Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period endedJune 30, 2021
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to                                    
Commission File Number 001-36911
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
117 Adams StreetBrooklynNY11201
(Address of principal executive offices)(Zip code)
(718) 880-3660
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock$0.001 par value per shareETSYThe Nasdaq Global Select Market
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated Filer Smaller Reporting Company
Emerging Growth Company
    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
    The number of shares of common stock outstanding as of July 30, 2021 was 126,576,797.

Table of Contents
Part I - Financial Information
Item 1.Consolidated Financial Statements (Unaudited)
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

Unless the context otherwise requires, we use the terms “Etsy,” the “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q (“Quarterly Report”) to refer to Etsy, Inc. and, where appropriate, our consolidated subsidiaries.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating and Financial Metrics” for the definitions of the following terms used in this Quarterly Report: “active buyer,” “active seller,” “Adjusted EBITDA,” “GMS,” “international GMS,” “mobile GMS,” and “currency-neutral GMS growth.”
Etsy has used, and intends to continue using, its investor relations website and the Etsy News Blog (blog.etsy.com/news) to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website and the Etsy News Blog in addition to following our press releases, SEC filings, and public conference calls and webcasts.

Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information relating to our opportunity; the impact of our “Right to Win” strategy and levers for growth, marketing, and product initiatives and investments on our business and operating results, including future gross merchandise sales (“GMS”) and revenue growth; the impact of our Offsite Ads offering on our future financial performance; our plans for acquisitions and strategic investments, our “House of Brands” strategy, and their potential impact on our growth and results of operations; our intended environmental, social, and ecological impacts; and the uncertain impacts that the COVID-19 pandemic or its abatement may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows, on changes in overall levels of consumer spending, on e-commerce generally, and on volatility in the global economy. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as “aim,” “anticipate,” “believe,” “could,” “enable,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” “would” or similar expressions and derivative forms and/or negatives of those terms.
Forward-looking statements are not guarantees of performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Those risks include those described in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. Given these uncertainties, you should read this Quarterly Report in its entirety and not place undue reliance on any forward-looking statements in this Quarterly Report.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and, although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Moreover, we operate in a competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements made in this Quarterly Report. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic may amplify many of these risks.
Forward-looking statements represent our beliefs and assumptions only as of the date of this Quarterly Report. We disclaim any obligation to update forward-looking statements.
Summary Risk Factors
Our business is subject to numerous risks. The following summary highlights some of the risks we are exposed to in the normal course of our business activities. This summary is not complete and the risks summarized below are not the only risks we face. You should review and consider carefully the risks and uncertainties described in more detail in the “Risk Factors” section of this Quarterly Report which includes a more complete discussion of the risks summarized below as well as a discussion of other risks related to our business and an investment in our common stock.
Financial Performance and Operational Risks Related to Our Business
We have experienced rapid growth, and we may not have the infrastructure, human resources, or operational resources to sustain continued growth at our recent pace.
The COVID-19 pandemic is unprecedented and has impacted, and the pandemic and its abatement may continue to impact, our GMS, and could impact our results of operations in numerous ways that remain volatile and unpredictable.
Our quarterly operating results may fluctuate, which could cause our stock price to decline. The price of our common stock has been and will likely continue to be volatile and declines in the price of our common stock could subject us to litigation.
We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.
Our business could suffer if we experience a technology disruption that results in a loss of information, if personal data or sensitive information about users or employees is misused or disclosed, or if we or our third-party providers are unable to protect against technology vulnerabilities, service interruptions, security breaches, or other cyber incidents.

The trustworthiness of our marketplaces and the connections within our communities are important to our success. Our business, financial performance, and growth depend on our ability to attract and retain active and engaged communities of buyers and sellers. If we are unable to retain our existing buyers and sellers and activate new ones, our financial performance could decline.
Our business depends on continued and unimpeded access to third party services, platforms, and infrastructure that we rely upon to maintain and scale our platforms.
We have experienced rapid domestic and global growth, and we may be subject to expanded and potentially uninsured risk, making it more difficult for us to maintain profitability in the future.
Our business could be adversely affected by economic downturns, natural disasters, political crises, geopolitical changes or other macroeconomic conditions which have in the past and may in the future negatively impact our business and financial performance.
Our ability to attract and hire a diverse pipeline of talent and retain key employees is important to our success. If we experience significant attrition or turnover it could impact our ability to grow our business.
Strategic Risks Related to Our Business and Industry
We face intense competition and may not be able to compete effectively.
If we are not able to keep pace with technological changes, and enhance current and develop new offerings to respond to the changing needs of sellers and buyers, our business may be harmed.
If the widely adopted mobile, social, search and advertising solutions that we, our sellers and our buyers rely on as part of our key offering are no longer available or effective, or if access to these major platforms is limited, the use of our marketplaces could decline.
If we do not demonstrate progress against our Impact strategy or if our Impact strategy is not perceived to be adequate, our reputation could be harmed. We could also damage our reputation and the value of our brands if we fail to demonstrate that our commitment to our Impact strategy enhances our overall financial performance.
Expanding our operations outside of the United States is part of our strategy, and the growth of our business could be harmed if our international expansion efforts do not succeed.
Our recent acquisitions of Depop Limited (“Depop”) and Elo7 Serviços de Informática S.A. (“Elo7”) may create strains on our management, technology and operational resources and may prove to be costlier and take longer to integrate than we anticipate.
We may expand our business through additional acquisitions of other businesses or assets or strategic partnerships and investments, which may divert management’s attention and/or prove to be unsuccessful.
We have a significant amount of convertible debt that may be settled in cash and may incur additional debt in the future.
Regulatory, Compliance, and Legal Risks
Compliance and protection under evolving global legal and regulatory requirements including privacy and data protection laws, tax laws, product liability laws, antitrust laws, intellectual property and counterfeiting regulations, may materially impact our time, resources, and ability to grow our business.
Expanding our operations in Latin America and India may expose us to additional risks.
We may be involved in litigation and regulatory matters that are expensive and time consuming and that may require changes to our strategy, the features of our platforms and how our business operates.
We may be subject to intellectual property or other claims, which, even if untrue, could damage our brands, require us to pay significant damages, and could limit our ability to use certain technologies or business strategies in the future.

Other Risks
Future sales and issuances of our common stock, or rights to purchase common stock, including upon conversion of our convertible notes, could result in additional dilution to our stockholders and could cause the price of our common stock to decline.

Part I - Financial Information
Item 1. Consolidated Financial Statements (Unaudited).
Etsy, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands, except share and per share amounts)
As of June 30,
As of December 31,
Current assets:
Cash and cash equivalents$2,053,882 $1,244,099 
Short-term investments430,727 425,119 
Accounts receivable, net of expected credit losses of $11,420 and $9,757 as of June 30, 2021 and December 31, 2020, respectively
20,283 22,605 
Prepaid and other current assets49,693 56,152 
Funds receivable and seller accounts136,395 146,806 
Total current assets2,690,980 1,894,781 
Restricted cash5,341 5,341 
Property and equipment, net of accumulated depreciation and amortization of $136,382 and $158,771 as of June 30, 2021 and December 31, 2020, respectively
105,814 112,495 
Goodwill140,045 140,810 
Intangible assets, net of accumulated amortization of $33,133 and $25,705 as of June 30, 2021 and December 31, 2020, respectively
178,854 187,449 
Deferred tax assets46,106 115 
Long-term investments102,801 39,094 
Other assets20,475 24,404 
Total assets$3,290,416 $2,404,489 
Current liabilities:
Accounts payable$26,752 $40,883 
Accrued expenses209,823 232,352 
Finance lease obligations—current8,691 8,537 
Funds payable and amounts due to sellers136,395 146,806 
Deferred revenue12,312 11,264 
Other current liabilities13,027 14,822 
Total current liabilities407,000 454,664 
Finance lease obligations—net of current portion40,969 44,979 
Deferred tax liabilities33 58,481 
Long-term debt, net2,273,331 1,062,299 
Other liabilities38,330 41,642 
Total liabilities2,759,663 1,662,065 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 126,522,519 and 125,835,931 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)
127 126 
Preferred stock ($0.001 par value, 25,000,000 shares authorized as of June 30, 2021 and December 31, 2020)
Additional paid-in capital590,232 883,166 
Accumulated deficit(56,970)(146,819)
Accumulated other comprehensive (loss) income(2,636)5,951 
Total stockholders’ equity530,753 742,424 
Total liabilities and stockholders’ equity$3,290,416 $2,404,489 
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Operations (Unaudited)
(In thousands, except share and per share amounts)
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
Revenue$528,900 $428,737 $1,079,546 $656,792 
Cost of revenue148,969 111,381 291,886 193,797 
Gross profit379,931 317,356 787,660 462,995 
Operating expenses:
Marketing167,474 114,707 318,678 163,212 
Product development61,753 45,233 115,459 83,015 
General and administrative61,599 38,276 113,781 72,263 
Total operating expenses290,826 198,216 547,918 318,490 
Income from operations89,105 119,140 239,742 144,505 
Other (expense) income:
Interest expense(1,882)(10,026)(3,567)(19,993)
Interest and other income803 1,732 1,782 5,345 
Foreign exchange (loss) gain(2,272)1,470 5,525 (7,848)
Total other (expense) income(3,351)(6,824)3,740 (22,496)
Income before income taxes85,754 112,316 243,482 122,009 
Benefit (provision) for income taxes12,500 (15,891)(1,462)(13,062)
Net income$98,254 $96,425 $242,020 $108,947 
Net income per share attributable to common stockholders:
Basic$0.77 $0.81 $1.91 $0.92 
Diluted$0.68 $0.75 $1.68 $0.88 
Weighted-average common shares outstanding:
Basic126,977,990 118,865,885 126,659,372 118,483,712 
Diluted144,867,491 134,408,041 144,857,500 133,238,316 

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
Net income$98,254 $96,425 $242,020 $108,947 
Other comprehensive income (loss):
Cumulative translation adjustment2,714 2,538 (8,350)(133)
Unrealized gains (losses) on marketable securities, net of tax expense (benefit) of $5, $142, $(75) and $347, respectively
18 462 (237)1,133 
Total other comprehensive income (loss)2,732 3,000 (8,587)1,000 
Comprehensive income$100,986 $99,425 $233,433 $109,947 

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In thousands, except share amounts)
Three Months Ended June 30, 2021
 Common StockAdditional
Paid-in Capital
Retained Earnings
(Accumulated Deficit)
Accumulated Other Comprehensive LossTotal
Balance as of March 31, 2021126,785,568 $127 $664,240 $24,775 $(5,368)$683,774 
Stock-based compensation— — 28,381 — — 28,381 
Exercise of vested options122,502 — 4,107 — — 4,107 
Purchase of capped calls, net of taxes— — (64,673)— — (64,673)
Settlement of convertible senior notes, net of taxes360,059  (131)— — (131)
Vesting of restricted stock units, net of shares withheld311,905 1 (41,692)— — (41,691)
Stock repurchase(1,057,515)(1)— (179,999)— (180,000)
Other comprehensive income— — — — 2,732 2,732 
Net income— — — 98,254 — 98,254 
Balance as of June 30, 2021126,522,519 $127 $590,232 $(56,970)$(2,636)$530,753 
Six Months Ended June 30, 2021
 Common StockAdditional
Paid-in Capital
Accumulated DeficitAccumulated Other Comprehensive Income (Loss)Total
Balance as of December 31, 2020125,835,931 $126 $883,166 $(146,819)$5,951 $742,424 
Cumulative effect of adoption of accounting standard changes— — (228,738)27,828 — (200,910)
Stock-based compensation— — 49,357 — — 49,357 
Exercise of vested options339,795 — 8,037 — — 8,037 
Purchase of capped calls, net of taxes— — (64,673)— — (64,673)
Settlement of convertible senior notes, net of taxes985,081 1 (423)— — (422)
Vesting of restricted stock units, net of shares withheld419,227 1 (56,494)— — (56,493)
Stock repurchase(1,057,515)(1)— (179,999)— (180,000)
Other comprehensive loss— — — — (8,587)(8,587)
Net income— — — 242,020 — 242,020 
Balance as of June 30, 2021126,522,519 $127 $590,232 $(56,970)$(2,636)$530,753 


Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In thousands, except share amounts)
Three Months Ended June 30, 2020
Common StockAdditional
Paid-in Capital
Accumulated DeficitAccumulated Other Comprehensive LossTotal
Balance as of March 31, 2020118,376,782 $118 $657,311 $(239,883)$(10,699)$406,847 
Stock-based compensation— — 16,975 — — 16,975 
Exercise of vested options510,113 1 7,280 — — 7,281 
Vesting of restricted stock units, net of shares withheld253,742  (6,353)— — (6,353)
Other comprehensive income— — — — 3,000 3,000 
Net income— — — 96,425 — 96,425 
Balance as of June 30, 2020119,140,637 $119 $675,213 $(143,458)$(7,699)$524,175 

Six Months Ended June 30, 2020
Common StockAdditional
Paid-in Capital
Accumulated DeficitAccumulated Other Comprehensive LossTotal
Balance as of December 31, 2019118,342,772 $119 $642,628 $(227,414)$(8,699)$406,634 
Stock-based compensation— — 30,960 — — 30,960 
Exercise of vested options957,999 1 12,176 — — 12,177 
Vesting of restricted stock units, net of shares withheld382,972  (10,551)— — (10,551)
Stock repurchase(543,106)(1)— (24,991)— (24,992)
Other comprehensive income— — — — 1,000 1,000 
Net income— — — 108,947 — 108,947 
Balance as of June 30, 2020119,140,637 $119 $675,213 $(143,458)$(7,699)$524,175 

The accompanying notes are an integral part of these consolidated financial statements.


Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 Six Months Ended 
 June 30,
Cash flows from operating activities
Net income$242,020 $108,947 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense47,791 30,536 
Depreciation and amortization expense26,065 29,334 
Provision for expected credit losses9,890 5,904 
Foreign exchange (gain) loss(3,306)10,394 
Non-cash interest expense613 17,026 
Deferred (benefit) provision for income taxes(21,128)7,389 
Other non-cash expense, net2,280 1,845 
Changes in operating assets and liabilities:
Current assets6,599 (51,975)
Non-current assets3,756 4,994 
Current liabilities(41,225)90,707 
Non-current liabilities(3,193)(5,006)
Net cash provided by operating activities270,162 250,095 
Cash flows from investing activities
Purchases of property and equipment(1,917)(209)
Development of internal-use software(7,084)(2,043)
Purchases of marketable securities(268,972)(181,198)
Sales and maturities of marketable securities197,770 206,182 
Net cash (used in) provided by investing activities(80,203)22,732 
Cash flows from financing activities
Payment of tax obligations on vested equity awards(56,493)(10,551)
Repurchase of stock(180,000)(24,992)
Proceeds from exercise of stock options8,037 12,177 
Proceeds from issuance of convertible senior notes 1,000,000  
Payment of debt issuance costs (12,566)(14)
Purchase of capped calls(85,000) 
Settlement of convertible senior notes(43,853) 
Payments on finance lease obligations(4,887)(4,927)
Other financing, net72 (10,196)
Net cash provided by (used in) financing activities625,310 (38,503)
Effect of exchange rate changes on cash(5,486)(93)
Net increase in cash, cash equivalents, and restricted cash809,783 234,231 
Cash, cash equivalents, and restricted cash at beginning of period1,249,440 448,634 
Cash, cash equivalents, and restricted cash at end of period$2,059,223 $682,865 


Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown above:
Six Months Ended 
 June 30,
Beginning balance:
Cash and cash equivalents$1,244,099 $443,293 
Restricted cash5,341 5,341 
Total cash, cash equivalents, and restricted cash$1,249,440 $448,634 
Ending balance:
Cash and cash equivalents$2,053,882 $677,524 
Restricted cash5,341 5,341 
Total cash, cash equivalents, and restricted cash$2,059,223 $682,865 

The accompanying notes are an integral part of these consolidated financial statements.

Etsy, Inc.
Notes to Consolidated Financial Statements

Note 1—Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Etsy, Inc. (the “Company” or “Etsy”) operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers. The Company’s primary marketplace, Etsy.com, is the global marketplace for unique and creative goods. The Company generates revenue primarily from transaction, listing, and payments processing fees, and on-site advertising and shipping label services.
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.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The Company has condensed or omitted certain information and notes normally included in complete annual financial statements prepared in accordance with GAAP. These unaudited interim consolidated financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2021 (the “Annual Report”). In the opinion of management, all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for the periods presented have been reflected in the consolidated financial statements. The results of operations of any interim period are not necessarily indicative of the results of operations for the full annual period or any future period due to seasonal and other factors.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates and judgments. The accounting estimates that require management’s most subjective judgments include: stock-based compensation; income taxes, including the estimate of the annual effective tax rate at interim periods and evaluation of uncertain tax positions; and valuation of goodwill and intangible assets. As of June 30, 2021, the effects of the COVID-19 pandemic and its abatement on the Company’s business, results of operations, and financial condition continue to evolve. As a result, many of the Company’s estimates and judgments required increased judgment and carry a higher degree of variability and volatility. As additional information becomes available, the Company’s estimates may change materially in future periods.
Stock-Based Compensation
Service based stock options, service based restricted stock units (“RSUs”), and performance based restricted stock units (“PBRSUs”) are awarded to employees, officers, and members of the Company’s Board of Directors. The PBRSUs include financial performance based restricted stock units (“Financial PBRSUs”) and total shareholder return performance based restricted stock units (“TSR PBRSUs”), both of which have performance and service vesting requirements. The Company recognizes forfeitures as they occur.
The fair value of stock options and RSUs is measured using the closing price of the Company’s common stock on Nasdaq on the grant date. Additionally, the fair value of the Financial PBRSUs is determined using a probability assessment and the fair value of the TSR PBRSUs with market conditions are determined using a Monte-Carlo simulation model.
For PBRSUs, the Company recognizes stock-based compensation expenses on a straight-line basis over the longer of the derived, explicit, or implicit service period. As of interim and annual reporting periods, the Financial PBRSUs stock-based compensation expense is adjusted based on expected achievement of performance targets, while TSR PBRSUs stock-based compensation expense is not adjusted.

Etsy, Inc.
Notes to Consolidated Financial Statements
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models previously required under GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features through equity. Without an initial allocation of proceeds to the conversion option, the debt will likely have a lower discount, thereby resulting in less non-cash interest expense through accretion. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This update permits the use of either the modified retrospective or fully retrospective method of transition.
The Company early adopted this standard, effective as of January 1, 2021, on a modified retrospective basis. The adoption of this standard had a material effect on the Company’s consolidated financial statements. The most significant effects related to the 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), 0.125% Convertible Senior Notes due 2026 (the “2019 Notes”), and 0% Convertible Senior Notes due 2023 (the “2018 Notes” and together with the 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), the 2020 Notes, and the 2019 Notes, the “Notes”), and included derecognition of the unamortized debt discount, which was recorded as a direct deduction from the Notes, resulting in an increase in long-term debt, net of approximately $264 million; derecognition of the equity component, which represents the value of the conversion option on the issuance date of the Notes outstanding, resulting in a reduction in additional paid-in capital of approximately $229 million, net of taxes; derecognition of deferred tax liabilities of approximately $63 million; and reversal of the cumulative debt discount recognized as interest expense in the Company’s Consolidated Statements of Operations since the date of issuance of each of the Notes to the period ending December 31, 2020, resulting in a decrease of accumulated deficit of approximately $28 million, net of taxes. The Company also had a reduction in interest expense due to the adoption of ASU 2020-06 as the debt discount has been derecognized and, effective January 1, 2021, there is no amortization of the debt discount. The Company did not incur any impact to liquidity or cash flows. When calculating net income per share of common stock attributable to common stockholders, the Company uses the if-converted method as required under ASU 2020-06 to determine the dilutive effect of the Notes.
Note 2—Revenue
The following table summarizes revenue disaggregated by Marketplace revenue and optional Services revenue for the periods presented (in thousands):
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
Marketplace revenue$395,463 $332,031 $809,105 $487,952 
Services revenue133,437 96,706 270,441 168,840 
Revenue$528,900 $428,737 $1,079,546 $656,792 
Contract balances
Deferred revenues
The amount of revenue recognized in the six months ended June 30, 2021 that was included in the deferred balance at January 1, 2021 was $11.3 million.

Etsy, Inc.
Notes to Consolidated Financial Statements
Note 3—Income Taxes
The Company’s provision or benefit from income taxes in interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its estimate of the annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment. The estimate of the annual effective income tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year.
The Company’s quarterly tax provision, and its quarterly estimate of the annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting its income or loss before tax and the mix of jurisdictions to which they relate, taxable income or loss in each jurisdiction, changes in its stock price, audit-related developments, acquisitions, changes in its deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, the effective tax rate can be more or less volatile based on the amount of income or loss before tax. For example, the impact of discrete items and non-deductible expenses on the effective tax rate is greater when income before income taxes is lower.
For the six months ended June 30, 2021, the Company’s effective income tax rate was 0.6% representing an income tax provision recorded on net income before tax. The effective tax rate for the six months ended June 30, 2021 was lower than the U.S. statutory rate of 21% primarily due to excess tax benefits from employee stock-based compensation, the impact from foreign operations that are subject to lower tax rates, and a benefit related to a research and development tax credit, partially offset by state income taxes.
Although management believes its tax positions and related provisions reflected in the consolidated financial statements are fully supportable, it recognizes that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law and closing of statute of limitations. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in the provision for income taxes.
The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination, may result in additional taxes or penalties against the Company. If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on the Company’s tax provision.
The amount of unrecognized tax benefits included in the Consolidated Balance Sheets increased $1.7 million in the six months ended June 30, 2021, from $23.7 million as of December 31, 2020 to $25.4 million as of June 30, 2021. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $24.5 million as of June 30, 2021. Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. Given the number of years remaining subject to examination and the number of matters being examined, at this time, the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense.

Etsy, Inc.
Notes to Consolidated Financial Statements
Note 4—Net Income Per Share
The following table presents the method used when calculating the impact of the Company’s Notes on earnings per share for the periods presented:
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2021 NotesIf-ConvertedN/AIf-ConvertedN/A
2020 NotesIf-ConvertedN/AIf-ConvertedN/A
2019 NotesIf-ConvertedTreasury StockIf-ConvertedTreasury Stock
2018 NotesIf-ConvertedIf-ConvertedIf-ConvertedIf-Converted
The Notes were dilutive for the three and six months ended June 30, 2021.
The following table presents the calculation of basic and diluted net income per share for the periods presented (in thousands, except share and per share amounts):
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
Net income attributable to common stockholders—basic$98,254 $96,425 $242,020 $108,947 
Add back interest expense, net of tax attributable to assumed conversion of convertible senior notes934 3,969 1,718 7,891 
Net income attributable to common stockholders—diluted$99,188 $100,394 $243,738 $116,838 
Weighted-average common shares outstanding—basic126,977,990 118,865,885 126,659,372 118,483,712 
Dilutive effect of assumed conversion of options to purchase common stock4,164,254 4,279,288 4,284,047 4,149,229 
Dilutive effect of assumed conversion of restricted stock units1,734,872 1,750,875 2,026,843 1,093,382 
Dilutive effect of assumed conversion of convertible senior notes11,990,375 9,511,993 11,887,238 9,511,993 
Weighted-average common shares outstanding—diluted144,867,491 134,408,041 144,857,500 133,238,316 
Net income per share attributable to common stockholders—basic$0.77 $0.81 $1.91 $0.92 
Net income per share attributable to common stockholders—diluted$0.68 $0.75 $1.68 $0.88 
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:
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
Stock options176,858 410,409 105,322 777,412 
Restricted stock units690,062 42,361 388,099 1,166,627 
Convertible senior notes 7,412,600  7,412,600 
Total anti-dilutive securities866,920 7,865,370 493,421 9,356,639 

Etsy, Inc.
Notes to Consolidated Financial Statements
Note 5—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 Sheets 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 Company did not have any Level 3 instruments as of June 30, 2021 and December 31, 2020.
Short- and long-term investments and certain cash equivalents consist of investments in debt securities that are available-for-sale. The following table sets forth the cost, gross unrealized losses, gross unrealized gains, and fair values of the Company’s investments as of the dates indicated (in thousands):
Fair ValueCash and Cash EquivalentsShort-term InvestmentsLong-term Investments
June 30, 2021
Cash$162,196 $ $ $162,196 $162,196 $ $ 
Level 1
U.S. Government and agency securities269,020  130 269,150  269,150  
Money market funds1,891,686   1,891,686 1,891,686   
2,160,706  130 2,160,836 1,891,686 269,150  
Level 2
Certificate of deposit27,953  11 27,964  27,964  
Commercial paper46,744  17 46,761  46,761  
Corporate bonds189,653 (99)99 189,653  86,852 102,801 
264,350 (99)127 264,378  161,577 102,801