Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

FORM 8-K

_____________________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 12, 2023

ETSY, INC.

(Exact name of registrant as specified in its charter)

_____________________________________

Delaware

001-36911

20-4898921

(State or other jurisdiction
of incorporation)

(Commission
File Number)

(IRS Employer
Identification No.)

117 Adams Street

Brooklyn, New York 11201

(Address of principal executive offices, including zip code)

(718) 880-3660

(Registrant's telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

_____________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	ETSY	The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. □

Item 2.05. Costs Associated with Exit or Disposal Activities.

On December 12, 2023, the board of directors of Etsy, Inc. (“Etsy”) approved a restructuring plan designed to increase Etsy’s operational efficiencies, reduce operating costs, and better align Etsy’s workforce and cost structure with current business needs, top strategic priorities and key growth opportunities (collectively, the “Restructuring Plan”).

The Restructuring Plan includes an approximately 11% reduction of the Etsy marketplace workforce, which is approximately 225 employees, inclusive of the management changes described below. Following the Restructuring Plan, headcount for the core Etsy marketplace team is estimated to be approximately 1,770 people, similar to the headcount level early in 2022. The Restructuring Plan is expected to deliver meaningful operational efficiencies and cost savings and/or cost avoidance, particularly related to compensation and benefits.

In connection with the Restructuring Plan, Etsy estimates that it will incur approximately $25 million to $30 million in charges, largely made up of cash expenditures, consisting of severance payments, employee benefits, and related costs. Etsy expects that the charges will be incurred primarily in the fourth quarter of 2023 and that the execution of the Restructuring Plan will be substantially complete by the end of the first quarter of 2024.

The charges that Etsy expects to incur are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual expenses may differ materially from the estimates above.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

In connection with the Restructuring Plan, Etsy announced the departure of Ryan Scott, Chief Marketing Officer, effective December 31, 2023. To assist in the transition, Mr. Scott has agreed to continue in an advisory role, which may extend through June 30, 2024.

Raina Moskowitz, formerly Chief Operating Officer, will assume the title of Chief Operating and Marketing Officer, responsible for driving global growth by expanding brand consideration and deepening customer trust and loyalty. Under her expanded role, Ms. Moskowitz will lead Etsy’s marketing, international markets, trust & safety, member support, strategy & operations, and impact teams.

Ms. Moskowitz has extensive marketing experience from her time with American Express, where she successfully grew share of wallet with the existing customer base, including significantly increasing customer billings and loan growth, while also strategically attracting new customers through marketing channel expansion, improved conversion, and multiple new product launches. Ms. Moskowitz also serves on the board of directors of Sprout Social (Nasdaq: SPT), an industry-leading provider of cloud based social media management software.

Also in connection with the Restructuring Plan, Etsy will move its Payments and Fulfillment functions from Ms. Moskowitz’s organization to the Product organization, under the leadership of Chief Product Officer Nick Daniel.

On December 12, 2023, Mr. Scott and Etsy entered into a letter agreement (the “Letter Agreement”) governing the terms of his remaining service to Etsy and his departure. The Letter Agreement provides for the following compensation and benefits as an inducement for Mr. Scott’s continued services during the transition period: (1) continuation of current base salary of $460,000 during the transition period and, as a severance benefit, for a period of twelve months after the date employment ends (“Separation Date”), consistent with the terms of the Etsy Executive Severance Plan; (2) reimbursement of his COBRA premiums for up to twelve months following the Separation Date; and (3) subject to the terms of the Executive Severance Plan, a pro rata cash bonus award for 2024, if applicable. PSU awards outstanding as of the Separation Date will vest in accordance with their terms for a Qualifying Termination.

In return for these benefits, Mr. Scott will provide a customary general release and waiver of claims. In the event that Etsy terminates Mr. Scott’s service for “Cause” (as defined in the Executive Severance Plan) prior to June 30, 2024, he will receive only his base salary through the date of termination, as well as certain accrued benefits.

This description of the Letter Agreement is qualified in its entirety by reference to the full text of the Letter Agreement, which is expected to be filed as an exhibit to Etsy’s Annual Report on Form 10-K for the year ended December 31, 2023.

Item 7.01. Regulation FD Disclosure.

Etsy currently estimates that on a year-over-year basis, its consolidated Q4 2023 results will be as follows: GMS will decline approximately (2)% to (1)%, revenue will increase approximately 2% to 3%, and adjusted EBITDA margin will be approximately 27% to 28%. It is expected that the Restructuring Plan will not materially impact Etsy's three primary guidance metrics (GMS, revenue, and adjusted EBITDA margin) for the fourth quarter.

On December 13, Etsy issued an employee communication relating to the Restructuring Plan, which is shared in part as Exhibit 99.1 to this Form 8-K and is incorporated by reference.

The information set forth in this Item 7.01 and in Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

With respect to our expectations regarding the fourth quarter of 2023, reconciliation of adjusted EBITDA margin guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity, and low visibility with respect to the charges excluded from adjusted EBITDA; in particular, stock-based compensation expense, foreign exchange gain, acquisition and divestiture related expenses; and other non-recurring expenses can have unpredictable fluctuations based on unforeseen activity that is out of our control and/or cannot reasonably be predicted.

Item 8.01. Other Events.

In connection with the Restructuring Plan, Etsy also announced the departure of Kimaria Seymour, Etsy’s Chief Human Resources Officer, effective December 31, 2023. Ms. Seymour is expected to remain at Etsy in an advisory role through June 30, 2024 to assist in the transition. Effective January 1, 2024, Toni Thompson, Etsy’s VP, People & Talent Strategy since 2020, will assume the role of Chief Human Resources Officer.

Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws. These statements include, but are not limited to, statements concerning the expected timing and scope of the Restructuring Plan, including the senior management transitions, the amount and timing of the related charges and cash and non-cash expenditures, the objectives of the Restructuring Plan and the expected benefits, including expected operational efficiencies and cost savings and/or cost avoidance of the Restructuring Plan and Etsy’s guidance for the fourth quarter of 2023.

Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “plan,” “should,” “will,” 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 Etsy expects. Many factors could cause Etsy's Q4 results or the actual results of the Restructuring Plan to differ materially from those expressed in these forward-looking statements. For the Restructuring Plan, these factors include, among other things: (i) the preliminary nature of our estimates of the charges and cash expenditures to be incurred in connection with the Restructuring Plan, which are subject to change as we make decisions and refine these estimates over time; (ii) timing delays in implementing the Restructuring Plan because of legal requirements and (iii) potential disruption to our business and operations as we implement the Restructuring Plan. Other risks and uncertainties that may cause actual results to differ materially from those that Etsy expects are described in Etsy’s filings with the Securities and Exchange Commission, including in the section titled “Risk Factors” in Etsy’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, and subsequent reports that Etsy files with the Securities and Exchange Commission. In light of these risks, you should not place undue reliance on such forward-looking statements.

Forward-looking statements represent Etsy’s beliefs and assumptions only as of the date of this Current Report on Form 8-K. Etsy disclaims any obligation to update forward-looking statements.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits


Exhibit No.			Description
99.1			Message from Josh Silverman to employees on December 13, 2023
104			Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ETSY, INC.

By: /s/ Rachel Glaser

Rachel Glaser

Chief Financial Officer

Dated: December 13, 2023

Exhibit 99.1

Team,

As I shared in my livestream a few moments ago, today we are announcing some very difficult yet necessary decisions to better position Etsy for future growth. After deep discussion and careful consideration, we are reorganizing our internal structure to more closely align our resources with our most important business priorities and better serve our customers. As part of this, I’m sad to share that we must say goodbye to approximately 225 team members, reducing the Etsy workforce by ~11%. This decision was among the hardest we’ve ever made, and one that we have tried earnestly to avoid.

I want to take some time to walk you through how we got here, how we approached these changes, and how we will move forward together. I’ll also share the details of some changes to our Executive Team (ET) and org structure.

How we got here

First, I am incredibly proud of how this team has shown up for our customers over the past several years. Together, we built a strong foundation that enabled us to harness the moment when the pandemic drove more people to Etsy than ever before, and create explosive growth for our marketplace through 2021. Because of your passion, innovative spirit, and dedication to our mission, Etsy brought more economic opportunities to more sellers around the world and delighted tens of millions more shoppers at a time when they needed us most.

While the Etsy marketplace is still more than double the size it was in 2019, we need to acknowledge and adjust for today’s realities. We are operating in a very challenging macro and competitive environment, and GMS has remained essentially flat since 2021. This means we are not bringing our sellers more sales, which is the single most important thing we can do for them. At the same time, employee expenses have grown, even as we have introduced significant cost-cutting measures and adjusted or paused hiring plans. This is ultimately not a sustainable trajectory and we must change it.

As we head into 2024, we have identified our “Vital Few” projects and initiatives that we believe will reignite growth for our sellers and drive buyer consideration and loyalty through a focus on quality, value, and reliability. I have great confidence in these plans, but we need the right structure and resources in place to successfully execute on them.

Following extensive discussions and analysis with senior leaders, it was apparent that a leaner, more agile team would enable us to properly focus on our key growth priorities, move bold and fast, and maintain a sustainable cost structure. Parting ways with some of our colleagues was absolutely not an option we wanted to pursue; however, we have a responsibility to our entire community, especially the nearly 7M sellers who count on us everyday – and we must make the hard decisions that allow us to continue serving them.

How we approached these changes

Our strategy for identifying departing employees

First, I want to underscore that the reductions we are making today are ultimately about making us an even more focused, agile company and positioning Etsy for growth.

When we decided to reduce our workforce, our goal was to ensure the new structure directly mapped to our Vital Few business priorities and foundational workstreams. Our commitment to diversity remains, and fairness was at the forefront of this process. Our dedication to minimizing the impact on affected employees is unwavering; we are providing generous support to every departing team member as they move on from Etsy and transition to their next opportunity.

We focused on simplicity and efficiency in our org structure, with clear lines of accountability, so that we could hit the ground running in the new year. We assessed how each team at Etsy mapped against our growth priorities and reviewed every single team member, starting from our most senior levels, to determine how well their roles and skills matched our current and future business needs. We then made the hard decision to say goodbye to those who did not fit into our new structure. Please know that we did not arrive at any individual decision lightly.

I believe that these changes put us at our ‘fighting weight’ - a more streamlined and agile team, similar to where we were early in 2022 in terms of the size of our core Etsy team, with renewed focus and conviction in our top priorities.

Key updates to our Executive Team

As we reviewed our structure and priorities across the company, I also looked at my ET to identify any areas where we could drive greater efficiency. First, there was a meaningful opportunity to bring our core products and services together by moving the Payments and Fulfillment functions to Nick Daniel in the Product Org. Additionally, after nearly 5 years of building a world-class marketing team and making Etsy top-of-mind for our customers, Ryan Scott will be departing Etsy, and we will consolidate our Marketing Org under Raina Moskowitz’s leadership. In her expanded role as Etsy’s Chief Operating and Marketing Officer, Raina will work to drive growth globally by expanding brand consideration and deepening customer trust and loyalty. I’m excited to see Raina leverage her extensive marketing experience from her time with American Express, where she successfully grew share of wallet with their existing customer base while strategically attracting new customers.

As we move forward as a leaner organization, nurturing our talent will remain a top priority. Kim Seymour has placed a strong focus on creating growth opportunities across Etsy, including within her own team. With that in mind, Kim will hand over the reins to her successor, Toni Thompson, Etsy’s current VP of Global People and Talent Strategy, as she becomes Etsy's new Chief Human Resources Officer. Since joining Etsy in 2020, Toni has led our people development strategy through periods of significant transformation, including scaling our teams to support marketplace growth and our expansion into a House of Brands. She has served as a trusted advisor to myself and the entire ET as we have cultivated an engaged, inclusive workforce and created an exceptional experience through all stages of the employee lifecycle.

These changes will take effect on January 1, 2024, and you’ll hear more details about these new Org structures tomorrow. I want to pause and thank Ryan and Kim for their immense impact on Etsy. Under Ryan’s leadership, tens of millions of new buyers around the globe discovered the joy of Etsy and returned again and again. Ryan helped transform our brand globally during a period of critical growth through his skilled storytelling and full-funnel activation of channels like above-the-line advertising and advanced, data-driven performance marketing. And over the past 18 months, Kim has built a talent strategy that enables us to engage and retain employees, serve our customers, and care for our workforce both personally and professionally. We wish them both the best and they will forever be a part of the Etsy community.

Support for our departing teammates

Once we knew we needed to make workforce reductions, we wanted to communicate our decision with you as soon as possible. However, that puts us in the unfortunate position of sharing this news amid the winter holidays. While generally the last working day for departing Admin is today (or in accordance with local laws and procedures), all impacted Admin will remain on Etsy payroll until at least January 2, 2024 (or will be paid in lieu where local regulations make this payroll extension infeasible). We hope this extra financial support provides some peace of mind during the holidays as they process this change and prepare to explore their next step.

Our departing employees have contributed so much to make Etsy who we are today. Each of these team members were valued members of our community across all functions, levels, tenures, and locations, who supported our sellers and drove our mission forward through unprecedented and very meaningful times. We are grateful for the impact they had on our marketplace and culture, and remain committed to treating them with kindness, respect, and empathy in this transition. Therefore, we are offering the following enhanced severance package to impacted Admin:

•Severance: 16 weeks of base pay, plus 1 week for each full year of service.

•Bonus: To acknowledge their efforts throughout this calendar year, departing employees will receive bonus payments for 2023.

•Healthcare: 12 months of COBRA coverage in the US (effective Feb 1, 2024) or a cash equivalent in non-US markets, including 12 months of Lyra Mental Health support.

•Time off: Accrued, unused PTO will be paid out. Those on or eligible for Sabbaticals (5+ years tenure) and approved leaves (including Parental) will be paid out for this time.

•Job support: 3 months of career service support through an external partner, including job lead connections, skill-based learning classes, professional coaching, resume and LinkedIn branding support, and more.

•Laptops: Departing Admin will be able to keep their laptops for personal use following their departure.

•Immigration Support: Our HR immigration specialist will be working directly with impacted individuals whose immigration status is connected with their employment.

How we will move forward, together

No doubt, this is a challenging day – one of the hardest we’ve experienced at Etsy – and I want to provide more clarity for you on what happens from here. There is no perfect way to deliver such difficult news, especially when it’s impacting teammates that we value so much. Please know we have taken a deeply thoughtful approach to try to be as empathetic and human as possible in this moment.

To close, while there are many things we can't control, there is still a lot we can, so let’s remain obsessively focused on that. We owe it to our sellers and buyers – and we owe it to each other – to continue working passionately and with the highest level of urgency towards our Vital Few initiatives and supporting workstreams.

I firmly believe that it is still very early innings for Etsy. The opportunity ahead of us is enormous, our market share remains small, and we are solving for something no one else is: Keeping Commerce Human. I have confidence in our plans and in every single one of you, and I am deeply grateful for your tireless commitment to our company and the sellers and buyers who depend on us. This is the team that will get us back to growth for our community. The waters may be rough right now, but there’s no other ship I’d rather be on, and no other crew I’d rather be with, as we weather this cycle and emerge even stronger on the other side.

Onward,

Josh

Notes:

For clarity and brevity, details about internal meeting logistics, processes, and individual employment statuses included in the original email have been redacted from the text above.

Cover Page	Dec. 12, 2023
Cover [Abstract]
Document Type	8-K
Document Period End Date	Dec. 12, 2023
Entity Registrant Name	ETSY, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	001-36911
Entity Tax Identification Number	20-4898921
Entity Address, Address Line One	117 Adams Street
Entity Address, City or Town	Brooklyn
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	11201
City Area Code	718
Local Phone Number	880-3660
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	ETSY
Security Exchange Name	NASDAQ
Entity Central Index Key	0001370637
Amendment Flag	false
Entity Emerging Growth Company	false