Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Tue Aug 4 2015 17:08:22

Etsy Grows GMS 25 Percent in Q2 2015

By: Ina Steiner

Sponsored Link

Etsy's conference call with analysts is at 5:30 pm EST today, here is the company's press release announcing second quarter 2015 earnings, you can view the full release with tables on Etsy's investor relations website.

Etsy, Inc. Reports Second Quarter 2015 Financial Results
Etsy, Inc. (Nasdaq: ETSY), a marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods, today announced financial results for its second quarter 2015, ended June 30, 2015.

"Over the past 10 years we built a platform that connects people and communities through commerce and we have made progress toward achieving our mission to reimagine commerce by continuing to execute on our long-term strategy," said Chad Dickerson, Etsy, Inc. CEO and Chairman. 

"At the end of the second quarter of 2015, our loyal and engaged community included nearly 1.5 million active sellers and 21.7 million active buyers who drove more than $1 billion in GMS during the first half of the year. We succeed when our sellers succeed, and we believe our reputation as an authentic, trusted marketplace is the foundation for the long-term value we expect to create for our entire community, including our investors, for decades to come."

Second Quarter 2015 Operational Highlights
GMS was $546.2 million, up 24.6% compared with the second quarter of 2014. Growth in GMS was driven by 24.6% year-over-year growth in active sellers and 31.6% year-over-year growth in active buyers. We continued to make progress in narrowing the gap between mobile visits and mobile GMS as a result of strong year-over-year GMS growth on our mobile app platform. Etsy has rapidly become a mobile-first company; percent mobile visits was approximately 60% compared with approximately 53% in the second quarter of 2014 and percent mobile GMS was approximately 43% compared with approximately 36% in the second quarter of 2014. Mobile visits also continued to grow faster than desktop visits.

We believe our GMS growth and percent international GMS are impacted by currency exchange rates in two ways. First, approximately 9% of our GMS comes from goods that are not listed in U.S. dollars and as a result is subject to the impact of currency exchange fluctuations.  On a currency-neutral basis, GMS growth in the second quarter of 2015 would have been 26.5% or approximately 1.9 percentage points higher than the as-reported 24.6% growth.

Second, we believe weaker local currencies in key international markets continued to dampen the demand for U.S. dollar-denominated goods during the second quarter of 2015. For example, during the second quarter of 2015, GMS from international buyers purchasing from U.S. sellers declined approximately 6% year-over-year, compared with approximately 43%, 23% and 0.3% year-over-year growth in the third and fourth quarters of 2014 and the first quarter of 2015, respectively. 

In contrast, excluding our French subsidiary ALM, GMS from international buyers making purchases from sellers in their own country grew more than 50% year-over-year during the second quarter of 2015. We continue to believe that we can grow international GMS, over time, to represent 50% of our total GMS and that the impact of currency exchange rates contributed to the year-over-year decline in percent international GMS, which was 30.2% in the second quarter of 2015. Percent international GMS was approximately flat in the second quarter of 2015 compared with the first quarter of this year.  

Second Quarter 2015 Financial Highlights
Total revenue was $61.4 million, up 44.4% year-over-year, driven by growth in both Marketplace and Seller Services revenue. Marketplace revenue grew 23.0%, primarily due to growth in transaction fee revenue and, to a lesser extent, growth in listing fee revenue. Seller Services revenue grew 79.5% year-over-year, primarily due to growth in revenue from Promoted Listings, which continued to benefit from the re-launch of the product at the end of the third quarter of 2014. Seller Services revenue also benefited from growth in revenue from Direct Checkout and Shipping Labels.

Gross profit for the second quarter was $39.5 million, up 56.8% year-over-year, and gross margin was 64.3%, up 510 bps compared with 59.2% in the second quarter of 2014. Similar to the first quarter of 2015, gross profit grew faster than revenue in the second quarter because of leverage in the cost of revenue for employee-related and hosting and bandwidth costs. In addition, growth of a higher-margin revenue stream, Promoted Listings, outpaced growth of lower-margin Direct Checkout revenue. 

Total operating expenses were $43.2 million in the second quarter, up 49.3% year-over-year. The increase in operating expenses was primarily driven by increases in marketing and G&A expenses. Marketing expenses were up 77.3% year-over-year due to planned increases in spending on product listing ads, higher employee-related expenses, also as anticipated, and approximately $300,000 in IPO-related expenses that were not deductible from IPO proceeds, which were disclosed last quarter. Product development expenses grew 14.6% year-over-year, primarily due to higher employee-related expenses. G&A expenses grew 54.7% year-over-year, mostly driven by higher employee-related expenses and Etsy's one-time charitable cash contribution of $300,000 to Etsy.org.

Non-GAAP Adjusted EBITDA for the second quarter was $4.1 million and grew 18.3% year-over-year. Adjusted EBITDA margin was 6.6%, down 150 bps year-over-year. The year-over-year Adjusted EBITDA margin comparison was impacted by the previously mentioned increases in marketing and employee-related expenses. 

Net loss for the second quarter of 2015 was $6.4 million, compared with a $3.2 million net loss in the second quarter of 2014 and a $36.6 million net loss in the first quarter of 2015. Etsy's net loss in the second quarter of 2015 was favorably impacted by a $5.8 million non-cash, non-operating currency exchange gain largely due to intercompany debt related to Etsy's revised global corporate structure that we implemented on January 1, 2015. Largely offsetting this non-cash, non-operating gain, we also recorded a $4.9 million tax provision, of which $2.0 million was non-cash, also related to the revised global corporate structure. Etsy's revised global corporate structure was implemented to more closely align with its global operations and future expansion plans outside the U.S.

Net cash provided by operating activities was $4.7 million in the second quarter of 2015 compared with $0.7 million in the second quarter of 2014.

Cash and marketable securities were $268.2 million as of June 30, 2015 and included $194.1 million in net proceeds from our initial public offering.

Third Quarter 2015 Outlook: Factors to Consider
We'd like to highlight a few factors that we believe will impact Etsy's third quarter 2015 results. First, as we conveyed in the first quarter of 2015, if currency exchange rates remain at current levels, currency translation will continue to negatively affect GMS growth for goods that are not listed in U.S. dollars and will also continue to dampen the demand for U.S. dollar-denominated goods from buyers outside of the U.S. Second, similar to the first and second quarters, we plan to spend more on marketing in absolute dollars in the third quarter compared with both the second quarter of 2015 and the third quarter of 2014. Third, also similar to the second quarter, we expect to increase the pace of hiring in the third quarter compared with both the second quarter of 2015 and the third quarter of 2014.  Finally, we would like to remind investors that by the end of the third quarter 2015, we will anniversary the re-launch of Promoted Listings, which has been the biggest driver of Seller Services year-over-year revenue growth this year. As we approach this anniversary, we expect the revenue growth rate from this service to decelerate.

Updated on 8/5/15 to add Related Stories:

How Etsy Earned Its Revenue in the Second QuarterLINK

CEO Says Etsy Sellers Choose Domestic ManufacturersLINK




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Readers Comments

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: Mog This user has validated their user name.

Tue Aug 4 19:08:38 2015

To think all those new buyers came from Ebay who chased off their sellers by the thousands. Those sellers went to Etsy and took their buyers with them.
So ebay, if you want to know where your buyers have gone, ask your ex-sellers.  

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: Owen This user has validated their user name.

Tue Aug 4 19:44:57 2015

I am noticing a little uptick in Etsy sales recently.

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: justsaying This user has validated their user name.

Tue Aug 4 21:41:02 2015

I am doing very well on Etsy. I just started back on 12-13-14, just when the eBay sales plummeted, just before Christmas. And 7 months later, with 350+ listings same on eBay as Etsy, dollar % of eBay sales are 56% and Etsy are 44%.  I am very happy with Etsy and the seller atmosphere, and my sales growth, and look forward to a very promising future there.  But I miss the "old" eBay, too:(

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: Ebay's Slow Death This user has validated their user name.

Wed Aug 5 02:57:58 2015

I sold five things on Etsy today. I know it doesn't sound like much, but I feel like I am building my business there, and it is starting to pay off.

My sales on Ebay have dwindled down to about nothing. I still have about 1800 items listed there, but I don't spend any time listing new stuff anymore. It just isn't worth the effort.

I started on Ebay in 1997, and made a decent living for years. Now, it is just dead in the water, with no wind in sight. How sad!

I think Etsy and eCrater are taking the place of Ebay.

I love it when Etsy says, ''We succeed when our sellers succeed, and we believe our reputation as an authentic, trusted marketplace is the foundation for the long-term value...''  Let's just hope they really mean it! If it were Ebay saying that, I would just be laughing.

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: GotToGetOut This user has validated their user name.

Wed Aug 5 06:41:29 2015

I got totally disgusted with Ebay and cut my listings by 75% over the past 4 months. I listed only one item on Etsy and a duplicate of the same item on Ebay. It sold on Etsy within a week and the other one is still listed on Ebay!

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: rhawk This user has validated their user name.

Wed Aug 5 09:16:20 2015

HEY EBAY!!!

This 25% increase for Etsy is a direct result of your incompetent leadership that drove away both sellers and buyers.

You treat sellers like the scum of the earth.  Guess what we are buyers too!   Just not on ebay anymore.  

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: ebay refugee camp This user has validated their user name.

Wed Aug 5 10:50:28 2015

Congrats to Etsy, sales strong for our company and way up for the last 7 days. Ebay is in the toilet.
Listings for top sellers on ebay have completely been REMOVED from Google shopping for all sellers in that category.
The same items are on google  shopping from ETSY and Bonanza.
Ebay's problems wih Google boil down to one word MONEY!!
Etsy fees are quite lower that ebay and we see Ebay cannot afford to send ebay items to Google shopping! Yet we gave John Donahoe a 23 million retention bonus to stay on for 6 months???
This is plain and simple unacceptable, for all you paying a ebay store fee I now recommend closing that store because ebay simply does not care.
Why are Etsy and Bonanza able to get your items onto Google Shopping and Ebay cannot?? Anyone have the real answer besides money?  

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

This user has validated their user name. by: The End

Wed Aug 5 11:16:07 2015

To Etsy:
Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, Don't Raise Fees, .....

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: pace306 This user has validated their user name.

Wed Aug 5 12:48:51 2015

Ummmm the market(s) dont seem to see it this way - maybe Ins can get a clarification.

From: marketwatch.com

Angry at Etsy, sellers and buyers may eye Amazon

Wedbush analysts say Handmade at Amazon ‘clearly superior’ for Etsy sellers

Etsy Inc. ETSY, -21.96%  shares tanked Wednesday, causing the stock to trade below its initial public offering price a day after the company reported weak earnings and outlook.

Etsy late Tuesday reported a net loss of $6.4 million, or 7 cents a share, wider than the loss of 6 cents expected by analysts surveyed by FactSet. Sales of $61.4 million were higher than the FactSet consensus of $59.6 million.

In its forecast, Etsy highlighted that it would continue to ramp up spending in marketing and hiring while projecting the growth rate of revenue-generating Promoted Listings will “decelerate” by the end of the third quarter.

Increasing marketing dollars could help in the near-term, according to Wedbush Securities analysts. Longer term, however, Etsy faces continuing anger from its community of sellers. This is particularly an issue now that Amazon AMZN, +0.87%  launched a platform that the analysts say is “clearly superior” for sellers due to its access to Amazon Prime and stated commitment to handmade items.

“We believe many sellers angered by the increasing presence of mass-manufactured and counterfeit goods on Etsy are likely to shift items to Handmade at Amazon,” the analysts wrote.

In May, Wedbush analysts downgraded Etsy on concerns over counterfeit goods, which they found could make up 5% of all merchandise. In Wednesday’s note, Wedbush reiterated an underperform rating and a $9 price target.

The analysts said they believe it is unlikely eBay EBAY, +0.39% Amazon or Alibaba BABA, +1.03% would acquire Etsy because those platforms have already attracted the sellers and buyers from Etsy.

On a positive note, Etsy executives said on the earnings call that the company is “continuing to face headwinds” from the strong U.S. dollar — Wedbush analysts said this should lead more U.S. consumers to buy from European sellers on the platform.

“Obviously, European purchases of U.S. goods have diminished, but we believe U.S. buying of European goods increased more than the overall,” the analysts said.

Shares of Etsy have fallen 37% in the past three months.


So which is it? Are they doing well and is it the place to be? (I dont sell these types of items so I wouldnt know) OR is Etsy drying up and dying due to Amazon?

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: Jerseygal This user has validated their user name.

Wed Aug 5 16:03:39 2015

And you are actually influenced by Wall Street analysts?   Analysts who lauded Ebay and JD for the brilliant 3 year turn around plan that left Ebay dead in the water after 8 long years.  At least sales are happening on Etsy;  Amazon Handmade still needs to be tried and tested.  Different customer; Mega corporate venue that couldn't possibly understand the artist and his/her needs....  We shall see.  

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: pace306 This user has validated their user name.

Wed Aug 5 17:04:36 2015

Jersey :) the Wall street people are simply parrots. They repeat corporate lines that the companies give them.

My point was that theres some kind of conflict on the numbers - growth in volume vs stock price losses.

Which group of liars is telling the truth (or something close to it?)

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

This user has validated their user name. by: Philip Cohen
Web Site

Wed Aug 5 18:05:44 2015

Agreed, take no notice of the Wall Street analysts/shills; take notice of where the "smart money" on Wall Street goes—and it's not going into eBay ...

AMZN ~$533; PYPL ~$39; EBAY ~$28—LOL ...

The eBay executive suite—where the incompetent mingle with the disingenuous, the unscrupulous, the malevolent and the outright criminal, and the just plain stupid … http://bit.ly/11F2eas

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: Watching the Wheels This user has validated their user name.

Thu Aug 6 00:54:41 2015

So, Etsy put out their damage control article here. They closed yesterday at $13.78

For those of you from Ebay. There's no stability on Etsy. Don't kid yourselves.

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: JimJuris This user has validated their user name.

Thu Aug 6 09:41:58 2015

Did you notice that Etsy said that they are continuing to increasing their marketing spending and they are also increasing their number of employees.

I believe that the average Etsy employee makes over $100,000 per year.  I don't remember where I read that.

I believe that the only way that Etsy can be profitable and to get their stock price out of the toilet is to raise their seller fees.

Right now, in after hours trading, the Etsy stock price is a little bit below $14, which is a little bit more than $2 below the stocks IPO selling price.

I don't see that price going back up anytime in the near future unless someone from Google happens to mention Etsy.

I am expecting the price of Etsy stock to be trading in the $9 to $12 range within the next six months unless Etsy can start making a profit.

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

This user has validated their user name. by: Philip Cohen
Web Site

Thu Aug 6 13:43:30 2015

@JimJuris,

Don't worry Jim, once Etsy gets their hooks firmly enough into the market they will increase their fees, just like eBay did after Johnny Ho came on board ...

Now, Jim, how about a prediction on the future of eBay's stock price?

AMZN ~$533; PYPL ~$38; EBAY ~$28—LOL ...

The eBay executive suite—where the incompetent mingle with the disingenuous, the unscrupulous, the malevolent and the outright criminal, and the just plain stupid … http://bit.ly/11F2eas

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: JimJuris This user has validated their user name.

Thu Aug 6 16:30:18 2015

@Philip Cohen, Sorry, the only stock that I follow and make predictions on is Etsy.

You can see all of my Etsy predictions on my Twitter page (jim_juris).  I have been making predictions about the price of Etsy stock since before it went public and I have been recommending sell the stock rather than buy it before the stock went public.

I don't expect Etsy to raise their seller fees until around the end of this year or sometime within the first half of 2016.

Another thing that Etsy should do is hire a CEO that knows the true meaning of the word "handmade".  Then Etsy should go back to the real meaning of handmade and kick out all of the resellers.

If Etsy ever did that they would probably be profitable even if they increased their seller fees.  

I think that sellers and buyers would come back to Etsy if it was truly a venue for handmade, vintage and supplies.

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: funkygrrl This user has validated their user name.

Thu Aug 6 19:38:56 2015

I sold on Etsy in the past and when they instituted "browse" (sort of Etsy's Cassini), my sales tanked within a couple of months and so did many, many others.

In 2012, Etsy and Ebay were exactly 50/50 in sales.
In 2013, it was 80/20 Ebay/Etsy.
In 2014, I decided Etsy was a waste of energy for me.
It's a shame. I like Etsy, but they do not have near the traffic that Ebay does for vintage, plus they don't give a crap about vintage.  For a while they even hid the category.
I still pop into their forums to see how people are doing, but there's always a very long thread about slow sales.  Here's a good example: https://www.etsy.com/teams/7722/discussions/discuss/16343183/.
So I do not yet feel they are worth my energy.  Still looking for another venue besides Ebay that is.

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: JimJuris This user has validated their user name.

Thu Aug 6 20:06:46 2015

I have never known Etsy to care about or to listen to their customers- their sellers.  If they did, and if the did not allow resellers, they would probably be very successful and profitable.

Perminate Link for Etsy Grows GMS 25 Percent in Q2 2015   Etsy Grows GMS 25 Percent in Q2 2015

by: Volvo351 This user has validated their user name.

Sat Aug 8 07:39:09 2015

What "The End" said. Fees/commissions/rake-offs function exactly like a TAX. You can only cut into the seller's gross so much. eBay is at or well beyond that now. That, and their greedy refusal to put any of that dough into PROMOTION, are why eBay sell-thru is now in the toilet.



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