BROOKLYN, N.Y., May 1, 2024 /PRNewswire/ -- Etsy, Inc. (NASDAQ:ETSY), which operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world, today announced results for its first quarter ended March 31, 2024. "Our first quarter performance, while in line with our guidance, was pressured by the challenging environment for consumer discretionary products, which continues to be a headwind to Etsy marketplace growth," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "That said, we are encouraged by the meaningful progress we have made to improve customer experiences that we expect will drive buyer consideration and frequency over time, and we are working with focus and urgency to set the foundation to reignite Etsy marketplace growth. I'm confident that leaning into our differentiators to make Etsy even more Etsy will help ensure we stand out in the sea of sameness in e-commerce." First quarter 2024 performance highlights include: Consolidated GMS was $3.0 billion, down 3.7% year-over-year and down 4.1% on a currency-neutral basis. Headwinds to consolidated GMS included a still challenging macroeconomic environment that impacted consumer discretionary product spending, as well as a small headwind from the prior year divestiture of Elo7. Etsy marketplace GMS was $2.6 billion, down 5.3% year-over-year and down 5.6% on a currency-neutral basis. Gift ModeTM is off to a solid start as one important component to drive awareness of Etsy as a destination for gift giving. In the first quarter, Etsy's site-wide 'Gifting' GMS1 grew low single digits on a year-over-year basis, outperforming the Etsy marketplace's overall growth and select U.S. online gifting 'pure play' peers2. Active buyers increased 1.9% year-over-year to 91.6 million, largely flat on a sequential basis. United States active buyers grew slightly on a year-over-year basis for the third quarter in a row, and we continued to see healthy year-over-year growth in international active buyers. We reactivated 6.3 million buyers, up 5.9% from the prior year period, and acquired 5.7 million new buyers. Our retention of active buyers increased modestly from the prior year and remains above pre-pandemic levels on a trailing twelve month basis. While GMS per active buyer on a trailing twelve month basis for the Etsy marketplace declined 3.5% year-over-year to $125 in the first quarter, trends in this metric continued to show signs of stabilization on a sequential basis. Our number of habitual buyers was 7 million, down 2.9% year-over-year, although our retention rate of habitual buyers was slightly better compared to the fourth quarter of 2023 and on a year-over-year basis. U.S. domestic GMS represented 52% of overall GMS and GMS ex-U.S. domestic was 48% of overall GMS. Consolidated revenue was $646.0 million, up 0.8% versus the first quarter of 2023, with a take rate (i.e., consolidated revenue divided by consolidated GMS) of 21.6%. Our modestly positive revenue growth was primarily driven by growth in payments revenue, transaction fee revenue from Offsite Ads, and Etsy Ads. Consolidated net income was $63.0 million, down $11.5 million year-over-year. Consolidated net income margin (i.e., net income divided by revenue) was approximately 9.8% and diluted net income per share was $0.48. Consolidated non-GAAP Adjusted EBITDA was $167.9 million, with consolidated non-GAAP Adjusted EBITDA margin (i.e., consolidated non-GAAP Adjusted EBITDA divided by consolidated revenue) of approximately 26.0%. Etsy ended the first quarter with $1.1 billion in cash and cash equivalents and short- and long-term investments. Under Etsy's stock repurchase program, during the first quarter of 2024 Etsy repurchased an aggregate of approximately $158 million, or 2.2 million shares, of its common stock. These shares were purchased pursuant to a 10b5-1 plan or in open market purchases. 1Etsy Gifting GMS: Estimate based upon word 'gift' in the listing title, shipped with a gift message, or other signal the item was purchased as a gift.2Source: Consumer Edge spend data from sampling of credit card transactions from online 'gifting' peers Zola, Zazzle, Minted, Uncommon Goods, Hallmark, and Mark and Graham. "On a consolidated basis, our revenue outgrew GMS, and adjusted EBITDA margins were in line with expectations," said Rachel Glaser, Chief Financial Officer. "We believe that our disciplined investment approach and sharp eye on cost management enable us to simultaneously invest in future growth while delivering on profitability. It is encouraging to see continued health in our Etsy marketplace active buyer metric during the first quarter, which remains at record levels - with further improvement in the U.S. and continued growth internationally on a year-over-year basis." First Quarter 2024 Financial Summary(in thousands, except percentages; unaudited) The financial results of Elo7 have been included in our consolidated financial results for the prior year period, as Elo7 was sold on August 10, 2023. The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are: Three Months Ended   March 31, % (Decline) Growth Y/Y 2024 2023 GMS (1) $            2,986,500 $            3,101,358 (3.7) % Revenue $               645,954 $               640,877 0.8 % Marketplace revenue $               466,982 $               467,516 (0.1) % Services revenue $               178,972 $               173,361 3.2 % Gross profit $               458,821 $               445,424 3.0 % Operating expenses $               390,731 $               367,225 6.4 % Net income $                 63,004 $                 74,537 (15.5) % Net income margin 9.8 % 11.6 %                   (180)  bps Adjusted EBITDA (Non-GAAP) $               167,935 $               170,344 (1.4) % Adjusted EBITDA margin (Non-GAAP) 26.0 % 26.6 %                     (60)  bps Active sellers (2) 9,131 7,942 15.0 % Active buyers (2) 96,392 95,526 0.9 % Percent GMS ex-U.S. domestic (1) 45 % 45 %                        —  bps (1) Consolidated GMS for the three months ended March 31, 2024 includes Etsy marketplace GMS of $2.6 billion. Percent GMS ex-U.S. domestic for the Etsy marketplace for the three months ended March 31, 2024 was 48%. (2) Consolidated active sellers and active buyers includes Etsy marketplace active sellers and active buyers of 7.0 million and 91.6 million, respectively, as of March 31, 2024.   First Quarter 2024 Operating Highlights  EtsyOur "Right to Win" is centered on key elements that we believe make the Etsy marketplace a better place to shop and sell and, which, in turn, will bring more buyers, lead to increased frequency and size of purchases, and build trust in the Etsy marketplace. In 2024, we are focused on building buyer consideration by making it easier to 'find the best stuff' on Etsy, driving association that Etsy sellers offer great value, and making shopping on Etsy more reliable and dependable. Here are some of our key initiatives from the first quarter. We successfully launched Gift Mode, our interactive gift shopping experience that combines artificial intelligence ("AI") and human curation to help shoppers find the perfect present. We are in early days of building out the Gift Mode customer experience, with important product launches slated for the second quarter and beyond.  We made significant improvements to Search, including updates to our retrieval engines and ranking algorithms to better understand the context for a buyer's search and the purchase mission they are on. We also improved user engagement, with recommendations based upon their short-term interests on Etsy web and app listing pages.  We highlighted the great value Etsy has to offer, with discount-related signals continuing to drive significant GMS impact. We also introduced new functionality for sellers, such as a 'Growth Page' with customer insights they can use to inform actions to grow their business. For example, a new 'earnings calculator' was launched to assist sellers in understanding the various inputs that go into their profitability.  In our efforts to improve reliability, our fulfillment team launched a new machine learning model aimed at reducing our estimate of United States Postal Service transit times by greater than one day. This initiative resulted in a nearly tripling of the percentage of eligible orders for which Etsy is able to show an estimated delivery date of seven days or less.  We worked to continue to build trust in our marketplace with the introduction of a new seller set-up fee. This fee was part of an effort to strengthen our new shop onboarding process, which also includes testing enhanced identity verification. Tests indicated it resulted in an expected decrease in new shop openings and a significant decline in fraud attempts. Based upon this successful outcome, in early April we rolled out the fee in all eligible countries.  We continued to enhance our Etsy Ads product line as we work to utilize more of our sellers' advertising budgets and maintain strong return on ad spend. During the quarter, we refined Etsy Ads' data retrieval engines to improve conversion predictions and the pace of ad spend throughout the day, which drove a meaningful increase in revenue and GMS. An ads module was added to the buyers' shopping cart page on our website, which increased shop revenue delivered to sellers based upon their advertising spend.  We continued to invest with discipline in our performance marketing channels, optimizing our core channel investments. We also continued to scale up our mid-funnel channels to diversify our channel portfolio mix: including paid social video, app download campaigns, and influencer marketing campaigns.  We implemented full funnel marketing activations across all channels to create breakthrough messaging around gifting, including a Gift Mode brand campaign, which included our first-ever 'Big Game' football advertising, as well as promotions for our Home Refresh Sales event and for Valentine's Day and other key gifting occasions. Etsy recently published a series of blog posts on our Impact activities for 2023, as well as our goals, which can be found on the Etsy News page of our website. Reverb Reverb introduced a 'second-pass' machine learning-based ranking layer in Search that was a big step forward in helping buyers connect with the most relevant and high-quality listings on the marketplace. Reverb also implemented country flags on item cards in the E.U. and U.K. to help buyers find local inventory more easily, and highlighted call to actions to buyers on mobile and web which drove higher conversion. Reverb launched Thank You coupons, which, along with Direct Offers, allow sellers to more easily engage with buyers at multiple touch points on their shopping journey.  Reverb continues to highlight affordability messaging and inspirational content designed to drive conversion, and is also showcasing savings and deals on the site to highlight the marketplace as an affordable place to buy music gear.  Reverb introduced a video-first programming strategy for its marketing channels (such as YouTube, Instagram, and TikTok) - resulting in nearly 17 million organic video views in the first quarter across its social channels. Reverb also began developing integrated campaigns to grow and retain specific types of target customers, such as guitar or synth enthusiasts. 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