BROOKLYN, N.Y., July 27, 2022 /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 second quarter ended June 30, 2022.
Second quarter 2022 performance highlights include:
"Our second quarter results once again reflect that Etsy has maintained most of our pandemic gains, and that we are able to deliver strong bottom line performance while simultaneously investing in key initiatives," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "Despite facing headwinds caused by macroeconomic and geopolitical factors, we believe the improvements we've driven in customer experiences across the Etsy marketplace and our House of Brands, coupled with continued focus on our 'Right to Win' strategy, will enable us to unlock the enormous long-term opportunities we see ahead."
Second Quarter 2022 Financial Summary
(in thousands, except percentages; unaudited)
The financial results of Elo7 and Depop have been included in our consolidated financial results from July 2, 2021 and July 12, 2021 (the dates of acquisition), respectively. The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:
Three Months Ended June 30, | % (Decline) Growth Y/Y | Six Months Ended June 30, | % Growth (Decline) Y/Y | ||||||||
2022 | 2021 | 2022 | 2021 | ||||||||
GMS (1) | $ 3,029,777 | $ 3,041,490 | (0.4) % | $ 6,282,164 | $ 6,184,662 | 1.6 % | |||||
Revenue | $ 585,135 | $ 528,900 | 10.6 % | $ 1,164,401 | $ 1,079,546 | 7.9 % | |||||
Marketplace revenue | $ 439,549 | $ 395,463 | 11.1 % | $ 867,240 | $ 809,105 | 7.2 % | |||||
Services revenue | $ 145,586 | $ 133,437 | 9.1 % | $ 297,161 | $ 270,441 | 9.9 % | |||||
Gross profit | $ 413,714 | $ 379,931 | 8.9 % | $ 819,985 | $ 787,660 | 4.1 % | |||||
Operating expenses | $ 341,153 | $ 290,826 | 17.3 % | $ 663,109 | $ 547,918 | 21.0 % | |||||
Net income | $ 73,123 | $ 98,254 | (25.6) % | $ 159,232 | $ 242,020 | (34.2) % | |||||
Adjusted EBITDA (Non-GAAP) | $ 162,704 | $ 139,474 | 16.7 % | $ 321,902 | $ 323,542 | (0.5) % | |||||
Adjusted EBITDA margin (Non-GAAP) | 28 % | 26 % | 200 bps | 28 % | 30 % | (200) bps | |||||
Active sellers (2) | 7,403 | 5,233 | 41.5 % | 7,403 | 5,233 | 41.5 % | |||||
Active buyers (2) | 93,947 | 90,490 | 3.8 % | 93,947 | 90,490 | 3.8 % | |||||
Percent mobile GMS | 66 % | 63 % | 300 bps | 66 % | 63 % | 300 bps | |||||
Percent non-U.S. GMS (1) | 43 % | 41 % | 200 bps | 44 % | 41 % | 300 bps |
(1) | Consolidated GMS for the three and six months ended June 30, 2022 includes Etsy.com GMS of $2.6 billion and $5.5 billion, respectively. Percent non-U.S. GMS for Etsy.com for the three and six months ended June 30, 2022 was 44% and 45%, respectively. |
(2) | Consolidated active sellers and active buyers includes Etsy.com active sellers and active buyers of 5.3 million and 88.1 million, respectively, as of June 30, 2022. |
For information about how we define our metrics, see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.
"Second quarter revenue grew over 10%, despite strong macroeconomic headwinds and challenging year over year comparables," said Rachel Glaser, Etsy, Inc. Chief Financial Officer. "This growth is attributable to the Etsy marketplace transaction fee increase, the addition of Depop and Elo7 to our House of Brands portfolio, and the strength of our Etsy Ads product, which continues to be a great solution for sellers looking to grow their businesses. We are pleased that Etsy's highly variable cost structure helped drive strong second quarter adjusted EBITDA margin of 28% and operating cash flow of $125.8 million."
Second Quarter 2022 Operating Highlights
Select highlights of second quarter business initiatives for the Etsy marketplace are outlined below:
Product: Our primary focus in 2022 is to enhance the customer experiences across Etsy.com to engage, retain, and grow our buyer base. These are just a few of our initiatives during the second quarter, aligned with our "Right to Win" strategy.
Marketing: We continued to optimize spending across our marketing channels, focusing on driving top-of-mind awareness and new buyer acquisition, and increasing retention and purchase frequency of existing buyers. Here are some highlights for the quarter:
Impact Pillars: We continued to make progress on our Impact strategy to reflect the positive impact we want to have on the world while advancing and complementing our business strategy. Second quarter highlights include:
Here are a few operational highlights from our subsidiary marketplaces:
Reverb helped buyers find their perfect instrument with updates to on-site algorithms, local enhancements, and improved domestic discovery in the United Kingdom. To meet buyer expectations on free shipping and returns, we helped buyers connect with sellers offering free 2-day shipping and 30-day return policies.
Depop focused on improving the buyer experience by increasing product velocity and efficient experimentation, addressing early stages in the discovery journey all the way through to post-purchase support. In addition, Depop invested in data infrastructure and reliability. Depop expanded brand awareness with its digital video campaign in the United Kingdom, as well as tested and enhanced its performance marketing attribution and incrementality models.
Elo7 improved the buyer experience by introducing signals and nudges into the purchasing journey and continued to expand shipping options for sellers to reduce costs and increase delivery speed, while improving delivery transparency for buyers.
Financial Guidance and Outlook
Etsy's guidance for consolidated GMS, revenue, and Adjusted EBITDA margin for the third quarter of 2022 is:
GMS: $2.8B to $3.0B
Revenue: $540M to $575M
Adjusted EBITDA
margin: Approximately 26%
Please note that our guidance assumes currency exchange rates remain unchanged at current levels.
Regarding Etsy's outlook, Mr. Silverman commented, "We see multiple scenarios possible for the remainder of 2022, but all still point to very healthy profitability throughout. We'll keep focusing on the things we can control - driving great customer experiences, investing with discipline and care, and helping our team minimize distractions to focus on getting the job done. It's not an easy time for the world, but we take heart that we come to work every day to drive value for our sellers and give buyers experiences they can't find anywhere else."
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. Those interested in submitting questions during the earnings call can do so by using the Q&A chat window, which will be available during the webcast. 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, musical instrument marketplace Reverb, and Brazil-based handmade goods marketplace Elo7. 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
[email protected]
Jessica Schmidt, Sr. Director, Investor Relations
[email protected]
Media Relations Contact:
Sarah Marx, Director, Corporate Communications
[email protected]
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 third quarter of 2022 and key drivers thereof; our opportunity; the impact of our "Right to Win" and other growth strategies, marketing and product initiatives, and investments and other levers of growth on our business and operating results, including future GMS and revenue growth; our ability to attract, engage, and retain buyers and sellers; our plans for investment in our marketplaces and in our member support programs; strategic investments and the potential benefits thereof; our intended environmental and social impacts; the global macroeconomic uncertainty, including impacts general market, political, economic, and business conditions may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows; changes in overall levels of consumer spending and e-commerce generally; and volatility in the global economy. 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) our ability to sustain our rapid growth and demand for our services; (2) risks related to the ongoing COVID-19 pandemic, which continues to impact our business and results of operations in numerous volatile and unpredictable ways, as well as risks the e-commerce gains experienced during the COVID-19 pandemic do not hold as the pandemic abates; (3) the fluctuation of our quarterly operating results; (4) our failure to meet our publicly announced guidance or other expectations; (5) our ability to successfully execute on our business strategy or if our strategy proves to be ineffective; (6) our ability to attract and retain active and engaged communities of sellers and buyers; (7) macroeconomic events that are outside of our control; (8) our ability to recruit and retain employees; (9) the importance to our success of the trustworthiness of our marketplaces and the connections within our communities; (10) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers; (11) the effectiveness of our marketing efforts; (12) the effectiveness of our mobile solutions for sellers and buyers; (13) our ability to expand our business in our core geographic markets; (14) regulation in the area of privacy and protection of user data; (15) our dependence on third-party payment providers; (16) our ability to successfully integrate the Depop and Elo7 acquisitions and execute on our "House of Brands" strategy; (17) acquisitions that may prove unsuccessful or divert management attention; and (18) the potential misuse or disclosure of sensitive information about members of our communities and the potential for cyber-attacks. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, 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. | |||
As of | As of | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 758,874 | $ 780,196 | |
Short-term investments | 247,816 | 204,416 | |
Accounts receivable, net | 20,133 | 27,266 | |
Prepaid and other current assets | 112,855 | 109,417 | |
Funds receivable and seller accounts | 180,544 | 220,206 | |
Total current assets | 1,320,222 | 1,341,501 | |
Restricted cash | 5,341 | 5,341 | |
Property and equipment, net | 261,697 | 275,062 | |
Goodwill | 1,269,155 | 1,371,064 | |
Intangible assets, net | 550,925 | 607,170 | |
Deferred tax assets | 105,331 | 95,863 | |
Long-term investments | 46,944 | 85,034 | |
Other assets | 47,485 | 50,774 | |
Total assets | $ 3,607,100 | $ 3,831,809 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 17,929 | $ 28,007 | |
Accrued expenses | 218,029 | 328,118 | |
Finance lease obligations?current | 3,709 | 2,418 | |
Funds payable and amounts due to sellers | 180,544 | 220,206 | |
Deferred revenue | 11,873 | 12,339 | |
Other current liabilities | 17,818 | 24,500 | |
Total current liabilities | 449,902 | 615,588 | |
Finance lease obligations?net of current portion | 107,287 | 110,283 | |
Deferred tax liabilities | 68,639 | 79,484 | |
Long-term debt, net | 2,277,519 | 2,275,418 | |
Other liabilities | 122,458 | 122,417 | |
Total liabilities | 3,025,805 | 3,203,190 | |
Total stockholders' equity | 581,295 | 628,619 | |
Total liabilities and stockholders' equity | $ 3,607,100 | $ 3,831,809 |
Etsy, Inc. | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenue | $ 585,135 | $ 528,900 | $ 1,164,401 | $ 1,079,546 | |||
Cost of revenue | 171,421 | 148,969 | 344,416 | 291,886 | |||
Gross profit | 413,714 | 379,931 | 819,985 | 787,660 | |||
Operating expenses: | |||||||
Marketing | 164,068 | 167,474 | 318,348 | 318,678 | |||
Product development | 102,095 | 61,753 | 191,571 | 115,459 | |||
General and administrative | 74,990 | 61,599 | 153,190 | 113,781 | |||
Total operating expenses | 341,153 | 290,826 | 663,109 | 547,918 | |||
Income from operations | 72,561 | 89,105 | 156,876 | 239,742 | |||
Other income (expense), net | 601 | (3,351) | 2,273 | 3,740 | |||
Income before income taxes | 73,162 | 85,754 | 159,149 | 243,482 | |||
(Provision) benefit for income taxes | (39) | 12,500 | 83 | (1,462) | |||
Net income | $ 73,123 | $ 98,254 | $ 159,232 | $ 242,020 | |||
Net income per share attributable to common stockholders: | |||||||
Basic | $ 0.58 | $ 0.77 | $ 1.25 | $ 1.91 | |||
Diluted | $ 0.51 | $ 0.68 | $ 1.11 | $ 1.68 | |||
Weighted-average common shares outstanding: | |||||||
Basic | 127,088,053 | 126,977,990 | 127,171,302 | 126,659,372 | |||
Diluted | 145,683,336 | 144,867,491 | 146,373,492 | 144,857,500 |
Etsy, Inc. | |||
Six Months Ended June 30, | |||
2022 | 2021 | ||
Cash flows from operating activities | |||
Net income | $ 159,232 | $ 242,020 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Stock-based compensation expense | 113,628 | 47,791 | |
Depreciation and amortization expense | 49,781 | 26,065 | |
Provision for expected credit losses | 5,409 | 9,890 | |
Foreign exchange gain | (10,164) | (3,306) | |
Deferred benefit for income taxes | (14,941) | (21,128) | |
Other non-cash expense, net | 4,658 | 2,893 | |
Changes in operating assets and liabilities | (122,305) | (34,063) | |
Net cash provided by operating activities | 185,298 | 270,162 | |
Cash flows from investing activities | |||
Purchases of property and equipment | (5,633) | (1,917) | |
Development of internal-use software | (11,567) | (7,084) | |
Purchases of marketable securities | (133,642) | (268,972) | |
Sales and maturities of marketable securities | 124,370 | 197,770 | |
Net cash used in investing activities | (26,472) | (80,203) | |
Cash flows from financing activities | |||
Payment of tax obligations on vested equity awards | (39,787) | (56,493) | |
Repurchase of stock | (124,736) | (180,000) | |
Proceeds from exercise of stock options | 5,458 | 8,037 | |
Proceeds from issuance of convertible senior notes | ? | 1,000,000 | |
Payment of debt issuance costs | (25) | (12,566) | |
Purchase of capped calls | ? | (85,000) | |
Settlement of convertible senior notes | (32) | (43,853) | |
Payments on finance lease obligations | (3,188) | (4,887) | |
Other financing, net | (4,335) | 72 | |
Net cash (used in) provided by financing activities | (166,645) | 625,310 | |
Effect of exchange rate changes on cash | (13,503) | (5,486) | |
Net (decrease) increase in cash, cash equivalents, and restricted cash | (21,322) | 809,783 | |
Cash, cash equivalents, and restricted cash at beginning of period | 785,537 | 1,249,440 | |
Cash, cash equivalents, and restricted cash at end of period | $ 764,215 | $ 2,059,223 |
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 growth for the periods presented below are as follows:
Quarter-to-Date Period Ended | Year-to-Date Period Ended | ||||||||||
As Reported | Currency- | FX Impact | As Reported | Currency- | FX Impact | ||||||
June 30, 2022 (1) | (0.4) % | 2.6 % | (3.0) % | 1.6 % | 3.7 % | (2.1) % | |||||
March 31, 2022 (1) | 3.5 % | 4.8 % | (1.3) % | 3.5 % | 4.8 % | (1.3) % | |||||
December 31, 2021 (1) | 16.5 % | 16.9 % | (0.4) % | 31.2 % | 29.6 % | 1.6 % | |||||
September 30, 2021 (1) | 17.9 % | 16.6 % | 1.3 % | 39.2 % | 36.5 % | 2.7 % | |||||
June 30, 2021 | 13.1 % | 10.2 % | 2.9 % | 53.0 % | 49.5 % | 3.5 % |
(1) | Includes the acquisitions of Depop and Elo7, which occurred during the third quarter of 2021. |
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 expense, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange (gain) loss; and acquisition-related expenses. 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. With respect to our expectations under "Financial Guidance and Outlook" above, reconciliation of Adjusted EBITDA and 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 these non-GAAP measures; in particular, stock-based compensation expense, foreign exchange (gain) loss, and acquisition-related and other non-recurring expenses can have unpredictable fluctuations based on unforeseen activity that is out of our control and/or cannot reasonably be predicted.
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:
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 | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net income | $ 73,123 | $ 98,254 | $ 159,232 | $ 242,020 | |||
Excluding: | |||||||
Interest and other non-operating expense, net (1) | 2,557 | 1,079 | 5,847 | 1,785 | |||
Provision (benefit) for income taxes | 39 | (12,500) | (83) | 1,462 | |||
Depreciation and amortization (2) | 25,027 | 12,985 | 49,781 | 26,065 | |||
Stock-based compensation expense (3) | 64,357 | 27,440 | 113,628 | 47,791 | |||
Foreign exchange (gain) loss | (3,158) | 2,272 | (8,120) | (5,525) | |||
Acquisition-related expenses (4) | 759 | 9,944 | 1,617 | 9,944 | |||
Adjusted EBITDA | $ 162,704 | $ 139,474 | $ 321,902 | $ 323,542 | |||
Divided by: | |||||||
Revenue | $ 585,135 | $ 528,900 | $ 1,164,401 | $ 1,079,546 | |||
Adjusted EBITDA margin | 28 % | 26 % | 28 % | 30 % |
(1) | Included in the increase in interest and other non-operating expense, net is primarily interest expense related to the 2021 Notes and the Brooklyn headquarters lease, which was amended in the fourth quarter of 2021. |
(2) | Included in the increase in depreciation and amortization is amortization expense of acquired intangible and developed technology assets related to our acquisitions of Depop and Elo7 which is reflected in the three and six months ended June 30, 2022. |
(3) | The increase in stock-based compensation expense is primarily driven by headcount growth, including increases related to the acquisitions of Depop and Elo7. |
(4) | Acquisition-related expenses for the three and six months ended June 30, 2022 and June 30, 2021 related to our acquisitions of Depop and Elo7. |
SOURCE Etsy
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