Q1 2018 Financial Results May 8, 2018 Forward-looking Statements - - PowerPoint PPT Presentation

Q1 2018 Financial Results

May 8, 2018

This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward- looking statements include statements related to our business strategy, market size, financial guidance and key drivers thereof, the impact of our focus areas and key initiatives, our product launch roadmap and potential future

• growth. Forward-looking statements include all statements that are not historical facts. In some cases, forward-

looking statements can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “may,” “plans,” “will,” “intends,” or similar expressions and the negatives of those words. Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include: (1) our history of operating losses; (2) the fluctuation of our quarterly operating results; (3) our ability to implement our business strategy; (4) our ability to attract and retain an active and engaged community of Etsy sellers and Etsy buyers; (5) macroeconomic events that are outside of our control; (6) our ability to recruit and retain employees; (7) the importance to our success of the trustworthiness of our marketplace and the connections within our community; (8) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of Etsy sellers and Etsy buyers; (9) the effectiveness of our marketing efforts; (10) the effectiveness of our mobile solutions for Etsy sellers and Etsy buyers; (11) our ability to expand our business in our core geographic markets; (12) regulation in the area of privacy and protection of user data; (13) our dependence on third-party payment providers; and (14) the potential misuse

• r disclosure of sensitive information about our members and the potential for cyber-attacks. These risks and

uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, and subsequent reports that we file. Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

Forward-looking Statements

This presentation is a high-level summary of our Q1 2018 financial results. For more information please refer to our press release dated May 8, 2018 and filings with the SEC

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Q1 Key Accomplishments and Highlights

Accelerated GMS and Revenue Growth with stable margins Improved buyer experience driving conversion rate gains Created efficiencies from key foundational investments Executed a $345 Million Convertible Debt Offering Repurchased approximately $70 Million of Etsy shares Raised 2018 guidance for GMS, Revenue and Adjusted EBITDA Margin 1 2 3 4 5 6

GMS


$861M

+19.8% Y/Y

+17.6% Y/Y (FX adj.)

Revenue


$121M

+24.8% Y/Y

Net Income


$13M

$0.10 EPS1

Adjusted EBITDA*


$26M

21.9% margin

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Our Strategy Continues to Yield Strong Financial Results

*Reconciliation of non-GAAP financial measures is contained in the Appendix. **Revised to reflect the correction of an immaterial error

GMS Growth Revenue Growth

• Adj. EBITDA Margin*

1Q17 2Q17 3Q17 4Q17 1Q18

24.8% 23.6% 21.5% 19.1% 18.4%

1Q17 2Q17 3Q17 4Q17 1Q18

21.9% 25.6% 21.4% 12.5% 10.0%

1Q17 2Q17** 3Q17 4Q17 1Q18 FX-Neutral GMS As-Reported GMS

19.8% 17.8% 13.2% 11.8% 14.2%

FX-Neutral GMS 17.6%

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Etsy’s Virtuous Marketing Cycle

Improved experience Leads to a higher conversion rate for new and repeat buyers Leads to a higher LTV Higher LTV enables more marketing spend

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2018 Balanced Portfolio of Investments

Foundational Longer Term Immediate

~20% ~60% ~20%

Focused on foundational investments, incremental growth initiatives and longer term projects

Examples:

• Help Center
• Google Cloud
• Technical Debt

Examples:

• Discovery
• Machine Learning
• Engagement

Examples:

• Search & Discovery
• Trust & Reliability
• Marketing Capabilities
• Seller Tools and Services

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Foundational Investments Support our Product Roadmap

• Focus on improved operational efficiency and use of resources
• Enhanced experience for buyers and sellers
• Faster processing speed and page load times
• More nimble capacity utilization
• More agile development infrastructure to maintain velocity
• Streamlined code base to improve page load times
• Data and privacy transparency, accountability and security

for our community

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Delivering on our Four Key Initiatives

We estimate product enhancements launched in Q1 will generate over $75M in annualized GMS

Trust & Reliability Search & Discovery Marketing Capabilities Seller Tools & Services

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Search & Discovery: Helps Buyers Find “Special” Context Specific Ranking

Promoted Listings for a “wedding dress” search without CSR Promoted Listings for a “wedding dress” search with CSR

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Trust & Reliability: Relieves Friction in the Buying Process

Scarcity Badges

New Structured Return Policy Free Shipping Filters Scarcity Signals Guest Checkout

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Marketing Capabilities: Unique Inventory “Made With Love”

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Seller Tools & Services: Enable our Sellers to Drive Growth Targeted Offers Custom Orders

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Q1 Results Highlight Improvements in the Product Experience

GMS Growth (y/y)

Consecutive quarters of accelerated growth

Revenue Growth (y/y)

Consecutive quarters of accelerated growth

*Reconciliation of non-GAAP financial measures is contained in the Appendix. **Revised to reflect the correction of an immaterial error

• Adj. EBITDA Margin*

Solid Adjusted EBITDA margin

Focused on initiatives that we believe have the highest probability of driving growth

1Q17 2Q17** 3Q17 4Q17 1Q18 FX-Neutral GMS As-Reported GMS

19.8% 17.8% 13.2% 11.8% 14.2%

1Q17 2Q17 3Q17 4Q17 1Q18

24.8% 23.6% 21.5% 19.1% 18.4%

1Q17 2Q17 3Q17 4Q17 1Q18

21.9% 25.6% 21.4% 12.5% 10.0%

FX-Neutral GMS 17.6%

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New Revenue Categories: Marketplace & Services 27% 73%

Marketplace Services Marketplace Revenue (Required)

• Listing Fee
• $0.20 listing fee per item
• Transaction Fee
• 3.5% transaction fee on

goods sold

• Etsy Payments
• 3-4% + a flat fee charged

in local currency

• 2.5% - 5% fee for foreign

currency transactions

Services Revenue (optional)

• Promoted Listings
• Etsy Shipping Labels
• Pattern by Etsy

$88M, up 24.7% $33M, up 35.0%

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1Q18 1Q17 (in thousands) Revenue $120,912 $96,891 Cost of revenue 41,295 34,659 Gross profit 79,617 62,232 Marketing 26,194 23,454 Product development 20,721 18,116 General and administrative 18,904 22,763 Operating expenses 65,819 64,333 Income (loss) from operations 13,798

• 2,101

Other (expense) income, net (817) 628 Net income (loss) $12,967 ($421) Net income (loss) per share — diluted $0.10 $0.00

Condensed Consolidated Statement of Operations

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Convertible Debt Transaction

Launch Date: March 8, 2018 Issue: Convertible Senior Notes due 2023 Offering Size: $300 million Greenshoe: $45 million Ranking: Senior unsecured Maturity: 5 years Coupon: 0% Conversion Premium: 37.5% Concurrent Stock Repurchase: $42 million, 1.6 million shares Use of Proceeds: Capped call transactions, general corporate purposes

Leveraging the strength of our balance sheet for long-term growth investments

Full Year 2018 Guidance

* Reconciliation of non-GAAP financial measures is contained in the Appendix. ** Based on the mid-point of 2018 revenue guidance 1 Original guidance issued on 2/27/2018 and revised guidance issued on 5/8/2018

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2018 Original Guidance1 2018 Revised Guidance1 GMS Growth 14 - 16% 16 - 18% ~$3.7B - $3.8B ~$3.8B - $3.84B Revenue Growth 21 - 23% 22 - 24% ~$534M - $543M ~$538M - $547M Adjusted EBITDA Margin* 20 - 22% 21 - 23% ~$108M - $118M** ~$114M - $125M**

Appendix

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1Q18 4Q17 (in thousands) Cash and cash equivalents $533,855 $315,442 Short-term investments 67,526 25,108 Property and equipment, net 116,385 117,617 Accounts receivable, net 31,292 33,677 Other assets 121,107 113,739 Total assets $870,165 $605,583 Accounts payable $8,094 $13,622 Facility financing obligation 60,041 60,049 Long-term debt, net 265,415

• Other liabilities

152,128 135,018 Total liabilities 485,678 208,689 Total stockholders’ equity 384,487 396,894 Total liabilities and stockholders’ equity $870,165 $605,583

Condensed Consolidated Balance Sheets

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1Q18 1Q17 (in thousands) Net income (loss) $12,967 ($421) Excluding: Interest and other non-operating expense, net 2,667 2,152 Provision (benefit) for income taxes 14 (1,052) Depreciation and amortization 6,320 6,938 Stock-based compensation expense 5,740 4,043 Stock-based compensation expense-acquisitions 714 842 Foreign exchange gain (1,850) (2,780) Restructuring and other exit costs (income) (151) — Adjusted EBITDA $26,421 $9,722

Etsy is not able, at this time, to provide GAAP targets for net income margin for 2018 because of the unreasonable effort of estimating certain non-cash items that are excluded from non-GAAP Adjusted EBITDA margin, including, for example, provision or benefit for income taxes and foreign exchange gain or loss, the effect of which may be significant.

Reconciliation of Quarterly Net Income (Loss) to Adj. EBITDA