Item 2.02. Results of Operations and Financial Condition.
On May 6, 2020, Etsy, Inc. (the "Company") issued a press release announcing its
financial results for the quarter ended March 31, 2020. A copy of the press
release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated by
reference.
Information in this Form 8-K shall not be deemed "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise incorporated by reference into any filing pursuant to the
Securities Act of 1933, as amended, or the Exchange Act except as otherwise
expressly stated in such filing.
Item 8.01. Other Events
The Company is supplementing the risk factors previously disclosed in its Annual
Report on Form 10-K for the year ended December 31, 2019 with the following risk
factors:
The COVID-19 pandemic is unprecedented and is impacting our GMS, key metrics,
and results of operations in numerous ways that remain volatile and
unpredictable.
The impact of the current COVID-19 pandemic is severe, widespread and evolving.
The pandemic and related government and private sector responsive actions have
already affected the broader economies and financial markets, triggering an
economic downturn, which has and could continue to adversely affect demand for
our products. It is impossible to predict the effect and ultimate impact of the
COVID-19 pandemic, as the situation is rapidly evolving. The COVID-19 pandemic
has disrupted the global supply chain and the preventative and protective
measures currently in place, such as quarantines, closures and travel
restrictions, may interfere with the ability of our sellers to deliver products
to our buyers. If delivery services are delayed or shut down, our GMS and
revenue could be negatively impacted.
As a result of the COVID-19 pandemic, our employees are working remotely and it
is possible that this could have a negative impact on the execution of our
business plans and operations. If a natural disaster, power outage, connectivity
issue, or other event occurred that impacted our employees' ability to work
remotely, it may be difficult or, in certain cases, impossible, for us to
continue our business for a substantial period of time. Further, if the current
COVID-19 pandemic continues unabated, we may experience disruptions as our
employees or third-party service providers' employees become ill and are unable
to perform their duties, and our operations, internet, or mobile networks, or
the operations of one or more of our third-party service providers, is impacted.
The increase in remote working may also result in consumer privacy, IT security
and fraud concerns.
Our results of operations may be materially affected by adverse conditions in
the capital markets and the economy generally, both in the United States and
internationally. Uncertainty in the economy could adversely impact consumer
purchases of discretionary items across all of our product categories, and
demand for products available in our marketplaces may be reduced. We have also
seen significant and rapid shifts in consumer purchasing behavior as this
pandemic has evolved, particularly as it relates to what may be perceived as
'essential' vs 'non-essential items.' It is difficult to predict how our
business might be impacted by changing consumer spending patterns. Factors that
could affect consumers' willingness to make discretionary purchases include,
among others: general business conditions, levels of employment, interest rates,
tax rates, the availability of consumer credit, consumer confidence in future
economic conditions, and risks, or the public perception of risks, related to
epidemics or pandemics like COVID-19. In the event of a prolonged economic
downturn or acute recession, consumer spending habits could be adversely
affected, and we could experience lower than expected GMS, revenue, net income
and Adjusted EBITDA.
The uncertainty around the duration of business disruptions and the extent of
the spread of the virus in the United States and to other areas of the world
will likely continue to adversely impact the national or global economy and
negatively impact consumer spending. The full extent of COVID-19's impact on our
operations, key metrics and financial performance depends on future developments
that are uncertain and unpredictable, including the duration and spread of the
pandemic, its impact on capital and financial markets and any new information
that may emerge concerning the severity of the virus, its spread to other
regions as well as the actions taken to contain it, among others. Any of these
outcomes could have a material adverse impact on our business, financial
condition, operating results and ability to execute and capitalize on our
strategies.
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We may fail to meet our publicly announced guidance or other expectations about
our business and future operating results, which would cause our stock price to
decline.
From time to time, we release earnings guidance in our quarterly and annual
earnings conference calls, quarterly and annual earnings releases, or otherwise,
regarding our future performance that represents our management's estimates as
of the date of release. For example, we historically provide annual guidance,
but we withdrew our 2020 annual guidance on April 2, 2020 given the economic
uncertainty caused by the COVID-19 pandemic. On May 6, 2020, we provided
guidance for the second quarter of 2020. This guidance includes forward-looking
statements based on projections prepared by our management. Projections are
based upon a number of assumptions and estimates that, while presented with
numerical specificity, are inherently subject to significant business, economic
and competitive uncertainties and contingencies on our business, many of which
are beyond our control and are based upon specific assumptions with respect to
future business decisions, some of which will change. One of those key
assumptions relates to the impact of the COVID-19 pandemic and the associated
economic uncertainty on our business, which is inherently difficult to predict,
particularly in the long term. We intend to state possible outcomes as high and
low ranges which are intended to provide a sensitivity analysis as variables are
changed but are not intended to imply that actual results could not fall
outside of the suggested ranges. The principal reason that we release guidance
is to provide a basis for our management to discuss our business outlook with
analysts and investors. Furthermore, analysts and investors may develop and
publish their own projections of our business, which may form a consensus about
our future performance. Our actual business results may vary significantly from
such guidance or that consensus due to a number of factors, many of which are
outside of our control, including due to the global economic uncertainty and
financial market conditions caused by the COVID-19 pandemic, and which could
adversely affect our business and future operating results. There are no
comparable recent events that provide insights as to the probable effect of the
COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-19
outbreak is highly uncertain and subject to change. We are relying on the
reports and models of economic and medical experts in making assumptions
relating to the duration of this crisis and predictions as to timing and pace of
any future economic recovery. If these models are incorrect or incomplete, or if
we fail to accurately predict the full impact that the COVID-19 pandemic will
have on all aspects of our business, the guidance and other forward-looking
statements we provide may also be incorrect or incomplete. Furthermore, if we
make downward revisions of our previously announced guidance, or if our publicly
announced guidance of future operating results fails to meet expectations of
securities analysts, investors or other interested parties, the price of our
common stock would decline.
Given the uncertainty surrounding the impact of COVID-19, we may choose to
discontinue providing guidance, or provide more limited guidance, as we have for
the second quarter of 2020. Guidance is necessarily speculative in nature, and
it can be expected that some or all of the assumptions underlying the guidance
furnished by us will not materialize or will vary significantly from actual
results. Accordingly, our guidance is only an estimate of what management
believes is realizable as of the date of release. Actual results may vary from
our guidance and the variations may be material. In light of the foregoing,
investors are urged not to rely upon our guidance in making an investment
decision regarding our common stock.
Any failure to successfully implement our operating strategy or the occurrence
of any of the events or circumstances set forth in the "Risk Factors" section in
our Annual Report on Form 10-K for the year ended December 31, 2019 could result
in the actual operating results being different from our guidance, and the
differences may be adverse and material.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
99.1 Press Release issued by Etsy, Inc. on May 6, 2020
Cover Page Interactive Data File - the cover page XBRL tags are
104 embedded within the Inline XBRL document
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