Etsy, Inc.

Hi, everyone, and welcome to Etsy's third quarter 2025 earnings conference call. I'm Deb Wasser, VP Investor Relations, and joining me today for our pre-recording are Josh Silverman, CEO, Krithi Patel-Goyal, President and Chief Growth Officer, and Lani Baker, CFO. In addition to our quarterly results, we have some exciting news to review regarding our leadership transition. Once we are finished with the presentation, we will take questions from our publishing sell-side analysts on video. Please keep in mind that our results today include forward-looking statements related to our financial guidance, our business, our operating results, and our leadership transition, as noted in the slide deck posted to our website for your reference. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties, some of which are described in today's earnings release and our most recent periodic report, and which will be updated in future periodic reports that we file with the SEC. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also during the call, we'll present both GAAP and non-GAAP financial measures, which are reconciled to GAAP financial measures in today's earnings press release or slide deck posted on our IR website, along with the replay of this call. With that, I'll turn it over to Josh.

Thanks, Deb. Before we dive into our third quarter results, I want to acknowledge the news we announced earlier today. After eight and a half years as Etsy's CEO, I've decided that this is the right time for me to hand over the leadership baton to the next generation. Therefore, we'll be transitioning over the next few months and I'll become executive chair while the fabulously talented Kruthi Patel-Goyal takes the reins as our CEO effective January 1st. It's been an incredible privilege to lead Etsy through several chapters of evolution and transformation, from the turnaround of 2017, to managing through the hyperscaling of the pandemic, to steering us back towards growth again in a more app-centric, discovery-centric world. We've adapted and evolved with creativity, agility, urgency, and heart, all while keeping our sellers at the center of everything we do. Now, in our third decade, Etsy is entering a new phase, one focused on harnessing AI to further personalize and transform the shopping experience in ways that were previously unimaginable. It's an exciting moment and perfect timing, I believe, for fresh perspective and a new leader. As you know, following an incredible two-year run as Depop's CEO, reigniting their growth, I asked Kruthi to return to Etsy last year as Chief Growth Officer. Kruthi's been a key part of Etsy's leadership for over 15 years, and she brings deep knowledge of and passion for our mission, marketplace, customers, and community. Since coming back and ramping up, she's already made a significant impact on the business, evolving our strategic priorities, redefining how we measure success and shifting how we work. She's also already taken on leadership of many of our day-to-day operations. So it's natural and an exciting next step for her to become Etsy's next CEO. If I was the right person to lead Etsy's last chapter, Kruthi is the right person to lead our next. Our board of directors has been deeply engaged in our succession planning and wholeheartedly endorses her appointment. I also want to acknowledge Fred Wilson, who's been a part of our growth journey since 2007, first as a board member and then as chair. He's been an absolutely incredible chair, passionate, wise, and highly engaged. I couldn't have asked for a better partner, and we're thrilled that he will remain on our board. On a personal note, serving as Etsy's CEO has been the honor of a lifetime. While I'm incredibly proud of the results and the growth we've delivered as a team, what I'll remember most is the impact we've had on the lives of our sellers and buyers and our role in preserving creativity and human connection in a world increasingly shaped by automation and commoditization. And I'll continue to love hearing, I love Etsy, every time I hear the Etsy brand mentioned. I've always found purpose in leading through transformation, and I'm excited to make room for new growth, both for Etsy and for myself. Thank you for the trust and confidence you've placed in me. I'm confident Kruthi will similarly earn your trust as our next leader. With that, let's turn to our results. We're making steady progress improving our performance in 2025, with our third quarter results exceeding expectations on all three key financial metrics, GMS, revenue, and adjusted EBITDA. I'm pleased to report that GMS for Etsy and Depop combined returned to year-over-year growth, with further sequential improvement expected at the midpoint of our fourth quarter guidance. Etsy Marketplace results improved sequentially as we continue to see that the customer-centric priorities Kruthi has defined are starting to gain traction. GMS improved approximately 300 basis points sequentially to $2.43 billion, down 2.4% year-over-year. In addition to the impact from these initiatives, there were some exogenous factors which also impacted our results, and Etsy once again proved its resiliency. It gives me tremendous comfort that we benefit from such a dynamic and fundamentally sound business model. Depop's third quarter growth accelerated about 400 basis points sequentially, with GMS up 39.4% year-over-year to $292 million. New user growth and improvements to buyer conversion were primarily responsible for 59% year-over-year growth in Depop's US GMS. And while not a meaningful growth driver in the third quarter, Depop launched its largest ever brand campaign, targeted at raising awareness in the U.S. We're really excited that Peter and his team are continuing to build on the foundation that Kruthi built at Depop, which has led to the great momentum the business has seen over the past two years. That said, we're all clear-eyed that there's significantly more work to do. So I'll turn the call over to Kruthi.

Thank you, Josh, and good morning, everyone. Since returning to Etsy earlier this year, I've been reminded at every turn that this company is built on something rare in e-commerce today, creativity, human connection, and purpose. So it's an incredible honor to be named our next CEO. I'm deeply grateful to our board for their confidence in me and to Josh for his leadership, mentorship, and support over so many years. He's led Etsy through extraordinary growth. Our customer base, GMS, revenue, profitability, and market cap are all multiples larger than when he started. But Etsy isn't just bigger. Etsy's better and well-positioned for our next chapter of growth. We'll continue to work closely together through this transition period, and I'm so pleased that Josh will remain a sounding board for our executive team and me as our executive chair. I'll now cover our four strategic priorities, which are working together to deliver tangible value to our customers and support sustainable growth. We're showing up where shoppers find inspiration, matching them with items that feel tailor-made for them, working to deepen loyalty across our community and amplifying what sets us apart, the creativity and authenticity of our sellers. Each priority fuels the next, creating a cycle of discovery, engagement, and connection that truly differentiates Etsy. starting with showing up where shoppers discover. We know today's shopping journey isn't linear. People find inspiration everywhere. To capture this behavior, we're meeting shoppers in more of those moments with content that feels personal and relevant. A great example of how we're capitalizing on the evolving shopper's journey is our partnership with OpenAI, which gives us an early foothold in a fast-growing, high-intent discovery channel and helps to create another seamless path from inspiration to purchase. In September, Etsy became the first live partner for their Instant Checkout feature, allowing users to buy items on Etsy directly through ChatGPT. We now provide a dedicated product feed that enables eligible purchases to be completed seamlessly within the chat experience, processed through Etsy payments. This integration was designed to ensure buyers know it's Etsy. When a customer purchases a product through Etsy and ChatGPT, they'll see the Etsy brand mark, information about the human seller, and an order confirmation from us. Agentic visits represent a small slice of e-commerce traffic today, but they're growing quickly, and early analysis suggests that these buyers come to Etsy with higher purchase intent than those from traditional search. And over time, we believe these types of integrations will drive incremental growth and, importantly, brand consideration for Etsy. Another example of how we're showing up where shoppers discover is our marketing approach this holiday season. As we've told you, we're significantly reallocating our brand marketing spend away from linear TV into upper funnel channels intended to spark engagement and inspiration, such as social video and streaming. You'll see us highlight the many ways people shop, decorate, and celebrate, how they're discovering the trends shaping the moment or honoring the traditions at the heart of the season. Because shopping on Etsy isn't about checking a box. It's about finding something that makes someone feel seen and reminding the world that the most meaningful items come from real people. Of course, once we get shoppers' attention, the experience on Etsy has to deliver. We've made strong progress improving the Etsy app. In Q3, AppGMS outperformed non-AppGMS by 13 percentage points, a meaningful indicator that our work is beginning to pay off. This progress reflects a series of thoughtful improvements, from a redesigned home screen central hub of what's new and relevant, to simpler navigation that helps shoppers reach key features faster, to a completely reimagined discovery feed powered by a new recommendations model designed to anticipate what each shopper might love next. Early results are encouraging. Engagement on our app home screen is up significantly, and app home GMS grew 20% year over year in the third quarter. Advancements in AI and machine learning power much of this work and are central to how we match shoppers with the right items. Over the past few months, we've made meaningful progress in our machine learning capabilities, particularly in two areas that are core to Etsy's differentiation, buyer understanding and item understanding. In buyer understanding, we've developed new models that more deeply interpret our users' interests through a combination of advanced ML and emerging LLM techniques. These models now power our app discovery feed, where they've already driven double-digit increases in engagement metrics and have also demonstrated positive impact in our emails and our web homepage experience. In item understanding, we've strengthened our ability to extract richer insights from listing images, enhancing how we represent and connect inventory. This improvement has delivered measurable conversion gains across search and ads with further opportunities ahead. Rafe and his team's rapid time to market on these initiatives has been excellent, and we're excited to continue testing and iterating. Turning to our most valuable customers, starting with our buyers. We see strong opportunity not only to deepen loyalty with our top buyers, but also to nurture customers with the potential to become them by making shopping on Etsy easier and more rewarding. In the near term, we're piloting targeted offers for our most active buyers and launching the latest beta iteration of the Etsy Insider Loyalty Program, reimagined with our top buyers in mind so they feel rewarded every time they shop, with shipping discounts and 5% back in Etsy credit on every purchase, all while seeking to deliver sustainable economics for Etsy. From my perspective, one of the most important elements to our long-term success will be Etsy's ability to continue to attract creative entrepreneurs and support their ongoing success. Because their creativity and innovation is what makes the Etsy experience like nowhere else. Since becoming Chief Growth Officer, I've been connecting weekly with many different groups of sellers. And it's clear we can better help them spend less time managing and more time creating. We've launched new AI-powered tools to help sellers generate listing titles and draft buyer messages, two of the most time-consuming parts of running an Etsy shop, and improved issue resolution with increased access to live, knowledgeable support. We're pleased to see that our efforts are starting to make an impact. For example, seller satisfaction scores are up more than 10 percentage points from this time last year. Finally, we're amplifying our competitive differentiation, the human connection at the heart of our marketplace. It underpins and is intertwined with each of the other three priorities. And while we see abundant opportunities to weave human touch more deeply into every part of the Etsy experience over time, we've started with simple, high-impact updates that bring sellers and their stories closer to buyers, like adding richer seller information directly onto listing pages. Early test results show that these changes are helping buyers trust listings faster and make purchase decisions with less friction. In closing, thank you to our employees, our community, and to all of you for your confidence and partnership. I'm excited to take the helm come January. While we've been showing continued improved performance, there is so much more we need to do. You'll hear more from me as I continue to evolve our vision and plans for the business. And with that, I'll turn the call over to Lani.