10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2017
	OR
¨	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

_________________________

ETSY, INC.

(Exact name of registrant as specified in its charter)

_________________________

Delaware	20-4898921
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
117 Adams Street, Brooklyn, NY	11201
(Address of principal executive offices)	(Zip code)

(718) 880-3660

(Registrant's telephone number, including area code)

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 x No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    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 filer x	Accelerated filer ¨
Non-accelerated filer ¨(Do not check if a smaller reporting company)	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  x

The number of shares of common stock outstanding as of July 14, 2017 was 118,257,427.

Etsy, Inc.

Table of Contents

		Page
	Note Regarding Forward-Looking Statements	3
	Part I - Financial Information	4
Item 1.	Consolidated Financial Statements (Unaudited)	4
	Consolidated Balance Sheets as of December 31, 2016 and June 30, 2017	4
	Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2017	5
	Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2016 and 2017	6
	Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2017	7
	Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2017	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
	Part II - Other Information	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	55
	Signatures	56
	Exhibit Index	57

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 visit” and “mobile GMS.”

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 related to our possible or assumed future results of operations and expenses, our outlook, our mission, business strategies and plans, business environment, market size, cost-savings initiatives, new management team transition and plans, product capabilities and release timing and future growth. 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,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the 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 “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.

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.

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.

3

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 December 31, 2016			As of June 30, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	181,592		$	226,885
Short-term investments	100,494			60,353
Accounts receivable, net of allowance for doubtful accounts of $1,999 and $2,278 as of December 31, 2016 and June 30, 2017, respectively	26,426			24,990
Prepaid and other current assets	15,571			28,916
Deferred tax charge—current	17,132			—
Funds receivable and seller accounts	29,817			35,084
Total current assets	371,032			376,228
Restricted cash	5,341			5,341
Property and equipment, net of accumulated depreciation and amortization of $46,153 and $56,667 as of December 31, 2016 and June 30, 2017, respectively	126,407			129,074
Goodwill	35,657			37,438
Intangible assets, net of accumulated amortization of $4,209 and $3,274 as of December 31, 2016 and June 30, 2017, respectively	7,507			5,301
Deferred tax charge—net of current portion	34,264			—
Other assets	985			935
Total assets	$	581,193		$	554,317
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,978		$	7,595
Accrued expenses	24,179			30,377
Capital lease obligations—current	6,829			7,345
Funds payable and amounts due to sellers	29,817			35,084
Deferred revenue	5,648			5,789
Other current liabilities	6,557			2,134
Total current liabilities	84,008			88,324
Capital lease obligations—net of current portion	5,296			6,191
Deferred tax liabilities	65,068			65,028
Facility financing obligation	57,360			60,668
Other liabilities	24,704			25,827
Total liabilities	236,436			246,038
Stockholders’ equity:
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of December 31, 2016 and June 30, 2017; 115,973,039 and 117,819,400 shares issued and outstanding as of December 31, 2016 and June 30, 2017, respectively)	116			118
Additional paid-in capital	442,510			462,578
Accumulated deficit	(116,341		)	(156,542		)
Accumulated other comprehensive income	18,472			2,125
Total stockholders’ equity	344,757			308,279
Total liabilities and stockholders’ equity	$	581,193		$	554,317

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

4

Etsy, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share amounts)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
Revenue	$	85,349		$	101,692		$	167,196		$	198,583
Cost of revenue	29,098			35,724			57,009			70,383
Gross profit	56,251			65,968			110,187			128,200
Operating expenses:
Marketing	17,205			27,521			33,052			50,975
Product development	11,840			21,754			24,070			39,870
General and administrative	22,537			28,411			41,613			51,174
Total operating expenses	51,582			77,686			98,735			142,019
Income (loss) from operations	4,669			(11,718		)	11,452			(13,819		)
Other (expense) income:
Interest expense and amortization of deferred financing costs	(1,803		)	(2,696		)	(2,341		)	(5,287		)
Interest and other income	470			543			911			982
Foreign exchange (loss) gain	(6,386		)	16,103			1,734			18,883
Total other (expense) income	(7,719		)	13,950			304			14,578
(Loss) income before income taxes	(3,050		)	2,232			11,756			759
(Provision) benefit for income taxes	(4,261		)	9,437			(17,875		)	10,489
Net (loss) income	$	(7,311	)	$	11,669		$	(6,119	)	$	11,248
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10
Diluted	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10
Weighted average common shares outstanding:
Basic	113,045,888			116,933,216			112,760,531			116,453,790
Diluted	113,045,888			120,723,938			112,760,531			120,424,631

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

5

Etsy, Inc.

Consolidated Statements of Comprehensive Loss (Unaudited)

(In thousands)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
Net (loss) income	$	(7,311	)	$	11,669		$	(6,119	)	$	11,248
Other comprehensive income (loss):
Cumulative translation adjustment	4,011			(13,381		)	(3,428		)	(16,336		)
Unrealized gains (losses) on marketable securities, net of tax	16			11			108			(11		)
Total other comprehensive income (loss)	4,027			(13,370		)	(3,320		)	(16,347		)
Comprehensive loss	$	(3,284	)	$	(1,701	)	$	(9,439	)	$	(5,099	)

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

6

Etsy, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

(In thousands except share amounts)

	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total
	Shares	Amount
Balance as of December 31, 2016	115,973,039	$	116	$	442,510		$	(116,341	)	$	18,472		$	344,757
Stock-based compensation	—	—		11,117			—			—			11,117
Exercise of vested options	1,592,327	2		6,374			—			—			6,376
Vesting of restricted stock units, net of shares withheld	254,034	—		(2,029		)	—			—			(2,029		)
Stock-based compensation—acquisitions	—	—		1,683			—			—			1,683
Conversion of liability-classified restricted shares upon vesting	—	—		2,838			—			—			2,838
Cumulative effect adjustment	—	—		85			(51,449		)	—			(51,364		)
Other comprehensive loss	—	—		—			—			(16,347		)	(16,347		)
Net income	—	—		—			11,248			—			11,248
Balance as of June 30, 2017	117,819,400	$	118	$	462,578		$	(156,542	)	$	2,125		$	308,279

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

7

Etsy, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Six Months Ended   June 30,
	2016			2017
Cash flows from operating activities
Net (loss) income	$	(6,119	)	$	11,248
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Stock-based compensation expense	6,033			10,592
Stock-based compensation expense—acquisitions	1,472			2,455
Depreciation and amortization expense	9,834			13,598
Bad debt expense	681			863
Foreign exchange gain	(1,734		)	(18,883		)
Amortization of debt issuance costs	91			110
Non-cash interest expense	1,287			4,368
Interest on marketable securities	(573		)	302
Loss on disposal of assets	766			89
Amortization of deferred tax charge	9,267			—
Changes in operating assets and liabilities:
Accounts receivable	135			1,008
Funds receivable and seller accounts	(3,630		)	(4,436		)
Prepaid expenses and other current assets	453			(13,172		)
Other assets	593			(54		)
Accounts payable	(5,804		)	(2,282		)
Accrued and other current liabilities	1,288			3,928
Funds payable and amounts due to sellers	3,630			4,436
Deferred revenue	469			27
Other liabilities	1,442			1,251
Net cash provided by operating activities	19,581			15,448
Cash flows from investing activities
Purchases of property and equipment	(26,278		)	(3,593		)
Development of internal-use software	(5,611		)	(6,604		)
Purchases of marketable securities	(108,216		)	(29,462		)
Sales of marketable securities	19,799			69,290
Net cash (used in) provided by investing activities	(120,306		)	29,631
Cash flows from financing activities
Repurchase of stock for tax on RSU vesting	(180		)	(2,028		)
Proceeds from exercise of stock options	2,894			6,376
Payments on capital lease obligations	(2,810		)	(3,742		)
Deferred payments on acquisition of business	(649		)	—
Payments on facility financing obligation	—			(1,224		)
Net cash used in financing activities	(745		)	(618		)
Effect of exchange rate changes on cash	(2,292		)	832
Net (decrease) increase in cash and cash equivalents	(103,762		)	45,293
Cash and cash equivalents at beginning of period	271,244			181,592
Cash and cash equivalents at end of period	$	167,482		$	226,885
Supplemental non-cash disclosures
Equipment acquired under capital lease obligations	$	2,074		$	5,152
Stock-based compensation capitalized in development of capitalized software	$	267		$	525
Non-cash additions to development of internal-use software and property and equipment	$	9,800		$	176

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

8

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”) was incorporated in Delaware in February 2006. Etsy is a global creative commerce platform. Etsy builds markets, services and economic opportunity for creative entrepreneurs. The Company generates revenue primarily from transaction and listing fees, Etsy Payments fees (formerly referred to as Direct Checkout fees), Promoted Listing fees and Shipping Label sales.

Basis of Consolidation

The consolidated financial statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

For the six months endedJune 30, 2016, the Company reclassified $0.5 million of excess tax benefits from exercise of stock options from cash used in financing activities to cash provided by operating activities to conform to the current year presentation upon adoption of ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting.

Unaudited Interim Financial Information

The accompanying consolidated balance sheet as of June 30, 2017, the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2016 and 2017, the consolidated statements of cash flows for the six months ended June 30, 2016 and 2017 and the consolidated statement of changes in stockholders’ equity for the six months ended June 30, 2017 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position as of June 30, 2017, results of operations for the three and six months ended June 30, 2016 and 2017 and cash flows for the six months ended June 30, 2016 and 2017. The results from these interim periods are not necessarily indicative of the results to be anticipated for the full annual period or any future period. The financial data and the other information disclosed in these notes to the consolidated financial statements related to these three and six month periods are unaudited. These unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2017 (the “Annual Report”).

During the first quarter of 2017, the Company adopted the accounting principles outlined within ASU 2016-16, Income Taxes: Intra-entity Transfers of Assets other than Inventory removing the requirement to capitalize previously reported deferred tax charges and recognize the associated amortization through the tax provision. There have been no additional material changes in the Company's significant accounting policies from those that were disclosed in the Annual Report.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting estimates that require management’s most difficult and subjective judgments include revenue recognition, income taxes, website development costs and internal-use software, purchase price allocations for business combinations, valuation of goodwill and intangible assets, leases stock-based compensation and restructuring and other exit costs. The Company evaluates its estimates and judgments on an ongoing basis and revises them when necessary. Actual results may differ from the original or revised estimates.

9

Etsy, Inc.

Notes to Consolidated Financial Statements

Income Taxes

The Company's income tax provision for interim periods is determined using an estimate of its annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. The Company updates its estimate of the annual effective tax rate each quarter and makes cumulative adjustments if its estimated annual tax rate changes.

The Company's quarterly tax provision and quarterly estimate of its annual effective tax rate are subject to significant variations due to several factors, including variability in predicting its pretax and taxable income and the mix of jurisdictions to which those relate, changes of expenses or losses for which tax benefits are not recognized and changes in the laws, regulations and administrative practices of the jurisdictions in which the Company operates.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, which replaces existing revenue recognition guidance. The new guidance is effective for the annual and interim periods beginning after December 15, 2017. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company has performed a preliminary assessment of its Markets and Seller Services revenue streams and, while the Company is still finalizing the identification of its performance obligations, it does not expect the adoption of this standard to have a material impact on its revenue recognition on an ongoing basis. The Company is also performing an assessment over data availability and the presentation that will be necessary to meet additional disclosure requirements pursuant to this guidance. In addition, the Company continues to monitor additional changes, modifications, clarifications or interpretations related to this guidance being undertaken by the FASB, which may impact current conclusions.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. The new guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Upon adoption of this standard, the Company expects to recognize, on a discounted basis, its minimum commitments under noncancelable operating leases on the consolidated balance sheets resulting in the recording of right of use assets and lease obligations. The Company is currently evaluating whether there are any additional impacts this guidance will have on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The new guidance is effective for the annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements, but does not expect it to have a significant impact on its consolidated financial statements because its balance of restricted cash does not change significantly from period to period.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, to clarify the definition of a business and provide guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance is to be applied on a prospective basis and is effective for the annual and interim periods beginning after December 15, 2017. As the adoption of this standard will only impact prospective acquisitions, the Company does not anticipate that this update will have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, to simplify the measurement of goodwill impairment by eliminating step two from the goodwill impairment test. The new guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The new guidance is effective for the annual and interim periods beginning after December 15, 2019 and early adoption is permitted. The Company expects to adopt this guidance in the fourth quarter of 2017 and does not anticipate the update to have a material impact on its consolidated financial statements.

10

Etsy, Inc.

Notes to Consolidated Financial Statements

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting, to increase comparability and provide clarity on whether changes in the terms or conditions in a share-based payment award require a reporting entity to apply modification guidance per FASB Accounting Standards Codification Topic 718. The new guidance is to be applied on a prospective basis, is effective for the annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting, for share-based payment transactions that require a reporting entity to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement. The new guidance is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period. The Company adopted this standard in the first quarter of 2017. As a result of this updated guidance, the Company recorded $2.6 million and $2.9 million of excess tax benefits to income tax expense, rather than additional paid-in capital, in the three and six months endedJune 30, 2017. On a prospective basis, the Company has updated its calculation of diluted earnings per share to exclude excess tax benefits previously included in the calculation of assumed proceeds under the treasury stock method. The Company has elected to apply the updated guidance on cash flow classification of excess tax benefits as operating activities using a retrospective approach for consistent year-over-year comparability. The Company has elected to recognize forfeitures as they occur on a modified retrospective basis and to adopt the amendments on statutory withholding requirements on a prospective basis, both of which have no material impact to the consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-entity Transfers of Assets other than Inventory, which eliminated the exception that previously existed for the income tax consequences of intra-entity asset transfers other than inventory. The new guidance is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted in annual reporting periods for which interim or annual financial statements have not been issued. The Company has adopted this standard in the first quarter of 2017. The amendments in this update have been applied on a modified retrospective basis through a cumulative effect adjustment recorded to retained earnings as of January 1, 2017 of $51.4 million, which represents the unamortized amount of the deferred tax charge asset on the balance sheet at December 31, 2016. Consequently, the adoption of this standard eliminates the recognition in the tax provision of $17.1 million in each year through 2019, the year through which the deferred tax charge was previously amortizable. Additionally, a deferred tax asset of $21.7 million was recognized which previously qualified for an exception that has been eliminated. A full valuation allowance for that deferred tax asset was also recognized resulting in no impact to the consolidated financial statements.

Note 2—Stock-based Compensation

The Company granted stock options and restricted stock units (“RSUs”) under its 2015 Equity Incentive Plan (“2015 Plan”) in the three months ended June 30, 2017. As permitted by the 2015 Plan, the Board of Directors approved an increase of 5,798,651 shares to the total number of shares available for issuance under the 2015 Plan as of January 3, 2017. At June 30, 2017, 23,347,913 shares were authorized under the 2015 Plan, and 13,407,187 shares were available for future grant.

In the first quarter of 2017, the Company made an accounting policy election to recognize forfeitures as they occur upon adoption of guidance per ASU 2016-09. In reporting periods prior to 2017, the Company estimated forfeitures at the time of grant and revised in subsequent periods as necessary if actual forfeitures differed from estimates.

11

Etsy, Inc.

Notes to Consolidated Financial Statements

The fair value of options granted in the periods presented below using the Black-Scholes pricing model has been based on the following assumptions:

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2016	2017	2016	2017
Volatility	44.3% - 44.6%	41.7% - 44.2%	44.2% - 44.6%	41.7% - 44.2%
Risk-free interest rate	1.2% - 1.5%	1.9% - 2.0%	1.2% - 1.9%	1.9% - 2.2%
Expected term (in years)	5.5 - 6.3	5.5 - 6.3	5.5 - 6.3	5.5 - 6.3
Dividend rate	—%	—%	—%	—%

The following table summarizes the activity for the Company's options during the period presented below:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2016	9,339,567		$	7.89
Granted	5,473,601		10.77
Exercised	(1,592,327	)	4.00
Forfeited/Canceled	(718,334	)	10.80
Outstanding at June 30, 2017	12,502,507		9.47		6.60	$	71,404
Total exercisable at June 30, 2017	6,069,330		7.87		3.59	45,027

The following table summarizes the weighted average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested in the three and six months endedJune 30, 2016 and 2017 (in thousands except per share amounts):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
Weighted average grant date fair value of options granted	$	4.09	$	4.73	$	3.78	$	4.71
Intrinsic value of options exercised	3,722		11,135		6,110		12,866
Fair value of awards vested	2,873		6,695		6,209		10,485

The total unrecognized compensation expense at June 30, 2017 related to the Company's options was $29.6 million, which will be recognized over an estimated weighted-average amortization period of 3.44 years.

The following table summarizes the activity for the Company's unvested RSUs during the period presented below:

	Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2016	3,135,181		$	10.70
Granted	1,775,586		11.14
Vested	(433,174	)	9.39
Forfeited/Canceled	(473,653	)	10.50
Unvested at June 30, 2017	4,003,940		11.06

The total unrecognized compensation expense at June 30, 2017 related to the Company's unvested RSUs was $38.8 million, which will be recognized over an estimated weighted-average amortization period of 3.03 years.

12

Etsy, Inc.

Notes to Consolidated Financial Statements

Total stock-based compensation expense included in the consolidated statements of operations for the periods presented below is as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
Cost of revenue	$	250	$	398	$	451	$	762
Marketing	221		528		402		972
Product development	1,026		2,053		1,883		4,073
General and administrative	2,771		5,183		4,769		7,240
Total stock-based compensation expense	$	4,268	$	8,162	$	7,505	$	13,047

Total stock-based compensation expense in the three months ended June 30, 2016 and 2017 includes $0.8 million and $1.6 million in acquisition-related stock-based compensation expense, respectively. Total stock-based compensation expense in the six months ended June 30, 2016 and 2017 includes $1.5 million and $2.5 million in acquisition-related stock-based compensation expense, respectively.

Total stock-based compensation expense in the three and six months endedJune 30, 2017 includes $1.7 million of costs associated with the Actions (as defined below) approved by the Board of Directors during the second quarter of 2017 discussed in “Note 9—Restructuring and Other Exit Costs.”

Note 3—Income Taxes

The Company adopted the provisions of ASU 2016-09 and ASU 2016-16 as of the beginning of the current fiscal year. Please refer to “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for additional detail regarding the adoption of these accounting standards and their impact on the consolidated financial statements.

Included in the tax benefit for the three and six months endedJune 30, 2017 is a discrete benefit of $3.0 million related to the costs discussed in “Note 9—Restructuring and Other Exit Costs.”

The amount of unrecognized tax benefits included in the consolidated balance sheets increased$0.3 million in the six months ended June 30, 2017, from $23.6 million at December 31, 2016 to $23.9 million at June 30, 2017. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $23.9 million at June 30, 2017.

Note 4—Fair Value Measurements

The Company has characterized its investments in marketable securities, based on the priority of the inputs used to value the investments, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), and lowest priority to unobservable inputs (Level 3). If the inputs used to measure the investments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the investment. Investments recorded in the accompanying consolidated balance sheet are categorized based on the inputs to valuation techniques as follows:

Level 1—These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the Company has the ability to access.

Level 2—These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3—These are liabilities where values are derived from techniques in which one or more significant inputs are unobservable.

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Etsy, Inc.

Notes to Consolidated Financial Statements

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and June 30, 2017 (in thousands):

	As of December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Commercial Paper	$	—	$	2,997	$	—	$	2,997
Money market funds	98,161		—		—		98,161
U.S. Government bills	1,950		—		—		1,950
	100,111		2,997		—		103,108
Short-term investments:
Commercial paper	—		17,146		—		17,146
Corporate bonds	—		33,303		—		33,303
U.S. Government and agency bills	50,045		—		—		50,045
	50,045		50,449		—		100,494
	$	150,156	$	53,446	$	—	$	203,602
Liability
Post-combination compensation classified as liability	$	—	$	—	$	2,067	$	2,067
	$	—	$	—	$	2,067	$	2,067

	As of June 30, 2017
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Commercial Paper	$	—	$	32,570	$	—	$	32,570
Money market funds	88,819		—		—		88,819
U.S. Government and agency bills	20,177		—		—		20,177
	108,996		32,570		—		141,566
Short-term investments:
Commercial paper	—		9,764		—		9,764
Corporate bonds	—		17,335		—		17,335
U.S. Government and agency bills	33,254		—		—		33,254
	33,254		27,099		—		60,353
	$	142,250	$	59,669	$	—	$	201,919

Level 1 instruments include money market funds and AAA-rated U.S. Government and agency securities, which are valued based on inputs including quotes from broker-dealers or recently executed transactions in the same or similar securities.

Level 2 instruments include fixed-income funds consisting of investments in commercial paper and corporate bonds, which are valued based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3 instruments include post-combination compensation classified as a liability in connection with the acquisition of ALM. The post-combination compensation was classified as a liability due to its affiliation with a related put option, which expired upon vesting of the underlying consideration in the second quarter of 2017, and its fair value was previously determined based on the fair value of the Company's common stock at the period-end reporting date, with adjustments included in general and administrative expenses.

14

Etsy, Inc.

Notes to Consolidated Financial Statements

The table below provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3) (in thousands):

	Six Months Ended   June 30, 2017
Balance at beginning of period	$	2,067
Changes to liability-classified stock awards	771
Conversion of liability-classified restricted shares upon vesting	(2,838		)
Balance at end of period	$	—

Note 5—Marketable Securities

Short-term investments and certain cash equivalents consist of marketable securities that are available-for-sale. The cost and fair value of available-for-sale securities were as follows as of the dates indicated (in thousands):

	Cost		Gross Unrealized Holding Loss			Gross Unrealized Holding Gain		Fair Value
December 31, 2016
Cash equivalents:
Commercial paper	$	2,997	$	—		$	—	$	2,997
	2,997		—			—		2,997
Short-term investments:
Commercial paper	17,146		—			—		17,146
Corporate bonds	33,318		(16		)	1		33,303
U.S. Government and agency bills	50,059		(15		)	1		50,045
	100,523		(31		)	2		100,494
	$	103,520	$	(31	)	$	2	$	103,491
June 30, 2017
Cash equivalents:
Commercial paper	$	32,570	$	—		$	—	$	32,570
U.S. Government and agency bills	20,177		—			—		20,177
	52,747		—			—		52,747
Short-term investments:
Commercial paper	9,764		—			—		9,764
Corporate bonds	17,349		(14		)	—		17,335
U.S. Government and agency bills	33,280		(26		)	—		33,254
	60,393		(40		)	—		60,353
	$	113,140	$	(40	)	$	—	$	113,100

The Company’s investments in marketable securities consist primarily of investments in fixed-income funds and AAA-rated U.S. Government and agency bills. When evaluating investments for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and the Company’s ability and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery in market value. The Company evaluates fair values for each individual security in the investment portfolio.

15

Etsy, Inc.

Notes to Consolidated Financial Statements

Note 6—Net (Loss) Income Per Share

The following table presents the calculation of basic and diluted net (loss) income per share for periods presented (in thousands except share and per share amounts):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
Numerator:
Net (loss) income	$	(7,311	)	$	11,669		$	(6,119	)	$	11,248
Net income allocated to participating securities under the two-class method	—			(17		)	—			(16		)
Net (loss) income applicable to common stockholders—basic	(7,311		)	11,652			(6,119		)	11,232
Dilutive effect of net income allocated to participating securities under the two-class method	—			17			—			16
Change in fair value of liability classified restricted stock	—			832			—			771
Net (loss) income applicable to common stockholders—diluted	$	(7,311	)	$	12,501		$	(6,119	)	$	12,019
Denominator:
Weighted average common shares outstanding—basic (1)	113,045,888			116,933,216			112,760,531			116,453,790
Common equivalent shares from options to purchase common stock and restricted stock units	—			2,921,081			—			3,118,640
Dilutive effect of assumed conversion of restricted stock units	—			844,331			—			838,890
Dilutive effect of assumed conversion of restricted stock from acquisition	—			25,310			—			13,311
Weighted average common shares outstanding—diluted	113,045,888			120,723,938			112,760,531			120,424,631
Net (loss) income per share applicable to common stockholders—basic	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10
Net (loss) income per share applicable to common stockholders—diluted	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10

(1) 172,445 shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for the three and six months endedJune 30, 2017.

The following potential common shares were excluded from the calculation of diluted net (loss) 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,
	2016	2017	2016	2017
Stock options	11,129,114	6,201,891	11,155,837	4,451,613
Restricted stock units	1,941,768	648,762	1,395,452	1,065,495
Warrants	36,590	—	67,261	—
Total anti-dilutive securities	13,107,472	6,850,653	12,618,550	5,517,108

16

Etsy, Inc.

Notes to Consolidated Financial Statements

Note 7—Segment and Geographic Information

The Company has determined it operates as one operating and reportable segment for purposes of allocating resources and evaluating financial performance.

Revenue by country is based on the billing address of the seller. The following table summarizes revenue by geographic area for the periods presented (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
United States	$	64,773	$	73,546	$	127,814	$	145,068
International	20,576		28,146		39,382		53,515
Revenue	$	85,349	$	101,692	$	167,196	$	198,583

No individual country’s revenue other than the United States exceeded 10% of total revenue for the periods presented. All significant long-lived assets are located in the United States.

Note 8—Contingencies

Non-Income Tax Contingencies

The Company had reserves of $0.3 million and $0.4 million at December 31, 2016 and June 30, 2017, respectively, for certain non-income tax obligations, representing management’s best estimate of its potential liability. The Company could also be subject to examination in various jurisdictions related to non-income tax matters. The resolution of these types of matters, if in excess of the recorded reserve, could have an adverse impact on the Company’s business.

Legal Proceedings

On May 13, 2015, a purported securities class action complaint (Altayyar v. Etsy, Inc., et al., Docket No. 1:15-cv-02785) was filed in the United States District Court for the Eastern District of New York against the Company and certain officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of the Company's common stock from April 16, 2015 through and including May 10, 2015. It asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false or misleading statements and omissions with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement and actions taken by third-party brands against Etsy sellers for trademark or copyright infringement. 

On October 22, 2015, the court appointed a lead plaintiff and lead plaintiff’s counsel. On January 21, 2016, the lead plaintiff filed an amended class action complaint alleging false or misleading statements or omissions with respect to substantially the same topics as the original complaint. The amended complaint adds certain outside directors and underwriters as defendants, expands the purported class period to be April 16, 2015 to August 4, 2015, inclusive, and asserts violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The amended complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. On April 5, 2016, defendants moved to dismiss the amended complaint.  On March 24, 2017, the court entered a judgment dismissing the amended complaint in its entirety, with prejudice, based on an opinion filed March 16, 2017. On August 2, 2017, Plaintiffs appealed to the United States Court of Appeals for the Second Circuit.

The Company and the named officers and directors intend to defend themselves vigorously against this action. In light of, among other things, the early stage of the litigation, the Company is unable to predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.

On July 21, 2015, a purported securities class action complaint (Cervantes v. Dickerson, et.al., Case No. CIV 534768) was filed in the Superior Court of State of California, County of San Mateo against the Company, certain officers, directors and underwriters. The complaint asserts violations of Sections 11 and 15 of the Securities Act of 1933.  As in the Altayyar litigation,

17

Etsy, Inc.

Notes to Consolidated Financial Statements

the complaint alleges misrepresentations in the Company’s Registration Statement on Form S-1 and Prospectus with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. On December 7, 2015, the Company and the underwriter defendants moved to stay the Cervantes action on the grounds of forum non conveniens.

On November 5, 2015, another purported securities class action complaint (Weiss v. Etsy et al., No. CIV 536123) was filed in the Superior Court of State of California, County of San Mateo. The Weiss complaint names as defendants the Company and the same officers, directors and underwriters named in the Cervantes complaint, and also asserts violations of Sections 11 and 15 of the Securities Act of 1933 based on allegedly false or misleading statements or omissions with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement. On December 24, 2015, the court consolidated the Cervantes and Weiss actions. The Company and the named officers and directors intend to defend themselves vigorously against these consolidated actions. In light of, among other things, the early stage of the litigation, the Company is unable to predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome. On February 3, 2016, the court granted the Company’s motion to stay the consolidated actions. 

In addition, from time to time in the normal course of business, various other claims and litigation have been asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability for damages. Any claims or litigation, regardless of their success, could have an adverse effect on the Company’s consolidated results of operations or cash flows in the period the claims or litigation are resolved. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business.

Note 9—Restructuring and Other Exit Costs

On April 30, 2017, the Board of Directors approved a plan to increase efficiency and streamline the Company's cost structure through headcount reductions and a reduction in internal program expenses (the “May Actions”). On June 16, 2017, the Board of Directors approved additional initiatives that are designed to improve focus on key strategic growth opportunities (together with the May Actions, the “Actions”). The Actions included total headcount reductions of 245 positions or 23% of the total workforce as of December 31, 2016, closing A Little Market (“ALM”), a market in France, and closing or consolidating certain international offices.

In connection with the Actions, the Company expects to incur restructuring and other exit costs, comprised of employee severance, stock compensation modifications and other exit costs, of $12.3 million to $16.6 million, largely made up of cash expenditures. For the three months ended June 30, 2017, $11.3 million of these costs have been incurred, including $9.0 million of severance charges, $1.7 million of stock modification charges and $0.6 million of other exit costs. The remaining $1.0 million to $5.3 million of expected costs and all remaining cash payments are expected to be recognized over the remainder of 2017. The remaining range of expected costs relates primarily to uncertainty in the amount of exit costs that will be recognized in connection with the ultimate disposition of one of the Company's international offices.

18

Etsy, Inc.

Notes to Consolidated Financial Statements

The following table displays restructuring and other exit costs recorded related to the Actions and a rollforward of the charges to the accrued expenses balance as of June 30, 2017 (in thousands):

	Severance Charge			Stock-Based Compensation			Other Exit Costs			Total
Balance, December 31, 2016	$	—		$	—		$	—		$	—
Total restructuring and other exit costs	8,972			1,668			620			11,260
Costs charged against equity/assets	—			(1,668		)	—			(1,668		)
Cash payments	(2,110		)	—			(278		)	(2,388		)
Balance, June 30, 2017	$	6,862		$	—		$	342		$	7,204

Total restructuring and other exit costs related to the Actions included in the consolidated statements of operations are as follows (in thousands):

	Three and Six Months Ended
	June 30, 2017
Cost of revenue	$	694
Marketing	2,349
Product development	3,101
General and administrative	5,116
Total restructuring and other exit costs	$	11,260

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2017. This discussion, particularly information with respect to our outlook, our plans and strategy for our business and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in the “Risk Factors” section. For more information regarding key factors affecting our performance, see“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting our Performance” in our Annual Report on Form 10-K, which we incorporate by reference.

Overview

Business

Etsy builds markets, services and economic opportunity for creative entrepreneurs. We have a seller-aligned business model: we make money when our Etsy sellers make money, so we continue to invest in building the platform they depend on. Our markets provide creative entrepreneurs with access to consumers around the world. Our six key geographic markets are the United States, Canada, United Kingdom, France, Germany and Australia. Our top six purchase categories based on GMS are (from largest to smallest): clothing and accessories, home and living, jewelry, craft supplies, art and collectibles, and paper and party supplies. Each of our top three categories accounted for over $500 million in GMS over the last 12 months.

Our top priority is to grow our core Etsy.com market, especially within our six key geographic markets. We are focused on winning the purchase occasions that center around celebrations, gifting and style. We want to empower our passionate community of 1.8 million Etsy sellers to compete and win against mass retailers through four key initiatives:

• Improving trust and reliability on Etsy.com. We want to ensure that the Etsy brand delivers trust and reliability throughout the buying experience.

• Enhancing search and discovery. Helping buyers better navigate the 45 million items on Etsy.com is a key area of focus.

• Building world-class marketing capabilities. We are focused on Search Engine Optimization, digital acquisition marketing and email to increase traffic to Etsy.com.

• Providing best-in-class seller tools and services. We plan to continue to invest in tools and Seller Services that enable Etsy sellers to start, manage and scale their businesses.

Our revenue is diversified, generated from a mix of market activities and Seller Services. Markets revenue is primarily made up of the 3.5% transaction fee that an Etsy seller pays for each completed transaction on Etsy.com and the $0.20 listing fee the seller pays for each item listed on Etsy.com. Seller Services revenue includes the fees Etsy sellers pay us for services, which include Etsy Payments (formerly called Direct Checkout), our payment processing service; Promoted Listings, our ad service for prominent placement in on-site search results; Shipping Labels, which allow Etsy sellers to purchase shipping labels through our platform; and Pattern by Etsy, launched in April 2016, which enables sellers to easily create their own custom website. Other revenue typically includes revenue generated from commercial partnerships.

Quarter Highlights

As of June 30, 2017, our platform, which includes our markets, our services and our technology, connected 1.8 million active Etsy sellers and 30.6 million active Etsy buyers, in nearly every country in the world. In the three and six months endedJune 30, 2017, Etsy sellers generated GMS of $748.0 million and $1.5 billion, respectively, of which approximately 51% in each period came from purchases made on mobile devices. We are a global company and 32% of our GMS in the three and six months endedJune 30, 2017 came from transactions where either an Etsy seller or an Etsy buyer were located outside of the United States.

In May 2017, we made key changes in management, appointing a new Chief Executive Officer, Josh Silverman, and a new Chief Financial Officer, Rachel Glaser. In July 2017, we appointed Mike Fisher as our new Chief Technology Officer.

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We are focused on creating a more agile organization. On April 30, 2017, the Board of Directors approved a plan to increase efficiency and streamline the Company's cost structure through headcount reductions and a reduction in third party and internal program expenses (the “May Actions”). On June 16, 2017, the Board of Directors approved additional initiatives that are designed to improve focus on key strategic growth opportunities (together with the May Actions, the “Actions”). We believe our newly streamlined organizational structure will allow us to execute faster on our key initiatives, and in recent months, we have increased the pace of experiments. The Actions included:

• Headcount reductions. Since May 2017, we have reduced our headcount by approximately 245 positions, or approximately 23% of our total headcount at the end of 2016.

• Streamlining international operations. We plan to close ALM at the end of September 2017 in order to focus on one core Etsy market in France. We are also closing our office in Melbourne, Australia and have reduced the marketing staff footprint in our key international markets. We remain committed to driving growth in our key international markets and plan to leverage our centralized product development and marketing initiatives resources to support our efforts in our key international markets.

• Driving meaningful annualized cost savings.As a result of the Actions, we have identified approximately $20 million in 2017 expense reductions, which are expected to result in approximately $35 million in annualized cost savings. These savings will be realized through a combination of headcount reductions, reduced third-party expenses and programming costs.

Key Operating and Financial Metrics

We collect and analyze operating and financial data to evaluate the health of our ecosystem, allocate our resources (such as capital, people and technology investments) and assess the performance of our business. The unaudited key operating and financial metrics we use are:

	Three Months Ended   June 30,						% Growth Y/Y		Six Months Ended   June 30,						% Growth Y/Y
	2016			2017					2016			2017
	(in thousands, except percentages)
GMS	$	669,704		$	748,029		11.7	%	$	1,298,871		$	1,467,066		12.9	%
Revenue	$	85,349		$	101,692		19.1	%	$	167,196		$	198,583		18.8	%
Markets revenue	$	37,405		$	42,069		12.5	%	$	73,135		$	82,828		13.3	%
Seller Services revenue	$	47,069		$	58,816		25.0	%	$	90,602		$	112,763		24.5	%
Net (loss) income	$	(7,311	)	$	11,669		(259.6	)%	$	(6,119	)	$	11,248		(283.8	)%
Adjusted EBITDA	$	14,040		$	12,696		(9.6	)%	$	28,791		$	22,418		(22.1	)%
Active sellers	1,654			1,834			10.9	%	1,654			1,834			10.9	%
Active buyers	26,104			30,584			17.2	%	26,104			30,584			17.2	%
Percent mobile visits	64		%	65		%	100	bps	63		%	66		%	300	bps
Percent mobile GMS	47		%	51		%	400	bps	47		%	51		%	400	bps
Percent international GMS	31		%	32		%	100	bps	31		%	32		%	100	bps

GMS

Gross merchandise sales (“GMS”) is the dollar value of items sold in our markets within the applicable period, excluding shipping fees and net of refunds associated with canceled transactions. GMS does not represent revenue earned by Etsy. GMS is largely driven by transactions in our Markets and is not directly impacted by Seller Services activity. However, because our revenue and cost of revenue depend significantly on the dollar value of items sold in our markets, we believe that GMS is an indicator of the success of Etsy sellers, the satisfaction of Etsy buyers, the health of our ecosystem and the scale and growth of our business.

Adjusted EBITDA

Adjusted EBITDA represents our net (loss) income adjusted to exclude: interest and other non-operating expense, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); and restructuring and other exit costs. See “Non-GAAP Financial Measures” for information regarding our use of

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Adjusted EBITDA, including its limitations as a financial measure, and for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial measure calculated in accordance with GAAP.

Active Sellers

An active seller is an Etsy seller who has incurred at least one charge from us in the last 12 months. Charges include transaction fees, listing fees and fees for Etsy Payments, Promoted Listings, Shipping Labels, Pattern, Google Shopping and Etsy Wholesale enrollment. An Etsy seller is identified by a unique e-mail address; a single person can have multiple Etsy seller accounts. We succeed when Etsy sellers succeed, so we view the number of active sellers as a key indicator of the awareness of our brand, the reach of our platform, the potential for growth in GMS and revenue and the health of our ecosystem.

Active Buyers

An active buyer is an Etsy buyer who has made at least one purchase in the last 12 months. An Etsy buyer is identified by a unique e-mail address; a single person can have multiple Etsy buyer accounts. We generate revenue when Etsy buyers order items from Etsy sellers, so we view the number of active buyers as a key indicator of our potential for growth in GMS and revenue, the reach of our platform, awareness of our brand, the engagement and loyalty of Etsy buyers and the health of our ecosystem.

Mobile Visits

A visit represents activity from a unique browser or mobile app. A visit ends after 30 minutes of inactivity. A mobile visit is a visit that occurs on a mobile device, such as a tablet or a smartphone. Etsy sellers are increasingly using mobile devices to manage their listings and track their business performance on our platform. In addition, Etsy buyers increasingly use mobile devices to search, browse and purchase items on our platform. We view percent mobile visits as a key indicator of the level of engagement of Etsy sellers and Etsy buyers on our mobile website and mobile apps and of our ability to sustain GMS and revenue.

Mobile GMS

Mobile GMS is GMS that results from a transaction completed on a mobile device, such as a tablet or a smartphone. Mobile GMS excludes ALM and Etsy Wholesale as well as orders initiated on mobile devices but ultimately completed on a desktop. When calculating percent mobile GMS, we do not take into account refunds associated with canceled transactions. We believe that mobile GMS indicates our success in converting mobile activity into mobile purchases and demonstrates our ability to grow GMS and revenue.

International GMS

International GMS is GMS from transactions where either the billing address for the Etsy seller or the shipping address for the Etsy buyer at the time of sale is outside of the United States. When calculating percent international GMS, we do not take into account refunds associated with canceled transactions. We believe that international GMS shows the level of engagement of our community outside the United States and demonstrates our ability to grow GMS and revenue.

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Results of Operations

The following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results. We have included in “Comparison of Three Months EndedJune 30, 2016 and 2017” below non-GAAP cost of revenue, marketing expenses, product development expenses and general and administrative expenses, each excluding restructuring and other exit costs. See “Non-GAAP Financial Measures” for a reconciliation of these measures to cost of revenue, marketing expenses, product development expenses and general and administrative expenses, respectively, the most directly comparable financial measures calculated in accordance with GAAP. For more information regarding the components of our results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Our Results of Operations” in the Annual Report, which we incorporate by reference.

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
	(in thousands)
Revenue:
Markets	$	37,405		$	42,069		$	73,135		$	82,828
Seller Services	47,069			58,816			90,602			112,763
Other	875			807			3,459			2,992
Total revenue	85,349			101,692			167,196			198,583
Cost of revenue	29,098			35,724			57,009			70,383
Gross profit	56,251			65,968			110,187			128,200
Operating expenses:
Marketing	17,205			27,521			33,052			50,975
Product development	11,840			21,754			24,070			39,870
General and administrative	22,537			28,411			41,613			51,174
Total operating expenses	51,582			77,686			98,735			142,019
Income (loss) from operations	4,669			(11,718		)	11,452			(13,819		)
Other (expense) income, net	(7,719		)	13,950			304			14,578
(Loss) income before income taxes	(3,050		)	2,232			11,756			759
(Provision) benefit for income taxes	(4,261		)	9,437			(17,875		)	10,489
Net (loss) income	$	(7,311	)	$	11,669		$	(6,119	)	$	11,248
	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
Revenue:
Markets	43.8		%	41.4		%	43.7		%	41.7		%
Seller Services	55.1			57.8			54.2			56.8
Other	1.0			0.8			2.1			1.5
Total revenue	100.0			100.0			100.0			100.0
Cost of revenue	34.1			35.1			34.1			35.4
Gross profit	65.9			64.9			65.9			64.6
Operating expenses:
Marketing	20.2			27.1			19.8			25.7
Product development	13.9			21.4			14.4			20.1
General and administrative	26.4			27.9			24.9			25.8
Total operating expenses	60.4			76.4			59.1			71.5
Income (loss) from operations	5.5			(11.5		)	6.8			(7.0		)
Other (expense) income, net	(9.0		)	13.7			0.2			7.3
(Loss) income before income taxes	(3.6		)	2.2			7.0			0.4
(Provision) benefit for income taxes	(5.0		)	9.3			(10.7		)	5.3
Net (loss) income	(8.6		)%	11.5		%	(3.7		)%	5.7		%

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Comparison of Three Months EndedJune 30, 2016 and 2017

Revenue

	Three Months Ended June 30,						Change
	2016			2017			$			%
	(in thousands except percentages)
Revenue:
Markets	$	37,405		$	42,069		$	4,664		12.5	%
Percentage of total revenue	43.8		%	41.4		%
Seller Services	$	47,069		$	58,816		$	11,747		25.0	%
Percentage of total revenue	55.1		%	57.8		%
Other	$	875		$	807		$	(68	)	(7.8	)%
Percentage of total revenue	1.0		%	0.8		%
Total revenue	$	85,349		$	101,692		$	16,343		19.1	%

GMS increased $78.3 million, or 11.7%, to $748.0 million in the three months ended June 30, 2017 compared to the three months ended June 30, 2016. On a currency-neutral basis (excluding the direct impact of currency translation on GMS from goods that are not listed in U.S. dollars) GMS growth in the second quarter of 2017 would have been 12.6%, or approximately one percentage point higher than reported growth. Supporting this growth in GMS, active sellers increased10.9% to 1.8 million and active buyers increased17.2% to 30.6 million at June 30, 2017 compared to June 30, 2016. We expect GMS growth deceleration to stabilize in the second half of 2017, with third quarter GMS growth higher than second quarter GMS growth.

During the three months ended June 30, 2017, percent mobile visits increased as a percentage of total visits to approximately 65%up from approximately 64% for the three months ended June 30, 2016, and mobile GMS increased as a percentage of total GMS to approximately 51%, up from approximately 47% for the three months ended June 30, 2016. These increases were a result of increased mobile traffic and, to a lesser extent, continued improvements in our mobile offerings for Etsy buyers. Mobile web continued to be the largest contributor to both overall visits and mobile GMS. Mobile GMS growth during the second quarter of 2017 was approximately 20%, with mobile web and mobile app GMS each continuing to grow significantly faster than desktop GMS during the period. Mobile web and mobile Buy on Etsy app conversion rates increased but desktop conversion rates decreased and, as a result, our aggregate conversion rate declined slightly in the three months ended June 30, 2017 compared to the three months ended June 30, 2016. We expect conversion rates to increase across both mobile and desktop in the second half of 2017.

For the three months ended June 30, 2017, international GMS increased as a percentage of total GMS to approximately 32%, from approximately 31% for the three months ended June 30, 2016. During the three months ended June 30, 2017, the growth in percent international GMS was largely driven by GMS growth between U.S. buyers and international sellers and GMS growth between buyers and sellers outside of the United States, both in the same country and cross-border. GMS growth between international buyers and sellers in the same country remained the fastest growing category of international GMS, up approximately 39% year-over-year during the second quarter. International GMS was up approximately 18% in the three months ended June 30, 2017 compared to the three months ended June 30, 2016, growing faster than overall GMS. We believe the growth in this category demonstrates the progress we are making on our strategy to build and deepen local Etsy communities in our key international markets.

Revenue increased $16.3 million, or 19.1%, to $101.7 million in the three months ended June 30, 2017 compared to the three months ended June 30, 2016, of which 41.4% of the total consisted of Markets revenue and 57.8% consisted of Seller Services revenue. We continue to expect revenue growth to outpace GMS and operating expense growth for the remainder of 2017 and to accelerate compared to the first half of 2017.

Markets revenue increased $4.7 million, or 12.5%, to $42.1 million in the three months ended June 30, 2017 compared to the three months ended June 30, 2016. This growth corresponded with a 11.7%increase in GMS to a total of $748.0 million for the three months ended June 30, 2017. As our GMS increased, our Markets revenue increased, primarily due to growth in transaction fee revenue and, to a lesser extent, an increase in listing fee revenue.

Seller Services revenue increased $11.7 million, or 25.0%, to $58.8 million in the three months ended June 30, 2017compared tothe three months ended June 30, 2016. Thegrowthin Seller Services revenue was primarily driven by anincreasein revenue from Etsy Payments, largely driven by overall GMS growth trends and increased seller adoption. The share of GMS processed

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through our Etsy Payments platform was 85% in the second quarter, up from 76% in the second quarter of 2016, primarily due to the transition of all sellers in eligible countries to the platform. Seller Services revenue also benefited from the growth in revenue from Promoted Listings and, to a lesser extent, Pattern and Shipping Labels. The increase in Promoted Listings revenue was due to higher click volume and overall product enhancements. The increase in Pattern revenue reflects increased subscriptions since its launch in April 2016. The increase in Shipping Label revenue reflects a combination of an increase in label volume and, to a lesser extent, an increase in average margin per label. Growth in Seller Services revenue continued to outpace growth in Markets revenue in the second quarter of 2017. We expect continued Seller Services revenue growth during the second half of the year and we expect Seller Services revenue to grow at a faster rate than GMS and Markets revenue, primarily driven by Promoted Listings and Etsy Payments.

Other revenue remained relatively flat for the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

Cost of Revenue

	Three Months Ended June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Cost of revenue	$	29,098		$	35,724		$	6,626	22.8	%
Percentage of total revenue	34.1		%	35.1		%

Cost of revenue increased$6.6 million, or 22.8%, to $35.7 million in the three months ended June 30, 2017 compared to the three months ended June 30, 2016, primarily as a result of additional costs to support the increase in Etsy Payments revenue and, to a lesser extent, an increase in employee-related costs, including $0.7 million of restructuring and other exit costs associated with the Actions. Excluding the impact of restructuring and other exit costs, non-GAAP cost of revenue increased $5.9 million, or 20.4% to $35.0 million, representing 34.4% of total revenue. Cost of revenue increased as a percentage of revenue largely due to increased employee-related costs and professional services.

Operating Expenses

We had 877 total employees on July 26, 2017, which reflects the majority of the headcount reductions resulting from the Actions, compared with 1,062 total employees on March 31, 2017.

Marketing

	Three Months Ended June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Marketing	$	17,205		$	27,521		$	10,316	60.0	%
Percentage of total revenue	20.2		%	27.1		%

Marketing expenses increased$10.3 million, or 60.0%, to $27.5 million in the three months ended June 30, 2017 compared to the three months ended June 30, 2016, primarily as a result of increased spend on digital marketing related to buyer acquisition and an increase in employee-related expenses for our marketing team, including $2.3 million of restructuring and other exit costs associated with the Actions. Excluding the impact of restructuring and other exit costs, non-GAAP marketing expenses increased $8.0 million, or 46.3% to $25.2 million, representing 24.8% of total revenue. During the second quarter, we decided to pause our investment in brand marketing for the remainder of 2017 and a portion of the spend earmarked for brand was re-allocated to digital acquisition marketing.

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Product development

	Three Months Ended June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Product development	$	11,840		$	21,754		$	9,914	83.7	%
Percentage of total revenue	13.9		%	21.4		%

Product development expenses increased$9.9 million, or 83.7%, to $21.8 million in the three months ended June 30, 2017 compared to the three months ended June 30, 2016, primarily as a result of an increase in employee-related expenses for our product and engineering teams, including $3.1 million of restructuring and other exit costs associated with the Actions, and additional expenses resulting from the acquisition of Blackbird Technologies, Inc. (“Blackbird”) in September 2016.We expect to incur additional product development expenses through the third quarter of 2017 as compared to 2016 as a result of expenses related to the acquisition of Blackbird. Excluding the impact of restructuring and other exit costs, non-GAAP product development expenses increased $6.8 million, or 57.5% to $18.7 million, representing 18.3% of total revenue.

General and administrative

	Three Months Ended June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
General and administrative	$	22,537		$	28,411		$	5,874	26.1	%
Percentage of total revenue	26.4		%	27.9		%

General and administrative expenses increased$5.9 million, or 26.1%, to $28.4 million in the three months ended June 30, 2017 compared to the three months ended June 30, 2016, primarily driven by an increase in employee-related expenses, including $5.1 million of restructuring and other exit costs associated with the Actions. Excluding the impact of restructuring and other exit costs, non-GAAP general and administrative expenses increased $0.8 million, or 3.4%, to $23.3 million, representing 22.9% of total revenue.

Other (Expense) Income, net

	Three Months Ended June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Other (expense) income, net	$	(7,719	)	$	13,950		$	21,669	(280.7	)%
Percentage of total revenue	(9.0		)%	13.7		%

Other income, net was $14.0 million in the three months ended June 30, 2017 mainly due to a foreign currency gain related to our intercompany debt resulting from the significant change in exchange rates during the period, partially offset by interest expense associated with the build-to-suit lease accounting related to our corporate headquarters. Other expense, net was $7.7 million in the three months ended June 30, 2016 mainly due to a foreign currency loss on our intercompany debt and interest expense on our corporate headquarters lease.

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(Provision) Benefit for Income Taxes

	Three Months Ended June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
(Provision) benefit for income taxes	$	(4,261	)	$	9,437		$	13,698	(321.5	)%
Percentage of total revenue	(5.0		)%	9.3		%

Our income tax benefit and provision for the three months ended June 30, 2017 and 2016 was $9.4 million and $4.3 million, respectively. Our tax rate is affected by recurring items, and discrete items that may differ between and among periods.

The primary drivers of our income tax benefit for the three months ended June 30, 2017 were the exclusion of certain foreign jurisdictions that are subject to a valuation allowance from the forecasted annual effective tax rate, a discrete tax benefit for stock based compensation of $3.0 million, and a discrete tax benefit related to restructuring and exit costs of $3.0 million. The primary driver of our income tax provision for the three months ended June 30, 2016 was an increase in our forecasted pretax income.

Comparison of Six Months EndedJune 30, 2016 and 2017

Revenue

	Six Months Ended   June 30,						Change
	2016			2017			$			%
	(in thousands except percentages)
Revenue:
Markets	$	73,135		$	82,828		$	9,693		13.3	%
Percentage of total revenue	43.7		%	41.7		%
Seller Services	$	90,602		$	112,763		$	22,161		24.5	%
Percentage of total revenue	54.2		%	56.8		%
Other	$	3,459		$	2,992		$	(467	)	(13.5	)%
Percentage of total revenue	2.1		%	1.5		%
Total revenue	$	167,196		$	198,583		$	31,387		18.8	%

GMS increased $168.2 million, or 12.9%, to $1.5 billion in the six months ended June 30, 2017 compared to the six months ended June 30, 2016. On a currency-neutral basis (excluding the direct impact of currency translation on GMS from goods that are not listed in U.S. dollars) GMS growth in the six months ended June 30, 2017 would have been 13.9%, or approximately one percentage point higher than reported growth. Supporting this growth in GMS, active sellers increased10.9% to 1.8 million and active buyers increased17.2% to 30.6 million at June 30, 2017 compared to June 30, 2016.

During the six months ended June 30, 2017, percent mobile visits increased as a percentage of total visits to approximately 66%up from approximately 63% for the six months ended June 30, 2016, and mobile GMS increased as a percentage of total GMS to approximately 51%, up from approximately 47% for the six months ended June 30, 2016. These increases were a result of increased mobile traffic and, to a lesser extent, continued improvements in our mobile offerings for Etsy buyers. Mobile web continued to be the largest contributor to both overall visits and mobile GMS. Mobile GMS growth during the six months ended June 30, 2017 was approximately 21%, with mobile web and mobile app GMS each continuing to grow faster than desktop GMS during the period.

For the six months ended June 30, 2017, international GMS increased as a percentage of total GMS to approximately 32%, from approximately 31% for the six months ended June 30, 2016. During the six months ended June 30, 2017, the growth in percent international GMS was largely driven by continued GMS growth between U.S. buyers and international sellers, and buyers and sellers outside of the U.S., both in the same country and cross-border. GMS growth between international buyers and sellers in the same country remained the fastest growing category of international GMS, up approximately 42% year-over-year during the six months ended June 30, 2017 compared to the six months ended June 30, 2016. International GMS was up approximately 19% in the six months ended June 30, 2017 compared to the six months ended June 30, 2016, growing faster than overall GMS.

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Revenue increased $31.4 million, or 18.8%, to $198.6 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016, of which 41.7% consisted of Markets revenue and 56.8% consisted of Seller Services revenue.

Markets revenue increased $9.7 million, or 13.3%, to $82.8 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016. This growth corresponded with a 12.9%increase in GMS to a total of $1.5 billion for the six months ended June 30, 2017. As our GMS increased, our Markets revenue increased, primarily due to growth in transaction fee revenue and, to a lesser extent, an increase in listing fee revenue.

Seller Services revenue increased $22.2 million, or 24.5%, to $112.8 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016.The growth in Seller Services revenue was primarily driven by an increase in revenue from Etsy Payments, largely driven by overall GMS growth trends and increased seller adoption. Seller Services revenue also benefited from the growth in revenue from Promoted Listings and, to a lesser extent, Pattern and Shipping Labels. The increase in Promoted Listings revenue was due to higher click volume and overall product enhancements. Pattern revenue was mostly incremental during the six months ended June 30, 2017 due to its launch in April 2016, with the first paid subscriptions beginning in May 2016. The increase in Shipping Label revenue reflects a combination of an increase in label volume and an increase in average margin per label.

Other revenue decreased $0.5 million, or 13.5%, to $3.0 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016. During the six months ended June 30, 2017, $1.3 million of revenue was recognized in connection with our partnership with Google for our Google Shopping offering for Etsy sellers. During the six months ended June 30, 2016, $1.7 million of revenue was recognized from accumulated unused gift card funds received from our third-party service provider, representing the three-year cumulative value of gift cards that the third-party service provider concluded were not likely to be redeemed. Remaining items in Other revenue remained relatively flat for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

Cost of Revenue

	Six Months Ended   June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Cost of revenue	$	57,009		$	70,383		$	13,374	23.5	%
Percentage of total revenue	34.1		%	35.4		%

Cost of revenue increased $13.4 million, or 23.5%, to $70.4 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016, primarily as a result of additional costs to support the increase in Etsy Payments revenue and, to a lesser extent, an increase in employee-related costs. Cost of revenue increased as a percentage of revenue largely due to the increase in employee-related costs and, to a lesser extent, additional costs to support the increased Etsy Payments revenue and higher professional services expenses. Restructuring and other exit costs of $0.7 million associated with the Actions were included in cost of revenue for the six months ended June 30, 2017, but did not have a significant impact on the period-over-period comparison.

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Operating Expenses

Marketing

	Six Months Ended   June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Marketing	$	33,052		$	50,975		$	17,923	54.2	%
Percentage of total revenue	19.8		%	25.7		%

Marketing expenses increased $17.9 million, or 54.2%, to $51.0 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016, primarily as a result of increased spend on digital marketing related to buyer acquisition and brand marketing campaigns, and an increase in employee-related expenses for our marketing team, including $2.3 million of restructuring and other exit costs associated with the Actions.

Product development

	Six Months Ended   June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Product development	$	24,070		$	39,870		$	15,800	65.6	%
Percentage of total revenue	14.4		%	20.1		%

Product development expenses increased $15.8 million, or 65.6%, to $39.9 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016, primarily as a result of an increase in employee-related expenses in our product and engineering teams, including additional expenses resulting from the acquisition of Blackbird in September 2016 and $3.1 million of restructuring and other exit costs associated with the Actions. We expect to incur additional product development expenses through the third quarter of 2017 as compared to 2016 as a result of expenses related to the acquisition of Blackbird in the third quarter of 2016.

General and administrative

	Six Months Ended   June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
General and administrative	$	41,613		$	51,174		$	9,561	23.0	%
Percentage of total revenue	24.9		%	25.8		%

General and administrative expenses increased $9.6 million, or 23.0%, to $51.2 million in the six months ended June 30, 2017 compared to the six months ended June 30, 2016, primarily driven by an increase in employee-related costs including $5.1 million of restructuring and other exit costs associated with the Actions.

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Other Income, net

	Six Months Ended   June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
Other income, net	$	304		$	14,578		$	14,274	4,695.4	%
Percentage of total revenue	0.2		%	7.3		%

Other income, net was $14.6 million in the six months ended June 30, 2017 mainly due to a foreign currency gain on our intercompany debt based on the significant change in exchange rates during the period, partially offset by interest expense associated with the build-to-suit lease accounting related to our corporate headquarters. Other income, net was $0.3 million in the six months ended June 30, 2016 mainly due to a foreign currency gain on our intercompany debt offset by interest expense on our corporate headquarters lease.

(Provision) Benefit for Income Taxes

	Six Months Ended   June 30,						Change
	2016			2017			$		%
	(in thousands except percentages)
(Provision) benefit for income taxes	$	(17,875	)	$	10,489		$	28,364	(158.7	)%
Percentage of total revenue	(10.7		)%	5.3		%

Our income tax benefit and provision for the six months ended June 30, 2017 and 2016 was $10.5 million and $17.9 million, respectively. Our tax rate is affected by recurring items and discrete items that may differ between and among periods.

The primary drivers of our income tax benefit for the six months ended June 30, 2017 were the exclusion of certain foreign jurisdictions that are subject to a valuation allowance from the forecasted annual effective tax rate, a discrete tax benefit for stock based compensation of $3.2 million, and a discrete tax benefit related to restructuring and exit costs of $3.0 million. The primary driver of our income tax provision for the six months ended June 30, 2016 was the tax expense related to our updated corporate structure of $9.3 million.

Non-GAAP Financial Measures

Adjusted EBITDA

In this Quarterly Report, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net (loss) income adjusted to exclude: interest and other non-operating expense, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain) and restructuring and other exit costs. Below is a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measure.

We have included Adjusted EBITDA because it is a key measure used by our management and Board of Directors to evaluate our operating performance and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans, determine incentive compensation and assess the health of our business. As our Adjusted EBITDA increases, we are able to invest more in our platform.

We believe that Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business as it removes the impact of certain non-cash items and certain variable charges.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

30

• Adjusted EBITDA does not consider the impact of stock-based compensation expense;

• Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;

• Adjusted EBITDA does not consider the impact of foreign exchange loss (gain);

• Adjusted EBITDA does not consider the impact of restructuring and other exit costs;

• Adjusted EBITDA does not reflect other non-operating expenses, net of other non-operating income, including net interest expense; and

• other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net (loss) income and our other GAAP results.

The following table reflects the reconciliation of net (loss) income to Adjusted EBITDA for each of the periods indicated:

	Three Months Ended June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
	(in thousands)
Net (loss) income	$	(7,311	)	$	11,669		$	(6,119	)	$	11,248
Excluding:
Interest and other non-operating expense, net (1)	1,333			2,153			1,430			4,305
Provision (benefit) for income taxes	4,261			(9,437		)	17,875			(10,489		)
Depreciation and amortization (1)	5,103			6,660			9,834			13,598
Stock-based compensation expense (2)	3,452			4,881			6,033			8,924
Stock-based compensation expense—acquisitions	816			1,613			1,472			2,455
Foreign exchange loss (gain)	6,386			(16,103		)	(1,734		)	(18,883		)
Restructuring and other exit costs (3)	—			11,260			—			11,260
Adjusted EBITDA	$	14,040		$	12,696		$	28,791		$	22,418

(1) Included in interest and depreciation expense amounts above, interest and depreciation expense related to our headquarters under build-to-suit accounting requirements, which commenced in May 2016, in the three and six months endedJune 30, 2016 and 2017 are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
	(in thousands)
Interest expense	$	1,287	$	2,223	$	1,287	$	4,368
Depreciation	546		819		546		1,638

(2) $1.7 million of restructuring-related stock-based compensation expense has been excluded from the three and six months endedJune 30, 2017 and is included in total restructuring and other exit costs below. See note (3).

(3) Total restructuring and other exit costs included in the consolidated statements of operations are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
	(in thousands)
Cost of revenue	$	—	$	694	$	—	$	694
Marketing	—		2,349		—		2,349
Product development	—		3,101		—		3,101
General and administrative	—		5,116		—		5,116
Total restructuring and other exit costs	$	—	$	11,260	$	—	$	11,260

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Statement of Operations Line Items Excluding Restructuring and Other Exit Costs

In this Quarterly Report, we discuss certain financial statement line items excluding restructuring and other exit costs, each a non-GAAP financial measure that represents the income statement line item adjusted to exclude restructuring and other exit costs incurred in the second quarter of 2017.

We have included these financial statement line items excluding restructuring and other exit costs because the Actions were unusual and do not necessarily reflect the ongoing trends in these financial statement line items. We believe that these non-GAAP measures can provide a useful measure for period-to-period comparisons of our business as it removes the impact of the Actions.

These non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• many of these costs were or will be settled in cash;

• there is no certainty that restructuring and other exit costs will not recur;

• other companies, including companies in our industry, may adjust for similar items in a different manner, or may not exclude such charges, which reduces their usefulness as comparative measures.

Because of these limitations, you should consider these non-GAAP measures alongside other financial performance measures, including the GAAP financial statement line items.

The following table reflects the reconciliation of each affected GAAP line item of the consolidated statement of operations to the non-GAAP line item excluding restructuring and other exit costs for each of the periods indicated:

	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	As Reported			Restructuring and Other Exit Costs		Excluding Restructuring and Other Exit Costs			As Reported			Restructuring and Other Exit Costs		Excluding Restructuring and Other Exit Costs
	(in thousands)
Revenue	$	101,692		$	—	$	101,692		$	198,583		$	—	$	198,583
Cost of revenue	35,724			694		35,030			70,383			694		69,689
Gross profit	65,968			694		66,662			128,200			694		128,894
Operating expenses:
Marketing	27,521			2,349		25,172			50,975			2,349		48,626
Product development	21,754			3,101		18,653			39,870			3,101		36,769
General and administrative	28,411			5,116		23,295			51,174			5,116		46,058
Total operating expenses	77,686			10,566		67,120			142,019			10,566		131,453
Loss from operations	$	(11,718	)	$	11,260	$	(458	)	$	(13,819	)	$	11,260	$	(2,559	)

Liquidity and Capital Resources

The following table shows our cash and cash equivalents, short-term investments, accounts receivable and net working capital:

	As of June 30, 2017
	(in thousands)
Cash and cash equivalents	$	226,885
Short-term investments	60,353
Accounts receivable, net	24,990
Net working capital	287,904

As of June 30, 2017, our cash and cash equivalents, a majority of which were held in cash deposits and money market funds, were held for future capital investments and working capital purposes.

We invest our excess working capital funds into short-term instruments, including fixed-income funds and AAA-rated U.S. Government and agency securities aligned with our investment strategy. These investments are intended to allow us to preserve

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our principal, maintain the ability to meet our liquidity needs, deliver positive yields and continue to provide us with direct fiduciary control. In accordance with our investment policy, all investments have maturities no longer than 24 months, with the average maturity of these investments maintained at 12 months or less.

Sources of Liquidity

We believe that our existing cash and cash equivalents and short-term investments, together with cash generated from operations and available borrowing capacity under our Credit Agreement (described below under “Credit Facility”), will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in our “Risk Factors” in this report.

The majority of our cash and cash equivalents and short-term investments are held in the U.S. We fund our international operations, to the extent needed, from our funds held in the U.S. on an as-needed basis.

Credit Facility

In May 2014, we entered into a $35.0 million senior secured revolving credit facility pursuant to a Revolving Credit and Guaranty Agreement with several lenders, (“Credit Agreement”). In March 2015, we amended the Credit Agreement to increase the credit facility to $50.0 million. In December 2015, we amended the Credit Agreement to clarify certain provisions relating to permitted investments and to make other immaterial updates. As amended, the Credit Agreement will mature in May 2019. The amended Credit Agreement includes a letter of credit sublimit of $10.0 million and a swingline loan sublimit of $15.0 million. A description of the terms of the Credit Agreement is included in “Note 7—Debt” in our Annual Report on Form 10-K.

As of August 7, 2017, no amounts have been drawn under the credit facility.

Historical Cash Flows

	Six Months Ended   June 30,
	2016			2017
	(in thousands)
Cash provided by (used in):
Operating activities	$	19,581		$	15,448
Investing activities	(120,306		)	29,631
Financing activities	(745		)	(618		)

Net Cash Provided by Operating Activities

Our cash flows from operations are largely dependent on the amount of revenue generated on our platform. Net cash provided by operating activities in each period presented has been influenced by changes in accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities.

Net cash provided by operating activities was $15.4 million in the six months ended June 30, 2017, as a result of the net income of $11.2 million, depreciation and amortization expense, stock-based compensation expense, foreign exchange gain and other non-cash charges of $13.5 million and changes in our operating assets and liabilities that used$9.3 million in cash.

Net cash provided by operating activities was $19.6 million in the six months ended June 30, 2016, as a result of the net loss of $6.1 million, depreciation and amortization expense, stock-based compensation expense, amortization of deferred tax charge and other non-cash charges of $27.1 million and changes in our operating assets and liabilities that used$1.4 million in cash.

The decrease in cash flows from operating activities is primarily a result of $2.4 million of restructuring and other exit costs paid out in the second quarter of 2017.

Net Cash (Used in) Provided by Investing Activities

Our primary investing activities consist of sales, maturities and purchases of short-term marketable securities and capital expenditures, including purchases of property and equipment and investments in website development and internal-use software to support our overall business growth. Investments in website development and internal-use software and purchases

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of property and equipment may vary from period to period due to timing of the expansion of our operations and the timing of related payments.

Net cash provided by investing activities was $29.6 million in the six months ended June 30, 2017. This was primarily attributable to net sales of marketable securities of $39.8 million, mainly due to increased investments in instruments with shorter-term maturities, classified as cash equivalents, in the second quarter of 2017 as we continued to monitor interest rate changes. This increase was offset by $10.2 million in capital expenditures, including $6.6 million for website development and internal-use software as we continued to invest in projects adding new features and functionality to the Etsy platform, and $3.6 million for purchases of property and equipment.

Net cash used in investing activities was $120.3 million in the six months ended June 30, 2016. This was primarily attributable to net purchases of marketable securities of $88.4 million, as we made a significant investment of our excess working capital into short-term marketable securities in the first quarter of 2016 with the implementation of our investment strategy, and $31.9 million in capital expenditures, including $26.3 million for purchases of property and equipment, largely related to the build-out of our Brooklyn headquarters, and $5.6 million for website development and internal-use software.

Net Cash Used in Financing Activities

Our primary financing activities include financing of capitalized leases for computer equipment, proceeds from exercise of stock options and shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units.

Net cash used in financing activities was $0.6 million in the six months ended June 30, 2017. This was primarily attributable to payments on capital lease obligations of $3.7 million, stock repurchases of vested RSUs withheld to satisfy tax obligations of $2.0 million and payments on facility financing obligations of $1.2 million, related to the built-to-suit accounting treatment of our Brooklyn headquarters lease, partially offset by proceeds from the exercise of stock options of $6.3 million.

Net cash used in financing activities was $0.7 million in the six months ended June 30, 2016. This was primarily attributable to payments on capital lease obligations of $2.8 million, a deferred payment related to ALM of $0.6 million and stock repurchase of $0.2 million, offset by proceeds from the exercise of stock options of $2.9 million.

Off Balance Sheet Arrangements

As of June 30, 2017, we did not have any off balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Contractual Obligations

In January 2017, we entered into a three-year contractual commitment to integrate and utilize cross-channel marketing software with an aggregate future payment of $6.3 million. As of June 30, 2017, there were no other material changes in commitments under contractual obligations, compared to the contractual obligations disclosed in the Annual Report.

Unrecognized tax benefits totaled $23.6 million and $23.9 million at December 31, 2016 and June 30, 2017, respectively. While the ultimate resolution and timing of these unrecognized tax positions remain uncertain, we do not expect this balance to significantly increase or decrease over the next 12 months.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, income taxes, website development costs and internal-use software, purchase price allocations for business combinations, valuation of goodwill and intangible assets, leases, stock-based compensation and restructuring and other exit costs have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

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For information regarding changes to our significant accounting policies, please refer to “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements. For a summary of our significant accounting policies, see our Annual Report on Form 10-K.

Recent Accounting Pronouncements

For information regarding our recently issued accounting pronouncements and recently adopted accounting pronouncements, please refer to “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Management believes there have been no material changes to our quantitative and qualitative disclosures about market risks during the six months ended June 30, 2017, compared to those discussed in the Annual Report, except as described below.

Currency Risk

Most of our sales are denominated in U.S. dollars, and therefore, our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, and may be subject to fluctuations due to changes in currency exchange rates, particularly changes in the Pound Sterling and Euro. Fluctuations in currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. On January 1, 2015, we implemented a revised corporate structure to more closely align our structure with our global operations and future expansion plans outside of the United States, which resulted in a U.S. dollar-denominated intercompany debt on a Euro-denominated ledger that may be subject to continued currency exchange rate risk. A 10% increase or decrease in current exchange rates could result in an increase or decrease to currency exchange (loss) gain of $49.1 million.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2017. “Disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2017 at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) of the Exchange Act during the second quarter of 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

See “Note 8—Contingencies—Legal Proceedings” in the Notes to Consolidated Financial Statements.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, our consolidated financial statements and related notes, and the other information in this Quarterly Report on Form 10-Q. If any of these risks actually occur, our business, financial condition, results of operations and prospects could be adversely affected. As a result, the price of our common stock could decline and you could lose part or all of your investment.

Risks Related to Our Business and Industry

We have a history of operating losses and we may not maintain profitability in the future.

We generatednet income of $11.2 million for the six months ended June 30, 2017 and incurred net losses of $29.9 million, $54.1 million, $15.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. As of June 30, 2017, we had an accumulated deficit of $156.5 million. Our net income in the six months ended June 30, 2017 was principally due to a foreign currency gain on our intercompany debt resulting from the significant change in exchange rates during the period. We may not have the benefit of such gains in future periods. We may not achieve or maintain profitability in the future. Our operating expenses may increase if we increase our marketing efforts, expand our operations, hire additional employees and continue to invest in the development of our platform, including our Seller Services and tools and technological enhancements. These efforts may be more costly than we expect and our revenue may not increase sufficiently to offset these additional expenses. In addition, our revenue may decline for a number of reasons, including those described in these Risk Factors.

Further, our revenue growth rate may continue to decelerate in the future for a number of reasons, including the gradual deceleration of our GMS growth rate. For further information about the rate of revenue and GMS growth, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenue.” You should not rely on growth rates of prior quarterly or annual periods as an indication of our future performance.

Our quarterly operating results may fluctuate, which could cause our stock price to decline.

Our quarterly operating results, as well as our key metrics, may fluctuate for a variety of reasons, many of which are beyond our control, including:

• fluctuations in revenue generated from Etsy sellers on our platform, including as a result of the seasonality of market transactions, and Etsy sellers’ use of Seller Services;

• the amount and timing of our operating expenses and the success of any cost-reduction activities;

• our success in attracting and retaining Etsy sellers and Etsy buyers;

• our success in executing on our strategy and the impact of any changes in our strategy;

• the timing and success of new services and features we introduce;

• the impact of our investment in marketing;

• economic and market conditions, such as currency fluctuations and global events;

• disruptions or defects in our markets, such as privacy or data security breaches or other incidents that impact the reliability of our platform;

• the impact of competitive developments and our response to those developments;

• our ability to manage our existing business and future growth;

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• any failure or delay in transitioning our new management team and any future management team changes;

• the impact of the Actions that we implemented during the second quarter of 2017; and

• the impact of our revised global corporate structure that was implemented on January 1, 2015.

Fluctuations in our quarterly operating results and key metrics may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. Fluctuations in our results could also cause a number of other problems. For example, analysts or investors might change their models for valuing our common stock, we could experience short-term liquidity issues, our ability to retain or attract key personnel may diminish and other unanticipated issues may arise.

In addition, we believe that our quarterly operating results and key metrics may vary in the future and that period-to-period comparisons of our operating results may not be meaningful. For example, our overall historical growth rate may have overshadowed the effect of seasonal variations on our historical operating results. These seasonal effects may become more pronounced over time, which could also cause our operating results and key metrics to fluctuate. You should not rely on the results of one quarter as an indication of future performance.

Our growth depends on our ability to attract and retain an active and engaged community of Etsy sellers and Etsy buyers.

Our financial performance has been and will continue to be significantly determined by our success in attracting and retaining active sellers and active buyers. For example, our revenue is driven by the number of active sellers, seller engagement, the number of active buyers, buyer engagement and our ability to maintain trusted markets. We must continue to encourage Etsy sellers to list items for sale and use our Seller Services. We must also encourage Etsy buyers to return and purchase items in our markets more frequently, and we are focused on winning the purchase occasions that center around celebrations, gifting and style.

We want to create the best shopping experience for Etsy buyers and are focused on making enhancements to drive more shopping on Etsy.com from new and existing buyers. We believe that many new Etsy sellers and Etsy buyers find Etsy.com by word of mouth and other non-paid referrals from existing Etsy sellers and Etsy buyers. If existing Etsy sellers are dissatisfied with their experience on our platform, they may stop listing items in our markets and using our Seller Services and may stop referring others to us. Likewise, if existing Etsy buyers do not find our platform appealing, whether because of a negative experience, lack of buyer-friendly features, declining interest in the nature of the goods offered by Etsy sellers or other factors, they may make fewer purchases and they may stop referring others to us. Under these circumstances, we may have difficulty attracting new Etsy sellers and Etsy buyers without incurring additional marketing expense.

Even if we are able to attract new Etsy sellers and Etsy buyers to replace the ones that we lose, they may not maintain the same level of activity, and the revenue generated from new Etsy sellers and Etsy buyers may not be as high as the revenue generated from the ones who leave our markets. If we are unable to retain existing Etsy sellers and Etsy buyers and attract new Etsy sellers and Etsy buyers who contribute to an active community, our growth prospects would be harmed and our business could be adversely affected.

Additionally, the demand for the goods listed in our markets is dependent on consumer preferences which can change quickly and may differ across generations and cultures. If demand for the goods that Etsy sellers offer declines, we may not be able to attract and retain Etsy buyers and our business would be harmed. Trends in socially-conscious consumerism and buying locally could also shift or slow which would make it more difficult to attract new Etsy sellers and Etsy buyers. Our growth prospects would also be hampered if the shift to online and mobile commerce does not continue.

The trustworthiness of our markets and the connections within our community are important to our success. If we are unable to maintain them, our ability to attract and retain Etsy sellers and Etsy buyers could suffer.

We have built trusted markets that embody our values-based culture and continue to focus on ensuring that we deliver trust and reliability throughout the buyer experience on Etsy.com. Our reputation depends upon our Etsy sellers, their unique offerings and their adherence to our policies. We establish trust in our markets in a variety of ways. For example, our policies are designed to encourage transparency and clearly outline the rights and responsibilities of Etsy sellers, Etsy buyers, Etsy Wholesale partners and production partners participating on our platform. We strive to give the Etsy buyer comfort that she is purchasing unique goods from small businesses that adhere to certain principles. Our Integrity team uses a combination of machine learning, automated systems and community-generated flags to review items and shops that may violate our policies. We also have sophisticated tools to detect fraud and we strive to prohibit bad actors from using our platform.

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Our transparency with our community helps to support the trustworthiness of our markets. For example, we publish an annual Progress Report that details our progress toward our ideals and shares our goals for the years to come and we also release an annual Transparency Report, which, among other things, describes the steps we take when items that do not meet our guidelines are listed on our platform, or when listed items are alleged to infringe third party rights.

We also establish trust by emphasizing the person behind every transaction. We deepen connections among members of our community through our communication tools, seller stories on our website and our in-person events, which highlight personal relationships as a key part of the Etsy experience. For example, Etsy sellers are encouraged to share their stories and use tools, such as shop videos, to reach Etsy buyers on our platform and on social media. We also recognize that sometimes transactions don’t go as planned. When that happens, our Case System provides a way for Etsy sellers and Etsy buyers to communicate with each other to resolve disputes.

We also encourage our employees to build meaningful connections with other members of our community. For example, we ask employees to perform support rotations to help foster connections with Etsy sellers and Etsy buyers and to help us better understand their needs.

The trustworthiness of our markets and the connections among the members of our community are the cornerstones of our business. Many things could undermine these cornerstones, such as:

• complaints or negative publicity about us, our platform or our policies and guidelines, even if factually incorrect or based on isolated incidents;

• an inability to gain the trust of prospective buyers;

• disruptions or defects in our markets, such as the increased pace of product experimentation, privacy or data security breaches, site outages, or other incidents that impact the reliability of our platform;

• lack of awareness of our policies;

• changes to our policies that members of our community perceive as inconsistent with our values or that are not clearly articulated;

• a failure to enforce our policies effectively, fairly and transparently, including, for example, by allowing the widespread listing of prohibited items in our markets;

• a failure to respond to feedback from our community; or

• a failure to operate our business in a way that is consistent with our values.

If we are unable to maintain trustworthy markets and encourage connections among members of our community, then our ability to attract and retain Etsy sellers and Etsy buyers could be impaired and our reputation and business could be adversely affected.

If we are not able to enhance our current offerings and develop new offerings to respond to the changing needs of Etsy sellers and Etsy buyers, our growth prospects may be harmed.

Our industry is characterized by rapidly changing technology, new service and product introductions and changing customer demands. In particular, two of our key initiatives include enhancing our search and discovery functionality and providing best-in-class seller tools and services. We enhance our Seller Services and the buying experience on a regular basis. We also regularly launch new products, features and services and, since May 2017, have significantly increased the pace of product experiments. For example, in 2016, we launched a new Seller Service, Pattern, which enables Etsy sellers to create their own custom website. We have also introduced a number of tools, such as Google Shopping, which allows sellers to reach audiences off of Etsy by advertising their listings in Google search results. In June 2017, we added a 'recently viewed reel' at the bottom of the search results page that lets buyers more easily relocate items they have browsed and launched updates to Pattern that allow Etsy sellers to include non-Etsy merchandise on their Etsy-powered custom websites. Our effectiveness in enhancing our current offerings and introducing new offerings may impact our revenue growth and our operating results.

Etsy sellers and Etsy buyers may not be satisfied with our enhancements or new offerings or may perceive that these offerings do not respond to their needs. Additionally, as we experiment with new offerings or changes to our platform, Etsy sellers and Etsy buyers may find these changes to be unfamiliar and disruptive and may perceive them negatively. In addition, developing new services and features is complex, and the timetable for commercial release is difficult to predict and may vary from our

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historical experience. As a result, the introduction of new offerings may occur after anticipated release dates or they may be introduced as pilot programs, which may not be continued for various reasons. In addition, new offerings may not be successful due to defects or errors, negative publicity or our failure to market them effectively.

New offerings may not drive increases in revenue, may require substantial investment and planning and may bring us more directly into competition with companies that are better established or have greater resources than we do.

If we do not continue to cost-effectively develop new offerings that satisfy Etsy sellers and Etsy buyers, then our competitive position and growth prospects may be harmed. In addition, new offerings may have lower margins than existing offerings and our revenue from the new offerings may not be enough to offset the cost of developing them.

Our marketing efforts to help grow our business may not be effective.

Maintaining and promoting awareness of our markets and broader platform is important to our ability to attract and retain Etsy sellers and Etsy buyers. We believe that much of the historical growth in the number of active sellers and active buyers has originated from word-of-mouth referrals and other organic means, as our historical marketing efforts and expenditures have been relatively limited, although increasing in recent years. One of our key initiatives is to build outstanding marketing capabilities to amplify the voice and relevance of our sellers, and to get buyers to purchase more often. Our marketing initiatives may become increasingly expensive as we continue to invest in marketing efforts and as competition increases, and generating a meaningful return on those initiatives may be difficult.

The marketing efforts we implement may not succeed for a variety of reasons, including our inability to execute and implement our plans. External factors beyond our control may also impact the success of our marketing initiatives. Our marketing efforts currently include search engine optimization, search engine marketing, affiliate marketing and display advertising, as well as, social media, mobile push notifications and email. We obtain a significant number of visits via search engines such as Google, Bing and Yahoo!. Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search and may make other changes to the way results are displayed, which can negatively affect the placement of links to our markets and, therefore, reduce the number of visits to our markets. The growing use of online ad-blocking software, including on mobile devices, may also impact the success of our marketing efforts because we may reach a smaller audience and fail to bring more Etsy buyers to our platform. We also obtain a significant number of visits through email. If we are unable to successfully deliver emails to Etsy sellers and Etsy buyers, or if Etsy sellers and Etsy buyers do not open our emails, whether by choice, because those emails are marked as low priority or spam, or for other reasons, our business could be adversely affected. We are in the midst of a migration to a new CRM system that we believe will enable more personalized, dynamic and timely email communications and push notifications. If the CRM migration fails to achieve the expected results our business could be adversely affected. Social networking websites, such as Facebook and Pinterest, are another important source of visits to our markets. As online commerce and social networking evolve, we must continue to evolve our marketing tactics accordingly.

Our ability to recruit and retain employees is important to our success.

We strive to attract, retain and motivate employees, from our office administrators to our management team, who share our dedication to our community and our mission. We cannot guarantee we will continue to attract and retain the employees we need to maintain our competitive position.

Some of the challenges we face in attracting and retaining employees include:

• negative perceptions based on recent headcount reductions or changes in senior management;

• perceived uncertainties as to our future direction in relation to the actions of activist stockholders; 

• preserving our company culture;

• continuing to attract and retain qualified employees who share our values;

• promoting existing employees into leadership positions to help sustain and grow our culture;

• hiring employees in multiple locations globally;

• responding to competitive pressures and changing business conditions in ways that do not divert us from our values; and

• integrating new personnel and businesses from acquisitions.

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Our ability to attract, retain and motivate employees, including our management team, is important to our success. In general, our employees, including our management team, work for us on an at-will basis. The unexpected loss of or failure to retain one or more of our key employees, such as our Chief Executive Officer, Chief Financial Officer or Chief Technology Officer, or unsuccessful succession planning in the future, could adversely affect our business. Other companies, including our competitors, may be successful in recruiting and hiring our employees, and it may be difficult for us to find suitable replacements on a timely basis or on competitive terms.

In the second quarter of 2017, we effected headcount reductions globally and have also experienced increased voluntary attrition. These changes, together with recent senior management changes, could adversely impact employee morale, lead to additional voluntary attrition and increased difficulty in recruiting qualified employees. If we are unable to retain and attract qualified employees, particularly in critical areas of operations such as engineering, then our business and operations could be harmed.

Filling engineering, product management and other technical positions in the New York City area is particularly challenging, especially as we transition our new Chief Technology Officer and in light of our distinctive technology philosophy and engineering culture. Qualified individuals are limited and in high demand, and we may incur significant costs to attract, develop and motivate them. Even if we were to offer higher compensation and other benefits, people with suitable technical skills may choose not to join us or to continue to work for us. In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. If the perceived value of our stock awards declines, it may adversely affect our ability to recruit and retain highly skilled employees.

We have experienced a number of changes to our senior management team. If we are unable to effectively transition and integrate our new executive officers and implement our business strategy, our business and financial results could be adversely impacted.

Our Chief Executive Officer and Chief Financial Officer joined Etsy in May 2017 and, in July 2017, we hired a new Chief Technology Officer. In light of these and other changes, several members of our senior management team are new to Etsy and continuing to learn about our business. The execution of our business strategy and our financial performance will continue to depend in significant part on our senior management team and key team leaders. If there is any failure or delay in transitioning or integrating our new management team or if they are unable to execute our strategy and four key initiatives, then our business and financial results could be adversely impacted.

We may not achieve the intended results of our recently announced plansto increase efficiency, streamline our cost structure and improve focus on key strategic growth opportunities.

During the second quarter of 2017, we commenced the Actions to increase efficiency, streamline our cost structure and improve focus on key strategic growth opportunities, through a combination of headcount reductions and reductions in internal program expenses and other actions. We expect the Actions to result in restructuring and other exit costs of $12.3 million to $16.6 million and $35 million in annualized cost savings, however, these estimated costs and benefits may vary materially based on various factors, including the timing of our execution of the Actions, potential employment or other claims and litigation, and changes in management’s assumptions and projections. Further, the Actions may make it more difficult for us to execute on our strategy and four key initiatives in a timely manner or at all. As a result of these events and circumstances, delays and unexpected costs may occur, which could result in higher costs than we anticipate or our not realizing all, or any, of the anticipated benefits of these Actions.

Our business could be negatively affected as a result of actions of activist stockholders.

The actions of activist stockholders could adversely affect our business. Specifically, responding to common actions of an activist stockholder, such as requests for special meetings, potential nominations of candidates for election to our Board of Directors, requests to pursue a strategic combination or other transaction or other special requests, could disrupt our operations, be costly and time-consuming or divert the attention of our management and employees. In addition, perceived uncertainties as to our future direction in relation to the actions of an activist stockholder may result in the loss of potential business opportunities or the perception that we are unstable as a company, which may make it more difficult to attract and retain qualified employees. Actions of an activist stockholder may also cause fluctuations in our stock price based on speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

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If the mobile solutions available to Etsy sellers and Etsy buyers are not effective, the use of our platform could decline.

Purchases made on mobile devices by consumers, including Etsy buyers, have increased significantly in recent years. The smaller screen size and reduced functionality associated with some mobile devices may make the use of our platform more difficult or less appealing. Etsy sellers are also increasingly using mobile devices to operate their businesses on our platform. If we are not able to deliver a rewarding experience on mobile devices, Etsy sellers’ ability to manage and scale their businesses may be harmed and, consequently, our business may suffer. Further, although we strive to provide engaging mobile experiences for both Etsy sellers and Etsy buyers who visit our mobile website using a browser on their mobile device, we depend on Etsy sellers and Etsy buyers using our mobile apps for the optimal mobile experience. Visits to our markets through a mobile website may not convert into purchases as often as visits made through our mobile app or through desktop, which could result in less revenue for us. Additionally, conversion rates may slow or stall, which could also have a negative impact on revenue.

As new mobile devices and mobile platforms are released, we may encounter problems in developing or supporting apps for them. In addition, supporting new devices and mobile device operating systems may require substantial time and resources.

The success of our mobile apps could also be harmed by factors outside our control, such as:

• actions taken by providers of mobile operating systems or mobile app download stores;

• unfavorable treatment received by our mobile apps, especially as compared to competing apps, such as the placement of our mobile apps in a mobile app download store;

• increased costs to distribute or use our mobile apps; or

• changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps or that give preferential treatment to competitive products.

If Etsy sellers and Etsy buyers encounter difficulty accessing or using our platform on their mobile devices, or if they choose not to use our platform on their mobile devices, our growth prospects and our business may be adversely affected.

Expanding our community outside of the United States is part of our strategy and the growth of our business could be harmed if our expansion efforts do not succeed.

Our vision is both global and local and we are focused on growing our business outside of the United States, particularly in Canada, United Kingdom, France, Germany and Australia.Although we have a significant number of Etsy sellers and Etsy buyers outside of the United States, we have limited experience developing local markets outside the United States and may not execute our strategy successfully. Operating outside of the United States also requires significant management attention, including managing and staffing operations over a broad geographic area with varying cultural norms and customs, and adapting our platform to local markets.

Despite our execution efforts, the goods that Etsy sellers list on Etsy.com may not appeal to non-U.S. consumers in the same way as they do to consumers in the United States. In addition, non-U.S. buyers are not as familiar with the Etsy brand as buyers in the United States and may not perceive us as relevant or trustworthy. Also, visits to Etsy.com from Etsy buyers outside the United States may not convert into sales as often as visits from within the United States, including due to the impact of the strong U.S. dollar relative to other currencies and the fact that a majority of the goods listed on our platform are denominated in U.S. dollars. Our success outside the United States will be linked to our ability to attract local Etsy sellers and Etsy buyers to our markets. If we are not able to expand outside of the United States successfully, our growth prospects could be harmed. An inability to develop Etsy's community globally or to otherwise grow our business outside of the United States on a cost-effective basis could adversely affect our GMS, revenue and operating results.

Competition is also likely to intensify outside of the United States, both where we operate now and where we plan to expand our operations. Local companies based outside the United States may have a substantial competitive advantage because of their greater understanding of, and focus on, their local markets. Some of our competitors may also be able to develop and grow internationally more quickly than we will.

Continued expansion outside of the United States may also require significant financial investment. These investments include marketing, enhancing our machine translation and machine learning to help sellers and buyers connect even if they do not speak the same language, forming relationships with third-party service providers, supporting operations in multiple countries and potentially acquiring companies based outside the United States and integrating those companies with our operations. Our investment outside of the United States may be more costly than we expect and our revenue may not increase sufficiently to offset these additional expenses.

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Further expansion outside of the United States will subject us to risks associated with operations abroad.

Doing business outside of the United States subjects us to increased risks and burdens such as:

• complying with different (and sometimes conflicting) laws and regulatory standards (particularly including those related to the use and disclosure of personal information, online payments, intellectual property, consumer protection, online platform liability and taxation of goods and services);

• fluctuations of foreign exchange rates;

• potentially heightened risk of fraudulent transactions;

• limitations on the repatriation of funds;

• exposure to liabilities under anti-corruption, anti-money laundering and export control laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act of 2010, trade controls and sanctions administered by the U.S. Office of Foreign Assets Control, and similar laws and regulations in other jurisdictions;

• varying levels of internet, e-commerce and mobile technology adoption and infrastructure;

• our ability to enforce contracts and intellectual property rights in jurisdictions outside the United States; and

• barriers to international trade, such as tariffs, customs or other taxes.

Etsy sellers face similar risks in conducting their businesses across borders. Even if we are successful in managing the risks of conducting our business across borders, if Etsy sellers are not, our business could be adversely affected.

If we invest substantial time and resources to expand our operations outside of the United States and cannot manage these risks effectively, the costs of doing business in those markets may be prohibitive or our expenses may increase disproportionately to the revenue generated in those markets.

Our payments system depends on third-party providers and is subject to evolving laws and regulations.

Etsy buyers primarily pay for purchases using Etsy Payments or PayPal. In the United States and other countries where Etsy Payments is available, Etsy buyers can use Etsy Payments on our platform to pay with credit cards, debit cards, bank transfers, PayPal and, in certain markets, Apple Pay, Android Pay and Etsy Gift Cards, rather than being directed to a third-party payment platform. A significant portion of our GMS is processed through Etsy Payments, and a significant portion of our revenue is derived from Etsy Payments.

We have engaged third-party service providers to perform underlying compliance, card processing and payment disbursing, currency exchange, identity verification and fraud analysis services. If these service providers do not perform adequately or if our relationships with these service providers were to terminate, Etsy sellers’ ability to receive orders or payment could be adversely affected and our business would be harmed. For example, third-party service providers may experience service outages from time to time that impact Etsy. In July 2016, a third-party payment processor experienced a technical issue that caused payment processing delays and complications for purchases through Etsy Payments, which required Etsy to develop a short-term manual solution. If a third-party payment processor has significant outages in the future and we do not have alternative payment processors in place or are unable to provide our own solution, our business could be harmed. In addition, if our third-party providers increase the fees they charge us, our operating expenses could increase. If we respond by increasing the fees we charge to Etsy sellers, some Etsy sellers may stop using Etsy Payments, stop listing new items for sale or even close their accounts altogether.

The laws and regulations related to payments are complex, evolving and subject to change and vary across different jurisdictions in the United States and globally. As a result, we are required to spend significant time and effort to comply with those laws and regulations. Any failure or claim of our failure to comply, or any failure by our third-party service providers to comply, could cost us substantial resources, could result in liabilities or could force us to stop offering Etsy Payments. Additionally, changes in payment regulation may occur that could render our payments system less profitable. For example, any significant change in credit or debit card interchange rates in the United States or other markets, including as a result of changes in interchange fee limitations, may negatively impact Etsy Payments.

As we expand the availability of Etsy Payments or offer new payment methods to Etsy sellers and Etsy buyers in the future, we may become subject to additional regulations and compliance requirements.

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Further, through our agreements with our third-party payment processors, we are indirectly subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard, which are subject to change. Failure to comply with these rules and certification requirements could impact our ability to meet our contractual obligations with our third-party payment processors and could result in potential fines. We are also subject to rules governing electronic funds transfers. Any change in these rules and requirements could make it difficult or impossible for us to comply. In addition, similar to a potential increase in costs from third-party providers described above, any increased costs associated with compliance with payment card association rules could lead to increased fees for Etsy or Etsy sellers, which may negatively impact Etsy Payments usage and our markets.

Adherence to our values and our focus on our mission and long-term sustainability may negatively influence our short- or medium-term financial performance.

Our values are integral to everything we do. Accordingly, we intend to focus on the long-term sustainability of our business and work toward our mission. We may take actions that we believe will benefit our business and, therefore, our stockholders over a longer period of time, even if those actions do not maximize short- or medium-term financial results. However, these longer-term benefits may not materialize within the time frame we expect or at all. For example:

• we may choose to prohibit the sale of items in our markets that are inconsistent with our policies even though we could benefit financially from the sale of those items; or

• we may choose to revise our policies in ways that we believe will be beneficial to our community in the long term even though the changes may be perceived unfavorably.

We are a Certified B Corporation. The term “Certified B Corporation” does not refer to a particular form of legal entity, but instead refers to companies that are certified by B Lab, an independent nonprofit organization, as meeting rigorous standards of social and environmental performance, accountability and transparency. Our reputation could be harmed if we lose our status as a Certified B Corporation, whether by our choice or by our failure to meet B Lab’s certification requirements, if that change in status were to create a perception that we are more focused on financial performance and are no longer as committed to the values shared by Certified B Corporations. For example, since we do not intend to reorganize as a public benefit corporation under Delaware law, our future status as a Certified B Corporation may be affected. Likewise, our reputation could be harmed if our publicly reported B Corporation score declines and that were to create a perception that we have slipped in our satisfaction of the Certified B Corporation standards. Similarly, our reputation could be harmed if we take actions that are perceived to be misaligned with our values.

Our business could be adversely affected by economic downturns, natural disasters, public health crises, political crises or other unexpected events.

Macroeconomic conditions may adversely affect our business. If general economic conditions deteriorate in the United States or other markets where we operate, consumer discretionary spending may decline and demand for the goods and services available in our platform may be reduced. This would cause sales in our markets and Seller Services revenue to decline and adversely impact our business. Conversely, if recent trends supporting self-employment and the desire for supplemental income were to reverse, the number of Etsy sellers offering their goods in our markets could decline and the number of goods listed in our markets could decline. In addition, currency exchange rates may impact our business. For example, currency exchange rates may dampen demand from buyers outside the United States for goods denominated in U.S. dollars, which could impact GMS. For the six months endedJune 30, 2017, approximately 86% of our GMS was denominated in U.S. dollars.

Natural disasters and other adverse weather and climate conditions, public health crises, political crises, such as terrorist attacks, war and other political instability or other unexpected events, could disrupt our operations, internet or mobile networks, or the operations of one or more of our third-party service providers. For example, when Hurricane Sandy struck New York in October 2012, our headquarters in Brooklyn was closed for five days, and we experienced a heavy volume of support requests from Etsy sellers and Etsy buyers, which required us to devote additional resources to handle those requests. Events of this type could impact Etsy sellers’ ability to continue producing goods for sale in our markets. These events may also impact consumer perceptions of well-being and security, which may adversely impact consumer discretionary spending. If any of these events occurs, our business could be adversely affected.

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If sensitive information about members of our community is misused or disclosed, or if we or our third-party providers are subject to cyber attacks, members of our community may curtail use of our platform, we may be exposed to liability and our reputation could suffer.

Like all online services, our platform is vulnerable to power outages, telecommunications failures and catastrophic events, as well as computer viruses, break-ins, phishing attacks, denial-of-service attacks and other cyber attacks. Any of these incidents could lead to interruptions or shutdowns of our platform, loss of data or unauthorized disclosure of our members' personal or financial information. Cyber attacks could also result in the theft of our intellectual property. As we gain greater public visibility, we may face a higher risk of being targeted by cyber attacks. Although we rely on a variety of security measures, including encryption and authentication technology licensed from third parties, we cannot assure you that such measures will provide absolute security, particularly given the increasingly sophisticated tools and methods used by hackers and cyber terrorists. Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or employees of our third-party service providers.

Additionally, some of our third party service providers, such as identity verification and payment processing providers, regularly have access to some confidential and sensitive member data. If these third parties fail to adhere to adequate security practices, or experience a breach of their networks, our members' data may be improperly accessed, used or disclosed.

Cyber attacks aimed at disrupting our and our third-party service providers’ services have occurred regularly in the past, and we expect they will continue to occur in the future. If we or our third-party service providers experience security breaches that result in marketplace performance or availability problems or the loss or unauthorized disclosure of sensitive information, or if we fail to respond appropriately to any security breaches that we may experience, people may become unwilling to provide us the information necessary to set up an account with us. Existing Etsy sellers and Etsy buyers may stop listing new items for sale, decrease their purchases or close their accounts altogether. We could also face potential liability, regulatory investigation, costly remediation efforts and litigation, which may not be adequately covered by insurance. Any of these results could harm our growth prospects, our business and our reputation for maintaining trusted markets.

We face intense competition and may not be able to compete effectively.

Our industry is highly competitive and we expect competition to increase in the future. To be successful, we need to attract and retain both Etsy sellers and Etsy buyers. As a result, we face competition from a wide range of online and offline competitors.

We compete for Etsy sellers with both retailers and companies that sell software and services to small businesses. In addition to listing her goods for sale on Etsy, an Etsy seller can list her goods with other online retailers, such as Amazon, eBay or Alibaba, or sell her goods through local consignment and vintage stores and other venues or marketplaces, including through commerce channels on social networks like Facebook and Instagram. She may also sell wholesale directly to traditional retailers, including large national retailers, who discover her goods in our markets or otherwise. We also compete with companies that sell software and services to small businesses, enabling an Etsy seller to sell from her own website or otherwise run her business independently of our platform, such as Square, Intuit and Shopify.

We compete to attract, engage and retain Etsy sellers based on many factors, including:

• our brand awareness;

• the extent to which our Seller Services can ease the administrative tasks that an Etsy seller might encounter in running her business, wherever she chooses to pursue commerce;

• the global scale of our markets and the breadth of our online presence;

• the number and engagement of Etsy buyers;

• our seller education resources and tools;

• our policies and fees;

• the ability to scale her business through Pattern, Etsy Wholesale or with a production partner;

• our mobile apps;

• the strength of our community; and

• our values.

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In addition, we compete with retailers for the attention of the Etsy buyer. An Etsy buyer has the choice of shopping with any online or offline retailer, whether large marketplaces, such as Amazon, eBay or Alibaba, or national retail chains, such as West Elm or Target, or local consignment and vintage stores or other venues or marketplaces. Many of these competitors offer low-cost or free shipping, fast shipping times, favorable return policies and other features that may be difficult or impossible for Etsy sellers to match.

We compete to attract, engage and retain Etsy buyers based on many factors, including:

• the breadth of unique goods that Etsy sellers list in our markets;

• our brand awareness;

• the person-to-person commerce experience;

• our reputation for trustworthiness;

• our mobile apps;

• ease of payment; and

• the availability and reliability of our platform.

Many of our competitors and potential competitors have longer operating histories, greater resources, better name recognition or more customers than we do.

They may invest more to develop and promote their services than we do, and they may offer lower fees to sellers than we do. Further, our competitors could obtain preferential rates or shipping services, causing Etsy sellers and Etsy buyers to pay higher shipping costs or find alternative delivery services. Additionally, we believe that it is relatively easy for new businesses to create online commerce offerings or tools or services that enable entrepreneurship.

Local companies or more established companies based in markets where we operate outside of the United States may also have a better understanding of local customs, providing them a competitive advantage. For example, in certain markets outside the United States, we compete with smaller, but similar, local online marketplaces with a focus on unique goods that are attempting to attract sellers and buyers in those markets.

If we are unable to compete successfully, or if competing successfully requires us to expend significant resources in response to our competitors’ actions, our business could be adversely affected.

We rely on Etsy sellers to provide a fulfilling experience to Etsy buyers.

A small portion of Etsy buyers complain to us about their experience with our platform. For example, Etsy buyers may report that they have not received the items that they purchased, that the items received were not as represented by an Etsy seller or that an Etsy seller has not been responsive to their questions.

Although our Case System provides a way for Etsy sellers and Etsy buyers to communicate with each other to resolve disputes, negative publicity and sentiment generated as a result of these types of complaints could reduce our ability to attract and retain Etsy sellers and Etsy buyers or damage our reputation. A perception that our levels of responsiveness and support for Etsy sellers and Etsy buyers are inadequate could have similar results. In some situations, we may choose to reimburse Etsy buyers for their purchases to help avoid harm to our reputation, but we may not be able to recover the funds we expend for those reimbursements.

Anything that prevents the timely processing of orders or delivery of goods to Etsy buyers could harm Etsy sellers. Service interruptions and delivery delays may be caused by events that are beyond the control of Etsy sellers, such as interruptions in order or payment processing, transportation disruptions, natural disasters, inclement weather, terrorism, public health crises or political unrest. Disruptions in the operations of a substantial number of Etsy sellers could also result in negative experiences for a substantial number of Etsy buyers, which could harm our reputation and adversely affect our business.

Our reputation may be harmed if members of our community use illegal or unethical business practices.

Our emphasis on our values makes our reputation particularly sensitive to allegations of illegal or unethical business practices by Etsy sellers or other members of our community. Our policies promote legal and ethical business practices, such as

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encouraging Etsy sellers to work only with manufacturers who do not use child or involuntary labor, who do not discriminate and who promote sustainability and humane working conditions. However, we do not control Etsy sellers or other members of our community or their business practices and cannot ensure that they comply with our policies. If members of our community engage in illegal or unethical business practices or are perceived to do so, we may receive negative publicity and our reputation may be harmed.

Failure to deal effectively with fraud could harm our business.

Although we have measures in place to detect and reduce the occurrence of fraudulent activity in our markets, those measures may not always be effective.

For example, Etsy sellers occasionally receive orders placed with fraudulent or stolen credit card data. Under current credit card practices, we could be held liable for orders placed through Etsy Payments with fraudulent credit card data even if the associated financial institution approved the credit card transaction. Although we attempt to detect or challenge fraudulent transactions, we may not be able to do so effectively. As a result, our business could be adversely affected. We could also incur significant fines or lose our ability to give the option of paying with credit cards if we fail to follow payment card industry data security standards or fail to limit fraudulent transactions conducted in our markets.

Negative publicity and sentiment resulting from fraudulent or deceptive conduct by members of our community or the perception that our levels of responsiveness and support for Etsy sellers and Etsy buyers are inadequate could reduce our ability to attract and retain Etsy sellers and Etsy buyers and damage our reputation.

Our business depends on continued and unimpeded access to the internet and mobile networks.

Etsy sellers and Etsy buyers rely on access to the internet or mobile networks to access our markets. Internet service providers may choose to disrupt or degrade access to our platform or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our mobile apps.

Internet service providers or mobile network operators could also attempt to charge us for providing access to our platform. In 2015, rules approved by the Federal Communications Commission (the “FCC”) went into effect that prohibit internet service providers from charging content providers higher rates in order to deliver their content over certain “fast traffic” lanes; however, in May 2017, the FCC issued a notice of proposed rulemaking, the intention of which is to repeal the rules adopted in 2015. Depending on the outcome of this rulemaking process, our business could be adversely impacted. Outside of the United States, government regulation of the internet, including data localization requirements, limitation on marketplace scope or ownership, intellectual property intermediary liability rules, regulation of online speech, limits on network neutrality and rules related to security, privacy or national security may impede Etsy and our users. As a result, we could face discriminatory or anti-competitive practices that could impede both our and Etsy sellers’ growth prospects, increase our costs and harm our business.

Our business depends on network and mobile infrastructure provided by third parties and on our ability to maintain and scale the technology underlying our platform.

The reliability of our platform is important to our reputation and our ability to attract and retain Etsy sellers and Etsy buyers. As the number of Etsy sellers and Etsy buyers, volume of traffic, number of transactions and the amount of information shared on our platform grow, our need for additional network capacity and computing power will also grow. The operation of the technology underlying our platform is expensive and complex, and we could experience operational failures. If we fail to accurately predict the rate or timing of the growth of our platform, we may be required to incur significant additional costs to maintain reliability. The investments we make in our platform are designed to grow our business and to improve our operating results in the long term, but these investments could also delay our ability to achieve profitability or reduce profitability in the near term.

We also depend on the development and maintenance of the internet, cloud and mobile infrastructure, and increasingly rely on the availability, features, cost and reliability of third party service providers and platforms. For example, this includes maintenance of reliable internet and mobile networks with the necessary speed, data capacity and security, as well as timely development of complementary products. We are also exploring ways to better leverage cloud technology.

Third-party providers host much of our technology infrastructure and are likely to host more in the future. Any disruption in their services, or any failure of our providers to handle the demands of our markets could significantly harm our business. We exercise little control over these providers, which increases our vulnerability to their financial conditions and to problems with

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the services they provide. If we experience failures in our technology infrastructure or do not expand our technology infrastructure successfully, then our ability to attract and retain Etsy sellers and Etsy buyers could be adversely affected, which could harm our growth prospects and our business.

The growth of our business may strain our management team and our operational and financial infrastructure.

We have experienced rapid growth in our business, such as in headcount, the number of Etsy sellers and the number of countries in which we have Etsy sellers and Etsy buyers and we plan to continue to grow in the future, both in the United States and abroad. The growth of our business places significant demands on our management team and pressure to expand our operational and financial infrastructure. For example, we may need to continue to develop and improve our operational, financial and management controls and enhance our reporting systems and procedures. If we do not manage our growth effectively, the increases in our operating expenses could outpace any increases in our revenue and our business could be harmed.

Our business is subject to a large number of U.S. and non-U.S. laws, many of which are evolving.

We are subject to a variety of laws and regulations in the United States and around the world, including those relating to traditional businesses, such as employment laws and taxation, and laws and regulations focused on internet service providers and online commerce, such as online payments, privacy, anti-spam, data security and protection, online platform liability, intellectual property and consumer protection. In light of our international operations, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption and export control laws. These laws and regulations are continuously evolving, and compliance is costly and can require changes to our business practices and significant management time and effort.

Additionally, it is not always clear how existing laws apply to the internet as many of these laws do not address the unique issues raised by internet service providers or online commerce. For example, laws relating to online privacy are evolving differently in different jurisdictions. Federal, state and non-U.S. governmental authorities, as well as courts interpreting the laws, continue to evaluate and assess the privacy requirements relating to the use of third-party “cookies,” “web beacons” and other methods of online tracking. The United States, the European Union and other governments have enacted or are considering legislation that could (i) significantly restrict the ability of companies and individuals to collect and store user information, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools and (ii) require internet service providers to disclose user information to regulatory authorities.

Some providers of consumer devices and web browsers have implemented, or have announced plans to implement, ways to block tracking technologies which, if widely adopted, could also result in online tracking methods becoming significantly less effective. Any reduction in our ability to make effective use of such technologies could harm our ability to personalize the experience of Etsy buyers, increase our costs and limit our ability to attract and retain Etsy sellers and Etsy buyers on cost-effective terms. As a result, our business could be adversely affected.

In some cases, non-U.S. privacy, data security and protection, consumer protection, e-commerce and other laws and regulations are more restrictive than those in the United States and are actively enforced. Consequently, the expansion of our operations internationally may require changes to the ways we display, collect and use consumer information and may necessitate specific product changes for our non-U.S. users. For example, the European Union has adopted the General Data Protection Regulation, or GDPR, which is expected to take effect in May 2018 and, among other things, imposes more stringent data protection requirements and provides for greater penalties for noncompliance.  Complying with the GDPR may cause us to incur substantial operational costs or require us to change our business practices. Despite our efforts to bring practices into compliance before the effective date of the GDPR, we may not be successful either due to internal or external factors such as resource allocation limitations or a lack of vendor cooperation. Non-compliance could result in proceedings against us by governmental entities or others. 

Existing and future laws and regulations enacted by federal, state or non-U.S. governments could impede the growth of internet service providers or online commerce. It is also possible that governments of one or more countries may seek to censor content available on our platform or may even attempt to block access to our platform. If we are restricted from operating in one or more countries, our ability to attract and retain Etsy sellers and Etsy buyers may be adversely affected and we may not be able to grow our business as we anticipate.

We strive to comply with all applicable laws, but they may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction. Despite our efforts, we may not have fully complied in the past and may not in the future. If we become liable under laws or regulations

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applicable to us, we could be required to pay significant fines and penalties, our reputation may be harmed and we may be forced to change the way we operate. That could require us to incur significant expenses or to discontinue certain services, which could negatively affect our business.

Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could result in other liabilities for us and could harm our business.

We may be subject to claims that items listed in our markets are counterfeit, infringing or illegal.

Although we do not create or take possession of the items listed in our markets by Etsy sellers, we frequently receive communications alleging that items listed in our markets infringe third-party copyrights, trademarks, patents or other intellectual property rights. We have intellectual property complaint and take-down procedures in place to address these communications, and we believe such procedures are important to promote confidence in our markets. We follow these procedures to review complaints and relevant facts to determine the appropriate action, which may include removal of the item from our markets and, in certain cases, closing the shops of Etsy sellers who repeatedly violate our policies.

Our procedures may not effectively reduce or eliminate our liability. In particular, we may be subject to civil or criminal liability for activities carried out by Etsy sellers on our platform, especially outside the United States where we may be less protected under local laws than we are in the United States. Under current U.S. copyright law and the Communications Decency Act, we may benefit from statutory safe harbor provisions that protect us from copyright liability for content posted on our platform by Etsy sellers and Etsy buyers. However, trademark and patent laws do not include similar statutory provisions, and liability for these forms of intellectual property is often determined by court decisions. These safe harbors and court rulings may change unfavorably. In that event, we may be held secondarily liable for the intellectual property infringement of Etsy sellers.

Regardless of the validity of any claims made against us, we may incur significant costs and efforts to defend against or settle them. If a governmental authority determines that we have aided and abetted the infringement or sale of counterfeit goods or if legal changes result in us potentially being liable for actions by Etsy sellers on our platform, we could face regulatory, civil or criminal penalties. Successful claims by third-party rights owners could require us to pay substantial damages or refrain from permitting any further listing of the relevant items. These types of claims could force us to modify our business practices, which could lower our revenue, increase our costs or make our platform less user-friendly. Moreover, public perception that counterfeit or other unauthorized items are common in our markets, even if factually incorrect, could result in negative publicity and damage to our reputation.

We may be subject to intellectual property claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies in the future.

Companies in the internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. We periodically receive communications that claim we have infringed, misappropriated or misused others’ intellectual property rights. To the extent we gain greater public recognition, we may face a higher risk of being the subject of intellectual property claims. Third-parties may have intellectual property rights that cover significant aspects of our technologies or business methods and prevent us from expanding our offerings. Any intellectual property claim against us, with or without merit, could be time consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters.In addition, some of our competitors have extensive portfolios of issued patents. Many potential litigants, including some of our competitors and patent holding companies, have the ability to dedicate substantial resources to enforcing their intellectual property rights. Any claims successfully brought against us could subject us to significant liability for damages and we may be required to stop using technology or other intellectual property alleged to be in violation of a third party’s rights in one or more jurisdictions where Etsy does business. We also might be required to seek a license for third-party intellectual property. Even if a license is available, we could be required to pay significant royalties or submit to unreasonable terms, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, which could require significant time and expense. If we cannot license or develop technology for any allegedly infringing aspect of our business, we would be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.

We may be involved in litigation matters that are expensive and time consuming.

In addition to intellectual property claims, we may become involved in other litigation matters, including class action lawsuits. For example, as described further in “Note 8—Contingencies—Legal Proceedings” in the Notes to Consolidated Financial

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Statements in this Quarterly Report, three purported securities class action lawsuits have been filed naming Etsy and certain of our officers and/or directors as defendants. Under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of current and former directors, officers and underwriters, in connection with the litigation described in this Quarterly Report and in connection with any future lawsuits. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.

We may be unable to protect our intellectual property adequately.

Our intellectual property is an essential asset of our business. To establish and protect our intellectual property rights, we rely on a combination of trade secret, copyright, trademark and, to a lesser extent, patent laws, as well as confidentiality procedures and contractual provisions. The efforts we have taken to protect our intellectual property may not be sufficient or effective. We generally do not elect to register our copyrights, relying instead on the laws protecting unregistered intellectual property, which may not be sufficient. We rely on both registered and unregistered trademarks, which may not always be comprehensive in scope. In addition, our copyrights and trademarks, whether or not registered, and patents may be held invalid or unenforceable if challenged, and may be of limited territorial reach. While we have obtained or applied for patent protection with respect to some of our intellectual property, we generally do not rely on patents as a principal means of protecting intellectual property. To the extent we do seek patent protection, any U.S. or other patents issued to us may not be sufficiently broad to protect our proprietary technologies.

In addition, we may not be effective in policing unauthorized use of our intellectual property and authorized uses may not have the intended effect. Even if we do detect violations, we may need to engage in litigation to enforce our intellectual property rights. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are unenforceable. The legal framework surrounding protection of intellectual property changes frequently throughout the world, and these changes may impact our ability to protect our intellectual property and defend against third party claims. If we are unable to cost-effectively protect our intellectual property rights, then our business could be harmed.

Our software is highly complex and may contain undetected errors.

The software underlying our platform is highly complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after the code has been released. We rely heavily on a software engineering practice known as “continuous deployment,” meaning that we typically release software code many times per day. This practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platform. Any errors or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of our community members, loss of revenue or liability for damages, any of which could adversely affect our growth prospects and our business.

We are subject to the terms of open source licenses because our platform incorporates open source software.

The software powering our markets incorporates software covered by open source licenses. In addition, we regularly contribute source code to open source software projects and release internal software projects under open source licenses, and we anticipate doing so in the future. The terms of many open source licenses relied upon by Etsy and the internet and technology industries generally have not been interpreted by U.S. courts and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our markets. Under certain open source licenses, if certain conditions were met, we could be required to publicly release aspects of the source code of our software or to make our software available under open source licenses. To avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software. In addition, use of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform. Additionally, because any software source code we contribute to open source projects is publicly available, while we may benefit from the contributions of others, our ability to protect our intellectual property rights in such software source code may be limited or lost entirely, and we will be unable to prevent our competitors or others from using such contributed software source code. Any of these risks could be difficult to eliminate or manage and, if not addressed, could adversely affect our business, financial condition and results of operations.

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Our business and our Etsy sellers and Etsy buyers may be subject to sales and other taxes.

The application of indirect taxes, such as sales and use tax, value-added tax, provincial taxes, goods and services tax, business tax and gross receipt tax, to businesses like ours and to Etsy sellers and Etsy buyers is a complex and evolving issue. Significant judgment is required to evaluate applicable tax obligations and as a result amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear how new and existing statutes might apply to our business or to Etsy sellers’ businesses. One or more states, the federal government or other countries may seek to impose additional reporting, record-keeping or indirect tax collection obligations on businesses like ours that facilitate online commerce. For example, taxing authorities in the United States and other countries have identified e-commerce platforms as a means to calculate, collect and remit indirect taxes for transactions taking place over the internet, and are considering related legislation. New legislation could adversely affect our business. For example, new legislation could require us or Etsy sellers to incur substantial costs in order to comply, including costs associated with tax calculation, collection, remittance and audit requirements, which could make selling in our markets less attractive. New legislation could also require tax to be included on items sold on Etsy, which could lead to increased prices and make our markets less attractive to current and prospective Etsy buyers.

We may experience fluctuations in our tax obligations and effective tax rate.

We are subject to taxation in the United States and in numerous other jurisdictions. We record tax expense based on current tax payments and our estimates of future tax payments, which may include reserves for estimates of probable settlements of tax audits. At any one time, multiple tax years could be subject to audit by various taxing jurisdictions. As a result, we expect that throughout the year there could be ongoing variability in our quarterly tax rates as taxable events occur and exposures are re-evaluated. Further, our effective tax rate in a given financial statement period may be adversely impacted by changes in tax laws, changes in the mix of revenue among different jurisdictions, changes to accounting rules and changes to our ownership or capital structure. Fluctuations in our tax obligations and effective tax rate could adversely affect our business.

In January 2015, we implemented a revised corporate structure to more closely align our structure with our global operations and future expansion plans outside of the United States. Our new corporate structure changed how we use our intellectual property and implemented certain intercompany arrangements. We believe this may result in a reduction in our overall effective tax rate over the long term and other operational efficiencies; however, the tax laws of the jurisdictions in which we operate are subject to interpretation, and their application may depend on our ability to operate our business in a manner consistent with our corporate structure. Moreover, these tax laws are subject to change. Tax authorities may disagree with our position as to the tax treatment of our transfer of intangible assets or determine that the manner in which we operate our business does not achieve the intended tax consequences. If our new corporate structure does not achieve our expectations for any of these or other reasons, we may be subject to a higher overall effective tax rate and our business may be adversely affected.

We may expand our business through acquisitions of other businesses, which may divert management’s attention and/or prove to be unsuccessful.

We have acquired a number of other businesses in the past and may acquire additional businesses or technologies in the future. For example, in September 2016 we acquired Blackbird Technologies, Inc. Acquisitions may divert management’s time and focus from operating our business. Acquisitions also may require us to spend a substantial portion of our available cash, issue stock, incur debt or other liabilities, amortize expenses related to intangible assets or incur write-offs of goodwill or other assets. In addition, integrating an acquired business or technology is risky. Completed and future acquisitions may result in unforeseen operational difficulties and expenditures associated with:

• integrating new businesses and technologies into our infrastructure;

• consolidating operational and administrative functions;

• coordinating outreach to our community;

• maintaining morale and culture and retaining and integrating key employees;

• maintaining or developing controls, procedures and policies (including effective internal control over financial reporting and disclosure controls and procedures); and

• assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, commercial disputes, cyber attacks, taxes and other matters.

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Moreover, we may not benefit from our acquisitions as we expect, or in the time frame we expect. We also may issue additional equity securities in connection with an acquisition, which could cause dilution to our stockholders. Finally, acquisitions could be viewed negatively by analysts, investors or the members of our community.

If our insurance coverage is insufficient or our insurers are unable to meet their obligations, our insurance may not mitigate the risks facing our business.

Our insurance policies cover a number of risks and potential liabilities, such as general liability, property coverage, errors and omissions liability, employment liability, business interruptions, data breaches, crime, product liability and directors’ and officers’ liability. For certain types of business risk, we may not be able to, or may choose not to, acquire insurance. In addition, we may not obtain enough insurance to adequately mitigate the risks we face or we may have to pay high premiums and/or deductibles for the coverage we do obtain. Additionally, if any of our insurers becomes insolvent, it would be unable to pay any claims that we make.

Operating as a public company requires us to incur substantial costs and requires substantial management attention. In addition, our management team has limited experience managing a public company.

As a public company, we incur substantial legal, accounting and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, the applicable requirements of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the SEC. The rules and regulations of Nasdaq also apply to us. As part of these requirements, we have established and maintained effective disclosure and financial controls and made changes to our corporate governance practices. We expect that continued compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming. In addition, as a public company, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management and impact the manner in which we operate our business in ways we cannot currently anticipate.

Most of our management and other personnel have little experience managing a public company and preparing public filings. In addition, our management and other personnel divert attention from other business matters to devote substantial time to the reporting and other requirements of being a public company. In particular, we have incurred significant expense and devoted substantial management effort to complying with the requirements of Section 404 of the Sarbanes-Oxley Act. We may need to continue to invest in additional accounting, financial and legal resources to ensure that we continue to meet our public company requirements.

If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy of our financial reports.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting. It also requires our independent registered public accounting firm to attest to our evaluation of our internal controls over financial reporting. Although our management has determined, and our independent registered public accounting firm has attested, that our internal control over financial reporting was effective as of December 31, 2016, we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal control in the future.

If we have a material weakness in our internal control over financial reporting in the future, we may not detect errors on a timely basis. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we identify a material weakness in our internal control over financial reporting in the future, it could harm our operating results, cause us to fail to meet our SEC reporting obligations or Nasdaq listing requirements, adversely affect our reputation, cause our stock price to decline or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements. Further, if there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal controls, such as Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in the accuracy and completeness of our financial reports and that could cause the price of our common stock to decline. We could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.

In addition, our internal control over financial reporting will not prevent or detect all errors and fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

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The terms of our debt instruments may restrict our ability to pursue our business strategies.

We do not currently have any obligations outstanding under our credit facility. However, our credit facility requires us to comply with various covenants that limit our ability to take actions such as:

• disposing of assets;

• completing mergers or acquisitions;

• incurring additional indebtedness;

• encumbering our properties or assets;

• paying dividends or making other distributions;

• making specified investments; and

• engaging in transactions with our affiliates.

These restrictions could limit our ability to pursue our business strategies. If we default under our credit facility and if the default is not cured or waived, the lenders could terminate their commitments to lend to us and cause any amounts outstanding to be payable immediately. Such a default could also result in cross defaults under other debt instruments. Moreover, any such default would limit our ability to obtain additional financing, which may have an adverse effect on our cash flow and liquidity.

We may need additional capital, which may not be available to us on acceptable terms or at all.

We believe that our existing cash and cash equivalents and short-term investments, together with cash generated from operations and available borrowing capacity under our credit facility, will be enough to meet our anticipated cash needs for at least the next 12 months. However, we may require additional cash resources due to changed business conditions or other developments, such as acquisitions or investments we may decide to pursue. We may seek to borrow funds under our credit facility or sell additional equity or debt securities. The sale of additional equity securities could result in dilution to our existing stockholders. Borrowing funds would result in increased debt service obligations and could result in additional operating and financial covenants that would limit our operations. It is also possible that financing may not be available to us in amounts or on terms acceptable to us, if at all.

Risks Related to Ownership of Our Common Stock

The price of our common stock has been and will likely continue to be volatile and declines in the price of common stock could subject us to litigation.

The price of our common stock has been and is likely to continue to be volatile. For example, since January 1, 2016, our common stock's daily closing price on Nasdaq has ranged from a low of $6.36 to a high of $15.81 through August 4, 2017. The price of our common stock may fluctuate significantly for numerous reasons, many of which are beyond our control, such as:

• variations in our operating results and other financial and operational metrics, including the key financial and operating metrics disclosed in this Quarterly Report, as well as how those results and metrics compare to analyst and investor expectations;

• forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections or changes in our financial guidance or projections;

• failure of analysts to initiate or maintain coverage of our company, changes in their estimates of our operating results or changes in recommendations by analysts that follow our common stock or a negative view of our financial guidance or projections;

• announcements of new services or enhancements, strategic alliances or significant agreements or other developments by us or our competitors;

• announcements by us or our competitors of mergers or acquisitions or rumors of such transactions involving us or our competitors;

• the amount and timing of our operating expenses and the success of any cost-savings actions we take;

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• changes in our Board of Directors, management or other key personnel;

• disruptions in our markets due to hardware, software or network problems, security breaches or other issues;

• the strength of the global economy or the economy in the jurisdictions in which we operate, currency fluctuations, and market conditions in our industry and those affecting members of our community;

• the trading activity of our largest stockholders;

• the number of shares of our common stock that are available for public trading;

• litigation or other claims against us;

• stockholder activism;

• the performance of the equity markets in general and in our industry;

• the operating performance of other similar companies;

• changes in legal requirements relating to our business; and

• any other factors discussed in this Quarterly Report.

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the price of our common stock could decline for reasons unrelated to our business, results of operations or financial condition. Stock prices of many technology companies have historically been highly volatile. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. For example, as described further in “Note 8—Contingencies—Legal Proceedings” in the Notes to Consolidated Financial Statements in this Quarterly Report, three purported securities class action lawsuits have been filed naming Etsy and certain of our officers and/or directors as defendants. We may experience more such litigation following future periods of volatility or declines in our stock price. Any securities litigation, could result in substantial costs and divert our management’s attention and resources, which could adversely affect our business.

If analysts do not publish research about our business, or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that analysts publish about our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our common stock would likely decline. If few analysts cover us, demand for our common stock could decrease and our common stock price and trading volume may decline. Similar results may occur if one or more of these analysts stop covering us in the future or fail to publish reports on us regularly.

We do not intend to pay dividends on our capital stock, so any returns will be limited to increases in the value of our common stock.

We have never declared or paid any cash dividends on our capital stock. We currently anticipate that we will retain future earnings for the operation and expansion of our business and do not anticipate declaring any dividends in the foreseeable future. In addition, our ability to pay cash dividends on our capital stock is restricted by the terms of our credit facility. As a result, stockholders will not receive dividends or other distributions and may only receive a return on their investment if the trading price of our common stock increases.

Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution to our stockholders and could cause the price of our common stock to decline.

We may issue additional common stock, convertible securities or other equity in the future. We also issue common stock to our employees, directors and other service providers pursuant to our equity incentive plans. Such issuances could be dilutive to investors and could cause the price of our common stock to decline. New investors in such issuances could also receive rights senior to those of current stockholders.

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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, could limit attempts to make changes in our management and could depress the price of our common stock.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change in control of our company or limiting changes in our management. Among other things, these provisions:

• provide for a classified board of directors so that not all members of our Board of Directors are elected at one time;

• permit our Board of Directors to establish the number of directors and fill any vacancies and newly created directorships;

• provide that directors may only be removed for cause;

• require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;

• authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;

• eliminate the ability of our stockholders to call special meetings of stockholders;

• prohibit stockholder action by written consent, which means all stockholder actions must be taken at a meeting of our stockholders;

• provide that our Board of Directors is expressly authorized to amend or repeal any provision of our bylaws;

• restrict the forum for certain litigation against us to Delaware; and

• require advance notice for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

These provisions may delay or prevent attempts by our stockholders to replace members of our management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, Section 203 of the Delaware General Corporation Law (“DGCL”) may delay or prevent a change in control of our company. Section 203 of the DGCL imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock. Anti-takeover provisions could depress the price of our common stock by acting to delay or prevent a change in control of our company.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, our certificate of incorporation or our bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

54

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities.

The table below provides information with respect to repurchases of shares of our common stock during the three months ended June 30, 2017.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 - 30, 2017 (1)	87,242	$	10.63	—	—
May 1 - 31, 2017 (1)	22,689	13.38		—	—
June 1 - 30, 2017	—	—		—	—
Total	109,931	$	11.20	—	—

(1) Represents shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

See the Exhibit Index.

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Signatures

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

ETSY, INC.
Date: August 7, 2017	/s/ Rachel Glaser
	Rachel Glaser Chief Financial Officer
	(Principal Financial and Accounting Officer)

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Exhibit Index

Exhibit Number		Incorporated by Reference				Filed Herewith
	Exhibit Description	Form	File No.	Exhibit	Filing Date
10.1*	Letter Agreement between Etsy, Inc. and Josh Silverman, dated May 2, 2017					X
10.2.1*	Letter Agreement between Etsy, Inc. and Rachel Glaser, dated April 2, 2017	8-K	001-36911	10.1	4/3/2017
10.2.2*	Amendment to the Letter Agreement between Etsy, Inc. and Rachel Glaser, dated May 4, 2017					X
10.3*	Separation Letter Agreement between Etsy, Inc. and Chad Dickerson, dated May 2, 2017					X
10.4*	Separation Letter Agreement between Etsy, Inc. and John Allspaw, dated May 3, 2017					X
10.5*	Amended and Restated Compensation Program for Non-Employee Directors					X
31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended					X
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended					X
32.1†	Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350					X
32.2†	Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Schema Linkbase Document					X
101.CAL	XBRL Taxonomy Calculation Linkbase Document					X
101.DEF	XBRL Taxonomy Definition Linkbase Document					X
101.LAB	XBRL Taxonomy Labels Linkbase Document					X
101.PRE	XBRL Taxonomy Presentation Linkbase Document'					X

* Indicates a management contract or compensatory plan.

† These certifications are not deemed to be filed with the SEC and are not to be incorporated by reference into any filing of Etsy, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

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EX-10.1

Exhibit 10.1

May 2, 2017

Josh Silverman

[Delivered electronically]

Dear Josh,

Etsy, Inc. is pleased to offer you full-time employment on the terms described in this offer letter. This offer is contingent on formal approval of Etsy's Board of Directors (the "Board") or Compensation Committee.

Your employment will begin on May 3, 2017 or on a date mutually agreed upon between you and Etsy ("Start Date"). Your title will be President and Chief Executive Officer. You will report to the Board, working from our Brooklyn office. As long as you are employed as President and Chief Executive Officer, Etsy will nominate you for election to the Board. Upon the termination of your employment for any reason, unless otherwise requested by the Board, you will be deemed to have resigned from the Board (and all other positions held at Etsy and its affiliates) voluntarily, without any further required action by you, as of the end of your employment and you, at the Board's request, will execute any documents necessary to reflect your resignation.

If you ever wish to change your work location, you will need prior written approval from the Board.

Compensation

Your salary will be $375,000 per year and you will also be eligible for the great benefits that Etsy provides to regular, full-time employees. To the extent the terms of this offer letter conflict with any of Etsy's standardized plans referenced herein, the terms of this offer letter control.

You will be eligible to participate in the Management Cash Incentive Plan, with an annual target of 100% of your base salary earned during the performance period, which currently follows a calendar year (Jan 1 to Dec 31) cycle. Your bonus award will be determined based upon company financial performance and your individual performance. Your participation is subject to the terms and conditions of the Management Cash Incentive Plan and the applicable participation notice. Awards (if any) are paid in the calendar year following the performance year, generally within two and a half months after the end of the performance year.

Etsy will propose that you receive an equity award in the form of 250,000 Restricted Stock Units ("RSUs)" on May 4, 2017, subject to the approval of Etsy's Board or Compensation Committee.

Exhibit 10.1

The RSUs will "vest" (or convert into shares of Etsy's common stock) over the course of your employment with Etsy. One hundred percent (100%) of your RSUs will vest on the 12-month anniversary of your Start Date (assuming your continuous employment) or if Etsy undergoes a Change in Control (as defined in Etsy's Change in Control Severance Plan) before the 12-month anniversary of your Start Date and you remain employed through the date of that Change in Control.

Etsy will also propose that you receive an equity award in the form of Stock Options (i.e., an option to purchase shares of Etsy's common stock) for 3,869,969 shares with an exercise price per share equal to the fair market value of Etsy's common stock on the grant date. Twenty-five percent (25%) of your Stock Options will vest (or become exercisable) if you remain continuously employed at Etsy for 12 months after the grant date. The balance of your Stock Options will vest in equal monthly installments over the next three years of continuous employment with Etsy. In addition, if Etsy undergoes a Change in Control (as defined in Etsy's Change in Control Severance Plan) and subsequent to the date of that Change in Control, there are changes that, in your sole reasonable judgment, materially adversely affect your position, title, responsibilities, or ability to perform your duties, as compared to the period prior to the change of control, then twenty-five percent (25%) of the Stock Options will vest.

Your equity awards will be subject to the terms and conditions of Etsy's 2015 Equity Incentive Plan and your award agreements, which will also specify your vesting dates. You will not be eligible for the grant of future equity awards for the next four (4) years. After four years, any future equity awards will be made at the discretion of Etsy's Board of Directors and/or its Compensation Committee.

You acknowledge that as of May 3, 2017, you will discontinue service on the Board as an independent director and become an employee director, and your unvested non-employee director equity awards (e.g., your grants of restricted stock units and stock options on November 15, 2016) will be forfeited as of your Start Date in accordance with the Etsy, Inc. Compensation Program for Non-Employee Directors and the related award agreements.

Etsy will also reimburse up to $10,000 in legal fees that you incur in connection with this offer.

Severance Benefits

You will participate in the Etsy, Inc. Change in Control Severance Plan (subject to the changes noted below), which provides, subject to the terms and conditions of the plan document, eighteen (18) months of severance, up to eighteen (18) months of company-paid COBRA coverage, and a 100% acceleration factor for all outstanding equity awards issued to you. You will also participate in the Etsy, Inc. Severance Plan (subject to the changes noted below), which provides, subject to the terms and conditions of the plan document, twelve (12) months of severance and up to twelve (12) months of company-paid COBRA coverage.

For purposes of your participation in Etsy's Change in Control Severance Plan and Severance Plan, the definition of Cause is amended such that, in the case of clauses (b), (c) and (f), Etsy will give you notice of the circumstances constituting Cause and you shall have the opportunity to cure such circumstances (if curable) within ten (10) business days following your receipt of that notice. In addition, for purposes of your participation in Etsy's Change in Control Severance Plan and Severance Plan, Etsy agrees that the hiring of an Executive Chairman

Exhibit 10.1

would be a material breach of a material agreement between you and Etsy pursuant to clause (d) of the definition of Qualifying Termination.

Further, outside of the context of a Change in Control:

• If your employment is terminated in a Qualifying Termination (as defined in Etsy's Severance Plan, as modified by this offer letter), twenty-five percent (25%) of your Stock Options will vest; and

• If your employment terminates other than for Cause (as defined in the Severance Plan), your vested Stock Options will remain exercisable until the earlier of six (6) months after your last day of employment or ten (10) years after the Stock Options were granted.

Upon the termination of your employment for any reason, unless otherwise requested by the Board, you will be deemed to have resigned from the Board (and all other positions held at Etsy and its affiliates) voluntarily, without any further required action by you, and you agree to execute any documents necessary to reflect such resignation.

Confidentiality

This offer is contingent on you signing the attached Confidentiality and Prior

Inventions Agreement (the "CPIA"). It contains important information about your employment with Etsy, so please read it carefully. Here are a few highlights:

• You confirm that you have no legal obligations that would prohibit you from working for Etsy. For example, you have not signed a non-compete agreement with your current or former employer that would prevent you from working for Etsy.

• You agree not to use, rely upon, or share any confidential information of your former employer while working for Etsy.

• You agree that during your employment with Etsy (and otherwise as described in your CPIA), you will not engage in any other employment, consulting, or business activity that would create a conflict with your position with Etsy.

Miscellaneous

During your employment, you will not, without the prior written consent of the Board,

accept other employment or perform other services for compensation or that interfere with your employment or performance as President and Chief Executive Officer. A list of your current outside board and advisory responsibilities are attached as Exhibit A. Before starting work, you will be required to provide proof of your identity and your legal authorization to work in the United States.

This letter (including the attached CPIA) is the entire agreement between you and Etsy. Any discussions you may have had previously with Etsy are superseded by the terms of this letter and the CPIA. The terms of this offer may only be changed by a written agreement signed by you and the Chairman of the Board.

Exhibit 10.1

Although we are hiring you for the position listed above, your job duties, title, compensation, and benefits may change in the future. You understand that you will be an at-will employee of Etsy with the right to terminate your employment at any time and for any reason, and that Etsy will have a similar right. You also agree to comply with Etsy's workplace policies, which will be made available to you and may change from time to time.

We hope and expect that working at Etsy will be beneficial and rewarding for both you and us, but we do have to let you know that this letter and the resolution of any disputes relating to this letter or your employment with Etsy will be governed by the laws of New York State (excluding laws relating to conflicts or choice of law). Also, because Etsy is based in Brooklyn, you and Etsy agree to submit to the personal jurisdiction of a state court located in Kings County, New York or the United States District Court for the Eastern District of New York located in Brooklyn to resolve any dispute or claim between you and Etsy or any of its directors, officers, managers, or employees.

Exhibit 10.1

We look forward to you joining Etsy as our President and CEO.

Very truly yours,

/s/ Fred Wilson

Fred Wilson

Lead Independent Director

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I have read and accept this employment offer:

Name:        Josh Silverman

Signature:     /s/ Josh Silverman

Date:     May 2, 2017    

Email: XXXXXXX    

Exhibit 10.1

Exhibit A

Outside Activities

For Profit Boards:

• Shake Shack (SHAK)

Not for Profit Boards:

• ScriptEd.org

• ClubbedThumb

• Stanford Business School

Advisory Roles:

• HomeTeamCare

• Clinc

• FON

Exhibit 10.1

Exhibit B

CONFIDENTIALITY AND PRIOR INVENTIONS AGREEMENT

This Confidentiality and Prior Inventions Agreement (or the "Agreement," for short) is an important part of the employment offer that Etsy, Inc. has made to you. Please read it carefully and sign at the bottom if you understand and agree to all of its terms. If you sign this Agreement, it will take effect on TBD. If you have any questions about this Agreement, please speak with your contact on the Etsy Recruiting team before signing below.

In return for offering you the position described in your offer letter and for providing you with access to new and additional training and Confidential Information belonging to Etsy (and described below), Etsy needs you to make certain commitments. These commitments relate to:

• your ability to work for Etsy and perform your job duties without violating any commitments you may have agreed to in the past or that you are otherwise subject to,

• Etsy's ownership of any ideas you come up with or technologies you develop while working for Etsy,

• the need to keep confidential and protect certain information about Etsy and its members and employees both while working for Etsy and after you leave the company, and

• your willingness not to compete with Etsy or take certain actions that could hurt Etsy's legitimate interests while you are working for Etsy and for a short period of time afterward.

Each of these commitments is described in more detail below in Section 1 of this Agreement. Section 1 also contains information about your employment status with Etsy, which will be as an at-will employee.

In Section 2, you will find information on the rights you and Etsy have under this Agreement and how you and Etsy can enforce those rights. Section 2 also contains important information about how disputes relating to your employment will be resolved.

Section 1 - Your Commitments to Etsy

There are no conflicts that would prevent you from working for Etsy or performing your job. As much as we want you to join our company, we need you to confirm that the terms of your employment with your current employer (and any former employers) do not restrict your ability to work for Etsy. By signing this Agreement, you agree that you have not entered into an agreement (and will not in the future) that is in conflict with this Agreement or the terms of your employment with Etsy. You also agree that you have shared with Etsy a copy of any agreement (such as a non-compete or non-solicitation agreement) that could impact your ability to work for Etsy.

Example: You currently work for eBay and signed an offer letter or employment agreement that says you will not work for another online marketplace for one year after you leave eBay. You have a conflict that could prevent you from working for Etsy and must share that document with Etsy before you sign this Agreement.

Exhibit 10.1

You will not use any property or confidential information of a current or former employer without their permission. We want to respect the rights of your current and former employers, and quite frankly, we don't want them claiming any rights to the work you do here at Etsy. By signing this Agreement, you agree that you will not bring to Etsy, and will not use or disclose at Etsy, the confidential information of any current or former employer or any other party, unless you have their written permission to do so (and our Legal team would like to see that written permission, thank you). You also agree that you will not use at Etsy any documents or other property (including documents or property that you created yourself) from your current or former employer without the employer's written permission.

Example: You have confidential agreements or customer lists from your previous job that you think might be helpful in the work you will do for Etsy. You cannot use those materials while working for Etsy or share those materials with Etsy employees without getting written permission from your previous employer.

Etsy will own anything you create while working for Etsy that relates to the work you do for Etsy. While working for Etsy, you will hopefully develop or contribute to one or more products, services, or programs. In this Agreement, we refer to all ideas, products, services, processes, and designs you develop or contribute to while working for Etsy and that relate to Etsy's business as "Covered Inventions." In addition to your salary and benefits, Etsy will also provide you with the resources, materials, and support you need to do your job, including the development of Covered Inventions. In return, you agree that Etsy will own all rights in all Covered Inventions (including all patents, copyrights and other intellectual property rights), whether or not the work is performed in Etsy's offices, uses Etsy resources, or takes place during business hours.

By signing this Agreement, you are assigning to Etsy all of your rights in the U.S. and internationally in all Covered Inventions and all intellectual property rights related to those Covered Inventions. Any copyrights in the Covered Inventions, including in any computer programs, programming documentation, and other works of authorship, are "works made for hire" for purposes of Etsy's rights under copyright laws. By signing this Agreement, you are also assigning to Etsy any rights you currently have or may acquire at any time in the future in any Covered Inventions. Lastly, you agree to disclose all Covered Inventions to Etsy and to waive any claims you have or may have in the future for infringement of any Covered Inventions.

Example: As a software developer for Etsy, you write a piece of code that is included in a new Etsy product. Etsy will own all rights in the code you wrote and in any products or services that rely on that code.

Etsy has no interest in owning things you created or developed in the past, but Etsy needs a license from you if you incorporate that prior work into the work you do at Etsy. If you previously created something that relates to Etsy's business, and you do not want that creation to be considered a Covered Invention for purposes of this Agreement, please list it in Appendix A. We refer to any items listed in Appendix A as "Prior Inventions." We will follow an internal review process to be sure that we understand and agree about what you are claiming as a Prior Invention. While Etsy does not claim to own your Prior Inventions, you agree that if you incorporate Prior Inventions into the work you do for Etsy, Etsy will have the right to use those

Exhibit 10.1

Prior Inventions to operate its business. Here is the legalese version of the previous sentence: If any of the work you do for Etsy incorporates or uses a Prior Invention, you give Etsy a perpetual, irrevocable, worldwide, royalty-free, non-exclusive, sublicensable right and license to incorporate or use such Prior Invention and any related intellectual property rights.

Example: You are a graphic designer and want to retain ownership of some designs you did in the past. You list those designs in Appendix A and retain ownership of those designs, which are considered Prior Inventions. Later on, you incorporate one of the designs into a design you create for Etsy's website. Etsy then has a license to use your original design, because the original design is now part of the website design that you created for, and that is owned by, Etsy.

Etsy permits its employees to perform outside work and to take on side projects if certain conditions are met. We recognize that you may want to take on some outside work or side projects while working for Etsy. We have an approval process for activities like those; you will receive more information about the process after your start date. Etsy will not have or claim rights in anything you develop or create through an authorized side project as long as (a) the work is done entirely on your own time and will not interfere with your ability to perform the work you do for Etsy, (b) you did not incorporate any Etsy materials or resources, and (c) the development or creation does not relate to an Etsy product or service or Etsy intellectual property.

Example: If you are part of the Etsy PR team and want to do some work as a freelance calligrapher in your spare time, that would likely be an approved side project.

Example: If you are a software developer for Etsy and you want to serve on the board of advisors for a new gaming startup that doesn't conflict with your work at Etsy, that would likely be approved outside work.

You will keep confidential any Confidential Information you receive or learn about while working for Etsy. In order to perform your job at Etsy, you may create or be given access to Confidential Information about Etsy, or about its employees, contractors, customers, suppliers, and other parties. When we refer to "Confidential Information" in this Agreement, we mean information and physical materials not generally known or available outside of Etsy. Confidential Information could be technical data, product ideas, product roadmaps, business deals that we haven't announced to the public, software code and designs, personal information about other Etsy employees, or lists of suppliers. Confidential Information includes both information and materials that belong or relate to Etsy, as well as information and materials that a third party has disclosed to Etsy on a confidential basis.

By signing this Agreement, you agree that you will hold Confidential Information in strict confidence and that you will not use or disclose any Confidential Information, except as required to do your job. The restriction on your use or disclosure of Confidential Information will continue if you leave Etsy and will remain in effect until the Confidential Information becomes publicly available through no fault of your own.

Exhibit 10.1

Example: While working for Etsy, you have access to a supplier's pricing lists. The price lists are considered Confidential Information and you are required to maintain the confidentiality of the pricing information both while working for Etsy and after your employment ends.

If your employment with Etsy ends, you agree to return to Etsy all copies of any matierals you have that contain Confidential Information. You may keep your compensation records and a copy of this Agreement.

You will maintain the privacy of Etsy members and employees. As part of your work for Etsy, you may have access to private information about Etsy members and employees. Both groups place a high value on their privacy and it is critical that you treat private member and employee information with the highest degree of care. By signing this Agreement, you agree that you will only access and use Etsy member and employee information when it is necessary to do your job. You also agree that you will not share Etsy member and employee personal information outside of Etsy, or even with other Etsy employees, without proper authorization and even then only when required as part of your job. If you are ever in doubt about whether member or employee information may be shared within or outside of Etsy, you should ask the Etsy Legal team.

______________________________________________________________________

Please note that when we refer to a Competing Business in the next three paragraphs, we mean (a) any of the following companies, and any of their subsidiaries or parent companies that operate an online marketplace: Amazon, eBay, and Alibaba; (b) any business that develops or operates an online marketplace selling the types of products sold on Etsy.com or its related websites (for example, crafts, art, handmade goods, vintage goods, or craft supplies), and (c) any business that develops or operates a platform or tools for building or operating e-commerce websites. For purposes of illustration only, examples of category (b) include Craftsy and Michaels.com; and examples of category (c) include Shopify and WordPress.

______________________________________________________________________

You will not compete against Etsy while you are employed by Etsy. It probably goes without saying, but Etsy is hiring you to help build its business and not to compete with it. Competition could take several different forms, including starting or working for a Competing Business, doing consulting work for another company that conflicts with your work for Etsy, or diverting business opportunities from Etsy. By signing this Agreement, you agree that while working for Etsy you will not start, invest in, or do work for a Competing Business, or divert business opportunities with vendors, suppliers, or other business partners that otherwise might have been available to Etsy.

Example: It is not okay to (a) consult for the marketplace startup your friend founded, or (b) try to convince an Etsy partner to end its relationship with Etsy.

Example: It is okay to buy paper towels from Amazon or sneakers from eBay.

Exhibit 10.1

You will not compete against Etsy for a short period after your employment with Etsy ends. While working for Etsy you may be given access to plans, processes, contacts, customers, or other information that could put Etsy at an unfair competitive disadvantage if they were shared with or used for the benefit of a Competing Business. To protect Etsy's legitimate interests, we require that you agree to certain limits on actions that would be competitive with Etsy for a short period after your employment with Etsy ends. By signing this Agreement, you agree that for six months after your employment with Etsy ends for any reason, you will not, without Etsy's written permission, start, invest in, or do work for a Competing Business in a capacity that is similar in form or function to that which you performed in the last year of your employment with Etsy, and that you will not divert business opportunities that otherwise might have been available to Etsy.

Example: It is not okay to leave Etsy and immediately take a similar position with Amazon Handmade.

Example: It is okay to leave Etsy to launch a laundry delivery startup or to join a company like Google or Facebook.

You will not poach or solicit Etsy employees, members, or business partners while you are employed by Etsy or for a short period of time after your employment with Etsy ends. In addition to working for a Competing Business or diverting business opportunities from Etsy, you could also unfairly compete against Etsy by poaching or soliciting Etsy employees, members, vendors, suppliers, or other business partners. By signing this Agreement, you agree that both during your employment with Etsy and for one year after your employment with Etsy ends for any reason, you will not directly or indirectly cause anyone to leave their position with Etsy, or solicit any Etsy members, vendors, suppliers, or other business partners with whom you worked or acquired Confidential Information from in the last two years of your employment with Etsy.

Example: It is not okay to (a) persuade an Etsy seller to close her shop and instead sell on a competing platform that you own stock in, or (b) convince an Etsy developer to leave Etsy to work for your sister's startup.

Example: It is okay to encourage a colleague to leave Etsy to follow her dream of running her Etsy Shop full-time.

You will be an at-will employee of Etsy. You will be an at-will employee of Etsy, which means that you are free to resign at any time and that Etsy may terminate your employment at any time and for any or no reason. By signing this Agreement, you acknowledge that you will be an at-will employee of Etsy and that you are not entering into an employment contract with Etsy for a set period of time.

Section 2 - Enforcement of Rights and Other Legal Information

New York law will be used to resolve disputes. If there is a dispute concerning this Agreement or your employment with Etsy, the dispute will be resolved using the laws of New York State (excluding laws relating to conflicts or choice of law). Also, because Etsy is based in

Exhibit 10.1

Brooklyn, you and Etsy agree to submit to the personal jurisdiction of a state court located in Kings County, New York or the United States District Court for the Eastern District of New York located in Brooklyn.

Nothing in this Agreement prohibits you from reporting violations of the law or Etsy's policies, and no retaliatory action will be taken against you for doing so. Nothing in this Agreement, including the section on Confidential Information, prohibits you from reporting possible violations of the law. This includes making reports to a governmental agency, such as the Department of Justice or the Securities and Exchange Commission. Similarly, nothing in this Agreement prohibits you from reporting possible violations of the law or Etsy's Code of Conduct or other policies to your manager, Etsy's General Counsel, or Etsy's SVP of Human Resources, or through Etsy's whistleblower hotline. You do not need authorization from Etsy to report violations of the law or Etsy's policies and you do not have to notify Etsy that you have done so. Etsy takes its non-retaliatory culture very seriously and will not allow anyone to take adverse action, threaten, intimidate, or retaliate against you if you report a violation or a suspected violation in good faith, or cooperate with an investigation.

You may have additional rights not described in this Agreement. You may have additional rights that are not described in this Agreement. If you have any questions about your rights under this Agreement or otherwise, you should speak with a lawyer before signing this Agreement.

What you and Etsy must do to waive rights created by this Agreement. For you or Etsy to waive a right granted by this Agreement, you and an authorized representative of Etsy must explicitly agree to waive that right in writing. If either you or Etsy do not enforce a right granted by this Agreement for some period of time, that right will not be considered to have been waived. Similarly, if you or Etsy exercise one right granted by this Agreement, that will not be considered a waiver of any other right you or Etsy may have under this Agreement.

Example: You develop a piece of code for Etsy and then use that code in a website you develop for a friend. You tell your manager what you are doing and she tells you verbally that it's okay. Six months later, your VP finds out that you're using Etsy code for a non-Etsy project and asks you to stop. Neither your conversation with your manager nor the fact that six months elapsed before Etsy asked you to stop would be considered a waiver of Etsy's rights under this Agreement to control the use of the code you developed.

Etsy may assign this Agreement to certain third parties. Etsy may assign this Agreement to an affiliate, or to a third party in the case of a merger or acquisition. In the case of a merger or acquisition, as an at-will employee, you would still be free to resign at any time.

Etsy will be entitled to an injunction if you violate or threaten to violate this Agreement. Etsy could suffer serious harm if you violate this Agreement. By signing this Agreement, you agree that Etsy will be entitled to an injunction (and will not be required to post a bond) to protect itself if you breach or threaten to breach this Agreement. Note that a court has the discretion to strike or modify any part of this Agreement that it determinesis too broad or unenforceable under the specific circumstances related to your departure.

Exhibit 10.1

Section 1 of this Agreement will remain in effect after you stop working for Etsy. Whether you resign from Etsy or Etsy terminates your employment, the obligations you agreed to in Section 1 of this Agreement, including those concerning Confidential Information, ownership of your work, and non-competition, will remain in effect indefinitely.

ETSY, INC.	EMPLOYEE
By: /s/ Fred Wilson	Name: Josh Silverman
Name: Fred Wilson	Signature: /s/ Josh Silverman
Title: Lead Independent Director	Date: May 2, 2017 Email: XXXXXX

Exhibit 10.1

Appendix A

PRIOR INVENTIONS

EX-10.3

Exhibit 10.3

May 2, 2017

Chad Dickerson

Etsy, Inc.

Dear Chad:

This letter agreement (the "Agreement") confirms the agreement between you and Etsy, Inc. (the "Company") regarding your resignation.

1.     Last Date of Employment. As of May 3, 2017, you will and hereby resign from the office of Chair, President and Chief Executive Officer of the Company, as a member of the Board of Directors of the Company ("Board"), and from any and all other offices you hold with the Company or its affiliates. You will continue to be employed by the Company as an advisor from such date until May 31, 2017, which will be your last day of employment with the Company (the "Effective Date"). Through the Effective Date, you will continue to receive the same pay and (unless they are changed for other executives and your change will be no greater than proportionate) the same benefits in effect immediately prior to your resignation. As an advisor to the Company, you will cooperate in the effort to effect an orderly, smooth, and efficient transition of your duties and responsibilities and perform such duties and responsibilities as may be reasonably assigned to you.

2.     Separation Benefits. In exchange for your signing this Agreement and not revoking your acceptance of this Agreement and your continued compliance with your obligations under this Agreement and the Proprietary Information and Inventions Agreement described in Section 6, below (the "PIIA"), the Company will provide you with the following benefits:

a) Continuation of your base salary at an annualized rate of $375,000 (but not your employment) for twelve (12) months after the Effective Date, which base salary shall be paid to you in accordance with the Company's normal payroll practices;

b) A one-time payment of $156,250, which will be paid to you in a lump sum on the first payroll date following the Effective Date;

c) Reimbursement of the COBRA premiums to continue coverage under the Company's health plans for you, your spouse, and your eligible dependents for twelve (12) months

Exhibit 10.3

after the Effective Date or until such time as you are eligible for health coverage through another employer, whichever comes first;

d) Full (i.e., 100%) acceleration, on the Effective Date, of the stock options awarded to you on January 30, 2015, such that all such options will be fully vested and exercisable on and as of the Effective Date;

e) Full (i.e., 100%) acceleration, on the Effective Date, of the stock options awarded to you on March 1, 2016, such that all such options will be fully vested and exercisable on and as of the Effective Date;

f) Acceleration, on the Effective Date, of fifty percent (50%) of the restricted stock units awarded to you on March 15, 2017, such that such restricted stock units will be vested on and as of the Effective Date, and settled as soon as practicable thereafter;

g) An extension of the period following the Effective Date for you to exercise your vested options, (vested as of May 31, 2017) so that they will remain exercisable until May 31, 2018. If no trading windows in which you are pre-cleared to trade (if necessary) are opened within three hundred sixty-five (365) days following the Effective Date, you will be released from any trading restrictions imposed under the Insider Trading Policy, provided that you must at all times refrain from trading if you are in possession of material non-public information. You acknowledge, understand and agree that, as a result of the extension of the time to exercise your options, any portion of any of your options intended to be an "incentive stock option" under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") will cease to qualify as an incentive stock option (i) on the date you sign this Agreement, for any option with an exercise price less than the fair market value of the Company's common stock on the date you sign this Agreement and (ii) three months after the Effective Date for any option with an exercise price equal to or greater than the fair market value of the Company's common stock on the date you sign this Agreement and, in either case, will be treated as a nonstatutory stock option for U.S. Federal tax purposes thereafter; and

h) The Company will reimburse up to $15,000 in legal fees that you incur in connection with this Agreement.

Except for your salary through the Effective Date, any accrued but unused vacation, reimbursement of expenses you duly incur prior to the Effective Date, your entitlement to benefits under any Company benefit, stock, equity, and long-term incentive plan which are vested, and any other payments or benefits required to be paid or provided by law, you agree that you will not be entitled to any additional compensation from the Company, including any salary, bonus or incentive compensation, or other remuneration or benefits of any kind (including under your employment agreement with the Company dated as of March 24, 2015 (your "Employment Agreement")) other than as set forth in this Agreement and the Etsy, Inc. Change in Control Severance Plan ("CIC Plan") as set forth below.

Exhibit 10.3

You agree that if you violate any of your obligations under this Agreement or the PIIA, you will no longer be entitled to receive any benefits under Sections 2(a) through (h), above.

3.    Equity Grants. Your stock options and restricted stock units will vest through the Effective Date in accordance with the terms and conditions of the applicable equity plan(s) and award agreement(s) pursuant to which they were granted. Subject to the acceleration described in Section 2(d) through (f), above, and Section 6 below, any options and restricted stock units that are unvested as of the Effective Date will be forfeited in accordance with those plan(s) and agreement(s). Your vested options as of the Effective Date will remain exercisable until May 31, 2018 as described above. The award agreement(s) between you and the Company evidencing your equity awards pursuant to the Etsy, Inc. 2006 Stock Plan and the Etsy, Inc. 2015 Equity Incentive Plan will remain in full force and effect and you agree to remain bound by them. You also acknowledge and agree that you will remain bound by the terms of the Company's Insider Trading Policy, subject to Section 2(g) above.

4.    Mutual Release of

5.    All Claims. In consideration for receiving the benefits described in Section 2 above, and to the fullest extent permitted by applicable law, you hereby waive, release and promise never to assert any claims or causes of action, whether or not now known, against the Company or its predecessors, successors or past or present subsidiaries, stockholders, directors, officers, employees, consultants, attorneys, agents, assigns and employee benefit plans (collectively, including the Company, the "Company Parties") with respect to any matter, including (without limitation) any matter related to your employment with the Company or the termination of that employment, claims for attorneys' fees or costs, claims of wrongful discharge, constructive discharge, emotional distress, defamation, invasion of privacy, fraud, breach of contract or breach of the covenant of good faith and fair dealing, claims under Title†VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the New York State Human Rights Law, the New York Labor Law, and the New York City Human Rights Law; claims under any and all other federal, state, and local statutes, regulations, and laws of any type; and claims for any compensation or benefits not specifically referenced in this Agreement, including claims under your Employment Agreement, the Etsy, Inc. Severance Plan, or any Company incentive plan or bonus plan. Execution of this Agreement does not bar (i) any claim that arises hereafter, including (without limitation) a claim for breach of this Agreement, (ii) any rights you may already have to be indemnified and/or advanced or reimbursed expenses pursuant to any corporate document of the Company or its affiliates or applicable law, including the Indemnification Agreement between you and the Company dated April 15, 2015 (the "Indemnification Agreement"), or your right to be covered under any applicable directors' and officers' liability insurance policies (the Indemnification Agreement and all such corporate document or insurance policies, collectively, the "Indemnification Documents"), (iii) any rights to the benefits set forth in this Agreement and the CIC Plan as set forth below, and (iv) any rights to vested equity awards and any rights under any benefit plans of the Company under which you have a vested benefit and for which amounts are payable after the Effective Date.

Exhibit 10.3

In consideration of the release provided by you, the Company Parties waive and release to the maximum extent permitted by applicable law any and all claims or causes of action, whether or not now known, that the Company Parties have or might have against you that arise from or are in any way related to events, acts, conduct or omissions by you within the scope of your duties to the Company occurring prior to or on the date the Company signs this Agreement (collectively, the "Company Parties' Released Claims"). The Company Parties' Released Claims include (without limitation) claims arising out of or in any way related to your service with the Company, claims for breach of contract and breach of the implied covenant of good faith and fair dealing, tort claims and federal, state and local statutory claims. Notwithstanding the foregoing, the Company Parties' Released Claims shall not include, and the Company Parties are hereby not waiving or releasing, any claims based on your acts (if any) of fraud, embezzlement, gross negligence, willful misconduct, violations of federal or state securities laws, or any other acts that would disqualify you from indemnity under the Indemnification Documents or applicable law.

6.    No Admission. Nothing contained in this Agreement will constitute or be treated as an admission by you or the Company of liability, any wrongdoing or any violation of law.

7.    Other Agreements. At all times in the future, you will remain bound by the PIIA, a copy of which is attached as Exhibit†A. The Company agrees to modify the definition of the term "Competing Agreement" (as referenced in the PIIA), as follows: for purposes of this Agreement, the term "Competing Business" is defined as: (a) defined business units and/or business lines within any of the following companies, and any of their subsidiaries or parents, that operate an online marketplace: Amazon, eBay, and Alibaba; or (b) any business that develops or operates an online marketplace selling primarily the types of products sold on Etsy.com or its related websites (for example, crafts, handmade art, handmade goods, vintage goods, craft supplies); or (c) any business that develops, operates or sells software, services or tools for building or operating e-commerce websites.

In addition, if the Company experiences a Change in Control (as defined in the CIC Plan) prior to August 31, 2017, you will be entitled to receive: (1) the benefits under Sections II(1)(A) and (B) of the CIC Plan in lieu of the benefits under Sections 2(a) and (c) of this Agreement; (2) the benefits described in Sections 2(b) and 2(d) through 2(h) of this Agreement; and (3) the benefits described in Section II(1)(C) of the CIC Plan.

Except as expressly provided in this Agreement, this Agreement renders null and void all prior agreements between you and the Company (except for the Indemnification Agreement and the PIIA) and constitutes the entire agreement between you and the Company regarding the subject matter of this Agreement. This Agreement may be modified only in a written document signed by you and a duly authorized officer of the Company.

8.    Company Property. You represent that on or before the Effective Date, you will return to the Company all property that belongs to the Company, including (without limitation) copies of documents that belong to the Company and files stored on your computer(s) that contain information belonging to the Company.

Exhibit 10.3

9.    Confidentiality of Agreement. You agree that, until such time as this Agreement is disclosed publicly by the Company, you will not disclose to others the existence or terms of this Agreement, except that you may disclose such information to your spouse, attorney, or financial advisors (provided such individuals agree that they will not disclose to others the existence or terms of this Agreement).

10.    No Disparagement. You agree that you will not make any disparaging statements (orally or in writing) about the Company or its products, services, legal or business practices, past venture capital investors, known institutional investors, or current or past (as of the date of this Agreement) directors, officers, and known employees who served during your tenure at Etsy. The Company will instruct current members of the Etsy Executive Team and the Board to refrain from making any disparaging statements about you.

11.    Cooperation. You agree that you will provide reasonable cooperation with and assistance to the Company in connection with the defense or prosecution of any claim that may be made against or by the Company, or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, investigations or proceedings are related to services performed or required to be performed by you, knowledge possessed by you, or any act or omission by you. The Company will reimburse you for reasonable related expenses in connection with such cooperation.

12.    Preservation of Rights. Nothing in Sections 4, 8, 9 or 10 above, or otherwise in this Agreement, shall be construed to prevent you from (a) reporting violations of United States or other law or regulations to or (b) participating in an investigation conducted by, or providing truthful information to any government, regulatory, or self-regulatory agency in accordance with law, including but not limited to the Department of Justice, the Securities and Exchange Commission ("SEC"), the U.S. Equal Employment Opportunity Commission ("EEOC"), the Congress, and any agency Inspector General, or from making other disclosures that are protected under the whistleblower or other provisions of any applicable United States or other law or regulation. You do not need the prior authorization of the Company to make any such reports or disclosures and you are not required to notify the Company that you have made such reports or disclosures. Nevertheless, you acknowledge that you cannot recover any monetary benefit, damages, or equitable relief from the Company with respect to any of the claims released and waived in this Agreement through or from any charge filed by you with a fair employment practices agency such as the EEOC or any action commenced by a third party. However, nothing in this Agreement prevents you from obtaining a monetary award from the SEC or other government agencies for information provided to the SEC or such agencies.

13.    Public Communications. The Company will use its reasonable best efforts to allow you to review and comment on any press releases, public filings or otherwise, concerning your departure and this Agreement prior to such disclosures becoming public.

Exhibit 10.3

14.    Disclosures. You hereby represent, acknowledge, and agree that you have, prior to signing this Agreement, fully disclosed to the Board all information that you possess with respect to any violations, or potential violations, of the securities laws or any other laws and regulations with which the Company has an obligation to comply.

15.    Taxes. All payments under this Agreement will be subject to all deductions required by law, including applicable taxes and withholdings. In accordance with its normal payroll practices, the Company will mail to your home address in the Company's records any tax reporting forms it prepares in accordance with any payments made to you, at such time as those forms are prepared and/or filed. An IRS Form 1099 will be issued to you with respect to the reimbursement of legal fees described in Section 2(h), above. You will be solely responsible and liable for any taxes owed on any payments or benefits made or provided to you under this Agreement.

16.    Section 409A. The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively "Code Section 409A") and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance with Code Section 409A; provided that the Company does not guarantee to you any particular tax treatment with respect to this Agreement and any payments hereunder.

For purposes of Code Section 409A, each payment is a separate payment and your right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., "payment shall be made within ten calendar days following the date of termination"), the actual date of payment within the specified period shall be within the sole discretion of the Company. In no event may you, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered non-qualified deferred compensation.

With regard to any provision in this Agreement that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; provided, that this clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Internal Revenue Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expense was incurred.

Notwithstanding any other provision hereof, if you are, as of the Effective Date, a "specified employee" for purposes of Treas. Reg. ß 1.409A-1(i), then any amount payable to you pursuant to this Agreement that is neither a short-term deferral within the meaning of Treas. Reg. ß 1.409A-1(b)(4) nor within the involuntary separation pay limit under Treas. Reg. ß 1.409A-1

Exhibit 10.3

(b)(9)(iii)(A) will not be paid before the date that is six months after the date of termination, or if earlier, the date of your death. Any payments to which you would otherwise be entitled during such non-payment period will be accumulated and paid or otherwise provided to you on the first day of the seventh month following such date of termination, or if earlier, within thirty (30) calendar days of your death to your surviving spouse (or to your estate if your spouse does not survive you).

17.    Severability. If any term of this Agreement is held to be invalid, void or unenforceable, the remainder of this Agreement will remain in full force and effect and will in no way be affected, and the parties will use their best efforts to find an alternate way to achieve the same result.

18.    Choice of Law. This Agreement will be construed and interpreted in accordance with the laws of the State of New York (other than their choice-of-law provisions).

19.    Execution. This Agreement may be executed in counterparts, each of which will be considered an original, but all of which together will constitute one agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

20.    Effective Date and Revocation. You agree by your signature below that you had, and that the Company gave you, at least twenty-one (21) days to review and consider this Agreement before signing it, and that such period was sufficient for you to fully and completely consider all of its terms. The Company hereby advises you to discuss this Agreement with your own attorney (at your own expense) during this period if you wish to do so. You may accept this Agreement by delivering a copy of the Agreement signed by you to me within twenty-one (21) days from the day you receive the Agreement. You may revoke your acceptance of the Agreement for a period of seven (7) days after signing the Agreement by delivering written notification to me within that seven-day period. If you do not revoke your acceptance of the Agreement, it will be effective on the eighth (8th) day after you sign it. If you revoke your acceptance of this Agreement, you will not be entitled to the benefits listed in Section 2 above. You agree that you have carefully read this Agreement, fully understand what it means, and are entering into it voluntarily.

Exhibit 10.3

Please indicate your agreement with the above terms by signing below.

Very truly yours,

/s/ Fred Wilson

Fred Wilson

Lead Independent Director

Etsy, Inc.

I agree to the terms of this Agreement.

/s/ Chad Dickerson    

Signature

Chad Dickerson    

Print Name

Dated: 5-2-2017

Exhibit 10.3

EXHIBIT A

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

Exhibit 10.3

Exhibit A

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

Effective as of July 15, 2008, the following confirms an agreement between Etsy, Inc., a Delaware corporation (the Company) and the individual identified on the signature page to this Agreement. This Agreement is a material part of the consideration for my employment by the Company. In exchange for the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.    No Conflicts.    I have not made and agree not to make any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with or the rights of any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party's confidential information or intellectual property (collectively, Restricted Materials), except as expressly authorized by the Company in writing. Further, I have not retained anything containing any confidential information of a prior employer or other third party, whether or not created by me.

2.    Inventions.

a.    Definitions.    Intellectual Property Rightsmeans any and all patent rights, copyright rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefore). Invention means any idea, concept, discovery, invention, development, technology, work of authorship, trade secret, software, firmware, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, whether or not it may be patented, copyrighted or otherwise protected (including all versions, modifications, enhancements and derivative works thereof).

b.    Assignment.    To the fullest extent under applicable law, the Company shall own all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein or related thereto) that are made, conceived or reduced to practice, in whole or in part, by me during the term of my employment with the Company and which arise out of research or other activity conducted by, for or under the direction of the Company (whether or not conducted at the Company's facilities, during working hours or using Company assets), or which are useful with or relate directly or indirectly to any Company Interest (meaning any product, service, other Invention or Intellectual Property Right that is sold, leased, used or under consideration or development by the Company). I will promptly disclose and provide all of the foregoing Inventions (the Assigned Inventions) to the Company. I hereby make and agree to make all assignments to the Company necessary to accomplish the foregoing ownership. Assigned Inventions shall not include any Invention (i) that I develop entirely on my own time, (ii) without use of any Company assets and (iii) which is not useful with and does not relate to any Company Interest.

c.    Assurances.    I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company as my agent and attorney-in-fact to act for and in my behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

Exhibit 10.3

d.    Other Inventions.    If I wish to clarify that something created by me prior to my employment that relates to the Company's actual or proposed business is not within the scope of this Agreement, I have listed it on Appendix A. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise on behalf of the Company), or (ii) any Assigned Invention cannot be fully made, used, reproduced or otherwise exploited without using or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such Restricted Materials and Intellectual Property Rights therein. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

e.    Moral Rights.    To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as moral rights, artist's rights, droit moral or the like (collectively, Moral Rights). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company.

3.    Proprietary Information. I agree that all Assigned Inventions and all other financial, business, legal and technical information, including the identity of and information relating to the Company's employees, Affiliates and Business Partners (as such terms are defined below), which I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute Proprietary Information. I will hold in strict confidence and not disclose or, except within the scope of my employment, use any Proprietary Information. Proprietary Information will not include information that I can document is or becomes readily publicly available without restriction through no fault of mine. Upon termination of my employment, I will promptly return to the Company all items containing or embodying Proprietary Information (including all copies), except that I may keep my personal copies of (a) my compensation records, (b) materials distributed to shareholders generally and (c) this Agreement. I also recognize and agree that I have no expectation of privacy with respect to the Company's networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, electronic mail messages and voice messages), and that my activity and any files or messages on or using any of those systems may be monitored at any time without notice.

4.    Restricted Activities.    For the purposes of this Section 4, the term Company includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (Affiliates).

a.    Definitions.    Any Capacity includes, without limitation, to (i) be an owner, founder, shareholder, partner, member, advisor, director, consultant, contractor, agent, employee, affiliate or co-venturer, (ii) otherwise invest, engage or participate in, (iii) be compensated by or (iv) prepare to be or do any of the foregoing or assist any third party to do so; provided, Any Capacity will not include being a holder of less than one percent (1%) of the outstanding equity of a public company. Business Partner means any past, present or prospective customer, vendor, supplier, distributor or other business partner of the Company with which I have contact during my employment. Cause means to recruit, employ, retain or otherwise solicit, induce or influence (or to attempt to do so). Solicit means to (i) service, take orders from or solicit the business or patronage of any Business Partner for myself or any other person or entity, (ii) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (iii) to solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

Exhibit 10.3

b.    Acknowledgments. I acknowledge and agree that (i) the Company's business is highly competitive, secrecy of the Proprietary Information is of the utmost importance to the Company and I will learn and use Proprietary Information in performing my work for the Company and (ii) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company's success.

c.    As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to leave their employment with the Company (other than terminating subordinate employees in the course of my duties for the Company); (ii) Solicit any Business Partner; or (iii) act in Any Capacity in or with respect to any commercial activity which competes or is reasonably likely to compete with any business that the Company conducts, or demonstrably anticipates conducting, at any time during my employment (a Competing Business).

d.    After Termination. For the period of one year immediately following termination of my employment with the Company (for any or no reason, whether voluntary or involuntary), I will not directly or indirectly: (i) Cause any person to leave their employment with the Company; or (ii) Solicit any Business Partner; or (iii) act in Any Capacity in or with respect to any Competing Business located within the State of New York, the rest of the United States, or anywhere else in the world.

d.    Enforcement. I understand that the restrictions set forth in this Section 4 are intended to protect the Company's interest in its Proprietary Information and established relationships and goodwill with employees and Business Partners, and I agree that such restrictions are reasonable and appropriate for this purpose. If at any time any of the provisions of this Section 4 are deemed invalid or unenforceable or are prohibited by the laws of the state or place where they are to be performed or enforced, by reason of being vague or unreasonable as to duration or geographic scope or scope of activities restricted, or for any other reason, such provisions shall be considered divisible and shall become and be immediately amended to include only such restrictions and to such extent as shall be deemed to be reasonable and enforceable by the court or other body having jurisdiction over this Agreement. The Company and I agree that the provisions of this Section 4, as so amended, shall be valid and binding as though any invalid or unenforceable provision had not been included.

5.    Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the President of the Company (or authorized designee).

6.    Survival. I agree that my obligations under Sections 2, 3 and 4 of this Agreement shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers. My obligations under Sections 2, 3 and 4 also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement may be freely assigned by the Company to any third party.

Exhibit 10.3

7.    Governing Law; Remedies. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of New York without regard to the conflict of laws provisions thereof. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. I further agree that if one or more provisions of this Agreement are held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I also understand that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be a adequate remedy, and, therefore, the Company will be entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY THE COMPANY AND THE OTHER COUNTERPART WILL BE RETAINED BY ME.

Chad Dickerson

By: /s/ Chad Dickerson

Exhibit 10.3

Appendix A

PRIOR MATTERS

EX-10.4

Exhibit 10.4

May 3, 2017

John Allspaw

Etsy, Inc.

Dear John:

This letter agreement (the "Agreement") confirms the agreement between you and Etsy, Inc. (the "Company") regarding your resignation.

1.    Last Date of Employment. As of May 2, 2017, you will and hereby resign from the office of Chief Technology Officer of the Company and from any and all other offices you hold with the Company or its affiliates. You will continue to be employed by the Company as an advisor from such date until May 30, 2017, which will be your last day of employment with the Company (the "Effective Date"). Through the Effective Date, you will continue to receive the same pay and (unless they are changed for other executives and your change will be no greater than proportionate) the same benefits in effect immediately prior to your resignation. As an advisor to the Company, you will cooperate in the effort to effect an orderly, smooth, and efficient transition of your duties and responsibilities and perform such duties and responsibilities as may be reasonably assigned to you.

2.    Separation Benefits. In exchange for your signing this Agreement and not revoking your acceptance of this Agreement and your continued compliance with your obligations under this Agreement and the Proprietary Information and Inventions Agreement described in Section 6, below (the "PIAA"), the Company will provide you with the following benefits:

(a)    Continuation of your base salary at an annualized rate of $325,000 (but not your employment) for twelve (12) months after the Effective Date, which base salary shall be paid to you in accordance with the Company's normal payroll practices;

(b)    Reimbursement of the COBRA premiums to continue coverage under the Company's health plans for you and your eligible dependents for twelve (12) months after the Effective Date or until such time as you are eligible for health coverage through another employer, whichever comes first;

(c)    Payment for vacation days that are accrued but unused as of the Effective Date;

Exhibit 10.4

(d)    Full (i.e., 100%) acceleration, on the Effective Date, of the stock options awarded to you in October 2013, such that all such options will be fully vested and exercisable on and as of the Effective Date;

(e)    Full (i.e., 100%) acceleration, on the Effective Date, of the stock options awarded to you on November 2015, such that all such options will be fully vested and exercisable on and as of the Effective Date;

(f)    Full (i.e., 100%) acceleration, on the Effective Date, of the restricted stock units awarded to you on November 2015, such that all such restricted stock units will be fully vested on and as of the Effective Date and settled as soon as practicable thereafter;

(g)    Acceleration of fifty percent (50%), on the Effective Date, of the restricted stock units awarded to you on March 2017, such that such restricted stock units will be vested on and as of the Effective Date and settled as soon as practicable thereafter;

(h)    An extension of the period following the Effective Date for you to exercise your vested options, so that they will remain exercisable until May 30, 2018. If no trading windows in which you are pre-cleared to trade (if necessary) are opened within three hundred and sixty (360) days following the Effective Date, you will be released from any trading restrictions imposed under the Insider Trading Policy, provided that you must at all times refrain from trading if you are in possession of material non-public information. You acknowledge, understand and agree that, as a result of the extension of the time to exercise your options, any portion of any of your options intended to be an "incentive stock option" under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") will cease to qualify as an incentive stock option (i) on the date you sign this Agreement, for any option with an exercise price less than the fair market value of the Company's common stock on the date you sign this Agreement and (ii) three months after the Effective Date for any option with an exercise price equal to or greater than the fair market value of the Company's common stock on the date you sign this Agreement and, in either case, will be treated as a nonstatutory stock option for U.S. Federal tax purposes thereafter; and

(i)    The Company will pay up to $10,000 in legal fees that you incur in connection with this Agreement.

Except for your salary through the Effective Date, any accrued but unused vacation, reimbursement of expenses you duly incur prior to the Effective Date, your entitlement to benefits under any Company benefit, stock, equity, and long-term incentive plan which are vested, and any other payments or benefits required to be paid or provided by law, you agree that you will not be entitled to any additional compensation from the Company, including any salary, bonus or incentive compensation, or other remuneration or benefits of any kind (including under your November 6, 2009 offer letter or any other employment agreement or offer letter with the Company), or any severance or separation payments or benefits of any kind (including under the Etsy, Inc. Severance

Exhibit 10.4

Plan or the Company's Change in Control Severance Plan), except as specifically set forth in this Agreement.

You agree that if you violate any of your obligations under this Agreement or the PIIA, you will no longer be entitled to receive any benefits under Sections 2(a) through (h), above.

3.    Equity Grants. Your stock options and restricted stock units will vest through the Effective Date in accordance with the terms and conditions of the applicable equity plan(s) and award agreement(s) pursuant to which they were granted. Subject to the acceleration described in Section 2(d) through (g), above, any options and restricted stock units that are unvested as of the Effective Date will be forfeited in accordance with those plan(s) and agreement(s). Your vested options as of the Effective Date will remain exercisable until May 30, 2018. The award agreement(s) between you and the Company evidencing your equity awards pursuant to the Etsy, Inc. 2006 Stock Plan and the Etsy, Inc. 2015 Equity Incentive Plan will remain in full force and effect and you agree to remain bound by them. You also acknowledge and agree that you will remain bound by the terms of the Company's Insider Trading Policy, subject to Section 2(h) above.

4.    Release of All Claims. In consideration for receiving the benefits described in Section 2 above, and to the fullest extent permitted by applicable law, you hereby waive, release and promise never to assert any claims or causes of action, whether or not now known, against the Company or its predecessors, successors or past or present subsidiaries, stockholders, directors, officers, employees, consultants, attorneys, agents, assigns and employee benefit plans with respect to any matter, including (without limitation) any matter related to your employment with the Company or the termination of that employment, claims for attorneysí fees or costs, claims of wrongful discharge, constructive discharge, emotional distress, defamation, invasion of privacy, fraud, breach of contract or breach of the covenant of good faith and fair dealing, claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the New York State Human Rights Law, the New York Labor Law, and the New York City Human Rights Law; claims under any and all other federal, state, and local statutes, regulations, and laws of any type; and claims for any compensation or benefits not specifically referenced in this Agreement, including claims under your November 6, 2009 offer letter or any other employment agreement or offer letter with the Company, the Etsy, Inc. Severance Plan, the Company's Change in Control Severance Plan, or any other Company incentive plan, bonus plan, or severance plan. Execution of this Agreement does not bar (i) any claim that arises hereafter, including (without limitation) a claim for breach of this Agreement, (ii) any rights you may already have to be indemnified and/or advanced or reimbursed expenses pursuant to any corporate document of the Company or its affiliates or applicable law, including the Indemnification Agreement between you and the Company dated May 3, 2017 (the "Indemnification Agreement"), or your right to be covered under any applicable directors' and officers' liability insurance policies, (iii) any rights to the benefits set forth in this Agreement, and (iv) any rights to vested equity awards and any rights under any benefit plans of the Company under which you have a vested benefit and for which amounts are payable after the Effective Date. The Company is not aware of any pending claims against you.

Exhibit 10.4

5.    No Admission. Nothing contained in this Agreement will constitute or be treated as an admission by you or the Company of liability, any wrongdoing or any violation of law.

6.    Other Agreements. At all times in the future, you will remain bound by the PIIA, a copy of which is attached as Exhibit A.

Except as expressly provided in this Agreement, this Agreement renders null and void all prior agreements between you and the Company (except for the Indemnification Agreement and the PIIA) and constitutes the entire agreement between you and the Company regarding the subject matter of this Agreement. This Agreement may be modified only in a written document signed by you and a duly authorized officer of the Company.

7.    Company Property. You represent that on or before the Effective Date, you will return to the Company all property that belongs to the Company, including (without limitation) copies of documents that belong to the Company and files stored on your computer(s) that contain information belonging to the Company.

8.    Confidentiality of Agreement. You agree that, until such time as this Agreement is disclosed publicly by the Company, you will not disclose to others the existence or terms of this Agreement, except that you may disclose such information to your spouse, attorney, or financial advisors (provided such individuals agree that they will not disclose to others the existence or terms of this Agreement). The Company may disclose this Agreement as it is required to do by law; to its directors, officers, attorneys, accountants, senior management, and advisors; and otherwise as it otherwise determines appropriate to do in accordance with its business judgment.

9.    No Disparagement. You agree that you will not make any disparaging statements (orally or in writing) about the Company or its products, services, legal or business practices, past venture capital investors, known institutional investors, or current or past (as of the date of this Agreement) directors, officers, and known employees who served during your tenure at Etsy. The Company will instruct current members of the Etsy Executive Team and Board of Directors ("Board") to refrain from making any disparaging statements about you.

10.    Cooperation. You agree that you will provide reasonable cooperation with and assistance to the Company in connection with the defense or prosecution of any claim that may be made against or by the Company, or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, investigations or proceedings are related to services performed or required to be performed by you, knowledge possessed by you, or any act or omission by you. The Company will reimburse you for reasonable related expenses in connection with such cooperation.

11.    Preservation of Rights. Nothing in Sections 4, 8, 9 or 10 above, or otherwise in this Agreement, shall be construed to prevent you from (a) reporting violations of United States

Exhibit 10.4

or other law or regulations to or (b) participating in an investigation conducted by, or providing truthful information to any government, regulatory, or self-regulatory agency in accordance with law, including but not limited to the Department of Justice, the Securities and Exchange Commission ("SEC"), the U.S. Equal Employment Opportunity Commission ("EEOC"), the Congress, and any agency Inspector General, or from making other disclosures that are protected under the whistleblower or other provisions of any applicable United States or other law or regulation. You do not need the prior authorization of the Company to make any such reports or disclosures and you are not required to notify the Company that you have made such reports or disclosures. Nevertheless, you acknowledge that you cannot recover any monetary benefit, damages, or equitable relief from the Company with respect to any of the claims released and waived in this Agreement through or from any charge filed by you with a fair employment practices agency such as the EEOC or any action commenced by a third party. However, nothing in this Agreement prevents you from obtaining a monetary award from the SEC or other government agencies for information provided to the SEC or such agencies.

12.    Disclosures. You hereby represent, acknowledge, and agree that you have, prior to signing this Agreement, fully disclosed to the Board all information that you possess with respect to any violations, or potential violations, of the securities laws or any other laws and regulations with which the Company has an obligation to comply.

13.    Taxes. All payments under this Agreement will be subject to all deductions required by law, including applicable taxes and withholdings. In accordance with its normal payroll practices, the Company will mail to your home address in the Company's records any tax reporting forms it prepares in accordance with any payments made to you, at such time as those forms are prepared and/or filed. An IRS Form 1099 will be issued to you with respect to the reimbursement of legal fees described in Section 2 above. You will be solely responsible and liable for any taxes owed on any payments or benefits made or provided to you under this Agreement.

14.    Section 409A. The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively "Code Section 409A") and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance with Code Section 409A; provided, that the Company does not guarantee to you any particular tax treatment with respect to this Agreement and any payments hereunder.

For purposes of Code Section 409A, each payment is a separate payment and your right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., "payment shall be made within ten calendar days following the date of termination"), the actual date of payment within the specified period shall be within the sole discretion of the Company. In no event may you, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered non-qualified deferred compensation.

Exhibit 10.4

With regard to any provision in this Agreement that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; provided, that this clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Internal Revenue Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expense was incurred.

Notwithstanding any other provision hereof, if you are, as of the Effective Date, a "specified employee" for purposes of Treas. Reg. ß 1.409A-1(i), then any amount payable to you pursuant to this Agreement that is neither a short-term deferral within the meaning of Treas. Reg. ß 1.409A-1(b)(4) nor within the involuntary separation pay limit under Treas. Reg. ß 1.409A-1(b)(9)(iii)(A) will not be paid before the date that is six months after the date of termination, or if earlier, the date of your death. Any payments to which you would otherwise be entitled during such non-payment period will be accumulated and paid or otherwise provided to you on the first day of the seventh month following such date of termination, or if earlier, within thirty (30) calendar days of your death to your surviving spouse (or to your estate if your spouse does not survive you).

15.    Severability. If any term of this Agreement is held to be invalid, void or unenforceable, the remainder of this Agreement will remain in full force and effect and will in no way be affected, and the parties will use their best efforts to find an alternate way to achieve the same result.

16.    Choice of Law. This Agreement will be construed and interpreted in accordance with the laws of the State of New York (other than their choice-of-law provisions).

17.    Execution. This Agreement may be executed in counterparts, each of which will be considered an original, but all of which together will constitute one agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

18.    Effective Date and Revocation. You agree by your signature below that you had, and that the Company gave you, at least twenty-one (21) days to review and consider this Agreement before signing it, and that such period was sufficient for you to fully and completely consider all of its terms. The Company hereby advises you to discuss this Agreement with your own attorney (at your own expense) during this period if you wish to do so. You may accept this Agreement by delivering a copy of the Agreement signed by you to me within twenty-one (21) days from the day you receive the Agreement. You may revoke your acceptance of the Agreement for a period of seven (7) days after signing the Agreement by delivering written notification to me within that seven-day period. If you do not revoke your acceptance of the Agreement, it will be effective on the eighth (8th) day after you sign it. If you revoke your

Exhibit 10.4

acceptance of this Agreement, you will not be entitled to the benefits listed in Section 2 above. You agree that you have carefully read this Agreement, fully understand what it means, and are entering into it voluntarily.

Please indicate your agreement with the above terms by signing below.

Very truly yours,

/s/ Brian Christman

Brian Christman

SVP, People and Workplace

Etsy, Inc.

I agree to the terms of this Agreement.

/s/ John Allspaw    

Signature

John Allspaw    

Print Name

Dated: 5/3/2017    

Exhibit 10.4

EXHIBIT A

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

Exhibit 10.4

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

Effective as of July 15, 2008, the following confirms an agreement between Etsy, Inc., a Delaware corporation (the Company) and the individual identified on the signature page to this Agreement. This Agreement is a material part of the consideration for my employment by the Company. In exchange for the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.    No Conflicts. I have not made and agree not to make any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with or the rights of any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party's confidential information or intellectual property (collectively, Restricted Materials), except as expressly authorized by the Company in writing. Further, I have not retained anything containing any confidential information of a prior employer or other third party, whether or not created by me.

2.    Inventions.

a.    Definitions. Intellectual Property Rights means any and all patent rights, copyright rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefore). Invention means any idea, concept, discovery, invention, development, technology, work of authorship, trade secret, software, firmware, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, whether or not it may be patented, copyrighted or otherwise protected (including all versions, modifications, enhancements and derivative works thereof).

b.    Assignment. To the fullest extent under applicable law, the Company shall own all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein or related thereto) that are made, conceived or reduced to practice, in whole or in part, by me during the term of my employment with the Company and which arise out of research or other activity conducted by, for or under the direction of the Company (whether or not conducted at the Company's facilities, during working hours or using Company assets), or which are useful with or relate directly or indirectly to any Company Interest (meaning any product, service, other Invention or Intellectual Property Right that is sold, leased, used or under consideration or development by the Company). I will promptly disclose and provide all of the foregoing Inventions (the Assigned Inventions) to the Company. I hereby make and agree to make all assignments to the Company necessary to accomplish the foregoing ownership. Assigned Inventions shall not include any Invention (i) that I develop entirely on my own time, (ii) without use of any Company assets and (iii) which is not useful with and does not relate to any Company Interest.

c.    Assurances. I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company as my agent and attorney-in-fact to act for and in my behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

d.    Other Inventions. If I wish to clarify that something created by me prior to my employment that relates to the Company's actual or proposed business is not within the scope of this Agreement, I have

Exhibit 10.4

listed it on Appendix A. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise on behalf of the Company), or (ii) any Assigned Invention cannot be fully made, used, reproduced or otherwise exploited without using or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such Restricted Materials and Intellectual Property Rights therein. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

e.    Moral Rights. To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as moral rights, artist's rights, droit moral or the like (collectively, Moral Rights). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company.

3.    Proprietary Information. I agree that all Assigned Inventions and all other financial, business, legal and technical information, including the identity of and information relating to the Company's employees, Affiliates and Business Partners (as such terms are defined below), which I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute Proprietary Information. I will hold in strict confidence and not disclose or, except within the scope of my employment, use any Proprietary Information. Proprietary Information will not include information that I can document is or becomes readily publicly available without restriction through no fault of mine. Upon termination of my employment, I will promptly return to the Company all items containing or embodying Proprietary Information (including all copies), except that I may keep my personal copies of (a) my compensation records, (b) materials distributed to shareholders generally and (c) this Agreement. I also recognize and agree that I have no expectation of privacy with respect to the Company's networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, electronic mail messages and voice messages), and that my activity and any files or messages on or using any of those systems may be monitored at any time without notice.

4.    Restricted Activities. For the purposes of this Section 4, the term Company includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (Affiliates).

a.    Definitions. Any Capacity includes, without limitation, to (i) be an owner, founder, shareholder, partner, member, advisor, director, consultant, contractor, agent, employee, affiliate or co-venturer, (ii) otherwise invest, engage or participate in, (iii) be compensated by or (iv) prepare to be or do any of the foregoing or assist any third party to do so; provided, Any Capacity will not include being a holder of less than one percent (1%) of the outstanding equity of a public company. Business Partner means any past, present or prospective customer, vendor, supplier, distributor or other business partner of the Company with which I have contact during my employment. Cause means to recruit, employ, retain or otherwise solicit, induce or influence (or to attempt to do so). Solicit means to (i) service, take orders from or solicit the business or patronage of any Business Partner for myself or any other person or entity, (ii) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (iii) to solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

Exhibit 10.4

b.    Acknowledgments. I acknowledge and agree that (i) the Company's business is highly competitive, secrecy of the Proprietary Information is of the utmost importance to the Company and I will learn and use Proprietary Information in performing my work for the Company and (ii) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company's success.

c.    As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to leave their employment with the Company (other than terminating subordinate employees in the course of my duties for the Company); (ii) Solicit any Business Partner; or (iii) act in Any Capacity in or with respect to any commercial activity which competes or is reasonably likely to compete with any business that the Company conducts, or demonstrably anticipates conducting, at any time during my employment (a Competing Business).

d.    After Termination. For the period of one year immediately following termination of my employment with the Company (for any or no reason, whether voluntary or involuntary), I will not directly or indirectly: (i) Cause any person to leave their employment with the Company; or (ii) Solicit any Business Partner; or (iii) act in Any Capacity in or with respect to any Competing Business located within the State of New York, the rest of the United States, or anywhere else in the world.

d.    Enforcement. I understand that the restrictions set forth in this Section 4 are intended to protect the Company's interest in its Proprietary Information and established relationships and goodwill with employees and Business Partners, and I agree that such restrictions are reasonable and appropriate for this purpose. If at any time any of the provisions of this Section 4 are deemed invalid or unenforceable or are prohibited by the laws of the state or place where they are to be performed or enforced, by reason of being vague or unreasonable as to duration or geographic scope or scope of activities restricted, or for any other reason, such provisions shall be considered divisible and shall become and be immediately amended to include only such restrictions and to such extent as shall be deemed to be reasonable and enforceable by the court or other body having jurisdiction over this Agreement. The Company and I agree that the provisions of this Section 4, as so amended, shall be valid and binding as though any invalid or unenforceable provision had not been included.

5.    Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the President of the Company (or authorized designee).

6.    Survival. I agree that my obligations under Sections 2, 3 and 4 of this Agreement shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers. My obligations under Sections 2, 3 and 4 also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement may be freely assigned by the Company to any third party.

Exhibit 10.4

7.    Governing Law; Remedies. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of New York without regard to the conflict of laws provisions thereof. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. I further agree that if one or more provisions of this Agreement are held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I also understand that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be a adequate remedy, and, therefore, the Company will be entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY THE COMPANY AND THE OTHER COUNTERPART WILL BE RETAINED BY ME.

ETSY, INC.	EMPLOYEE
By: /s/ Sinohe Terrero	Name (PRINT): JOHN ALLSPAW
Name: Sinohe Terrero	Signature: /s/ John Allspaw
Title: VP , Fimance	/NHDate2/ Address: XXXXX

Exhibit 10.4

Appendix A

PRIOR MATTERS

EX-10.5

Exhibit 10.5

ETSY, INC.AMENDED AND RESTATED COMPENSATION PROGRAM FOR NON-EMPLOYEE DIRECTORS

EFFECTIVE AS OF JUNE 8, 2017

This program has been established in order to attract and retain non-employee directors who have the knowledge, skills and experience to serve as a member of the Board of Directors of Etsy, Inc.

All equity awards granted under this program shall be granted under the Company’s then-current equity incentive plan (or director equity incentive plan, if any). Capitalized terms used but not defined will have the meaning set forth in the applicable equity incentive plan or equity award agreement.

A.Annual Retainers

Each non-employee director who will continue serving on the Board after the Company’s regular annual meeting of stockholders will receive the Annual Board Retainer and any applicable Additional Retainers, as described below.

Annual Board Retainers

The Annual Board Retainer will be paid annually in the form of Options and/or Restricted Stock Units in the discretion of the Compensation Committee (in each case, “Equity”) with a fair value¹ equal to the Annual Board Retainer; however, a director may elect to receive a portion of the Annual Board Retainer, up to a maximum of 50%, in cash. Such election shall be made no later than December 31^st for the Annual Board Retainer to be paid in the next calendar year.

Each Annual Board Retainer Equity award will be granted on the date of the Company’s annual meeting of stockholders and will vest in full on the date of the next annual meeting of stockholders, provided that the director has served continuously as a member of the Board during the vesting period. Notwithstanding the foregoing, an Annual Board Retainer Equity award will vest in full in the event that the Company is subject to a Change in Control or in the event of the director’s death.

The portion of the Annual Board Retainer paid in cash, if any, shall be paid in full within 30 days of the Company’s annual meeting of stockholders.

Additional Retainers

____________________________

¹ “Fair value” of all Equity awards described in this Compensation Program will be calculated in accordance with the Company’s Equity Grant Policy.

1

Exhibit 10.5

Additional Retainer fees shall be paid in full in cash within 30 days of the Company’s annual meeting of stockholders.

In the event that a director’s committee service or role on a committee changes, he or she will be entitled to a pro-rated Additional Retainer, as applicable, in cash, which shall be determined based on the number of whole months of service before the next annual meeting of stockholders.

B.    New Directors

Each new, non-employee director who joins the Board on or after the date of the Company’s initial public offering will be granted Equity with a fair value equal to the New Director Fee on the first business day of the month following the month in which the his or her appointment to the Board became effective (or, if such day is not a trading day, on the following trading day). Equity awards for new directors will vest in equal annual installments on the first three anniversaries of the grant date, provided that the director has served continuously as a member of the Board through the applicable vesting date. Notwithstanding the foregoing, Equity awards for new directors will vest in full in the event that the Company is subject to a Change in Control or in the event of the director’s death.

A director who receives a New Director Fee will not receive an Annual Board Retainer in the same calendar year.

In addition, each new non-employee director shall be entitled to a pro-rated Additional Retainer, as applicable, in cash, which shall be determined based on the number of whole months that the new director serves on the Board before the next annual meeting of stockholders.

C.    Schedule of Fees

1.    AnnualBoard Retainer: Equity and/or cash with a total fair value of $175,000

2. New Director Fee: Equity with fair value on the grant date equal to $262,500

3. Additional Retainers: Cash equal to:

2

Exhibit 10.5

Lead Independent Director	$15,000
Chairman of the Audit Committee	$18,000
Member of the Audit Committee	$9,000
Chairman of the Compensation Committee	$10,000
Member of the Compensation Committee	$5,000
Chairman of the Nominating and Corporate Governance Committee	$6,000
Member of the Nominating and Corporate Governance Committee	$3,000

D. Expenses

The reasonable expenses incurred by non-employee directors in connection with attendance at Board or committee meetings or other Company-related activities will be reimbursed upon submission of appropriate documentation.

E.    Administration

This Program shall be administered by the Compensation Committee, which shall have the power to interpret these provisions and approve changes from time to time as it deems appropriate.

3

EX-10.2.2

Exhibit 10.2.2

May 4, 2017

Rachel Glaser

[Delivered electronically]

Dear Rachel,

The letter agreement between you and Etsy, Inc. ("Etsy"), dated April 2, 2017 (the "letter agreement") is amended as follows:

1. The second and third paragraphs of the letter agreement are amended and restated as follows:

You agree to that your employment will begin on May 16, 2017 ("Start Date") with the understanding that you may work remotely until June 6, 2017. Your title will be Chief Financial Officer. You will report to the Chief Executive Officer, working from our Brooklyn office. If you ever wish to change your work location, you will need prior written approval from Etsy. Your salary will be $375,000 per year and you will also be eligible for the great benefits that Etsy provides to regular, full-time employees. To the extent the terms of this offer letter conflict with any of Etsy's standardized plans referenced herein, the terms of this offer letter control.

We recognize that you will forfeit a significant amount of unvested equity and other benefits when you leave your current employer. To help offset this loss, you will also receive a signing bonus ("Signing Bonus") of $250,000 on the first administratively feasible payroll after your Start Date.

2. The definition of "Good Reason" set forth in the letter agreement is amended and restated as follows:

For purposes of the letter agreement, "Good Reason" shall mean the occurrence of any one or more of the following events without your prior written consent, unless Etsy fully corrects the circumstances constituting Good Reason (provided such circumstances are capable of correction) as provided below:

a. a material reduction by Etsy of your duties, responsibilities, authority, or reporting relationship such that you no longer serve in a substantive, senior executive role for Etsy comparable in stature to your then-current role, or you no longer report to the Chief Executive Officer of Etsy or the Board (in the circumstance where the Company does not have a Chief Executive Officer or acting Chief Executive Officer);

b. a requirement that you report to work at a Company location that is more than twenty (20) miles greater than the distance between the principal residence you establish

Exhibit 10.2.2

following your relocation to New York City and the Company's current office location in Brooklyn (provided that the change in distance is not the result of a change in your principal residence)

c. a material reduction in your Base Salary; or

d. a material breach by Etsy of its obligations under this offer letter.

Notwithstanding the foregoing, you will not be deemed to have resigned for Good Reason unless (1) you provide Etsy with written notice setting forth in reasonable detail the facts and circumstances claimed by you to constitute Good Reason within thirty (30) days after the date of the occurrence of any event that you know or should reasonably have known to constitute Good Reason, (2) Etsy fails to cure such acts or omissions within thirty (30) days following its receipt of such notice and (3) the effective date of the your resignation for Good Reason occurs no later than thirty (30) days after the expiration of Etsy's cure period.

3. The first sentence of the 10th paragraph of the letter agreement is amended and restated as follows:

Etsy will propose that you receive an equity award with a fair value at the time of the grant equal to $2,100,000, subject to the approval of the Compensation Committee.

Other than the provisions set forth above, no other changes are being made to the letter agreement and all of the other terms remain in full force and effect.

Very truly yours,

/s/ Brian Christman

Brian Christman

Senior Vice President, People and Workplace

I have read and accept this amended employment offer:

Name: Rachel Glaser

Signature: /s/ Rachel Glaser

Date: 5/4/17

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Josh Silverman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Josh Silverman____________

Josh Silverman
President and Chief Executive Officer (Principal Executive Officer)

Date: August 7, 2017

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Rachel Glaser, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Etsy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Rachel Glaser________

Rachel Glaser

Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: August 7, 2017

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Josh Silverman, certify that the Quarterly Report of Etsy, Inc. on Form 10-Q for the quarterly period ended June 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Etsy, Inc.

/s/ Josh Silverman____________

Josh Silverman

President and Chief Executive Officer (Principal Executive Officer)

Date: August 7, 2017

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Rachel Glaser, certify that the Quarterly Report of Etsy, Inc. on Form 10-Q for the quarterly period ended June 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Etsy, Inc.

/s/ Rachel Glaser

Rachel Glaser

Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: August 7, 2017

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 14, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	ETSY INC
Entity Central Index Key	0001370637
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		118,257,427

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 226,885	$ 181,592
Short-term investments	60,353	100,494
Accounts receivable, net of allowance for doubtful accounts of $1,999 and $2,278 as of December 31, 2016 and June 30, 2017, respectively	24,990	26,426
Prepaid and other current assets	28,916	15,571
Deferred tax charge—current	0	17,132
Funds receivable and seller accounts	35,084	29,817
Total current assets	376,228	371,032
Restricted cash	5,341	5,341
Property and equipment, net of accumulated depreciation and amortization of $46,153 and $56,667 as of December 31, 2016 and June 30, 2017, respectively	129,074	126,407
Goodwill	37,438	35,657
Intangible assets, net of accumulated amortization of $4,209 and $3,274 as of December 31, 2016 and June 30, 2017, respectively	5,301	7,507
Deferred tax charge—net of current portion	0	34,264
Other assets	935	985
Total assets	554,317	581,193
Current liabilities:
Accounts payable	7,595	10,978
Accrued expenses	30,377	24,179
Capital lease obligations—current	7,345	6,829
Funds payable and amounts due to sellers	35,084	29,817
Deferred revenue	5,789	5,648
Other current liabilities	2,134	6,557
Total current liabilities	88,324	84,008
Capital lease obligations—net of current portion	6,191	5,296
Deferred tax liabilities	65,028	65,068
Facility financing obligation	60,668	57,360
Other liabilities	25,827	24,704
Total liabilities	246,038	236,436
Stockholders’ equity:
Common stock ($0.001 par value, 1,400,000,000 shares authorized as of December 31, 2016 and June 30, 2017; 115,973,039 and 117,819,400 shares issued and outstanding as of December 31, 2016 and June 30, 2017, respectively)	118	116
Additional paid-in capital	462,578	442,510
Accumulated deficit	(156,542)	(116,341)
Accumulated other comprehensive income	2,125	18,472
Total stockholders’ equity	308,279	344,757
Total liabilities and stockholders’ equity	$ 554,317	$ 581,193

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 2,278	$ 1,999
Accumulated depreciation and amortization	56,667	46,153
Accumulated amortization, intangible assets	$ 3,274	$ 4,209
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	1,400,000,000	1,400,000,000
Common stock, shares issued (in shares)	117,849,400	115,973,039
Common stock, shares outstanding (in shares)	117,849,400	115,973,039

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Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Revenue	$ 101,692	$ 85,349	$ 198,583	$ 167,196
Cost of revenue	35,724	29,098	70,383	57,009
Gross profit	65,968	56,251	128,200	110,187
Operating expenses:
Marketing	27,521	17,205	50,975	33,052
Product development	21,754	11,840	39,870	24,070
General and administrative	28,411	22,537	51,174	41,613
Total operating expenses	77,686	51,582	142,019	98,735
Income (loss) from operations	(11,718)	4,669	(13,819)	11,452
Other (expense) income:
Interest expense and amortization of deferred financing costs	(2,696)	(1,803)	(5,287)	(2,341)
Interest and other income	543	470	982	911
Foreign exchange (loss) gain	16,103	(6,386)	18,883	1,734
Total other (expense) income	13,950	(7,719)	14,578	304
(Loss) income before income taxes	2,232	(3,050)	759	11,756
(Provision) benefit for income taxes	9,437	(4,261)	10,489	(17,875)
Net (loss) income	$ 11,669	$ (7,311)	$ 11,248	$ (6,119)
Net (loss) income per share attributable to common stockholders:
Basic (in dollars per share)	$ 0.10	$ (0.06)	$ 0.10	$ (0.05)
Diluted (in dollars per share)	$ 0.10	$ (0.06)	$ 0.10	$ (0.05)
Weighted average common shares outstanding:
Basic (in shares)	116,933,216	113,045,888	116,453,790	112,760,531
Diluted (in shares)	120,723,938	113,045,888	120,424,631	112,760,531

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Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ 11,669	$ (7,311)	$ 11,248	$ (6,119)
Other comprehensive income (loss):
Cumulative translation adjustment	(13,381)	4,011	(16,336)	(3,428)
Unrealized gains (losses) on marketable securities, net of tax	11	16	(11)	108
Total other comprehensive income (loss)	(13,370)	4,027	(16,347)	(3,320)
Comprehensive loss	$ (1,701)	$ (3,284)	$ (5,099)	$ (9,439)

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Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) - 6 months ended Jun. 30, 2017 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income
Balance as of December 31, 2016 at Dec. 31, 2016	$ 344,757	$ 116	$ 442,510	$ (116,341)	$ 18,472
Balance as of December 31, 2016 (in shares) at Dec. 31, 2016		115,973,039
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	11,117		11,117
Exercise of vested options	$ 6,376	$ 2	6,374
Exercise of vested options (in shares)	1,592,327	1,592,327
Vesting of restricted stock units, net of shares withheld	$ (2,029)		(2,029)
Vesting of restricted stock units, net of shares withheld (in shares)		254,034
Stock-based compensation—acquisitions	1,683		1,683
Conversion of liability-classified restricted shares upon vesting	2,838		2,838
Other comprehensive loss	(16,347)				(16,347)
Net income	11,248			11,248
Balance as of June 30, 2017 at Jun. 30, 2017	308,279	$ 118	462,578	(156,542)	$ 2,125
Balance as of June 30, 2017 (in shares) at Jun. 30, 2017		117,819,400
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect adjustment	$ (51,364)		$ 85	$ (51,449)

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities
Net (loss) income	$ 11,248	$ (6,119)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Stock-based compensation expense	10,592	6,033
Stock-based compensation expense—acquisitions	2,455	1,472
Depreciation and amortization expense	13,598	9,834
Bad debt expense	863	681
Foreign exchange gain	(18,883)	(1,734)
Amortization of debt issuance costs	110	91
Non-cash interest expense	4,368	1,287
Interest on marketable securities	302	(573)
Loss on disposal of assets	89	766
Amortization of deferred tax charge	0	9,267
Changes in operating assets and liabilities:
Accounts receivable	1,008	135
Funds receivable and seller accounts	(4,436)	(3,630)
Prepaid expenses and other current assets	(13,172)	453
Other assets	(54)	593
Accounts payable	(2,282)	(5,804)
Accrued and other current liabilities	3,928	1,288
Funds payable and amounts due to sellers	4,436	3,630
Deferred revenue	27	469
Other liabilities	1,251	1,442
Net cash provided by operating activities	15,448	19,581
Cash flows from investing activities
Purchases of property and equipment	(3,593)	(26,278)
Development of internal-use software	(6,604)	(5,611)
Purchases of marketable securities	(29,462)	(108,216)
Sales of marketable securities	69,290	19,799
Net cash (used in) provided by investing activities	29,631	(120,306)
Cash flows from financing activities
Repurchase of stock for tax on RSU vesting	(2,028)	(180)
Proceeds from exercise of stock options	6,376	2,894
Payments on capital lease obligations	(3,742)	(2,810)
Deferred payments on acquisition of business	0	(649)
Net cash used in financing activities	(618)	(745)
Effect of exchange rate changes on cash	832	(2,292)
Net (decrease) increase in cash and cash equivalents	45,293	(103,762)
Cash and cash equivalents at beginning of period	181,592	271,244
Cash and cash equivalents at end of period	226,885	167,482
Supplemental non-cash disclosures
Equipment acquired under capital lease obligations	5,152	2,074
Stock-based compensation capitalized in development of capitalized software	525	267
Non-cash additions to development of internal-use software and property and equipment	176	9,800
Payments for Facility Financing Obligation	$ (1,224)	$ 0

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

Note 1—Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

Etsy, Inc. (the “Company” or “Etsy”) was incorporated in Delaware in February 2006. Etsy is a global creative commerce platform. Etsy builds markets, services and economic opportunity for creative entrepreneurs. The Company generates revenue primarily from transaction and listing fees, Etsy Payments fees (formerly referred to as Direct Checkout fees), Promoted Listing fees and Shipping Label sales.

Basis of Consolidation

The consolidated financial statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

For the six months endedJune 30, 2016, the Company reclassified $0.5 million of excess tax benefits from exercise of stock options from cash used in financing activities to cash provided by operating activities to conform to the current year presentation upon adoption of ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting.

Unaudited Interim Financial Information

The accompanying consolidated balance sheet as of June 30, 2017, the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2016 and 2017, the consolidated statements of cash flows for the six months ended June 30, 2016 and 2017 and the consolidated statement of changes in stockholders’ equity for the six months ended June 30, 2017 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position as of June 30, 2017, results of operations for the three and six months ended June 30, 2016 and 2017 and cash flows for the six months ended June 30, 2016 and 2017. The results from these interim periods are not necessarily indicative of the results to be anticipated for the full annual period or any future period. The financial data and the other information disclosed in these notes to the consolidated financial statements related to these three and six month periods are unaudited. These unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2017 (the “Annual Report”).

During the first quarter of 2017, the Company adopted the accounting principles outlined within ASU 2016-16, Income Taxes: Intra-entity Transfers of Assets other than Inventory removing the requirement to capitalize previously reported deferred tax charges and recognize the associated amortization through the tax provision. There have been no additional material changes in the Company's significant accounting policies from those that were disclosed in the Annual Report.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting estimates that require management’s most difficult and subjective judgments include revenue recognition, income taxes, website development costs and internal-use software, purchase price allocations for business combinations, valuation of goodwill and intangible assets, leases stock-based compensation and restructuring and other exit costs. The Company evaluates its estimates and judgments on an ongoing basis and revises them when necessary. Actual results may differ from the original or revised estimates.

Income Taxes

The Company's income tax provision for interim periods is determined using an estimate of its annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. The Company updates its estimate of the annual effective tax rate each quarter and makes cumulative adjustments if its estimated annual tax rate changes.

The Company's quarterly tax provision and quarterly estimate of its annual effective tax rate are subject to significant variations due to several factors, including variability in predicting its pretax and taxable income and the mix of jurisdictions to which those relate, changes of expenses or losses for which tax benefits are not recognized and changes in the laws, regulations and administrative practices of the jurisdictions in which the Company operates.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, which replaces existing revenue recognition guidance. The new guidance is effective for the annual and interim periods beginning after December 15, 2017. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company has performed a preliminary assessment of its Markets and Seller Services revenue streams and, while the Company is still finalizing the identification of its performance obligations, it does not expect the adoption of this standard to have a material impact on its revenue recognition on an ongoing basis. The Company is also performing an assessment over data availability and the presentation that will be necessary to meet additional disclosure requirements pursuant to this guidance. In addition, the Company continues to monitor additional changes, modifications, clarifications or interpretations related to this guidance being undertaken by the FASB, which may impact current conclusions.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. The new guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Upon adoption of this standard, the Company expects to recognize, on a discounted basis, its minimum commitments under noncancelable operating leases on the consolidated balance sheets resulting in the recording of right of use assets and lease obligations. The Company is currently evaluating whether there are any additional impacts this guidance will have on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The new guidance is effective for the annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements, but does not expect it to have a significant impact on its consolidated financial statements because its balance of restricted cash does not change significantly from period to period.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, to clarify the definition of a business and provide guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance is to be applied on a prospective basis and is effective for the annual and interim periods beginning after December 15, 2017. As the adoption of this standard will only impact prospective acquisitions, the Company does not anticipate that this update will have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, to simplify the measurement of goodwill impairment by eliminating step two from the goodwill impairment test. The new guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The new guidance is effective for the annual and interim periods beginning after December 15, 2019 and early adoption is permitted. The Company expects to adopt this guidance in the fourth quarter of 2017 and does not anticipate the update to have a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting, to increase comparability and provide clarity on whether changes in the terms or conditions in a share-based payment award require a reporting entity to apply modification guidance per FASB Accounting Standards Codification Topic 718. The new guidance is to be applied on a prospective basis, is effective for the annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting, for share-based payment transactions that require a reporting entity to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement. The new guidance is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period. The Company adopted this standard in the first quarter of 2017. As a result of this updated guidance, the Company recorded $2.6 million and $2.9 million of excess tax benefits to income tax expense, rather than additional paid-in capital, in the three and six months endedJune 30, 2017. On a prospective basis, the Company has updated its calculation of diluted earnings per share to exclude excess tax benefits previously included in the calculation of assumed proceeds under the treasury stock method. The Company has elected to apply the updated guidance on cash flow classification of excess tax benefits as operating activities using a retrospective approach for consistent year-over-year comparability. The Company has elected to recognize forfeitures as they occur on a modified retrospective basis and to adopt the amendments on statutory withholding requirements on a prospective basis, both of which have no material impact to the consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-entity Transfers of Assets other than Inventory, which eliminated the exception that previously existed for the income tax consequences of intra-entity asset transfers other than inventory. The new guidance is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted in annual reporting periods for which interim or annual financial statements have not been issued. The Company has adopted this standard in the first quarter of 2017. The amendments in this update have been applied on a modified retrospective basis through a cumulative effect adjustment recorded to retained earnings as of January 1, 2017 of $51.4 million, which represents the unamortized amount of the deferred tax charge asset on the balance sheet at December 31, 2016. Consequently, the adoption of this standard eliminates the recognition in the tax provision of $17.1 million in each year through 2019, the year through which the deferred tax charge was previously amortizable. Additionally, a deferred tax asset of $21.7 million was recognized which previously qualified for an exception that has been eliminated. A full valuation allowance for that deferred tax asset was also recognized resulting in no impact to the consolidated financial statements.

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Stock-based Compensation

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Note 2—Stock-based Compensation

The Company granted stock options and restricted stock units (“RSUs”) under its 2015 Equity Incentive Plan (“2015 Plan”) in the three months ended June 30, 2017. As permitted by the 2015 Plan, the Board of Directors approved an increase of 5,798,651 shares to the total number of shares available for issuance under the 2015 Plan as of January 3, 2017. At June 30, 2017, 23,347,913 shares were authorized under the 2015 Plan, and 13,407,187 shares were available for future grant.

In the first quarter of 2017, the Company made an accounting policy election to recognize forfeitures as they occur upon adoption of guidance per ASU 2016-09. In reporting periods prior to 2017, the Company estimated forfeitures at the time of grant and revised in subsequent periods as necessary if actual forfeitures differed from estimates.

The fair value of options granted in the periods presented below using the Black-Scholes pricing model has been based on the following assumptions:

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2016	2017	2016	2017
Volatility	44.3% - 44.6%	41.7% - 44.2%	44.2% - 44.6%	41.7% - 44.2%
Risk-free interest rate	1.2% - 1.5%	1.9% - 2.0%	1.2% - 1.9%	1.9% - 2.2%
Expected term (in years)	5.5 - 6.3	5.5 - 6.3	5.5 - 6.3	5.5 - 6.3
Dividend rate	—%	—%	—%	—%

The following table summarizes the activity for the Company's options during the period presented below:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2016	9,339,567		$	7.89
Granted	5,473,601		10.77
Exercised	(1,592,327	)	4.00
Forfeited/Canceled	(718,334	)	10.80
Outstanding at June 30, 2017	12,502,507		9.47		6.60	$	71,404
Total exercisable at June 30, 2017	6,069,330		7.87		3.59	45,027

The following table summarizes the weighted average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested in the three and six months endedJune 30, 2016 and 2017 (in thousands except per share amounts):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
Weighted average grant date fair value of options granted	$	4.09	$	4.73	$	3.78	$	4.71
Intrinsic value of options exercised	3,722		11,135		6,110		12,866
Fair value of awards vested	2,873		6,695		6,209		10,485

The total unrecognized compensation expense at June 30, 2017 related to the Company's options was $29.6 million, which will be recognized over an estimated weighted-average amortization period of 3.44 years.

The following table summarizes the activity for the Company's unvested RSUs during the period presented below:

	Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2016	3,135,181		$	10.70
Granted	1,775,586		11.14
Vested	(433,174	)	9.39
Forfeited/Canceled	(473,653	)	10.50
Unvested at June 30, 2017	4,003,940		11.06

The total unrecognized compensation expense at June 30, 2017 related to the Company's unvested RSUs was $38.8 million, which will be recognized over an estimated weighted-average amortization period of 3.03 years.

Total stock-based compensation expense included in the consolidated statements of operations for the periods presented below is as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
Cost of revenue	$	250	$	398	$	451	$	762
Marketing	221		528		402		972
Product development	1,026		2,053		1,883		4,073
General and administrative	2,771		5,183		4,769		7,240
Total stock-based compensation expense	$	4,268	$	8,162	$	7,505	$	13,047

Total stock-based compensation expense in the three months ended June 30, 2016 and 2017 includes $0.8 million and $1.6 million in acquisition-related stock-based compensation expense, respectively. Total stock-based compensation expense in the six months ended June 30, 2016 and 2017 includes $1.5 million and $2.5 million in acquisition-related stock-based compensation expense, respectively.

Total stock-based compensation expense in the three and six months endedJune 30, 2017 includes $1.7 million of costs associated with the Actions (as defined below) approved by the Board of Directors during the second quarter of 2017 discussed in “Note 9—Restructuring and Other Exit Costs.”

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Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Note 3—Income Taxes

The Company adopted the provisions of ASU 2016-09 and ASU 2016-16 as of the beginning of the current fiscal year. Please refer to “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for additional detail regarding the adoption of these accounting standards and their impact on the consolidated financial statements.

Included in the tax benefit for the three and six months endedJune 30, 2017 is a discrete benefit of $3.0 million related to the costs discussed in “Note 9—Restructuring and Other Exit Costs.”

The amount of unrecognized tax benefits included in the consolidated balance sheets increased$0.3 million in the six months ended June 30, 2017, from $23.6 million at December 31, 2016 to $23.9 million at June 30, 2017. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $23.9 million at June 30, 2017.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 4—Fair Value Measurements

The Company has characterized its investments in marketable securities, based on the priority of the inputs used to value the investments, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), and lowest priority to unobservable inputs (Level 3). If the inputs used to measure the investments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the investment. Investments recorded in the accompanying consolidated balance sheet are categorized based on the inputs to valuation techniques as follows:

Level 1—These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the Company has the ability to access.

Level 2—These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3—These are liabilities where values are derived from techniques in which one or more significant inputs are unobservable.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and June 30, 2017 (in thousands):

	As of December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Commercial Paper	$	—	$	2,997	$	—	$	2,997
Money market funds	98,161		—		—		98,161
U.S. Government bills	1,950		—		—		1,950
	100,111		2,997		—		103,108
Short-term investments:
Commercial paper	—		17,146		—		17,146
Corporate bonds	—		33,303		—		33,303
U.S. Government and agency bills	50,045		—		—		50,045
	50,045		50,449		—		100,494
	$	150,156	$	53,446	$	—	$	203,602
Liability
Post-combination compensation classified as liability	$	—	$	—	$	2,067	$	2,067
	$	—	$	—	$	2,067	$	2,067

	As of June 30, 2017
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Commercial Paper	$	—	$	32,570	$	—	$	32,570
Money market funds	88,819		—		—		88,819
U.S. Government and agency bills	20,177		—		—		20,177
	108,996		32,570		—		141,566
Short-term investments:
Commercial paper	—		9,764		—		9,764
Corporate bonds	—		17,335		—		17,335
U.S. Government and agency bills	33,254		—		—		33,254
	33,254		27,099		—		60,353
	$	142,250	$	59,669	$	—	$	201,919

Level 1 instruments include money market funds and AAA-rated U.S. Government and agency securities, which are valued based on inputs including quotes from broker-dealers or recently executed transactions in the same or similar securities.

Level 2 instruments include fixed-income funds consisting of investments in commercial paper and corporate bonds, which are valued based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3 instruments include post-combination compensation classified as a liability in connection with the acquisition of ALM. The post-combination compensation was classified as a liability due to its affiliation with a related put option, which expired upon vesting of the underlying consideration in the second quarter of 2017, and its fair value was previously determined based on the fair value of the Company's common stock at the period-end reporting date, with adjustments included in general and administrative expenses.

The table below provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3) (in thousands):

	Six Months Ended   June 30, 2017
Balance at beginning of period	$	2,067
Changes to liability-classified stock awards	771
Conversion of liability-classified restricted shares upon vesting	(2,838		)
Balance at end of period	$	—

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Marketable Securities

6 Months Ended

Jun. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Note 5—Marketable Securities

Short-term investments and certain cash equivalents consist of marketable securities that are available-for-sale. The cost and fair value of available-for-sale securities were as follows as of the dates indicated (in thousands):

	Cost		Gross Unrealized Holding Loss			Gross Unrealized Holding Gain		Fair Value
December 31, 2016
Cash equivalents:
Commercial paper	$	2,997	$	—		$	—	$	2,997
	2,997		—			—		2,997
Short-term investments:
Commercial paper	17,146		—			—		17,146
Corporate bonds	33,318		(16		)	1		33,303
U.S. Government and agency bills	50,059		(15		)	1		50,045
	100,523		(31		)	2		100,494
	$	103,520	$	(31	)	$	2	$	103,491
June 30, 2017
Cash equivalents:
Commercial paper	$	32,570	$	—		$	—	$	32,570
U.S. Government and agency bills	20,177		—			—		20,177
	52,747		—			—		52,747
Short-term investments:
Commercial paper	9,764		—			—		9,764
Corporate bonds	17,349		(14		)	—		17,335
U.S. Government and agency bills	33,280		(26		)	—		33,254
	60,393		(40		)	—		60,353
	$	113,140	$	(40	)	$	—	$	113,100

The Company’s investments in marketable securities consist primarily of investments in fixed-income funds and AAA-rated U.S. Government and agency bills. When evaluating investments for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and the Company’s ability and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery in market value. The Company evaluates fair values for each individual security in the investment portfolio.

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

Note 6—Net (Loss) Income Per Share

The following table presents the calculation of basic and diluted net (loss) income per share for periods presented (in thousands except share and per share amounts):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
Numerator:
Net (loss) income	$	(7,311	)	$	11,669		$	(6,119	)	$	11,248
Net income allocated to participating securities under the two-class method	—			(17		)	—			(16		)
Net (loss) income applicable to common stockholders—basic	(7,311		)	11,652			(6,119		)	11,232
Dilutive effect of net income allocated to participating securities under the two-class method	—			17			—			16
Change in fair value of liability classified restricted stock	—			832			—			771
Net (loss) income applicable to common stockholders—diluted	$	(7,311	)	$	12,501		$	(6,119	)	$	12,019
Denominator:
Weighted average common shares outstanding—basic (1)	113,045,888			116,933,216			112,760,531			116,453,790
Common equivalent shares from options to purchase common stock and restricted stock units	—			2,921,081			—			3,118,640
Dilutive effect of assumed conversion of restricted stock units	—			844,331			—			838,890
Dilutive effect of assumed conversion of restricted stock from acquisition	—			25,310			—			13,311
Weighted average common shares outstanding—diluted	113,045,888			120,723,938			112,760,531			120,424,631
Net (loss) income per share applicable to common stockholders—basic	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10
Net (loss) income per share applicable to common stockholders—diluted	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10

(1) 172,445 shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for the three and six months endedJune 30, 2017.

The following potential common shares were excluded from the calculation of diluted net (loss) 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,
	2016	2017	2016	2017
Stock options	11,129,114	6,201,891	11,155,837	4,451,613
Restricted stock units	1,941,768	648,762	1,395,452	1,065,495
Warrants	36,590	—	67,261	—
Total anti-dilutive securities	13,107,472	6,850,653	12,618,550	5,517,108

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Segment and Geographic Information

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segment and Geographic Information

Note 7—Segment and Geographic Information

The Company has determined it operates as one operating and reportable segment for purposes of allocating resources and evaluating financial performance.

Revenue by country is based on the billing address of the seller. The following table summarizes revenue by geographic area for the periods presented (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
United States	$	64,773	$	73,546	$	127,814	$	145,068
International	20,576		28,146		39,382		53,515
Revenue	$	85,349	$	101,692	$	167,196	$	198,583

No individual country’s revenue other than the United States exceeded 10% of total revenue for the periods presented. All significant long-lived assets are located in the United States.

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Contingencies

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Note 8—Contingencies

Non-Income Tax Contingencies

The Company had reserves of $0.3 million and $0.4 million at December 31, 2016 and June 30, 2017, respectively, for certain non-income tax obligations, representing management’s best estimate of its potential liability. The Company could also be subject to examination in various jurisdictions related to non-income tax matters. The resolution of these types of matters, if in excess of the recorded reserve, could have an adverse impact on the Company’s business.

Legal Proceedings

On May 13, 2015, a purported securities class action complaint (Altayyar v. Etsy, Inc., et al., Docket No. 1:15-cv-02785) was filed in the United States District Court for the Eastern District of New York against the Company and certain officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of the Company's common stock from April 16, 2015 through and including May 10, 2015. It asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false or misleading statements and omissions with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement and actions taken by third-party brands against Etsy sellers for trademark or copyright infringement. 

On October 22, 2015, the court appointed a lead plaintiff and lead plaintiff’s counsel. On January 21, 2016, the lead plaintiff filed an amended class action complaint alleging false or misleading statements or omissions with respect to substantially the same topics as the original complaint. The amended complaint adds certain outside directors and underwriters as defendants, expands the purported class period to be April 16, 2015 to August 4, 2015, inclusive, and asserts violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The amended complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. On April 5, 2016, defendants moved to dismiss the amended complaint.  On March 24, 2017, the court entered a judgment dismissing the amended complaint in its entirety, with prejudice, based on an opinion filed March 16, 2017. On August 2, 2017, Plaintiffs appealed to the United States Court of Appeals for the Second Circuit.

The Company and the named officers and directors intend to defend themselves vigorously against this action. In light of, among other things, the early stage of the litigation, the Company is unable to predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.

On July 21, 2015, a purported securities class action complaint (Cervantes v. Dickerson, et.al., Case No. CIV 534768) was filed in the Superior Court of State of California, County of San Mateo against the Company, certain officers, directors and underwriters. The complaint asserts violations of Sections 11 and 15 of the Securities Act of 1933.  As in the Altayyar litigation, the complaint alleges misrepresentations in the Company’s Registration Statement on Form S-1 and Prospectus with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. On December 7, 2015, the Company and the underwriter defendants moved to stay the Cervantes action on the grounds of forum non conveniens.

On November 5, 2015, another purported securities class action complaint (Weiss v. Etsy et al., No. CIV 536123) was filed in the Superior Court of State of California, County of San Mateo. The Weiss complaint names as defendants the Company and the same officers, directors and underwriters named in the Cervantes complaint, and also asserts violations of Sections 11 and 15 of the Securities Act of 1933 based on allegedly false or misleading statements or omissions with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement. On December 24, 2015, the court consolidated the Cervantes and Weiss actions. The Company and the named officers and directors intend to defend themselves vigorously against these consolidated actions. In light of, among other things, the early stage of the litigation, the Company is unable to predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome. On February 3, 2016, the court granted the Company’s motion to stay the consolidated actions. 

In addition, from time to time in the normal course of business, various other claims and litigation have been asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability for damages. Any claims or litigation, regardless of their success, could have an adverse effect on the Company’s consolidated results of operations or cash flows in the period the claims or litigation are resolved. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business.

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Restructuring and Other Exit Costs

6 Months Ended

Jun. 30, 2017

Restructuring and Related Activities [Abstract]

Restructuring and Other Exit Costs

Note 9—Restructuring and Other Exit Costs

On April 30, 2017, the Board of Directors approved a plan to increase efficiency and streamline the Company's cost structure through headcount reductions and a reduction in internal program expenses (the “May Actions”). On June 16, 2017, the Board of Directors approved additional initiatives that are designed to improve focus on key strategic growth opportunities (together with the May Actions, the “Actions”). The Actions included total headcount reductions of 245 positions or 23% of the total workforce as of December 31, 2016, closing A Little Market (“ALM”), a market in France, and closing or consolidating certain international offices.

In connection with the Actions, the Company expects to incur restructuring and other exit costs, comprised of employee severance, stock compensation modifications and other exit costs, of $12.3 million to $16.6 million, largely made up of cash expenditures. For the three months ended June 30, 2017, $11.3 million of these costs have been incurred, including $9.0 million of severance charges, $1.7 million of stock modification charges and $0.6 million of other exit costs. The remaining $1.0 million to $5.3 million of expected costs and all remaining cash payments are expected to be recognized over the remainder of 2017. The remaining range of expected costs relates primarily to uncertainty in the amount of exit costs that will be recognized in connection with the ultimate disposition of one of the Company's international offices.

The following table displays restructuring and other exit costs recorded related to the Actions and a rollforward of the charges to the accrued expenses balance as of June 30, 2017 (in thousands):

	Severance Charge			Stock-Based Compensation			Other Exit Costs			Total
Balance, December 31, 2016	$	—		$	—		$	—		$	—
Total restructuring and other exit costs	8,972			1,668			620			11,260
Costs charged against equity/assets	—			(1,668		)	—			(1,668		)
Cash payments	(2,110		)	—			(278		)	(2,388		)
Balance, June 30, 2017	$	6,862		$	—		$	342		$	7,204

Total restructuring and other exit costs related to the Actions included in the consolidated statements of operations are as follows (in thousands):

	Three and Six Months Ended
	June 30, 2017
Cost of revenue	$	694
Marketing	2,349
Product development	3,101
General and administrative	5,116
Total restructuring and other exit costs	$	11,260

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Consolidation

Basis of Consolidation

The consolidated financial statements include the accounts of Etsy and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Reclassifications

For the six months endedJune 30, 2016, the Company reclassified $0.5 million of excess tax benefits from exercise of stock options from cash used in financing activities to cash provided by operating activities to conform to the current year presentation upon adoption of ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting.

Use of Estimates

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting estimates that require management’s most difficult and subjective judgments include revenue recognition, income taxes, website development costs and internal-use software, purchase price allocations for business combinations, valuation of goodwill and intangible assets, leases stock-based compensation and restructuring and other exit costs. The Company evaluates its estimates and judgments on an ongoing basis and revises them when necessary. Actual results may differ from the original or revised estimates.

Income Tax

Income Taxes

The Company's income tax provision for interim periods is determined using an estimate of its annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. The Company updates its estimate of the annual effective tax rate each quarter and makes cumulative adjustments if its estimated annual tax rate changes.

The Company's quarterly tax provision and quarterly estimate of its annual effective tax rate are subject to significant variations due to several factors, including variability in predicting its pretax and taxable income and the mix of jurisdictions to which those relate, changes of expenses or losses for which tax benefits are not recognized and changes in the laws, regulations and administrative practices of the jurisdictions in which the Company operates.

Recently Issued and Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, which replaces existing revenue recognition guidance. The new guidance is effective for the annual and interim periods beginning after December 15, 2017. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company has performed a preliminary assessment of its Markets and Seller Services revenue streams and, while the Company is still finalizing the identification of its performance obligations, it does not expect the adoption of this standard to have a material impact on its revenue recognition on an ongoing basis. The Company is also performing an assessment over data availability and the presentation that will be necessary to meet additional disclosure requirements pursuant to this guidance. In addition, the Company continues to monitor additional changes, modifications, clarifications or interpretations related to this guidance being undertaken by the FASB, which may impact current conclusions.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. The new guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Upon adoption of this standard, the Company expects to recognize, on a discounted basis, its minimum commitments under noncancelable operating leases on the consolidated balance sheets resulting in the recording of right of use assets and lease obligations. The Company is currently evaluating whether there are any additional impacts this guidance will have on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The new guidance is effective for the annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements, but does not expect it to have a significant impact on its consolidated financial statements because its balance of restricted cash does not change significantly from period to period.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, to clarify the definition of a business and provide guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance is to be applied on a prospective basis and is effective for the annual and interim periods beginning after December 15, 2017. As the adoption of this standard will only impact prospective acquisitions, the Company does not anticipate that this update will have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, to simplify the measurement of goodwill impairment by eliminating step two from the goodwill impairment test. The new guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The new guidance is effective for the annual and interim periods beginning after December 15, 2019 and early adoption is permitted. The Company expects to adopt this guidance in the fourth quarter of 2017 and does not anticipate the update to have a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting, to increase comparability and provide clarity on whether changes in the terms or conditions in a share-based payment award require a reporting entity to apply modification guidance per FASB Accounting Standards Codification Topic 718. The new guidance is to be applied on a prospective basis, is effective for the annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting, for share-based payment transactions that require a reporting entity to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement. The new guidance is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted for financial statements as of the beginning of an interim or annual reporting period. The Company adopted this standard in the first quarter of 2017. As a result of this updated guidance, the Company recorded $2.6 million and $2.9 million of excess tax benefits to income tax expense, rather than additional paid-in capital, in the three and six months endedJune 30, 2017. On a prospective basis, the Company has updated its calculation of diluted earnings per share to exclude excess tax benefits previously included in the calculation of assumed proceeds under the treasury stock method. The Company has elected to apply the updated guidance on cash flow classification of excess tax benefits as operating activities using a retrospective approach for consistent year-over-year comparability. The Company has elected to recognize forfeitures as they occur on a modified retrospective basis and to adopt the amendments on statutory withholding requirements on a prospective basis, both of which have no material impact to the consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-entity Transfers of Assets other than Inventory, which eliminated the exception that previously existed for the income tax consequences of intra-entity asset transfers other than inventory. The new guidance is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted in annual reporting periods for which interim or annual financial statements have not been issued. The Company has adopted this standard in the first quarter of 2017. The amendments in this update have been applied on a modified retrospective basis through a cumulative effect adjustment recorded to retained earnings as of January 1, 2017 of $51.4 million, which represents the unamortized amount of the deferred tax charge asset on the balance sheet at December 31, 2016. Consequently, the adoption of this standard eliminates the recognition in the tax provision of $17.1 million in each year through 2019, the year through which the deferred tax charge was previously amortizable. Additionally, a deferred tax asset of $21.7 million was recognized which previously qualified for an exception that has been eliminated. A full valuation allowance for that deferred tax asset was also recognized resulting in no impact to the consolidated financial statements.

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Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Black-Scholes Valuation Assumptions Used to Determine Fair Value of Options Granted

The fair value of options granted in the periods presented below using the Black-Scholes pricing model has been based on the following assumptions:

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2016	2017	2016	2017
Volatility	44.3% - 44.6%	41.7% - 44.2%	44.2% - 44.6%	41.7% - 44.2%
Risk-free interest rate	1.2% - 1.5%	1.9% - 2.0%	1.2% - 1.9%	1.9% - 2.2%
Expected term (in years)	5.5 - 6.3	5.5 - 6.3	5.5 - 6.3	5.5 - 6.3
Dividend rate	—%	—%	—%	—%

Summary of Stock Option Activity

The following table summarizes the activity for the Company's options during the period presented below:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contract Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2016	9,339,567		$	7.89
Granted	5,473,601		10.77
Exercised	(1,592,327	)	4.00
Forfeited/Canceled	(718,334	)	10.80
Outstanding at June 30, 2017	12,502,507		9.47		6.60	$	71,404
Total exercisable at June 30, 2017	6,069,330		7.87		3.59	45,027

Summary of Intrinsic Value of Options Exercised and Fair Value of Awards Vested

The following table summarizes the weighted average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested in the three and six months endedJune 30, 2016 and 2017 (in thousands except per share amounts):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
Weighted average grant date fair value of options granted	$	4.09	$	4.73	$	3.78	$	4.71
Intrinsic value of options exercised	3,722		11,135		6,110		12,866
Fair value of awards vested	2,873		6,695		6,209		10,485

Summary of Unvested RSU Activity

The following table summarizes the activity for the Company's unvested RSUs during the period presented below:

	Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2016	3,135,181		$	10.70
Granted	1,775,586		11.14
Vested	(433,174	)	9.39
Forfeited/Canceled	(473,653	)	10.50
Unvested at June 30, 2017	4,003,940		11.06

Schedule of Stock-Based Compensation Expense

Total stock-based compensation expense included in the consolidated statements of operations for the periods presented below is as follows (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
Cost of revenue	$	250	$	398	$	451	$	762
Marketing	221		528		402		972
Product development	1,026		2,053		1,883		4,073
General and administrative	2,771		5,183		4,769		7,240
Total stock-based compensation expense	$	4,268	$	8,162	$	7,505	$	13,047

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Major Categories of Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and June 30, 2017 (in thousands):

	As of December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Commercial Paper	$	—	$	2,997	$	—	$	2,997
Money market funds	98,161		—		—		98,161
U.S. Government bills	1,950		—		—		1,950
	100,111		2,997		—		103,108
Short-term investments:
Commercial paper	—		17,146		—		17,146
Corporate bonds	—		33,303		—		33,303
U.S. Government and agency bills	50,045		—		—		50,045
	50,045		50,449		—		100,494
	$	150,156	$	53,446	$	—	$	203,602
Liability
Post-combination compensation classified as liability	$	—	$	—	$	2,067	$	2,067
	$	—	$	—	$	2,067	$	2,067

	As of June 30, 2017
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Commercial Paper	$	—	$	32,570	$	—	$	32,570
Money market funds	88,819		—		—		88,819
U.S. Government and agency bills	20,177		—		—		20,177
	108,996		32,570		—		141,566
Short-term investments:
Commercial paper	—		9,764		—		9,764
Corporate bonds	—		17,335		—		17,335
U.S. Government and agency bills	33,254		—		—		33,254
	33,254		27,099		—		60,353
	$	142,250	$	59,669	$	—	$	201,919

Reconciliation of the Beginning and Ending Balances for Liabilities Measured at Fair Value using Significant Unobservable Inputs

The table below provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3) (in thousands):

	Six Months Ended   June 30, 2017
Balance at beginning of period	$	2,067
Changes to liability-classified stock awards	771
Conversion of liability-classified restricted shares upon vesting	(2,838		)
Balance at end of period	$	—

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Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Cost and Fair Value of Available-for-sale Securities

The cost and fair value of available-for-sale securities were as follows as of the dates indicated (in thousands):

	Cost		Gross Unrealized Holding Loss			Gross Unrealized Holding Gain		Fair Value
December 31, 2016
Cash equivalents:
Commercial paper	$	2,997	$	—		$	—	$	2,997
	2,997		—			—		2,997
Short-term investments:
Commercial paper	17,146		—			—		17,146
Corporate bonds	33,318		(16		)	1		33,303
U.S. Government and agency bills	50,059		(15		)	1		50,045
	100,523		(31		)	2		100,494
	$	103,520	$	(31	)	$	2	$	103,491
June 30, 2017
Cash equivalents:
Commercial paper	$	32,570	$	—		$	—	$	32,570
U.S. Government and agency bills	20,177		—			—		20,177
	52,747		—			—		52,747
Short-term investments:
Commercial paper	9,764		—			—		9,764
Corporate bonds	17,349		(14		)	—		17,335
U.S. Government and agency bills	33,280		(26		)	—		33,254
	60,393		(40		)	—		60,353
	$	113,140	$	(40	)	$	—	$	113,100

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Net Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Schedule of Calculation of Basic and Diluted Net (Loss) Income Per Share

The following table presents the calculation of basic and diluted net (loss) income per share for periods presented (in thousands except share and per share amounts):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2017			2016			2017
Numerator:
Net (loss) income	$	(7,311	)	$	11,669		$	(6,119	)	$	11,248
Net income allocated to participating securities under the two-class method	—			(17		)	—			(16		)
Net (loss) income applicable to common stockholders—basic	(7,311		)	11,652			(6,119		)	11,232
Dilutive effect of net income allocated to participating securities under the two-class method	—			17			—			16
Change in fair value of liability classified restricted stock	—			832			—			771
Net (loss) income applicable to common stockholders—diluted	$	(7,311	)	$	12,501		$	(6,119	)	$	12,019
Denominator:
Weighted average common shares outstanding—basic (1)	113,045,888			116,933,216			112,760,531			116,453,790
Common equivalent shares from options to purchase common stock and restricted stock units	—			2,921,081			—			3,118,640
Dilutive effect of assumed conversion of restricted stock units	—			844,331			—			838,890
Dilutive effect of assumed conversion of restricted stock from acquisition	—			25,310			—			13,311
Weighted average common shares outstanding—diluted	113,045,888			120,723,938			112,760,531			120,424,631
Net (loss) income per share applicable to common stockholders—basic	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10
Net (loss) income per share applicable to common stockholders—diluted	$	(0.06	)	$	0.10		$	(0.05	)	$	0.10

(1) 172,445 shares of unvested stock are considered participating securities and are excluded from basic shares outstanding for the three and six months endedJune 30, 2017.

Schedule of Anti-Dilutive Securities Excluded from Computation of Earnings Per Share

The following potential common shares were excluded from the calculation of diluted net (loss) 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,
	2016	2017	2016	2017
Stock options	11,129,114	6,201,891	11,155,837	4,451,613
Restricted stock units	1,941,768	648,762	1,395,452	1,065,495
Warrants	36,590	—	67,261	—
Total anti-dilutive securities	13,107,472	6,850,653	12,618,550	5,517,108

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Segment and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Schedule of Revenue by Geographic Area

The following table summarizes revenue by geographic area for the periods presented (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2017		2016		2017
United States	$	64,773	$	73,546	$	127,814	$	145,068
International	20,576		28,146		39,382		53,515
Revenue	$	85,349	$	101,692	$	167,196	$	198,583

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Restructuring and Other Exit Costs (Tables)

6 Months Ended

Jun. 30, 2017

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Reserve by Type of Cost

The following table displays restructuring and other exit costs recorded related to the Actions and a rollforward of the charges to the accrued expenses balance as of June 30, 2017 (in thousands):

	Severance Charge			Stock-Based Compensation			Other Exit Costs			Total
Balance, December 31, 2016	$	—		$	—		$	—		$	—
Total restructuring and other exit costs	8,972			1,668			620			11,260
Costs charged against equity/assets	—			(1,668		)	—			(1,668		)
Cash payments	(2,110		)	—			(278		)	(2,388		)
Balance, June 30, 2017	$	6,862		$	—		$	342		$	7,204

Restructuring and Related Costs

Total restructuring and other exit costs related to the Actions included in the consolidated statements of operations are as follows (in thousands):

	Three and Six Months Ended
	June 30, 2017
Cost of revenue	$	694
Marketing	2,349
Product development	3,101
General and administrative	5,116
Total restructuring and other exit costs	$	11,260

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Basis of Presentation and Summary of Significant Accounting Policies - Reclassifications and New Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net cash provided by (used in) operating activities		$ 15,448	$ 19,581
Excess tax benefit	$ 2,600	2,900
Cumulative effect of new accounting principle in period of adoption	$ (51,364)	$ (51,364)
Accounting Standards Update 2016-16
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Cumulative effect of new accounting principle in period of adoption				$ (51,400)
Deferred tax assets				21,700
Adjustments for New Accounting Principle, Early Adoption | Accounting Standards Update 2016-16
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Amortization of deferred charges related to deferred tax liability				$ 17,100
Restatement Adjustment | New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-09, Statutory Tax Withholding Component
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net cash provided by (used in) operating activities			$ 500

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Stock-based Compensation - Additional Information (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jan. 03, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense—acquisitions		$ 1,600	$ 800	$ 2,455	$ 1,472
Restructuring charges				11,260
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation		29,600		$ 29,600
Total unrecognized compensation, period of recognition				3 years 5 months 9 days
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation, period of recognition				3 years 11 days
Total unrecognized compensation		$ 38,800		$ 38,800
2015 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of additional shares issued annually (in shares)	5,798,651
Number of shares authorized (in shares)		23,347,913		23,347,913
Number of shares available for grant (in shares)		13,407,187		13,407,187
Stock-Based Compensation
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restructuring charges				$ 1,668

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Stock-based Compensation - Fair Value of Options Granted Using the Black-Scholes Pricing Model (Details) - Stock options	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility, minimum	41.70%	44.30%	41.70%	44.20%
Volatility, maximum	44.20%	44.60%	44.20%	44.60%
Risk-free interest rate, minimum	1.90%	1.20%	1.90%	1.20%
Risk-free interest rate, maximum	2.00%	1.50%	2.20%	1.90%
Dividend rate	0.00%	0.00%	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	5 years 6 months	5 years 6 months	5 years 6 months	5 years 6 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	6 years 3 months 18 days	6 years 3 months 18 days	6 years 3 months 18 days	6 years 3 months 18 days

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Stock-based Compensation - Summary of Stock Option Activity (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($) $ / shares shares
Shares
Outstanding, beginning balance (in shares) | shares	9,339,567
Granted (in shares) | shares	5,473,601
Exercised (in shares) | shares	(1,592,327)
Forfeited/Canceled (in shares) | shares	(718,334)
Outstanding, ending balance (in shares) | shares	12,502,507
Total exercisable at June 30, 2017 (in shares) | shares	6,069,330
Weighted-Average Exercise Price
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 7.89
Granted (in dollars per share) | $ / shares	10.77
Exercised (in dollars per share) | $ / shares	4.00
Forfeited/Canceled (in dollars per share) | $ / shares	10.80
Outstanding, ending balance (in dollars per share) | $ / shares	9.47
Total exercisable at June 30, 2017 (in dollars per share) | $ / shares	$ 7.87
Weighted-Average Remaining Contract Term (in years)
Outstanding at June 30, 2017, Weighted-Average Remaining Contract Term	6 years 7 months 6 days
Total exercisable at June 30, 2017, Weighted-Average Remaining Contract Term	3 years 7 months 2 days
Aggregate Intrinsic Value
Outstanding at June 30, 2017, Aggregate Intrinsic Value | $	$ 71,404
Total exercisable at June 30, 2017, Aggregate Intrinsic Value | $	$ 45,027

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Stock-based Compensation - Weighted Average Grant Date Fair Value of Options Granted, Intrinsic Value of Options Exercised and Fair Value of Awards Vested (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Weighted average grant date fair value of options (in dollars per share)	$ 4.73	$ 4.09	$ 4.71	$ 3.78
Intrinsic value of options exercised	$ 11,135	$ 3,722	$ 12,866	$ 6,110
Fair value of awards vested	$ 6,695	$ 2,873	$ 10,485	$ 6,209

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Stock-based Compensation - Summary of Unvested RSUs (Details) - RSUs	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Shares
Unvested at December 31, 2016 (in shares) | shares	3,135,181
Granted (in shares) | shares	1,775,586
Vested (in shares) | shares	(433,174)
Forfeited/Cancelled (in shares) | shares	(473,653)
Unvested at June 30, 2017 (in shares) | shares	4,003,940
Weighted-Average Grant Date Fair Value
Unvested at December 31, 2016 (in dollars per share) | $ / shares	$ 10.70
Granted (in dollars per share) | $ / shares	11.14
Vested (in dollars per share) | $ / shares	9.39
Forfeited/Cancelled (in dollars per share) | $ / shares	10.50
Unvested at June 30, 2017 (in dollars per share) | $ / shares	$ 11.06

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Stock-based Compensation - Allocated Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 8,162	$ 4,268	$ 13,047	$ 7,505
Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	398	250	762	451
Marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	528	221	972	402
Product development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	2,053	1,026	4,073	1,883
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 5,183	$ 2,771	$ 7,240	$ 4,769

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Benefit for income taxes	$ 9,437	$ (4,261)	$ 10,489	$ (17,875)
Unrecognized Tax Benefit
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Increase in unrecognized tax benefits			300
Unrecognized tax benefits	23,900		23,900		$ 23,600
Unrecognized tax benefits that would impact effective tax rate favorably	23,900		23,900
Restructuring and exit costs
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Benefit for income taxes	$ 3,000		$ 3,000

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Fair Value Measurements - Schedule of Major Categories of Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Recurring - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	$ 141,566	$ 103,108
Short-term investments	60,353	100,494
Asset	201,919	203,602
Liability		2,067
Post-combination compensation classified as liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liability		2,067
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	32,570	2,997
Short-term investments	9,764	17,146
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	88,819	98,161
U.S. Government bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents		1,950
Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	17,335	33,303
U.S. Government and agency bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	20,177
Short-term investments	33,254	50,045
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	108,996	100,111
Short-term investments	33,254	50,045
Asset	142,250	150,156
Liability		0
Level 1 | Post-combination compensation classified as liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liability		0
Level 1 | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Short-term investments	0	0
Level 1 | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	88,819	98,161
Level 1 | U.S. Government bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents		1,950
Level 1 | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
Level 1 | U.S. Government and agency bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	20,177
Short-term investments	33,254	50,045
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	32,570	2,997
Short-term investments	27,099	50,449
Asset	59,669	53,446
Liability		0
Level 2 | Post-combination compensation classified as liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liability		0
Level 2 | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	32,570	2,997
Short-term investments	9,764	17,146
Level 2 | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Level 2 | U.S. Government bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents		0
Level 2 | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	17,335	33,303
Level 2 | U.S. Government and agency bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0
Short-term investments	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Short-term investments	0	0
Asset	0	0
Liability		2,067
Level 3 | Post-combination compensation classified as liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liability		2,067
Level 3 | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Short-term investments	0	0
Level 3 | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Level 3 | U.S. Government bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents		0
Level 3 | Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
Level 3 | U.S. Government and agency bills
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0
Short-term investments	$ 0	$ 0

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Fair Value Measurements - Schedule of Unobservable Inputs Reconciliation (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Reconciliation of Beginning and Ending Balances for the Liabilities Measured at Fair Value Using Significant Observable Inputs
Balance at beginning of period	$ 2,067
Changes to liability-classified stock awards	771
Conversion of liability-classified restricted shares upon vesting	(2,838)
Balance at end of period	$ 0

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Marketable Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 113,140	$ 103,520
Gross Unrealized Holding Loss	(40)	(31)
Gross Unrealized Holding Gain	0	2
Fair Value	113,100	103,491
Cash and Cash Equivalents
Schedule of Available-for-sale Securities [Line Items]
Cost	52,747	2,997
Gross Unrealized Holding Loss	0	0
Gross Unrealized Holding Gain	0	0
Fair Value	52,747	2,997
Cash and Cash Equivalents | Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Cost	32,570	2,997
Gross Unrealized Holding Loss	0	0
Gross Unrealized Holding Gain	0	0
Fair Value	32,570	2,997
Cash and Cash Equivalents | U.S. Government and agency bills
Schedule of Available-for-sale Securities [Line Items]
Cost	20,177
Gross Unrealized Holding Loss	0
Gross Unrealized Holding Gain	0
Fair Value	20,177
Short-term Investments
Schedule of Available-for-sale Securities [Line Items]
Cost	60,393	100,523
Gross Unrealized Holding Loss	(40)	(31)
Gross Unrealized Holding Gain	0	2
Fair Value	60,353	100,494
Short-term Investments | Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Cost	9,764	17,146
Gross Unrealized Holding Loss	0	0
Gross Unrealized Holding Gain	0	0
Fair Value	9,764	17,146
Short-term Investments | Corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Cost	17,349	33,318
Gross Unrealized Holding Loss	(14)	(16)
Gross Unrealized Holding Gain	0	1
Fair Value	17,335	33,303
Short-term Investments | U.S. Government and agency bills
Schedule of Available-for-sale Securities [Line Items]
Cost	33,280	50,059
Gross Unrealized Holding Loss	(26)	(15)
Gross Unrealized Holding Gain	0	1
Fair Value	$ 33,254	$ 50,045

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Net Income (Loss) Per Share - Calculation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Numerator:
Net (loss) income	$ 11,669	$ (7,311)	$ 11,248	$ (6,119)
Net income allocated to participating securities under the two-class method	(17)	0	(16)	0
Net (loss) income applicable to common stockholders—basic	11,652	(7,311)	11,232	(6,119)
Dilutive effect of net income allocated to participating securities under the two-class method	17	0	16	0
Change in fair value of liability classified restricted stock	832	0	771	0
Net (loss) income applicable to common stockholders—diluted	$ 12,501	$ (7,311)	$ 12,019	$ (6,119)
Denominator:
Weighted average common shares outstanding—basic (in shares)	116,933,216	113,045,888	116,453,790	112,760,531
Weighted average common shares outstanding—diluted (in shares)	120,723,938	113,045,888	120,424,631	112,760,531
Net (loss) income per share applicable to common stockholders—basic (in dollars per shares)	$ 0.10	$ (0.06)	$ 0.10	$ (0.05)
Net (loss) income per share applicable to common stockholders—diluted (in dollars per share)	$ 0.10	$ (0.06)	$ 0.10	$ (0.05)
Participating securities excluded from computation of earnings per share (in shares)	6,850,653	13,107,472	5,517,108	12,618,550
Participating Securities
Denominator:
Participating securities excluded from computation of earnings per share (in shares)	172,445		172,445
Stock Options
Denominator:
Dilutive effect of common equivalent shares from options and restricted stock (in shares)	2,921,081	0	3,118,640	0
Restricted stock units
Denominator:
Dilutive effect of common equivalent shares from options and restricted stock (in shares)	844,331	0	838,890	0
Restricted Stock
Denominator:
Dilutive effect of common equivalent shares from options and restricted stock (in shares)	25,310	0	13,311	0

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Net Income (Loss) Per Share - Summary of Shares Excluded from the Calculation of Diluted Net Loss Per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share (in shares)	6,850,653	13,107,472	5,517,108	12,618,550
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share (in shares)	6,201,891	11,129,114	4,451,613	11,155,837
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share (in shares)	648,762	1,941,768	1,065,495	1,395,452
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share (in shares)	0	36,590	0	67,261

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Segment and Geographic Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenue, Major Customer [Line Items]
Revenue	$ 101,692	$ 85,349	$ 198,583	$ 167,196
United States
Revenue, Major Customer [Line Items]
Revenue	73,546	64,773	145,068	127,814
International
Revenue, Major Customer [Line Items]
Revenue	$ 28,146	$ 20,576	$ 53,515	$ 39,382

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Contingencies (Details) - USD ($) $ in Millions	Jun. 30, 2017	Dec. 31, 2016
Non-Income Tax Obligations
Loss Contingencies [Line Items]
Non-income tax obligation reserve	$ 0.4	$ 0.3

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Restructuring and Other Exit Costs (Details) $ in Thousands		3 Months Ended	6 Months Ended
	Jun. 16, 2017 position	Jun. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)
Restructuring Cost and Reserve [Line Items]
Expected number of positions eliminated | position	245
Number of positions eliminated, inception to date	23.00%
Restructuring costs		$ 11,260	$ 11,260
Restructuring charges			11,260
Minimum
Restructuring Cost and Reserve [Line Items]
Restructuring and related cost, expected cost		12,300	12,300
Expected remaining costs		1,000	1,000
Maximum
Restructuring Cost and Reserve [Line Items]
Restructuring and related cost, expected cost		16,600	16,600
Expected remaining costs		$ 5,300	5,300
Severance Charge
Restructuring Cost and Reserve [Line Items]
Restructuring charges			8,972
Stock-Based Compensation
Restructuring Cost and Reserve [Line Items]
Restructuring charges			1,668
Other Exit Costs
Restructuring Cost and Reserve [Line Items]
Restructuring charges			$ 620

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Restructuring and Other Exit Costs - Restructuring Charges Recorded to Date (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Restructuring Reserve [Roll Forward]
Beginning balance	$ 0
Total restructuring and other exit costs	11,260
Costs charged against equity/assets	(1,668)
Cash payments	(2,388)
Ending balance	7,204
Severance Charge
Restructuring Reserve [Roll Forward]
Beginning balance	0
Total restructuring and other exit costs	8,972
Costs charged against equity/assets	0
Cash payments	(2,110)
Ending balance	6,862
Stock-Based Compensation
Restructuring Reserve [Roll Forward]
Beginning balance	0
Total restructuring and other exit costs	1,668
Costs charged against equity/assets	(1,668)
Cash payments	0
Ending balance	0
Other Exit Costs
Restructuring Reserve [Roll Forward]
Beginning balance	0
Total restructuring and other exit costs	620
Costs charged against equity/assets	0
Cash payments	(278)
Ending balance	$ 342

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Restructuring and Other Exit Costs - Restructuring and Other Exit Costs (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017
Restructuring Cost and Reserve [Line Items]
Restructuring costs	$ 11,260	$ 11,260
Cost of revenue
Restructuring Cost and Reserve [Line Items]
Restructuring costs	694	694
Marketing
Restructuring Cost and Reserve [Line Items]
Restructuring costs	2,349	2,349
Product development
Restructuring Cost and Reserve [Line Items]
Restructuring costs	3,101	3,101
General and administrative
Restructuring Cost and Reserve [Line Items]
Restructuring costs	$ 5,116	$ 5,116