Etsy 2015 Annual Report Download - page 43


revenue of $195.6 million, up 56.4% over 2013. In 2015, we generated a net loss of $54.1 million and Adjusted EBITDA of $31.0 million compared to a net
loss of $15.2 million and Adjusted EBITDA of $23.1 million in 2014. In 2014, we generated a net loss of $15.2 million and Adjusted EBITDA of $23.1
million compared to a net loss of $0.8 million and Adjusted EBITDA of $16.9 million in 2013. See “—Non-GAAP Financial Measures” for more information
and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.
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, time and technology
investments) and assess the performance of our business. In addition to revenue, net (loss) income and other results under GAAP, the key operating and
financial metrics we use are:





GMS
$ 1,347,833
$ 1,931,981
$ 2,388,387
Adjusted EBITDA
$ 16,947
$ 23,081
$ 31,007
Active sellers
1,074
1,353
1,563
Active buyers
14,032
19,810
24,046
Percent mobile visits
41%
54%
60%
Percent mobile GMS
30%
37%
43%
Percent international GMS
28.4%
30.9%
29.8%

Gross merchandise sales, or GMS, is the dollar value of items sold in our marketplace within the applicable period, excluding shipping fees and net of refunds
associated with cancelled transactions. GMS does not represent revenue earned by us. GMS relates only to Marketplace activity and does not reflect Seller
Services activity. However, because our revenue and cost of revenue depend significantly on the dollar value of items sold in our marketplace, 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 represents our net loss before interest expense, net, (benefit) provision for income taxes and depreciation and amortization, adjusted to
eliminate stock-based compensation expense, net unrealized loss (gain) on warrant and other liabilities, foreign exchange loss (gain), other non-operating
expense, net, acquisition-related expenses and our contributions to Etsy.org. We have included Adjusted EBITDA because it is a key measure used by our
management and board of directors to understand and evaluate our operating performance and trends, allocate internal resources, prepare and approve our
annual budget, develop short- and long-term operating plans and assess the health of our ecosystem. As our Adjusted EBITDA increases, we are able to invest
more resources in our community. We also believe that Adjusted EBITDA provides a useful measure for period-to-period comparisons of our business as it
removes the impact of non-cash items and certain variable charges. See “Non-GAAP Financial Measures” below for information regarding the limitations
of using Adjusted EBITDA as a financial measure and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure
calculated in accordance with GAAP.

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
Direct Checkout, Promoted Listings, Shipping Labels and Wholesale enrollment. An Etsy seller is someone who has created an account and has listed an item
in our marketplace. 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.
39