Etsy, Inc. Reports First Quarter 2024 Results
BROOKLYN, N.Y., May 1, 2024 /PRNewswire/ -- Etsy, Inc. (NASDAQ: ETSY), which operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world, today announced results for its first quarter ended March 31, 2024.
"Our first quarter performance, while in line with our guidance, was pressured by the challenging environment for consumer discretionary products, which continues to be a headwind to Etsy marketplace growth," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "That said, we are encouraged by the meaningful progress we have made to improve customer experiences that we expect will drive buyer consideration and frequency over time, and we are working with focus and urgency to set the foundation to reignite Etsy marketplace growth. I'm confident that leaning into our differentiators to make Etsy even more Etsy will help ensure we stand out in the sea of sameness in e-commerce."
First quarter 2024 performance highlights include:
-- Consolidated GMS was $3.0 billion, down 3.7% year-over-year and down
4.1% on a currency-neutral basis. Headwinds to consolidated GMS included
a still challenging macroeconomic environment that impacted consumer
discretionary product spending, as well as a small headwind from the
prior year divestiture of Elo7.
-- Etsy marketplace GMS was $2.6 billion, down 5.3% year-over-year and down
5.6% on a currency-neutral basis.
-- Gift Mode(TM) is off to a solid start as one important component to
drive awareness of Etsy as a destination for gift giving. In the
first quarter, Etsy's site-wide 'Gifting' GMS(1) grew low single
digits on a year-over-year basis, outperforming the Etsy
marketplace's overall growth and select U.S. online gifting 'pure
play' peers(2).
-- Active buyers increased 1.9% year-over-year to 91.6 million, largely
flat on a sequential basis. United States active buyers grew
slightly on a year-over-year basis for the third quarter in a row,
and we continued to see healthy year-over-year growth in
international active buyers.
-- We reactivated 6.3 million buyers, up 5.9% from the prior year
period, and acquired 5.7 million new buyers. Our retention of active
buyers increased modestly from the prior year and remains above
pre-pandemic levels on a trailing twelve month basis.
-- While GMS per active buyer on a trailing twelve month basis for the
Etsy marketplace declined 3.5% year-over-year to $125 in the first
quarter, trends in this metric continued to show signs of
stabilization on a sequential basis.
-- Our number of habitual buyers was 7 million, down 2.9%
year-over-year, although our retention rate of habitual buyers was
slightly better compared to the fourth quarter of 2023 and on a
year-over-year basis.
-- U.S. domestic GMS represented 52% of overall GMS and GMS ex-U.S.
domestic was 48% of overall GMS.
-- Consolidated revenue was $646.0 million, up 0.8% versus the first
quarter of 2023, with a take rate (i.e., consolidated revenue divided by
consolidated GMS) of 21.6%. Our modestly positive revenue growth was
primarily driven by growth in payments revenue, transaction fee revenue
from Offsite Ads, and Etsy Ads.
-- Consolidated net income was $63.0 million, down $11.5 million
year-over-year. Consolidated net income margin (i.e., net income divided
by revenue) was approximately 9.8% and diluted net income per share was
$0.48.
-- Consolidated non-GAAP Adjusted EBITDA was $167.9 million, with
consolidated non-GAAP Adjusted EBITDA margin (i.e., consolidated
non-GAAP Adjusted EBITDA divided by consolidated revenue) of
approximately 26.0%.
-- Etsy ended the first quarter with $1.1 billion in cash and cash
equivalents and short- and long-term investments. Under Etsy's stock
repurchase program, during the first quarter of 2024 Etsy repurchased an
aggregate of approximately $158 million, or 2.2 million shares, of its
common stock. These shares were purchased pursuant to a 10b5-1 plan or
in open market purchases.
(1)Etsy Gifting GMS: Estimate based upon word 'gift' in the listing title, shipped with a gift message, or other signal the item was purchased as a gift.
(2)Source: Consumer Edge spend data from sampling of credit card transactions from online 'gifting' peers Zola, Zazzle, Minted, Uncommon Goods, Hallmark, and Mark and Graham.
"On a consolidated basis, our revenue outgrew GMS, and adjusted EBITDA margins were in line with expectations," said Rachel Glaser, Chief Financial Officer. "We believe that our disciplined investment approach and sharp eye on cost management enable us to simultaneously invest in future growth while delivering on profitability. It is encouraging to see continued health in our Etsy marketplace active buyer metric during the first quarter, which remains at record levels - with further improvement in the U.S. and continued growth internationally on a year-over-year basis."
First Quarter 2024 Financial Summary
(in thousands, except percentages; unaudited)
The financial results of Elo7 have been included in our consolidated financial results for the prior year period, as Elo7 was sold on August 10, 2023. The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:
Three Months Ended % (Decline)
March 31, Growth
Y/Y
2024 2023
GMS (1) $2,986,500 $3,101,358 (3.7) %
Revenue $645,954 $640,877 0.8 %
Marketplace revenue $466,982 $467,516 (0.1) %
Services revenue $178,972 $173,361 3.2 %
Gross profit $458,821 $445,424 3.0 %
Operating expenses $390,731 $367,225 6.4 %
Net income $63,004 $74,537 (15.5) %
Net income margin 9.8 % 11.6 % (180) bps
Adjusted EBITDA (Non-GAAP) $167,935 $170,344 (1.4) %
Adjusted EBITDA margin (Non-GAAP) 26.0 % 26.6 % (60) bps
Active sellers (2) 9,131 7,942 15.0 %
Active buyers (2) 96,392 95,526 0.9 %
Percent GMS ex-U.S. domestic (1) 45 % 45 % - bps
(1) Consolidated GMS for the three months ended March 31, 2024 includes Etsy marketplace GMS of $2.6 billion. Percent GMS ex-U.S. domestic for the Etsy marketplace for the three
months ended March 31, 2024 was 48%.
(2) Consolidated active sellers and active buyers includes Etsy marketplace active sellers and active buyers of 7.0 million and 91.6 million, respectively, as of March 31, 2024.
First Quarter 2024 Operating Highlights
Etsy
Our "Right to Win" is centered on key elements that we believe make the Etsy marketplace a better place to shop and sell and, which, in turn, will bring more buyers, lead to increased frequency and size of purchases, and build trust in the Etsy marketplace. In 2024, we are focused on building buyer consideration by making it easier to 'find the best stuff' on Etsy, driving association that Etsy sellers offer great value, and making shopping on Etsy more reliable and dependable. Here are some of our key initiatives from the first quarter.
-- We successfully launched Gift Mode, our interactive gift shopping
experience that combines artificial intelligence ("AI") and human
curation to help shoppers find the perfect present. We are in early days
of building out the Gift Mode customer experience, with important
product launches slated for the second quarter and beyond.
-- We made significant improvements to Search, including updates to our
retrieval engines and ranking algorithms to better understand the
context for a buyer's search and the purchase mission they are on. We
also improved user engagement, with recommendations based upon their
short-term interests on Etsy web and app listing pages.
-- We highlighted the great value Etsy has to offer, with discount-related
signals continuing to drive significant GMS impact. We also introduced
new functionality for sellers, such as a 'Growth Page' with customer
insights they can use to inform actions to grow their business. For
example, a new 'earnings calculator' was launched to assist sellers in
understanding the various inputs that go into their profitability.
-- In our efforts to improve reliability, our fulfillment team launched a
new machine learning model aimed at reducing our estimate of United
States Postal Service transit times by greater than one day. This
initiative resulted in a nearly tripling of the percentage of eligible
orders for which Etsy is able to show an estimated delivery date of
seven days or less.
-- We worked to continue to build trust in our marketplace with the
introduction of a new seller set-up fee. This fee was part of an effort
to strengthen our new shop onboarding process, which also includes
testing enhanced identity verification. Tests indicated it resulted in
an expected decrease in new shop openings and a significant decline in
fraud attempts. Based upon this successful outcome, in early April we
rolled out the fee in all eligible countries.
-- We continued to enhance our Etsy Ads product line as we work to utilize
more of our sellers' advertising budgets and maintain strong return on
ad spend. During the quarter, we refined Etsy Ads' data retrieval
engines to improve conversion predictions and the pace of ad spend
throughout the day, which drove a meaningful increase in revenue and
GMS. An ads module was added to the buyers' shopping cart page on our
website, which increased shop revenue delivered to sellers based upon
their advertising spend.
-- We continued to invest with discipline in our performance marketing
channels, optimizing our core channel investments. We also continued to
scale up our mid-funnel channels to diversify our channel portfolio mix:
including paid social video, app download campaigns, and influencer
marketing campaigns.
-- We implemented full funnel marketing activations across all channels to
create breakthrough messaging around gifting, including a Gift Mode
brand campaign, which included our first-ever 'Big Game' football
advertising, as well as promotions for our Home Refresh Sales event and
for Valentine's Day and other key gifting occasions.
Etsy recently published a series of blog posts on our Impact activities for 2023, as well as our goals, which can be found on the Etsy News page of our website.
Reverb
-- Reverb introduced a 'second-pass' machine learning-based ranking layer
in Search that was a big step forward in helping buyers connect with the
most relevant and high-quality listings on the marketplace. Reverb also
implemented country flags on item cards in the E.U. and U.K. to help
buyers find local inventory more easily, and highlighted call to actions
to buyers on mobile and web which drove higher conversion. Reverb
launched Thank You coupons, which, along with Direct Offers, allow
sellers to more easily engage with buyers at multiple touch points on
their shopping journey.
-- Reverb continues to highlight affordability messaging and inspirational
content designed to drive conversion, and is also showcasing savings and
deals on the site to highlight the marketplace as an affordable place to
buy music gear.
-- Reverb introduced a video-first programming strategy for its marketing
channels (such as YouTube, Instagram, and TikTok) - resulting in nearly
17 million organic video views in the first quarter across its social
channels. Reverb also began developing integrated campaigns to grow and
retain specific types of target customers, such as guitar or synth
enthusiasts.
Depop
-- Depop had its highest ever product development velocity in the first
quarter of 2024 while maintaining a strong win rate. Its biggest wins
were related to helping sellers set a fair price on their listings and
making it easier for buyers to send reasonably priced offers to sellers.
Depop also saw increased conversion from search improvements that rank
listings by relevance and desirability.
-- In order to empower sellers to increase their number of listings and
make it easier for people to take their first step into secondhand,
Depop removed selling fees for sellers based in the U.K. and introduced
a buyer marketplace fee of up to 5% of the item purchase price plus a
fixed amount of up to £1 on every purchase. This change was announced
with a national digital and out-of-home campaign. The marketplace fee
will support continued investment across the marketplace, e.g. Depop
Protection, customer support, platform improvements and growing its
community.
-- Depop scaled its U.S. marketing efforts across the funnel, and saw
increased returns from existing channels, as well as promising signals
from their new campaign testing on streaming services.
Consolidated Q2 24 Financial Guidance and FY 24 Outlook
Q2 24 Guidance
FY 24 Outlook
GMS The year-over-year decline in consolidated Q2 24 GMS is expected to be similar to actual Q1 24 performance With a range of potential outcomes for the full year, our current view
- with the downside being a mid-single-digit decline and the upside being the top end of a low single- suggests a modest acceleration in year-over-year consolidated GMS in the
digit decline. second half.
Take Rate
Similar to actual Q1 24 performance. We expect revenue growth to outpace GMS growth; full year take-rate in line
or ahead of present level.
Adjusted EBITDA Margin
Similar to actual Q1 24 performance. We continue to expect to maintain very healthy margins, with consolidated
Adjusted EBITDA margins for 2024 at least the same as the 2023 result.
Please note that our guidance assumes currency exchange rates remain unchanged at current levels.
With respect to our expectations under "Consolidated Q2 24 Financial Guidance and FY 24 Outlook" above, reconciliation of Adjusted EBITDA margin guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity, and low visibility with respect to the charges excluded from Adjusted EBITDA; in particular, stock-based compensation expense, foreign exchange (gain) loss, interest and other non-operating income, net, provision for income taxes, acquisition, divestiture, and corporate structure-related expenses; and other non-recurring expenses.
Webcast and Conference Call Information
Etsy will host a video webcast conference call to discuss these results at 5:00 p.m. Eastern Time today, which will be live-streamed via our Investor Relations website (investors.etsy.com) under the Events section. A copy of the earnings call presentation will also be posted to our website.
A replay of the video webcast will be available through the same link following the conference call starting at 8:00 p.m. Eastern Time this evening, for at least three months thereafter.
About Etsy
Etsy, Inc. operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. These marketplaces share a mission to "Keep Commerce Human," and we're committed to using the power of business and technology to strengthen communities and empower people. Our primary marketplace, Etsy.com, is the global destination for unique and creative goods. Buyers come to Etsy to be inspired and delighted by items that are crafted and curated by creative entrepreneurs. For sellers, we offer a range of tools and services that address key business needs.
Etsy, Inc.'s "House of Brands" portfolio also includes fashion resale marketplace Depop, and musical instrument marketplace Reverb. Each Etsy, Inc. marketplace operates independently, while benefiting from shared expertise in product, marketing, technology, and customer support.
Etsy was founded in 2005 and is headquartered in Brooklyn, New York.
Etsy has used, and intends to continue using, its Investor Relations website and the Etsy News Blog (blog.etsy.com/news) to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website and the Etsy News Blog in addition to following our press releases, SEC filings, and public conference calls and webcasts.
Investor Relations Contact:
Deb Wasser, Vice President, Investor Relations and ESG Engagement
ir@etsy.com
Media Relations Contact:
Sarah Marx, Director, Corporate Communications
press@etsy.com
Cautionary Statement Regarding Forward-Looking Statements
This press release contains or references forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements relating to our financial guidance for the second quarter of 2024 and outlook for the full year of 2024 and underlying assumptions; our ability to invest in future growth while delivering on profitability; our ability to build buyer consideration; our ability to reignite Etsy marketplace growth; and the impact of our "Right to Win" strategy and our product development and marketing goals. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as "aim," "anticipate," "believe," "could," "enable," "estimate," "expect," "goal," "intend," "may," "outlook," "plan," "potential," "target," "will," or similar expressions and derivative forms and/or the negatives of those words.
Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include: (1) the level of demand for our services or products sold in our marketplaces; (2) the importance to our success of the trustworthiness of our marketplaces and our ability to attract and retain active and engaged communities of buyers and sellers; (3) the fluctuation of our quarterly operating results; (4) our failure to meet our publicly announced guidance or other expectations; (5) any real or perceived inaccuracies in our operational metrics; (6) if we or our third-party providers are unable to protect against technology vulnerabilities, service interruptions, security breaches, or other cyber-related events; (7) our dependence on continued and unimpeded access to third-party services, platforms, and infrastructure; (8) macroeconomic events that are outside of our control; (9) operational and compliance risks related to our payments systems; (10) our ability to recruit and retain employees; (11) our ability to compete effectively; (12) enforcement of our marketplace policies; (13) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers; (14) risks related to our environmental, social, and governance activities and disclosures; (15) our efforts to expand our operations outside of the United States; (16) acquisitions that may prove unsuccessful or divert management attention; (17) failure to deal effectively with fraud; (18) compliance with evolving regulations, including in the area of privacy and data protection; and (19) litigation and regulatory matters, including intellectual property claims. These and other risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, and subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur.
Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.
Etsy, Inc.
Condensed Consolidated Balance Sheets
(in thousands; unaudited)
As of As of
March 31, December 31,
2024 2023
ASSETS
Current assets:
Cash and cash equivalents $788,837 $914,323
Short-term investments 254,875 236,118
Accounts receivable, net 16,542 24,734
Prepaid and other current assets 104,633 129,884
Funds receivable and seller accounts 239,532 265,387
Total current assets 1,404,419 1,570,446
Property and equipment, net 241,875 249,794
Goodwill 137,894 138,377
Intangible assets, net 444,829 457,140
Deferred tax assets 141,012 137,776
Long-term investments 84,424 86,676
Other assets 43,218 45,191
Total assets $2,497,671 $2,685,400
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $10,132 $29,920
Accrued expenses 262,518 353,553
Finance lease obligations-current 6,045 6,079
Funds payable and amounts due to sellers 239,532 265,387
Deferred revenue 13,869 14,635
Other current liabilities 33,025 41,207
Total current liabilities 565,121 710,781
Finance lease obligations-net of current portion 98,112 99,620
Deferred tax liabilities 11,023 13,192
Long-term debt, net 2,284,883 2,283,817
Other liabilities 122,293 121,705
Total liabilities 3,081,432 3,229,115
Total stockholders' deficit (583,761) (543,715)
Total liabilities and stockholders' deficit $2,497,671 $2,685,400
Etsy, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts; unaudited)
Three Months Ended
March 31,
2024 2023
Revenue $645,954 $640,877
Cost of revenue 187,133 195,453
Gross profit 458,821 445,424
Operating expenses:
Marketing 191,811 171,314
Product development 109,846 115,924
General and administrative 89,074 79,987
Total operating expenses 390,731 367,225
Income from operations 68,090 78,199
Other income, net 11,565 3,072
Income before income taxes 79,655 81,271
Provision for income taxes (16,651) (6,734)
Net income $63,004 $74,537
Net income per share attributable to common stockholders:
Basic $0.53 $0.60
Diluted $0.48 $0.53
Weighted-average common shares outstanding:
Basic 118,440 124,337
Diluted 135,338 142,966
Etsy, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands; unaudited)
Three Months Ended
March 31,
2024 2023
Cash flows from operating activities
Net income $63,004 $74,537
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense 70,683 68,683
Depreciation and amortization expense 26,846 23,172
Provision for expected credit losses 4,078 4,969
Deferred benefit for income taxes (5,230) (8,968)
Other non-cash (income) expense, net (5,066) 3,512
Changes in operating assets and liabilities (85,282) (110,274)
Net cash provided by operating activities 69,033 55,631
Cash flows from investing activities
Purchases of property and equipment (2,257) (2,249)
Development of internal-use software (7,456) (5,957)
Purchases of investments (142,359) (116,896)
Sales and maturities of investments 126,966 89,005
Net cash used in investing activities (25,106) (36,097)
Cash flows from financing activities
Payment of tax obligations on vested equity awards (5,936) (9,194)
Repurchase of stock (158,344) (148,182)
Proceeds from exercise of stock options 2,252 3,005
Payment of debt issuance costs - (2,045)
Settlement of convertible senior notes - (45)
Payments on finance lease obligations (1,548) (1,575)
Other financing, net 562 (512)
Net cash used in financing activities (163,014) (158,548)
Effect of exchange rate changes on cash (6,399) 4,532
Net decrease in cash, cash equivalents, and restricted cash (125,486) (134,482)
Cash, cash equivalents, and restricted cash at beginning of period 914,323 926,619
Cash, cash equivalents, and restricted cash at end of period $788,837 $792,137
Currency-Neutral GMS Growth
We calculate currency-neutral GMS growth by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.
As reported and currency-neutral GMS decline for the periods presented below are as follows:
Quarter-to-Date Period Ended
As Reported Currency- FX Impact
Neutral
March 31, 2024 (3.7) % (4.1) % 0.4 %
March 31, 2023 (4.6) % (2.6) % (2.0) %
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin
In this press release, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net income adjusted to exclude: interest and other non-operating income, net; provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange (gain) loss; acquisition, divestiture, and corporate structure-related expenses; and restructuring and other exit costs. We also provide Adjusted EBITDA margin, a non-GAAP financial measure that presents Adjusted EBITDA divided by revenue. Below is a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
We have included Adjusted EBITDA and Adjusted EBITDA margin because they are key measures used by our management and Board of Directors to evaluate our operating performance and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans, determine incentive compensation, and assess the health of our business. As our Adjusted EBITDA increases, we are able to invest more in our platforms.
We believe that Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business as they remove the impact of certain non-cash items and certain variable charges.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
-- Adjusted EBITDA does not reflect interest and other non-operating
income, net;
-- Adjusted EBITDA does not reflect tax payments that may represent a
reduction in cash available to us;
-- although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the future,
and Adjusted EBITDA does not reflect cash capital expenditure
requirements for such replacements or for new capital expenditure
requirements;
-- Adjusted EBITDA does not consider the impact of stock-based compensation
expense;
-- Adjusted EBITDA does not consider the impact of foreign exchange (gain)
loss;
-- Adjusted EBITDA does not reflect acquisition, divestiture, and corporate
structure-related expenses;
-- Adjusted EBITDA does not reflect restructuring and other exit costs; and
-- other companies, including companies in our industry, may calculate
Adjusted EBITDA differently, which reduces its usefulness as a
comparative measure.
Because of these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA margin alongside other financial performance measures, including net income, revenue, and our other GAAP results.
Reconciliation of Net Income to Adjusted EBITDA and the Calculation of Adjusted EBITDA Margin
(in thousands, except percentages; unaudited)
Three Months Ended
March 31,
2024 2023
Net income $63,004 $74,537
Excluding:
Interest and other non-operating income, net (5,310) (5,689)
Provision for income taxes 16,651 6,734
Depreciation and amortization 26,846 23,172
Stock-based compensation expense (1) 70,683 68,683
Foreign exchange (gain) loss (6,255) 2,618
Acquisition, divestiture, and corporate structure-related expenses 1,898 289
Restructuring and other exit costs 418
Adjusted EBITDA $167,935 $170,344
Divided by:
Revenue $645,954 $640,877
Adjusted EBITDA margin 26.0 % 26.6 %
(1) Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for the periods
presented below is as follows:
Three Months Ended
March 31,
2024 2023
Cost of revenue $7,704 $7,246
Marketing 6,437 5,262
Product development 34,064 36,709
General and administrative 22,478 19,466
Stock-based compensation expense $70,683 $68,683
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SOURCE Etsy, Inc.
