ETSY INCETSY
ETSY INC Debt Disclosure
Note 12—Debt
The following table presents the outstanding principal amount and carrying value of short- and long-term debt as of the dates indicated (in thousands):
| As of December 31, 2025 | |||||||||||||||||
| 2025 Notes | 2021 Notes | 2020 Notes | 2019 Notes | Total | |||||||||||||
| Principal | $ | 700,000 | $ | 1,000,000 | $ | 650,000 | $ | 649,887 | $ | 2,999,887 | |||||||
| Unamortized debt issuance costs | 10,110 | 4,671 | 1,989 | 879 | 17,649 | ||||||||||||
| Net carrying value | $ | 689,890 | $ | 995,329 | $ | 648,011 | $ | 649,008 | $ | 2,982,238 | |||||||
| As of December 31, 2024 | |||||||||||||||||
| 2025 Notes | 2021 Notes | 2020 Notes | 2019 Notes | Total | |||||||||||||
| Principal | $ | — | $ | 1,000,000 | $ | 650,000 | $ | 649,887 | $ | 2,299,887 | |||||||
| Unamortized debt issuance costs | — | 6,571 | 3,182 | 2,051 | 11,804 | ||||||||||||
| Net carrying value | $ | — | $ | 993,429 | $ | 646,818 | $ | 647,836 | $ | 2,288,083 | |||||||
Terms of the Notes
The terms of the Notes are summarized below:
Convertible Senior Notes | Maturity Date | Contractual Convertibility Date (1) | Initial Conversion Rate per $1,000 Principal (2) | Initial Conversion Price | Annual Effective Interest Rate | ||||||||||||
2025 Notes | June 15, 2030 | February 15, 2030 | 11.6570 | $ | 85.79 | 1.3 | % | ||||||||||
| 2021 Notes | June 15, 2028 | February 15, 2028 | 4.0518 | 246.80 | 0.4 | % | |||||||||||
| 2020 Notes | September 1, 2027 | May 1, 2027 | 5.0007 | 199.97 | 0.3 | % | |||||||||||
| 2019 Notes | October 1, 2026 | June 1, 2026 | 11.4040 | 87.69 | 0.3 | % | |||||||||||
(1)As of December 31, 2025, none of the conditions permitting the holders of the 2025 Notes, 2021 Notes, 2020 Notes, and 2019 Notes to early convert have been met, based on the daily closing prices of the Company’s stock during the quarter ended December 31, 2025.
(2)The initial conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s common stock.
Based on the terms of each series of Notes, they will mature on the respective maturity date, unless earlier converted, redeemed, or repurchased. Additionally, the holders of each series of Notes may convert all or a portion of such series of Notes prior to the close of business on the business day immediately preceding the respective contractual convertibility date only under the following circumstances: (1) during any calendar quarter preceding the respective contractual convertibility date of each series of Notes, in which the closing price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price for such series of Notes on each applicable trading day; (2) during the 5 business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of such series of Notes for each trading day of the measurement period was less than 98% of the product of the closing price of the Company’s common stock and the conversion rate on each such trading day; (3) if the Company calls the 2025 Notes or 2021 Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events. On and after the applicable contractual convertibility date until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances.
The Company may redeem all or any portion of the 2025 Notes and 2021 Notes, at the Company’s option, subject to partial redemption limitations, on or after June 20, 2028 and June 20, 2025, respectively, if the last reported sale
price of the Company’s common stock has been at least 130% of the applicable conversion price for such series of Notes then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption for such series of Notes at a redemption price equal to 100% of the principal amount of the 2025 Notes or 2021 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If a fundamental change occurs prior to the maturity date for any series of Notes, holders of the applicable series of Notes may require the Company to repurchase all or a portion of their Notes for cash at a price equal to 100% of the principal amount of the Note to be repurchased. Holders of the Notes who convert their Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the applicable series of Notes.
Based on the terms of each series of Notes, when a conversion notice is received, the Company has the option to pay by delivery of cash, shares of the Company’s common stock, or a combination thereof. Accordingly, the Company cannot be required to settle the 2025 Notes, 2021 Notes, and the 2020 Notes in cash and, therefore, the aforementioned notes are classified as long-term debt in the Consolidated Balance Sheets. The 2019 Notes will mature on October 1, 2026 and therefore, are classified as short-term debt in the Consolidated Balance Sheets as of December 31, 2025.
Seniority of the Notes
The Notes are general unsecured obligations of the Company. The Notes rank senior in right of payment to all of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment with all of the Company’s liabilities that are not so subordinated; are effectively junior to any of the Company’s secured indebtedness; and are structurally junior to all indebtedness and liabilities (including trade payables) of the Company’s subsidiaries.
2025 Convertible Debt
In June 2025, the Company issued $700.0 million aggregate principal amount of the 2025 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The net proceeds from the sale of the 2025 Notes were $689.5 million after deducting the initial purchasers’ discount and offering expenses, and before the repurchase of stock, as described in “Note 14—Stockholders’ Deficit.” The 2025 Notes are convertible into shares of the Company’s common stock based upon an initial conversion rate.
The Company recorded the 2025 Notes as a liability at face value. Transaction costs attributable to the liability were recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheet and are amortized to interest expense over the term of the 2025 Notes.
2021 Convertible Debt
In June 2021, the Company issued $1.0 billion aggregate principal amount of the 2021 Notes in a private placement to qualified institutional buyers pursuant to the Securities Act. The net proceeds from the sale of the 2021 Notes were approximately $986.7 million after deducting the initial purchasers’ discount and offering expenses and before the 2021 Capped Call Transactions, as described below, and the repurchase of approximately 1.1 million shares of common stock for approximately $180 million concurrently with the issuance of the 2021 Notes. The Company used $85.0 million of the net proceeds from the 2021 Notes to enter into privately negotiated capped call instruments (“2021 Capped Call Transactions”) with certain financial institutions.
2020 Convertible Debt
In August 2020, the Company issued $650.0 million aggregate principal amount of the 2020 Notes in a private placement to qualified institutional buyers pursuant to the Securities Act. The net proceeds from the sale of the 2020 Notes were approximately $639.5 million after deducting the offering expenses and before the purchase of
the 2020 Capped Call Transactions and the partial repurchase of the 2018 Notes, each as described below. The Company used $74.7 million of the net proceeds from the 2020 Notes to enter into privately negotiated capped call instruments (“2020 Capped Call Transactions”) with certain financial institutions.
2019 Convertible Debt
In September 2019, the Company issued $650.0 million aggregate principal amount of the 2019 Notes in a private placement to qualified institutional buyers pursuant to the Securities Act. The net proceeds from the sale of the 2019 Notes were $639.5 million after deducting the initial purchasers’ discount and offering expenses. The Company used $76.2 million of the net proceeds from the 2019 Notes offering to enter into separate capped call instruments (“2019 Capped Call Transactions”) with the initial purchasers and/or their respective affiliates.
Interest Expense
Interest expense related to each of the Notes consisted of coupon interest and amortization of debt issuance costs, and was $13.4 million for the year ended 2025 and $8.4 million for both the years ended 2024 and 2023.
Fair Value of Notes
The estimated fair value of each of the Notes was determined through inputs that are observable in the market, and are classified as Level 2. See “Note 8—Fair Value Measurements ” for more information regarding the fair value of the Notes.
Capped Call Transactions
The Company used a portion of the net proceeds from each of the 2021, 2020, and 2019 Note offerings to enter into separate privately negotiated capped call instruments (the 2021, 2020, and 2019 capped call instruments collectively referred to as the “Capped Call Transactions”) with certain financial institutions, initial purchasers, and/or their respective affiliates. The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the 2021, 2020, and 2019 Notes upon conversion of the respective Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the respective Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Notes.
The initial terms of the Company’s Capped Call Transactions are presented below:
| Capped Call Transactions | Maturity Date | Initial Cap Price per Share | Cap Price Premium | ||||||||
| 2021 Capped Call Transactions | June 15, 2028 | $ | 340.42 | 100 | % | ||||||
| 2020 Capped Call Transactions | September 1, 2027 | 327.83 | 150 | % | |||||||
| 2019 Capped Call Transactions | October 1, 2026 | 148.63 | 150 | % | |||||||
| 2018 Capped Call Transactions (1) | March 1, 2023 | 52.76 | 100 | % | |||||||
(1)The 2018 Capped Call Transactions, purchased using a portion of the net proceeds from the 0% Convertible Senior Notes due 2023 (“the 2018 Notes”), matured on March 1, 2023, and, in accordance with the settlement terms, the Company received 1,194,006 shares of the Company’s common stock from the counterparties to the capped call instruments. These shares were retired upon receipt.
Each series of the Capped Call Transactions does not meet the criteria for separate accounting as a derivative as they are indexed to the Company’s stock. The premiums paid for each of the Capped Call Transactions have been included as a net reduction to additional paid-in capital within stockholders’ deficit.
2023 Credit Agreement
On March 24, 2023, the Company entered into a $400.0 million senior secured revolving credit facility pursuant to an Amended and Restated Credit Agreement (the “2023 Credit Agreement”) among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders, and JPMorgan Chase Bank N.A., as administrative Agent. The 2023 Credit Agreement will mature in March 2028 and includes a letter of credit sublimit of $60.0 million and a swingline loan sublimit of $20.0 million.
The 2023 Credit Agreement amends and restates in its entirety the Credit Agreement dated as of February 25, 2019 (the “2019 Credit Agreement”) between the Company, as borrower, the lenders party thereto from time to time, and Citibank N.A., as administrative Agent.
Borrowings under the 2023 Credit Agreement (other than swingline loans) bear interest, at the Company’s option, at (i) a base rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, and (c) an adjusted Term SOFR rate for a one-month interest period plus 1.00%, in each case plus a margin ranging from 0.50% to 1.25% or (ii) an adjusted Term SOFR rate plus a margin ranging from 1.50% to 2.25%. Swingline loans under the 2023 Credit Agreement bear interest at the same base rate (plus the margin applicable to borrowings bearing interest at the base rate). These margins are determined based on the senior secured net leverage ratio (defined as secured funded debt, net of unrestricted cash up to $100.0 million, to EBITDA (as defined in the 2023 Credit Agreement)) for the preceding four fiscal quarter periods. The Company is also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee, ranging from 0.20% to 0.35% depending on the Company’s senior secured net leverage ratio, and fees associated with letters of credit. The 2023 Credit Agreement also permits the Company, in certain circumstances, to request an increase in the facility by an amount of up to $200.0 million at the same maturity, pricing, and other terms and to request an extension of the maturity date for the facility. In connection with the 2023 Credit Agreement, the Company also paid the lenders certain upfront fees.
The 2023 Credit Agreement contains customary representations and warranties applicable to the Company and its subsidiaries and customary affirmative and negative covenants applicable to the Company and its restricted subsidiaries. The negative covenants include restrictions on, among other things, indebtedness, liens, certain fundamental changes (including mergers), investments, dispositions, restricted payments (including dividends and stock repurchases), prepayments of junior debt, and transactions with affiliates. These restrictions do not prohibit a subsidiary of the Company from making pro rata payments to the Company or any other person that owns an equity interest in such subsidiary. The 2023 Credit Agreement contains financial covenants, that require the Company and its subsidiaries to maintain (i) a secured net leverage ratio not to exceed 3.50 to 1.00, subject to an increase, at the option of the Company, to 4.00 to 1.00 for a specified period of time in the event of certain material acquisitions, tested as of the last day of each fiscal quarter.
The 2023 Credit Agreement includes customary events of default, including, but not limited to, nonpayment of principal or interest, breaches of representations and warranties, failure to perform or observe covenants, cross-defaults with certain other indebtedness, final judgments or orders, certain change of control events, and certain bankruptcy-related events or proceedings. Upon the occurrence of an event of default (subject to notice and grace periods), obligations under the 2023 Credit Agreement could be accelerated.
Subject to certain exceptions, to the extent the Company has any material domestic subsidiaries, the obligations under the 2023 Credit Agreement would be required to be guaranteed by such material domestic subsidiaries. The obligations under the 2023 Credit Agreement are secured by all or substantially all of the assets of the Company and any such subsidiary guarantors. At December 31, 2025 and December 31, 2024, the Company did not have any borrowings under the 2023 Credit Agreement and was in compliance with all financial covenants.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.