Etsy Inc.
10/29/2025 | Press release | Distributed by Public on 10/29/2025 06:17
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 19, 2025 (the "Annual Report"). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, "Risk Factors." We also believe that our performance and future success depend on a number of factors that present significant opportunities for us, as discussed in Part I, Item 1, "Business," in our Annual Report, which we incorporate by reference.
Overview
Business
Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. These marketplaces share a mission to "Keep Commerce Human," and we're committed to using the power of business and technology to strengthen communities and empower people.
Our primary marketplace, Etsy, is the global destination for unique and creative goods. It connects artisans and entrepreneurs with thoughtful consumers seeking items that reflect their tastes and values. We aim to create a virtuous cycle that benefits all of our stakeholders. Ultimately, our success is tied to our sellers; we make money when they do. In addition to providing them with access to tens of millions of buyers, we offer a range of tools and services that address key business needs. Buyers come to Etsy to be inspired and delighted by items that are crafted and curated by creative entrepreneurs.
In addition to our core Etsy marketplace, we also own Depop Limited ("Depop"), a fashion resale marketplace acquired in 2021. On June 2, 2025, we completed the previously announced sale of Reverb Holdings, Inc. ("Reverb"), our musical instrument marketplace acquired in 2019. Our condensed consolidated financial results and related disclosures for the nine months ended September 30, 2025 include the results of Reverb until June 2, 2025. Our marketplaces operate independently, while benefiting from shared expertise in product development, marketing, technology, and customer support.
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 strategy is focused around:
•Building a sustainable competitive advantage for the Etsy marketplace - our "Right to Win;"
•Growing the Etsy marketplace in our core geographies and globally; and
•Leveraging our expertise, or "playbook," in running two-sided marketplaces across our brands.
Our investments in technology infrastructure, product development, marketing, trust and safety, member support, helping sellers grow, and fostering engaged and impactful teams, support our strategy, which you can read more about in our Annual Report.
Third Quarter 2025 Key Metrics and Financial Highlights
As of September 30, 2025, our marketplaces connected 8.5 million active sellers and 93.2 million active buyers in nearly every country in the world. In the three and nine months ended September 30, 2025, sellers generated GMS of $2.7 billion and $8.3 billion, respectively.
Total revenue was $678.0 million and $2.0 billion in the three and nine months ended September 30, 2025, respectively. In the three and nine months ended September 30, 2025, we recorded net income of $75.5 million and $52.2 million, respectively, and non-GAAP Adjusted EBITDA of $171.9 million and $512.1 million, respectively. See "Non-GAAP Financial Measures" for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP.
Cash and cash equivalents and short-term investments were $1.5 billion as of September 30, 2025. As of September 30, 2025, we had four outstanding series of convertible notes, which collectively had a net carrying value of $3.0 billion. Additionally, we have the ability to draw down on our $400.0 million senior secured revolving credit facility. In the nine months ended September 30, 2025, we had positive operating cash flows of $376.3 million.
Sale of Reverb
On June 2, 2025, we closed the previously announced sale of Reverb. We recognized a net loss on the sale of Reverb of $5.1 million, representing the difference between the fair value of the consideration received of $108.2 million and the carrying amount of Reverb's net assets as of the closing date.
Convertible Debt
In June 2025, we issued $700.0 million aggregate principal amount of 1.00% Convertible Senior Notes due 2030 (the "2025 Notes") in a private placement to qualified institutional buyers. The initial conversion price of the 2025 Notes represented a premium of approximately 42.5% over the closing price of our common stock on June 11, 2025, the date the 2025 Notes offering was priced. The net proceeds from the sale of the 2025 Notes were $689.5 million after deducting the offering expenses. The 2025 Notes will mature on June 15, 2030, unless earlier converted, redeemed, or repurchased.
We repurchased approximately 2.5 million shares of our common stock for approximately $150.0 million concurrently with the issuance of the 2025 Notes. We intend to use the remainder of the net proceeds from the 2025 Notes for general corporate purposes, which may include the repayment or repurchase, at or prior to maturity, of our existing debt securities. For more information on the 2025 Notes, see "Note 10-Debt" in the Notes to Consolidated Financial Statements.
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). We are providing Etsy marketplace information in certain instances where particularly relevant. The financial results of Reverb have been included in our consolidated financial results until June 2, 2025 (the date of sale), except as noted in footnote (3) to the table below. The financial measures and key operating metrics we use are:
|
Three Months Ended September 30, |
% (Decline)
Growth
Y/Y
|
Nine Months Ended September 30, |
% (Decline) Growth Y/Y |
||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| GMS (1) | $ | 2,724,665 | $ | 2,915,256 | (6.5) | % | $ | 8,324,250 | $ | 8,851,010 | (6.0) | % | |||||||||||||||||||||||
| Revenue | $ | 678,026 | $ | 662,410 | 2.4 | % | $ | 2,001,865 | $ | 1,956,170 | 2.3 | % | |||||||||||||||||||||||
|
Revenue take rate (2)
|
24.9 | % | 22.7 | % | 220 | bps | 24.0 | % | 22.1 | % | 190 | bps | |||||||||||||||||||||||
| Marketplace revenue | $ | 468,058 | $ | 476,075 | (1.7) | % | $ | 1,394,722 | $ | 1,413,434 | (1.3) | % | |||||||||||||||||||||||
| Services revenue | $ | 209,968 | $ | 186,335 | 12.7 | % | $ | 607,143 | $ | 542,736 | 11.9 | % | |||||||||||||||||||||||
| Gross profit | $ | 483,381 | $ | 476,770 | 1.4 | % | $ | 1,421,611 | $ | 1,399,307 | 1.6 | % | |||||||||||||||||||||||
| Operating expenses | $ | 400,670 | $ | 389,953 | 2.7 | % | $ | 1,284,798 | $ | 1,174,231 | 9.4 | % | |||||||||||||||||||||||
| Net income | $ | 75,503 | $ | 57,366 | 31.6 | % | $ | 52,247 | $ | 173,375 | (69.9) | % | |||||||||||||||||||||||
| Net income margin | 11.1 | % | 8.7 | % | 240 | bps | 2.6 | % | 8.9 | % | (630) | bps | |||||||||||||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 171,928 | $ | 183,587 | (6.4) | % | $ | 512,050 | $ | 530,897 | (3.6) | % | |||||||||||||||||||||||
| Adjusted EBITDA margin (Non-GAAP) | 25.4 | % | 27.7 | % | (230) | bps | 25.6 | % | 27.1 | % | (150) | bps | |||||||||||||||||||||||
|
Active sellers (3)
|
8,501 | 8,522 | (0.2) | % | 8,501 | 8,522 | (0.2) | % | |||||||||||||||||||||||||||
| Active buyers (3) | 93,161 | 96,707 | (3.7) | % | 93,161 | 96,707 | (3.7) | % | |||||||||||||||||||||||||||
(1)Consolidated GMS for the three and nine months ended September 30, 2025 includes Etsy marketplace GMS of $2,432.6 million and $7,167.7 million, respectively, and Depop marketplace GMS of $292.1 million and $775.2 million, respectively.
(2)Revenue take rate is consolidated revenue divided by consolidated GMS.
(3)Consolidated active sellers and active buyers include Etsy marketplace active sellers and active buyers of 5.5 million and 86.6 million, respectively. Reverb active buyer and seller metrics are reflected in the 2024 periods presented and excluded from the 2025 periods presented following the completion of its sale.
GMS
Gross merchandise sales ("GMS") is the dollar value of items sold in our marketplaces, excluding shipping fees and net of refunds, within the applicable period. GMS does not represent revenue earned by us. GMS is largely driven by transactions in our marketplaces and is not directly impacted by Services activity. However, because our revenue and cost of revenue depend significantly on the dollar value of items sold in our marketplace, we believe that GMS is an indicator of the success of our sellers, the satisfaction of our buyers, and the health and scale of our business. 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.
GMS decreased $190.6 million to $2,724.7 million in the three months ended September 30, 2025 compared to the three months ended September 30, 2024, and GMS decreased $526.8 million to $8,324.3 million in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. GMS decreased for both the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024, reflecting lower Etsy marketplace GMS and the sale of Reverb, with the former having a greater impact on the year-to-date comparison. For both the three and nine months ended September 30, 2025 and 2024, these decreases were partially offset by an increase in GMS for the Depop marketplace. At the start of 2025, Etsy marketplace GMS was impacted by pressure on consumer discretionary product spending, a highly promotional and competitive retail environment, category mix, and changes to Etsy's product development strategy last year which prioritized foundational investments over near-term GMS driving initiatives. While some of these factors persist, we saw momentum in the third quarter attributable in part to improved app performance, effective marketing initiatives, and other areas of investment. Although Etsy marketplace GMS declined year-over-year, quarterly year-over-year comparisons continued to improve sequentially, reflecting early progress from these initiatives. The Etsy marketplace GMS per active buyer on a trailing twelve-month basis declined 1.6% year-over-year to $121, along with a year-over-year decline of 5.0% of active buyers on the Etsy marketplace to 86.6 million.
U.S. buyer GMS is GMS from transactions in which the shipping address entered by the buyer at the time of sale is in the U.S., net of refunds. GMS from transactions in which the shipping address entered by the buyer at the time of sale is not in the U.S, net of refunds is non-U.S. buyer GMS. Percent U.S. buyer GMS for the periods presented below are as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Percent U.S. Buyer GMS (1) | 74 | % | 74 | % | 75 | % | 74 | % | |||||||||||||||
(1)Etsy marketplace percent U.S. Buyer GMS was 74% for the three and nine months ended September 30, 2025 and 2024.
There is considerable uncertainty regarding the evolving tariff landscape, how recent changes to de minimis exemptions may play out, and the impact higher tariffs might have on consumer demand and discretionary wallet share. Any circumstances that reduce consumer demand or hinder our sellers' cross-border trade may adversely affect our business. See Part II, Item 1A, "Risk Factors" for further detail.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents our net income adjusted to exclude: stock-based compensation expense and related payroll taxes; depreciation and amortization; provision for income taxes; interest and other non-operating income, net; foreign exchange (gain) loss; asset impairment charge; acquisition, divestiture, and corporate structure-related expenses; loss on sale of business; restructuring and other exit costs; and retroactive non-income tax expense. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue. See "Non-GAAP Financial Measures" for a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
Active Sellers
An active seller is a seller who has had a charge or sale in the last 12 months. Charges include Marketplace and Services revenue fees, discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Overview-Business." 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, and we continue to exclude certain disqualified sellers. 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.
Active Buyers
An active buyer is a buyer who has made at least one purchase in the last 12 months. A buyer is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple buyer accounts and can count as a distinct active buyer in each of our marketplaces. We generate revenue when buyers order items from sellers, so we view the number of active buyers as a key indicator of our potential for growth in GMS and revenue, the reach of our platforms, consumer awareness of our brands, the engagement and loyalty of buyers, and the health of our business.
Currency-Neutral GMS
We calculate currency-neutral GMS by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.
As reported and currency-neutral GMS decline for the periods presented below are as follows:
| Quarter-to-Date Period Ended | Year-to-Date Period Ended | ||||||||||||||||||||||||||||||||||
| As Reported | Currency-Neutral | FX Impact | As Reported | Currency-Neutral | FX Impact | ||||||||||||||||||||||||||||||
| September 30, 2025 | (6.5) | % | (7.2) | % | 0.7 | % | (6.0) | % | (6.2) | % | 0.2 | % | |||||||||||||||||||||||
| September 30, 2024 | (4.1) | % | (4.4) | % | 0.3 | % | (3.3) | % | (3.5) | % | 0.2 | % | |||||||||||||||||||||||
Results of Operations
Comparison of Three Months Ended September 30, 2025 and 2024
Revenue
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Marketplace | $ | 468,058 | $ | 476,075 | $ | (8,017) | (1.7) | % | |||||||||||||||
| Percentage of total revenue | 69.0 | % | 71.9 | % | |||||||||||||||||||
| Services | $ | 209,968 | $ | 186,335 | $ | 23,633 | 12.7 | % | |||||||||||||||
| Percentage of total revenue | 31.0 | % | 28.1 | % | |||||||||||||||||||
| Total revenue | $ | 678,026 | $ | 662,410 | $ | 15,616 | 2.4 | % | |||||||||||||||
Revenue increased primarily driven by an increase in services revenue, and partially offset by a decrease in marketplace revenue.
Services revenue increased primarily due to a $13.5 million increase in advertising revenue, primarily driven by an increase in average price per click on Etsy Ads.
Marketplace revenue decreased primarily due to a decrease of $19.3 million related to the sale of the Reverb marketplace on June 2, 2025. Additionally, marketplace revenue decreased, to a lesser extent, due to a decrease in transaction fee revenue, which was driven by GMS, which declined for the Etsy marketplace and increased for Depop. These decreases were partially offset by an increase in payments revenue of $5.7 million, largely related to an increase in Depop GMS.
Costs and Operating Expenses
Cost of Revenue
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Cost of revenue | $ | 194,645 | $ | 185,640 | $ | 9,005 | 4.9 | % | |||||||||||||||
| Percentage of total revenue | 28.7 | % | 28.0 | % | |||||||||||||||||||
The increase in cost of revenue was primarily driven by an increase in cost of refunds and cloud-related hosting and bandwidth costs, partially offset by the sale of Reverb on June 2, 2025.
Marketing
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Marketing | $ | 207,841 | $ | 196,526 | $ | 11,315 | 5.8 | % | |||||||||||||||
| Percentage of total revenue | 30.7 | % | 29.7 | % | |||||||||||||||||||
Marketing expenses increased primarily due to an increase in performance marketing, driven by greater investment in search engine marketing and product listing ads. To a lesser extent, marketing expenses increased due to an increase in brand marketing spend, although brand marketing investment decreased for the Etsy marketplace. These net increases were partially offset by the sale of Reverb on June 2, 2025. Paid GMS was 23% of overall GMS for the three months ended September 30, 2025 compared to 21% for the three months ended September 30, 2024.
Product development
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Product development | $ | 113,379 | $ | 107,251 | $ | 6,128 | 5.7 | % | |||||||||||||||
| Percentage of total revenue | 16.7 | % | 16.2 | % | |||||||||||||||||||
Product development expenses increased primarily due to increased employee compensation-related expenses, partially offset by the sale of Reverb on June 2, 2025.
General and administrative
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | 79,450 | $ | 86,176 | $ | (6,726) | (7.8) | % | |||||||||||||||
| Percentage of total revenue | 11.7 | % | 13.0 | % | |||||||||||||||||||
General and administrative expenses decreased, primarily due to the sale of Reverb on June 2, 2025 and due to net unfavorable non-income tax items in the prior year which did not reoccur in the current year.
As part of ongoing trade negotiations between Canada and the United States, the Canadian government may formally repeal its digital services tax ("DST") legislation, which, if rescinded, would result in the reversal of DST expense recorded in prior periods.
Other Income (Expense), net
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Other income (expense), net: | |||||||||||||||||||||||
| Interest expense | $ | (5,685) | $ | (3,442) | $ | (2,243) | 65.2 | % | |||||||||||||||
| Interest and other income | 14,282 | 7,250 | 7,032 | 97.0 | % | ||||||||||||||||||
| Foreign exchange gain (loss) | 777 | (16,815) | 17,592 | (104.6) | % | ||||||||||||||||||
| Other income (expense), net | $ | 9,374 | $ | (13,007) | $ | 22,381 | (172.1) | % | |||||||||||||||
| Percentage of total revenue | 1.4 | % | (2.0) | % | |||||||||||||||||||
Other income, net increased from other expense, net, primarily driven by changes in exchange rates that impact our non-functional currency cash and intercompany balances, which resulted in a gain for the three months ended September 30, 2025 as compared to a loss for the three months ended September 30, 2024.
Provision for Income Taxes
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Provision for income taxes | $ | (16,582) | $ | (16,444) | $ | (138) | 0.8 | % | |||||||||||||||
| Percentage of total revenue | (2.4) | % | (2.5) | % | |||||||||||||||||||
The primary drivers of our income tax provision for the three months ended September 30, 2025 were tax expense on income before income taxes, partially offset by tax benefits from stock-based compensation due to a higher stock price upon exercise of stock options compared to the stock price upon grant.
The primary drivers of our income tax provision for the three months ended September 30, 2024 were tax expense on income before income taxes, tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant, and state and local income taxes.
Comparison of Nine Months Ended September 30, 2025 and 2024
Revenue
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Marketplace | $ | 1,394,722 | $ | 1,413,434 | $ | (18,712) | (1.3) | % | |||||||||||||||
| Percentage of total revenue | 69.7 | % | 72.3 | % | |||||||||||||||||||
| Services | $ | 607,143 | $ | 542,736 | $ | 64,407 | 11.9 | % | |||||||||||||||
| Percentage of total revenue | 30.3 | % | 27.7 | % | |||||||||||||||||||
| Total revenue | $ | 2,001,865 | $ | 1,956,170 | $ | 45,695 | 2.3 | % | |||||||||||||||
Revenue increased primarily driven by an increase in services revenue, and partially offset by a decrease in marketplace revenue.
Services revenue increased primarily due to a $42.9 million increase in advertising revenue, primarily driven by an increase in average price per click on Etsy Ads.
Marketplace revenue decreased primarily due to a $26.5 million decrease related to the sale of the Reverb marketplace on June 2, 2025 and additionally, a decrease of $26.0 million in transaction fee revenue, which was driven by a decline in Etsy marketplace GMS and an increase in Depop GMS. These decreases were partially offset by an increase in payments revenue of $17.0 million, primarily related to an increase in Depop GMS, and a $15.0 million increase in Etsy marketplace seller set-up fee revenue.
Costs and Operating Expenses
Cost of Revenue
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Cost of revenue | $ | 580,254 | $ | 556,863 | $ | 23,391 | 4.2 | % | |||||||||||||||
| Percentage of total revenue | 29.0 | % | 28.5 | % | |||||||||||||||||||
The increase in cost of revenue was driven by an increase in cloud-related hosting and bandwidth costs and, to a lesser extent, cost of refunds and Etsy Insider loyalty program costs, which launched in beta form in the third quarter of 2024. These increases are partially offset by the sale of Reverb on June 2, 2025 and a net decrease in payments processing fees driven by a net GMS decrease and cost optimization efforts.
Marketing
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Marketing | $ | 608,955 | $ | 571,400 | $ | 37,555 | 6.6 | % | |||||||||||||||
| Percentage of total revenue | 30.4 | % | 29.2 | % | |||||||||||||||||||
Marketing expenses increased primarily due to an increase in performance marketing, driven by greater investment in search engine marketing, product listing ads, and paid social. This increase was partially offset by a decrease in brand marketing spend, although brand marketing investment increased at Depop. The sale of Reverb on June 2, 2025 also reduced marketing expenses. Paid GMS was 23% of overall GMS for the nine months ended September 30, 2025 compared to 21% for the nine months ended September 30, 2024.
Product development
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Product development | $ | 335,750 | $ | 331,590 | $ | 4,160 | 1.3 | % | |||||||||||||||
| Percentage of total revenue | 16.8 | % | 17.0 | % | |||||||||||||||||||
Product development expenses increased, primarily due to increased employee compensation-related expenses. This increase was partially offset by the sale of Reverb on June 2, 2025 and, to a lesser extent, an increase in the amount of employee-related costs capitalized as a result of several larger projects.
General and administrative
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | 238,390 | $ | 271,241 | $ | (32,851) | (12.1) | % | |||||||||||||||
| Percentage of total revenue | 11.9 | % | 13.9 | % | |||||||||||||||||||
General and administrative expenses decreased, primarily due to net favorable non-income tax items as well as retroactive non-income tax expense related to the DST legislation in Canada, which was enacted on June 28, 2024 retroactive to January 1, 2022 and recorded in the second quarter of 2024. Additionally, general and administrative expenses decreased due to a decrease in stock-based compensation, including lower performance-based restricted stock units, and the sale of Reverb on June 2, 2025.
Asset impairment charges
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Asset impairment charge | $ | 101,703 | $ | - | $ | 101,703 | NM | ||||||||||||||||
| Percentage of total revenue | 5.1 | % | - | % | |||||||||||||||||||
Asset impairment charges were $101.7 million in the nine months ended September 30, 2025, related to the impairment of the goodwill of Reverb. See Part I, Item 1, "Note 6-Goodwill" for more information.
Other (Expense) Income, net
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Other (expense) income, net: | |||||||||||||||||||||||
| Interest expense | $ | (12,862) | $ | (10,384) | $ | (2,478) | 23.9 | % | |||||||||||||||
| Interest and other income | 31,619 | 23,449 | 8,170 | 34.8 | % | ||||||||||||||||||
| Foreign exchange loss | (40,561) | (5,699) | (34,862) | 611.7 | % | ||||||||||||||||||
|
Loss on sale of business
|
(5,097) | - | (5,097) | NM | |||||||||||||||||||
| Other (expense) income, net | $ | (26,901) | $ | 7,366 | $ | (34,267) | (465.2) | % | |||||||||||||||
| Percentage of total revenue | (1.3) | % | 0.4 | % | |||||||||||||||||||
Other expense, net decreased from other income, net, primarily driven by changes in exchange rates that impact our non-functional currency cash and intercompany balances, which resulted in a larger loss for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.
Provision for Income Taxes
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Provision for income taxes | $ | (57,665) | $ | (59,067) | $ | 1,402 | (2.4) | % | |||||||||||||||
| Percentage of total revenue | (2.9) | % | (3.0) | % | |||||||||||||||||||
The primary drivers of our income tax provision for the nine months ended September 30, 2025 were tax expense on income before income taxes excluding the impairment charge and tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant.
The primary drivers of our income tax provision for the nine months ended September 30, 2024 were tax expense on income before income taxes, tax deficiencies from stock-based compensation due to a lower stock price at vesting of restricted stock units compared to the stock price upon grant, and state and local income taxes.
Non-GAAP Financial Measures
The following table reflects the reconciliation of net income to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for each of the periods indicated:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income | $ | 75,503 | $ | 57,366 | $ | 52,247 | $ | 173,375 | |||||||||||||||
| Excluding: | |||||||||||||||||||||||
| Stock-based compensation expense and related payroll taxes (1) | 62,172 | 69,292 | 186,719 | 214,692 | |||||||||||||||||||
| Depreciation and amortization | 24,263 | 27,739 | 76,951 | 81,672 | |||||||||||||||||||
| Provision for income taxes | 16,582 | 16,444 | 57,665 | 59,067 | |||||||||||||||||||
| Interest and other non-operating income, net | (7,680) | (3,808) | (17,521) | (13,065) | |||||||||||||||||||
| Foreign exchange (gain) loss | (777) | 16,815 | 40,561 | 5,699 | |||||||||||||||||||
| Asset impairment charge | - | - | 101,703 | - | |||||||||||||||||||
| Acquisition, divestiture, and corporate structure-related expenses | (18) | (697) | 7,148 | 1,435 | |||||||||||||||||||
| Loss on sale of business | - | - | 5,097 | - | |||||||||||||||||||
| Restructuring and other exit costs | 1,883 | 1,556 | 1,480 | 1,898 | |||||||||||||||||||
| Retroactive non-income tax expense (2) | - | (1,120) | - | 6,124 | |||||||||||||||||||
| Adjusted EBITDA | $ | 171,928 | $ | 183,587 | $ | 512,050 | $ | 530,897 | |||||||||||||||
| Divided by: | |||||||||||||||||||||||
| Revenue | $ | 678,026 | $ | 662,410 | $ | 2,001,865 | $ | 1,956,170 | |||||||||||||||
| Adjusted EBITDA margin | 25.4 | % | 27.7 | % | 25.6 | % | 27.1 | % | |||||||||||||||
(1)Beginning in the first quarter of 2025, we are excluding payroll tax expense related to stock-based compensation from Adjusted EBITDA because these taxes are directly related to stock-based compensation expense which is excluded from Adjusted EBITDA. Additionally, these taxes fluctuate with settlements and exercises of stock-based compensation awards, our stock price, and other factors that are beyond our control, and therefore we believe they are not reflective of our ongoing business operations or the underlying trends in our business. Management does not consider these taxes when evaluating the performance of our business or making operating plans. We believe excluding this expense from Adjusted EBITDA provides investors with a better understanding of the performance of our core business and serves as a tool for investors to use in comparing our core business operating results over multiple periods with other companies in our industry. We did not retrospectively apply this change to prior periods as the impact was immaterial to such periods. In the three and nine months ended September 30, 2024, payroll tax expense related to stock-based compensation was $0.7 million and $4.8 million, respectively.
(2)Retroactive non-income tax expense related to the DST legislation in Canada, which was enacted on June 28, 2024 retroactive to January 1, 2022.
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments were $1.5 billion as of September 30, 2025. Additionally, we have $108.3 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. As of September 30, 2025, we had net working capital of $1.2 billion and in the nine months ended September 30, 2025, we had positive operating cash flows of $376.3 million. We believe that this capital structure, as well as the nature and framework of our business, will allow us to meet all debt covenants, sustain our business operations, and be able to react to changing macroeconomic conditions.
As of September 30, 2025, a majority of our cash and cash equivalents, short-term, and long-term investments balance was held in the United States. Our cash and cash equivalents are held for future investments, working capital funding, and general corporate purposes. 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, which are intended to allow us to preserve our principal, maintain the ability to meet our liquidity needs, deliver positive yields across a balanced portfolio, and continue to provide us with direct fiduciary control. 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.
Sources of Liquidity
We have the ability to draw down on a $400.0 million senior secured revolving credit facility (the "2023 Credit Agreement"). See Part I, Item 1, "Note 10-Debt" for more information on the 2023 Credit Agreement.
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. While this belief is 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 II, Item 1A, "Risk Factors" in this Quarterly Report.
Historical Cash Flows
|
Nine Months Ended September 30, |
|||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Cash provided by (used in): | |||||||||||
| Operating activities | $ | 376,290 | $ | 437,510 | |||||||
| Investing activities | 31,529 | (36,759) | |||||||||
| Financing activities | (4,582) | (504,793) | |||||||||
Net Cash Provided by Operating Activities
Our cash flows from operations are largely dependent on revenue generation and net income, as well as working capital movements and non-cash items. Non-cash working capital at any specific point in time is subject to many variables, including variability in the timing of cash receipts and payments (including payment of taxes), and vendor payment terms. The decrease in the nine months ended September 30, 2025 of $61.2 million, compared to the same period in 2024, was primarily due to a $74.0 million decrease in the change in working capital less cash, partially offset by an increase of $12.8 million in net income, excluding non-cash items.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by (used in) investing activities results from purchases and maturities of investments and capital expenditures, including investments in website and app development and purchases of property and equipment to support our business initiatives, and any proceeds from sale of business. The increase in the nine months ended September 30, 2025 of $68.3 million, compared to the same period in 2024, was primarily due to the proceeds from sale of Reverb, net of cash, offset in part by net purchases of investments.
Net Cash Used in Financing Activities
Net cash used in financing activities primarily consists of cash inflows from the issuance of convertible notes and cash outflows from stock repurchases and payment of tax obligations on vested equity awards. The increase in the nine months ended September 30, 2025 of $500.2 million, compared to the same period in 2024, was primarily due to the issuance of the 2025 Notes offset in part by an increase in stock repurchases and payment of tax obligations on vested equity awards.
Contractual Obligations
In June 2025, we issued the 2025 Notes, see Part I, Item 1, "Note 10-Debt" for more information. As of September 30, 2025, there were no other material changes in commitments under contractual obligations, compared to the contractual obligations disclosed in our Annual Report.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed 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. We believe we have used reasonable estimates and assumptions in preparing the condensed consolidated financial statements. Our actual results could differ from these estimates.
There have been no significant changes to our critical accounting policies and estimates included in our Annual Report.
Recent Accounting Pronouncements
See Part I, Item 1, "Note 1-Basis of Presentation and Summary of Significant Accounting Policies" for information regarding recently adopted and recently issued accounting pronouncements.
Etsy Inc. published this content on October 29, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 29, 2025 at 12:17 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]