x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2018 | |
OR | |
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to |
Delaware | 20-4898921 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
117 Adams Street, Brooklyn, NY | 11201 | |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer x | Accelerated filer ¨ |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
Emerging growth company ¨ |
Page | ||
Note Regarding Forward-Looking Statements | ||
Part I - Financial Information | ||
Item 1. | Consolidated Financial Statements (Unaudited) | |
Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 | ||
Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 | ||
Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2018 and 2017 | ||
Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2018 | ||
Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 | ||
Notes to Consolidated Financial Statements | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
Part II - Other Information | ||
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
Signatures |
As of June 30, 2018 | As of December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 357,820 | $ | 315,442 | |||
Short-term investments | 209,689 | 25,108 | |||||
Accounts receivable, net of allowance for doubtful accounts of $3,568 and $2,687 as of June 30, 2018 and December 31, 2017, respectively | 30,615 | 33,677 | |||||
Prepaid and other current assets | 18,558 | 20,379 | |||||
Funds receivable and seller accounts | 49,551 | 44,658 | |||||
Total current assets | 666,233 | 439,264 | |||||
Restricted cash | 5,341 | 5,341 | |||||
Property and equipment, net of accumulated depreciation and amortization of $75,969 and $66,226 as of June 30, 2018 and December 31, 2017, respectively | 117,024 | 117,617 | |||||
Goodwill | 37,959 | 38,541 | |||||
Intangible assets, net of accumulated amortization | 38,077 | 4,100 | |||||
Other assets | 676 | 720 | |||||
Total assets | $ | 865,310 | $ | 605,583 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 14,760 | $ | 13,622 | |||
Accrued expenses | 35,447 | 28,743 | |||||
Capital lease obligations—current | 4,376 | 5,798 | |||||
Funds payable and amounts due to sellers | 49,551 | 44,658 | |||||
Deferred revenue | 6,440 | 6,262 | |||||
Other current liabilities | 2,925 | 3,394 | |||||
Total current liabilities | 113,499 | 102,477 | |||||
Capital lease obligations—net of current portion | 2,806 | 4,115 | |||||
Deferred tax liabilities | 32,292 | 23,786 | |||||
Facility financing obligation | 60,025 | 60,049 | |||||
Long-term debt, net | 269,133 | — | |||||
Other liabilities | 17,464 | 18,262 | |||||
Total liabilities | 495,219 | 208,689 | |||||
Commitments and contingencies (Note 12) | |||||||
Stockholders’ equity: | |||||||
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of June 30, 2018 and December 31, 2017; 119,545,384 and 121,769,238 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively) | 120 | 122 | |||||
Preferred Stock ($0.001 par value, 25,000,000 shares authorized as of June 30, 2018 and December 31, 2017) | — | — | |||||
Additional paid-in capital | 546,121 | 499,441 | |||||
Accumulated deficit | (169,602 | ) | (96,290 | ) | |||
Accumulated other comprehensive loss | (6,548 | ) | (6,379 | ) | |||
Total stockholders’ equity | 370,091 | 396,894 | |||||
Total liabilities and stockholders’ equity | $ | 865,310 | $ | 605,583 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue | $ | 132,387 | $ | 101,692 | $ | 253,299 | $ | 198,583 | |||||||
Cost of revenue | 45,409 | 35,724 | 86,704 | 70,383 | |||||||||||
Gross profit | 86,978 | 65,968 | 166,595 | 128,200 | |||||||||||
Operating expenses: | |||||||||||||||
Marketing | 28,941 | 27,521 | 55,135 | 50,975 | |||||||||||
Product development | 23,568 | 21,754 | 44,289 | 39,870 | |||||||||||
General and administrative | 21,707 | 28,411 | 40,611 | 51,174 | |||||||||||
Total operating expenses | 74,216 | 77,686 | 140,035 | 142,019 | |||||||||||
Income (loss) from operations | 12,762 | (11,718 | ) | 26,560 | (13,819 | ) | |||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (6,125 | ) | (2,696 | ) | (9,889 | ) | (5,287 | ) | |||||||
Interest and other income | 2,438 | 543 | 3,535 | 982 | |||||||||||
Foreign exchange (loss) gain | (4,450 | ) | 16,103 | (2,600 | ) | 18,883 | |||||||||
Total other (expense) income | (8,137 | ) | 13,950 | (8,954 | ) | 14,578 | |||||||||
Income before income taxes | 4,625 | 2,232 | 17,606 | 759 | |||||||||||
(Provision) benefit for income taxes | (1,246 | ) | 9,437 | (1,260 | ) | 10,489 | |||||||||
Net income | $ | 3,379 | $ | 11,669 | $ | 16,346 | $ | 11,248 | |||||||
Net income per share attributable to common stockholders: | |||||||||||||||
Basic | $ | 0.03 | $ | 0.10 | $ | 0.14 | $ | 0.10 | |||||||
Diluted | $ | 0.03 | $ | 0.10 | $ | 0.13 | $ | 0.10 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 119,450,194 | 116,933,216 | 120,819,201 | 116,453,790 | |||||||||||
Diluted | 125,551,759 | 120,723,938 | 126,186,664 | 120,424,631 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 3,379 | $ | 11,669 | $ | 16,346 | $ | 11,248 | |||||||
Other comprehensive loss: | |||||||||||||||
Cumulative translation adjustment | (276 | ) | (13,381 | ) | (152 | ) | (16,336 | ) | |||||||
Unrealized gains (losses) on marketable securities, net of tax | 9 | 11 | (17 | ) | (11 | ) | |||||||||
Total other comprehensive loss | (267 | ) | (13,370 | ) | (169 | ) | (16,347 | ) | |||||||
Comprehensive income (loss) | $ | 3,112 | $ | (1,701 | ) | $ | 16,177 | $ | (5,099 | ) |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance as of December 31, 2017 | 121,769,238 | $ | 122 | $ | 499,441 | $ | (96,290 | ) | $ | (6,379 | ) | $ | 396,894 | |||||||||
Stock-based compensation | — | — | 14,450 | — | — | 14,450 | ||||||||||||||||
Exercise of vested options | 947,642 | 1 | 10,724 | — | — | 10,725 | ||||||||||||||||
Issuance of convertible senior notes, net of issuance costs and taxes | — | — | 54,214 | — | — | 54,214 | ||||||||||||||||
Purchase of capped call, net of taxes | — | — | (26,243 | ) | — | — | (26,243 | ) | ||||||||||||||
Vesting of restricted stock units, net of shares withheld | 358,838 | — | (7,898 | ) | — | — | (7,898 | ) | ||||||||||||||
Stock repurchase | (3,530,334 | ) | (3 | ) | — | (89,658 | ) | — | (89,661 | ) | ||||||||||||
Stock-based compensation—acquisitions | — | — | 1,433 | — | — | 1,433 | ||||||||||||||||
Other comprehensive loss | — | — | — | — | (169 | ) | (169 | ) | ||||||||||||||
Net income | — | — | — | 16,346 | — | 16,346 | ||||||||||||||||
Balance as of June 30, 2018 | 119,545,384 | $ | 120 | $ | 546,121 | $ | (169,602 | ) | $ | (6,548 | ) | $ | 370,091 | |||||||||
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 16,346 | $ | 11,248 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Stock-based compensation expense | 13,638 | 10,592 | |||||
Stock-based compensation expense—acquisitions | 1,433 | 2,455 | |||||
Depreciation and amortization expense | 12,677 | 13,598 | |||||
Bad debt expense | 1,961 | 863 | |||||
Foreign exchange loss (gain) | 2,600 | (18,883 | ) | ||||
Amortization of debt issuance costs | 475 | 110 | |||||
Non-cash interest expense | 4,335 | 4,368 | |||||
Interest on marketable securities | (922 | ) | 302 | ||||
Loss on disposal of assets | 26 | 89 | |||||
Deferred income taxes | (377 | ) | — | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 922 | 1,008 | |||||
Funds receivable and seller accounts | (5,272 | ) | (4,436 | ) | |||
Prepaid expenses and other current assets | 2,545 | (13,172 | ) | ||||
Other assets | 32 | (54 | ) | ||||
Accounts payable | 368 | (2,282 | ) | ||||
Accrued and other current liabilities | 5,975 | 3,928 | |||||
Funds payable and amounts due to sellers | 5,272 | 4,436 | |||||
Deferred revenue | 233 | 27 | |||||
Other liabilities | 4,245 | 1,251 | |||||
Net cash provided by operating activities | 66,512 | 15,448 | |||||
Cash flows from investing activities | |||||||
Cash paid for asset acquisition | (35,323 | ) | — | ||||
Purchases of property and equipment | (304 | ) | (3,593 | ) | |||
Development of internal-use software | (8,146 | ) | (6,604 | ) | |||
Purchases of marketable securities | (234,149 | ) | (29,462 | ) | |||
Sales of marketable securities | 50,472 | 69,290 | |||||
Net cash (used in) provided by investing activities | (227,450 | ) | 29,631 | ||||
Cash flows from financing activities | |||||||
Repurchase of stock for tax on RSU vesting | (7,898 | ) | (2,028 | ) | |||
Repurchase of stock | (89,661 | ) | — | ||||
Proceeds from exercise of stock options | 10,725 | 6,376 | |||||
Proceeds from issuance of convertible senior notes | 345,000 | — | |||||
Payment of debt issuance costs | (9,561 | ) | — | ||||
Purchase of capped call | (34,224 | ) | — | ||||
Payments on capital lease obligations | (3,421 | ) | (3,742 | ) | |||
Payments on facility financing obligation | (5,469 | ) | (1,224 | ) | |||
Net cash provided by (used in) financing activities | 205,491 | (618 | ) | ||||
Effect of exchange rate changes on cash | (2,175 | ) | 832 | ||||
Net increase in cash, cash equivalents and restricted cash | 42,378 | 45,293 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 320,783 | 186,933 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 363,161 | $ | 232,226 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Supplemental non-cash disclosures | |||||||
Equipment acquired under capital lease obligations | $ | 690 | $ | 5,152 | |||
Stock-based compensation capitalized in development of capitalized software | $ | 812 | $ | 525 | |||
Additions to development of internal-use software and property and equipment included in accounts payable and accrued expenses | $ | 1,663 | $ | 176 | |||
Debt issuance costs included in accounts payable and accrued expenses | $ | 406 | $ | — |
As of June 30, 2018 | As of December 31, 2017 | ||||||
Cash and cash equivalents | $ | 357,820 | $ | 315,442 | |||
Short-term investments | 209,689 | 25,108 | |||||
Total cash, cash equivalents and short-term investments | $ | 567,509 | $ | 340,550 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Beginning balance: | |||||||
Cash and cash equivalents | $ | 315,442 | $ | 181,592 | |||
Restricted cash | 5,341 | 5,341 | |||||
Total cash, cash equivalents and restricted cash | $ | 320,783 | $ | 186,933 | |||
Ending balance: | |||||||
Cash and cash equivalents | $ | 357,820 | $ | 226,885 | |||
Restricted cash | 5,341 | 5,341 | |||||
Total cash, cash equivalents and restricted cash | $ | 363,161 | $ | 232,226 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Marketplace revenue (1) | $ | 91,306 | $ | 75,445 | $ | 179,273 | $ | 146,007 | |||||||
Services revenue | 39,507 | 25,440 | 72,112 | 49,584 | |||||||||||
Other revenue | 1,574 | 807 | 1,914 | 2,992 | |||||||||||
Revenue | $ | 132,387 | $ | 101,692 | $ | 253,299 | $ | 198,583 |
(1) | Etsy Payments revenue for the three and six months ended June 30, 2018 has been classified and presented within Marketplace revenue. Comparative periods have been reclassified to conform to current period presentation. |
• | Revenue from Promoted Listings, the Company's on-site advertising service, consists of cost-per-click fees an Etsy seller pays for prominent placement of the seller's listings in search results in the Company's marketplace. Promoted Listings fees are based on an auction system, which utilizes the budget that each Etsy seller sets when using Promoted Listings to determine the cost-per-click fee. Promoted Listing fees are nonrefundable and are charged to a seller’s Etsy bill when the Promoted Listing is clicked; at which time revenue is recognized. |
• | Revenue from Etsy Shipping Labels consists of fees an Etsy seller pays the Company when the seller purchases shipping labels through our platform, net of the cost the Company incurs in purchasing those shipping labels. The Company provides sellers access to purchase shipping labels from the United States Postal Service, FedEx, and Canada Post at discounted pricing due to the volume of purchases through its platform. The Company recognizes Etsy Shipping Label revenue when an Etsy seller purchases a shipping label. The Company recognizes Etsy Shipping Label revenue on a net basis as the Company is an agent in this arrangement and does not take ownership of shipping labels prior to transferring the labels to the Etsy Seller. Etsy Shipping Label revenue is recorded net of refunds. |
• | Revenue from Pattern by Etsy consists of monthly subscription fees an Etsy seller pays to use the Company's custom website services. The Company recognizes revenue from Pattern ratably over the term of the subscription. The Pattern subscription fee is $15 per month and is nonrefundable. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2018 | 2018 | ||||||
Balance as of the beginning of the period | $ | 6,464 | $ | 6,262 | |||
Cash payments received or due | 18,452 | 36,603 | |||||
Revenue recognized in the period | (18,476 | ) | (36,425 | ) | |||
Balance as of the end of the period | $ | 6,440 | $ | 6,440 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
Volatility | 38.6% - 42.1% | 41.7% - 44.2% | 38.6% - 42.1% | 41.7% - 44.2% | |||
Risk-free interest rate | 2.8% - 2.9% | 1.9% - 2.0% | 2.6% - 2.9% | 1.9% - 2.0% | |||
Expected term (in years) | 5.5 - 6.08 | 5.5 - 6.3 | 5.5 - 6.25 | 5.5 - 6.3 | |||
Dividend rate | —% | —% | —% | —% |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contract Term (in years) | Aggregate Intrinsic Value | |||||||||
Outstanding at December 31, 2017 | 7,947,939 | $ | 11.02 | |||||||||
Granted | 742,709 | 28.11 | ||||||||||
Exercised | (947,642 | ) | 11.32 | |||||||||
Forfeited/Canceled | (148,365 | ) | 13.07 | |||||||||
Outstanding at June 30, 2018 | 7,594,641 | 12.61 | 8.31 | $ | 224,619 | |||||||
Total exercisable at June 30, 2018 | 2,814,740 | 10.57 | 7.31 | 89,010 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Weighted-average grant date fair value of options granted | $ | 13.51 | $ | 4.73 | $ | 12.50 | $ | 4.71 | |||||||
Intrinsic value of options exercised | 1,397 | 11,135 | 11,196 | 12,866 | |||||||||||
Fair value of awards vested | 11,469 | 6,695 | 14,399 | 10,485 |
Shares | Weighted-Average Grant Date Fair Value | |||||
Unvested at December 31, 2017 | 3,074,247 | $ | 11.98 | |||
Granted | 2,141,543 | 25.70 | ||||
Vested | (650,978 | ) | 11.00 | |||
Forfeited/Canceled | (215,469 | ) | 13.76 | |||
Unvested at June 30, 2018 | 4,349,343 | 19.66 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of revenue | $ | 927 | $ | 398 | $ | 1,473 | $ | 762 | |||||||
Marketing | 699 | 528 | 1,177 | 972 | |||||||||||
Product development | 4,025 | 2,053 | 6,664 | 4,073 | |||||||||||
General and administrative | 2,966 | 5,183 | 5,757 | 7,240 | |||||||||||
Total stock-based compensation expense | $ | 8,617 | $ | 8,162 | $ | 15,071 | $ | 13,047 |
Shares Repurchased | Average Price Paid per Share (1) | Value of Shares Repurchased (1) | Remaining Amount Authorized | |||||||||||
Balance as of December 31, 2017 | 586,231 | $ | 17.57 | $ | 10,301 | $ | 89,699 | |||||||
Repurchases of common stock for the three months ended: | ||||||||||||||
March 31, 2018 | 2,807,393 | 24.43 | 68,586 | (68,586 | ) | |||||||||
June 30, 2018 | 722,941 | 29.15 | 21,113 | (21,113 | ) | |||||||||
Balance as of June 30, 2018 | 4,116,565 | $ | 24.28 | $ | 100,000 | $ | — |
As of June 30, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Commercial paper | $ | — | $ | 25,984 | $ | — | $ | 25,984 | |||||||
Money market funds | 233,234 | — | — | 233,234 | |||||||||||
233,234 | 25,984 | — | 259,218 | ||||||||||||
Short-term investments: | |||||||||||||||
Commercial paper | — | 110,996 | — | 110,996 | |||||||||||
Corporate bonds | — | 46,793 | — | 46,793 | |||||||||||
U.S. Government and agency securities | 51,900 | — | — | 51,900 | |||||||||||
51,900 | 157,789 | — | 209,689 | ||||||||||||
Funds receivable and seller accounts: | |||||||||||||||
Money market funds | 20,182 | — | — | 20,182 | |||||||||||
20,182 | — | — | 20,182 | ||||||||||||
$ | 305,316 | $ | 183,773 | $ | — | $ | 489,089 |
As of December 31, 2017 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Commercial paper | $ | — | $ | 11,290 | $ | — | $ | 11,290 | |||||||
Money market funds | 204,867 | — | — | 204,867 | |||||||||||
U.S. Government and agency securities | 24,989 | — | — | 24,989 | |||||||||||
229,856 | 11,290 | — | 241,146 | ||||||||||||
Short-term investments: | |||||||||||||||
Commercial paper | — | 2,998 | — | 2,998 | |||||||||||
Corporate bonds | — | 12,748 | — | 12,748 | |||||||||||
U.S. Government and agency securities | 9,362 | — | — | 9,362 | |||||||||||
9,362 | 15,746 | — | 25,108 | ||||||||||||
Funds receivable and seller accounts: | |||||||||||||||
Money market funds | 14,144 | — | — | 14,144 | |||||||||||
14,144 | — | — | 14,144 | ||||||||||||
$ | 253,362 | $ | 27,036 | $ | — | $ | 280,398 |
Cost | Gross Unrealized Holding Loss | Gross Unrealized Holding Gain | Fair Value | ||||||||||||
June 30, 2018 | |||||||||||||||
Cash equivalents: | |||||||||||||||
Commercial paper | $ | 25,984 | $ | — | $ | — | $ | 25,984 | |||||||
25,984 | — | — | 25,984 | ||||||||||||
Short-term investments: | |||||||||||||||
Commercial paper | 110,996 | — | — | 110,996 | |||||||||||
Corporate bonds | 46,814 | (21 | ) | — | 46,793 | ||||||||||
U.S. Government and agency securities | 51,893 | (5 | ) | 12 | 51,900 | ||||||||||
209,703 | (26 | ) | 12 | 209,689 | |||||||||||
$ | 235,687 | $ | (26 | ) | $ | 12 | $ | 235,673 | |||||||
December 31, 2017 | |||||||||||||||
Cash equivalents: | |||||||||||||||
Commercial paper | $ | 11,290 | $ | — | $ | — | $ | 11,290 | |||||||
U.S. Government and agency securities | 24,990 | (1 | ) | — | 24,989 | ||||||||||
36,280 | (1 | ) | — | 36,279 | |||||||||||
Short-term investments: | |||||||||||||||
Commercial paper | 2,998 | — | — | 2,998 | |||||||||||
Corporate bonds | 12,754 | (6 | ) | — | 12,748 | ||||||||||
U.S. Government and agency securities | 9,352 | (1 | ) | 11 | 9,362 | ||||||||||
25,104 | (7 | ) | 11 | 25,108 | |||||||||||
$ | 61,384 | $ | (8 | ) | $ | 11 | $ | 61,387 |
As of June 30, 2018 | As of December 31, 2017 | ||||||||||||||||||||||
Gross book value | Accumulated amortization | Net book value | Gross book value | Accumulated amortization | Net book value | ||||||||||||||||||
Patents and developed technology | $ | 7,200 | $ | (4,300 | ) | $ | 2,900 | $ | 7,200 | $ | (3,100 | ) | $ | 4,100 | |||||||||
Referral agreement | 35,323 | (146 | ) | 35,177 | — | — | — | ||||||||||||||||
Total intangible assets | $ | 42,523 | $ | (4,446 | ) | $ | 38,077 | $ | 7,200 | $ | (3,100 | ) | $ | 4,100 |
2018 | $ | 2,969 | |
2019 | 5,232 | ||
2020 | 3,532 | ||
2021 | 3,532 | ||
2022 | 3,532 | ||
Thereafter | 19,280 | ||
Total amortization expense | $ | 38,077 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator: | |||||||||||||||
Net income | $ | 3,379 | $ | 11,669 | $ | 16,346 | $ | 11,248 | |||||||
Net income allocated to participating securities under the two-class method | (3 | ) | (17 | ) | (16 | ) | (16 | ) | |||||||
Net income applicable to common stockholders—basic | 3,376 | 11,652 | 16,330 | 11,232 | |||||||||||
Dilutive effect of net income allocated to participating securities under the two-class method | 3 | 17 | 16 | 16 | |||||||||||
Change in fair value of liability classified restricted stock | — | 832 | — | 771 | |||||||||||
Net income attributable to common stockholders—diluted | $ | 3,379 | $ | 12,501 | $ | 16,346 | $ | 12,019 | |||||||
Denominator: | |||||||||||||||
Weighted-average common shares outstanding—basic (1) | 119,450,194 | 116,933,216 | 120,819,201 | 116,453,790 | |||||||||||
Common equivalent shares from options to purchase common stock and restricted stock units | 3,964,746 | 2,921,081 | 3,559,951 | 3,118,640 | |||||||||||
Dilutive effect of assumed conversion of restricted stock units | 2,053,861 | 844,331 | 1,733,777 | 838,890 | |||||||||||
Dilutive effect of assumed conversion of restricted stock from acquisition | 82,958 | 25,310 | 73,735 | 13,311 | |||||||||||
Weighted-average common shares outstanding—diluted | 125,551,759 | 120,723,938 | 126,186,664 | 120,424,631 | |||||||||||
Net income per share attributable to common stockholders—basic | $ | 0.03 | $ | 0.10 | $ | 0.14 | $ | 0.10 | |||||||
Net income per share attributable to common stockholders—diluted | $ | 0.03 | $ | 0.10 | $ | 0.13 | $ | 0.10 |
(1) | 114,963 shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for the three and six months ended June 30, 2018. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Stock options | 642,418 | 6,201,891 | 421,412 | 4,451,613 | |||||||
Restricted stock units | 118,209 | 648,762 | 1,054,803 | 1,065,495 | |||||||
Total anti-dilutive securities | 760,627 | 6,850,653 | 1,476,215 | 5,517,108 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
United States | $ | 96,805 | $ | 73,546 | $ | 181,728 | $ | 145,068 | |||||||
International | 35,582 | 28,146 | 71,571 | 53,515 | |||||||||||
Revenue | $ | 132,387 | $ | 101,692 | $ | 253,299 | $ | 198,583 | |||||||
United States | $ | 8,017 | $ | (22,702 | ) | $ | 5,752 | $ | (32,305 | ) | |||||
International (1) | (3,392 | ) | 24,934 | 11,854 | 33,064 | ||||||||||
Income (loss) before income taxes | $ | 4,625 | $ | 2,232 | $ | 17,606 | $ | 759 | |||||||
United States | $ | 7,525 | $ | (12,609 | ) | $ | 5,507 | $ | (20,935 | ) | |||||
International (1) | (4,146 | ) | 24,278 | 10,839 | 32,183 | ||||||||||
Net income (loss) | $ | 3,379 | $ | 11,669 | $ | 16,346 | $ | 11,248 |
(1) | The loss before income taxes and net loss in the three months ended June 30, 2018 was primarily driven by a foreign exchange loss related to the U.S. Dollar to Euro exchange rate fluctuations on the Company's intercompany and other non-functional currency balances. |
Severance Charge | Stock-Based Compensation | Other Exit Costs | Total | ||||||||||||
Balance, December 31, 2017 | $ | 1,308 | $ | — | $ | 34 | $ | 1,342 | |||||||
Total restructuring and other exit costs (income) | (156 | ) | — | 5 | (151 | ) | |||||||||
Costs charged against equity/assets | — | — | — | — | |||||||||||
Cash payments | (793 | ) | — | — | (793 | ) | |||||||||
Balance, March 31, 2018 | 359 | — | 39 | 398 | |||||||||||
Total restructuring and other exit costs (income) | (43 | ) | — | 2 | (41 | ) | |||||||||
Costs charged against equity/assets | — | — | — | — | |||||||||||
Cash payments | (271 | ) | — | (16 | ) | (287 | ) | ||||||||
Balance, June 30, 2018 | $ | 45 | $ | — | $ | 25 | $ | 70 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of revenue | $ | (6 | ) | $ | 694 | $ | (13 | ) | $ | 694 | |||||
Marketing | (13 | ) | 2,349 | (72 | ) | 2,349 | |||||||||
Product development | (16 | ) | 3,101 | (95 | ) | 3,101 | |||||||||
General and administrative | (6 | ) | 5,116 | (12 | ) | 5,116 | |||||||||
Total restructuring and other exit costs (income) | $ | (41 | ) | $ | 11,260 | $ | (192 | ) | $ | 11,260 |
• | Enhancing search and discovery. Helping buyers better navigate the over 50 million items on Etsy.com is a key area of focus. |
• | Improving trust and reliability. We want to ensure that the Etsy brand delivers trust and reliability throughout the buying experience and improve conversion. |
• | Building world-class marketing capabilities. We are focused on driving traffic to Etsy.com utilizing our own marketing efforts and the efforts of our sellers, primarily through digital acquisition marketing, search engine optimization, social channels, and email. |
• | Providing best-in-class seller tools and services. We plan to continue to invest in tools and paid services that enable Etsy sellers to start, manage, and scale their businesses. |
Etsy Standard | Etsy Plus | Etsy Premium | ||
Currently available | Available as of July 15, 2018 | Available 2019 | ||
• Access to the nearly 36 million active buyers in Etsy’s marketplace• All the seller tools and services Etsy currently offers that help creative entrepreneurs start, manage, and grow a business | • Access to everything in Etsy Standard• Advanced shop customization options• Targeted restock notifications• Discounts on branded packaging and promotional materials• Free or discounted custom web addresses• $5 monthly Promoted Listing credit and 15 free monthly listing credits | • Access to everything in Etsy Standard and Etsy Plus• Advanced management tools specifically designed for business owners with employees• Premium customer support• More details to be announced in the coming months |
• | Enhancing search and discovery: We continued to launch new product enhancements and build upon prior launches to help buyers find the right product at the right time, or discover inspiration among the items in our marketplace. We began to localize search results by using context specific ranking to improve the experience for buyers around the world who visit Etsy.com. We also ran several experiments surfacing user-generated curated collections, which were featured on the homepage and within search, as well as in our email and social channels. |
• | Improving trust and reliability: We launched several product enhancements aimed at bolstering trust on the platform and improving conversion rates. We continued to make customer support improvements, and in July, we launched Klarna, a pay later option for buyers in Germany, to help remove friction from the checkout process and support alternative payment options common to the region. |
• | Building world-class marketing capabilities: We made structural improvements to Search Engine Optimization, one of our largest channels, to drive incremental traffic to Etsy. Other notable developments included launches focused on driving new and existing buyers to Etsy. |
• | Providing best-in-class seller tools and services: We announced subscription packages designed to give sellers more ways to grow their businesses and their brands. Also, we launched a migration tool to transition DaWanda sellers to the Etsy marketplace, made additional improvements to our Sell on Etsy app, launched a tool to better utilize our sellers' Promoted Listings budgets, and focused on improving shipping. |
Quarter-to-Date Period Ended | Year-to-Date Period Ended | ||||||||||||||||||||||||||||||
Previous Presentation | Updated Presentation | Previous Presentation | Updated Presentation | ||||||||||||||||||||||||||||
Marketplace Revenue | Services Revenue | Marketplace Revenue | Services Revenue | Marketplace Revenue | Services Revenue | Marketplace Revenue | Services Revenue | ||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||
June 30, 2018 | $ | 49,625 | $ | 81,188 | $ | 91,306 | $ | 39,507 | $ | 97,458 | $ | 153,927 | $ | 179,273 | $ | 72,112 | |||||||||||||||
March 31, 2018 | 47,834 | 72,738 | 87,967 | 32,605 | 47,834 | 72,738 | 87,967 | 32,605 | |||||||||||||||||||||||
December 31, 2017 | 54,251 | 82,319 | 102,261 | 34,309 | 179,492 | 258,453 | 326,076 | 111,869 | |||||||||||||||||||||||
September 30, 2017 | 42,413 | 63,371 | 77,808 | 27,976 | 125,241 | 176,134 | 223,815 | 77,560 | |||||||||||||||||||||||
June 30, 2017 | 42,069 | 58,816 | 75,445 | 25,440 | 82,828 | 112,763 | 146,007 | 49,584 |
Three Months Ended June 30, | % Growth Y/Y | Six Months Ended June 30, | % Growth Y/Y | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||
GMS | $ | 901,685 | $ | 748,762 | 20.4 | % | $ | 1,762,760 | $ | 1,467,803 | 20.1 | % | |||||||||
Revenue | $ | 132,387 | $ | 101,692 | 30.2 | % | $ | 253,299 | $ | 198,583 | 27.6 | % | |||||||||
Marketplace revenue | $ | 91,306 | $ | 75,445 | 21.0 | % | $ | 179,273 | $ | 146,007 | 22.8 | % | |||||||||
Services revenue | $ | 39,507 | $ | 25,440 | 55.3 | % | $ | 72,112 | $ | 49,584 | 45.4 | % | |||||||||
Net income | $ | 3,379 | $ | 11,669 | (71.0 | )% | $ | 16,346 | $ | 11,248 | 45.3 | % | |||||||||
Adjusted EBITDA | $ | 27,695 | $ | 12,696 | 118.1 | % | $ | 54,116 | $ | 22,418 | 141.4 | % | |||||||||
Active sellers | 1,983 | 1,834 | 8.1 | % | 1,983 | 1,834 | 8.1 | % | |||||||||||||
Active buyers | 35,830 | 30,584 | 17.2 | % | 35,830 | 30,584 | 17.2 | % | |||||||||||||
Percent mobile GMS | 55 | % | 51 | % | 400 | bps | 55 | % | 51 | % | 400 | bps | |||||||||
Percent international GMS | 34 | % | 32 | % | 200 | bps | 34 | % | 32 | % | 200 | bps |
Quarter-to-Date Period Ended | Year-to-Date Period Ended | ||||||||||||||||
As Reported | Currency Neutral | FX Impact | As Reported | Currency Neutral | FX Impact | ||||||||||||
June 30, 2018 | 20.4 | % | 19.3 | % | 1.1 | % | 20.1 | % | 18.5 | % | 1.6 | % | |||||
March 31, 2018 | 19.8 | % | 17.6 | % | 2.2 | % | 19.8 | % | 17.6 | % | 2.2 | % | |||||
December 31, 2017 | 17.8 | % | 16.5 | % | 1.3 | % | 14.5 | % | 14.3 | % | 0.2 | % | |||||
September 30, 2017 | 13.2 | % | 12.6 | % | 0.6 | % | 13.0 | % | 13.4 | % | (0.4 | )% | |||||
June 30, 2017 | 11.8 | % | 12.6 | % | (0.8 | )% | 12.9 | % | 13.9 | % | (1.0 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Revenue: | |||||||||||||||
Marketplace | $ | 91,306 | $ | 75,445 | $ | 179,273 | $ | 146,007 | |||||||
Services | 39,507 | 25,440 | 72,112 | 49,584 | |||||||||||
Other | 1,574 | 807 | 1,914 | 2,992 | |||||||||||
Total revenue | 132,387 | 101,692 | 253,299 | 198,583 | |||||||||||
Cost of revenue | 45,409 | 35,724 | 86,704 | 70,383 | |||||||||||
Gross profit | 86,978 | 65,968 | 166,595 | 128,200 | |||||||||||
Operating expenses: | |||||||||||||||
Marketing | 28,941 | 27,521 | 55,135 | 50,975 | |||||||||||
Product development | 23,568 | 21,754 | 44,289 | 39,870 | |||||||||||
General and administrative | 21,707 | 28,411 | 40,611 | 51,174 | |||||||||||
Total operating expenses | 74,216 | 77,686 | 140,035 | 142,019 | |||||||||||
Income (loss) from operations | 12,762 | (11,718 | ) | 26,560 | (13,819 | ) | |||||||||
Other (expense) income, net | (8,137 | ) | 13,950 | (8,954 | ) | 14,578 | |||||||||
Income before income taxes | 4,625 | 2,232 | 17,606 | 759 | |||||||||||
(Provision) benefit for income taxes | (1,246 | ) | 9,437 | (1,260 | ) | 10,489 | |||||||||
Net income | $ | 3,379 | $ | 11,669 | $ | 16,346 | $ | 11,248 | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Marketplace | 69.0 | % | 74.2 | % | 70.8 | % | 73.5 | % | |||||||
Services | 29.8 | 25.0 | 28.5 | 25.0 | |||||||||||
Other | 1.2 | 0.8 | 0.8 | 1.5 | |||||||||||
Total revenue | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||
Cost of revenue | 34.3 | 35.1 | 34.2 | 35.4 | |||||||||||
Gross profit | 65.7 | 64.9 | 65.8 | 64.6 | |||||||||||
Operating expenses: | |||||||||||||||
Marketing | 21.9 | 27.1 | 21.8 | 25.7 | |||||||||||
Product development | 17.8 | 21.4 | 17.5 | 20.1 | |||||||||||
General and administrative | 16.4 | 27.9 | 16.0 | 25.8 | |||||||||||
Total operating expenses | 56.1 | 76.4 | 55.3 | 71.5 | |||||||||||
Income (loss) from operations | 9.6 | (11.5 | ) | 10.5 | (7.0 | ) | |||||||||
Other (expense) income, net | (6.1 | ) | 13.7 | (3.5 | ) | 7.3 | |||||||||
Income before income taxes | 3.5 | 2.2 | 7.0 | 0.4 | |||||||||||
(Provision) benefit for income taxes | (0.9 | ) | 9.3 | (0.5 | ) | 5.3 | |||||||||
Net income | 2.6 | % | 11.5 | % | 6.5 | % | 5.7 | % |
Three Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Revenue: | ||||||||||||||
Marketplace | $ | 91,306 | $ | 75,445 | $ | 15,861 | 21.0 | % | ||||||
Percentage of total revenue | 69.0 | % | 74.2 | % | ||||||||||
Services | $ | 39,507 | $ | 25,440 | $ | 14,067 | 55.3 | % | ||||||
Percentage of total revenue | 29.8 | % | 25.0 | % | ||||||||||
Other | $ | 1,574 | $ | 807 | $ | 767 | 95.0 | % | ||||||
Percentage of total revenue | 1.2 | % | 0.8 | % | ||||||||||
Total revenue | $ | 132,387 | $ | 101,692 | $ | 30,695 | 30.2 | % |
Three Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Cost of revenue | $ | 45,409 | $ | 35,724 | $ | 9,685 | 27.1 | % | ||||||
Percentage of total revenue | 34.3 | % | 35.1 | % |
Three Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Marketing | $ | 28,941 | $ | 27,521 | $ | 1,420 | 5.2 | % | ||||||
Percentage of total revenue | 21.9 | % | 27.1 | % |
Three Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Product development | $ | 23,568 | $ | 21,754 | $ | 1,814 | 8.3 | % | ||||||
Percentage of total revenue | 17.8 | % | 21.4 | % |
Three Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
General and administrative | $ | 21,707 | $ | 28,411 | $ | (6,704 | ) | (23.6 | )% | |||||
Percentage of total revenue | 16.4 | % | 27.9 | % |
Three Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Other (expense) income, net: | ||||||||||||||
Interest expense | $ | (6,125 | ) | $ | (2,696 | ) | $ | (3,429 | ) | 127.2 | % | |||
Percentage of total revenue | (4.6 | )% | (2.7 | )% | ||||||||||
Interest and other income | $ | 2,438 | $ | 543 | $ | 1,895 | 349.0 | % | ||||||
Percentage of total revenue | 1.8 | % | 0.5 | % | ||||||||||
Foreign exchange (loss) gain | $ | (4,450 | ) | $ | 16,103 | $ | (20,553 | ) | (127.6 | )% | ||||
Percentage of total revenue | (3.4 | )% | 15.8 | % | ||||||||||
Other (expense) income, net | $ | (8,137 | ) | $ | 13,950 | $ | (22,087 | ) | (158.3 | )% | ||||
Percentage of total revenue | (6.1 | )% | 13.7 | % |
Three Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
(Provision) benefit for income taxes | $ | (1,246 | ) | $ | 9,437 | $ | (10,683 | ) | (113.2 | )% | ||||
Percentage of total revenue | (0.9 | )% | 9.3 | % |
Six Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Revenue: | ||||||||||||||
Marketplace | $ | 179,273 | $ | 146,007 | $ | 33,266 | 22.8 | % | ||||||
Percentage of total revenue | 70.8 | % | 73.5 | % | ||||||||||
Services | $ | 72,112 | $ | 49,584 | $ | 22,528 | 45.4 | % | ||||||
Percentage of total revenue | 28.5 | % | 25.0 | % | ||||||||||
Other | $ | 1,914 | $ | 2,992 | $ | (1,078 | ) | (36.0 | )% | |||||
Percentage of total revenue | 0.8 | % | 1.5 | % | ||||||||||
Total revenue | $ | 253,299 | $ | 198,583 | $ | 54,716 | 27.6 | % |
Six Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Cost of revenue | $ | 86,704 | $ | 70,383 | $ | 16,321 | 23.2 | % | ||||||
Percentage of total revenue | 34.2 | % | 35.4 | % |
Six Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Marketing | $ | 55,135 | $ | 50,975 | $ | 4,160 | 8.2 | % | ||||||
Percentage of total revenue | 21.8 | % | 25.7 | % |
Six Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Product development | $ | 44,289 | $ | 39,870 | $ | 4,419 | 11.1 | % | ||||||
Percentage of total revenue | 17.5 | % | 20.1 | % |
Six Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
General and administrative | $ | 40,611 | $ | 51,174 | $ | (10,563 | ) | (20.6 | )% | |||||
Percentage of total revenue | 16.0 | % | 25.8 | % |
Six Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
Other (expense) income, net: | ||||||||||||||
Interest expense | $ | (9,889 | ) | $ | (5,287 | ) | $ | (4,602 | ) | 87.0 | % | |||
Percentage of total revenue | (3.9 | )% | (2.7 | )% | ||||||||||
Interest and other income | $ | 3,535 | $ | 982 | $ | 2,553 | 260.0 | % | ||||||
Percentage of total revenue | 1.4 | % | 0.5 | % | ||||||||||
Foreign exchange (loss) gain | $ | (2,600 | ) | $ | 18,883 | $ | (21,483 | ) | (113.8 | )% | ||||
Percentage of total revenue | (1.0 | )% | 9.5 | % | ||||||||||
Other (expense) income, net | $ | (8,954 | ) | $ | 14,578 | $ | (23,532 | ) | (161.4 | )% | ||||
Percentage of total revenue | (3.5 | )% | 7.3 | % |
Six Months Ended June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands except percentages) | ||||||||||||||
(Provision) benefit for income taxes | $ | (1,260 | ) | $ | 10,489 | $ | (11,749 | ) | (112.0 | )% | ||||
Percentage of total revenue | (0.5 | )% | 5.3 | % |
• | Adjusted EBITDA does not reflect other non-operating expenses, net of other non-operating income, including net interest expense; |
• | Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
• | Adjusted EBITDA does not consider the impact of stock-based compensation expense; |
• | Adjusted EBITDA does not consider the impact of foreign exchange loss (gain); |
• | Adjusted EBITDA does not consider the impact of restructuring and other exit costs (income); and |
• | other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Net income | $ | 3,379 | $ | 11,669 | $ | 16,346 | $ | 11,248 | |||||||
Excluding: | |||||||||||||||
Interest and other non-operating expense, net (1) | 3,687 | 2,153 | 6,354 | 4,305 | |||||||||||
Provision (benefit) for income taxes | 1,246 | (9,437 | ) | 1,260 | (10,489 | ) | |||||||||
Depreciation and amortization (1) | 6,357 | 6,660 | 12,677 | 13,598 | |||||||||||
Stock-based compensation expense (2) | 7,898 | 4,881 | 13,638 | 8,924 | |||||||||||
Stock-based compensation expense—acquisitions | 719 | 1,613 | 1,433 | 2,455 | |||||||||||
Foreign exchange loss (gain) (3) | 4,450 | (16,103 | ) | 2,600 | (18,883 | ) | |||||||||
Restructuring and other exit costs (income) (4) | (41 | ) | 11,260 | (192 | ) | 11,260 | |||||||||
Adjusted EBITDA | $ | 27,695 | $ | 12,696 | $ | 54,116 | $ | 22,418 |
(1) | Included in interest and depreciation expense amounts above, are interest and depreciation expense related to our headquarters under build-to-suit accounting requirements, which commenced in May 2016. In the three and six months ended June 30, 2018 and 2017 those amounts are as follows: |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Interest expense | $ | 2,249 | $ | 2,223 | $ | 4,499 | $ | 4,368 | |||||||
Depreciation | 819 | 819 | 1,638 | 1,638 |
(2) | $1.7 million of restructuring-related stock-based compensation expense has been excluded from the three and six months ended June 30, 2017 and is included in total restructuring and other exit costs below. See note (4). Total stock-based compensation expense included in the Consolidated Statements of Operations is as follows: |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Cost of revenue | $ | 927 | $ | 398 | $ | 1,473 | $ | 762 | |||||||
Marketing | 699 | 528 | 1,177 | 972 | |||||||||||
Product development | 4,025 | 2,053 | 6,664 | 4,073 | |||||||||||
General and administrative | 2,966 | 5,183 | 5,757 | 7,240 | |||||||||||
Total stock-based compensation expense | $ | 8,617 | $ | 8,162 | $ | 15,071 | $ | 13,047 |
(3) | See “—Results of Operations—Other (Expense) Income, net” for more information on the fluctuation in foreign exchange loss (gain) in the three and six months ended June 30, 2018 and 2017. |
(4) | Total restructuring and other exit costs (income) related to the Actions included in the Consolidated Statements of Operations are as follows: |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Cost of revenue | $ | (6 | ) | $ | 694 | $ | (13 | ) | $ | 694 | |||||
Marketing | (13 | ) | 2,349 | (72 | ) | 2,349 | |||||||||
Product development | (16 | ) | 3,101 | (95 | ) | 3,101 | |||||||||
General and administrative | (6 | ) | 5,116 | (12 | ) | 5,116 | |||||||||
Total restructuring and other exit costs (income) | $ | (41 | ) | $ | 11,260 | $ | (192 | ) | $ | 11,260 |
• | many of these costs were or will be settled in cash; |
• | there is no certainty that restructuring and other exit costs (income) will not recur; |
• | other companies, including companies in our industry, may adjust for similar items in a different manner, or may not exclude such charges, which reduces their usefulness as comparative measures. |
Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | ||||||||||||||||||||||
As Reported | Restructuring and Other Exit Costs (Income) | Excluding Restructuring and Other Exit Costs | As Reported | Restructuring and Other Exit Costs (Income) | Excluding Restructuring and Other Exit Costs | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenue | $ | 132,387 | $ | — | $ | 132,387 | $ | 253,299 | $ | — | $ | 253,299 | |||||||||||
Cost of revenue | 45,409 | (6 | ) | 45,415 | 86,704 | (13 | ) | 86,717 | |||||||||||||||
Gross profit | 86,978 | (6 | ) | 86,972 | 166,595 | (13 | ) | 166,582 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Marketing | 28,941 | (13 | ) | 28,954 | 55,135 | (72 | ) | 55,207 | |||||||||||||||
Product development | 23,568 | (16 | ) | 23,584 | 44,289 | (95 | ) | 44,384 | |||||||||||||||
General and administrative | 21,707 | (6 | ) | 21,713 | 40,611 | (12 | ) | 40,623 | |||||||||||||||
Total operating expenses | 74,216 | (35 | ) | 74,251 | 140,035 | (179 | ) | 140,214 | |||||||||||||||
Income from operations | $ | 12,762 | $ | (41 | ) | $ | 12,721 | $ | 26,560 | $ | (192 | ) | $ | 26,368 |
Three Months Ended June 30, 2017 | Six Months Ended June 30, 2017 | ||||||||||||||||||||||
As Reported | Restructuring and Other Exit Costs (Income) | Excluding Restructuring and Other Exit Costs | As Reported | Restructuring and Other Exit Costs (Income) | Excluding Restructuring and Other Exit Costs | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenue | $ | 101,692 | $ | — | $ | 101,692 | $ | 198,583 | $ | — | $ | 198,583 | |||||||||||
Cost of revenue | 35,724 | 694 | 35,030 | 70,383 | 694 | 69,689 | |||||||||||||||||
Gross profit | 65,968 | 694 | 66,662 | 128,200 | 694 | 128,894 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Marketing | 27,521 | 2,349 | 25,172 | 50,975 | 2,349 | 48,626 | |||||||||||||||||
Product development | 21,754 | 3,101 | 18,653 | 39,870 | 3,101 | 36,769 | |||||||||||||||||
General and administrative | 28,411 | 5,116 | 23,295 | 51,174 | 5,116 | 46,058 | |||||||||||||||||
Total operating expenses | 77,686 | 10,566 | 67,120 | 142,019 | 10,566 | 131,453 | |||||||||||||||||
Loss from operations | $ | (11,718 | ) | $ | 11,260 | $ | (458 | ) | $ | (13,819 | ) | $ | 11,260 | $ | (2,559 | ) |
As of June 30, 2018 | |||
(in thousands) | |||
Cash and cash equivalents | $ | 357,820 | |
Short-term investments | 209,689 | ||
Accounts receivable, net | 30,615 | ||
Net working capital | 552,734 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Cash provided by (used in): | |||||||
Operating activities | $ | 66,512 | $ | 15,448 | |||
Investing activities | (227,450 | ) | 29,631 | ||||
Financing activities | 205,491 | (618 | ) |
• | fluctuations in revenue generated from Etsy sellers on our platform, including as a result of the seasonality of market transactions, and Etsy sellers’ use of Services; |
• | our ability to convert visits to Etsy.com into sales for our sellers; |
• | the amount and timing of our operating expenses; |
• | our success in attracting and retaining Etsy sellers and Etsy buyers; |
• | our success in executing on our strategy and the impact of any changes in our strategy; |
• | the timing and success of product launches, including new services and features we may introduce, such as the launch of our new seller subscription packages in connection with our new pricing model; |
• | the success of our marketing efforts; |
• | economic and market conditions, such as currency fluctuations and global events; |
• | disruptions or defects in our marketplace, such as privacy or data security breaches or other incidents that impact the reliability of our platform; |
• | the impact of competitive developments and our response to those developments; |
• | our ability to manage our existing business and future growth; |
• | our ability to recruit and retain employees; |
• | the impact and success of the actions that we implemented during the second quarter of 2017 to increase efficiency, streamline our cost structure, and improve our focus on key strategic growth opportunities; and |
• | the impact of our revised global corporate structure that was implemented on January 1, 2015. |
• | negative perceptions based on our 2017 headcount reductions or changes in senior management; |
• | perceived uncertainties as to our commitment to our mission, values and culture; |
• | skepticism regarding our ability to continue to accelerate GMS growth in the future; |
• | continuing to offer competitive compensation and benefits; |
• | enhancing engagement levels among existing employees and their work-life balance; |
• | attracting and retaining qualified employees who support our mission and share our values; |
• | promoting existing employees into leadership positions to help sustain and grow our culture; |
• | hiring employees in multiple locations globally; and |
• | responding to competitive pressures and changing business conditions in ways that do not divert us from our values. |
• | complaints or negative publicity about us, our platform or our policies and guidelines, even if factually incorrect or based on isolated incidents; |
• | an inability to gain the trust of prospective buyers; |
• | disruptions or defects in our marketplace, such as the increased pace of product experimentation, privacy or data security breaches, site outages, payment disruptions or other incidents that impact the reliability of our platform; |
• | lack of awareness of our policies; |
• | changes to our policies that members of our community perceive as inconsistent with our values or that are not clearly articulated; |
• | a failure to enforce our policies effectively, fairly and transparently, including, for example, by allowing the widespread listing of prohibited items in our marketplace; |
• | inadequate or unsatisfactory customer service experiences; |
• | a failure to respond to feedback from our community; or |
• | a failure to operate our business in a way that is consistent with our values and mission. |
• | actions taken by providers of mobile operating systems or mobile app download stores; |
• | unfavorable treatment received by our mobile apps, especially as compared to competing apps, such as the placement of our mobile apps in a mobile app download store; |
• | increased costs to distribute or use our mobile apps; or |
• | changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps or that give preferential treatment to competitive products. |
• | complying with different (and sometimes conflicting) laws and regulatory standards (particularly including those related to the use and disclosure of personal information, online payments, intellectual property, consumer protection, online platform liability and taxation of goods and services); |
• | fluctuations of foreign exchange rates; |
• | potentially heightened risk of fraudulent transactions; |
• | limitations on the repatriation of funds; |
• | exposure to liabilities under anti-corruption, anti-money laundering and export control laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act of 2010, trade controls and sanctions administered by the U.S. Office of Foreign Assets Control, and similar laws and regulations in other jurisdictions; |
• | varying levels of internet, e-commerce, and mobile technology adoption and infrastructure; |
• | our ability to enforce contracts and intellectual property rights in jurisdictions outside the United States; |
• | geopolitical events such as natural disasters, terrorism and acts of war; |
• | uncertainties and instability in European markets caused by the United Kingdom’s decision to exit the European Union; and |
• | barriers to international trade, such as tariffs, customs or other taxes. |
• | we may choose to prohibit the sale of items in our marketplace that are inconsistent with our policies even though we could benefit financially from the sale of those items; or |
• | we may choose to revise our policies in ways that we believe will be beneficial to our community in the long term even though the changes may be perceived unfavorably, such as updates to the way we define “handmade.” |
• | our brand awareness; |
• | the extent to which our Services can ease the administrative tasks that an Etsy seller might encounter in running her business, wherever she chooses to pursue commerce; |
• | the global scale of our marketplace and the breadth of our online presence; |
• | the number and engagement of Etsy buyers; |
• | our seller education resources and tools; |
• | our policies and fees; |
• | the ability to scale her business, including through Pattern or with a production partner; |
• | our mobile apps; |
• | the strength of our community; and |
• | our values. |
• | the breadth of unique goods that Etsy sellers list in our marketplace; |
• | the ease of finding the special item a buyer is looking for; |
• | our brand awareness; |
• | the person-to-person commerce experience; |
• | our reputation for trustworthiness; |
• | our mobile apps; |
• | ease of payment; and |
• | the availability and reliability of our platform. |
• | integrating new businesses and technologies into our infrastructure; |
• | consolidating operational and administrative functions; |
• | coordinating outreach to our community; |
• | maintaining morale and culture and retaining and integrating key employees; |
• | maintaining or developing controls, procedures and policies (including effective internal control over financial reporting and disclosure controls and procedures); and |
• | assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, commercial disputes, cyber attacks, taxes, and other matters. |
• | variations in our operating results and other financial and operational metrics, including the key financial and operating metrics disclosed in this Quarterly Report, as well as how those results and metrics compare to analyst and investor expectations; |
• | forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections or changes in our financial guidance or projections; |
• | failure of analysts to initiate or maintain coverage of our company, changes in their estimates of our operating results or changes in recommendations by analysts that follow our common stock or a negative view of our financial guidance or projections and our failure to meet or exceed the estimates of such analysts; |
• | announcements of new services or enhancements, such as the launch of our new seller subscription packages in connection with our new pricing model, strategic alliances or significant agreements or other developments by us or our competitors; |
• | announcements by us or our competitors of mergers or acquisitions or rumors of such transactions involving us or our competitors; |
• | the amount and timing of our operating expenses and the success of any cost-savings actions we take; |
• | changes in our Board of Directors, management or other key personnel; |
• | disruptions in our marketplace due to hardware, software or network problems, security breaches or other issues; |
• | the strength of the global economy or the economy in the jurisdictions in which we operate, currency fluctuations, and market conditions in our industry and those affecting members of our community; |
• | the trading activity of our largest stockholders; |
• | the number of shares of our common stock that are available for public trading; |
• | litigation or other claims against us; |
• | stockholder activism; |
• | the performance of the equity markets in general and in our industry; |
• | the operating performance of other similar companies; |
• | changes in legal requirements relating to our business; and |
• | any other factors discussed in this Quarterly Report. |
• | provide for a classified board of directors so that not all members of our Board of Directors are elected at one time; |
• | permit our Board of Directors to establish the number of directors and fill any vacancies and newly created directorships; |
• | provide that directors may only be removed for cause; |
• | require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; |
• | authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan; |
• | eliminate the ability of our stockholders to call special meetings of stockholders; |
• | prohibit stockholder action by written consent, which means all stockholder actions must be taken at a meeting of our stockholders; |
• | provide that our Board of Directors is expressly authorized to amend or repeal any provision of our bylaws; |
• | restrict the forum for certain litigation against us to Delaware; and |
• | require advance notice for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. |
Period | Total Number of Shares Purchased | Average Price Paid per Share(2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3) | Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (in thousands)(3) | |||||||||
April 1 - 30, 2018 (1) | 709,529 | $ | 28.97 | 634,541 | $ | 2,663 | |||||||
May 1 - 31, 2018 (1) | 218,476 | 30.56 | 88,400 | — | |||||||||
June 1 - 30, 2018 | — | — | — | — | |||||||||
Total | 928,005 | $ | 29.34 | 722,941 | $ | — |
(2) | Average price paid per share excludes broker commissions. |
(3) | On November 17, 2017, we announced that our Board of Directors had approved a stock repurchase program for the repurchase of up to $100 million of our common stock. All shares reflected in this column were repurchased pursuant to this stock repurchase program and a 10b5-1 trading plan. The stock repurchase program was completed in the second quarter of 2018. |
Exhibit Number | Incorporated by Reference | Filed Herewith | ||||||||||||||||||||||
Exhibit Description | Form | File No. | Exhibit | Filing Date | ||||||||||||||||||||
8-K | 001-36911 | 4.1 | 3/14/2018 | |||||||||||||||||||||
8-K | 001-36911 | 4.2 | 3/14/2018 | |||||||||||||||||||||
8-K | 001-36911 | 99.1 | 3/14/2018 | |||||||||||||||||||||
8-K | 001-36911 | 99.2 | 3/14/2018 | |||||||||||||||||||||
X | ||||||||||||||||||||||||
X | ||||||||||||||||||||||||
X | ||||||||||||||||||||||||
X | ||||||||||||||||||||||||
101.INS | XBRL Instance Document | X | ||||||||||||||||||||||
101.SCH | XBRL Taxonomy Schema Linkbase Document | X | ||||||||||||||||||||||
101.CAL | XBRL Taxonomy Calculation Linkbase Document | X | ||||||||||||||||||||||
101.DEF | XBRL Taxonomy Definition Linkbase Document | X | ||||||||||||||||||||||
101.LAB | XBRL Taxonomy Labels Linkbase Document | X | ||||||||||||||||||||||
101.PRE | XBRL Taxonomy Presentation Linkbase Document' | X |
ETSY, INC. | |
Date: August 6, 2018 | /s/ Rachel Glaser |
Rachel Glaser Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
1. | I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Aug. 03, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ETSY INC | |
Entity Central Index Key | 0001370637 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 119,753,433 |
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Net of allowance for doubtful accounts | $ 3,568 | $ 2,687 |
Accumulated depreciation and amortization | $ 75,969 | $ 66,226 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 1,400,000,000 | 1,400,000,000 |
Common stock, shares issued (in shares) | 119,545,384 | 121,769,238 |
Common stock, shares outstanding (in shares) | 119,545,384 | 121,769,238 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement [Abstract] | ||||
Revenues | $ 132,387 | $ 101,692 | $ 253,299 | $ 198,583 |
Cost of revenue | 45,409 | 35,724 | 86,704 | 70,383 |
Gross profit | 86,978 | 65,968 | 166,595 | 128,200 |
Operating expenses: | ||||
Marketing | 28,941 | 27,521 | 55,135 | 50,975 |
Product development | 23,568 | 21,754 | 44,289 | 39,870 |
General and administrative | 21,707 | 28,411 | 40,611 | 51,174 |
Total operating expenses | 74,216 | 77,686 | 140,035 | 142,019 |
Income (loss) from operations | 12,762 | (11,718) | 26,560 | (13,819) |
Other (expense) income: | ||||
Interest expense | (6,125) | (2,696) | (9,889) | (5,287) |
Interest and other income | 2,438 | 543 | 3,535 | 982 |
Foreign exchange (loss) gain | (4,450) | 16,103 | (2,600) | 18,883 |
Total other (expense) income | (8,137) | 13,950 | (8,954) | 14,578 |
Income before income taxes | 4,625 | 2,232 | 17,606 | 759 |
(Provision) benefit for income taxes | (1,246) | 9,437 | (1,260) | 10,489 |
Net income | $ 3,379 | $ 11,669 | $ 16,346 | $ 11,248 |
Net income per share attributable to common stockholders: | ||||
Basic (in dollars per share) | $ 0.03 | $ 0.10 | $ 0.14 | $ 0.10 |
Diluted (in dollars per share) | $ 0.03 | $ 0.10 | $ 0.13 | $ 0.10 |
Weighted-average common shares outstanding: | ||||
Basic (in shares) | 119,450,194 | 116,933,216 | 120,819,201 | 116,453,790 |
Diluted (in shares) | 125,551,759 | 120,723,938 | 126,186,664 | 120,424,631 |
Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 3,379 | $ 11,669 | $ 16,346 | $ 11,248 |
Other comprehensive loss: | ||||
Cumulative translation adjustment | (276) | (13,381) | (152) | (16,336) |
Unrealized gains (losses) on marketable securities, net of tax | 9 | 11 | (17) | (11) |
Total other comprehensive loss | (267) | (13,370) | (169) | (16,347) |
Comprehensive income (loss) | $ 3,112 | $ (1,701) | $ 16,177 | $ (5,099) |
Basis of Presentation and Summary of Significant Accounting Policies |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Summary of Significant Accounting Policies | Note 1—Basis of Presentation and Summary of Significant Accounting Policies Description of Business Etsy, Inc. (the “Company” or “Etsy”) is the global marketplace for unique and creative goods. The Company generates revenue primarily from transaction and listing fees, Etsy Payments fees, Promoted Listing fees, Etsy Shipping Label sales, and Pattern by Etsy fees. Basis of Consolidation The Consolidated Financial Statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Reclassifications Certain items in the prior years’ Consolidated Financial Statements have been reclassified to conform to the current year presentation reflected in the Consolidated Financial Statements. Specifically, the Company reclassified $33.4 million and $63.2 million previously included in Services revenue to Marketplace revenue (see “Note 2—Revenue”) for the three and six months ended June 30, 2017, respectively, to conform to the current year presentation in connection with the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Additionally, the Company reclassified $5.3 million on the Consolidated Statement of Cash Flows in the six months ended June 30, 2017 to include restricted cash in the beginning and ending cash, cash equivalents and restricted cash balances to conform to the current year presentation upon adoption of Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash. Correction of Errors During the three months ended June 30, 2018, the Company recorded $2.8 million of revenue and $1.4 million of cost of revenue as correction of errors related to the years ended December 31, 2017 and 2016. The Company has concluded that the errors and their correction were not material to the Consolidated Financial Statements for any of the periods impacted nor are they expected to be material for the estimated 2018 results. Unaudited Interim Financial Information The accompanying Consolidated Balance Sheet as of June 30, 2018, the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2018 and 2017, the Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 and the Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2018 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual Consolidated Financial Statements except for new accounting standards adopted as of January 1, 2018 as disclosed below, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position as of June 30, 2018, results of operations for the three and six months ended June 30, 2018 and 2017 and cash flows for the six months ended June 30, 2018 and 2017. The results for these interim periods are not necessarily indicative of the results to be anticipated for the full annual period or any future period. The financial data and the other information disclosed in these Notes to the Consolidated Financial Statements related to these three and six month periods are unaudited. These unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2018 (the “Annual Report”). During the first quarter of 2018, the Company adopted the accounting principles outlined within ASU 2014-09, Revenue from Contracts with Customers, and ASU 2016-18, Statement of Cash Flows: Restricted Cash, each as described below. There have been no additional material changes in the Company's significant accounting policies from those that were disclosed in the Annual Report. Use of Estimates The preparation of the Company’s Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting estimates that require management’s most difficult and subjective judgments include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations; income taxes; website development costs and internal-use software; purchase price allocations for business combinations; valuation of goodwill and intangible assets; leases; stock-based compensation; restructuring and other exit costs (income); and fair value of financial instruments. The Company evaluates its estimates and judgments on an ongoing basis and revises them when necessary. Actual results may differ from the original or revised estimates. Cash, Cash Equivalents and Short-term Investments The Company considers all investments with an original maturity of three months or less at time of purchase to be cash equivalents. Cash restricted by third parties is not considered cash and cash equivalents. Short-term investments, consisting primarily of commercial paper, corporate bonds and U.S. Government and agency securities with original maturities of greater than three months but less than one year when purchased, are classified as available-for-sale and are reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated income tax provisions or benefits. The following table provides cash, cash equivalents and short-term investments within the Consolidated Balance Sheets as of the dates indicated (in thousands):
Revenue Recognition The Company’s revenue is diversified; generated from a mix of marketplace activities and other optional services to help Etsy sellers start, manage and scale their business. Revenues are recognized as the Company transfers control of promised goods or services to Etsy sellers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfillment of the promise, has inventory risk and has the latitude in establishing pricing and selecting suppliers, among other factors. Based on its evaluation of these factors, revenue is recorded either gross or net of costs associated with the transaction. Sales and usage-based taxes are excluded from revenues. See “Note 2—Revenue” for additional information regarding revenue recognition. Income Taxes The Company's income tax (provision) benefit for interim periods is determined using an estimate of its annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. The Company updates its estimate of the annual effective tax rate each quarter and makes cumulative adjustments if its estimated annual tax rate changes. The Company's quarterly tax provision and quarterly estimate of its annual effective tax rate are subject to significant variations due to several factors, including variability in predicting its pretax and taxable income and the mix of jurisdictions to which those relate, changes of expenses or losses for which tax benefits are not recognized, recording of excess tax benefits related to stock-based compensation and changes in the laws, regulations and administrative practices of the jurisdictions in which the Company operates. Net Income Per Share Basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed by dividing net income for the period by the weighted-average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and stock-based compensation awards is reflected in diluted net income per share by application of the treasury stock method. Since the Company expects to settle in cash the principal outstanding under the 0% Convertible Senior Notes due 2023 the Company issued in March 2018 (the “Notes,” see “Note 3—Convertible Debt”), it uses the treasury stock method when calculating the potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company's common stock for a given period exceeds the conversion price of $36.27 per share. The calculation of diluted net income per share excludes all anti-dilutive common shares. For periods in which the Company has reported net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Recently Issued Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases, and additional changes, modifications, clarifications or interpretations related to this guidance thereafter, which require a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. The new guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Upon adoption of this standard, the Company expects to recognize, on a discounted basis, its minimum commitments under noncancelable operating leases on the Consolidated Balance Sheets resulting in the recording of right-of-use assets and lease obligations. The Company is currently evaluating whether there are any additional impacts this guidance will have on its Consolidated Financial Statements. In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees. The new guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of the new guidance and does not anticipate the update to have a material impact on its Consolidated Financial Statements. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and additional changes, modifications, clarifications or interpretations related to this guidance thereafter, which replaces existing revenue recognition guidance. The new guidance was effective for the annual and interim periods beginning after December 15, 2017. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the requirements of the new guidance as of January 1, 2018, utilizing the full retrospective method of transition. In connection with the adoption, the company reclassified Etsy Payments revenue from Services revenue to Marketplace revenue in the Consolidated Statements of Operations. Aside from this presentation reclassification, adoption of the new guidance did not result in changes to the prior year or current year Consolidated Financial Statements. See “Note 2—Revenue” for additional information regarding revenue recognition. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The new guidance is effective for the annual and interim periods beginning after December 15, 2017. The Company adopted this standard in the first quarter of 2018 utilizing the full retrospective method of transition. As a result of this guidance, the Company reclassified $5.3 million on the Consolidated Statement of Cash Flows in the six months ended June 30, 2018 and 2017 to include restricted cash in the beginning and ending cash, cash equivalent and restricted cash balances. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows (in thousands):
The balances included in restricted cash represent amounts held as collateral associated with the lease of the Company's Brooklyn, New York headquarters. This standard had no other impact to the Consolidated Financial Statements. |
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Note 2—Revenue The following table summarizes revenue by type of service for the periods presented (in thousands):
Marketplace Revenue: As members of the Etsy marketplace, Etsy sellers receive the benefit of marketplace activities, including listing items for sale, completing sales transactions, and payments processing, which represents a single stand-ready performance obligation. Etsy sellers pay a fixed listing fee of $0.20 for each item listed on Etsy.com for a period of four months or, if earlier, until a sale occurs. Variable fees include the 3.5% transaction fee that an Etsy seller pays for each completed transaction, exclusive of shipping fees charged, and Etsy Payments fees for processing payments, including foreign currency payments. Etsy Payments processing fees vary between 3 - 4% of an item’s total sale price, including shipping, plus a flat fee per order, depending on the country in which a seller's bank account is located. When a foreign currency payment is processed, an additional 2.5 - 5% transaction fee is applied. The listing fee is recognized ratably over a four-month listing period, unless the item is sold or the seller relists it, at which time any remaining listing fee is recognized. The 3.5% transaction fee and Etsy Payments fees are recognized when the corresponding transaction is consummated. Listing fees are nonrefundable while transaction fees and Etsy Payments fees are recorded net of refunds. Services revenue: Services revenue is derived from optional services offered to Etsy sellers, which include Promoted Listings, Etsy Shipping Labels, and Pattern by Etsy. Each service below represents an individual obligation that the Company must perform when an Etsy seller chooses to use the service.
Other revenue: Other revenue typically includes revenue generated from commercial partnerships, which are recognized as the customer in each contract consumes the benefit of the service Etsy provides in each arrangement. Payment terms Etsy sellers receive a bill electronically on the first day of each month for the previous month’s charges, including all listing fees, transactions fees, Promoted Listing fees, Etsy Shipping Labels fees, and Pattern fees. Payment is due by the 15th of every month. Etsy Payments fees are deducted from the funds credited to the seller's shop payment account prior to settlement of those funds to the seller’s bank account. Contract balances Deferred revenues The Company records deferred revenues when cash payments are received or due in advance of the completion of the listing period, which represents the value of the Company's unsatisfied performance obligations. Deferred listing revenue is recognized ratably over the remainder of the four-month listing period, unless the item is sold or the seller relists it, at which time any remaining listing fee is recognized. The following table summarizes the deferred revenue activity during the period indicated (in thousands):
Significant Judgments Judgment is required to assess the nature of the services that the Company promises to its customers and the timing of satisfaction of those promised services. For services that are refundable, the Company accounts for the right of return as a refund liability and reduction of revenue recognized in the amount of refunds that are expected to be issued. Refunds are estimated monthly, are based on historical refund patterns, and are updated at the end of each reporting period as additional information becomes available. Subsequent Event After June 30, 2018, the Company increased the seller transaction fee effective as of July 16, 2018 from 3.5% to 5%, and it will also apply to the cost of shipping in addition to the cost of the item. After June 30, 2018, the Company also launched Etsy Plus, a new subscription package, which sellers can opt into for an introductory rate of $10 per month, and $20 per month starting January 1, 2019. Etsy Plus is intended to support sellers who are seeking to grow their businesses using a suite of enhanced tools, such as marketing, advertising, and branding. Sellers who do not opt into Etsy Plus continue to have access to the same tools and services that are already available on Etsy without an additional monthly fee as part of the Etsy Standard offering. |
Convertible Debt |
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Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Debt | Note 3—Convertible Debt In March 2018, the Company issued $345.0 million aggregate principal amount of 0% Convertible Senior Notes due 2023 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The net proceeds from the sale of the Notes were $335.0 million after deducting the initial purchasers' discount and offering expenses. The Notes are convertible based upon an initial conversion rate of 27.5691 shares of the Company’s common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $36.27 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s common stock. The Company will settle any conversions of the Notes in cash, shares of the Company’s common stock or a combination thereof, with the form of consideration determined at the Company’s election. The Notes will mature on March 1, 2023, unless earlier converted or repurchased. Prior to the close of business on the business day immediately preceding November 1, 2022, holders may convert all or a portion of their Notes only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) with respect to any or all of the Notes called for redemption by the Company prior to the close of business on the business day immediately preceding November 1, 2022, holders may convert all or any portion of their notes at any time prior to the close of business on the second scheduled trading day prior to the redemption date, even if the notes are not otherwise convertible at such time; (4) upon the occurrence of specified corporate events. On and after November 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. If a fundamental change occurs prior to the maturity date, holders may require the Company to repurchase all or a portion of their Notes for cash at a price equal to 100% of the principal amount of the Notes to be repurchased. Holders of Notes who convert their Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the Notes. As of June 30, 2018, none of the conditions permitting the holders of the Notes to early convert had been met. Therefore the Notes are classified as long-term debt. The Notes are general unsecured obligations of the Company. The Notes rank senior in right of payment to all of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment with all of our liabilities that are not so subordinated; are effectively junior to any of the Company’s secured indebtedness; and are structurally junior to all indebtedness and liabilities (including trade payables) of the Company’s subsidiaries. In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, which does not meet the criteria for separate accounting as a derivative as it is indexed to the Company's own stock, was determined by deducting the fair value of the liability component from the par value of the Notes. The difference between the principal amount of the Notes and the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheet and accreted over the period from the date of issuance to the contractual maturity date, resulting in the recognition of non-cash interest expense. The equity component of the Notes of approximately $72.8 million is included in additional paid-in capital in the Consolidated Balance Sheet and is not remeasured as long as it continues to meet the conditions for equity classification. Transaction costs were allocated to the liability and equity components in the same proportion as the allocation of the proceeds. Transaction costs attributable to the liability component were recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheet and are amortized to interest expense using the effective interest method over the term of the Notes, and transaction costs attributable to the equity component were netted with the equity component in stockholders’ equity. Non-cash interest expense related to the Notes for the three and six months ended June 30, 2018 was $3.6 million and $4.8 million, respectively. Total unamortized debt issuance costs were $7.4 million as of June 30, 2018. The estimated fair value of the Notes was $275.4 million as of June 30, 2018. The estimated fair value of the Notes was determined through consideration of quoted market prices for similar instruments. The fair value is classified as Level 2, as defined in “Note 7—Fair Value Measurements.” Capped Call Transactions The Company used $34.2 million of the net proceeds from the Notes offering to enter into separate capped call transactions (“Capped Call Transactions”) with the initial purchasers and/or their respective affiliates. The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the Notes upon conversion of the Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap. The Capped Call Transactions have an initial cap price of $52.76 per share of the Company’s common stock, which represents a premium of 100% over the last reported sale price of the Company’s common stock on March 8, 2018, and is subject to certain adjustments under the terms of the Capped Call Transactions. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Notes. The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company's stock. The premiums paid for the Capped Call Transactions have been included as a net reduction to additional paid-in capital within stockholders’ equity. |
Stock-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation | Note 4—Stock-based Compensation During the three and six months ended June 30, 2018, the Company granted stock options and restricted stock units (“RSUs”) under its 2015 Equity Incentive Plan (“2015 Plan”) and, pursuant to the evergreen increase provision of the 2015 Plan, the Board of Directors approved an increase of 6,088,461 shares to the total number of shares available for issuance under the 2015 Plan effective as of January 2, 2018. At June 30, 2018, 29,436,374 shares were authorized under the 2015 Plan and 18,215,562 shares were available for future grant. The fair value of options granted in the periods presented below using the Black-Scholes pricing model has been based on the following assumptions:
The following table summarizes the activity for the Company's options during the six months ended June 30, 2018 (in thousands except share and per share amounts):
The following table summarizes the weighted-average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested during the three and six months ended June 30, 2018 and 2017 (in thousands except per share amounts):
The total unrecognized compensation expense at June 30, 2018 related to the Company's options was $27.5 million, which will be recognized over an estimated weighted-average amortization period of 3.07 years. The following table summarizes the activity for the Company's unvested RSUs during the six months ended June 30, 2018:
The total unrecognized compensation expense at June 30, 2018 related to the Company's unvested RSUs was $75.2 million, which will be recognized over an estimated weighted-average amortization period of 3.39 years. Total stock-based compensation expense included in the Consolidated Statements of Operations for the periods presented below is as follows (in thousands):
Total stock-based compensation expense in the three months ended June 30, 2018 and 2017 includes $0.7 million and $1.6 million in acquisition-related stock-based compensation expense, respectively. Total stock-based compensation expense in the six months ended June 30, 2018 and 2017 includes $1.4 million and $2.5 million in acquisition-related stock-based compensation expense, respectively. Total stock-based compensation expense in the three and six months ended June 30, 2017 includes $1.7 million of costs associated with the Actions (as defined below) approved by the Board of Directors during the second quarter of 2017 discussed in “Note 13—Restructuring and Other Exit Costs (Income).” |
Stockholders' Equity |
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Stockholders' Equity | Note 5—Stockholders’ Equity In November 2017, the Board of Directors approved a stock repurchase program that enabled the Company to repurchase up to $100 million of its common stock. The program was completed in the second quarter of 2018. Under the stock repurchase program, the Company was able to purchase shares of its common stock through various means, including open market transactions, privately negotiated transactions, tender offers, or any combination thereof. In addition, open market repurchases of common stock could be made pursuant to trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permitted common stock to be repurchased at a time that the Company might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. The following table summarizes the Company's share repurchase activity, excluding shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units (in thousands except share and per share amounts):
(1) Average price paid per share excludes broker commissions. Value of shares repurchased includes broker commissions. All repurchased shares of common stock have been retired. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 6—Income Taxes On December 22, 2017, the U.S. government enacted The Tax Cuts and Jobs Act (“The Act”) which includes significant changes to the taxation of business entities. These changes include, among others, (1) a permanent reduction to the corporate income tax rate, (2) a partial limitation on the deductibility of business interest expense (“163(j) Interest Limitation”), and (3) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a quasiterritorial system (along with certain rules designed to prevent erosion of the U.S. income tax base). Effective January 1, 2018, the Company is subject to several provisions of the Tax Act including computations under Global Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion and Anti-Abuse Tax (“BEAT”), and the 163(j) Interest Limitation. For the GILTI and FDII computations, the Company included a reasonable estimate in its annual effective tax rate as of June 30, 2018. For the BEAT and 163(j) Interest Limitation computations, the Company did not record an estimate in its effective tax rate for the three and six months ended June 30, 2018 because the Company currently estimates that these provisions of The Act will not apply in 2018. The Company will continue to refine the estimates for the computations of the GILTI, FDII, BEAT and the 163(j) Interest Limitation rules as it gathers additional information during the year. The Company also continues to evaluate the impact of the GILTI provisions under The Act which are complex and subject to continuing regulatory interpretation by the IRS. The Company is required to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company’s accounting policy election with respect to the new GILTI rules will depend, in part, on analyzing its global income to determine whether it can reasonably estimate the tax impact. While the Company has included an estimate of GILTI in its estimated effective tax rate for 2018, it has not completed its analysis and is not yet able to determine which method to elect. Adjustments related to the amount of GILTI recorded in its Consolidated Financial Statements may be required based on the outcome of this election. The amount of unrecognized tax benefits included in the Consolidated Balance Sheets remained flat at $17.0 million as of June 30, 2018 and December 31, 2017. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $17.0 million at June 30, 2018. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 7—Fair Value Measurements The Company has characterized its investments in marketable securities, based on the priority of the inputs used to value the investments, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), and lowest priority to unobservable inputs (Level 3). If the inputs used to measure the investments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the investment. Investments recorded in the accompanying Consolidated Balance Sheet are categorized based on the inputs to valuation techniques as follows: Level 1—These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the Company has the ability to access. Level 2—These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets. Level 3—These are financial instruments where values are derived from techniques in which one or more significant inputs are unobservable. The following are the major categories of assets measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 (in thousands):
Level 1 instruments include investments in debt securities including money market funds and AA-rated U.S. Government and agency securities, which are valued based on inputs including quotes from broker-dealers or recently executed transactions in the same or similar securities. Level 2 instruments include investments in debt securities, including fixed-income funds consisting of investments in commercial paper and corporate bonds, which are valued based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets. The Company did not have any Level 3 instruments as of June 30, 2018 and December 31, 2017. See “Note 8—Marketable Securities” for additional information on the Company's marketable securities measured at fair value. Disclosure of Fair Values Our financial instruments that are not remeasured at fair value include the Notes (see “Note 3—Convertible Debt”). The Company estimates the fair value of the Notes through consideration of quoted market prices of similar instruments, classified as Level 2 as described above. The estimated fair value of the Notes was $275.4 million as of June 30, 2018. The estimated fair value of the Notes was determined through consideration of quoted market prices for similar instruments. |
Marketable Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | Note 8—Marketable Securities Short-term investments and certain cash equivalents consist of investments in debt securities that are available-for-sale. The cost and fair value of available-for-sale securities were as follows as of the dates indicated (in thousands):
The Company’s investments in marketable securities consist primarily of investments in debt securities, including AA-rated U.S. Government and agency securities and fixed-income funds. When evaluating investments for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and the Company’s ability, and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery in market value. The Company evaluates fair values for each individual security in the investment portfolio. See “Note 7—Fair Value Measurements” for additional information on the Company's marketable securities measured at fair value. |
Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Note 9—Intangible Assets On June 15, 2018, the Company entered into a referral agreement with DaWanda GmbH (“DaWanda”), a privately held Germany-based marketplace for gifts and handmade items. As part of this agreement, DaWanda agreed to encourage its community of buyers and sellers to migrate to the Etsy platform. DaWanda plans to wind down its operations and shut down its site on August 30, 2018. Etsy will not acquire any of DaWanda's assets, liabilities, or employees as part of this agreement. The Company accounted for the agreement as an asset acquisition and the referral agreement intangible asset will be amortized on a straight-line basis over a period of 10 years. At June 30, 2018 and December 31, 2017, the gross book value and accumulated amortization of intangible assets were as follows (in thousands):
Amortization expense for the three months ended June 30, 2018 and June 30, 2017 was $0.7 million and $0.8 million, respectively, and $1.3 million and $2.2 million for the six months ended June 30, 2018 and 2017, respectively. Based on amounts recorded at June 30, 2018, the Company will recognize intangible asset amortization expense for the six months ending December 31, 2018 and years ending December 31, 2019, 2020, 2021, 2022 and thereafter as follows (in thousands):
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Net Income Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | Note 10—Net Income Per Share The following table presents the calculation of basic and diluted net income per share for periods presented (in thousands except share and per share amounts):
The following potential common shares were excluded from the calculation of diluted net income per share attributable to common stockholders because their effect would have been anti-dilutive for the periods presented:
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Segment and Geographic Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment and Geographic Information | Note 11—Segment and Geographic Information The Company has determined it operates as one operating and reportable segment for purposes of allocating resources and evaluating financial performance. Revenue by country is based on the billing address of the seller. The following table summarizes revenue, income (loss) before income taxes and net income (loss) by geographic area for the periods presented (in thousands):
No individual country’s revenue other than the United States exceeded 10% of total revenue for the periods presented. All significant long-lived assets are located in the United States. |
Commitments and Contingencies |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 12—Commitments and Contingencies Long-Term Debt In March 2018, the Company issued $345.0 million aggregate principal amount of 0% Convertible Senior Notes due 2023 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Notes will mature on March 1, 2023, unless earlier converted or repurchased, and there are no contractual payments required until maturity. For more information on the Notes, see “Note 3—Convertible Debt”. Non-Income Tax Contingencies The Company had reserves of $1.7 million and $0.4 million at June 30, 2018 and December 31, 2017, respectively, for certain non-income tax obligations, representing management’s best estimate of its probable liability. The Company could also be subject to examination in various jurisdictions related to non-income tax matters. The resolution of these types of matters, if in excess of the recorded reserve, could have an adverse impact on the Company’s business. Legal Proceedings Cervantes and Weiss Cases On July 21, 2015, a purported securities class action complaint (Cervantes v. Dickerson, et.al., Case No. CIV 534768) was filed in the Superior Court of State of California, County of San Mateo against the Company, certain officers, directors, and underwriters. The complaint asserts violations of Sections 11 and 15 of the Securities Act. The complaint alleges misrepresentations in the Company’s Registration Statement on Form S-1 and Prospectus with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. On December 7, 2015, the Company and the underwriter defendants moved to stay the Cervantes action on the grounds of forum non conveniens. On November 5, 2015, another purported securities class action complaint (Weiss v. Etsy et al., No. CIV 536123) was filed in the Superior Court of State of California, County of San Mateo. The Weiss complaint names as defendants the Company and the same officers, directors, and underwriters named in the Cervantes complaint, and also asserts violations of Sections 11 and 15 of the Securities Act based on allegedly false or misleading statements or omissions with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement. On December 24, 2015, the court consolidated the Cervantes and Weiss actions. On February 3, 2016, the court granted the Company’s motion to stay the consolidated actions. The Company and the named officers and directors intend to defend themselves vigorously against these consolidated actions. In light of, among other things, the early stage of the litigation, the Company is unable to predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome. In addition, from time to time in the normal course of business, various other claims and litigation have been asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability for damages. Any claims or litigation, regardless of their success, could have an adverse effect on the Company’s Consolidated Results of Operations or Cash Flows in the period the claims or litigation are resolved. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. |
Restructuring and Other Exit Costs (Income) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Other Exit Costs (Income) | Note 13—Restructuring and Other Exit Costs (Income) On April 30, 2017, the Board of Directors approved a plan to increase efficiency and streamline the Company's cost structure through headcount reductions and a reduction in internal program expenses (the “May Actions”). On June 16, 2017, the Board of Directors approved additional initiatives that are designed to improve focus on key strategic growth opportunities (together with the May Actions, the “Actions”). The Actions included total headcount reductions of 245 positions or 23% of the total workforce as of December 31, 2017, closing A Little Market (“ALM”), a market in France, and closing or consolidating certain international offices. In connection with the Actions, the Company incurred $13.9 million of restructuring and other exit costs in the year ended December 31, 2017, comprised of employee severance, stock compensation modifications, and other exit costs, largely made up of cash expenditures. The Company generated $0.2 million of income in the six months ended June 30, 2018 due to changes in estimated severance costs. All remaining cash payments are expected to be recognized in 2018. The following table displays restructuring and other exit costs (income) recorded related to the Actions and a rollforward of the charges to the accrued expenses balance as of June 30, 2018 (in thousands):
Total restructuring and other exit costs (income) related to the Actions included in the Consolidated Statements of Operations are as follows (in thousands):
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Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Consolidation | Basis of Consolidation The Consolidated Financial Statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
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Reclassifications | Reclassifications Certain items in the prior years’ Consolidated Financial Statements have been reclassified to conform to the current year presentation reflected in the Consolidated Financial Statements. Specifically, the Company reclassified $33.4 million and $63.2 million previously included in Services revenue to Marketplace revenue (see “Note 2—Revenue”) for the three and six months ended June 30, 2017, respectively, to conform to the current year presentation in connection with the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. |
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Use of Estimates | Use of Estimates The preparation of the Company’s Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting estimates that require management’s most difficult and subjective judgments include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations; income taxes; website development costs and internal-use software; purchase price allocations for business combinations; valuation of goodwill and intangible assets; leases; stock-based compensation; restructuring and other exit costs (income); and fair value of financial instruments. The Company evaluates its estimates and judgments on an ongoing basis and revises them when necessary. Actual results may differ from the original or revised estimates. |
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Cash, Cash Equivalents and Short-term Investments | Cash, Cash Equivalents and Short-term Investments The Company considers all investments with an original maturity of three months or less at time of purchase to be cash equivalents. Cash restricted by third parties is not considered cash and cash equivalents. Short-term investments, consisting primarily of commercial paper, corporate bonds and U.S. Government and agency securities with original maturities of greater than three months but less than one year when purchased, are classified as available-for-sale and are reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated income tax provisions or benefits. |
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Revenue Recognition | Revenue Recognition The Company’s revenue is diversified; generated from a mix of marketplace activities and other optional services to help Etsy sellers start, manage and scale their business. Revenues are recognized as the Company transfers control of promised goods or services to Etsy sellers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfillment of the promise, has inventory risk and has the latitude in establishing pricing and selecting suppliers, among other factors. Based on its evaluation of these factors, revenue is recorded either gross or net of costs associated with the transaction. Sales and usage-based taxes are excluded from revenues. |
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Income Tax | Income Taxes The Company's income tax (provision) benefit for interim periods is determined using an estimate of its annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. The Company updates its estimate of the annual effective tax rate each quarter and makes cumulative adjustments if its estimated annual tax rate changes. The Company's quarterly tax provision and quarterly estimate of its annual effective tax rate are subject to significant variations due to several factors, including variability in predicting its pretax and taxable income and the mix of jurisdictions to which those relate, changes of expenses or losses for which tax benefits are not recognized, recording of excess tax benefits related to stock-based compensation and changes in the laws, regulations and administrative practices of the jurisdictions in which the Company operates. |
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Net Income Per Share | Net Income Per Share Basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed by dividing net income for the period by the weighted-average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and stock-based compensation awards is reflected in diluted net income per share by application of the treasury stock method. Since the Company expects to settle in cash the principal outstanding under the 0% Convertible Senior Notes due 2023 the Company issued in March 2018 (the “Notes,” see “Note 3—Convertible Debt”), it uses the treasury stock method when calculating the potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company's common stock for a given period exceeds the conversion price of $36.27 per share. The calculation of diluted net income per share excludes all anti-dilutive common shares. For periods in which the Company has reported net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. |
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Recently Issued and Recently Adopted Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases, and additional changes, modifications, clarifications or interpretations related to this guidance thereafter, which require a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. The new guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Upon adoption of this standard, the Company expects to recognize, on a discounted basis, its minimum commitments under noncancelable operating leases on the Consolidated Balance Sheets resulting in the recording of right-of-use assets and lease obligations. The Company is currently evaluating whether there are any additional impacts this guidance will have on its Consolidated Financial Statements. In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees. The new guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of the new guidance and does not anticipate the update to have a material impact on its Consolidated Financial Statements. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and additional changes, modifications, clarifications or interpretations related to this guidance thereafter, which replaces existing revenue recognition guidance. The new guidance was effective for the annual and interim periods beginning after December 15, 2017. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the requirements of the new guidance as of January 1, 2018, utilizing the full retrospective method of transition. In connection with the adoption, the company reclassified Etsy Payments revenue from Services revenue to Marketplace revenue in the Consolidated Statements of Operations. Aside from this presentation reclassification, adoption of the new guidance did not result in changes to the prior year or current year Consolidated Financial Statements. See “Note 2—Revenue” for additional information regarding revenue recognition. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The new guidance is effective for the annual and interim periods beginning after December 15, 2017. The Company adopted this standard in the first quarter of 2018 utilizing the full retrospective method of transition. As a result of this guidance, the Company reclassified $5.3 million on the Consolidated Statement of Cash Flows in the six months ended June 30, 2018 and 2017 to include restricted cash in the beginning and ending cash, cash equivalent and restricted cash balances. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows (in thousands):
The balances included in restricted cash represent amounts held as collateral associated with the lease of the Company's Brooklyn, New York headquarters. This standard had no other impact to the Consolidated Financial Statements. |
Basis of Presentation and Summary of Significant Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Investments | The following table provides cash, cash equivalents and short-term investments within the Consolidated Balance Sheets as of the dates indicated (in thousands):
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Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows (in thousands):
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Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table summarizes revenue by type of service for the periods presented (in thousands):
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Contract with Customer, Liability Rollforward | The following table summarizes the deferred revenue activity during the period indicated (in thousands):
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Stock-based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Black-Scholes Valuation Assumptions Used to Determine Fair Value of Options Granted | The fair value of options granted in the periods presented below using the Black-Scholes pricing model has been based on the following assumptions:
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Summary of Stock Option Activity | The following table summarizes the activity for the Company's options during the six months ended June 30, 2018 (in thousands except share and per share amounts):
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Summary of Intrinsic Value of Options Exercised | The following table summarizes the weighted-average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested during the three and six months ended June 30, 2018 and 2017 (in thousands except per share amounts):
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Summary of Weighted Average Grant Date Fair Value and Fair Value of Awards Vested | The following table summarizes the weighted-average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested during the three and six months ended June 30, 2018 and 2017 (in thousands except per share amounts):
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Summary of Unvested RSU Activity | The following table summarizes the activity for the Company's unvested RSUs during the six months ended June 30, 2018:
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Schedule of Stock-Based Compensation Expense | Total stock-based compensation expense included in the Consolidated Statements of Operations for the periods presented below is as follows (in thousands):
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Stockholders' Equity (Tables) |
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Class of Treasury Stock | The following table summarizes the Company's share repurchase activity, excluding shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units (in thousands except share and per share amounts):
(1) Average price paid per share excludes broker commissions. Value of shares repurchased includes broker commissions. |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Major Categories of Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following are the major categories of assets measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 (in thousands):
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Marketable Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost and Fair Value of Available-for-sale Securities | The cost and fair value of available-for-sale securities were as follows as of the dates indicated (in thousands):
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Intangible Assets (Tables) |
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Schedule of Finite-Lived Intangible Assets | At June 30, 2018 and December 31, 2017, the gross book value and accumulated amortization of intangible assets were as follows (in thousands):
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Based on amounts recorded at June 30, 2018, the Company will recognize intangible asset amortization expense for the six months ending December 31, 2018 and years ending December 31, 2019, 2020, 2021, 2022 and thereafter as follows (in thousands):
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Net Income Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Calculation of Basic and Diluted Net (Loss) Income Per Share | The following table presents the calculation of basic and diluted net income per share for periods presented (in thousands except share and per share amounts):
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Schedule of Anti-Dilutive Securities Excluded from Computation of Earnings Per Share | The following potential common shares were excluded from the calculation of diluted net income per share attributable to common stockholders because their effect would have been anti-dilutive for the periods presented:
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Segment and Geographic Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue by Geographic Area | The following table summarizes revenue, income (loss) before income taxes and net income (loss) by geographic area for the periods presented (in thousands):
|
Restructuring and Other Exit Costs (Income) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring Reserve by Type of Cost | The following table displays restructuring and other exit costs (income) recorded related to the Actions and a rollforward of the charges to the accrued expenses balance as of June 30, 2018 (in thousands):
|
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Restructuring and Related Costs | Total restructuring and other exit costs (income) related to the Actions included in the Consolidated Statements of Operations are as follows (in thousands):
|
Basis of Presentation and Summary of Significant Accounting Policies - Cash, Cash Equivalents and Short-term Investments (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash and cash equivalents | $ 357,820 | $ 315,442 | $ 226,885 | $ 181,592 |
Short-term investments | 209,689 | 25,108 | ||
Total cash, cash equivalents and short-term investments | $ 567,509 | $ 340,550 |
Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 132,387 | $ 101,692 | $ 253,299 | $ 198,583 |
Marketplace Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 91,306 | 75,445 | 179,273 | 146,007 |
Service Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 39,507 | 25,440 | 72,112 | 49,584 |
Other Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 1,574 | $ 807 | $ 1,914 | $ 2,992 |
Revenue - Summary of Deferred Revenue Activity (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
|
Movement in Deferred Revenue [Roll Forward] | ||
Balance as of the beginning of the period | $ 6,464 | $ 6,262 |
Cash payments received or due | 18,452 | 36,603 |
Revenue recognized in the period | (18,476) | (36,425) |
Balance as of the end of the period | $ 6,440 | $ 6,440 |
Stock-based Compensation - Fair Value of Options Granted Using the Black-Scholes Pricing Model (Details) - Stock options |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Volatility, minimum | 38.60% | 41.70% | 41.70% | 38.60% |
Volatility, maximum | 42.10% | 44.20% | 44.20% | 42.10% |
Risk-free interest rate, minimum | 2.80% | 1.90% | 1.90% | 2.60% |
Risk-free interest rate, maximum | 2.90% | 2.00% | 2.00% | 2.90% |
Expected term (in years) | 6 years 3 months | |||
Dividend rate | 0.00% | 0.00% | 0.00% | 0.00% |
Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected term (in years) | 5 years 6 months | 5 years 6 months | 5 years 6 months | 5 years 6 months |
Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected term (in years) | 6 years 29 days | 6 years 3 months 18 days | 6 years 3 months |
Stock-based Compensation - Weighted Average Grant Date Fair Value of Options Granted, Intrinsic Value of Options Exercised and Fair Value of Awards Vested (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Weighted average grant date fair value of options (in dollars per share) | $ 13.51 | $ 4.73 | $ 12.50 | $ 4.71 |
Intrinsic value of options exercised | $ 1,397 | $ 11,135 | $ 11,196 | $ 12,866 |
Fair value of awards vested | $ 11,469 | $ 6,695 | $ 14,399 | $ 10,485 |
Stock-based Compensation - Summary of Unvested RSUs (Details) - RSUs |
6 Months Ended |
---|---|
Jun. 30, 2018
$ / shares
shares
| |
Shares | |
Unvested at December 31, 2017 (in shares) | shares | 3,074,247 |
Granted (in shares) | shares | 2,141,543 |
Vested (in shares) | shares | (650,978) |
Forfeited/Cancelled (in shares) | shares | (215,469) |
Unvested at March 31, 2018 (in shares) | shares | 4,349,343 |
Weighted-Average Grant Date Fair Value | |
Unvested at December 31, 2017 (in dollars per share) | $ / shares | $ 11.98 |
Granted (in dollars per share) | $ / shares | 25.70 |
Vested (in dollars per share) | $ / shares | 11.00 |
Forfeited/Cancelled (in dollars per share) | $ / shares | 13.76 |
Unvested at March 31, 2018 (in dollars per share) | $ / shares | $ 19.66 |
Stock-based Compensation - Allocated Share-Based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 8,617 | $ 8,162 | $ 15,071 | $ 13,047 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | 927 | 398 | 1,473 | 762 |
Marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | 699 | 528 | 1,177 | 972 |
Product development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | 4,025 | 2,053 | 6,664 | 4,073 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 2,966 | $ 5,183 | $ 5,757 | $ 7,240 |
Stockholders' Equity (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 8 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|---|
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
Nov. 17, 2017 |
|
Equity [Abstract] | ||||||
Stock repurchase program, authorized amount | $ 100,000,000 | |||||
Shares repurchased (in shares) | 722,941 | 2,807,393 | 4,116,565 | 586,231 | ||
Average price paid per share (in dollars per share) | $ 29.15 | $ 24.43 | $ 24.28 | $ 17.57 | ||
Stock repurchased and retired during period | $ (21,113,000) | $ (68,586,000) | $ (89,661,000) | $ (100,000,000) | $ (10,301,000) | |
Stock repurchase program, remaining authorized repurchase amount | $ 0 | $ 0 | $ 0 | $ 89,699,000 |
Income Taxes (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Unrecognized tax benefits | $ 17.0 | $ 17.0 |
Unrecognized tax benefits that would impact effective tax rate favorably | $ 17.0 |
Fair Value Measurements - Schedule of Long Term Debt Fair Value (Details) $ in Millions |
Jun. 30, 2018
USD ($)
|
---|---|
Recurring | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Long-term debt, fair value | $ 275.4 |
Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | |||||
Gross book value | $ 42,523 | $ 42,523 | $ 7,200 | ||
Accumulated amortization | (4,446) | (4,446) | (3,100) | ||
Total | 38,077 | 38,077 | 4,100 | ||
Amortization of intangible assets | 700 | $ 800 | 1,300 | $ 2,200 | |
Patents and developed technology | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Gross book value | 7,200 | 7,200 | 7,200 | ||
Accumulated amortization | (4,300) | (4,300) | (3,100) | ||
Total | 2,900 | 2,900 | 4,100 | ||
Referral agreement | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Gross book value | 35,323 | 35,323 | 0 | ||
Accumulated amortization | (146) | (146) | 0 | ||
Total | $ 35,177 | $ 35,177 | $ 0 | ||
Finite-lived intangible asset, useful life | 10 years |
Intangible Assets - Future Amortization Expense (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2018 | $ 2,969 | |
2019 | 5,232 | |
2020 | 3,532 | |
2021 | 3,532 | |
2022 | 3,532 | |
Thereafter | 19,280 | |
Total | $ 38,077 | $ 4,100 |
Net Income Per Share - Summary of Shares Excluded from the Calculation of Diluted Net Loss Per Share (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 760,627 | 6,850,653 | 1,476,215 | 5,517,108 |
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 642,418 | 6,201,891 | 421,412 | 4,451,613 |
Restricted stock units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 118,209 | 648,762 | 1,054,803 | 1,065,495 |
Segment and Geographic Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenue, Major Customer [Line Items] | ||||
Revenues | $ 132,387 | $ 101,692 | $ 253,299 | $ 198,583 |
Income (loss) before income taxes | 4,625 | 2,232 | 17,606 | 759 |
Net income | 3,379 | 11,669 | 16,346 | 11,248 |
United States | ||||
Revenue, Major Customer [Line Items] | ||||
Revenues | 96,805 | 73,546 | 181,728 | 145,068 |
Income (loss) before income taxes | 8,017 | (22,702) | 5,752 | (32,305) |
Net income | 7,525 | (12,609) | 5,507 | (20,935) |
International | ||||
Revenue, Major Customer [Line Items] | ||||
Revenues | 35,582 | 28,146 | 71,571 | 53,515 |
Income (loss) before income taxes | (3,392) | 24,934 | 11,854 | 33,064 |
Net income | $ (4,146) | $ 24,278 | $ 10,839 | $ 32,183 |
Commitments and Contingencies (Details) - USD ($) |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Non-Income Tax Obligations | ||
Loss Contingencies [Line Items] | ||
Non-income tax obligation reserve | $ 1,700,000 | $ 400,000 |
Convertible Senior Notes due 2023 | ||
Loss Contingencies [Line Items] | ||
Interest rate, stated percentage | 0.00% | |
Convertible Debt | Convertible Senior Notes due 2023 | ||
Loss Contingencies [Line Items] | ||
Aggregate principle amount | $ 345,000,000 |
Restructuring and Other Exit Costs (Income) (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
position
|
|
Restructuring and Related Activities [Abstract] | |||||
Expected number of positions eliminated | position | 245 | ||||
Number of positions eliminated, inception to date | 23.00% | ||||
Restructuring costs (income) | $ | $ (41) | $ 11,260 | $ (192) | $ 11,260 | $ 13,900 |
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