Etsy Grows Sales 20 Percent in Second Quarter 2018

Etsy reported financial results for the second quarter 2018 today. Gross Merchandise sales grew 20.4%, and revenue grew 30.2%. The company also raised its guidance for the year.

Excerpt of press release follows:

Etsy, Inc., the global marketplace for unique and creative goods, today announced financial results for its second quarter ended June 30, 2018.

“Etsy delivered another quarter of strong performance, including our fourth consecutive quarter of GMS acceleration, continued evidence that increased investments in our core marketplace are working,” said Josh Silverman, Etsy Inc. Chief Executive Officer. “We announced the first pricing change in the history of the company, further improving our ability to reinvest in our seller community.”

Second Quarter 2018 Highlights

GMS was $901.7 million in the second quarter of 2018, up 20.4% compared with the second quarter of 2017. We accelerated GMS growth by 60 bps compared with the first quarter of 2018, marking the fourth consecutive quarter of sequential acceleration in this metric on an as-reported basis.

On a currency-neutral basis (excluding the direct impact of currency translation on GMS from goods sold that are listed in non-U.S. dollar currencies) GMS growth accelerated to 19.3% from 17.6% in the first quarter of 2018.

Year-over-year aggregate conversion rate growth increased for the third consecutive quarter led by strong performance across all three devices, desktop, mobile web, and the mobile app.

Revenue was $132.4 million and grew 30.2% in the second quarter of 2018, compared with the second quarter of 2017.

We announced an increased seller transaction fee, which is expected to support additional investments in the growth and health of the marketplace. The new transaction fee of 5% is inclusive of the cost of shipping and went into effect on July 16, 2018.

In July, we announced a referral agreement with DaWanda, a Germany-based marketplace for gifts and handmade items. DaWanda plans to wind down its operations and shut down its site on August 30, 2018. It is encouraging its community of buyers and sellers to migrate to Etsy.

We made progress executing against each of our four key initiatives, including launching several product enhancements aimed at bolstering trust and improving conversion rates, utilizing location as an attribute in search ranking, structural improvements to SEO, and announcing monthly subscription packages.

“Second quarter revenue increased 30.2% from the prior year, with continued growth in Marketplace revenue and out-performance in Services revenue,” said Rachel Glaser, Chief Financial Officer. “We’ve made meaningful progress to enable significantly more investment in the Etsy platform, and are leveraging our strong financial position to support what we believe is a long runway for future growth.”

Second Quarter 2018 Financial & Operational Results

Total revenue was $132.4 million for the second quarter of 2018, up 30.2% year-over-year, driven by growth in both Marketplace and Services revenue.

Gross profit for the second quarter of 2018 was $87.0 million, up 31.8% year-over-year, and gross margin was 65.7%, up 80 basis points compared with 64.9% in the second quarter of 2017.

Total operating expenses were $74.2 million in the second quarter of 2018, down 4.5% year-over-year. The decrease in operating expenses was driven by restructuring charges and other exit costs stemming from our actions to streamline our cost structure in the second quarter of 2017.

Net income for the second quarter of 2018 was $3.4 million, with diluted earnings per share of $0.03 impacted by non-cash foreign exchange losses of $4.5 million, or $0.04 per diluted share. Net income and diluted earnings per share were significantly lower compared to last year. This was due to foreign exchange fluctuations, primarily related to intercompany balances, and a tax benefit recorded last year due to employee stock-option exercises, which both contributed to the year-over-year decline in net income and diluted earnings per share.

Non-GAAP Adjusted EBITDA for the second quarter of 2018 was $27.7 million and grew 118.1% year-over-year. Non-GAAP Adjusted EBITDA margin (i.e., Adjusted EBITDA divided by revenue) was 20.9%, up 840 bps year-over-year. Adjusted EBITDA performance was driven primarily by revenue growth and increased efficiencies in our operating structure resulting from a reduction in employee-related costs.

Net cash provided by operating activities was $66.5 million the six months ended June 30, 2018 compared with $15.4 million the prior year. The increase in net cash provided by operating activities for the six months ended June 30, 2018 was mainly driven by revenue growth and lower employee-related costs.

Etsy repurchased an aggregate of approximately $21.1 million, or 722,941 shares of its common stock in the second quarter of 2018, completing the authorized stock repurchase program announced in November 2017.

Cash, cash equivalents, and short-term investments were $567.5 million as of June 30, 2018.

See Etsy website for full press release including graphs and tables and guidance.

SOURCE: Etsy Press Release

Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.