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:
1Etsy 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.
2Source: 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 March 31, | % (Decline) 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.
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
Depop
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 the downside being a mid-single-digit decline and the upside being the top end of a low single-digit decline. | With a range of potential outcomes for the full year, our current view suggests a modest acceleration in year-over-year consolidated GMS in the 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
[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 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 | ||
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 | |||
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:
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 |
SOURCE Etsy, Inc.
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