Etsy, Inc. (ETSY) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Etsy's First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I'd now like to turn the conference over to your host, Mr. Gabriel Ratcliff. Sir, you may begin.

Thank you and good afternoon and welcome to Etsy's first quarter earnings conference call. Joining me today are Chad Dickerson, CEO; Josh Silverman, our newly appointed CEO; Jennifer Beugelmans, VP of IR and FP&A; and Karen Mullane, our Global Corporate Controller and Interim CFO. Before we get started, just a reminder that our remarks today include forward-looking statements relating to our financial performance and results of operations, business strategy, market size, cost saving initiatives, guidance, mission, product roadmap and potential future growth. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties which are described in our press release today and in our 10-Q filed with the SEC today. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today and we don't have any obligations to update them. Also during the call we'll present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which you can find on our Investor Relations Website. A link to the replay of this call will also be available there, and if you prefer to access the replay via phone, you can find that information in our press release as well. With that, I'll turn the call over to Chad. Chad?

Thanks, Gabe and good afternoon everyone. Before I begin I wanted to briefly discuss some important news that we announced with our earnings today. After being a leader at Etsy's for nine years I'll be stepping down as the CEO. Over the past 12 years Etsy's achieved tremendous growth and success. After successfully navigating the challenges of going from the small startup to an established leader and innovator Etsy is now entering its next phase of growth and development. The board has decided now is the right time for new leadership to take Etsy's forward and I support the decision. Josh Silverman a member of our board of directors since November will be leading Etsy going forward. With nearly 20 years of product development, marketing and e-commerce experience Josh have been established track record leading and growing consumer technology companies and scaling global market places. I got to know Josh over the past several months and I know Etsy will be in great hand with Josh at the helm. Josh is joining us today and before Jennifer and I discuss our results for the quarter, I will turn the call over to Josh for some brief remarks. Josh?

Thanks Chad, first I want to thank Chad for his leadership over the past nine years, we altered Etsy into a period of high growth, he took us to the IPO and he helped to make Etsy into the World Class Company and global place it is today. His efforts have laid the foundation for Etsy future success and I know has always been committed to delivering value for our stakeholders, from buyers and sellers to employees and shareholders. When I joined the board in November, I was excited to be a part of a company like Etsy and as a member of the board I've gained a deep appreciation for the fundamental strength of Etsy business, Etsy's employees and attractive market opportunities. Etsy has already accomplished so much of over the past 12 years, building a two-sided market place that offers a differentiated value proposition for buyers and a unique opportunity for sellers is difficult to do, Etsy has done that, creating a strong technology platform and cultivating powerful loyalty driven by a robust seller community and offering a board product inventory. We're going to continue to sharpen our focus on raising awareness among new buyers and getting our existing buyers to make more frequent purchases. As we head into our next phase of growth I want to leverage the many things Etsy as done well thus far, which include a strong core organic markets business, a thriving seller's services business and a world class technology platform. And I want to build new muscles where we can do even better, such as delivering a best in class buyer experience and improving our marketing capabilities. Though we have a lot of work to do we have a great culture and talented employees who I know are up the challenge. Over the coming weeks, I will be listening and learning from our employees, sellers, buyers and investors and deep diving into our operating plans to make sure that we’re focusing on the value enhancing near and long-term opportunities. I believe that we have significant opportunity to continue to grow and to drive our financial performance. I'm energized by the Etsy team's sense of urgency, culture of committing to our sellers and buyers and drive for operational excellence. I'm excited to work with the leadership team to capture Etsy exciting growth opportunities and I look forward to providing additional updates next quarter. Now I'll turn the call back to Chad to discuss the first quarter.

The first quarter was challenging. In February our average converting visit value, conversion rates and visits came in below our expectations resulting in GMF well below our forecast for that amount. Well March was better to 14.2% GMF growth and 18.4% revenue growth we delivered for the quarter were both lower than we expected. As difficult as the quarter was we've already made important progress this year. We launched Shop Manager, a centralized hub for sellers to manage their businesses. We expect shop manager to help increase the awareness of Etsy services among our sellers. We launched Etsy studio our new craft suppliers market which offers a disruptive online alternative to the historically offline crafts shopping experience and we begin rolling out significant enhancements to product search and discovery. These efforts give us confidence in our ability to driver growth going forward. We're taking steps to ensure our business to set up to support Etsy next stage of growth. Last year our COO, Linda Findley Kozlowski let a realignment of our internal structure which organized our markets and sell our services teams under General Manger's who lead core products and business teams. These changes sharpened cross-functional collaboration, increased accountability and led to faster product launches and tests. With this solid foundation in place over the past quarters we looked holistically across the business to identify opportunities to increase our efficiency and streamline our cost structure. As a result of this process we've identified savings that will be realized through a combination of headcount reductions and a reduction in internal program expenses. In total, we expect to eliminate approximately 80 positions which is approximately 8% of the total workforce. While decisions like these are never easy, we believe these actions will allow us to drive productivity and invest more in key growth opportunities. Now I’d like to walk you through some of our recent progress and discuss our focus areas in markets and seller services, staring with our markets. With the Etsy markets there are two key differentiators that service opportunities to drive growth. First, most visits are from organic channels, while organic traffic is an indicator of strong engagement and brand affinity, we cannot rely on this channel to continue to grow on its own. The work we are doing across marketing and products will drive paid traffic and GMS and improve the full product experience to help to improve organic traffic performance and conversion. Given the size of our organic reach this represents a significant optimization opportunity. Second, the Etsy market has more than 45 million listings with millions of one of a kind items or limited inventory. This presents one of the most complex tech challenges in ecommerce which we are uniquely positioned to meet. There is significant opportunities to use machine learning to improve our search and recommendations engines which we believe will help buyers discover and buy even more items on Etsy. For long CLO [ph] unique items to beautiful high quality everyday goods. So here is how we move the needle on these two big challenges and opportunities to drive GMS. The key to our market strategy is bringing new buyers to Etsy and also getting existing buyers to make more frequent purchases. We learned a lot from our first brand campaign and we plan to continue to refine our marketing plan and approach both brand and acquisition marketing. While our marketing was designed to drive buyer interest, creating an engaging and easy to use product experience is critical for turning this interest into a transaction. As such encouraging conversion will remain a key priority. We're making product enhancements particularly within search that improve the shopping experience. Over the past few years we've invested in product enhancements in our mobile capabilities to improve each step of the buyer journey. This has resulted in sixth consecutive quarters of conversion rate gains across desktop, mobile web and mobile apps as well as the slight narrowing of the gap between mobile visits and mobile GMS. In the first quarter and for the first time ever more than half of our GMS came from the mobile device. Building on this work we see search as the key area where we can augment our capabilities in order to further drive conversion. Many of you've asked about our integration plans for Blackbird technologies following our acquisition of the machine learning company last fall. I'm pleased to report that last week we initiated our first public test in the Etsy market that leverages their capabilities. We've added new facets and filters to our popular jewelry category making it easier for buyers to drill down and achieve sub-categories like rings and necklaces, or narrow their search by attribute such as gemstone or material. We plan to rollout facets and filters across most of our major categories on Etsy by the end of the year. We're also using blackboards expertise to help surface and recommend relevant items to buyers especially when one of the kind items are sold out. We believe these improvements for the search and discovery process will drive sales and conversion and make buyers want to return to our markets. I also wanted to touch on Etsy Studio which officially launched to the public last week. With nearly 8 million items alongside inspiring shoppable content, we believe that Etsy Studio is the unique offering within a huge industry that once study estimates to be over $40 billion in the U.S. along. As we continue to nurture and bring more buyers to our market, we’re also making easier for sellers to start, manage and scale their businesses. Seller services revenue continues to grow robustly and was up 23.9% year-over-year in the first quarter. Getting a seller to her first sale quickly and helping her manage the complexities of her growing business is the top priority. To do this we're building a comprehensive suite of services and tools that address key pinging point at seller's space and we're creating a platform from which she can run entire business. Over the past few years we created a payment platform where Etsy sellers and buyers are able to seamlessly transact. Recently, we rebranded direct checkout as Etsy payments. Starting later this month we'll require the all sellers in eligible countries transition to Etsy payments. We believe Etsy payments is beneficial for our sellers as buyers are more likely to complete a transaction with sellers who use this service. We’ve made enhancements that demonstrate our ability to address specific seller's needs. Our new shop manager tool is a centralized hub where sellers can manage listings and orders and track the effectiveness of their advertising campaigns all in one convenient place. This also enables many sellers to discover and take advantage of our entire suite of paid and free service and tools like pattern, quick books and shipping labels. We think shop manager has the potential to transform the way sellers think about Etsy, we're not just the place for them to start a shop, but instead of business platform that will support them no matter where or how they chose to grow their business. Ultimately, we believe there are seller services strategy will allow us to continue to grow our sellers service revenue stream and with Shop Manager, build a platform that grows with our creative entrepreneurs. In closing Etsy has a significant run way for growth and we're taking important steps to become strong, more nimble and better equipped to capitalize on our opportunities. We’re making investments in key areas of our business while maintaining a prudent cost structure and gaining leverage across our operating expenses. I'm excited about Etsy's future and I look forward to following its many successes in the quarters and years to come. With that I'll turn the call over to Jennifer to walk through our financial results. Jennifer?

Thanks, Chad, and hello everyone. Just a heads up, the comparisons I'll be referencing to are on a year-over-year basis unless specially noted. Let's start with GMS. During the first quarter of 2017, Etsy's generated $719 million in GMS, up 14% driven by growth in active sellers and active buyers. At the end of the first quarter Etsy had over 1.8 million active sellers up about 12%. Also at the end of the first quarter Etsy had nearly 30 million active buyers up about 19%. Both of these metrics demonstrate that our community of buyers and sellers continue to grow at a healthy rate. Roughly 66% of our visits come to us from a mobile device this quarter, this was up approximately 300 basis points and continues to outpace the rate of growth on desktop. Mobile GMS represented approximately 51% of our overall GMS up roughly 400 basis points and accounted for more than 50% of our overall GMS for the first time. During the first quarter, conversation rates on desktop, mobile web and mobile app increased for the sixth consecutive quarter and our aggregate conversion rate across all devices also increased. Mobile conversion rate improvements allowed us to slightly narrow the gap between mobile visits and mobile GMS. With that said because the mobile web business makes up a large portion of our overall visits they are still a bit of the headwind for us. This is because mobile web is the lowest converting device. Since the beginning of 2015, we made a series of product improvements and enhanced the buyer's journey, we have seen an improvement in our aggregate conversion rate. Mobile web conversion improved at a greater rate in desktop and mobile apps during 2016. For your reference, mobile web converts at about half of desktop and mobile app converts at about 1.3x desktop. As we continue to make enhancements to the mobile experience, we expect to continue our progress in narrowing the mobile gap. Etsy's international revenue grew 35% in first quarter. Percent international GMS was 13%, up a 180 basis points compared to last year. International GMS grew approximately 21% and accelerated year-over-year for the fourth consecutive quarter. During the first quarter, total revenue was $96.9 million, up 18% driven by growth in seller services and to a lesser extent growth in markets revenue. Seller services revenue was up 24% and represented 55.7% of total revenue. Seller services growth was driven primarily by revenue growth in Etsy's payments, formally direct checkout. Our promoted listings revenue was lower than anticipated this quarter, we're refining our algorithms and have recently added additional inventory. We believe both of these enhancements will allow us to continue to drive revenue growth in this seller service. Markets revenue grew 14%, primarily due to growth in transaction fee and to a lesser extent growth in listing fee revenue. Gross profit for the first quarter was $62.2 million up 15% and gross margin was 64% down 170 basis points. During the first quarter, we recognized 1.3 million related to our Google shopping tool for sellers, however this revenue is not expected to be significant through the remainder of 20107. Last year's gross margin was positively impacted by gift cards revenue of $1.7 million. Excluding these high margin revenue items gross margin would have only decreased marginally compared to last year. Turning now to operating expenses. Etsy's first quarter operating expenses was $64.3 million, up about 36%. Total operating expenses as a percent of revenue grew to about 66% in the first quarter compared with approximately 58% last year and 63% in the last quarter. The increase in operating expenses as a percent of revenue is primarily due to an increase in employee related expenses and marketing expenses associated with our brand campaign. Marketing expenses totaled $23.5 million, up 48% representing 24% of total revenue versus 19% last year and roughly 28% last quarter. The increase in marketing expense as a percent of revenue was driven by brand marketing expenses, and to a lesser extent digital acquisition marketing and higher employee related expenses. Digital acquisition marketing expense, which excludes brand marketing related spend on digital channels such as YouTube and Facebook, increased 26% year-over-year and continued to generate strong returns for Etsy and a positive ROI based on our global attribution model. Product development expenses totaled $18.1 million, up 48% representing nearly 19% of total revenue compared to 15% last year. The increase in product development expenses was driven by higher employee related expenses including additional expenses resulting from the acquisition of Blackbird technology. G&A expenses totaled $22.8 million, up about 19% driven by higher employee related expenses and partially offset by lower professional services expenses and stock compensation expenses related to the acquisition of ALM. G&A expense represented 23.5% of revenue in the first quarter and remained flat compared to last year. G&A as a percent of revenue has decreased each year since 2014 when it was nearly 27% of revenue to 23.6% in 2016. Headcount at the end of the quarter grew to 1,062 people compared with 1,043 as of December 31, 2016. During the first quarter Etsy's net loss was $421,000 and earnings per share were breakeven compared with earnings per share of $0.01 last year. Etsy's net loss this year includes interest expense of $2.1 million related to our Brooklyn headquarters, a $2.8 million foreign exchange gain and an income tax benefit of $1.1 million, all primarily non-cash. Non-GAAP adjusted EBITDA was $9.7 million. This resulted in an adjusted EBITDA margin of 10%, compared with 18% in the first quarter of 2016. Adjusted EBITDA this quarter was impacted by higher employee related expense and the increase in marketing as a percent of revenue. During the quarter, we recorded net cash divided by operating activities of $3.3 million, this compares to $2.8 million in the first quarter of 2016. The year-over-year increase in net cash provided by operating activities for the quarter was mainly due to revenue growth. As of March 31, 2016, we had cash, marketable securities, and short-term investments totaling approximately $276 million. As we noted in our press release our new management team will be reviewing our guidance. Josh, I and the rest of the team will be rolling up our fleets and reviewing our forecast and we plan to provide guidance in conjunction with the announcement of our second quarter 2017 results. Thanks for tuning in today, we look forward to sharing more in the coming quarter and with that I'd like to turn the call back over to Valarie, to open up for Q&A.

Thank you. [Operator Instructions] Our first question comes from Heath Terry of Goldman Sachs. Your line is open.

I was wondering you talked a lot about your goals around improving user engagement and frequency. Can you give us a sense as you progress through the quarter and even now that we're a month further into these initiatives, can you give us a sense of what you're seeing in terms of the strategies and methodologies you're putting in place that what kind of impact they are having on engagement or you getting any other traction that you want out of these investments?

Thank Heath, I will take that one. What we've really been focused on is continuing to improve on conversion and that really means focusing on the experience on all of our platform desktop, mobile web, mobile app. As I said we've been improving conversion now for 6 to 8 quarters. And we’re really excited about that work because it's really demonstrates the overall success of the product work that we're doing.

And I think the team has been focusing exactly the right area. This is Josh, great to meet you all. And I think, the acquisition of Blackbird technologies is a great example of really driving a lot more conversion. What you'll hear from me as a term I call the AAA, which is Acquisition and Activation and Activity. Acquisition is the efforts to bring more people, more visits to the site, Activation is conversion of those visits to buyers and Activity is driving more royalties so buyers to come back again and again. And I think there is good work underway in each of those buckets today, and I'll be laser focused with my team on each of those and that's driving the most value we can and I see a lot of opportunity for continued improvement in each of those three buckets.

Great, thanks Chad, Josh. I guess there is one other question on, the efforts to build up local seller communities, you guys have talked a lot in the past about the early attraction that you were seeing in the UK and some of the other markets. Any sort of tangible direction that you can give us on sort of either of foreign seller count or inter-country international GMS that, that would give us a sense of what kind of attraction you are seeing in those efforts?

We are continuing to gain attraction in our international strategy the international GMS that buyer and selling are in the same country outside of the United States is still the fastest growing bucket of GMS for us.

Thank you. Our next question comes from Mark Kelley of Citigroup. Your line is open.

Can you just talk a little bit more about March? What you saw there and what do you think the difference was relative to the beginning of the quarter. You noticed the brand campaign was shown you some results, just curious how much of that 20 million you spend in the quarter and if that had an impact do you think. And then, your buyer and seller bases continue to growing nicely, but given that the lag in GMS this quarter, just curious if there is a mix shift in the kind of items your sellers are listing, the lower price items. Thank you.

What we saw in March, I think was pretty consistent what we've heard from what's happening in the macro environment, I think we heard a lot of companies had a challenging February. So we see March as really largely due to all the product development that we've done and continue to work on conversion and we are really excited about the progress in March.

I would just add Mark, from February's perspective we're still unpacking how much were macro drivers. As Chad mentioned in this prepared comment and we key drivers for our model APDVs visits to conversion were all below what we expected. And I think it's a little bit -- some data and we've talked about from our brand marketing campaign, but it's a little too early to comment on any impact that might be having in buyer and seller growth.

Got it, thank you.

Thank you. Our next question comes from Scott Devitt of Stifel. Your line is open.

I was just wondering if you can talk a bit about just the longer-term direction of the company, that business started to slow and grow and you've embarked on a campaign to address it, to drive new buyers and get more purchasers from the existing buyers and you just sort of embarked on that progress and now you are making a management. So I was just wondering if Chad, you or Josh could just talk about whether there are views within the company in terms of may be the direction that you’ve taken isn’t the right one and if, when guidance is updated three months from now, if we may hear of modifications in strategy as well. Thank you.

Sure, Chad speaking, I'll hand it off to Josh in a moment. I think that everyone at Etsy, the board, the company is really excited about the long-term growth of Etsy. As I said even as I step aside I really believe in the long-term growth potential of Etsy. So there is no difference of opinion in that way. I think Josh is the leader as I said in my remarks, I think Josh brings a lot of skills to Etsy that are very helpful at this stage in our growth and I'm really excited about that.

Thanks Chad, and just to build on that Etsy has done something that’s really rare and really hard to do and that’s to build the two-sided market place that really unique. We have a very loyal and passionate group of sellers that offer a really unique set of inventory that’s not available anywhere else and that’s very special and very rare. That driven a good amount of organic and direct traffic that comes to etsy.com, people actually wake up in the morning typing www.etsy.com not a lot of e-commerce site have that. Where we've not invested as much historically is in really pouring fuel on the fire with the more traditional marketing levers, for the first eight years of the company it did no marketing. And its pretty common for a market place that is successful that does earn organic traffic to be able to significantly accelerate its growth through the addition of marketing. So when we as a board looked at what's going to unlock growth going forward in the future, we looked at acquisition activity and loyalty and said that those are going to be very important leverage going forward and so having leadership that has a lot of experience in that area would be appropriate.

Thank you. Our next question comes from Andrew Bruckner of RBC. Your line is open.

Two if I could, I'm wondering if the change to Etsy Payments, do you anticipate any increase in churn on the seller side from that and how can that effect increase [ph] going forward. And then effectively now that we’ve passed the anniversary of pattern, I'm wondering if you could make a comment in terms of how that has grown the GMS from those specific sellers who are early adopters of pattern? Thanks.

I can speak to Etsy payments. So Etsy payments which we first started rolling out almost five years ago has become a platform to our sellers really love to use and as I said in my remarks we've also found that sellers who use Etsy payments formally direct checkout are generally more successful than the one who don’t. So I think Etsy payments, as we begin to require for sellers, we believe we'll make sellers successful, so really happy with that.

And Andrew with regards to pattern, in our last call we give you an update about usage and we said roughly 2.5% of our active sellers in 2016 had used in the eight months since its launch. So I wouldn’t consider it a material driver of our GMS at this point in time.

Thank you. Our next question comes from [indiscernible]. Your line is open.

Just one question please. Josh you've been a board observer now, a CEO. There has been a lot of rumors in the market and I think could you make that academic argument for Etsy as part of a larger organization, but from your standpoint from where you sit right now, can you just talk about how and why you think that Etsy can drive more value operating independently versus part of a larger organizations? Thanks a lot.

Sure. As a board, we are laser focused on delivering value for our shareholders and I feel like there is a tremendous market opportunity for Etsy, that it has only began to tap and a very bright future. So I'm working hard with the team here to make sure that we're entirely focused on the activities that's going to deliver the most value for all of our stakeholders, our sellers, our buyers, our shareholders and our employees and I'm very enthusiastic about the path forward.

Thank you. Our next question comes from Tom Forte of Maxim Group. Your line is open.

So going back to February, is there something as you point to either from a competitive standpoint or geographic standpoint to the extent that maybe there is incremental pressure in Europe for something like that or from our calendar standpoint to the extent of Valentine's Day this year maybe have been materially weaker than last year. Just any comments on anything in February on those basis that maybe have affected the results? Thank you.

So Jennifer you can speak again in terms of the metrics that we did see as we said lower ACVV. And as I mentioned the office saw some macro issues that we've seen elsewhere in the economy, for example, you all probably heard that Q1 consumer spending growth was lower than it has been since the fourth quarter of 2009 as reported by the U.S. government. So those are the things that we saw in February.

Yes, Tom I think as I mentioned previously we're still analyzing it, but there was just a confluence of external factors that may have had an impact. Everything from mechanisms [ph] of thing, that macro political landscape to tax refunds coming out later than anticipated. But what we did disclose in our prepared remarks is that we did see recovery in March.

Thank you. Our next question comes from Darren Aftahi of ROTH. Your line is open.

Can you just talk a little bit more about where the areas, specifically where the 80-headcount reduction will occur? And then just on following-up on the Etsy Payments transition. Do you anticipate or are you at all concerned about potential push back from seller as it pertains to be given the May 17th deadlines for adoption? Thanks.

Sure. So on the headcount reduction, we exercise a really simple philosophy. We wanted to, as much as possible, ship cost out of G&A in the growth oriented areas. So we really looked out at in those terms and again that was on the heels of that realigning our teams and the reorganizing our teams to promote more clarity and accountability and speed in the works that they were doing. So we think that this is a right decision for Etsy in the long-term and I think it focuses the company much, much more. On the Etsy payment side, again what we found is that sellers who use Etsy payments again formally direct checkout are more successful than the sellers who are not, and since we’re so focused on seller's success. We believe that more and more sellers will continue to use Etsy payments and that we will be beneficial for individual sellers and the business overall.

Thank you. Our next question comes from Blake Harper of Loop Capital. Your line is open.

I want to ask two questions. One, are you able to quantify with the dollar cost savings is of the headcounts reductions that you’re doing. And then secondly, is there any update to the seller's services pipeline or Josh could you comment what you think about as you look at the product pipeline or how -- in other ways you can help your sellers by delivering some new product to them?

Hey Blake, what we can tell you about the reduction is that it's mostly focused in headcount as we mentioned in our disclosures, 80 headcount positions roughly 8% of our work force. We'll provide additional detail when we update our guidance on our second quarter call.

And so solid services, Chad and team have been very focused on that and have done a great job of unlocking value, we have a pipeline I'm very excited about of continues ways to help sellers to promote and sells their things on Etsy and in other channels as well.

Thank you. And our last question comes from Sam Kemp from Piper Jaffray. Your line is open.

Sorry if you already answer these, I'm between calls. But Josh can you line your thoughts on what you think the appropriate level of marketing investment is for Etsy? It seems in general overall its always been in little bit underinvestment in the marketing side. And then secondly can you talk about how you philosophically thinking about third party channels and the level of control you want to exert over, where the actual product is placed for example, Instagram is making a lot of progress towards making it more of a shopping direct channels. And I was just wondering if that's a channel that you're especially infested in participating in? Thanks.

To the first question and I apologize for others, I didn’t say this earlier, but I think it's worth noting, Etsy did not do any marketing for the first eight years of its history and traditionally when you have a market place vibrant enough and good enough to earn a direct traffic as the Etsy market place does with the breath and depth of really terrific inventory from great sellers like Etsy, that’s something you want to talk about. And there is lot of very effective marketing leverage that one can pull. And I think that quite candidly we have done some good work in the last few years to start to build those capabilities, but I'm very enthusiastic about the continued upside that we have to invest further marketing dollars and in infrastructure and capabilities to put those marketing dollars to work at very high ROI. So I do think that all three areas of the marketing funnel from acquisition to activation to activity have up side and its going to be a strong focus. I'm sorry the second part of your question can you -- how do I feel about our seller inventories being available not just on Etsy but off Etsy, is that what you were saying?

Yes, and especially transaction occur off the Etsy platform, but are populated by the Etsy inventory from Etsy sellers or maybe even just more broadly speaking how do you think about prioritizing the Etsy direct marketplace versus not Etsy marketplaces?

Yes, good question. First, I would say that our goal is to make sure that our sellers succeed that they come, they have a great experience on Etsy and then they can grow and scale their business and support their family's ad thrive. And we think that's a very important mission. We also think that the mission of delivering an outstanding buyer experience on Etsy is very important to us and etsy.com our core marketplace and our marketplaces internationally offer a really unique collection of inventory that you simply won't find anywhere else. I do think there is an opportunity to make sure it's very clear to buyers on what occasion should they would be thinking about Etsy and making sure that we build the habit, so they come and shop at Etsy and I know they're going to be delighted. I think it's complimentary to also support our sellers in making sure that their inventory is available in the other channels as well, we live in a multichannel world, we all recognize that and we think we can help our sellers to succeed and our help ourselves as well.

Great, thanks.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. And have a wonderful day. You may all disconnect.