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Etsy Inc (ETSY) Q2 2019 Earnings Call Transcript

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Etsy Inc (NASDAQ: ETSY)
Q2 2019 Earnings Call
Aug 1, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q2 2019 Etsy Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes.

It is now my pleasure to hand the conference over to Deb Wasser, Vice President of Investor Relations. You may begin.

Deb Wasser -- Vice President of Investor Relations

Thank you. Good afternoon, and welcome to Etsy's Q2 conference call. Joining me today are Josh Silverman, CEO; and Rachel Glaser, Chief Financial Officer. Before we get started, just a reminder that our remarks today includes forward-looking statements relating to our financial guidance and key drivers thereof, anticipated marketing spend and other current and planned investments and their anticipated impact on our future financial results, anticipated product launches and impacts of experiments, including on conversion rates and the anticipated impact on our future financial results. Our actual results may differ materially.

Forward-looking statements involve risks and uncertainties, which are described in our press release, our 10-Q filed with the SEC on May 9, 2019, and subsequent reports that we file with the SEC. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we don't have any obligation to update them.

Also during the call, we present both GAAP to 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 website. A link to the replay of this call will also be available there, and if you'd prefer to access the replay via phone, you can find that information in the press release as well. We have created a slide presentation to accompany today's opening remarks and recommend you follow along.

With that, I'll turn the call over to Josh.

Josh Silverman -- Chief Executive Officer

Thanks, Deb, and good afternoon, everyone. It's been another encouraging quarter across the board, with continued growth in GMS driven by our portfolio of marketing and product investments. GMS drove increases in revenue and EBITDA and services revenue was solid, resulting in an overall steady take rate of 16.5%. We're making great progress improving our product experience and our marketing capabilities and it's paying off. In addition, we have a number of bold new initiatives which we're excited to walk you through, detailing how we expect them to fuel our growth even further.

First, let's dive into highlights of our second quarter progress, starting with marketing. We have a full funnel marketing approach, and in 2019, we've been optimizing our investments in every part of the funnel. In the first quarter, we paused our spend in certain channels in order to test their incrementallity and to refine our attribution model.

As a result of these tests, we entered the second quarter with an optimized portfolio and conviction around some of the new channels we tested. First, we ramped our spend on Google performance marketing, while maintaining and even increasing ROI, through efficiency and infrastructure improvements.

Second, we're making progress unlocking potential in social channels. We found strategies, such as dynamic retargeting, where we are seeing positive returns and are encouraged by our progress. Over time, we believe social channels can become a powerful lever to drive incremental growth.

Third, we launched a new TV campaign called Belongings, which focuses on buying things that matter to you. It aired for 7 weeks on national cable and select digital channels from late April through mid-June. We're very pleased with the results. Our market research indicates that visits and purchase intent are significantly higher for customers who were exposed to the ads versus those who were not. In fact, buyers who visited the site after viewing our ads were 20% more likely to convert to a purchase.

As expected, we saw a correlated uplift in other channels such as our Google ads during the time the TV campaign was running. It's exciting to see this early evidence that TV spend can make our other channels work harder. We'll also produce shorter versions of our ads focused on specific categories, such as home furnishings and weddings.

In short, it's been a great quarter for our marketing initiatives, and these results further validate our belief in the potential for marketing to drive significant profitable growth as we strengthen our capabilities. And speaking of strengthening our capabilities, toward the end of the quarter, Etsy's new Chief Marketing Officer, Ryan Scott, joined the company. Ryan brings 2 decades of marketing and e-commerce experience to Etsy. He's a true master of the craft. And with just over a month under his belt, Ryan is already adding a ton of value and shares my enthusiasm that we are in the very early days of unlocking the power of marketing to turbocharge Etsy's growth.

Now let's turn to our product initiatives, which have continued to move the needle. Our product teams also delivered strong results in Q2. As you know, our product development strategy is tightly aligned with our rights to win, which focuses on highlighting our unique inventory, improved search and discovery, strengthening human connections and building a trusted brand. Product experiment velocity expanded to an all-time high, surpassing the record set in Q1.

We made progress on multiple fronts improving the customer experience, resulting in significant incremental GMS. For example, in the second quarter, we made meaningful strides in search and discovery, by making the homepage more personalized and dynamic, allowing buyers to more easily pick up where they left off on their most recent shopping mission. We also made progress improving our mobile app as part of what we expect will be a multiyear effort that will have significant positive impacts on metrics such as frequency.

And as I'll discuss in a moment, all of our focus on shipping is a core work stream connected to building an even more trusted brand. I'm encouraged to see that we are rapidly met -- we are able to rapidly scale our product and engineering teams, while maintaining and even accelerating productivity. It's a testament to the strength of our product pipeline, the discipline of our development methodology and the caliber of our team.

We're encouraged by the progress we made in both marketing and product development in the first half of 2019. The second half of this year also includes a trio of bold new initiatives that we expect will catalyze additional future growth. First is Etsy's new free shipping program; second, we're launching a new unified ad platform called Etsy Ads; and third, we're acquiring Reverb, a 2-sided marketplace very similar to Etsy, in a new category, with a strong strategic fit and robust growth potential.

First, let's discuss our recent news on shipping. When buyers find an item that they like and don't buy, additional cost of shipping is one of the top 3 most commonly cited reasons. Moreover, in these instances, buyers tell us they are far less likely to come back to Etsy or to promote us to their friends. Buyer expectations have changed regarding shipping, and it's important that Etsy keep up. Last year, fewer than 30% of listings on Etsy offered free domestic shipping, and a significant number of items had additional shipping prices that buyers perceived to be unreasonably high.

So on July 9, we rolled out a new program to give sellers the tools, education and support they need to offer free shipping to U.S. buyers on orders of $35 or more. Our central message to sellers is that buyers now expect free shipping. We know from our research that buyers are significantly more likely to buy an item that has free shipping as compared to the same item with shipping fees broken out separately.

To help our sellers manage this transition, we created a smart pricing tool, which allows them to easily set up a free shipping guarantee. The tool also gives individual sellers the option to incorporate all or a portion of their shipping cost into their item prices to recover costs and to bulk edit their listings accordingly. The products with a free shipping guarantee will be prioritized in U.S. search, a key factor we know sellers value deeply. Internal data suggests that free shipping for U.S. buyers often leads to higher order values.

We also believe that there is a potential for higher conversion and improved frequency related to better meeting buyer expectations regarding shipping. We're excited about the opportunity to make free shipping a core part of the Etsy shopping experience and to enable our sellers to better compete in today's e-commerce landscape. Seller adoption has been promising to date, and our plan is to begin actively marketing free shipping to buyers starting in September.

Our initial launch is focused on the U.S., our largest market, and the one that has the most established expectation for free shipping. But we plan to explore making this available to other core markets in the future. We also plan to address other friction points related to fulfillment, such as establishing a consistent approach to returns and ensuring that delivery date expectations are met.

I'm also excited to announce that later this month, we will be launching Etsy Ads, a new unified ad platform which is designed to give our sellers more opportunities to gain prominence and drive visits and sales. Today, Etsy offers 2 separate paid advertising products, which help sellers to drive traffic to their shop: Promoted Listings, our on-site advertising product; and Google Shopping, which advertises their products on Google.

Let me take a moment to explain these two products. Starting with Promoted Listings. This service has grown approximately 30% or more for each of the past 8 quarters, robust revenue growth for what is now our largest seller service. Pro List growth has been primarily driven by the expansion of inventory, meaning Promoted Listings show up in more places on the Etsy site, and to improve algorithms, which deliver the right ad to the right shopper, resulting in more sales. Promoted Listings is designed to be extremely easy to use.

Sellers simply give us a daily budget and we optimize that budget on their behalf, working to ensure that on average, they receive a strong return on ad spend. Since we know that our sellers are relatively indifferent as to whether the visits they are buying come from on- or off-Etsy, as long as they're high-quality visits, in 2016, we launched a second ad product, Google Shopping. This product allows sellers to give us a budget, which we used to buy PLAs on their behalf, driving traffic from Google directly to their listings. We also believe that on average, our sellers' gross margin is much higher than our 5% transaction fee. In other words, they are able to spend more on a visit from Google than we would and still achieve a strong return on ad spend.

Our research indicates that there are many potential visits we are leaving on the table that our sellers would have happily purchased. However today, Google Shopping is a completely separate ad buy, meaning that we do not invest any of the unused Pro List budget on Google Shopping. Our sellers have found it confusing and a bit intimidating to try to manage 2 separate ad programs, and as a result, seller adoption of Google Shopping has been limited. We believe that sellers want a single, simple solution with a single budget, where they tell us how much to spend and we invest that on their behalf, on- and off-Etsy.

As we've illustrated on Slide 14, today, we use less than 50% of our sellers' aggregated budget. In other words, they have more appetite to invest than we have inventory to offer. By creating 1 streamlined ad offering, we can optimize our sellers' budgets across both Pro List and Google PLAs, as you can see on the right-hand side of this slide. Etsy Ads will launch later this month. We aim to utilize more of our sellers' budgets over time, but expect that a portion will remain unutilized, as we continue to optimize sellers' spend with a strong ROAS hurdle as the guide post.

Over time, our goal is for this product to be a growth driver for our sellers and for Etsy. We expect to reduce Etsy spend on performance marketing channels and reallocate those investments to upper and mid-funnel marketing. We believe this will improve brand awareness and consideration, drive more direct traffic to our homepage and our mobile app, as well as increased frequency, reminding consumers why Etsy and when Etsy, a message no individual seller can do on their own, but every seller will benefit from.

A smarter way for us to be investing. We believe that Etsy ads will be another popular optional Seller Service, and as its uptake and budget grows, so will Etsy's take rate. It's a great example of how optional Seller Services can help us to deliver excellent value to our sellers and a fair take rate for Etsy, while minimizing mandatory fees. Our third growth catalyst is our recently announced agreement to acquire Reverb, a privately held marketplace for new, used and vintage music gear.

As you've heard me say many times, vibrant, two-sided marketplaces are lightning in a bottle. There are only a few -- a handful of them at scale, and Reverb is one. This transaction is a great strategic fit that firmly aligns with our mission of keeping commerce human. Reverb is the Etsy of musical instruments, with significant competitive differentiation, and we see tremendous value and potential in the business. What Reverb's founder, David Kalt, and his team have created in only 6 years is incredible.

Essentially, a new and special place to buy and sell musical instruments, and I'll bet some of you out there are musicians who are familiar with the platform. They've been a disruptive force in this space, where used musical instrument sales are now outpacing new. Reverb has redefined the sector and grown it online. Why am I so jazzed, sorry, about this deal? It's a great strategic fit and similar business model to Etsy, and the company is in the infancy of its growth.

We see a number of similarities between the lever of growth for Etsy and Reverb, such as improving search and discovery, making selling and buying easier and building a global brand and user community. We've -- successfully implementing these types of initiatives at Etsy, and are confident that we can similarly impact Reverb's business. We'll have more to share with you about this business once the transaction is completed, but since it's still pending regulatory approval and other customary closing conditions, we're keeping our commentary to a minimum today.

I've never been more excited about what lies ahead for Etsy. We have a core business that stands for something different and meaningful, which has never been more relevant and continues to have tremendous potential to unlock further growth, with disciplined investments in marketing and product development.

Overall, we feel good about the ROI and progress on our key marketing channels, including TV, and as we scale our product teams, we continue to see incremental returns there as well. And we continue to make bold bets that set us up for an even brighter future, and that we believe will have a positive impact on our financials in the near term and long.

And with that, I'll turn the call over to Rachel.

Rachel Glaser -- Chief Financial Officer

Thanks, Josh. In the second quarter, GMS grew 23% on a constant-currency basis and 21% on an as-reported basis, an acceleration versus prior quarter and last year, fueled by both increased product development velocity and optimized investment in mature and new marketing channels. Revenue grew 37% year-over-year to $181 million, with growth in both marketplace and services. And adjusted EBITDA was $40 million, with EBITDA margin expanding 100 basis points to 22% in Q2, as they continue to benefit from robust revenue growth.

Let me provide a little color on our revenue and adjusted EBITDA results. First, marketplace revenue benefited from 21% GMS growth and the related transaction revenue also benefiting from last year's price increase. As a reminder, in the beginning of Q3, we anniversaried the increase in our marketplace take rate, which has been a significant driver of marketplace revenue growth over the past year.

Next, Promoted Listings revenue was the largest factor contributing to growth in services revenue, growing 32% in Q2. As discussed on our last call, in the second quarter of last year, we had a onetime benefit of $2.8 million related to Etsy Shipping Label revenue that did not recur in 2019. In addition, some of our development squads shifted focus to work on Etsy Ads, somewhat delaying new product launches that may have had a positive impact on Promoted Listings revenue.

And a last note on revenue, 24% of active sellers have adopted our Shipping Labels service in the 4 markets where we offer this product, for approximately 430,000 sellers. This is an increase of approximately 40,000 sellers compared to prior year. Despite this growth, we saw headwind from Shipping Labels revenue as the USPS eliminated one of their rate classes, causing sellers to shift to a lower-margin class. This was effective at the beginning of the year and continued to cause a small year-over-year decrease in Q2.

Overall, our take rate remained at 16.5%, consistent with prior quarters. We were pleased to see incremental efficiency in our marketing spend, as we leveraged data and insights from recent tests. Both our robust revenue and marketing efficiency helped to drive 100 basis points of improvement to our EBITDA margins to 22%. Q2 EBITDA growth is partially offset by incremental expenses running through cost of revenue and G&A. Cost of revenue increased 29% year-over-year, though gross margin increased by 190 basis points.

In terms of our migration to Google Cloud, we have migrated a majority of our systems to Google Cloud and usage costs related to the cloud are expensed and recorded in cost of revenue. Cloud expenses were the primary driver of our year-over-year increase, and we expect to leverage the benefit of this spend for product initiatives with a positive impact on GMS growth.

G&A increases this quarter versus prior year were driven in large part by the impact of the new lease standard adopted at the beginning of the year, resulting in incremental depreciation, primarily noncash. This will now be included in our G&A expense line and the P&L going forward, and is backed out of EBITDA. Also backed out of EBITDA is $1.2 million of professional expenses primarily related to our pending acquisition of Reverb.

Our flywheel has continued to get stronger as demonstrated by the improvements in our key operating metrics. Active buyers accelerated for the seventh consecutive quarter, increasing 19% in Q2 to $43 million. GMS per active buyer on a trailing 12-month basis grew to over $100 for the first time ever, and delivered 5 consecutive quarters of positive growth, evidence that we are continuing to make progress improving frequency. It is important to keep in mind that we expect this metric to be positively impacted by our marketing investments such as TV, which has a longer-term payback period and can deliver returns in future quarters.

Our buyer categories continue to show signs of improvement. Habitual buyers, customers who have made 6 or more purchases and spent over $200 in a 12-month period, were again the fastest-growing segment of buyers. And active sellers increased 18%, driven in large part by growth in international sellers. International GMS was 38% of overall GMS in the quarter.

And on a constant-currency basis, GMS growth was 37%, another strong quarter for international growth driven by our U.S. buyer to international seller, in international domestic trade routes. Paid GMS as a percentage of total GMS was 15% in the quarter, contracting from 16% in Q2 2018. We define paid GMS as GMS attributable to our performance marketing efforts, excluding most of our upper funnel investments like TV and digital video.

We believe that more organic traffic is coming directly to Etsy as a result of our TV campaign having a positive impact on Etsy brand awareness. So those are the highlights of the second quarter financial and operating metrics. Let me take a few minutes to walk you through the financial impact of our free shipping initiative and Etsy Ads. There are a number of moving parts, and I will do my best to explain the accounting impact of each one. Let's start with our free shipping initiative. Our smart pricing tool allows sellers to set up a free shipping guarantee. They can then individually choose to incorporate all or a portion of their shipping cost into their item prices to recover costs, and present it to buyers as 1 clear price.

Slide 22 illustrates how we believe this initiative will drive higher GMS and revenue. First, in our tests, we saw that conversion rate increases for items that are presented with free shipping; second, we observed that average order value increased as buyers buy more from the same shop to reach the $35 minimum required to earn free shipping. We believe that in the future, these 2 factors will drive positive impact to GMS and revenue.

A third factor to consider is whether sellers will move their shipping price into their item price to recover the cost of shipping. Last, the seller transfers less than 100% of the shipping cost into the item price. This could have a neutral to negative impact on revenue and take rate. Sellers were already paying 5% transaction fee on shipping. Any amount less than 100% transfer from shipping to item price will result in a modest contraction to revenue.

In our tests, we saw that approximately 84% of shipping price was transferred into item price for cost recovery purposes. Net-net, when taken together, we expect the benefit from increased conversion and AOV will significantly outweigh this small contraction. In September, we will begin marketing the availability of free shipping to buyers, and we believe the strength of this free shipping method will have a positive impact on frequency and importantly, GMS and revenue growth.

Next let me walk you through the financial impact of Etsy Ads. Currently, sellers could elect to purchase Promoted Listings and/or Google Shopping. Promoted Listings is recorded as revenue and Google Shopping is recorded net with seller spend. But beginning in Q3, under the new Etsy Ads platform, the gross amount spent on Google Shopping will instead be recorded as revenue, with a dollar for dollar offset of expense in cost of revenue. In the short term, this results in a slight contraction in gross margin, even though gross profit dollars are not impacted. The budget allocated to each of these products were dedicated to these individual channels.

And as the budget was not utilized, these funds will return to the seller. With Etsy Ads, we will now take a seller's single-budget election and optimize it across 2 products: Promoted Listings and Google Shopping. Etsy controls the allocation of their marketing dollars, and this therefore becomes 1 gross revenue stream for Etsy.

So how does this impact our financials? Starting with GMS, the initial impact is neutral. But over time, we expect a positive impact to GMS as our sellers increase their ad budgets and we improve utilization. Revenue was also expected to increase with larger budget utilization. Since the Google Shopping portion of our Etsy Ads revenue will be a straight path through to cost of revenue, there will be 0 impact to gross profit.

Gradually, we expect that our sellers' marketing spend will replace Etsy's performance marketing spend to a great extent. This enables us to repurpose that spend to upper funnel marketing channels where Etsy can invest to build brand awareness, something our individual sellers cannot do on their own, but we believe they will greatly benefit from. Over time, we expect Etsy Ads to create a fundamental improvement to our margins, while also enabling sellers to more easily make investments in their own growth. And lastly, on our pending acquisition of Reverb. We plan to discuss any specific updates to 2019 financial guidance following the completion of the transaction.

Turning to how our overall business trends and these new initiatives impact our 2019 guidance. We are raising GMS guidance to 20% to 22% growth, raising revenue guidance to 32% to 34% growth, and taking our outlook for adjusted EBITDA down by 1 point to a range of 22% to 24%. The increase in our GMS guidance is driven by better-than-expected product development efforts, which has been delivering incremental GMS wins; efficiency in our portfolio of marketing initiatives, including TV; and the GMS benefit of our free shipping guarantee, which we expect will primarily impact the fourth quarter.

One headwind we are managing is the new state sales tax laws, which are coming online, which among other things in the macro environment, could offset some of the growth we expect in 2019. Our increased revenue guidance reflects both continued growth in our core business and the revenue benefit of Etsy Ads, which in the near term is primarily related to the additional revenue for our former Google Shopping service. Our guidance implies that in the second half of the year, revenue will grow 28% to 31%, a substantial increase to our run rate as we enter 2020. Please note that the fourth quarter is generally the high watermark for the year for our ad platform revenue.

Turning to adjusted EBITDA, we have a disciplined approach to making investments, and are comfortable investing for long-term growth, where we have confidence there is a positive return on investment. We have a great deal of confidence in our current slate of marketing and product initiatives, but some of them have longer-term payback periods. As the mix of our marketing spend shifts to include increased investment in upper funnel marketing channels, we expect our payback period to lengthen as we go forward. We have confidence in the positive return this investment will drive over time.

Secondly, the majority of incremental revenue associated with Etsy Ads will have no impact to adjusted EBITDA in 2019. As a result, our take rate will increase, but adjusted EBITDA margins will contract in the short-term. Over time, we expect the efficiency of this platform and a greater utilization of available ad budgets will be margin-accretive.

Last, now that we've migrated the majority of our systems operations to the cloud, including our machine learning efforts, we expect a lower percentage of our product development labor will be capitalized and more to be expensed going forward. As a reminder, our long-term target for adjusted EBITDA margins is 30% or higher.

We're building on our momentum following another great quarter. We expect to continue to capitalize on our large market opportunity and leverage our strong financial position to transform the business by delivering sustained growth and expanding margins.

Thank you all for your time today. We will now take your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Heath Terry with Goldman Sachs. Your line is now open.

Heath Terry -- Goldman Sachs -- Analyst

Great, thank you very much. Just on Etsy Ads, can you give us a sense as you're obviously dealing with a lot of sellers that have a budget plan around this. Should we expect that this has the potential for net ad spend at Etsy to be down in some part? Or is there enough demand across the platform to be able to reinvest all of the offset from sellers?

And then on the guidance for GFS, given the outperformance this quarter relative to expectations as well as the free shipping on the horizon, any reason that we shouldn't expect sort of further upside to the GMS growth over the second half relative to what you guys have guided to? Or is there potentially something we're missing in that?

Rachel Glaser -- Chief Financial Officer

So I'll take the second question first, and then Josh will take the one on the Etsy Ads spend. So first of all, thank you for your questions, and I would say, we've given our best estimate for GMS for the year, and so we're comfortable with that number. Baked into there is some conservatism around what we might or might not see from sales tax, so that could be -- we're doing our best estimate of that based on what we've seen thus far. We pointed out that, that could be a headwind or other macro factors could be a headwind, so we're doing our best there.

And then we are also just launching -- we have not yet launched Etsy Ads, so that's -- we are giving you kind of a debut of that product that's yet to come, so that's a lot -- that's a fairly big unknown to us, and we're just launching our shipping guarantee, the marketing for that doesn't even start until September.

So I think there's a -- we're doing our best based on expensive testing and speaking with sellers and -- to give the guidance that we understand we're pretty confident that we've given you a few good numbers, but there's a few unknowns as we've pointed out.

Josh Silverman -- Chief Executive Officer

And on Etsy Ads, it's a great question, Heath, and it's complicated, this new program. So I'll start with what we're really excited about it. If you ask sellers what they want from Etsy, one of the top things they're going to say is the opportunity to invest more to drive my own growth. And so this is -- we think over time, going to make the pie bigger, as it's going to really give sellers the opportunity to invest more to drive their own growth, have more agency, which we think is great, and I think they are going to think is great as well.

In the near term, it's really important that we are able to put that money to work in a way that drives incremental growth for them and good return on ad spend, and they're going to test and learn their way into the program. And so we're going to be testing and building out our capabilities, and they're going to be testing and getting more sellers to come into the program and more sellers to take their budget up is something that we want to do over time, and we're optimistic is going to happen.

In the near term, we're going to have to see how it works. So we're very optimistic about the program in the medium term. It's complicated, and we're going to be navigating it in the months to come. All that said, I think that the guidance that we've given you for this year is appropriate. There's a number of puts and takes, and I think it's appropriate.

Heath Terry -- Goldman Sachs -- Analyst

Great, thank you both.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Edward Yruma with KeyBanc. Your line is now open.

Edward Yruma -- KeyBanc -- Analyst

Hey, good afternoon and thanks for taking the question. I guess, just a follow-up on Etsy Ads, why do you think you'll hit the crossover point where the decline in Etsy funded performance marketing will allow you to basically hold or leverage ad spend? And I guess as a follow-up, you've asked a lot of your sellers, this is 12 months between the higher take rate, now pre-shipping and now potentially after the increased advertising for Etsy ads. What's your sense is the vibrancy of your supply base, maybe their margins and kind of how happy they are with a lot of these changes that are taking place? Thank you.

Rachel Glaser -- Chief Financial Officer

Hi, Ed. Thanks for your questions. This is Rachel. First of all, the vibrancy is robust. We have 18% active seller growth this quarter up to $2.3 million now. And Josh can speak more about some of the ways we rode the shipping guarantee out to our sellers, but in rolling it out, we did -- as we did with pricing, we did it very carefully through lots of marketing to them and gauging feedback, free testing and all of that, and that went as we expected it to. We would expect the same thing with Etsy Ads.

We think that Etsy Ads is going to be something that they're very excited about. It gives them -- we know from the budgets that they give us, and the amount that we're able to utilize, they have appetite to spend a whole lot more than we are able to spend on their behalf. And this will put more control and them being able to create growth of their own shops and listings. So we think this is something that they'll be very pleased about.

Josh Silverman -- Chief Executive Officer

Yes. And just to build on that, this is a pioneering new program, and I think that's pretty exciting. I do expect that the reception from sellers will be on the whole, very positive, because it gives them more agency. And Etsy is very committed to marketing our sellers. This gives us a chance to move up the funnel in a way that each individual seller can't. So we can do things like even more TV advertising, driving people to homepage, brand awareness of Etsy driving frequency, getting people to download the app.

And that results in more organic sales for our sellers, which is great for all of our sellers. If some of them want to opt in to further fuel their growth, they can through Etsy Ads and it's optional for them to do that, but it allows them to even further fuel their growth. And as I talked about in the script, there's a lot of reasons why they might have more appetite to do that than we do. Their gross margins, the 5% commission. When you run the math on how much we can afford to, for example, buy a Google PLA, there's many circumstances where I think the seller would be ready, willing and able to spend more on that click than we can.

So this really is an opportunity for the sellers to invest in an area that they're best suited to invest. That allows us to reallocate to where we can best use our income statement to their best interest. To your question about when and how we would be moving and reallocating that timing, you know, we're heading into the fourth quarter, and we'll continue to be investing ourselves and having our sellers invest.

The most important thing is that they get a really good return on ad spend, and we're going to make sure that we stay very close to this, that our sellers get a good return. That's what's going to have them liking the program and continuing to invest. So we're going to be continuing to invest with them at least for a period of time to make sure that the returns are really strong.

Edward Yruma -- KeyBanc -- Analyst

Great, thanks so much guys.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Kunal Madhukar with Deutsche Bank. Your line is now open.

Kunal Madhukar -- Deutsche Bank -- Analyst

Hi, thanks. A quick one on the long-term growth outlook that you have on one of the slides. It still remains at like 16% to 20%. Given free shipping and given that naturally whether it is 84% of the shipping charge that moves into GMS or not, but I was hoping that, that would have -- the 16% to 20% might have inched up more than that? And then the propensity to buy that side of the equation and the increased intent to buy, how much would that impact the 16% to 20% target as we kind of think about it?

Josh Silverman -- Chief Executive Officer

Yes, thanks for the question and thanks for your optimism and enthusiasm about the long-term growth, we share that. So we gave those long-term targets just in March, and we're not in a habit of updating those on a very, very frequent basis. So we gave those just in March. We're confident. We were confident in those targets when we gave them. We are very confident in those targets, continue to be very confident in those targets today and we're not updating them at this time.

Kunal Madhukar -- Deutsche Bank -- Analyst

Thank you.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Nick Jones with Citi. Your line is now open.

Nick Jones -- Citi -- Analyst

Hi, thanks for taking the question. We've heard you talk a little bit about educating sellers over time, and then we're kind of seeing some moves that may be for sellers had. Are there to kind of adapt the kind of behavior you're looking for. Are there kind of other opportunities to push sellers in the right direction so you can maybe bypass some of the more tedious education? And then a quick follow-up, in whether maybe Prime, they had an outsized impact this year compared to previous years?

Josh Silverman -- Chief Executive Officer

Yes, thanks for the question I really appreciate it. It's our job running a platform to look after the good of the comments. And we just have more data and that gives us an opportunity to gather more data and sometimes have more insight than any individual seller would have, the chance to have on their own. I do want to say, we do not consider education to be tedious at all. We consider it to be absolutely our day job. It's really important that we take the time and have empathy for the fact that sellers, they really count on us. It's a really big part of their life. And we really get that and this is a partnership. And so we work really hard to communicate with them.

So I think the way we've handled shipping, I hope is indicative of how we think about this. We've been talking to sellers about free shipping for 2 years, and we've been providing a lot of educational information. We've been giving them a lot of data and we've been making stronger and stronger strides to encourage our marketplace in the direction that it's gone. So the announcement we just made is the strongest. And again, what it -- it's designed to allow our sellers to compete on a level playing field with all the other e-commerce players out there, where when you look around, you see free shipping almost everywhere you go. And so we're just trying to make sure that our sellers get to a level playing field.

We do have some courage and conviction because of our role as a marketplace, we get more data than any individual seller has. And that means as a leadership team, sometimes we need to lead and educate and communicate to our sellers and then we'll do some things to help make sure that the whole marketplace gets to where -- what serves our sellers best and we'll keep doing that.

Rachel Glaser -- Chief Financial Officer

The second question was Amazon Prime rates.

Josh Silverman -- Chief Executive Officer

Say that again, I'm sorry.

Rachel Glaser -- Chief Financial Officer

Second question was on Amazon Prime Day? Correct?

Nick Jones -- Citi -- Analyst

Yes. Just if it had an outsize impact this year compared to previous years.

Josh Silverman -- Chief Executive Officer

I don't think we're commenting on individual days, but the guidance we've given to the rest of the year we think appropriately incorporates how we see the rest of the year.

Nick Jones -- Citi -- Analyst

Got it. Thank you.

Josh Silverman -- Chief Executive Officer

Yeah. Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Shweta Khajuria with RBC Capital Markets. Your line is now open.

Shweta Khajuria -- RBC Capital Markets -- Analyst

Thank you. Two questions, please. One, on the impact on revenue from shipping and Etsy Ads. So can you quantify a little bit the full year guide increase by $12 million at the midpoint? How should we think about where it's coming from, off that $12 million between the 2? And then the second, on the seller adoption for the shipping service. Rachel, I think you mentioned 24%, I may have gotten that wrong. So what percentage of sellers have a -- do you think have adopted right now? And how do you think that grows in the back half once it's fully launched? Do you think it would be 50% of sellers, 70% exiting the year that would be using the free shipping? Thank you.

Josh Silverman -- Chief Executive Officer

Great, so I'll take the first, and Rachel, take the second. On the first, your question's really, can we break down the revenue increase? I think, when we're increasing our guidance, how do we break down the components? And we're not going to give you specifics, but let me try to give you directional and dimensionalize it. First, we're taking up our GMS guidance and as we pick up our GMS guidance, there's some revenue flow through that just naturally comes from that. So that's a component of why we're taking up revenue. We talk about GMS for just a second.

We entered the year giving guidance, and when we entered the year, we had a sense that we were going to make progress on free shipping. In fact, I said in every opportunity that this year we will make really material progress on free shipping. We feel really good about the progress that we've made in the first half of the year on product and marketing. We think that those teams have done really well, and we've had a chance to test some of our free shipping ideas and do simulations and things like that, and the combination of all of those make us even more confident in the second half of the year, and thus the increase in guide to GMS, which has some revenue impact.

ut the larger piece of increasing our guidance on revenue is Etsy Ads, and there are 2 components to Etsy Ads. One is simply a reclassification. So Google Shopping did not used to count as revenue, and now it does. So the simple reclassification of Google Shopping from not revenue to revenue has an impact on, obviously on our revenue, but all of that is a straight flow through with no gross margin.

The second thing is we expect increased seller adoption and increased budget, which will in fact grow revenue, and that is through revenue growth that has real implications for revenue over time. To the extent that that's on the Google Shopping side, that's still a pass-through, but again, over time, we think Etsy Ads has real margin-accretive value to Etsy.

Rachel Glaser -- Chief Financial Officer

So before I jump into the second question, so I just want to punctuate the point that the revenue guide that we gave at the midpoint is implied 17.1% take rate, up from the 16.5% take rate that we've seen in the first half of the year. So I wanted to make that point so you're rightly capturing the fact that the revenue guide was up a significant increase in our run rate.

On the shipping, I just want to make sure I'm clear, I did say that shipping adoption grew to 24% for sellers in the 4 markets that we offer it. So it's only offered in 4 markets, and we're talking about shipping labels the product that we offer them as a Seller Service. That is not 24% adoption of the free shipping guarantee that we've just rolled out. We did not give a metric on how much that has been adopted, but we're really pleased that progress is exceeding what we expected -- where we expect it to be at this point.

Shweta Khajuria -- RBC Capital Markets -- Analyst

Okay, thank you very much, Josh and Rachel. Got it.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Rick Patel with Needham & Company. Your line is now open.

Rick Patel -- Needham & Company -- Analyst

Hey guys, thanks for taking the question and congrats on the strong execution. I'm hoping for some color on GMS per active buyer. So good progress there. Can you provide some granularity on what's driving that growth? I think Rachel called out frequency, but I'm just curious, are your search results optimizing product pricing as well? And just curious where the opportunities are and how sustainable the continued increases are?

Josh Silverman -- Chief Executive Officer

Yes. The number 1 driver is, while we're seeing visits per visitor as well, and I think TV is helpful to remind people of when to come back to Etsy, sort of more moments in which we're relevant, so that's helpful. And conversion rate continues to see progress. So it turns out that many of the people who shopped on Etsy come back on Etsy, not infrequently. We've just got to get them up in the line to buy. And so we continue to see some progress in conversion rate as well, and it's really the combination of those 2 that are driving the GMS per buyer.

What I didn't mention is AOV. So we've seen less progress to date on average order value. So the increase in GMS per buyer really is a function of people buying more often. So far it's not so much that they're buying more expensive products, although I think that there is a real opportunity for us to move AOV as well over time. And we're excited about the potential there.

Rachel Glaser -- Chief Financial Officer

I'll just add that, we had so much to talk about in this call that we didn't give as much color around which products we were working on that drove the conversion rate increases or the visit increases. There's a tremendous -- we did talk about a tremendous number of product wins and an increase in velocity of products that we're putting into market. And as we follow-up after this call at various conferences and on one-on-one calls, we should share a little bit more color on progress that we're making on search and other -- the 4 rights to win that Josh lined out.

Rick Patel -- Needham & Company -- Analyst

And can you contextualize marketing from a U.S. versus international perspective? I'm just curious how these cohorts have behaved differently to various marketing initiatives you've tested? And how we should think about the opportunity going forward?

Josh Silverman -- Chief Executive Officer

Yes. Great question. So first, let me break it out into performance marketing and then above the line. In performance marketing, we apply pretty much the same standard all around the world. So we talked about our sort of ROI thresholds of apply to that marginal and the next dollar has a marginal return less than our cost of capital. That we do everywhere. Above-the-line marketing, we've really only been testing in the U.S. and so we aren't really able to talk about the impact of above the line marketing outside the U.S. yet. We do expect that to change. But at this time, we've gone with above-the-line marketing in the U.S. Did that answer your question?

Rick Patel -- Needham & Company -- Analyst

Yes, it does.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Maria Ripps with Canaccord. Your line is now open.

Maria Ripps -- Canaccord -- Analyst

Great, thank you for taking my questions. Just a follow-up on frequency. Any incremental color you could share with us on your progress with improving frequency? And then in terms of habitual buyers, can you talk about how long they've been with Etsy on average? What are they most responsive to? And what are some things that you see in their behavior that maybe you can leverage -- across your broader your broader user base?

Rachel Glaser -- Chief Financial Officer

So the metrics that we gave in the call were that our habitual buyers were again, the fastest-growing consumer segments. And so -- and those are the buyers that spend $200 or more and visited us 6x -- or make 6 or more purchases, rather, in a 12-month period. So we're pleased that we're influencing that category through our marketing and product initiatives.

The other thing we see is that GMS on a trailing 12-month basis per active buyer, continues to grow. It grew to over $100 in the quarter for the first time ever. And that was the fifth consecutive quarter of growth. And when you look at that number on a 2-year stack, it's again, an acceleration. So that's a proxy for us saying, on average, over a 12-month period, so it smooths out seasonality. As we have more active buyers, those are buyers that have only come back to us in a 12-month period, that number is growing. And so that to us is one of the metrics to give that shows that frequency is actually having an impact.

Josh Silverman -- Chief Executive Officer

And in terms of describing the sort of average tenure of habitual buyers or some other characteristics. First, they tend to not show up as habitual buyers on day 1. They tend to have been with us for more than a year. So what you see is people steadily use us more and more. And what seems to differentiate a habitual buyer versus a not, is that they kind of understand the treasure chest of Etsy. They figure out how to find the best stuff on Etsy, which is we've talked about at length, we want to make that easier.

And these are the folks who have figured out kind of how to navigate that, and they have their own tips and tricks, so spending time with them, figuring out what those tips and tricks and how to kind of build those into the core experience so everyone can have that experience is part of what we do. But I think, hard to know is, other than that, describing habitual buyers' a little tough. It's not that they're all wedding people, or all baby people, or all home furnishing people.

It turns out that they're pretty diverse in almost every other way, and what I like about that is it suggests that it's not a small niche where it's only 1 or 2 use cases that lead to this behavior. There are many different use cases that can lead to this behavior. We've just got to make it easier for those sort of mass audience to find the treasure chest that the habitual buyers have had the temerity to do. And I think we can -- we get a lot of value there.

Maria Ripps -- Canaccord -- Analyst

Great, thank you both.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

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

Brian Nowak -- Morgan Stanley -- Analyst

Thanks for taking my question. Just to go back to the last question a little bit on new buyer growth. Rachel, I might have heard it, but my signal was in and out. Did you mention that you might be changing the overall ROI payback, kind of extending the payback that you're applying to the marketing spend going forward? That is happening. Just talk to us about what's causing that strategic change and how you think about incremental cost of buyers going forward? Thanks.

Rachel Glaser -- Chief Financial Officer

Yes. So we talked about -- because we have shifted the mix of our overall spend to include upper funnel marketing, which is television and digital video, those tend to have a longer-term payback periods, because we're relying on the frequency of the impression causing people to understand why Etsy and when Etsy. So that takes longer for that to happen. It has more legs to it also. But we haven't reduced our ROI hurdle and we have the same expectation of ROI, it's just the payback period shifts out a little bit.

Brian Nowak -- Morgan Stanley -- Analyst

Got it. And then we go the other half of the equation, so the conversion points, I think it amounts to a few times about kind of, couple of specific examples, we've had kind of conversion wins. I kind of just wanted to ask if you could sort of nail down the 1 or 2 key points of friction you still see on the platform to really drive higher conversion from all these repeat visits? And what are the things that you're really watching to drive faster overall GMS per buyer for better conversion?

Josh Silverman -- Chief Executive Officer

So at the risk of being boring, but I don't mind being boring, because we keep coming back to the same things. Can we really have a great search and discovery experience so people can find the good stuff easily? Have we built the trust in the brand so that buying from someone you've never met feels safe? It's really those core, can you find it, and do you have the confidence to buy it elements, and what I hope you see is us making really steady progress, sometimes incremental, sometimes more bold in those journeys. I think the free shipping launch of the past few weeks is an example of us doing something more bold in that direction.

Brian Nowak -- Morgan Stanley -- Analyst

Great, thanks.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Jason Helfstein with Oppenheimer. Your line is now open.

Jason Helfstein -- Oppenheimer -- Analyst

Thanks. I want to dig in a bit more, I guess, around marketing, and how you magnify everything that you've effectively kind of now put in place over the past, call it, 5 quarters. There was, I assume you've done testing around all of the new initiatives, labels, shipping, is there -- when you -- and then big data, right? You kind of moved into the cloud and leveraging all that. When you start to see the confidence behind that, deploying more marketing and how to bring it all together. Thanks.

Josh Silverman -- Chief Executive Officer

When you say confidence around the marketing, do you mean the return on our marketing spend? Or I'm sorry, can you...

Jason Helfstein -- Oppenheimer -- Analyst

The increase in marketing spend, you kind of drag it out. So I think investors have been trying to understand, when your comp guidance is going to step on the marketing gas to draw the top line.

Josh Silverman -- Chief Executive Officer

Great. Got it. So look, we spend what we think we can get a really good return on. We have a lot of discipline around that, and we're proud of that discipline. So what you're seeing us do right now is take our margins down just a tiny bit, which I think is really good news, because it means we've got a lot of confidence in the marketing initiatives and the product initiatives we've got -- we have right now. So much so that we're going to spend a little more into them, and we feel really good about that.

So let me give you a little more color, maybe you'd be interested in that. So for example, in performance marketing, we think that we can have better data feeds, and having better data feeds, we're going to be able to be more effective with folks like Google and some of the social channels. We think that our bidding strategies can become more nuanced and segmented, and we think that's going to have an impact. And with our landing pages can get better.

And Ryan, our new CMO, is a real expert and really technical in these areas and by the way, our marketing team's been doing a fantastic job without a CMO for the few months -- the past few months, and I want to call a shout out to that team. They really done a great job in spite of not having a CMO. But with Ryan there, we're even more equipped to go attack those kinds of opportunities that are going to make our marketing -- and the performance channels more effective.

And then in TV, we're pretty new to TV. We've been doing this for less than a year. And so the size of budget we're putting to TV, relative to folks that have been doing this for a year or less is actually -- I've done a lot of benchmarking of peer companies and were not being that timid, I don't think, for folks that have only been doing it for 1 year. That said, we're optimistic that if it continues to work like it seems to be working so far, you might see us take our TV budget up further in time to come, and we're excited. And I will say that the launch of Etsy Ads makes the pie bigger.

This gives us the chance for them to bring the sellers into the equation, even more and let them to fund some of the performance marketing channel, which they are uniquely well-positioned to do, so we can invest even more above the funnel and make the pie bigger for everyone.

Rachel Glaser -- Chief Financial Officer

And Jason, this is a Rachel. I'll just add that, Josh mentioned that in his prepared remarks, that we will -- we pulse TV on and off, as TV will pulse back on as we enter the late third quarter into the fourth quarter, so I think we're spending a healthy amount on upper funnel marketing and then on our performance marketing, we don't even give the teams a budget. We've given them an ROI hurdle and they spend as much as they can, up to where that hurdle is.

So we feel like we've continued to optimize there so that they can spend more. We continue to test less mature channels, so that we can give them that kind of, sort of like open to buy, to go out and spend up to the ROI hurdle, when we have confidence in the channel. I think we're -- I consider us to be on a more aggressive side of using marketing as a lever for growth.

Josh Silverman -- Chief Executive Officer

Profitable growth, right. We're super focused on profitable growth.

Jason Helfstein -- Oppenheimer -- Analyst

All right, thank you.

Operator

And our next question comes in the line of Marvin Fong with BTIG. Your line is now open.

Marvin Fong -- BTIG -- Analyst

Great, thank you for taking my question. Just to drill a little bit more into the Etsy Ads. So I understand what you're saying about sellers have better economics so they can spend more than Etsy might otherwise be. So is it conceivable that they would actually be spending more in aggregate than Etsy's current paid search budget? It sounds like in the long run, they can probably be spending multiples of what you guys are spending right now. And just mechanically, how would that work in that you guys will check to see if that seller has an Etsy Ad budget, and if not, you'll purchase that paid ad yourself, still. Or how mechanically is that going to work? Thanks.

Josh Silverman -- Chief Executive Officer

Yes, great question. So let me start with a second and then go to the first. So mechanically, yes, a seller gives us a budget and then we look at their listings, in their shop, and we work with Google to figure out what would be a reasonable -- a responsible bid to buy a visit on their behalf, and we look at what a good -- what we estimate the conversion rate of that visit would look like, and therefore what would the return on ad spend.

And what we're really trying to do is to back into what do we think their ROAS will be. And spend as much as we can reasonably spend on their behalf with, well maintaining a good ROAS and we obviously have much more sophisticated tools than any individual seller would be able to have on their own and their landing on the Etsy domain, which has a lot of confidence and performance better on average than landing on the individual sellers' domain. There's real value in that as well. So that's how the program works.

And could it be bigger than Etsy's existing performance marketing spend over time? I'd say it's too early to tell. We're going to come into this in the second half of the year and test and learn our way in. But we think it can drive a lot of value for sellers. And we're really excited about that. And so we're optimistic about the future of this program.

Marvin Fong -- BTIG -- Analyst

Great. And just as a follow-up. It sounded like you are saying that social retargeting is now ROI positive? If that's the case, are you guy -- are you planning on expanding your marketing spend in that channel? And could you just give us an idea of how big that channel is, maybe relative to TV or some of the other mass channels?

Josh Silverman -- Chief Executive Officer

Yes. So we did call that it, they we're finding some tactics within social that we've now figured out how to get ROI positive, with dynamic retargeting being 1. And so you should expect us to use the same methodology, which is the next dollar should still be ROI-positive, and when the next dollar isn't ROI positive, we don't spend that dollar. So as we unearth tactics, we use them.

Dynamically retargeting means that someone who's been an Etsy and has found a particular product in Etsy, we might have that opportunity if they're also on Facebook too. So it's only a certain community of people that you can reach so the size of that is smaller than being able to target, for example, everyone on a social channel. But we're -- I think it is early days for Etsy's marketing capabilities, and I think as we invest more in better martech, I think we can continue to unlock more opportunities to invest and grow.

Marvin Fong -- BTIG -- Analyst

Great thanks, Josh. Thanks, Rachel.

Josh Silverman -- Chief Executive Officer

Thank you.

Rachel Glaser -- Chief Financial Officer

Thank you.

Operator

And our next question comes from the line of Elliot Alper with D.A. Davidson. Your line is now open.

Elliot Alper -- D.A. Davidson -- Analyst

Great, thank you. Now that you've lapped your price increases last year, how should we, if at all, think about your strategy regarding future price increases? And secondly, you touched on this a little bit before, but eBay on its earnings call indicated, GMS growth has negatively impacted by 100 basis points due to online sales taxes. Are you, if at all, quantifying the impact for you? thank you.

Josh Silverman -- Chief Executive Officer

Sure. Let's start with the second, we go to the first. We're not quantifying it, but we think we've appropriately baked it into guidance. It is affecting. We do see that when we begin to collect state sales taxes, it does affect conversion rate and GMS to some extent, and there's real price elasticity, so with states that higher sales tax, it affects more than states that have lower sales tax. So we're seeing that. California is coming online soon. That's a big state. So while we're not quantifying it, we are seeing some impact, and we believe, although time will tell, we believe that we've appropriately baked it into the guidance that we've given you.

With regard to price increases and take rate, I think that Etsy Ads is a really great example of an optional service we can offer to sellers that delivers a lot of value for them and makes the pie bigger for everyone. So this is an opportunity for us to keep our mandatory fees low, while offering great value-added services that they may or may not choose to opt into, but as they choose to opt into them, the effect is that Etsy's take rate goes up. And so we're quite excited about Etsy Ads and the future of Etsy Ads.

And if you look at just thinking the midpoint of guidance for the second half of this year, it implies, as Rachel says, that our take rate grows from 16.5% today to 17.1% in the second half of the year and does that in a way that we think sellers are going to really like. They don't have to use Etsy Ads if they don't want to. They're going to get a ton of value from the Etsy platform if they don't use it, but they can get even more value by adopting Etsy Ads, and we like that strategy.

Elliot Alper -- D.A. Davidson -- Analyst

Thank you.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Deb Wasser -- Vice President of Investor Relations

Josh Silverman -- Chief Executive Officer

Rachel Glaser -- Chief Financial Officer

Heath Terry -- Goldman Sachs -- Analyst

Edward Yruma -- KeyBanc -- Analyst

Kunal Madhukar -- Deutsche Bank -- Analyst

Nick Jones -- Citi -- Analyst

Shweta Khajuria -- RBC Capital Markets -- Analyst

Rick Patel -- Needham & Company -- Analyst

Maria Ripps -- Canaccord -- Analyst

Brian Nowak -- Morgan Stanley -- Analyst

Jason Helfstein -- Oppenheimer -- Analyst

Marvin Fong -- BTIG -- Analyst

Elliot Alper -- D.A. Davidson -- Analyst

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