Etsy, Inc. (ETSY) Earnings Call Transcript & Summary

Great. Thanks, everybody. I'm Doug Anmuth, Internet analyst at JPMorgan. It's our pleasure to have with us today Etsy CEO, Josh Silverman; and CFO, Rachel Glaser. So Etsy is a 2-sided online marketplace connecting millions of passionate and creative buyers and sellers. The platform enables sellers to access millions of buyers and a range of tools and services to help them scale and generate revenue for buyers. Etsy serves as a place of inspiration and focuses on attracting customers to acquire meaningful items for special purchase occasions throughout the year. So prior to joining Etsy, Josh served as President of Consumer Products and Services at American Express. He was CEO of Skype and CEO of shopping.com. He also cofounded eBay and sits on the Board of Directors for Shake Shack. Before Etsy, Rachel served as CFO at Leaf Group and at Move, Inc, and prior to that at Yahoo! and Disney. So welcome, Josh and Rachel.

Thank you. It's great to be here.

Thanks for having us. And before we jump in, I just want to direct everybody to the safe harbor on -- which can be found on Etsy's Investor Relations website.

Thank you for that. And I will direct everyone, If they would like to ask a question to type it and use the blue Ask a Question feature, and I'll try to work that into the discussion as well.

All right. So let's kick it off. So I think most people certainly are aware of Etsy by now. But maybe for some of those who are a bit newer to the story, if you can give us an overview of the business and just how you think you're positioned competitively within the e-commerce space.

Great, happy to. And actually, Doug, you had a really nice introduction that I think did a good job actually of setting the stage for what Etsy is. But Etsy's mission is keeping commerce human. Our core marketplace is the Etsy Marketplace. We also own Reverb, which is very similar in many ways. But Etsy is about connecting people who make things with people who want to buy directly from the maker. So right now, we've got about 5 million sellers. These are people who make things with their own two hands or who design things and work directly with a production partner to have that made just for you or vintage items, things that are 20 years old or older. There's right now over 100 million unique items for sale on Etsy. So if you can imagine it, it is probably for sale on Etsy. And we connect to those sellers with over 60 million buyers who are looking to buy something that's different, that's unique, that special. Our top core categories, again, in our core marketplace, the Etsy Marketplace, are big categories like home furnishings, clothing, jewelry and accessories, paper and party supplies, art. If it's something that can be made by hand, it is almost certainly going to be made and for sale at Etsy. And in a world, to your question of how are we positioned, I think we are all buying more and more things that are produced quickly and cheaply that arrive at your house very fast. You use them, and 2 seconds later, they're in a landfill and you've forgotten about them. And more and more, I think people are yearning to maybe buy fewer things, but have those things mean more. They're yearning more and more for a sense of connection and a sense of community. And so the more that the world aggregates around a few big mass producers, the more I think people are going to yearn for an alternative to that mass production, and I think no one is better positioned than Etsy to be that alternative.

Got it. Okay. That's a great overview. If you could just help us unpack how you think about the overall market opportunity here, the TAM across Etsy and Reverb, and then just how the pandemic kind of changed that global market opportunity, just given macro trends and just overall shift and, of course, greater penetration in online commerce overall.

Yes. Before the pandemic, I know this is one of the questions we get most commonly from investors, and they always want us to come with a nice small number that shows that we are meaningfully penetrated versus the TAM, and it's difficult. So we -- in 2018, we laid out a vision of our TAM that said here's our top 6 categories: home furnishings, clothing, jewelry and apparel, paper and party supplies, art and craft supplies. And let's pretend we're only in those 6 categories, and that's not true. We're in many, many more. But let's pretend we're only in those 6 categories. Then let's pretend that there's a difference between the online and the offline world, and that's patently not true. But let's make that -- let's pretend . And then let's pretend that Etsy is only in 6 countries around the world, and that's also not true. We have buyers and sellers in almost every country around the world. And by -- with those leaps of faith, we managed to get the TAM down to only a few hundred billion dollars. Now the pandemic showed that those were all fictions. Of course, Etsy is in more than those 6 categories. Things like pet supplies exploded on Etsy, gardening exploded on Etsy. All manner of things that you could imagine or need, all of a sudden masks, fabric face masks, almost $800 million worth of face masks sold last year alone. So it turns out almost anything that you can imagine could be bought on Etsy. Things you can't buy an Etsy, consumer electronics. It's hard to imagine how those are made by hand. So with rare exceptions, consumer electronics, you can't buy on Etsy. It's easier to start with Amazon and carve out the categories that we aren't in. The other fiction was that there is somehow a difference between offline and online purchasing. I don't believe that's true. Consumer behavior says people need to go buy a piece of jewelry to give to a friend as a gift, and they're either going to go to the mall and buy it at Zales or they're going to come to Etsy or some other online place. And for consumers, they don't think online/offline. They just think what is this purchase occasion. And then, of course, Etsy has buyers and sellers all over the world. And we saw through the pandemic that we saw very strong growth in the United States, but we saw very strong growth across many, many markets outside the United States as well. So we believe that our TAM starts with a T, not a B. And while it's a little hard to quantify it, maybe an analogy that I would put out there is Airbnb, a company that I think gets a lot of attention right now. And they define their TAM as all of the hotel and hospitality space. The difference is, if I'm on a business trip and I just want to go someplace where it's going to be really reliable and really I know what I'm getting, and it's not sexy, but it just -- I need a business trip and I'm in and out, I'm going to go to the local Hilton. But if I want something that's more interesting, more special, more unique, I'm going to go to an Airbnb. So I think that metaphor is very similar to how one might think about Etsy. Almost anything you want, you could buy a version of it on Amazon or you could buy a version of it on Etsy. We think Etsy is -- allows for more self-expression, a lot more creativity. And we think that it's a very viable alternative to Amazon and many other places much of the time.

Okay. That's great. So maybe we can talk about the international strategy. Just which markets, which geographies you're focused on today and how you think about that going forward?

So we have 6 core geographies: the United States, France, Germany, the United Kingdom, Canada and Australia. We've actually recently added one more, which is India, where -- and let me talk about what we mean by a core market and a noncore market. And again, as I mentioned, we have Etsy buyers and sellers in almost every country around the world. But getting a two-sided marketplace to scale is lightning in a bottle. It almost never happens. The chicken and egg problem is really hard to solve, right? Sellers come, but there's no buyer, so they leave. Buyers come, but there's nothing for sale, so the buyers leave. And getting past that, well, it sounds obvious, almost every marketplace that tries to -- that raises funding and launches fails to solve that problem. So the way that Etsy can solve that problem is on day 1 in France, sellers can come and sell to the whole world. And in the early days, that was almost exclusively to U.S. buyers where Etsy had a much larger buyer base. So for $0.20, you can set up a shop and sell to the United States. Buyers come and they can import products, again, in the early days, largely from the United States. But you can have a satisfying export/import experience where -- and that's occurring in many countries all around the world. In order for Etsy to really get to scale and become a more every day and really mainstream destination, though, it's important that buyers and sellers feel like we're a local destination, that French people feel like we're French, the British people feel like Etsy is British. And so what we do is we build scale on supply and we build scale on demand through export and import. And then, we start to point supply and demand towards each other once we have enough vibrancy. So an example of that, in both the United Kingdom and in Germany now, more than 50% of purchases are domestic, meaning both the buyer and the seller are located in the same country. In the U.K., that's now well over 50%. And once that happens, we can really start to pour on the gas and invest more and more because our TAM in that country is much bigger when you're no longer a sort of exotic import/export destination. So what we're doing is we're focusing our investment dollars in a few regions where we get the flywheel spinning. Once we get the flywheel spinning, we can then expand and invest in more and more countries.

I think, if I can just add a couple of things, when we talk about investment dollars, we're very centralized. So from one central place, primarily Brooklyn, but some involvement from our West Coast team as well. We're doing all of the localization and translation efforts for the world. So we don't have a lot of boots on the ground in each of those markets that are doing the customization of the product itself. And then, the other resource that we can really turn on when the flywheel gets going are marketing dollars, which we've started to do more and more, both in the U.K. and Germany to great success. So for instance, in the fourth quarter, we started to run what we call upper funnel or above-the-line marketing in those markets. And in the U.K., we saw that we are now a top 10 site in that market. We jumped from something that was not top 10 all the way to, I think, top 5 even in the U.K. as far as brand awareness. So the timing of it was perfect because the product had become much more localized and specific to the buyers and sellers in that market.

Got it. Okay. Great. So just as we think about reopening and kind of moving and hopefully out of this COVID error and mobility restrictions easing, just how do we think about the impact on your business just in terms of the broader reopening? And what happens with consumers as they potentially shift wallet share, some from e-commerce into some other areas, whether it's dining or entertainment or travel, things that they haven't really been able to do that much over the past year?

So first, if we look back at the past year, it has been extraordinary. If you look at e-commerce overall, e-commerce grew at 40% last year. That's astonishing. I never would have imagined saying e-commerce grew at 40%. Etsy grew at 100%. So Etsy grew 2.5x the rate of e-commerce. And part of what happened over the past year is we pulled a bunch of people into e-commerce who still shopped offline. And many of us are so digitally native that we can lose sight of the fact that there's large numbers of people in the U.S. and the U.K. and other mature markets who still shop exclusively or almost exclusively offline, who almost never shop online. And so the pandemic required those people to shop online. And I think a lot of them had a very good experience and will continue to shop online. However, when retail reopens, I won't be surprised to see some of those people start to shop offline again at the mall. The other thing that happened was, you had very limited places you could spend your dollars. You can't travel, you can't dine out. So disproportionately, share of wallet has been going into retail. And because you can't shop offline, when I say retail, I really mean e-tail. So there have been some really big tailwinds for e-tail, all of e-tail, and Etsy has no doubt benefited from that. If I look forward over the next 6 and 12 months, I don't know what's going to happen. And anyone who claims to know, good for them in terms of what's going to happen to wallet spend, when you can travel, when you can dine out. I would expect that we're going to compete for dollars, and that will be a headwind for all of e-commerce. I would expect that when the malls are thriving again, that will be a bit of a headwind for e-commerce. So all of e-commerce will face headwinds. And Etsy, as part of e-commerce, will face those as well. But when I look forward over a 3-year, over 4-year, over a multiyear timeframe, has the pandemic accelerated e-commerce growth? Absolutely, it has. Do I believe that, that acceleration is sustainable and lasting? Absolutely, I do. Etsy gained a tremendous amount of market share versus e-commerce in 2020. And said differently, there are millions of buyers who came to Etsy, had great experiences, really liked it, and had great experiences across many, many different product categories. Do I think that, that is going to have sustainable momentum for Etsy for many years in the future? Absolutely, I do. So over the medium term, I think this has dramatically accelerated Etsy's growth and scale. And one of the really exciting things about a 2-sided marketplace, they're incredibly hard to get off the ground. But once you've got that, they get better as they get bigger. Etsy is now 3x bigger than it was before the pandemic. Our guidance in the midpoint says we'll do $3 billion of gross merchandise sales in the second quarter. We did $1 billion of gross merchandise sales the same quarter of 2019. We're 3x bigger. That makes us better. It makes us much more vibrant, and I think that is going to be a very sustainable advantage.

Okay. Great. All right. So as you move -- so you're kind of -- you're going to be building basically from this bigger base effectively going forward, right? Higher overall levels of e-commerce penetration, Etsy has more customers, obviously, a lot more GMV. How do you think about that growth flywheel just as the more company-specific drivers for the business over the long term?

We have basically 3 levers that we focus on. The first is product. We can make the product experience much, much better. We can make it better to be a buyer on Etsy. Better in ways that are table stakes relative to other competitors and better in ways that deepen our moat and enhance our differentiation relative to what everyone else is doing. Second, we have a lot of marketing levers we can pull to bring new buyers onto the platform and to bring buyers back more often and drive frequency. And third, there's a set of core infrastructure around trust and safety and customer support to make sure that Etsy is that trusted brand you count on. And we are investing in all 3 of those. We are seeing meaningful gains behind all 3 of those. And the product lever, we're doing a lot more to make the search and discovery experience on Etsy even more exciting. And search and discovery in a world where you've got 100 million items and none of them mapped to a catalog, none of them are commodity, that's hard, that's really hard. And as we get better and better as we have, we really deepen our moat versus everyone else who might want to dabble or have a hobby in this. Second big pillar of our product experience is around keeping commerce human. It's around really having that real interaction between buyers and sellers. Many of the products on Etsy are co-created between the buyer and the seller or personalized just for you. Many purchases involve a conversation between the buyer and seller. Most packages arrive with a handwritten note from the seller. That's not going to happen at Macy's. Jeff Bezos isn't going to write you a handwritten note for every package you buy on Amazon. The third pillar is around trust. On Etsy, you're buying an unbranded item from an unbranded seller. So Etsy's job is to instill that trust in the community that gets buyers confident and by doing so, it lifts up all of our sellers. And the fourth pillar is around having a seller platform that makes it really easy and efficient for sellers to know exactly where to invest their time and energy in order to make their shop more successful. And we have a fantastic roadmap. We've made great progress, very measurable progress in each of those 4 areas over the past 4 years, and I think the best is yet to come. I think we are in very early innings of improving that product experience. On the marketing side, we've made tremendous gains in our performance marketing funnel in order to really get very efficient at doing performance marketing. We also have basically a co-op program now where our sellers share in the cost of that performance marketing, which makes the ROI even stronger. And we've really been learning a lot around television and above the line, and we're seeing really exciting results from the television campaigns that we've launched over the past 1.5 years, which are performing really well, all of which is leading to really great gains in frequency. And so we're really encouraged that not only did we add millions of buyers during the pandemic, in fact, there were many weeks when we were adding 1 million new buyers a week in 2020. But we've also seen purchases per buyer and purchase value per buyer go up pretty meaningfully, about 20% over the course of the past year. And buyers buying more often, learning to make Etsy a habit, we think is really great news and bodes very well for the future.

Got it. So let's talk more there on buyer acquisition and marketing spending. So you mentioned many weeks, kind of 1 million-plus new buyers. I guess, what gives you that confidence, kind of the conviction to continue to drive those buyer characteristics, right, in terms of frequency and retention and just overall repeat purchase rates going forward?

Let me start by just giving a few of the stats that we've thrown out there that show that we're making real progress and frequency. And as a company, we sort of follow a model where we get really focused on the fewest things that drive the most value. Frequency is one of the areas where we have a number of our product and engineering squads focused on moving that number across both product and marketing. The -- so we put a lot of eggs in that basket as far as resourcing because we think that, that is going to drive a lot of the future value. We have been able to move the needle there. So we, for instance, talked about GMS per active buyer was up 20% in the first quarter, and it's been up and accelerating for many, many of the past quarters. I think we go back as far as 8 quarters back where it was increasing every quarter, but we started to see real inflection points in that growth rate. So it's been accelerating. Another metric that we put out there is that we think about our buyers in a few different segments. So we have active buyers. Those are buyers that come one time per year or they have come at least 1 time per year. We have repeat buyers who come 2 or more times a year. And then, the most valuable segment is what we call habitual buyers that come 6 or more times year and spend $200 or more. And the habitual category grew to 8 million in the first quarter of 2021, and was up over 200%. And that number keeps also growing and accelerating, and they represent something like 40% of our total GMS. So they're a very valuable category. They're the fastest-growing category. Repeat buyers also grew significantly about the same -- about 116%. It's a little faster than overall GMS. And one of the metrics that we gave not in the first quarter but the quarter before was that, for a long time, we had said that about 60% of Etsy's buyers came only once a year and the other 40% came to or more times a year. But suddenly, in 2020, we saw that had shifted to over 50% of our buyers who are coming 2 or more times a year, and the average of that group was 5. So we're really seeing a lot of positive signs that we're moving the needle on frequency. And as Josh said, we really have the one-two punch of marketing and products. They work really nicely together. What's the adage in marketing, you never want to drive a whole bunch of people to a bad experience. But we're spending a lot of, we think, ROI-positive dollars to drive people to an even better experience. So things like search and personalization are demonstrably increasing conversion rate. We're able to spend more because as conversion rate goes up, lifetime value goes up and you can spend deeper into the ROI curve.

Okay. Great. That is definitely helpful. So you've talked about some improvements as key priorities this year in search and discovery. Hope you can just talk about some of the key things that you're working on there and some of the benefits that you expect to get.

Yes. Let me take a second to talk about why this is hard, which is another way of saying, as we do it well, it becomes a moat. We've got 100 million items. And the one thing they have in common is that they don't have -- they're not exactly the same. And that's very different than what an Amazon or an eBay or a Wayfair or anyone else could do. Those people have a product catalog. And as they get incoming from third-party merchants, they're trying to map every item to that catalog. And then they'll tell you this is a Gillette razor, and here's 10 different places that will sell you that exact same commodity. Etsy doesn't work that way. There is no central catalog. So we have to discover what is this item, what's it related to, what are its attributes and what is the buyer actually looking for and where is there a match. To give you a simple example, there are about 200,000 coasters for sale on Etsy. Now coasters are not the most popular product. They're just a product in our home goods category. But 200,000 coasters for sale, if you -- I'm from Ann Arbor, Michigan. If you sat in the middle of the University of Michigan Stadium, the biggest football stadium in America, and you looked around, every single seat would have 2 coasters on it. From that quantity, we've got to pick 30 to put on the first page of search results. So that is a challenge that would have been literally impossible 10 years ago. But with machine learning, we can get better and better at understanding not just that it is a coaster, which turns out to be harder than you'd think with 100 million items, but second, what style is that coaster. What kind of aesthetic does it fit into? What do we know about this particular buyer and their tastes? And therefore, how should we pick the 30 out of 200,000 that will go on the first page of search results? And by the way, the substantial majority of search queries on Etsy have more than 10,000 search -- relevant search results. So this problem we face in almost every single search. And we are getting a ton better. Over the past few years, we've made a huge amount of progress making sure that the results that you get are relevant and understandable. And that's hard because you might search for, for example, a blue desk. And 3 years ago, we would have been showing you blue desk calendars and blue desk lamps and a lot of things that contain the words blue and desk, but are not, in fact, blue desks. We've done a ton with what we call context-specific ranking to be able to understand that a blue desk is different than a blue desk lamp. And for a couple of years now, we've been very good at that. What we've been focused on over the past year or so is really closing the semantic gap, so translating what you said to what you meant. An example for that would be you might type in cocktail attire for men. And the right search result for that would be a navy blazer. Now the words navy and blazer don't appear anywhere in cocktail attire for men. So we certainly need to translate what you wrote to what you actually meant. That is something we're using neural network learning models to be able to do and to be able to do much, much better. So we call that closing the semantic gap. And then very recently, just over the past 3 months, we've started to launch personalization models. What that means is only -- as recently as only a few months ago, Doug, if you and I or Rachel, you and I had typed in the same search keywords, we would have received the exact same search results, even though we're very different people with very different aesthetics. So Etsy now is taking into account more and more of our understanding of your taste, your preferences, your style, your history and personalizing search results. And those two that I just talked about closing the semantic gap and personalization, we are in the very early innings of what we can do. What we've already launched in the past quarter or 2 has led to very meaningful improvements, but there are still tons and tons that we can do more and better. And these are examples of areas where we don't need to be better than Google at search. We don't even need to be better than Amazon at product search. We just need to be the best in the world at search and discovery for our niche of the world, which is the very long tail of totally unbranded items. And that might be a small hobby or a side project for others, but it's our day job. It's all we do. We can make huge gains there. And in doing so, we really reinforce the moat of Etsy.

Okay. Great. Let's talk about marketing spend a little bit. So you've significantly ramped that up. Hope you could just talk about your strategy there on both the brand and performance side. I know you mentioned earlier some of the push into television as well. Also just curious what you're seeing just in the current environment. You certainly, across our coverage, see fairly strong online advertising results in online ad market generally. Obviously, just a lot of questions around what that means in terms of pricing, customer acquisition costs, all of those kind of dynamics.

I'll start, and Josh will, I'm sure, pile on. So yes, we really do see the value in marketing. Sometimes people tell me, as the CFO, they find that strange that I love it so much, but I love -- we do have a really great discipline of an ROI-focused and a really strong marketing and analytics team that have developed pretty sophisticated attribution model so that we can, with some level of certainty all through the funnel, including the upper funnel brand marketing, know what ROI we are leaning into. So we -- our philosophy is to spend -- to keep spending up until the last marginal dollar of spend is no longer achieving our ROI hurdles that we've set for ourselves. And we do that with the exception of we'll test our way into that. So sometimes we're testing and knowing it's not going to start off ROI-positive, but we'll optimize and either discontinue or we'll optimize until we get it to the ROI hurdles that we desire. And we use a full funnel approach. So at the low end of the funnel, we spend performance marketing dollars. And I want to point out 2 things there. About 80% of all of the GMS that we get for Etsy is coming in as free. I mean. It's coming in www.etsy.com or other things like SEO, e-mail or things like that. So our performance -- our marketing spend is really driving that 20% of the GMS that we get through paid. And we implemented, as Josh previously mentioned, I won't spend a ton of time on it, something that we call offsite ads, which means our sellers are cooperatively -- they're co-investing in that performance marketing for us. And in the last call, we said that about 30% of our performance marketing spend was subsidized. So that's an important number to think about because if you try to calculate our CAC by dividing GMS divided by performance marketing dollars, you won't get the full effect of it because a lot of that subsidy is coming in through revenue. When a seller has a successful transaction based on product listing ad that we've placed, they pay a slightly higher transaction fee. Moving up the funnel, we also have a very -- and this is fairly new in the last 1.5 years or so, a much more sophisticated marketing technology stack for CRM. So we're much better able to segment customers and target them with specific marketing campaigns and marketing promotions based on who they are and what kind of buyer they are. And then, all the way at the top of the funnel, we've been very successful with television and digital video that we also quantitatively measure. And we can see that we really have made great progress in improving brand awareness of who Etsy is and why you would come to the Etsy site. We spent about $150 million of marketing in the last quarter, and that's a 200% increase. So we're really driving up the level of spend, but you can see from our margins that it's a high-yield endeavor.

Got it. Okay. So let's shift gears, talk a little bit about just broader kind of e-commerce space. Curious how you view some of the emerging competition that is taking place just as social commerce kind of gains more traction, e-commerce enablers like Shopify and Wix just continue to build out capabilities for SMBs and then, also, of course, just Google, Facebook and Instagram and just how you think about kind of the landscape overall.

Yes. So Etsy has always faced tremendous competition. And we've thrived because we stand for something truly different. Etsy stands for keeping commerce human. So Amazon and Walmart have great everything stores. And if Google and Facebook succeed in their aspiration, there will be 2 more everything stores. Places you can go to buy almost anything. The vast majority, 99% of it, will be mass produced stuff, and it will compete on can you make it cheaper and ship it faster. And there'll be plumbing supplies and diapers and socks and every manner of everything. And that's fine. The more the world congeals around these big everything stores, shipping large amounts of mass-produced product, much of it imported from abroad at very cheap prices, the more I think people yearn for an alternative. Not all the time. Look, I shop on Amazon. Most of us shop on Amazon. And there's times I just want something to arrive fast and be cheap. But there's a lot of times when that's not what I want. I'm decorating my home. I'm inviting people over for a party. I'm wanting to wear something special to go to the event. I'm wanting to give a gift that means something. Those are times when I don't want to buy from a big mass commoditized place. I want something that expresses my sense of identity. And that's what Etsy stands for. Etsy stands for something different. So the more the world is all going in one direction, we're going in a different direction. And I think that, that is a very sustainable brand position that I think is going to become more and more valuable over time. I also want to talk just a second about the e-commerce enablers. We have about 5 million sellers on Etsy, The biggest ones do now and always have been multichannel. And, so what our sellers tell us is that Etsy is the #1 place that they sell. It accounts for most of their sales. The #2 place they sell is craft fairs offline. And all of the other e-commerce places combined with their stand-alone shop, when you add up everything they sell everywhere else, it comes in third. And that makes sense. What we find is when our sellers go multichannel, when they diversify, when they set up their own shop, that's when they really start to appreciate Etsy because it's not until then that they realize how incredibly hard it is. Etsy charges 5% commission. If they are only spending 40% or 50% of revenue on marketing, they're doing much better than most. Each of these sellers is a blade of grass in a tornado, trying hard to stand out. And most of their economics will eventually flow to whoever is sending them the traffic. And let's be honest, it's a duopoly. They're either getting their traffic from eBay or from Yahoo! or -- sorry, Facebook or Google. So there's not a lot of choice. All the economics are going to flow to those people or they can come to Etsy, where we provide a brand that lifts them up. It makes it much more cost-effective for them to market. So we think our market position is only getting stronger and stronger as the whole world is consolidating and commoditizing.

Okay. Great. All right. So last question maybe about a minute. Just hoping you can give us an update on capital allocation, your free cash flow-generative CapEx-light. You don't really have these heavy demands for capital. Just how should we think about the uses of cash on the balance sheet?

Great question. We had about $1.7 billion in cash when we closed In Q1. As you point out, we generate almost 100% of our operating cash flow becomes free cash flow. We don't have to make investments in physical retailer fulfillment and distribution. And as we've laid out in the past, it's 3 main buckets that we think about capital allocation. There's organic investments, which we've demonstrated, we've done through investing in things that help us scale like Google Cloud, marketing dollars. We have ample ability to place big bets on things that we want to do organically. We can invest it in M&A, which we did when we acquired Reverb 1.5 years ago. We also acquired the company or did referral agreement with a company in Germany called DaWanda. We acquired IP with -- when we do the Blackbird Technologies acquisition a couple of years ago, which really advanced our machine learning capabilities. And then the third bucket is return on capital, which we do a fair bit of share repurchase. We have a board authorization for $250 million of share repurchase right now. And we have a philosophy that we like to do that share repurchase to offset the dilution that is created from offering equity as a form of compensation to our employees because that dilutes shareholders, and it isn't free, and this returns that capital back to shareholders. So those are the 3 buckets that we look at. We -- I think we have a very strong balance sheet, and we're in a good position to deploy any one of those 3 uses of capital at any point in time.

Okay. Excellent. We're going to leave it there just in the interest of time. But thank you, Josh. Thank you, Rachel. Really appreciate you being here today.

Thank you.

Thank you for having us.

Thanks, everybody.

Yes, bye-bye.