Good day, ladies and gentlemen and welcome to the Etsy Inc. First Quarter 2015 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder today's conference call is being recorded. I would now like to turn the conference over to Jennifer Beugelmans, Vice President of Investor Relations at Etsy. Please go ahead.

Thank you and good afternoon. And welcome to Etsy's first quarter earnings conference call. Joining me today are Chad Dickerson, CEO and Kristina Salen, CFO. Before we get started, just a reminder that our remarks today include forward-looking statements relating to our financial performance and results of operations, business strategy, outlook, mission and potential future growth. Our actual results may be materially different. Forward-looking statements involve risks and uncertainties which are described in our press release and in our final prospectus filed with the SEC on April 16, 2015. Any forward-looking statements that we make on this call are based on our belief and assumptions today and we don't have any obligation to update them. Also during the call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which you can find on our Investor Relations Web site, a link to the replay of this call will also be available there. With that, I'll turn the call over to Chad. Chad?

Thanks Jennifer and thanks to everyone joining us today for our first ever financial results conference call. Before I jump into our first quarter performance, I want to once again thank our team here at Etsy and our sellers around the world who worked so hard to make our IPO a truly profound moment for our Company and our community. We've received such positive feedback and we're truly grateful for the support. During the first quarter of 2015, Etsy's GMS was nearly $532 million and Etsy's revenue growth was nearly 45% year-over-year. We saw a number of active sellers increase approximately 26% to 1.4 million and our number of active buyers increased nearly 37% to 20.8 million and we continue to expand our mobile presence. We believe that our first quarter results demonstrate that our mission is working. As we continue to make progress reimagining commerce to build a more fulfilling and lasting world, connecting creative entrepreneurs with thoughtful consumers and expanding the Etsy economy. As we shared before, we believe we can further our mission by focusing on four areas; making Etsy an everyday experience, building local marketplaces globally, operating high impact seller services and expanding the Etsy economy. So before I turn the call over to Kristina to discuss our financial results, let me give you an update on the progress we've made recently in these four areas. First up is our focus on making Etsy an everyday experience, this is all about mobile. We're leveraging our already strong mobile presence to increase engagement with Etsy buyers and enhance the Etsy seller experience. As of March 31st, our mobile apps have been downloaded 25 million times and we think our beautiful engaging mobile apps are one of the reasons that Etsy narrowed the gap between mobile visits and…

Thanks, Chad and hello to everyone joining us today. Just to note, unless I say so all comparisons I'll be referencing here are on a year-over-year basis. Let's start with GMS. During the first quarter of 2015, the Etsy marketplace generated $531.9 million and gross merchandize sales up 28.2%. Growth in GMS was driven by 25.8% growth in active sellers and 36.5% growth in active buyers. At the end of the first quarter Etsy had 1.4 million active sellers, up from 1.1 million last year and 1.35 million in the fourth quarter of 2014. As a reminder an active seller is one who has incurred at least one charge from us in the past 12 months. Charges include transactions, listing and Seller Services fee. Etsy had 20.8 million active buyers at the end of the first quarter, up from 15.3 million last year and 19.8 million in the fourth quarter 2014. Also as a reminder, active buyers are those who have made at least one purchase in the last 12 months. Etsy's first quarter results demonstrated our continued progress in narrowing the gap between mobile visits and mobile GMS and highlighted the results of continued improvements in our mobile app offering. 57.7% of our visits came to us from a mobile device. This continues to outpace the rate of growth on desktop and was up 750 basis points year-on-year and 270 basis points quarter-on-quarter. 41.4% of our GMS came from the mobile device, up 620 basis points year-on-year and 440 basis points quarter-on-quarter. Within Etsy's international business, we are seeing continued significant growth with international revenues growing 65.3% in the first quarter. However, international GMS as a percentage of total GMS was 30.5% flat year-on-year. We believe that foreign exchange has dampened Etsy's buyer activity outside of the U.S. and…

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

I guess a couple of things. If you could, Kristina, if you could update us on what you're seeing in terms of the ROI Etsy's able to achieve on this increased marketing spend. Has it held up the way that you had expected it to? And on the decision to invest in app marketing, when you say you're going to start your first app campaign, is that largely going to be an online campaign, as well? Or do you see branching out into other channels the way we've seen other app providers do over the last few years?

Sure, Heath. So your first question was on our marketing ROI. As we said previously, our intention is to keep our marketing ROI positive at an aggregate level, at a company level and we continue to stick to that in the first quarter and in the second quarter as well. To answer your second question, with regards to mobile app, the first thing that I would say is that we're talking about a relatively smaller dollar percentage, dollar growth in expenditure in this line item, it's the first time we've ever done it, so we want to see what happens. It will be on mobile and because it is about downloading a mobile app, so we don’t have any plans to go offline with our mobile app and download activity.

Thank you. And our next question comes from Brian Nowak of Morgan Stanley. Your line is now open.

I have two questions. First, I want to just go back to the marketing spend. Could you just helps us better understand how many countries are you spending on and advertising now? And can you talk to the buying behavior of any of the new buyers that you've been bringing on through the marketing relative to your legacy buyers? And then the second one, on Seller Services, you talked about rolling out more Seller Services over time. Just run through strategically how you think about evaluating new potential Seller Services and rolling them out to new sellers?

I will take the Seller Services question first. So first of all, it's important to understand how we think about Seller Services and we talked about this in our road show and in our S-1. Our focus on building Seller Services is really about reducing the amount of time that our sellers spend on administrative tasks, things like inventory management, marketing and communications et cetera, so that they can increase their time on the making task. And as we talked about in the road show and in the S-1 for every hour our seller spends on creative tasks spends an hour on business task. So we really believe that looking ahead there is an opportunity to add more services that save time in those areas like inventory and such, shipping has seen some progress in this quarter with calculated shipping and some of the other services I talked about, we're not ready to announce any service today but you can expect over the long-term and overtime that we build services that help our sellers save time and money.

And to answer your second question Brian. As it pertains to countries we advertise in, I would just remind everyone that our largest marketing expense by a wide-wide margin is GPLAs and so we advertise and have advertised for some time, it's not new to 2015 in a broad spectrum in those countries around the world. But we do focus on the key countries that we've mentioned in the past being kind of Australia, UK, France, Canada and the rest of the Western Europe. Your second question with regard to repeat purchases, you might remember in the S-1 wefocused on a chart that showed that nearly, historically nearly three quarters of purchases were repeat purchases, repeat buyers. And in 2014 even though we increased our marketing expense by 122% year-on-year our repeat purchases as a percent of total GMS remained at three quarters. So that tells us that the buyers that we acquired in 2014 looked a lot like the buyers who were already loyal and faithful to the Etsy platform. And so we're continuing along that path as we think about our marketing expense and just to remind everyone our long-term value model for marketing expenditure is based on two years, it's railed to be ROI positive at an aggregate level across the company and it assumes that a paid buyer or rather an acquired buyer performs differently than an organic buyer. What we've seen thus far what you might infer from our 2014 performance is that paid and organic are performing rather similarly. But overtime that could change as we acquire more buyers with the success of our marketing plan.

And then one more follow-up, I guess. I get a lot of questions around fraudulent and/or counterfeit goods. Could you talk to the way Etsy works to police that and how you think about that, the presence of non-licensed products on the site? Thanks.

First of all, we won't comment on any litigation but transparency is one of our values, so I want to take some time to answer this question. We were really proud when the Electronic Frontier Foundation awarded Etsy four out of five stars for our intellectual property practices we ultimately lost a star because we don’t issue a transparency report. So we have been working on that transparency report for the last few months and plan to publish that other side in the future. So based on the work that we've done for the transparency report we're able to give you today some insights into our great effort and our success in combating IT infringement. So I want to stress three points. First, we earn respect by following industry leading best practices and establish law. The second is that someone on the outside looking at our site lacks the context and the background information to determine what is infringing and what's not. And third we strive for a balanced approach that takes into account the interest of our sellers and IP owners and we believe that’s working. We at Etsy partner with major brands to address the problem of infringing articles. And in fact we are also accused of being too aggressive in taking down material posted by sellers. So it's important to note that I am not using the word counterfeit, people can’t even agree on the definition of that term. So to avoid confusion, I will address the broader issue of items that appear on the Etsy Web site that appear to misuse intellectual property. So now I will dive deeper into those three points. The first point about, earning respect by following industry-leading best practices and establish law. It's certainly true that brand owner complain to us…

Thank you. [Operator Instructions] Our next question comes from Tom Forte of Brean Capital. Your line is now open.

I recognize that today, a lot of the international revenue comes from cross the [indiscernible] but I wanted to give you [indiscernible] about your local efforts, how you're driving revenue on a local basis that would be less dependent. [Indiscernible] and how those efforts will drive revenue that isn't dependent on or less affected by movements in [indiscernible]?

We're sorry, we can't hear the full question, think that phone is cutting out.

I apologize for the bad connection. So basically, on international, I recognize that today a lot of your revenue comes from cross-border trade, but I think you have initiatives underway to drive local revenue, so revenue in an international country among a local marketplace. Can you tell us about those initiatives, and when should we expect that revenue to start hitting so you'll be less affected by changes in the U.S. dollar?

Right, so it is important to note our building local marketplace is a global strategy which is really about, again building on the activity in markets where there's relatively balanced buyer and seller activity. So we're seeing momentum, particularly in the UK as I mentioned earlier. We're seeing growth in purchases from UK sellers, domestic activity seven times higher than the growth and purchases from U.S. sellers to cross-border activity. So we really think that this means that that local community is really connecting, we believe that overtime encouraging this type of local commerce in our priority markets, Kristina mentioned the UK, Australia, Canada, Western Europe, that will be a positive influence on the global success of Etsy, but we're seeing that early success in the UK.

And Tom, if I could just add to that comment a clarifying point, it's important to understand that the number of our sellers who list in U.S. dollars, so even on a local-to-local basis that can sometimes impact price that buyers, local buyers are seeing. So it stands today 92% of our GMS comes from sellers who list in U.S. dollars even though 30% of our GMS comes from international. And so only 8% of our GMS is coming from sellers who list in local currency. One of the opportunities we have over the longer term which is actually quite a complex technical operation is to encourage and facilitate more and more sellers listing in the local currency which also could benefit a more balanced local ecosystem overtime.

Thank you. And our next question comes from Gil Luria of Wedbush Securities. Your line is now open.

I'll ask a couple upfront. So first of all to follow-up on the counterfeit, Alibaba and eBay, over the years have said very similar things in terms of the efforts they put in to getting counterfeit merchandise off the website. And yet, the brands and the luxury brands, at least a variety of them have seemed to crack down on it more and more and yesterday we saw a new lawsuit against Alibaba. They're dealing with their government, in spite the fact they say very similar things about a clear commitment to preventing fraudulent merchandise. So wanted to know why you think that the further scrutiny won't impact Etsy going forward? And the second question about the impact of currency. eBay has a similar issue in terms of when the currency goes, when the U.S. dollar goes up, it takes away from the purchasing power of European consumers. But on the flip side and what's an offset for them is that U.S. consumers can then afford to buy more outside the U.S., their purchasing power goes up. Since you have an even higher mix of U.S. consumers that now have more purchasing power vis-à-vis merchandise outside the U.S., why wouldn’t you have an offsetting impact from that?

I will take the first question. As I said in my earlier comments, we're not going to comment on litigation. So I will hand it over to Kristina for the second question.

Sure. So from a perspective of U.S. consumers and enjoying lower, relatively lower pricing, I would point in fact to the comments that I made on the dollar pricing, a 92% of our GMS comes from sellers who list in U.S. dollars. Another way to think about that is the majority of our sellers who sell on Etsy, even if they are located outside of United States are listing in U.S. dollars. And so as I said before, an opportunity we have is to encourage sellers to list in the local currency rather than in U.S. dollars and to facilitate that from a technical perspective. So when think about U.S. consumers enjoying a strong dollar that doesn’t call out in the way that our sellers currently list pricing of their items.

Wouldn't some sellers just recognize that and with their currency being that much lower, lower the U.S. dollar price, even if it's done, lower U.S. dollar price even if that's not done automatically?

We haven't seen that behavior. Again it's important to understand too that the $0.20 listing fee is a $0.20 listing fee no matter where you reside, so and to a certain extent as seller outside the Unites States has dollar exposure in the cost of the listing fee. So we haven't seen the kind of behavior where our sellers might be reacting to fluctuations in currency entertains their pricing. It's also important remember, relative to some other marketplaces that perhaps have significantly larger sellers on their platform who sell more commodity type mass manufactured goods, Etsy sellers are more micro entrepreneurs and so adjusting their pricing on an even weekly basis dependent on currency fluctuations might not be something in their toolset.

Thank you. And I am showing no further questions at this time. I would like to turn the conference back over to Chad Dickerson for any closing remarks.

Great, I just want to thank everyone for joining us on this first earnings call for Etsy and we look forward to speaking with you next quarter. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect.