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

Great. I think we can get started. So good morning, everyone. Thanks for joining us. My name is Alexandra Steiger. I'm part of the U.S. Internet research team here at Goldman Sachs. We are very pleased to have Rachel Glaser, CFO of Etsy, with us today. Thanks for coming. Good to see you in person.

It's my pleasure to be here, and thank you all for giving us half an hour, 40 minutes of your time. Before we jump in, I just wanted to refer everybody to the safe harbor that can be found on Etsy's Investor Relations website. And I won't read it all out to you, but you can take a look at it there.

Great. And with that, let's get started. So one of the key takeaways that we've had from your last earnings was the resilience of the Etsy business model amidst this very current uncertain macro environment. From a big picture perspective, what differentiates the Etsy business model versus some of its peers?

It's a good question because I imagine we probably have a mix of people in here who know Etsy very well and those of you that don't. So let me start with the big picture. At Etsy, it's a differentiated marketplace. We have about 100 million listings on the site. And on the Etsy core marketplace, that's about 5 million sellers, close to 90 million buyers. And almost everything on the site is either vintage or handmade in some way, and I can talk about what I mean by that in a bit. We have a very differentiated economic model as well. So we don't own any piece of the infrastructure for warehousing distribution. We own no physical retail. And that's been great in this period of time where we don't necessarily have to make billion-dollar bets on inventory purchases or pay large sums of our balance sheet for physical retail leases and things like that. And the product itself is differentiated because we identify Etsy as a place where you shop for something special. There are other places where you shop because of price or convenience. But you come to Etsy because you're looking for something special across 6 core categories but with a long, long tail of almost everything else that is out there to buy. We don't do automotive or electronics, but almost every other thing, if you can buy it somewhere else, you can probably find that item on Etsy as well. And our buyers, just a thumbnail sketch of our buyers, those 90 million that I referred to before, they skew female, but we have a mix of female and male, lots of opportunities in both of those demographics. And they -- they're pretty generalist as far as household income, although we have seen a shift away from the lower household income levels during this sort of macro environment that we're in now.

And as a follow-up to that question, can you also talk about the characteristics you briefly touched on it on your user base or buyer base? And have you noticed any change in spending or like purchasing behavior over the past few months?

Yes. So let me start with -- we define active buyer on Etsy as somebody who has shopped on the site at least once in the last 12 months. So that's our primary -- the number I referred to before, almost 90 million. We're actually -- our last quarter, we reported 88 million. So we've seen a small deceleration in the number of active buyers. And then we think about another category that we call repeat buyers. Those are buyers that come 2 or more times in a 12-month period. And then the third category, which is actually the fastest-growing category, are what we call habitual buyers. It doesn't take much to be called habitual, only 6 or more times in a year and spend $200 or more in a year. And then if you take another lens on it, we also look at new buyers, so people that have never -- we define that as buyers that have never ever shopped on Etsy before versus existing buyers. And then a third state can be lapsed. And we use the word lapsed rather than churn or deactivated because interestingly about Etsy's buyers is they generally don't ever go away. They may take a break for a year or 2. But when you look at the cohort data, you can see that they keep coming back to us many times -- many of them over a 10-year period even if it's once every couple of years. In fact, if you ask those buyers, why didn't you shop on Etsy last year or why didn't you buy on Etsy for X, Y, Z purchase? They'll say, of course, I love Etsy. I shop on Etsy, and we can show them, no. You haven't been here for over a year. And then they're like, oh, my gosh. Why didn't I think of it? There's -- the job to be done is really to work our way up into that top-of-mind habitual state that I talked about earlier. But we don't really ever lose those buyers over time. Now the thing that we've been working on is that concept of frequency and moving more of the active buyers to be repeat and more of the repeat buyers to be habitual. But we also see tremendous opportunity to light up more new buyers and to reactivate the lapsed buyers. And we are putting a lot of effort in that behind the work that we do on product and the work that we do on marketing. And I could talk about more of those things in just a bit, but we've actually seen over time the shift from -- for many years, we said that about 40% of our buyers came 2 or more times a year, meaning 60% came only 1 time a year. We've now seen that shift during this pandemic time, shift to be slightly more than 50% are coming 2 or more times a year. And on average, across that repeat population, they're coming 5-point-something times per year, which is up a bit from 4-point-something pre-pandemic. So we're seeing this shift, and it's sticking with us.

Before actually diving into the business itself and some of the current debates we're also having with investors, let me ask you just one more on like the broader consumer like macro environment. So beyond the impact of the ongoing reopening dynamics, which you helpfully itemized on the last call, can you just tell us, are you concerned about the health of the consumer going into the second half of this year and into '23?

Certainly, something that we look at and we think about in terms of risks and headwinds would be how does this environment affect not just our buyers but buyers in general. And Etsy arguably is 100% discretionary. When you think about discretionary things, Etsy is definitely in that category. On the other hand, Etsy's young enough. We're only 14 years old. We really haven't experienced recession at all as a mature business. And we don't really have a sense of, are we cyclical or countercyclical? So for instance, in that moment where you no longer can afford to buy the new sofa, maybe you still want to buy like a really beautiful throw blanket and that you feel good about something that you can buy, and it's a good value relative to other places where you can buy throw blankets, and you're still feeling like you're fixing up your house. So at the moment, we see, despite the fact that the government is no longer shoveling stimulus money into people's wallets, the fact that consumers now have a lot more choice about where to spend versus where they had before, we've been hanging on to over 90% of our GMS compared to the pre-pandemic period. So just for context, during the pre-pandemic, our GMS, what we call our gross merchandise sales, was $4.5 billion or so. And at the end of 2021, we were $13 billion in GMS. So we -- in the last quarter that we just reported, we were at $2.6 billion in GMS for the quarter, and the same period in 2019 was $1.9 billion. So we're really significantly bigger than we were before. We're hanging on to most of it. So consumer behavior on Etsy is showing us that they continue to come to Etsy for those special things. And even in a recession, you still need to buy birthday gifts. We're seeing weddings and events pick up more than they ever did before. And Etsy's -- Halloween is going to come around just like it did every year before, and Etsy's the perfect place to go for some of those things.

I'd like to move on to your forward guidance. So your Q3 guidance that you provided in August assumed a more cautious outlook versus your Q2 results. Can you just remind us of the underlying assumptions that went into the guide? And where do we sit today with only a few weeks left?

Yes. So what we guided to for the quarter was $2.8 billion to $3 billion in GMS on a consolidated basis. Our consolidated GMS in Q2 was $3 billion. For the consolidated, that includes all of our subsidiary marketplaces, and that would imply flat to a little bit down versus Q2. We've been guiding 1 quarter at a time, and the pre-pandemic, we were giving full year guidance, not quarterly guidance. The reason we've been guiding 1 quarter at a time is that it's been a very unpredictable volatile market. And we really couldn't guess what was beyond the quarter. In fact, the guidance usually is given at least 1/3 of the way through the quarter. So we're giving you 2 months of guidance, if you will. And in fact, in last quarter's guidance, we did give what we were seeing through July. During all those quarters of the pandemic, we were giving what we -- we try to give guidance as giving you as much information as we can possibly give without gaming it or trying to be too conservative. And we kept giving guidance that we were beating, and that wasn't because we were trying to -- we were guessing as best we could, and the market and the business kept surprising us. We kept overdelivering on those numbers. So in January -- we use this measure that's called a 3-year stack. So we're comparing our current quarter not only to the prior year, but what was the same period -- in the same growth rate in the period pre-pandemic because it's been such an unusual time. In January, our 3-year stack compared to the same quarter in 2019, we were at about 200% growth rate. And what happened starting in the first quarter of that year is we started to see a decel that we might have expected to happen in the quarters in 2021 and in 2020. We kept expecting this decel to happen because we had really doubled and almost tripled the size of our business. And we started to see that decel happen in February going into March and April. And so we moved from -- all the way from like 200% growth on a 3-year stack down to something that was more like 150% growth in April. And then we started to see a leveling off. So from April until May, June and even July, we were down closer to like a 140% growth rate on a 3-year stack. So you can see that the slope of that decel significantly slowed and almost looked to us like it was starting to flatten. So the guidance we gave for Q3 at the high end would assume we were almost flat in Q3 versus Q2, maybe a little bit further decel. And the guidance at the low end assumed some continued decel, but still less steep than we were seeing from that Q1, Q2 period. We don't -- we didn't guide for the full year. We didn't give guidance for Q4, but we did give some tea leaves or some reminders about what -- how to think about Q4. Q4 is typically a higher quarter for us because of the holiday season, starting with back-to-school really going into Halloween and Thanksgiving and then the winter holidays. But we had a very big quarter to lap. Last year, we also had seasonality, and we were still seeing a lot of people staying at home or travel plans being canceled because of the surge of Omicron. And we were still seeing the benefit of stimulus at that time. So there's a big number to lap going into Q4 of this year. So there was a little bit of caution plus uncertainty, further macroeconomic headwinds, increases in the Fed hikes and how that -- what that does to inflation and consumer spending. So we dropped a little bit of cold water on our optimism of we're leveling off. We don't know if we're going to stay level or we don't know if we've hit bottom yet for sure, but we were giving you what we observed through the end of July. And we'll talk about our Q4 guidance when we get into our next call.

I'm not going to ask you to guide to Q4, obviously, but just how do you feel about going into the holiday season versus the last 2 years, which obviously happened like very different?

Yes. So as I said, Q4 is a big -- something we're always excited about. We do think to get our sellers ready for it, too. We just did something last week called Etsy Up, which is a forum for our sellers to come in. And we give them the best guidance and advice as we can. They help each other on how to market, how to set up their shops, how to be prepared and really get them ready for the holiday season. We do a nice press event on the East Coast, where we bring in some media and talk about what we're seeing trend-wise and things going on for the holiday season in the market. And we already -- we have what we call flush. So that's like the whole team works on product development all year long until we get to a point where it kind of pencils down, not all the way pencils down, which is why it's not a freeze, but it's a flush because we work really hard on getting our best product development completed and ready to go for the holiday season. And then we try to get out of the seller's way and let them sell rather than any changes or introducing new product changes in the fourth quarter. We also increased our marketing spend in the fourth quarter and really lean into the why Etsy and the when Etsy. I know we're going to talk about marketing in a little bit, but we do dial up the marketing spend. I don't know if you've all seen our television ads. But at this time, we've modified the creative a bit to really remind people why and when do you come to Etsy, but also to inject the relative value that Etsy has versus other places where you can go shopping. By and large, our sellers have not taken big pricing increases to offset inflation. So we were always somewhat a value play relative to other places, but relative to other retailers taking price up because of inflation, we become even more and more interesting to think about a place to get great special items for a nice value. And we've really put a lot of things in place to help with the post-purchase experience and increasing the reliability of shopping on Etsy. So will I get it in time for Christmas, and what happens if it doesn't arrive when it -- if it doesn't show up on my doorstep even though the seller says they shipped it. Do I have confidence that it's going to arrive on time? And I could talk a lot more about how important that post-purchase experience and reliability is in just a little bit, but I'll let you do your next question.

Yes. No, I definitely want to talk about some of your product initiative. But let me ask you one more question just on like the user growth trajectory. So how should we think about some of the puts and takes influencing or impacting like the near-term trajectory of your active buyer addition, especially given all the work you're doing in terms of improving your product experience on the platform?

Yes. So in the second quarter, we added over 6 million new buyers, and we reactivated almost 5 million lapsed buyers. That's about 50% more new buyers than in the same quarter in the pre-pandemic period. And -- however, that is a decrease. So the -- and it affects our active buyer growth. So that decrease in new buyers is definitely a headwind to Etsy's growth, but it's still significantly better. And as I said earlier, we're holding on to the vast majority of the gains that we made during the pandemic period. We're also seeing, when we look at the cohort data, that the newer cohorts are at least as valuable, and in some cases, more valuable than the older cohorts. So we're seeing a lot of engagement with this new influx of buyers that we've brought in, and they're sticking with us for the Etsy experience. A lot of that happens because of the product introductions that we've made to the site, that we continue to enhance ways for people to find the good stuff on Etsy and to be inspired to come back again. So we're really -- everything we're doing is thinking about that engagement with buyers. People don't often come to other large e-commerce sites to be entertained, but they do come to Etsy quite a bit to hang out and to watch sellers talk about how they've made their item or to understand the story behind a seller or a seller's creation process. And so we really want to engage those buyers so that they come back and continue to -- on to conversion. The active buyer base at the end of 2021 was about 90 million. And in each of the last 2 quarters, we've attributed net about 1 million buyers per quarter. So that's going -- that is decelerating a little bit, but that tells you that we've gone from 46 million buyers pre-pandemic, and we're maintaining at about 88 million. And when we look at -- usually, we talk about GMS per active buyer on a trailing 12-month basis. That was up 135% in the second quarter. So a big number, still a little bit of a decline versus the prior quarter. And when you look at rather than on a trailing 12-month basis just the buyers that we got in the second quarter of 2022 versus the buyers we got in the second quarter of 2021, just for those 3 months, they're actually spending more. The GMS per active buyer is higher actually in the second quarter of 2022 versus 2021. So the actual spending in period is strong and healthy. And we are maintaining that engagement and that activity level that we want to see. I might inject here also that when you look at the buyer behavior by channel, so our -- we think about mobile -- desktop versus mobile web versus mobile app, our mobile app channel has 2 quarters ago crossed desktop as the highest percentage of GMS that we have, and it's always been the highest converting channels. So now we have the most -- the biggest audience, and the highest converting channel is our mobile app. So that's very promising that we're getting the traffic in the place where we think we have the best chance to reach the audience and get them to convert.

That's already very helpful color. Let me just jump back to some of the key product initiatives you're working on. You mentioned search and discovery. You mentioned the purchase protection program. What is like the area you're most excited about? And how should we think about those initiatives translating into buyer growth, GMS per buyer growth, but also increase purchase frequency?

So we often think about our opportunity on product to address 3 main areas. So we want to think about efficiency. We want to think about inspiration. And we want to think about reliability. Efficiency because when you have 100 million items on the site, each one sort of like a snowflake, there's no 2 alike, it's hard to find stuff. And sometimes you feel like you don't have 3 hours to look for the special, special thing. Some people love that. It's like going to a flea market on a Sunday and rummaging through and finding the aha, the golden treasure. But other people, they have less time and they're more practical. And they want to find the gift for their spouse or their partner, whoever, and be done. So helping people find the good stuff faster is really important. So we think about an initiative in the efficiency bucket. A lot to do with search, and I'm going to double-click on search in a minute. A lot to do with things like putting an add to cart button right on the listing result page rather than having them have to click through the listing itself or putting editors' picks right on -- right to the top of the place that you land when you're coming in from the outside. Recommendations, for instance, that helps you get to the good stuff faster. Inspiration. A lot to do with visual discovery. In the past year or 2, we've added many, many more seller videos, so you can actually see the seller throwing their ceramic pot or the dyeing of the wool for the mohair sweater that you're going to buy. We've allowed buyers to upload video reviews. We've recently added live video feeds. A seller can host, here I am hosting a how to make a baby shower, and here's all the things that you can buy on my shop or in other shops on Etsy, and that you can buy right through that video feed. And we've gotten a lot of engagement with that and a lot more of those live videos floated. And then we also have -- we've enabled buyers to submit buyer video reviews. And those are just some examples. But that video -- that visual discovery is really important to what we call that a whole set of initiatives. Explore is really important to increasing engagement and allowing people to have fun while they're on Etsy looking for that needle in a haystack. The other place of information, of course, is in search, and so finding the thing. You might not have said I want a white mohair sweater, but we can infer that you're shopping for something new and looking for a beautiful thing to wear to that new party that you've been invited to from your dwell time on other listings of things you've bought in the past. We're doing a lot with all of the search models that we have. And I'm going to come back to the search point in a moment. So search -- and the search and visual discovery are 2 of the things that we think about in that efficiency category. And then the third category, reliability, we've done a lot -- one of the biggest builders I have -- I feel that we have at Etsy is knowing that you're going to get the item on time, knowing that you can trust that it's actually going to arrive. What do you do if it arrives damaged? What do you do if the seller says they shipped it, but it never shows up on your doorstep or somebody took it off your doorstep? How do you get resolution in there and really have the confidence to buy on Etsy and to continue to come back on Etsy? So we've done a whole suite of things over the past few years, working on shipping price to make the price fair or free, looking on estimated delivery date. That's a lot to do with getting our sellers to have tracking on everything that they sell so that you can track the item and know when it's going to arrive. And we really helped them a lot in thinking about not only the elapsed time from when an item ships, but the time they need to actually create the item, the process time that's required and making sure that the estimated delivery date is actually accurate so that we've increased the percentage of items that do arrive on time based on the way -- the date that was promised. And we've gotten really good at that in the U.S., and we're working on it internationally, where a much larger percentage of listings internationally are now also having an estimated delivery date displayed, and they're improving on their on-time delivery date percentage as well. And then even more recently, we have launched something called Etsy purchase protection, which is Etsy has your back. If it wasn't the seller's fault and it wasn't the buyer's fault yet the money has been paid and the item never shows up, who's going to cover that? Well, Etsy is going to cover that. And thank goodness, our sellers generally do a really good job on making sure things don't arrive damaged and putting the tracking on there. We estimate that it's about $25 million annualized that we're putting -- we're taking from our P&L. We're going to make sure that, that item is covered, and the buyer doesn't get left holding the bag. I mean it's an okay experience for them, that it gets taken care of in a clean way. So we've -- we recently did a transaction fee increase. And part of that transaction fee increase is being -- is to cover this increased investment off our P&L, so we can keep our margins whole. We've also invested considerably in our -- what we call our trust and safety organization. And that's about marketplace integrity and marketplace compliance, that the items that you find on Etsy are -- follow our policy, follow our values. We do a great deal of manual and algorithm and takedown of sellers or listings if they are not matching our policies to keep the marketplace safe, not just for buyers, but that all the other sellers that are selling legitimately on the site are kept -- the integrity is consistent and universal for everybody.

Great. I also want to spend some time on your advertising offering, and maybe let's start with onsite. What's the value proposition you're providing to your sellers with your advertising offering?

So Etsy has 2 -- and we're talking advertising. These are the ad products that we create for our sellers to advertise. There's a whole other category that's Etsy's P&L.

And we're going to talk about that as well?

Yes, we are. And I also said I would get back to the -- give more color on search and I didn't, so I will squeeze that in. I'll answer the advertising question, and I will just give you some color on search. So the 2 products are Etsy Ads, which are -- gives -- it's the old paid inclusion model really gives sellers the ability to advertise on Etsy site. It gives the seller more prominence in the search results. And then the other product is called offsite ads, where the seller can use some of their budget to have their listings appear in a PLA ad mostly on Google. Let's start with Etsy Ads. That product has grown and grown. A lot of the growth comes because the ads are increasingly more relevant because they're benefiting from the improvements in our own search algorithms and our own search. So the more relevant the paid advertising is, the higher the click-through rate. And the higher the click-through rate, the higher the return on ad spend for the seller. And we've been able to -- we set a minimum floor on what that return on ad spend has to be because we want it to be a good experience for the seller. That product has grown over 500% in the last 5 years versus the Etsy Marketplace revenue on its own has grown 250%. So it's growing significantly faster than the other parts of our business, and it's been -- all the while we've kept that return on ad spend really healthy for the sellers. We've increased seller budgets by -- we've seen an increase of about 80%. And we can't even spend it all because we put that minimum floor on ROAS, so we won't spend it if we can't deliver that minimum ROAS. We see opportunity to expand the product. For instance, last quarter, we added Etsy Ads on our homepage where they weren't before. So we'll continue to invest in sort of the efficacy of that -- of the search results so we can keep making improvements in click-through rates and keep looking for places where it makes sense to integrate Etsy Ads in other parts of our site. Offsite ads is more of a compulsory product. So if you're a seller on Etsy, and we include your listing in our -- in the feed we give to Google for a PLA ad, and somebody clicks on that listing and it turns into a successful sale, the seller will pay slightly higher transaction fee if they get a successful sale from that click. They don't pay anything if they don't make a sale. So there's -- you can imagine, there's often a case a case where somebody clicks on that listing, they come over to that seller's listing. They don't buy that, but they buy something else. Nobody is paying in that case. It's really the old retail co-op ad model, where the sellers are paying some, and Etsy's paying some. So about 40% of Etsy's performance marketing is offset by this contribution from sellers on the offsite ads product. So it's also a very high ROAS. They pay between 12% and 15% for that transaction fee for that PLA. And that's something like a 6 to 8x ROAS for them.

Let's pivot to take rates actually for a moment. So you recently introduced a change to your transaction fee structure on etsy.com, and you were clear on your intention to leverage this as an opportunity to increase the value for your sellers. How are you broadly thinking about the current transaction pricing structure and the value you're providing to the seller base versus some of the other marketplaces out there? And how do you think about the take rate trajectory going from here?

So good thing that you said take rate also. So take rate has increased. It doesn't always increase because of the headline transaction fee changing. So examples of ways to bring take rate up have been things like Etsy Ads, which I just talked about. We -- when we worked really hard on incorporating shipping costs into item price so that we could have more of the listings on Etsy be reflected as shipping included or free shipping eligible, that also brought take rate up. We've made lots of strides in expanding Etsy payments to more markets, which also brings the take rate up. So a lot of those things raise take rate. At the end of Q2, we were at 19.3% take rate. That puts us sort of in the middle of the pack. It's sometimes hard to compare apples to apples. So we're not the highest take rate for a marketplace, but we're not the lowest either. And our credo has always been fair exchange of value. We would look at increases to take rate as long as we're giving some value to the sellers. It's not just the wholesale. We want more money. We're going to take the take rate up. The biggest change that we made recently was a change to the transaction fee, which is indeed a take rate increase. So I should add that offsite ads, all of that, that I explained before, it effectively was a 1% -- it ended up being a 1% take rate increase across all of those puts and takes of a slightly higher transaction fee on successful PLA listings. So this past year, we changed the headline take rate. The headline take rate was at 5%. We changed it to 6.5%. That's the second time in Etsy's history that we've taken a change to that headline take rate. But we do that with -- we're taking the price up, but we're going to spend more on -- in this case, we want to spend more on the Etsy purchase protection. We wanted to spend more on transaction -- sorry, on trust and safety. We want to spend more on further product investment and also continue to fund marketing at a healthy level. The last time we took the take rate up, it went from 3.5% to 5%. And almost 80% of that increase was reinvested in things like marketing and more seller tools and communications. So that exchange of value, if you ask the seller what they want from us, they probably won't give you this answer, but what they really need are more buyers, more buyers. So we want to -- really investing in the marketplace and the trusted brand really helps increase buyers and buyer conversion, and it really helps the seller. And so overall, from the vantage point we've seen and we're doing something for the marketplace, it's beneficial to buyers, it's beneficial to sellers, and it's also beneficial to Etsy.

In the interest of time, maybe let's move on to margins and some of the expense line items. So from like a high-level perspective, how do you think about balancing growth, reinvesting in the business and margin expansion, both the near and long term?

So we -- as I said, we really love our marketplace model because we have a pretty high conversion of EBITDA to cash flow. And we have -- we enjoy healthy margins because we were not invested in a lot of the things that -- the physical apparatus that you need in the full supply chain. On our last call, we actually also talked about how we see the buckets of OpEx. So a high percentage of our total cost base is 100% variable with revenue. A good example of that is performance marketing. The higher the GMS, the more we can lean into to performance marketing. Another good example might be credit card processing fees and things like that. They're highly variable with revenue and dynamically move up or down based on what's happening with GMS. The second bucket I call semi-variable. Those are things that are not fixed cost but are harder to pull back on, but we have -- we can make those choices. So comp costs, a lot of the comp cost, for instance, is semi-variable. And just, in fact, in this last quarter, we talked about we had been investing a lot in people. In fact, when our GMS and revenue shot up during 2020 and 2021, our product development costs as a percentage of our revenue dropped steeply because we couldn't react -- we could keep hiring, but you can't, all of a sudden, hire triple or quadruple. It still takes some time. And we wouldn't do that anyway. We are patient and picky about the talent that we bring into the company. So it took a while. But in this last quarter, product development finally got to a level that we think -- as a percentage of revenue got to a level that we think is healthy. But now as we see some headwinds in the second half of the year, we said we would slow hiring down commensurate with the pace of GMS growth. And then we have a percentage of our cost that R&D fixed. Maybe the leases to our office buildings would be in that category, a certain percentage of the comp, public company costs and things like that are fixed. So we really feel like we're in a strong economic position about having a high flow-through of incremental revenue to the bottom line. Our EBITDA in the last quarter was a 28% margin on a consolidated basis, but we have said that about 400 basis points of contraction comes from our investment in our subsidiary brands. The guidance we gave for the third quarter was 26% margin. So if you add that 400 basis points on top, we're still at about 30% margins for Etsy's core business. And we've been well over 30% on prior quarters, demonstrating that the model is scalable and supports that kind of high profitability level. But we reserve -- we're still a relatively young company with a lot of opportunity to invest. And so we still reserve the right to like we want to make good prudent investments. We don't -- we're not a growth-at-all-cost kind of company. We're sort of -- we like to balance profitable growth, and I think we've been demonstrating that over the past few years.

The last 2 minutes I'd like to spend on capital allocation. You acquired 3 companies over the past few years, or 3 years actually. Can you just remind us how you think about the potential for strategic M&A to kind of like expand your footprint, your offering? And then beyond M&A, how do you think about capital allocation?

Yes. And I'm going to squeeze in the extra commentary I wanted to do on search as part of this answer.

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That's okay. I've said in the past that there's like really 3 -- because academically speaking, there's 3 ways you can spend capital. There's sort of organic internal investments, which is where the search investments may come in, and there's M&A, and then there's return of capital. And the organic, just speaking about search, we've invested a lot of our product and engineering talent in the solving or the search opportunity. And I'll say you're never really done there. But in the past few years, we've actually really built up and matured 3 different search models. One of them is tech space. That's an exact match to the query that you put into the search results. The second one is what we call XWalk. That's more relational meaning I know what Alexandra likes to buy. I know what she -- how much time she's dwelled on such and such item. I know a lot about the seller. Are they -- do they ship on time? Do they have a good return policy? I know a lot about the item. It's nautical, and it's in the home and furnishing -- home furnishing category. And you can merge all those things to give a better result. She might get a different set of results than I would get for that same query. And the last one is neural IR, which is semantic, inferring what you mean. So you might type in wedding gown, and you don't get some of the results being the kind of dressing gown like a bathrobe. They're all going to be gowns. We've started to merge all those together, so we're getting even better search results. And that's an example of us putting our own P&L to work on things that we think are good product investments for us. On M&A, the vectors we look at would be geographic category, IP, talent, I'm probably missing a couple of vectors. And you've seen us do some M&A where several years ago, I mean, even before Josh and I joined in the company, we bought a company called Blackbird that was high on machine learning, talent. In a couple of years ago, we invested in a company called DaWanda in Germany that was basically a geographic extension, and we just did a referral agreement where we just added their audience to ours. And then most recently, we bought in a new category, Depop in the -- based in the U.K., but with robust growing U.S. audience that is in what we call the e-commerce space, fashion and apparel category we are already in, but it expands our presence in that category, and geographic with the acquisition of Elo7 in Brazil, where -- a market that we weren't in. Those businesses, we think, have significant opportunity. It's fair to say they faced stiffer headwinds from the macro environment than we had anticipated when we made those acquisitions, but we see so much opportunity. We've recently placed one of our very brightest and best Etsy executives and as the CEO for Depop, and her first day was 2 days ago. Excited to talk more about that. And lastly, on return of capital, we do have a $600 million share repurchase authorization from our Board. We like to offset the dilution that's created from granting equity to our employees by doing share repurchase authorization. I will say that, that $600 million was granted at a time when the stock price was much higher. So it gives us a lot more room for repurchasing that might go beyond -- potentially has the ability to go beyond just offsetting the equity dilution. I got a lot in there in that last. Thank you all.

Well, thank you so much for joining us today, and it was great to see you.

Thank you.

Thank you so much.

Great to see you, too.