Q2 2020Financial Results

August 5, 2020

This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements relating to our financial guidance for the third quarter of 2020 and key drivers thereof; the impact of our investments on topline growth the uncertain impacts that the COVID-19 pandemic may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows and changes in overall level of consumer spending and 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 “anticipates,” “believes,” “could,” “estimates,” “expects,” “may,” “plans,” “will,” “intends,” or similar expressions and the negatives of those words.

Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include: (1) risks related to the ongoing COVID-19 pandemic, which continues to impact our GMS, other key metrics and results of operations in numerous ways that remain volatile and unpredictable; (3) our failure to meet our publicly announced guidance or other expectations; (4) our ability to successfully execute on our business strategy or if our strategy proves to be ineffective; (5) our ability to attract and retain an active and engaged community of sellers and buyers; (6) our ability to maintain our growth; (7) macroeconomic events that are outside of our control; (8) our ability to recruit and retain employees; (9) the importance to our success of the trustworthiness of our marketplace and the connections within our community; (10) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers; (11) the effectiveness of our marketing efforts; (12) the effectiveness of our mobile solutions for sellers and buyers; (13) our ability to expand our business in our core geographic markets; (14) regulation in the area of privacy and protection of user data; (15) our dependence on third-party payment providers; (16) acquisitions that may prove unsuccessful or divert management attention, including our acquisition of Reverb; and (17) the potential misuse or disclosure of sensitive information about members of our community and the potential for cyber-attacks. These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled “Risk Factors” in our Quarterly Report for the quarter ended March 31, 2020, and subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. Forward-looking statements represent our beliefs and assumptions only as of the date of this presentation. We disclaim any obligation to update forward-looking statements.

This presentation is a high-level summary of our Q2 2020 and financial results. For more information please refer to our press release dated August 5, 2020 and filings with the SEC.

Forward-looking Statements

2

Our mission matters now more than ever

Facilitating human connections through commerce

Opportunity to make a positive impact

Foundation of our excellent results

Active Buyers

60.3M+41% Y/Y

Active Sellers

3.1M+35% Y/Y

4

Track record of making a positive impact

Unveiled Economic, Social and

Ecological Impact Strategy and Goals

Set a goal to approximately double the percentage of Blackand Latinx employees in Etsy’ s workforce by2023

17% of YTD hires were Black and Latinx

2018 2019 2020

Set a goal to include more underrepresented minority groups in Etsy’s marketing creative

Reverb began offsetting 100% of emissions from shipping

Soci

alEc

olog

ical

We doubled the number of new hires from underrepresented minorities

Curated lists of black owned shops holds rank as the #1 Editors Picks page

Set a goal to mitigate the carbon impacts of our marketplace that aligns with business growth

Etsy became the first global ecommerce company to offset 100% of carbon emissions from shipping, making us a carbon neutral company

Econ

omic Set a goal to double

U.S. Etsy sellers’ economic output by2023

Contributed $6.16 billion to the U.S. economy, a 14.7% increase compared to 2018

Set a goal to advance public policies that increase economic security and reduce administrative burdens for creative entrepreneurs

Initiated advocacy work urging Congress to pass COVID-19 relief for the self-employed

Rising to the occasion to deliver strong consolidated performance

Revenue

$429M+137% Y/Y

GMS

$2.7B+147% Y/Y Currency-Neutral

Adjusted EBITDA1

$151M+35% Margin

1Reconciliation of non-GAAP financial measures is contained in the appendixAll results are Consolidated and include Reverb financial results from the date of acquisition (August 15, 2019)

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Includes Reverb financial resultsIncludes Reverb financial results

22.8%31.1%

33.0% 32.6%

Includes Reverb financial results

146.7%

36.8%31.6%

35.0% 34.7%

136.7%

21.9%21.3% 20.2%

24.1%35.1%

$1,095

$2,689

$1,353

$1,656

$1,200

Constant Currency GMS Y/Y

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Etsy supplies the world with COVID-related items...

Mask Sales

$346M in GMSSellers with a mask sale

*Reflects results from the Etsy standalone marketplace

112K

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...And nearly everything else...

Non-Mask Sales*

Up 93% Y/Y +15% Y/YGrowth in non-mask sales demonstrates the depth and breadth of the Etsy marketplace and growth opportunities for many sellers

79%

93%

April 2Q

*Reflects results from the Etsy standalone marketplace1Y/Y growth in the trailing 12 month GMS per active seller from the Etsy standalone marketplace reflected based on 2Q20 vs 2Q19

GMS per Active Seller1

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Jewelry

Embroidered Necklace

Art

Pet Portraits

Apparel

Linen summer dress

Toy & Games

Custom Puzzle

Home & Living

Home Office Desk

Baked Goods

Sourdough Bread

Meeting everyday needs with items made just for you

*Items from the Etsy standalone marketplace

$1,645 $54.00 $76.00

$16.65 $40.49 $5.00

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+128% +50% +59%+138% +11%

Tremendous growth in many of our traditional top categories Category GMS ($M) and Y/Y Growth

TTM Category GMS $ $2.0B $1.2B $826M $774M $316M $431M

+187%

*Category GMS $ exclude mask salesChart data is reflected based on Q2 Category GMS $

Q2 Category Y/Y

Top 6 Categories

75% of Overall GMS

+92% Y/Y

~1.9B

2Q19 2Q20

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And ~$609M in quarterly GMS from items that don’t fit into one of our largest categories

Other

25% of Overall GMS

~$609M

2Q19 2Q20

+376% Y/Y

Etsy’s growth is distributed among many retail categories

*Reflects results from the Etsy standalone marketplace

~$100BMarket for “Special” defined by buyer psychographics

$1.7T 6 core geographiesAcross all relevant retail categories

→

$5B2019 Global GMS

Etsy Estimated Market Share:~5%

Top Geographies:United StatesUnited KingdomCanadaGermanyAustraliaFrance

Online spend only in ALL relevant retail categories and core geographies

Sources: Euromonitor (2018), Assoc. for Creative Ind. (Jan 2018), Art Basel (2018), Hiscox (2018), IBIS, Etsy Consumer Survey

2018 TOTAL RETAIL AND ONLINE TAM 2018

$249B

How we defined our TAM in March 2019

2018

Etsy is not a niche marketplace: we believe our TAM starts with a “T” and not a “B”

Many things count as “Special” - injecting

‘Joy into the Everyday’

Distinction between offline and online has meaningfully changed

Buyers and sellers in every country around the world

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More conviction than ever to invest in sustainable growth

Marketing as a % of GMS Product as a % of GMS

Incremental Investment Opportunity

Reflects Consolidated results

Scratching the surface as we invest in our Right to Win

Best-in-Class Search and Discovery

A TrustedBrand

HumanConnections

Our Collection of Unique Items

✕ ✕

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Improvements in Saved Searches and Favoriting provides key insight into purchase intent

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• 8% of unique visitors have at least 1 saved search; 11% returned to engage with a saved search

• 15M users favorited at least 1 item with an average of 24 favorites per user

• Next Up: Focus on making the site easier to browse

Saved Searches Favorites & ListsSEARCH:

Listing videos give sellers the ability to showcase their products in a unique way

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• As of 8/3 ~700,000 videos were uploaded

• Next Up: Leverage the sellers’ making process to build buyer engagement

HUMAN CONNECTIONS:

Free shipping bundle drives AOV

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• Continued focus on the post purchase experience

• Next Up: Delivery predictability and transparency

TRUST:

OUR COLLECTION OF UNIQUE ITEMS:

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Augmented Reality feature helps buyers visualize wall art they’re interested in purchasing

Next up: Inventory understanding

Improving the marketplace... and telling the world about it

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Etsy ‘Everyday Finds’ TV Campaign

• Creating segments and targeting buyers with more personalized messages

• Doubling down on recent purchasers to drive repeat buys within 14 days

• Deepen engagement and buyer loyalty

CRM Initiatives

Long Runway...

Revenue

$429M+137% Y/Y

GMS

$2.7B+147% Y/Y Currency-Neutral

Adjusted EBITDA1

$151M+35% Margin

1Reconciliation of non-GAAP financial measures is contained in the appendixAll results are Consolidated and include Reverb financial results from the date of acquisition (August 15, 2019)

21

Includes Reverb financial resultsIncludes Reverb financial results

22.8%31.1%

33.0% 32.6%

Includes Reverb financial results

146.7%

36.8%31.6%

35.0% 34.7%

136.7%

21.9%21.3% 20.2%

24.1%35.1%

$1,095

$2,689

$1,353

$1,656

$1,200

Constant Currency GMS Y/Y

Spectacular Q2 performance...

Strong growth trends continued through Q2 as well as July

22

Reflects Consolidated results

152%

146%

136% 158% 142%

Offsite Ads launch has been successful for our sellers and for Etsy

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As of the end of the quarter less than 2% of sellers have opted out of the program

Etsy Ads grew 94% Y/Y and had first $1M day in July

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• Reduction in ad units in May to optimize UX

• Continued to refine our algorithm and bidding strategies

Seller Investments

Offsite Ads Fee waivers and

Listing Credits

Etsy AdsInventory ReductionGMS growing faster

than visits*

1Q20Take-Rate

2Q20Take-Rate

15.9%16.9%

Revenue driven by GMS Volume

Transaction feesEtsy Payments

Q2 take-rate driversConsolidated results...Scale for illustrative purposes only

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Offsite Ads Fees

*GMS growing faster than visits leading to GMS out-performing Etsy Ads, which tends to grow with visits

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Gaining leverage while investing for profitable growth

Leverage vs 2Q19De-leverage vs 2Q19

Q2 Operating Expenses as a % of Revenue

32%

17% 16%

25%

Average Revenue per Employee

*Peer Group Average includes select marketplace peersAverage Revenue per Employee is based on the Etsy Standalone marketplace. 2Q20 reflects TTM revenue and YTD average headcount

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Disciplined investments in marketing drives spend efficiency

Marketing Expense

$115M+149% Y/Y

New and Reactivated Buyers

18.7M+162% Y/Y

1Paid GMS reflects the Etsy standalone marketplace

Paid GMS1

20.8%+218% Y/Y

GMS per Active Buyer*

Year-over-year growth

Record quarterly operating metrics for the Etsy marketplace

1.3% 1.8% 3.8%

Active Buyers1+ purchase days

60M+39% Y/Y

Repeat Buyers2+ purchase days per year

26M+51% Y/Y

4.1%

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5.9%Habitual Buyers6+ purchases days per year

4M+64% Y/Y

1.9% 3.8% 6.1% 6.1% 7.3%2-year growth rate

Mask Only BuyersBuyers with only mask purchases

4M

Metrics represented are for the Etsy standalone marketplace and do not include Reverb*2Q Trailing twelve month GMS per Active Buyer excluding mask sales and mask only buyers

Encouraging frequency metrics

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Repeat Purchase Rate% of buyers with a second purchase within 30 days

45%+520 bps Q/Q

9.6%+470 bps Y/Y

New and Reactivated Buyerswith 4 or more purchases across 2 or more categories

All cohorts inflected higher in Q2

Reflects metrics from the Etsy standalone marketplace*3Q20 Cohort represents performance in the month of July

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< 2015 2016 2017 2018 2019 1Q20 2Q20

Layered cohorts indexed by GMS

Dec 2017 Dec 2019 Jun 2020

3Q20*

Jun 2019Dec 2018June 2018

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Extremely dynamic macro environment: examples of ‘reopening’ impact on GMS in France and Texas

Days before and after Phase 1 Reopening - indicate meaningful deceleration in growth

GMS Growth in TexasGMS Growth in France

Limited Re-openingMay 11th

Limited Re-openingMay 1st

Days before and after Phase 1 Reopening show more volatility and some deceleration

Reverb’s 3.5% seller transaction fee now 5%*

Spend compared with 2019:

• Investments in marketing to increase 30%+

• Capacity of global customer support and product teams to increase 25% and 40%, respectively

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Reverb invests for growth

% New Gear GMS

51%% International GMS

19%

*Effective August 4, 2020

Free Cash Flow2

Capital light business model delivers strong EBITDA and Free Cash Flow

Cash Balance 6/30/201

$1.04B

1Cash, Cash Equivalents, and Short Term Investments 2Reconciliation of non-GAAP financial measures is contained in the Appendix

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Q3 Guidance

34

*Based on the mid-point of Q3 2020 revenue guidance. Reconciliation of non-GAAP financial measures is contained in the Appendix. Key factors potentially impacting our 2020 guidance are contained in the Appendix.

GMS ($)GMS Growth (%)

Revenue ($)Revenue Growth (%)

Adj. EBITDA* ($)Adj. EBITDA Margin (%)

Q3 Consolidated GuidanceAugust 5, 2020

~$2.2B-$2.5B80% - 110%

~$366M-$426M85% - 115%

~$111M-$127M28% - 32%

The Reverb acquisition was completed on August 15, 2019, adding approximately 20 percentage points of growth to Q2 2020. We fully lap the Reverb acquisition midway through

Q3 2020.

Q&A

35

Appendix

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We anticipate that the key factors impacting Q3 GMS and revenue guidance will be:

● Headwinds and tailwinds, including but not limited to the following: retail store closures, shift in spend from offline to online, competitive dynamics, government stimulus, demand for face masks and mask adjacent items, frequency of new buyer cohorts, economic environment, job losses, and consumer confidence

● Continued visit growth and conversion rate improvements driven by global product launches enhancing the buying experience.● Incremental GMS from marketing investments.● The continued impact from Offsite Ads, which is expected to generate incremental revenue in the form of an advertising fee to sellers. ● Additional external factors that may offset some growth include: sales taxes, regulatory changes, currency fluctuations, changes to VAT,

elections, and the potential for geopolitical events that impact trade, including, among other things, the COVID-19 pandemic.● The lapping of significant items including the anniversary of Etsy’s acquisition of Reverb and the benefit of Etsy’s free shipping initiative.

We anticipate that the key factors impacting our Q3 Adjusted EBITDA guidance will be:

● Revenue growth driven by the core business.● Planned investments in product development, employees, and marketing, including investments in newer channels for Etsy with more

speculative returns, as well as incremental investments in marketing spend related to our new Offsite Ads product. ● Continued investment in the usage of our cloud infrastructure, most of which will be expensed through cost of revenue.● Adjusted EBITDA associated with the recent acquisition of Reverb, which we expect to be a drag on consolidated EBITDA margin for Q3.

Q2 2020 Financial Results

Key factors impacting our Q3 Guidance

*These and other risks and uncertainties are more fully described in in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 that we will file with the SEC, and subsequent reports that we file with the SEC.

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Three Months Ended 6/30/20 Three Months Ended 6/30/19

(in thousands)

Revenue $428,737 $181,095

Cost of revenue 111,381 58,605

Gross profit 317,356 122,490

Marketing 114,707 45,994

Product development 45,233 28,765

General and administrative 38,276 29,883

Operating expenses 198,216 104,642

Income from operations 119,140 17,848

Other expense, net (6,824) (1,479)

(Provision) benefit for income taxes (15,891) 1,854

Net income $96,425 $18,223

Net income per share — diluted $0.75 $0.14

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Condensed Consolidated Statements of Operations

Q2 2020 Financial Results

Condensed Consolidated Statements of Cash Flows

Six months ended

6/30/20

Six months ended

6/30/19

(in thousands)

Net Income $108,947 $49,802

Net cash provided by operating activities 250,095 81,294

Net cash provided by (used in) investing activities 22,732 (47,955)

Net cash used in financing activities (38,503) (40,604)

Effect of exchange rate changes on cash (93) (561)

Net increase (decrease) in cash, cash equivalents, and restricted cash

234,231 (7,826)

Cash, cash equivalents, and restricted cash at the beginning of the period

448,634 372,326

Cash, cash equivalents, and restricted cash at the end of the period

$682,865 $364,500

39Q2 2020 Financial Results

Merilee Buckley

CommentCancel

Condensed Consolidated Balance Sheets

40Q2 2020 Financial Results

As of June 30,2020 As of December 31, 2019

(in thousands)

Cash and cash equivalents $677,524 $443,293

Short-term investments 365,659 373,959

Accounts receivable, net 16,527 15,386

Property and equipment, net 126,187 144,864

Other current and non-current assets 576,134 564,850

Total assets $1,762,031 $1,542,352

Accounts payable $15,978 $26,324

Long-term debt, net 803,227 785,126

Other current and non-current liabilities 418,651 324,268

Total liabilities 1,237,856 1,135,718

Total stockholders’ equity 524,175 406,634

Total liabilities and stockholders’ equity $1,762,031 $1,542,352

Reconciliation of Quarterly Net Income to Adj. EBITDA

41Q2 2020 Financial Results

2Q20 2Q19

(in thousands)

Net income $96,425 $18,223

Excluding:

Interest and other non-operating expense, net 8,294 1,287

Provision (benefit) for income taxes 15,891 (1,854)

Depreciation and amortization 14,171 9,810

Stock-based compensation expense 16,725 10,837

Foreign exchange (gain) loss (1,470) 192

Acquisition-related expenses 592 1,206

Adjusted EBITDA $150,628 $39,701

Six months ended

6/30/20

Six months ended

6/30/19

(in thousands)

Operating Cash Flow $250,095 $81,294

Purchases of property and equipment (209) (3,747)

Development of internal-use software (2,043) (4,669)

Free Cash Flow $247,843 $72,878

Q2 2020 Financial Results

Reconciliation of Operating Cash Flow to Free Cash FlowFree cash flow is considered to be a non-GAAP financial measure. We believe that free cash flow, which measures our ability to generate cash from our business operations, is an important financial measure for use in evaluating the company's financial performance. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. We believe it is important to view free cash flow as a measure that provides supplemental information to our Consolidated Statements of Cash Flows.

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2019 2018

$206,920 $198,925

(7,528) (1,019)

(7,750) (19,537)

$191,642 $178,369