure, and for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.
As reported and currency-neutral GMS growth for the periods presented below are as follows: Year-to-Date Period Ended As Reported Currency-Neutral FX Impact December 31, 2022 (1.3) % 1.6 % (2.9) % December 31, 2021 31.2 % 29.6 % 1.6 % December 31, 2020 106.7 % 105.7 % 1.0 % 80 Table of C ontents Key Factors Affecting Our Performance We believe that our performance and future success depend on a number of factors that present significant opportunities for us, including those discussed in Part I, Item 1, “Business,” but also pose risks and challenges, including those discussed in Part I, Item 1A, “Risk Factors.” Components of Our Results of Operations Revenue Our revenue is diversified and generated from a mix of marketplace activities and other optional services we provide to sellers to help them generate more sales and scale their businesses.
As reported and currency-neutral GMS (decline) / growth for the periods presented below are as follows: Year-to-Date Period Ended As Reported Currency-Neutral FX Impact December 31, 2023 (1.2) % (1.2) % — % December 31, 2022 (1.3) % 1.6 % (2.9) % December 31, 2021 31.2 % 29.6 % 1.6 % 79 Table of Contents Key Factors Affecting Our Performance We believe that our performance and future success depend on a number of factors that present significant opportunities for us, including those discussed in Part I, Item 1, “Business,” but also pose risks and challenges, including those discussed in Part I, Item 1A, “Risk Factors.” Components of Our Results of Operations Revenue Our revenue is diversified and generated from a mix of marketplace activities and other optional services we provide to sellers to help them generate more sales and scale their businesses.
Some of these limitations are: • Adjusted EBITDA does not reflect other non-operating expenses, net of other non-operating income, including net interest expense; • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not consider the impact of stock-based compensation expense; • Adjusted EBITDA does not consider the impact of foreign exchange loss (gain); • Adjusted EBITDA does not reflect acquisition-related expenses; • Adjusted EBITDA does not consider the impact of goodwill impairment; • Adjusted EBITDA does not consider the impact of the loss on extinguishment of debt; and • other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Some of these limitations are: • Adjusted EBITDA does not reflect interest and other non-operating (income) expense, net; • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not consider the impact of stock-based compensation expense; • Adjusted EBITDA does not consider the impact of foreign exchange loss (gain); • Adjusted EBITDA does not reflect acquisition, divestiture, and corporate structure-related expenses; • Adjusted EBITDA does not consider the impact of asset impairment charges; • Adjusted EBITDA does not consider the impact of the loss on sale of business; • Adjusted EBITDA does not reflect restructuring and other exit costs; and • other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
For those agreements with variable terms, we do not estimate what the total obligation may be beyond any minimum quantities and/or pricing. In addition, we have uncertain tax positions of $35.2 million and non-income tax related contingency reserves of $43.2 million, which amounts are not reflected in the table as the ultimate resolution and timing are uncertain.
For those agreements with variable terms, we do not estimate what the total obligation may be beyond any minimum quantities and/or pricing. In addition, we have uncertain tax positions of $51.7 million and non-income tax related contingency reserves of $26.2 million. These amounts are not reflected in the table as the ultimate resolution and timing are uncertain.
We fund our non-U.S. operations from our funds held in the United States on an as-needed basis. 88 Table of C ontents We invest in short- and long-term instruments, including fixed-income funds and U.S. Government securities aligned with our investment strategy.
We fund our non-U.S. operations from our funds held in the United States on an as-needed basis. We typically invest in short- and long-term instruments, including fixed-income funds and U.S. Government securities aligned with our investment strategy.
Based on the daily closing prices of our stock during the year ended December 31, 2022, holders of the 2019 Notes and 2018 Notes are eligible to convert their Notes during the first quarter of 2023 and holders of the 2021 Notes and 2020 Notes are not eligible to convert their Notes during the first quarter of 2023.
Based on the daily closing prices of our stock during the quarter ended December 31, 2023, holders of the 2021 Notes, 2020 Notes, and remaining 2019 Notes are not eligible to convert their Notes during the first quarter of 2024.
We believe that mobile GMS indicates our success in converting mobile activity into mobile purchases and demonstrates our ability to grow GMS and revenue. During the year ended December 31, 2022, mobile GMS increased as a percentage of total GMS to approximately 67%, up from approximately 64% for the year ended December 31, 2021. GMS ex-U.S.
We believe that mobile GMS indicates our success in converting mobile activity into mobile purchases and demonstrates our ability to grow GMS and revenue. During the year ended December 31, 2023, mobile GMS increased as a percentage of total GMS to approximately 68%, up from approximately 67% for the year ended December 31, 2022.
We generate revenue primarily from marketplace activities, including transaction, listing, and payments processing fees, and optional seller services, which include on-site advertising and shipping labels.
We generate revenue primarily from marketplace activities, including transaction (inclusive of offsite advertising), payments processing, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels.
Marketplace revenue increased $165.1 million to $1.9 billion in the year ended December 31, 2022 compared to the year ended December 31, 2021. The growth in marketplace revenue was primarily due to the impact of the pricing update to increase our seller transaction fee for the Etsy marketplace from 5% to 6.5% beginning on April 11, 2022.
Marketplace revenue increased $86.3 million to $2.0 billion in the year ended December 31, 2023 compared to the year ended December 31, 2022. The growth in marketplace revenue was primarily due to the impact of the pricing update to increase our seller transaction fee for the Etsy marketplace from 5% to 6.5% beginning on April 11, 2022.
The growth in Services revenue was primarily driven by an increase of 15.4% in on-site advertising revenue, which represented a significant majority of the overall Services revenue growth. The increase in on-site advertising revenue was primarily due to higher click volume and an increase in average price per click on Etsy Ads.
The growth in Services revenue was primarily driven by an increase of 16.9% in on-site advertising revenue, which represented a significant majority of the overall Services revenue growth. The increase in advertising revenue was primarily due to higher click volume on Etsy Ads.
Our strategy is focused around: • Building a sustainable competitive advantage - our “Right to Win;” • Growing the Etsy marketplace in our seven core geographies; and • Leveraging our marketplace expertise and playbook across our “House of Brands.” Our investments in technology infrastructure, product development, marketing, trust and safety, member support, and sellers tools and education, and other areas support our strategy, which you can read more about in Part 1, Item 1, “Business—Primary Business Drivers.” Annual Key Metrics and Financial Highlights As of December 31, 2022, our marketplaces connected 7.5 million active sellers and 95.1 million active buyers in nearly every country in the world.
Our strategy is focused around: • Building a sustainable competitive advantage for the Etsy marketplace - our “Right to Win;” • Growing the Etsy marketplace in our six core geographies and globally; and • Leveraging our marketplace playbook across our “House of Brands.” Our investments in technology infrastructure, product development, marketing, trust and safety, member support, and helping sellers grow support our strategy, which you can read more about in Part 1, Item 1, “Business—Primary Business Drivers.” 75 Table of Contents Annual Key Metrics and Financial Highlights As of December 31, 2023, our marketplaces connected 9.0 million active sellers and 96.5 million active buyers in nearly every country in the world.
The primary drivers of our income tax benefit for the year ended December 31, 2021 were tax benefits from stock-based compensation and a benefit related to research and development tax credits, partially offset by tax expense on income before income taxes and state and local income taxes. 86 Table of C ontents Non-GAAP Financial Measures Adjusted EBITDA and Adjusted EBITDA Margin In this Annual Report, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net (loss) income adjusted to exclude: interest and other non-operating expense, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); acquisition-related expenses; goodwill impairment; and loss on extinguishment of debt.
The primary drivers of our income tax provision for the year ended December 31, 2022 were tax expense on income before income taxes, excluding the non-deductible goodwill impairment expense, and state and local income taxes, partially offset by tax benefits from stock-based compensation and a benefit related to research and development tax credits. 85 Table of Contents Non-GAAP Financial Measures Adjusted EBITDA and Adjusted EBITDA Margin In this Annual Report, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net income (loss) adjusted to exclude: interest and other non-operating (income) expense, net; (benefit) provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); acquisition, divestiture, and corporate structure-related expenses; asset impairment charges; loss on sale of business; and restructuring and other exit costs.
The share of Etsy marketplace GMS processed through our Etsy Payments platform was 93% and 92% for the years ended December 31, 2022 and 2021, respectively. Services revenue increased $71.9 million to $655.2 million in the year ended December 31, 2022 compared to the year ended December 31, 2021.
The share of Etsy marketplace GMS processed through our Etsy Payments platform was 94% and 93% for the years ended December 31, 2023 and 2022, respectively. Services revenue increased $96.0 million to $751.2 million in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Net cash used in investing activities was $30.0 million in the year ended December 31, 2022. This was primarily attributable to $30.7 million in capital expenditures, including $20.5 million for website development and internal-use software as we continued to invest in projects adding new features and functionality to our platforms.
Net cash used in investing activities was $30.0 million in the year ended December 31, 2022. This was primarily attributable to $30.7 million in capital expenditures, including $20.5 million for website development and internal-use software.
(Provision) Benefit for Income Taxes Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2022 2021 $ % 2020 $ % (in thousands, except percentages) (Provision) benefit for income taxes $ (32,310) $ 21,853 $ (54,163) (247.9) % $ (16,463) $ 38,316 232.7 % Percentage of total revenue (1.3) % 0.9 % (1.0) % Our income tax provision and benefit for the years ended December 31, 2022 and 2021 was $32.3 million and $21.9 million, respectively.
Benefit (Provision) for Income Taxes Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2023 2022 $ % 2021 $ % (in thousands, except percentages) Benefit (provision) for income taxes $ 14,748 $ (32,310) $ 47,058 (145.6) % $ 21,853 $ (54,163) 247.9 % Percentage of total revenue 0.5 % (1.3) % 0.9 % Our income tax benefit and provision for the years ended December 31, 2023 and 2022 was $14.7 million and $32.3 million, respectively.
Key Operating and Financial Metrics We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments).
These shares were retired upon receipt. 76 Table of Contents Key Operating and Financial Metrics We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments).
For the year ended December 31, 2022, GMS ex-U.S. domestic as a percentage of total GMS was approximately 44%, compared to approximately 42% for the year ended December 31, 2021.
For the year ended December 31, 2023, GMS ex-U.S. domestic as a percentage of total GMS was approximately 45%, compared to approximately 44% for the year ended December 31, 2022. Additionally, GMS ex-U.S. domestic increased 2% from December 31, 2022 to December 31, 2023.
As a result, the discount rates increased by 380 and 160 basis points as compared to the discount rates in our purchase price allocations at the time of the Depop and Elo7 acquisitions, and by 300 and 100 basis points as compared to the discount rates used in our quantitative analysis on June 30, 2022, respectively.
In addition to these adverse changes to projected cash flows; for Depop and Elo7, respectively, discount rates increased by 380 and 160 basis points as compared to the discount rates in our purchase price allocations at the time of the Depop and Elo7 acquisitions; and by 300 and 100 basis points as compared to the discount rates used in our interim quantitative analysis for Depop and Elo7 as of June 30, 2022, respectively.
Additionally, we have $29.1 million in long-term investments that we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $200.0 million senior secured revolving credit facility. In the year ended December 31, 2022, we had positive operating cash flows of $683.6 million.
Additionally, we have $86.7 million in long-term investments, a majority of which we can liquidate at short notice and with minimal penalties if needed. We also have the ability to draw down on our $400.0 million senior secured revolving credit facility. In the year ended December 31, 2023, we had positive operating cash flows of $705.5 million.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. We continue to monitor the effects of global macroeconomic and geopolitical factors on our results of operations, cash flows, and financial position.
It is subject to an annual impairment test, and if we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then we are required to perform a quantitative assessment for impairment.
If we elect to bypass the qualitative assessment, or if the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then we are required to perform a quantitative assessment for impairment.
General and administrative expenses also include costs associated with the use of facilities and equipment, including depreciation and amortization and office overhead, bad debt expense, digital service tax, and certain professional services expenses. Goodwill impairment: Goodwill impairment expense consists of non-cash charges related to the impairment of the goodwill of Depop and Elo7.
General and administrative expenses also include costs associated with the use of facilities and equipment, including depreciation and amortization and office overhead, professional services expenses, digital services tax, bad debt expense, and non-income tax items. Asset impairment charges: Asset impairment charges consists of non-cash charges related to the impairment of goodwill, finite-lived intangible assets, and other long-lived assets.
The following table shows our cash and cash equivalents, short-term investments, long-term investments, and net working capital as of the dates indicated: As of December 31, 2022 2021 (in thousands) Cash and cash equivalents $ 921,278 $ 780,196 Short-term investments 250,413 204,416 Long-term investments 29,137 85,034 Total cash and cash equivalents, and short- and long-term investments $ 1,200,828 $ 1,069,646 Net working capital $ 881,988 $ 725,913 As of December 31, 2022, a majority of our cash and cash equivalents, which were primarily held in cash deposits and money market funds, were held in the United States for future investments, working capital funding, and general corporate purposes.
The following table shows our cash and cash equivalents, short-term investments, long-term investments, and net working capital as of the dates indicated: As of December 31, 2023 2022 (in thousands) Cash and cash equivalents $ 914,323 $ 921,278 Short-term investments 236,118 250,413 Long-term investments 86,676 29,137 Total cash and cash equivalents, and short- and long-term investments $ 1,237,117 $ 1,200,828 Net working capital $ 859,665 $ 881,988 As of December 31, 2023, a majority of our cash and cash equivalents, which were primarily held in cash deposits and money market funds, were held in the United States for future investments, working capital funding, and general corporate purposes.
Net cash provided by operating activities was $651.6 million in the year ended December 31, 2021, primarily driven by cash net income of $627.7 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that provided $23.9 million in cash, primarily driven by timing of payment of accrued expenses in the period.
Net cash provided by operating activities was $705.5 million in the year ended December 31, 2023, primarily driven by cash net income of $729.2 million as a result of revenue generated on our platforms, and changes in our operating assets and liabilities that used $23.7 million in cash, primarily driven by timing of the payment of prepaid expenses and other current assets, partially offset by the timing of payment of accrued expenses in the period.
We believe that certain assumptions and estimates associated with stock-based compensation; income taxes; the valuation of acquired intangible assets, developed technology, and goodwill as part of purchase price allocations for business combinations; valuation of goodwill; leases; and fair value of convertible senior notes are material in nature due to the subjectivity associated with them and have the greatest potential impact on our consolidated financial statements.
We believe that certain assumptions and estimates associated with stock-based compensation; income taxes; business combinations; valuation of goodwill; and leases are material in nature due to the subjectivity associated with them and have the greatest potential impact on our consolidated financial statements.
See Part II, Item 8, “Financial Statements and Supplementary Data—Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for further information on our critical accounting policies related to revenue recognition, stock-based compensation, income taxes, business combinations, goodwill, leases, and fair value of financial instruments.
Therefore, we consider the assumptions and estimates associated with these (as further detailed below) to be our critical accounting estimates. See Part II, Item 8, “Financial Statements and Supplementary Data—Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for further information on our critical accounting policies related to revenue recognition, stock-based compensation, income taxes, business combinations, goodwill, and leases.
Sources of Liquidity We expect to continue to generate net positive operating cash flow, and the cash we generate from our core operations enables us to fund ongoing operations and our investments which are outlined in Part 1, Item 1, “Business—Primary Business Drivers.” As of December 31, 2022, we had four outstanding series of convertible senior notes, which collectively had a net carrying value of $2.3 billion.
For more information on our Impact Investment Fund, see Part I, Item I, “Business—ESG Reporting: Our Impact Goals, Strategy & Progress.” 87 Table of Contents Sources of Liquidity We expect to continue to generate net positive operating cash flow, and the cash we generate from our core operations enables us to fund ongoing operations including those outlined in Part 1, Item 1, “Business—Primary Business Drivers.” As of December 31, 2023, we had three outstanding series of convertible senior notes, which collectively had a net carrying value of $2.3 billion.
Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA represents our net (loss) income adjusted to exclude: interest and other non-operating expense, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); acquisition-related expenses; goodwill impairment; and loss on extinguishment of debt. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue.
Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA represents our net income (loss) adjusted to exclude: interest and other non-operating (income) expense, net; (benefit) provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); acquisition, divestiture, and corporate structure-related expenses; asset impairment charges; loss on sale of business; and restructuring and other exit costs.
A seller is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple seller accounts and can count as a distinct active seller in each of our marketplaces. As part of our commitment to integrity and transparency, we continuously monitor the criteria for disqualifying a seller as an active seller.
A seller is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple seller accounts and can count as a distinct active seller in each of our marketplaces.
The primary drivers of our income tax provision for the year ended December 31, 2022 were tax expense on income before income taxes, excluding the non-deductible goodwill impairment expense, and state and local income taxes, partially offset by tax benefits from stock-based compensation and a benefit related to research and development tax credits.
The primary drivers of our income tax benefit for the year ended December 31, 2023 were a $55.9 million tax benefit related to Elo7 and a benefit related to research and development tax credits, partially offset by tax expense on income before income taxes and tax deficiencies from stock-based compensation.
Cost of revenue also includes chargebacks to support payments revenue, costs of refunds made to buyers that we either are not able to collect from sellers or are otherwise covered by us, and seller verification fees. Additionally, cost of revenue includes certain employee compensation-related expenses, depreciation and amortization, and third-party customer support services.
Cost of revenue also includes chargebacks to support payments revenue and costs of refunds made to buyers that we either are not able to collect from sellers or are otherwise covered by us, which we collectively refer to as cost of refunds, and seller verification fees.
Domestic GMS ex-U.S. domestic (formerly referred to as Non-U.S. GMS and international GMS) is GMS from transactions in which either the billing address for the seller or the shipping address for the buyer at the time of sale is outside of the United States.
GMS and international GMS) is GMS from transactions in which (1) the billing address for the seller and / or (2) the shipping address for the buyer at the time of sale is outside of the United States.
For these assumptions, the weighted-average used in the Black-Scholes option-pricing model in order to determine the fair value of stock options granted in the periods indicated were as follows: Year Ended December 31, 2022 2021 2020 Expected volatility 62.5% 43.4% - 57.4% 38.9% - 41.7% Expected term (in years) 4.6 4.6 - 6.2 5.5 - 6.2 For the year ended December 31, 2022, the assumptions related to stock options were no longer considered a critical accounting estimate as the number of options awarded was not material.
For these assumptions, the weighted-average used in the Black-Scholes option-pricing model in order to determine the fair value of stock options granted in the periods indicated were as follows: Year Ended December 31, 2023 2022 2021 Expected volatility 63.3% 62.5% 43.4% - 57.4% Expected term (in years) 4.5 4.6 4.6 - 6.2 For the years ended December 31, 2023 and 2022, the assumptions related to stock options were no longer considered a critical accounting estimate as the number of options awarded was not material. 90 Table of Contents Income Taxes We account for uncertainty in income taxes using a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.
This decrease was primarily driven by unfavorable changes in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates in the current year as compared to the prior year, which impact our intercompany and other non-functional currency cash balances. This decrease was also driven by an increase in interest expense.
This increase was partially offset by less favorable changes in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates in the current year versus the prior year which impact our intercompany and other non-functional currency cash balances.
The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are: Year Ended December 31, % (Decline) / Growth Y/Y Year Ended December 31, % Growth / (Decline) Y/Y 2022 2021 2020 (in thousands, except percentages) GMS (1)(2) $ 13,318,396 $ 13,491,828 (1.3) % $ 10,281,101 31.2 % Revenue $ 2,566,111 $ 2,329,114 10.2 % $ 1,725,625 35.0 % Marketplace revenue $ 1,910,887 $ 1,745,824 9.5 % $ 1,303,126 34.0 % Services revenue $ 655,224 $ 583,290 12.3 % $ 422,499 38.1 % Gross profit $ 1,821,519 $ 1,674,602 8.8 % $ 1,260,880 32.8 % Operating expenses $ 2,480,079 $ 1,208,870 105.2 % $ 836,871 44.5 % Net (loss) income $ (694,288) $ 493,507 (240.7) % $ 349,246 41.3 % Net (loss) income margin (3) (27) % 21 % (4,800) bps 20 % 100 bps Adjusted EBITDA (Non-GAAP) (1) $ 716,882 $ 716,613 — % $ 549,116 30.5 % Adjusted EBITDA margin (Non-GAAP) (1) 28 % 31 % (300) bps 32 % (100) bps Active sellers (1)(4) 7,470 7,522 (0.7) % 4,365 72.3 % Active buyers (1)(4) 95,076 96,336 (1.3) % 81,898 17.6 % Percent mobile GMS (1) 67 % 64 % 300 bps 61 % 300 bps Percent GMS ex-U.S.
The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are: Year Ended December 31, % (Decline) / Growth Y/Y Year Ended December 31, % (Decline) / Growth Y/Y 2023 2022 2021 (in thousands, except percentages) GMS (1)(2) $ 13,161,196 $ 13,318,396 (1.2) % $ 13,491,828 (1.3) % Revenue $ 2,748,377 $ 2,566,111 7.1 % $ 2,329,114 10.2 % Marketplace revenue $ 1,997,190 $ 1,910,887 4.5 % $ 1,745,824 9.5 % Services revenue $ 751,187 $ 655,224 14.6 % $ 583,290 12.3 % Gross profit $ 1,919,702 $ 1,821,519 5.4 % $ 1,674,602 8.8 % Operating expenses $ 1,639,861 $ 2,480,079 (33.9) % $ 1,208,870 105.2 % Net income (loss) $ 307,568 $ (694,288) 144.3 % $ 493,507 (240.7) % Net income (loss) margin (3) 11.2 % (27.1) % 3,830 bps 21.2 % (4,830) bps Adjusted EBITDA (Non-GAAP) (1) $ 754,311 $ 716,882 5.2 % $ 716,613 — % Adjusted EBITDA margin (Non-GAAP) (1) 27.4 % 27.9 % (50) bps 30.8 % (290) bps Active sellers (1)(4) 9,035 7,470 21.0 % 7,522 (0.7) % Active buyers (1)(4) 96,483 95,076 1.5 % 96,336 (1.3) % Percent mobile GMS (1)(5) 68 % 67 % 100 bps 64 % 300 bps Percent GMS ex-U.S.
Under the quantitative goodwill impairment test, if a reporting unit’s carrying amount exceeds its fair value, we record an impairment charge based on that difference, not exceeding the carrying amount of goodwill.
Under the quantitative goodwill impairment test, if a reporting unit’s carrying amount exceeds its fair value, we record an impairment charge based on that difference, not exceeding the carrying amount of goodwill. To determine a reporting unit’s fair value, we apply the income approach, which uses management’s forecasts to estimate future net available cash flows.
This increase was partially offset by a $173.4 million decrease in the volume of GMS on our marketplaces for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This increase was partially offset by a $157.2 million decrease in the volume of GMS on our marketplaces for the year ended December 31, 2023 compared to the year ended December 31, 2022, which was primarily driven by a decline in GMS for the Etsy marketplace, partially offset by an increase in GMS for the Depop marketplace.
(“Reverb”), our musical instrument marketplace, Depop Limited (“Depop”), our fashion resale marketplace, and Elo7 Serviços de Informática S.A. (“Elo7”), our Brazil-based marketplace for handmade and unique items. Each of our marketplaces operates independently, although some of our key operational functions such as finance, legal, and human resources, for example, support all four marketplaces to some extent.
(“Reverb”), our musical instrument marketplace, and Depop Limited (“Depop”), our fashion resale marketplace. Each of our marketplaces primarily operate independently, although some of our key operational functions such as finance, legal, and human resources, for example, support all of our marketplaces to some extent.
If actual results are materially lower than originally estimated, it could result in a material impact on our consolidated financial statements in future periods.
If actual results are materially lower than originally estimated, or if we experience significant, adverse changes to long-term growth rate or discount rate assumptions, it could result in a material impact on our consolidated financial statements in future periods.
In 2022, we authorized creation of an Impact portfolio through which we expect to deploy approximately $30 million in investments intended to further our Impact strategy and goals beginning in early 2023. The criteria for investments included in the Impact portfolio may differ from those made under our general investment policy.
In 2022, we set up an Impact Investment Fund and as of December 31, 2023 have deployed approximately $19 million of the $30 million designated for investments intended to further our Impact strategy and goals. The criteria for investments included in the Impact Investment Fund may differ from those made under our general investment policy.
We track “Paid GMS” for the Etsy marketplace and define it as Etsy.com GMS that is attributable to our performance marketing efforts, which excludes most of our marketing investments focused on brand awareness like TV and digital video.
We track “Paid GMS” for the Etsy marketplace and define it as Etsy marketplace GMS that is attributable to our performance marketing efforts, which excludes most of our marketing investments focused on brand awareness like TV and digital video. 77 Table of Contents As outlined starting on page 5 in Part I, Item 1, “Business” above, Etsy’s 2023 performance reflects the impact of macroeconomic headwinds.
Net cash used in financing activities was $506.5 million in the year ended December 31, 2022. This was primarily attributable to stock repurchases of $425.7 million and payment of tax obligations on vested equity awards of $79.2 million, partially offset by proceeds from the exercise of stock options of $15.0 million.
Net cash used in financing activities was $656.5 million in the year ended December 31, 2023. This was primarily attributable to stock repurchases of $577.0 million and, to a lesser extent, payment of tax obligations on vested equity awards of $83.4 million. Net cash used in financing activities was $506.5 million in the year ended December 31, 2022.
These decreases were partially offset by an increase in interest and other income primarily due to the increase in the federal interest rate.
This increase was primarily driven by an increase in interest and other income primarily due to the increase in the federal funds rate.
Other (Expense) Income, net Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2022 2021 $ % 2020 $ % (in thousands, except percentages) Other (expense) income, net: Loss on extinguishment of debt $ — $ — $ — NM $ (16,855) $ 16,855 NM Percentage of total revenue — % — % (1.0) % Interest expense $ (14,168) $ (9,885) $ (4,283) 43.3 % $ (42,025) $ 32,140 (76.5) % Percentage of total revenue (0.6) % (0.4) % (2.4) % Interest and other income $ 10,956 $ 2,137 $ 8,819 412.7 % $ 7,102 $ (4,965) (69.9) % Percentage of total revenue 0.4 % 0.1 % 0.4 % Foreign exchange (loss) gain $ (206) $ 13,670 $ (13,876) (101.5) % $ (6,522) $ 20,192 (309.6) % Percentage of total revenue — % 0.6 % (0.4) % Other (expense) income, net $ (3,418) $ 5,922 $ (9,340) (157.7) % $ (58,300) $ 64,222 (110.2) % Percentage of total revenue (0.1) % 0.3 % (3.4) % Other expense, net was $3.4 million in the year ended December 31, 2022, which decreased $9.3 million from Other income, net of $5.9 million in the year ended December 31, 2021.
Other Income (Expense), net Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2023 2022 $ % 2021 $ % (in thousands, except percentages) Other income (expense), net: Loss on sale of business $ (2,630) $ — $ (2,630) NM $ — $ — NM Percentage of total revenue (0.1) % — % — % Interest expense $ (14,042) $ (14,168) $ 126 (0.9) % $ (9,885) $ (4,283) 43.3 % Percentage of total revenue (0.5) % (0.6) % (0.4) % Interest and other income $ 35,999 $ 10,956 $ 25,043 228.6 % $ 2,137 $ 8,819 412.7 % Percentage of total revenue 1.3 % 0.4 % 0.1 % Foreign exchange (loss) gain $ (6,348) $ (206) $ (6,142) 2,981.6 % $ 13,670 $ (13,876) (101.5) % Percentage of total revenue (0.2) % — % 0.6 % Other income (expense), net $ 12,979 $ (3,418) $ 16,397 (479.7) % $ 5,922 $ (9,340) (157.7) % Percentage of total revenue 0.5 % (0.1) % 0.3 % Other income, net was $13.0 million in the year ended December 31, 2023, which increased $16.4 million from other expense, net of $3.4 million in the year ended December 31, 2022.
This was primarily attributable to proceeds from the issuance of the 2021 Notes of $1.0 billion and proceeds from the exercise of stock options of $22.7 million, partially offset by stock repurchases of $302.8 million ($180.0 million in conjunction with the issuance of the 2021 Notes and $122.8 million as part of our stock repurchase program), payments of $85.0 million for the 2021 Capped Call Transactions, payment of tax obligations on vested equity awards of $118.2 million, $43.9 million primarily related to the conversion of the 2018 Notes, and payment of debt issuance costs of $13.3 million. 90 Table of C ontents Critical Accounting Estimates and Policies Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
This was primarily attributable to stock repurchases of $425.7 million and payment of tax obligations on vested equity awards of $79.2 million, partially offset by proceeds from the exercise of stock options of $15.0 million. 89 Table of Contents Critical Accounting Estimates and Policies Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
General and administrative Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2022 2021 $ % 2020 $ % (in thousands, except percentages) General and administrative $ 312,260 $ 282,531 $ 29,729 10.5 % $ 156,035 $ 126,496 81.1 % Percentage of total revenue 12.2 % 12.1 % 9.0 % General and administrative expenses increased $29.7 million to $312.3 million in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount and the net impact of the acquisition of Depop and Elo7 which are reflected in the twelve months ended December 31, 2022 and only beginning in July of the prior year period.
General and administrative Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2023 2022 $ % 2021 $ % (in thousands, except percentages) General and administrative $ 343,242 $ 312,260 $ 30,982 9.9 % $ 282,531 $ 29,729 10.5 % Percentage of total revenue 12.5 % 12.2 % 12.1 % General and administrative expenses increased $31.0 million to $343.2 million in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increased employee compensation-related expenses, including stock-based compensation.
Product development Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2022 2021 $ % 2020 $ % (in thousands, except percentages) Product development $ 412,398 $ 271,535 $ 140,863 51.9 % $ 180,080 $ 91,455 50.8 % Percentage of total revenue 16.1 % 11.7 % 10.4 % Product development expenses increased $140.9 million to $412.4 million in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount, the issuance of equity awards as part of our compensation strategy, and the net impact of the acquisition of Depop and Elo7 which are reflected in the twelve months ended December 31, 2022 and only beginning in July of the prior year period.
Product development Year Ended December 31, Change Y/Y Year Ended December 31, Change Y/Y 2023 2022 $ % 2021 $ % (in thousands, except percentages) Product development $ 469,332 $ 412,398 $ 56,934 13.8 % $ 271,535 $ 140,863 51.9 % Percentage of total revenue 17.1 % 16.1 % 11.7 % Product development expenses increased $56.9 million to $469.3 million in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increased employee compensation-related expenses, including stock-based compensation, mainly driven by an increase in average headcount for the Etsy marketplace throughout the year and the issuance of equity awards as part of our compensation strategy, and partially due to restructuring and other exit costs associated with our workforce reductions in the fourth quarter of 2023.
We include stock-based compensation expense in the applicable operating expense category based on the respective equity award recipient’s function. 81 Table of C ontents Marketing: Marketing expenses primarily consist of direct marketing expenses, which largely includes digital marketing and television ad and digital video expenses.
We also include restructuring and other exit costs in the applicable operating expense category of the impacted function. 80 Table of Contents Marketing: Marketing expenses primarily consist of direct marketing expenses, which largely includes digital marketing and television ad and digital video expenses.
Because of these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA margin alongside other financial performance measures, including net (loss) income, revenue, and our other GAAP results. 87 Table of C ontents The following table reflects the reconciliation of net (loss) income to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Net (loss) income $ (694,288) $ 493,507 $ 349,246 Excluding: Interest and other non-operating expense, net 3,212 7,748 34,923 Provision (benefit) for income taxes 32,310 (21,853) 16,463 Depreciation and amortization (1) 96,702 74,267 58,189 Stock-based compensation expense (2) 230,888 139,910 65,114 Foreign exchange loss (gain) 206 (13,670) 6,522 Acquisition-related expenses (3) 2,830 36,704 1,804 Goodwill impairment (4) 1,045,022 — — Loss on extinguishment of debt — — 16,855 Adjusted EBITDA $ 716,882 $ 716,613 $ 549,116 Divided by: Revenue $ 2,566,111 $ 2,329,114 $ 1,725,625 Adjusted EBITDA margin 28 % 31 % 32 % (1) Included in the increase in depreciation and amortization is amortization expense of acquired intangible and developed technology assets related to the acquisitions of Depop and Elo7 which occurred in July 2021.
Because of these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA margin alongside other financial performance measures, including net income (loss), revenue, and our other GAAP results. 86 Table of Contents The following table reflects the reconciliation of net income (loss) to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Net income (loss) $ 307,568 $ (694,288) $ 493,507 Excluding: Interest and other non-operating (income) expense, net (21,957) 3,212 7,748 (Benefit) provision for income taxes (14,748) 32,310 (21,853) Depreciation and amortization 91,323 96,702 74,267 Stock-based compensation expense 284,558 230,888 139,910 Foreign exchange loss (gain) 6,348 206 (13,670) Acquisition, divestiture, and corporate structure-related expenses 3,921 2,830 36,704 Asset impairment charges 68,091 1,045,022 — Loss on sale of business 2,630 — — Restructuring and other exit costs 26,577 — — Adjusted EBITDA $ 754,311 $ 716,882 $ 716,613 Divided by: Revenue $ 2,748,377 $ 2,566,111 $ 2,329,114 Adjusted EBITDA margin 27.4 % 27.9 % 30.8 % Liquidity and Capital Resources Cash and cash equivalents and short-term investments were $1.2 billion as of December 31, 2023.
Additionally, we have the ability to draw down on our $200.0 million senior secured revolving credit facility. In the year ended December 31, 2022, we had positive operating cash flows of $683.6 million. Etsy Marketplace Transaction Fee Increase Effective April 11, 2022, we increased our seller transaction fee from 5% to 6.5%.
Additionally, we have the ability to draw down on our $400.0 million senior secured revolving credit facility. For further details, refer to 2023 Credit Agreement below. In the year ended December 31, 2023, we had positive operating cash flows of $705.5 million.
In the year ended December 31, 2022, sellers generated GMS of $13.3 billion, approximately 67% of which came from purchases made on mobile devices. We are a global company and approximately 44% of our GMS in the year ended December 31, 2022 came from transactions in which either a seller or a buyer was located outside of the United States.
We are a global company and approximately 45% of our GMS in the year ended December 31, 2023 came from transactions in which either a seller or a buyer, or both, were located outside of the United States. Total revenue was $2.7 billion in the year ended December 31, 2023, driven by growth in both Services and Marketplace revenue.
Other Income (Expense), net Other income (expense), net consists of interest expense, interest and other income, foreign exchange (loss) gain, and in 2020, also loss on extinguishment of debt which relates to the partial repurchase of our 2018 Notes in 2020.
Other (Expense) Income, net Other (expense) income, net consists of interest and other income, interest expense, foreign exchange (loss) gain, and, in 2023, also loss on sale of business which relates to the sale of Elo7 in 2023. Interest and other income is primarily comprised of interest income from our investment accounts.
See Part II, Item 8, “Financial Statements and Supplementary Data—Note 6—Goodwill and Intangible Assets” for more information. There was no goodwill impairment expense in the years ended December 31, 2021 and December 31, 2020.
Asset impairment charges were $1.0 billion in the year ended December 31, 2022 related to the impairment of goodwill for Depop and Elo7. See Part II, Item 8, “Financial Statements and Supplementary Data—Note 7—Goodwill and Intangible Assets” and “Note 10—Property and Equipment” for more information. There were no asset impairment charges in the year ended December 31, 2021.
The updates to the discount rates and estimated future cash flows each had a significant impact on the estimated fair values of Depop and Elo7 reporting units compared to our June 30, 2022 analysis. Management believes the revised projections, corresponding risk-adjusted discount rates, and the concluded fair value estimates to be reflective of market participant expectations for the reporting units.
The updates to the discount rates and estimated future cash flows each had a significant impact on the estimated fair values of Depop and Elo7 reporting units compared to our June 30, 2022 analysis, which ultimately resulted in impairments of their goodwill balances in the third quarter of 2022.
Subject to our stock price, we anticipate receiving settlement of amounts due on the 2018 Capped Call Transactions in shares which may reduce the number of shares we elect to repurchase (and associated use of cash) in 2023. 89 Table of C ontents We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months.
We believe that our existing cash and cash equivalents and short- and long-term investments, together with cash generated from operations, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months.
See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial measure calculated in accordance with GAAP. The net loss included goodwill impairment expense of $1.0 billion related to the full impairment of the goodwill of Depop and Elo7.
Additionally, there was a $55.9 million tax benefit related to Elo7. In the year ended December 31, 2023, we recorded non-GAAP Adjusted EBITDA of $754.3 million. See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP.
Additionally, on a consolidated basis we experienced the following (decline)/growth in both new buyer and existing buyer GMS in the periods presented: Year Ended December 31, 2022 2021 2020 % (Decline) Growth Y/Y % of GMS % Growth Y/Y % of GMS % Growth Y/Y % of GMS New Buyer GMS (1) (12) % 12 % 6 % 13 % 105 % 16 % Existing Buyer GMS — % 88 % 36 % 87 % 107 % 84 % (1) While new buyer GMS was down 12% year-over-year in the year ended December 31, 2022, the number of Etsy marketplace new buyers we acquired in the year ended December 31, 2022 remains meaningfully elevated when compared to pre-pandemic levels (years ended December 31, 2019 and prior).
(2) While new buyer GMS was down 7% year-over-year in the year ended December 31, 2023, the number of Etsy marketplace new buyers we acquired in the year ended December 31, 2023 remains meaningfully elevated when compared to pre-pandemic levels (years ended December 31, 2019 and prior).
Historical Cash Flows Year Ended December 31, 2022 2021 2020 (in thousands) Cash provided by (used in): Operating activities $ 683,612 $ 651,551 $ 678,956 Investing activities (30,024) (1,557,969) (11,379) Financing activities (506,484) 452,749 119,282 Net Cash Provided by Operating Activities Our cash flows from operations are largely dependent on the amount of revenue generated on our platforms, as well as associated cost of revenue and other operating expenses.
While these beliefs are based on our current expectations and assumptions, in light of current macroeconomic conditions, our future capital requirements and the adequacy of available funds will depend on many factors, including those described in Part I, Item 1A, “Risk Factors” in this Annual Report. 88 Table of Contents Historical Cash Flows Year Ended December 31, 2023 2022 2021 (in thousands) Cash provided by (used in): Operating activities $ 705,513 $ 683,612 $ 651,551 Investing activities (73,307) (30,024) (1,557,969) Financing activities (656,533) (506,484) 452,749 Net Cash Provided by Operating Activities Our cash flows from operations are largely dependent on the amount of revenue generated on our platforms, as well as associated cost of revenue and other operating expenses.
To determine reporting unit fair value, we use the income approach, which requires management to use significant judgment and estimates, including estimates of future revenue, net available cash flows, the long-term growth rates, and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.
Significant judgments inherent in this analysis include, but are not limited to, estimates of future revenue, operating margins, long-term growth rates, and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.
Our goal is that all four marketplaces benefit from shared expertise in product, marketing, technology, and customer support. The results of Reverb, Elo7, and Depop, acquired on August 15, 2019, July 2, 2021, and July 12, 2021, respectively, are included in all financial and other metrics discussed in this report, unless otherwise noted, from their respective dates of acquisition.
The results of Depop, acquired on July 12, 2021, are included in all financial and other metrics discussed in this report, unless otherwise noted, from the date of acquisition.
When calculating the percent of GMS ex-U.S. domestic, we do not take into account refunds associated with canceled transactions. We believe that GMS ex-U.S. domestic shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.
As noted above in “GMS,” beginning in the first quarter of 2023, GMS ex-U.S. domestic is calculated net of refunds. We believe that GMS ex-U.S. domestic shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.
We earn additional fees on transactions in which currency conversions are performed. Reverb and Depop sellers pay a 5.0% and 10% transaction fee, respectively for each completed transaction, inclusive of shipping fees charged, and a fee for payment processing. Similarly, Elo7 sellers pay a 7% transaction fee for each completed transaction, and a fee for payment processing.
Reverb and Depop sellers pay a 5% and 10% transaction fee, respectively for each completed transaction, inclusive of shipping fees charged, and a fee for payment processing. These marketplaces do not charge listing fees.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThis compares to a revenue decrease of $79.3 million or approximately 3.4% of total revenue for the year ended December 31, 2021 and currency exchange loss of $1.8 million based on the same analysis performed on balance sheet balances as of December 31, 2021. 93 Table of C ontents
Biggest changeThis compares to a revenue decrease of $97.2 million or approximately 3.8% of total revenue for the year ended December 31, 2022 and currency exchange loss of $9.5 million based on the same analysis performed on balance sheet balances as of December 31, 2022. 92 Table of Contents
We have asset and liability balances denominated in currencies other than the functional currency of the subsidiaries in which they are recorded. As a result of transacting business in multiple foreign currencies, primarily the Euro and Pound Sterling, we are subject to the risk of fluctuations in foreign currency exchange rates.
We have asset and liability balances denominated in currencies other than the functional currency of the subsidiaries in which they are recorded. As a result of transacting business in multiple foreign currencies, primarily the Euro, Pound Sterling, and Canadian dollar, we are subject to the risk of fluctuations in foreign currency exchange rates.
Additionally, a 10% adverse change in foreign currency exchange rates would result in a currency exchange loss of $9.5 million based on balance sheet balances as of December 31, 2022.
Additionally, a 10% adverse change in foreign currency exchange rates would result in a currency exchange loss of $11.5 million based on balance sheet balances as of December 31, 2023.
An adverse 10% change in foreign currency exchange rates would have resulted in a decrease to revenue of $97.2 million or approximately 3.8% of total revenue for the year ended December 31, 2022.
An adverse 10% change in foreign currency exchange rates would have resulted in a decrease to revenue of $111.1 million or approximately 4.0% of total revenue for the year ended December 31, 2023.

Other ETSY 10-K year-over-year comparisons