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Hmm. Based on the Wikipedia article, I can kind of comprehend this. They're making $921,146.95 / employee, yet somehow losing $236,200.71 / employee every yea

by araes 3y ago

Hmm. Based on the Wikipedia article, I can kind of comprehend this. They're making $921,146.95 / employee, yet somehow losing $236,200.71 / employee every year. Don't know where all their money's going, yet something does not look viable. Apparently, Goodwill impairment, Cost of revenue, then marketing. From: https://www.sec.gov/ix?doc=/Archives/edgar/data/1370637/000137063723000017/etsy-20221231.htm https://www.sec.gov/ix?doc=/Archives/edgar/data/1370637/0001... Revenue: $2,566,111,000 Costs: $3,224,671,000 - Cost of revenue: $744,592,000 - Operating expenses: - Marketing: $710,399,000 - Product: development $412,398,000 - General and administrative: $312,260,000 - Goodwill impairment: $1,045,022,000

selectodude 3y ago
Etsy must have written down the entire purchase of Depop.
fatnoah 3y ago
Wow on that Goodwill impairment. If I'm reading correctly, it's from their previous acquisitions of depop and elo7. They paid about $1.9B for both of those, so the "impairment" means they effectively overpaid by $1B.
jSully24 3y ago
Goodwill impairment: https://www.investopedia.com/ask/answers/061715/when-and-why-does-goodwill-impairment-occur.asp https://www.investopedia.com/ask/answers/061715/when-and-why... “ If the goodwill asset becomes impaired by a decline in the value of the asset below the purchase price, the company would record a goodwill impairment. This is a signal that the value of the asset has fallen below the amount that the company originally paid for it.”
kfk 3y ago
I mean, they did an acquisition when money was cheap, now it all goes to goodwill impairment because they paid pre-interest hiked multiples. That is where the money is going. https://www.nytimes.com/2021/06/02/business/etsy-depop.html https://www.nytimes.com/2021/06/02/business/etsy-depop.html
brvsft 3y ago
Wow, $1B goodwill impairment sounds absurd (for a company of Etsy's size). Had to look this up. https://www.fool.com/investing/2023/02/02/etsys-1b-problem-that-no-one-seems-to-be-talking-a/ https://www.fool.com/investing/2023/02/02/etsys-1b-problem-t... > In this case, Etsy believes that it overpaid by $1 billion for Depop and Elo7. A company normally takes write-downs like this when the results of an acquired business don't live up to the expectations at the time of the acquisition. That's not so good, noting that these two businesses are expected to be long-term growth drivers for the company.
- goatking 3y ago
  Aren't they just killing competition? Maybe it's worth the 1bill in the long term (for them, not for the customers)
  - throwup238 3y ago
    If that were the case, they wouldn't have to declare the goodwill impairment. Goodwill is meant to account for the kind of intangible benefit they'd get from killing off competition.
    - araes 3y ago
      The issue is, it doesn't matter what it's "meant" to do. It matters how it's technically implemented, and what they can legally claim without the claim running afoul of the IRS (or other tax agencies).
- wintogreen74 3y ago
  The key is this is how you get a (typically) non-amortizable asset off the balance sheet and expensed on the income statement when all those synergies and economies of scale promised by the (no longer with the company) executive who pushed the deal don't materialize.
Hayvok 3y ago
If you're like me, and you had no idea what "goodwill impairment" meant, and wondering 'what does this billion dollar expense get Etsy?' Investopedia: "Goodwill impairment occurs when a company decides to pay more than book value for the acquisition of an asset, and then the value of that asset declines. The difference between the amount that the company paid for the asset and the book value of the asset is known as goodwill." > Goodwill impairment: Goodwill impairment expense consists of non-cash charges related to the impairment of the goodwill of Depop and Elo7. This is a level of circular definition that makes the head spin. Depop and Elo7 were Etsy acquisitions. I haven't read the SEC filing in depth, but I assume this means that Etsy is acknowledging they overpaid on both these acquisitions, and that their value is in reality far less than they thought at the time. I'm not sure what the accounting advantages are here for Etsy, maybe someone else with more knowledge could weigh in?
- brvsft 3y ago
  It's not really a circular definition because "impairment" and "goodwill" are two words with their own meanings in accounting/finance, so "goodwill impairment" including those two words separately in the definition isn't circular. Goodwill is basically the extra value paid one company pays when buying another company. So if Etsy buys Depop for 1.6B, and of that 1.6B, let's say 600M were actual 'assets' (cash, inventory, whatever (not that Depop had those things when purchased)), then Etsy paid $1B (1.6B - 600M) in "goodwill" for Depop. That "goodwill" is basically the Depop brand, the desire for existing and potential customers to use Depop, etc. Suppose Etsy wakes up one day and realizes that the $1B worth of Depop brand must be worth less. I don't know how they determine this, as the most realistic way would be if they were somehow shopping around to sell Depop off to another buyer, and all the offers are markedly lower than the $1.6B they paid for the same assets + intangibles. That difference is the impairment, to the goodwill. Not sure if that made it sound less circular. I'm also not an accountant, but I've tried learning quite a bit about the subject.
  - drbacon 3y ago
    Thank you for that very well-stated explanation! TIL!
smsm42 3y ago
Wow this looks like some made an absolutely horrible acquisition investment (and quite possibly got promoted and bonused for it), and now as the company realizes that, it has to lay off people that had nothing to do with that decision?
throwup238 3y ago
"Goodwill" is a bit of an accounting trick: it's the difference between what a company is worth on paper and what the acquirer spent on actually getting it, meant to record the value of all the intangibles the acquirer is getting like existing relationships and prospects of future growth. It's the cost of convincing someone to sell their baby. Unless you're buying something like a gas station with very well understood economics, there's going to be tons of money "spent" on goodwill. Goodwill impairment means they're (essentially) admitting to making a huge miscalculation on what that company was worth without a change in the tangible assets.
ojbyrne 3y ago
I’m going to guess they’re mostly laying off the people from the acquired companies that resulted in that goodwill impairment.
avrionov 3y ago
These are numbers for 2022. This year they are supposed to be profitable.

by araes 3y ago

selectodude 3y ago

Etsy must have written down the entire purchase of Depop.

fatnoah 3y ago

Wow on that Goodwill impairment. If I'm reading correctly, it's from their previous acquisitions of depop and elo7. They paid about $1.9B for both of those, so the "impairment" means they effectively overpaid by $1B.

jSully24 3y ago

Goodwill impairment: https://www.investopedia.com/ask/answers/061715/when-and-why-does-goodwill-impairment-occur.asp https://www.investopedia.com/ask/answers/061715/when-and-why... “ If the goodwill asset becomes impaired by a decline in the value of the asset below the purchase price, the company would record a goodwill impairment. This is a signal that the value of the asset has fallen below the amount that the company originally paid for it.”

kfk 3y ago

I mean, they did an acquisition when money was cheap, now it all goes to goodwill impairment because they paid pre-interest hiked multiples. That is where the money is going. https://www.nytimes.com/2021/06/02/business/etsy-depop.html https://www.nytimes.com/2021/06/02/business/etsy-depop.html

brvsft 3y ago

Wow, $1B goodwill impairment sounds absurd (for a company of Etsy's size). Had to look this up. https://www.fool.com/investing/2023/02/02/etsys-1b-problem-that-no-one-seems-to-be-talking-a/ https://www.fool.com/investing/2023/02/02/etsys-1b-problem-t... > In this case, Etsy believes that it overpaid by $1 billion for Depop and Elo7. A company normally takes write-downs like this when the results of an acquired business don't live up to the expectations at the time of the acquisition. That's not so good, noting that these two businesses are expected to be long-term growth drivers for the company.

goatking 3y ago
Aren't they just killing competition? Maybe it's worth the 1bill in the long term (for them, not for the customers)
- throwup238 3y ago
  If that were the case, they wouldn't have to declare the goodwill impairment. Goodwill is meant to account for the kind of intangible benefit they'd get from killing off competition.
  - araes 3y ago
    The issue is, it doesn't matter what it's "meant" to do. It matters how it's technically implemented, and what they can legally claim without the claim running afoul of the IRS (or other tax agencies).
wintogreen74 3y ago
The key is this is how you get a (typically) non-amortizable asset off the balance sheet and expensed on the income statement when all those synergies and economies of scale promised by the (no longer with the company) executive who pushed the deal don't materialize.

Hayvok 3y ago

If you're like me, and you had no idea what "goodwill impairment" meant, and wondering 'what does this billion dollar expense get Etsy?' Investopedia: "Goodwill impairment occurs when a company decides to pay more than book value for the acquisition of an asset, and then the value of that asset declines. The difference between the amount that the company paid for the asset and the book value of the asset is known as goodwill." > Goodwill impairment: Goodwill impairment expense consists of non-cash charges related to the impairment of the goodwill of Depop and Elo7. This is a level of circular definition that makes the head spin. Depop and Elo7 were Etsy acquisitions. I haven't read the SEC filing in depth, but I assume this means that Etsy is acknowledging they overpaid on both these acquisitions, and that their value is in reality far less than they thought at the time. I'm not sure what the accounting advantages are here for Etsy, maybe someone else with more knowledge could weigh in?

brvsft 3y ago
It's not really a circular definition because "impairment" and "goodwill" are two words with their own meanings in accounting/finance, so "goodwill impairment" including those two words separately in the definition isn't circular. Goodwill is basically the extra value paid one company pays when buying another company. So if Etsy buys Depop for 1.6B, and of that 1.6B, let's say 600M were actual 'assets' (cash, inventory, whatever (not that Depop had those things when purchased)), then Etsy paid $1B (1.6B - 600M) in "goodwill" for Depop. That "goodwill" is basically the Depop brand, the desire for existing and potential customers to use Depop, etc. Suppose Etsy wakes up one day and realizes that the $1B worth of Depop brand must be worth less. I don't know how they determine this, as the most realistic way would be if they were somehow shopping around to sell Depop off to another buyer, and all the offers are markedly lower than the $1.6B they paid for the same assets + intangibles. That difference is the impairment, to the goodwill. Not sure if that made it sound less circular. I'm also not an accountant, but I've tried learning quite a bit about the subject.
- drbacon 3y ago
  Thank you for that very well-stated explanation! TIL!

smsm42 3y ago

Wow this looks like some made an absolutely horrible acquisition investment (and quite possibly got promoted and bonused for it), and now as the company realizes that, it has to lay off people that had nothing to do with that decision?

throwup238 3y ago

"Goodwill" is a bit of an accounting trick: it's the difference between what a company is worth on paper and what the acquirer spent on actually getting it, meant to record the value of all the intangibles the acquirer is getting like existing relationships and prospects of future growth. It's the cost of convincing someone to sell their baby. Unless you're buying something like a gas station with very well understood economics, there's going to be tons of money "spent" on goodwill. Goodwill impairment means they're (essentially) admitting to making a huge miscalculation on what that company was worth without a change in the tangible assets.

ojbyrne 3y ago

I’m going to guess they’re mostly laying off the people from the acquired companies that resulted in that goodwill impairment.

avrionov 3y ago

These are numbers for 2022. This year they are supposed to be profitable.