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

Hi, everyone, John Colantuoni here. Thanks for joining Jefferies' Inaugural Internet Summit. In case this is your first time joining us today, today is the official start to Institutional Investor survey. To the extent that you found our research helpful, we'd really appreciate your support in this year's survey. I'll be listed as Internet small and mid-cap. With that, let's turn to our next presenter. Joining me today, we have a few members of Etsy's management team, including CEO, Josh Silverman; CFO, Rachel Glaser, and the IR team. Thanks for participating. And I believe we're just going to start off. Rachel is going to kick off with a brief disclosure before we move to the fireside chat.

Thanks, John, and hello, everyone. Thank you for joining. I just wanted to refer everyone to the safe harbor statement that can be found on our IR website.

Josh, maybe we could just start with the background of Etsy. What does the brand stand for and how does the marketplace provide a differentiated offering to the consumers?

Yes. John, thanks very much for having us and thanks, everyone, for taking time. Etsy's mission is keeping commerce human. And so on Etsy, you're going to find a marketplace with 7 million makers who either made the product with their own 2 hands or designed it and were involved in the making process or we also have vintage items that are 20 years old or more. And so you have a chance as 1 of 89 million buyers to be buying from someone who can personalize the product for you, who can customize the product for you or for whom you know it was made with their hands. These are items that express your sense of style, your sense of taste, that come with a story and allow you to support small business. And so how is this different than what else is on e-commerce? Everyone else in e-commerce is effectively fighting head-to-head with Amazon, right? You're trying to sell a product for the lowest possible price and have it arrive in the shortest amount of time, but it's a product that's widely available in a bunch of other places. And Etsy is not doing that. We do something very different than that. And what it takes to succeed in our business is actually very different. So first, getting the two-sided marketplace to scale, having 7 million sellers and 89 million buyers is something that is in itself quite unique and has some significant moats around it. And then making search and discovery work in a world where we have now about 100 million items that are each bespoke that don't map to a catalog, that's a very unique challenge. Having the experience feel human buying and selling on the site, that's the exact opposite of what Amazon or any other major e-commerce player would want. The last thing they want is buyers and sellers talking to each other and customizing products because that slows you down. If you're trying to sell 10,000 units of something, the last thing you want is for that to feel human. At Etsy, almost every item comes with a handwritten note, makes it feel special. And then to keep the marketplace safe and trusted when you've got 7 million sellers who each do things their own way, providing a brand that stands for trust is especially valuable. And there's a whole set of tools and techniques that we use to make sure that the Etsy experience is safe and trusted. So in keeping commerce human as we do, I think we have a very unique ecosystem. And I think as the world consolidates and you have everyone trying to fight head-to-head with Amazon, most of them not succeeding, we do something very different. And I think the role for that becomes ever larger over time.

Obviously, there's been a lot of change for Etsy in recent years. You've more than doubled in size, macro conditions are more volatile right now. How are you running the company during this period?

Yes. So let's just talk for a second about scale. And you're right, the company is about 2.5x bigger than it was before the pandemic. So if you look at e-commerce, e-commerce grew a lot during the pandemic, a lot being 40%, 50% and has decelerated recently. And there have been a lot of accounts of how e-commerce is actually kind of snapping back onto the growth curve that it was at before the pandemic. Etsy is dramatically bigger than we were, 2.5x bigger than we were before the pandemic. So even at the low end of guidance for this quarter, Etsy would do $2.9 billion of GMS. To put that in perspective, in this quarter before the pandemic in 2019, Etsy did $1.1 billion. We have 15 categories that have more than 1 million buyers. We have 7 categories that have more than 15 million buyers. We have 200 million unique visitors each month on our website. So the size and scale of Etsy is dramatically different than what we were. And we think we're still at the early stages of where we can go as a business. If you look at Etsy's gross merchandise sales, a lot bigger than it was before the pandemic, but still very, very small as a percentage of e-commerce. So we are keeping our eye on the horizon and investing for what we think is a very big opportunity, but we're doing it with discipline as we have always done. We have not been a business that has said, let's grow at all costs. We've always been very focused on the ROI of each investment we're making. And one of the great benefits of our model is it's very high gross margin model with very, very little CapEx. And so we're able to decide with intention how much we want to be investing each quarter based on how much growth we expect to get. We guided to 25% EBITDA margins this quarter. We also acknowledge that the acquisitions we've made of a few other marketplaces that we think are great businesses, but they're in investment mode right now and providing a meaningful drag. So the EBITDA margins of our core marketplace are higher than 25% even in a tougher environment. And so we're investing for growth with our eyes on the horizon. If you look at headcount as an example, we are still continuing to grow headcount at some pace. If you look at our published metrics, headcount grew 71%, I think mid-70s year-over-year, but a lot of that is because of the acquisitions that we've made. If you look at the core marketplace, it grew 44% year-over-year. That means we still have more than $1 million of revenue per headcount. We're one of the most leveraged e-commerce businesses out there in terms of revenue per headcount. And it's because we hired actually relatively slowly during the pandemic relative to our growth rate. So growth is up 2.5x since pre-pandemic and headcount is up more like 50% pre-pandemic. And if we look at the returns we're getting on each new squad we're hiring, which is the way that we look at things. When we hire another squad, what returns are they producing for the marketplace? We have more than twice as much traffic as we did before. So every new product release we launched has even more impact on the market than it did before. And so we continue to feel very good about the ROI of the squads we're hiring, but that kind of discipline is the lens we use for each marketing dollar and each headcount investment we make, and it's the lens we've been using all along.

When do you think core Etsy can return to growth on a year-over-year basis? Do you think you will start to see positive growth trends resume later this year?

So I'll take that one. Let me start by reminding what we said on the last call. So Q1 was more difficult than we had expected at the start of the year. And we think it was more than just reopening headwinds, meaning more than just people going out and spending their money on non-shopping things, but also the macro effects and the distraction and trauma of significant worldwide events and things like that, that were also dampening consumer discretionary spending and distracting people from recreational things like shopping. We said that the trends in February actually decelerated and that this actually increased in March and again in April. So we weren't seeing a lessening of this headwind at the time that we gave our call. Even with that, we said at the low end of our guidance, we would expect core Etsy to retain at least 90% of the massive gains that we realized during the pandemic. And as Josh just said, we also said we had expected EBITDA margins of 25%, which reflects 400 basis points of contraction from our subsidiaries. So Etsy core is really at 29% margin for the second quarter. And we gave the guidance that we thought that the margins would not expand from there for the rest of the year. And then the caveat on, we didn't give full year guidance and the caveat was if macro conditions do not worsen, we would expect the second half growth to accelerate versus the first half partly because our second half is always bigger than the first half for seasonality, holidays, other things and partly because we have a lower comp. But I guess the caveat there is, we have no line of sight if the macro conditions are going to stabilize or get worse. And I don't know. We're not economists. I haven't seen any definitive answer to that question myself. So we really can't guide beyond the quarter.

Perfect. And talk about how, I mean, obviously, you've grown tremendously over the past few years. Talk about how the pandemic evolved or changed behavior and how that behavior is continuing to evolve as we move beyond the pandemic and what you think that means for Etsy's marketplace. And related to that, I think one of the things that we had heard and you had mentioned is that a lot of the people who had previously stopped using Etsy but came back during the pandemic realized that they were coming back to a much more robust and easier-to-use marketplace and that was resulting in attractive or lower levels of churn than you've seen previously. Just maybe talk about how that's continuing to evolve over time as we kind of move beyond the pandemic.

Yes. Let me start with this and maybe Josh wants to pile on. On the call last week, I used this statement, so I'll use it again. I see there's 2 truths. One is, we don't believe that e-commerce is going to go away. So even though we might see some temporary depression to consumer discretionary spending or pent-up demand to get back out and go to a mall, more likely go dine out or travel. Truth number one is, we believe e-commerce is here to stay. And one thing that we learned through the pandemic is that the lines are even more blurred than they ever were before about shopping offline versus online. People genuinely have a mission of, I need to get this gift or I need to satisfy all of my wedding center pieces or whatever. And then they have a choice between online and offline. The mission isn't that I'm going to shop offline today or I'm going to shop online today. And then the second truth is that Etsy is a significantly differentiated and unique marketplace. It's hard to think of any other e-commerce player that is distinctly like Etsy. And so I think that has become even, that prominence and that uniqueness and that personalization and customization that we offer has become even more profound and pronounced than it was before because of so many product improvements that we've made and because of the marketing that we've done to be able to make sure consumers understand that. So those are the 2 truths that have happened throughout the pandemic. And as we've grown, we like to point at the number in Q2 of 2019, we were $1.1 billion in total sales. And in Q2 of 2022, we guided even at the low end of our guidance that we were going to be almost triple to that, not quite, but $2.9 billion in sales. We've got so much more awareness of what the unique offering is and so much more scale that, that, I think, influences, it demonstrates that we've influenced consumer behavior, but it also helps support and perpetuate that consumer behavior. Josh, maybe you want to pile on to the top of that?

Yes. I would only add that during the pandemic, tens of millions of people came to Etsy because they had no other choice. Stores were shut down. If the stores were open, shelves were bare. And when you went to other e-commerce sites, you often found that things were out of stock, would have a very long delay. And so people would turn to Etsy. And whether it's home furnishings, clothing, jewelry, supplies to baked breads, toys with your kids, gardening, I could go on and on, for virtually everything you need as long as it's not a product that can only be mass produced, as long as it's not an iPhone, for almost everything you need, it turns out that there's something for sale on Etsy. And that something for sale at Etsy is priced at a great price, is typically available to ship relatively quickly. The maker is going to make it and put it in the mail and send it to you pretty quickly. And it's made just for you. And that was a delightful experience. So in 2020, we had tens of millions of people come to Etsy because they had to. In 2021 and beyond, what we're finding is that those people are coming back because they want to. And if we look at, again, being almost 3x as big, 2.5x as big as we were before the pandemic, we've suggested in guidance is we're keeping almost all of those gains. In a world that feels quite normalized now where people can shop, they can travel, they can dine out, where their wallets are candidly under more pressure than before, they're still spending almost as much on Etsy. And we think that's incredibly encouraging for the experience they've had and for the opportunity ahead.

Great. And so search and discovery has been a big focus area for your team. And maybe just talk about what the unique challenges are to search and discovery on Etsy and what solutions you provided so far or improvements that you've made so far? And then talk about the pipeline for future improvements in search and discovery and kind of what you're most excited about?

Yes. Great question. So it's a unique challenge and opportunity for Etsy. There's almost 100 million things for sale on Etsy. It's hard to wrap your mind around it. But for more than half of our search results, there's 10,000. And for more than half of our searches, there's at least 10,000 different things for sale on Etsy that are relevant to that search. And unlike virtually everyone else, if you're Amazon or Walmart or anyone else, your job is to create a catalog, let's say, it's in home furnishing, so every piece of home furnishing for sale. And then map the items coming into that catalog. You're going to have 10 or 20 different people selling the exact same item. And you'll get a lot of data about that. It's made with this material, it comes in this size, et cetera. On Etsy, we get none of that. Each item is bespoke. It's made just for you. And so there's 100 million snowflakes on Etsy. And our job is to understand what the user's intent is, understand what the item is and then create on the first page of search results the 30 most relevant results for you. And that involves, first, even just understanding what our inventory is and then understanding user's intent and then understanding things like style and what your taste is. And we've been making leaps and bounds. Five years ago, that would have been very difficult. Ten years ago, it would have been impossible. But with the advances that have been made in machine learning, we've made enormous leaps in understanding what users intent are. So for example, if you're searching for a cocktail attire for men, which would be a common query, our search engine knows that something called a blue blazer is the right search result for that. Now blue blazer doesn't contain the words cocktail, attire or men in it. But machine learning is able to understand what that means. We're then able to understand of all the things for sale on Etsy which are the blue blazers for men. And then to understand what your tastes are. And of the thousands of blue blazers that we have available, which are the 30 that should go first on the first page of search results. That's something we're getting ever better at, and it's a unique challenge for Etsy. We don't need to be better than Google at search. We don't even need to be better than Amazon at product search. But we do need to be the very best in the world at search for the ultra-long tail of items that don't map to a catalog, and we have a really world-class team that focuses exclusively on that challenge.

So I get a decent number of questions about competition. Just talk about how you think about competition. And is competition something that Etsy considers when it's making decisions about things like fees and monetization?

Of course, we always need to think about that. And we face a lot of competition. We've always faced a lot of competition. There is a ton of places to buy things online. And Amazon and Walmart are obvious examples. And by the way, not just online, our shoppers don't show up and say, I want the best place online to buy the following thing. They want to buy a thing. I need to decorate my living room, and they're going to go to West Elm and they're going to go to Wayfair, and they're going to go to Etsy, right? I want to buy jewelry. I might go to the mall and look for something and then I'm going to go to Etsy and look for that same thing. So the distinction between online and offline has candidly not been a user-centric distinction for a long time now. The pandemic really blew that up, but we face a tremendous amount of competition and we always have. The advantage of Etsy is that we do something truly different. Our brand stands for something genuinely different. And so while there are 100 different places from which you can buy the exact same item and because it's a commodity, they're focused only on, can they sell it cheaper or ship it faster. Etsy does something truly different. And what it takes to run a human marketplace like Etsy is different. Search and discovery is different. The human-centric buying experience is different. Building trust is different. The levers we have to manage our marketplace are very different. That builds over time, we believe, sustainable competitive advantage for Etsy, doing what we do well. But the fact that we have such significant scale now with 7 million sellers and 89 million active buyers means that if you're a seller who makes things and wants to sell them, there's no marketplace for you like Etsy. You can set up a shop in any of 20 places. And most of our sellers do, by the way, of our bigger sellers. They mostly do set up shops of their own. And that's one of the best loyalty programs for Etsy because you don't realize all the value you're getting from Etsy until you go and try to do it on your own. Each of our sellers on their own is a blade of grass in the thunderstorm, trying to create attention, trying to create a brand that means something to buyers. And with all the noise out there, it's almost impossible. When they sell on eBay or when they sell on Amazon, as many, many of them do, they're just a thumbnail and a price. Put right next to mass-produced product, which is created in huge quantity and a part of a global supply chain, they don't get a chance to tell their story and why they stand out. Only on Etsy do they really get a chance to stand out and do they get a chance to present themselves to 89 million buyers who actually value what they do, who know they're buying directly from the maker and who care about that. So we pay a ton of attention to the competition. We have a competition, but the pillar of strength for Etsy is we genuinely do something different from everyone else, and we're all-in on doing that thing really, really well.

Okay. Great. Let's talk about take rate. What are the kind of the key drivers or all of the drivers of take rate? And then talk about your decision to take a take rate increase in April. How much was that take rate increase? And then what are your plans for investing the additional revenue that you're going to get from that fee increase?

Great. I love to talk about revenue. So let me just start by just reminding people how our take rate works. So we have 2 components to take rate. There's basically the marketplace fees that are more or less mandatory fees to participate in Etsy's marketplace. That includes a transaction fee, includes listing fee, includes Etsy Payments. And more recently, includes an Offsite Ads fee if your listing successfully results in a sale. So it's a success fee-based fee. And then we have services revenue, which are more or less optional. And the primary driver of our services revenue is Etsy Ads. That's when you make an ad, you place an ad on Etsy's site, giving your listing more prominence. The other larger component in the services revenue is shipping. And we've grown those things over time, each different element at different times. So for instance, we did a straight transaction fee increase in 2018 of 1.5 points. We have expanded Etsy Payments to more markets in the last 8 quarters so that we are now over 92% of our total GMS flows through Etsy Payments where we earn a fee. And very recently, we said that we took, I don't want to skip Offsite Ads. When we launched Offsite Ads, that was effectively a 1 point take rate increase as well. Etsy Ads has grown just because the product has gotten to be much better. So the same, Josh talked about search, well, those same relevancy and prominence sort of conversion rate lifting initiatives that we've done on the search side have applied to our Etsy Ads product as well. So the ads product has grown because the click-through rate becomes much higher, delivering higher return on ad sales for our sellers, but also enables us to sell more of it. So we've gotten a lot of growth from Etsy Ads. In fact, that was a big driver of take rate increase in Q1 of this year. What we did very recently, and as you mentioned, we announced in April that we were doing another transaction fee increase, another 1.5 points. We announced it on our last call and it went live in May. And that take rate, just similarly to the other transaction fees that we have done, it drives lifetime value up, and it enables us to be able to spend more on things like marketing and still maintain the marginal ROI threshold that we internally hold ourselves to. In this case, we took that take rate increase because we see that we can, as we charge our sellers more, we can reinvest it back in the marketplace in ways that help them drive more sales. And so similar to what we did in 2018, we turned the dial up on our marketing investment, both performance marketing and above-the-line marketing. We're able to kind of lean more into product investments that we believe are going to be beneficial to the marketplace and continue to drive high ROI. And we are able to invest in support for them. So things like, we've talked a lot about the fulfillment process and being able to deliver a better transparency about estimated delivery date and the speed at which our shipments are arriving to customers and at least the confidence and assurance that it's going to get there when they expect it to get there, but also what we do when something goes wrong and how do we support our sellers and our buyers in those moments. So those are the kind of investments that we make in that sort of post-purchase experience and we're going to continue to invest in that we think also drives more sales for them. So the guidance we gave in Q1 for Q2 was a take rate of about 19%. The math that people have landed on because we had higher take rate in Q1, plus the 1.5 points that we've taken our pricing up by would suggest a higher take rate than we guided to, but we didn't guide the lift that we saw in Etsy Ads in Q1. We didn't guide for that to continue on into Q2. So that's the take rate story.

Okay. Great. And spend and frequency, I want to talk about spend and frequency. So I think that over the past few years, you've done a great job driving improved frequency or higher frequency, and that's driven average spend per buyer up. But even with that, the spend per buyer is still less than 1/3 of what it is at some of your other e-commerce competitors. And I know that it's not a perfect comparison, but just talk about what initiatives you've been implementing to continue to drive spend higher over time even from today's levels.

Yes. Great question. It's something that we focus a ton on and we think there's tremendous opportunity over time as Etsy becomes more front of mind. So just talking back to what I said before, we have 7 categories that each have over 15 million buyers and we have 15 categories that have at least 1 million buyers. So there are so many purchase occasions every week and every month for which Etsy is really relevant. It's that our buyers were not front of mind enough for our buyers to realize it. So if they came for, let's say, a wedding, they don't realize that we're great for baby showers or home furnishing or clothing or et cetera, et cetera, gardening, all the other categories that are available on Etsy. So just to speak to the numbers, pre-pandemic, about 41% of our active buyers bought 2 or more times in a year. In our most recent quarter, that was 49%. So we've made significant progress in getting buyers to buy 2 or more times. If you bought more than once over the last 12 months, you bought an average of 5 times over the last 12 months. We have 8 million habitual buyers now. These are people who buy 6 or more times and spend $200 or more in a year. And those 8 million habitual buyers bought an average of 13 times on Etsy or more than once a month. So there's ample evidence that Etsy can be relevant to a large number of people a lot of the time. And yet, John, to your point, if you look at the purchases per buyer or the spend per buyer on Etsy, it's still quite low relative to other e-commerce platforms. And so we think that there's tremendous upside here, and it's an area we keep focusing on and have been focusing on ever more in the past couple of years. So some of the big levers for us are inspiration and efficiency. And so what do we mean by that? Having a better experience for window shopping on Etsy, having a better experience when you're coming just for fun. Many people come to Etsy just for fun, just to see what's new, just to be inspired. And that's a privilege that doesn't happen on many e-commerce sites. And we have an opportunity to do a lot better at showing them things that they're likely to like. That's where our current science is focused on. Instead of showing you recommendations based on the last thing you bought, which can have a very sort of rearview mirror experience on Etsy, how do we anticipate the things you're likely to want next and show you engaging and inspiring content? And we've got 7 million content creators on Etsy. So we're leaning into that a lot and we're encouraged by early results that we're seeing there. How do we make it more efficient? So you feel like when you know what you want, you can get in and get out on Etsy and make that happen very quickly. And then the last piece of frequency is trust. How do we make sure that you use us not just for sort of low-stakes purchases, but also for higher-stakes purchases? So I need it to arrive by this date because this is the date of the wedding or the event. And we've made tremendous strides making sure that our sellers actually live to their promises. They set the dates for by when they will ship it, but we've made huge strides in making sure that they consistently live to that date. So the item arrives on time, the shipping costs are reasonable and you feel like Etsy has your back. We've made a lot of progress there and we have really exciting plans to continue to make progress there. Those 3 elements of reliability, efficiency and inspiration, we think, are all very important in terms of driving frequency and where we've made a lot of progress, but we have a ton of room to get better. The other element in this is average order value. And I think as we go on a journey from being a place you go for the cushions, to the place you go also to get the couch, from costume jewelry to fine jewelry, as we build more trust in the Etsy brand, we have the opportunity to earn bigger purchases, which I think is a big opportunity for Etsy. And what we know is that our sellers do a really great job of delivering on their promises and that buyers are delighted by the results a very, very high percentage of the time. And so the substance is there, we can do more now to communicate that and to build that trust with buyers, which I think can drive AOV over time as well.

Okay. Perfect. I wanted to ask about margin. So margin, EBITDA margin fell below 30% in the first quarter. And that was after being above 30% in the prior 7 quarters. You're also not expecting a material improvement in margin as 2022 progresses. Talk about the key drivers of the EBITDA margin and if you're able to give us a sense for how much of the spending this year is Etsy just catching up a bit from outsized growth over the past few years.

Great questions. So the guidance we gave for Q2 is sort of a nod to the rest of the year with 25% margins in the second quarter. And we said we didn't expect those margins to expand for the balance of the year because we see such a huge opportunity and we have so many places we want to invest and we believe the macro conditions that we're experiencing now, though we don't know how long they'll last, we think they are not permanent. So we're keeping our eye on the prize. Remember that the Etsy core business has grown by about 150% since the start of the pandemic. And Josh gave a great stat, which is our revenue per head is still over $1 million, which is we benchmark ourselves against peer group, and that's way above the peer group. So we're still keeping very much focused on, are we getting leverage out of our workforce? And we measure sort of product development similar to how we measure marketing investments. So we're always looking at the return on that spend. And in the case of product development it's the full squad: product managers, plus engineers, plus design, plus stock-based comp and our cloud computing, our bandwidth and hosting costs. So we're looking at a fully loaded number. And we're expecting an ROI positivity within a 2-year period. And we're constantly tracking and experimenting to track to make sure that we're achieving those goals. We love our marketplace model because the vast majority of our spend is variable in nature. So marketing, we can increase or decrease pretty dynamically. People costs less dynamically, but still we're able to pull back or slow down on hiring where we see that it's important or critical to do so. And we have that same kind of dynamic with almost all our costs. Our cloud costs are another example that are fairly dynamic. We don't have, as you know, retail stores or distribution centers or inventory that we hold. And so our margins are really pretty much in our control. If we wanted to deliver more margins, it would be within our ability to do so. But we see this big opportunity in the future and any slowdown or cutting of investments now would hurt our 2023 and 2024 and beyond. I'll also point out that our long-term margin goals that we gave in early 2019, we said we'd be by 2023 at 30% or higher. And as you point out, we have been at 30% or higher several times in the last 8 quarters, sort of proving out the model that when we have high increase in our top line, most of that flows to the bottom line quite easily. And if you look at 2023 in absolute dollars, since we're so much bigger on the top line, we are delivering approximately 50% more EBITDA now in absolute dollars than that model would have anticipated. And that model also did not anticipate any take rate increases or M&A. So we're delivering that now despite the contraction we're seeing from our investment in subsidiaries, which we also see as huge opportunities for the Etsy marketplace overall.

That's great. And just 2 more, if I can squeeze them in before we run out of time. Talk about international. How has the business performed recently, the international portion of the business relative to the domestic business? And just talk about your overall strategy outside the U.S.

We have a huge opportunity outside the U.S. And in fact, international has been growing faster than the U.S. for all the recent quarters. And we saw explosive growth in the U.K. As much as the U.S. and the rest of Etsy grew at tremendous rates, the U.K. grew even faster. And as the U.K. reopened, there's been a bit of a headwind from that, which is understandable. But yet, the U.K. growth rates looking at absolute are still, the business is much, much bigger than it was before the pandemic. And we've gained a lot of market share in the U.K. Germany, I think, is an interesting counterpoint where we've disproportionately leaned into investment in Germany, doing things like television advertising earlier than we normally would. Germany, we know is an amazing e-commerce market. And so we leaned in earlier than normal, and we're seeing some dividends from that now. Germany is actually growing faster than the rest of Europe, and we're gaining share in Germany and we feel great about that. If you look at the other markets that are not the U.S. and the U.K., our penetration in those markets is 80% lower than it is in the U.S. and the U.K. So I think, while I still think it's very early days for Etsy in the U.S. and U.K., it's even earlier days for us in the rest of Europe and our other international markets. We think that is great for future growth.

Okay. Great. Last one quickly on M&A. You've made some recent acquisitions. Just talk about your broader M&A strategy and how you see the acquisitions that you've made so far fitting into the overall business.

We have a very high bar for M&A. We love our model, a two-sided marketplace model that's truly peer-to-peer that doesn't have fixed cost or CapEx in the middle. And if you can get a two-sided marketplace to scale, that's lightning in a bottle. We think that those are very, very valuable businesses over time. So we've acquired a few other businesses that are also about keeping commerce human, that are also about special, but that expand our TAM in some very exciting areas. So we acquired Elo7 in Brazil, which we think is a foothold into Latin America. It's basically the Etsy of Brazil. And we think, over time, Latin America can be a very exciting market for us. Elo7 gives us a foothold. And then Depop is the best brand, we believe, in resale for Gen Z. And we think resale is a really exciting space. We think Gen Z is the most exciting demographic within. So we are really excited about the potential of those businesses. It's early days. They are definitely in investment mode right now, but we think that the potential for them is very significant over time. And we think Etsy has know-how to make those businesses significantly more valuable than they would be on their own.

Okay. Great. Well, we're out of time. Josh, Rachel, thank you so much for joining us today.

Thanks for your time.

Thanks for having us.