Etsy grew GMS – the value of goods third-party sellers sold on its marketplace – by 18.9% in the first three months of the year. But its own revenue grew a whopping 40.1% in the quarter, indicating sellers are paying more for sales than they had in the past. Be sure to read about the company’s “marketing recalibration,” which had a positive impact on profitability.
Press release follows:
Etsy, Inc., the global two-sided marketplace for unique and creative goods, today announced financial results for its first quarter ended March 31, 2019.
“We are pleased to report another quarter of strong growth,” said Josh Silverman, Etsy, Inc. Chief Executive Officer. “We began the year with a fresh slate of product initiatives and our teams’ development velocity surged to an all-time high, delivering healthy GMS growth during the quarter. We are focused on unlocking Etsy’s long-term growth opportunity by bolstering best-in-class search and discovery, leveraging human connections, building a trusted brand, and showcasing our vast collection of unique items.”
“During the first quarter of 2019 we temporarily paused some of our marketing investments in order to closely test incrementality of our less mature channels and refine our attribution models,” said Rachel Glaser, Etsy, Inc. Chief Financial Officer. “Profitability in the quarter was especially high because of this marketing recalibration. We expect to leverage our insights, while continuing to test new channels, including television, to maximize growth and profitability.”
First Quarter 2019 Highlights
- Product experiment velocity increased to an all-time high during the first quarter. Our initiatives focused on search relevance, listing quality and landing page experience which collectively improved the customer experience and fueled GMS growth.
- We continued to develop a search and discovery experience that unlocks the value of the unique items in our marketplace. We improved search relevance by incorporating the item price as one of the many factors that impact listing prominence. We focused on our collection of unique items by enhancing the image quality for listings on desktop, our largest channel by device, which is intended to convert more visits into purchases.
- We began serving our search traffic from Google Cloud, a major milestone in our search infrastructure and our two-year migration plan, which we expect to be complete in early 2020.
- GMS per active buyer on a trailing 12-month basis was up nearly 2% and has generated growth of nearly 2% or higher for the past three consecutive quarters, which we believe demonstrates continued progress in improving frequency.
- International GMS was 38% of overall GMS, and increased 33% year-over-year on a currency-neutral basis, Etsy’s highest international GMS growth since the beginning of 2015. International GMS growth was driven by GMS between U.S. buyers and international sellers and by our fastest growing international trade route, international domestic, which is GMS generated between a non-U.S. buyer and a non-U.S. seller both in the same country.
- Active buyers grew 18.3% year-over-year in the first quarter, despite our reduction in marketing spend across certain channels. Active sellers grew 13.0% year-over-year.
- GMS from paid channels was 15% of overall GMS in the first quarter of 2019, flat compared to the first quarter of 2018 and contracting 500 bps compared to the fourth quarter of 2018, due to our reduction in marketing spend across certain channels.
- Etsy began offsetting 100% of carbon emissions generated by shipping, which represent 98% of Etsy’s total emissions.
First Quarter 2019 Financial Results
- Total revenue was $169.3 million for the first quarter of 2019, up 40.1% year-over-year, driven by growth in both Marketplace and Services revenue.
- Gross profit for the first quarter of 2019 was $116.7 million, up 46.6% year-over-year, and gross margin was 68.9%, up 310 basis points compared with 65.8% in the first quarter of 2018. Gross margin was impacted by expenses related to our on-going migration to the cloud.
- Total operating expenses were $85.0 million in the first quarter of 2019, up 29.2% year-over-year. The increase in operating expenses was driven primarily by marketing expense and an increase in headcount related to product development.
- Net income for the first quarter of 2019 was $31.6 million, with diluted earnings per share of $0.24.
- Non-GAAP Adjusted EBITDA for the first quarter of 2019 was $49.9 million and grew 88.7% year-over-year. Non-GAAP Adjusted EBITDA margin (i.e., Adjusted EBITDA divided by revenue) was 29.4%, in the first quarter of 2019 up 750 basis points year-over-year. Adjusted EBITDA performance was driven primarily by year-over-year revenue growth related to changes in our pricing model and an intentional pull back in marketing spend compared to the fourth quarter of 2018.
- Cash, cash equivalents, and short-term investments were $622.1 million as of March 31, 2019. Under the stock repurchase program announced in November 2018, Etsy repurchased an aggregate of approximately $27.5 million, or 532,412 shares of its common stock, in the first quarter of 2019.
See link below for full press release including charts and guidance.
SOURCE: Etsy Press Release