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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Etsy Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating profit after taxes (NOPAT)¹	413,095)	393,749)	103,763)	76,568)	47,642)
Cost of capital²	15.27%	17.64%	16.51%	17.68%	17.92%
Invested capital³	2,842,921)	1,488,547)	888,183)	536,522)	498,789)

Economic profit⁴	(20,902)	131,237)	(42,859)	(18,304)	(41,755)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 413,095 – 15.27% × 2,842,921 = -20,902

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Etsy Inc. economic profit increased from 2019 to 2020 but then slightly decreased from 2020 to 2021 not reaching 2019 level.

Etsy Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income	493,507)	349,246)	95,894)	77,491)	81,800)
Deferred income tax expense (benefit)¹	(88,952)	2,201)	(12,686)	(23,144)	(43,693)
Increase (decrease) in allowance for credit losses²	(2,027)	4,724)	313)	2,033)	688)
Increase (decrease) in deferred revenue³	1,075)	3,647)	139)	1,216)	614)
Increase (decrease) in equity equivalents⁴	(89,904)	10,572)	(12,234)	(19,895)	(42,391)
Interest expense	9,885)	42,025)	24,320)	22,178)	11,130)
Interest expense, operating lease liability⁵	2,130)	925)	1,127)	1,837)	1,535)
Adjusted interest expense	12,015)	42,950)	25,447)	24,015)	12,665)
Tax benefit of interest expense⁶	(2,523)	(9,020)	(5,344)	(5,043)	(4,433)
Adjusted interest expense, after taxes⁷	9,492)	33,931)	20,103)	18,972)	8,233)
Net operating profit after taxes (NOPAT)	413,095)	393,749)	103,763)	76,568)	47,642)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income.

⁵ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 47,764 × 4.46% = 2,130

⁶ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 12,015 × 21.00% = 2,523

⁷ Addition of after taxes interest expense to net income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Etsy Inc. NOPAT increased from 2019 to 2020 and from 2020 to 2021.

Etsy Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Income tax provision (benefit)	(21,853)	16,463)	(15,248)	(22,413)	(49,535)
Less: Deferred income tax expense (benefit)	(88,952)	2,201)	(12,686)	(23,144)	(43,693)
Add: Tax savings from interest expense	2,523)	9,020)	5,344)	5,043)	4,433)
Cash operating taxes	69,622)	23,282)	2,782)	5,774)	(1,409)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Etsy Inc. cash operating taxes increased from 2019 to 2020 and from 2020 to 2021.

Etsy Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Finance lease obligations, current	2,418)	8,537)	8,275)	3,884)	5,798)
Finance lease obligations, net of current portion	110,283)	44,979)	53,611)	2,095)	4,115)
Facility financing obligation	—)	—)	—)	59,991)	60,049)
Long-term debt, net	2,275,418)	1,062,299)	785,126)	276,486)	—)
Operating lease liability¹	47,764)	21,718)	26,456)	24,019)	18,086)
Total reported debt & leases	2,435,883)	1,137,533)	873,468)	366,475)	88,048)
Stockholders’ equity	628,619)	742,424)	406,634)	400,898)	396,894)
Net deferred tax (assets) liabilities²	(16,379)	58,366)	50,240)	6,991)	23,627)
Allowance for credit losses³	7,730)	9,757)	5,033)	4,720)	2,687)
Deferred revenue⁴	12,339)	11,264)	7,617)	7,478)	6,262)
Equity equivalents⁵	3,690)	79,387)	62,890)	19,189)	32,576)
Accumulated other comprehensive (income) loss, net of tax⁶	75,014)	(5,951)	8,699)	7,813)	6,379)
Adjusted stockholders’ equity	707,323)	815,860)	478,223)	427,900)	435,849)
Construction in progress⁷	(10,835)	(633)	(206)	(551)	—)
Marketable securities⁸	(289,450)	(464,213)	(463,302)	(257,302)	(25,108)
Invested capital	2,842,921)	1,488,547)	888,183)	536,522)	498,789)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue.

⁵ Addition of equity equivalents to stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Etsy Inc. invested capital increased from 2019 to 2020 and from 2020 to 2021.

Etsy Inc., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,920,287)	18,920,287)	÷	22,754,289)	=	0.83	0.83	×	18.28%	=	15.20%
Debt and finance lease liabilities³	3,786,238)	3,786,238)	÷	22,754,289)	=	0.17	0.17	×	0.46% × (1 – 21.00%)	=	0.06%
Operating lease liability⁴	47,764)	47,764)	÷	22,754,289)	=	0.00	0.00	×	4.46% × (1 – 21.00%)	=	0.01%
Total:	22,754,289)					1.00					15.27%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	27,764,874)	27,764,874)	÷	28,984,790)	=	0.96	0.96	×	18.28%	=	17.51%
Debt and finance lease liabilities³	1,198,198)	1,198,198)	÷	28,984,790)	=	0.04	0.04	×	3.81% × (1 – 21.00%)	=	0.12%
Operating lease liability⁴	21,718)	21,718)	÷	28,984,790)	=	0.00	0.00	×	4.26% × (1 – 21.00%)	=	0.00%
Total:	28,984,790)					1.00					17.64%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	6,831,610)	6,831,610)	÷	7,752,517)	=	0.88	0.88	×	18.28%	=	16.11%
Debt and finance lease liabilities³	894,451)	894,451)	÷	7,752,517)	=	0.12	0.12	×	4.28% × (1 – 21.00%)	=	0.39%
Operating lease liability⁴	26,456)	26,456)	÷	7,752,517)	=	0.00	0.00	×	4.26% × (1 – 21.00%)	=	0.01%
Total:	7,752,517)					1.00					16.51%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	8,521,497)	8,521,497)	÷	8,890,586)	=	0.96	0.96	×	18.28%	=	17.52%
Debt and finance lease liabilities³	345,070)	345,070)	÷	8,890,586)	=	0.04	0.04	×	4.81% × (1 – 21.00%)	=	0.15%
Operating lease liability⁴	24,019)	24,019)	÷	8,890,586)	=	0.00	0.00	×	7.65% × (1 – 21.00%)	=	0.02%
Total:	8,890,586)					1.00					17.68%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	3,076,450)	3,076,450)	÷	3,164,497)	=	0.97	0.97	×	18.28%	=	17.77%
Debt and finance lease liabilities³	69,962)	69,962)	÷	3,164,497)	=	0.02	0.02	×	8.49% × (1 – 35.00%)	=	0.12%
Operating lease liability⁴	18,086)	18,086)	÷	3,164,497)	=	0.01	0.01	×	8.49% × (1 – 35.00%)	=	0.03%
Total:	3,164,497)					1.00					17.92%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Etsy Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	(20,902)	131,237)	(42,859)	(18,304)	(41,755)
Invested capital²	2,842,921)	1,488,547)	888,183)	536,522)	498,789)
Performance Ratio
Economic spread ratio³	-0.74%	8.82%	-4.83%	-3.41%	-8.37%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	4.73%	2.09%	-1.25%	—	—
Home Depot Inc.	16.42%	23.51%	23.94%	—	—
Lowe’s Cos. Inc.	12.35%	8.42%	-1.06%	—	—
TJX Cos. Inc.	-9.45%	8.25%	7.53%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -20,902 ÷ 2,842,921 = -0.74%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Etsy Inc. economic spread ratio improved from 2019 to 2020 but then slightly deteriorated from 2020 to 2021 not reaching 2019 level.

Etsy Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	(20,902)	131,237)	(42,859)	(18,304)	(41,755)

Revenue	2,329,114)	1,725,625)	818,379)	603,693)	441,231)
Add: Increase (decrease) in deferred revenue	1,075)	3,647)	139)	1,216)	614)
Adjusted revenue	2,330,189)	1,729,272)	818,518)	604,909)	441,845)
Performance Ratio
Economic profit margin²	-0.90%	7.59%	-5.24%	-3.03%	-9.45%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	2.03%	0.81%	-0.57%	—	—
Home Depot Inc.	6.18%	7.80%	7.56%	—	—
Lowe’s Cos. Inc.	3.91%	3.12%	-0.36%	—	—
TJX Cos. Inc.	-6.58%	3.70%	3.36%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -20,902 ÷ 2,330,189 = -0.90%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Etsy Inc. economic profit margin improved from 2019 to 2020 but then slightly deteriorated from 2020 to 2021 not reaching 2019 level.

Etsy Inc. (NASDAQ:ETSY)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin