Etsy Gross Merchandise Sales (GMS) was up 11.7% in the second quarter (April, May, and June) compared to the same quarter last year. The company did a better job of growing its own bottom line with a 19.1% increase in revenue for the quarter.
The company has a new CEO, new Chief Financial Officer, and new Chief Technology Officer, but fewer employees after a major shakeup during the second quarter.
Press release follows – feel free to post your comments below:
Etsy, Inc., which builds markets, services and economic opportunity for creative entrepreneurs, today announced financial results for its second quarter ended June 30, 2017.
“Since May, we have sharpened our focus and increased the velocity of product experiments and launches, which together, we believe will enable us to accelerate GMS growth in the third quarter compared to the second quarter,” said Josh Silverman, Etsy Inc. CEO. ” We are doubling down on our core Etsy.com market and, while it’s still early, the initiatives we have underway are already having a positive impact on GMS.”
Second Quarter 2017 Operational Highlights
GMS was $748.0 million, up 11.7%, compared with the second quarter of 2016. Growth in GMS was supported by 10.9% year-over-year growth in active sellers and 17.2% year-over-year growth in active buyers.
Continuing the trend we’ve seen for multiple quarters, mobile visits once again grew faster than desktop visits. Percent mobile visits was approximately 65% compared with approximately 64% in the second quarter of 2016, and approximately 66% in the first quarter of 2017. Percent mobile GMS was approximately 51% compared with approximately 47% in the second quarter of 2016 and 51% in the first quarter of 2017. Mobile web continued to be the largest contributor to both overall visits and mobile GMS. Mobile GMS growth was approximately 20%, with mobile web and mobile app GMS each continuing to grow significantly faster than desktop GMS during the second quarter.
Percent international GMS was approximately 32% in the second quarter of 2017, up from approximately 31% in the second quarter of 2016. International GMS was up approximately 18% in the second quarter of 2017, growing faster than overall GMS.
During the second quarter of 2017, percent international GMS was largely driven by continued robust GMS growth between U.S. buyers and international sellers and GMS growth between buyers and sellers outside of the U.S., both in the same country and cross-border. GMS growth between international buyers and sellers in the same country remained the fastest growing category of international GMS, up approximately 39% year-over-year during the second quarter of 2017. We believe that growth in this category demonstrates the progress we are making in building and deepening local Etsy communities in our key international markets.
Recent Operational Highlights
Sharpening our focus on key initiatives: We are doubling down on efforts to grow our core Etsy.com market, especially within our six key geographic markets (U.S., Canada, U.K., France, Germany, Australia). We are focused on winning the purchase occasions that center around celebrations, gifting and style. To empower our passionate community of 1.8 million sellers to compete and win against mass retailers, we are focused on four key initiatives:
– Improving trust and reliability on Etsy.com: We want to ensure that the Etsy brand delivers trust and reliability throughout the buying experience. In the second quarter, we launched Guest Checkout and Multi-Shop Checkout, both focused on removing friction in the payment process. We aimed to increase buyer confidence by including trust and accreditation notices on the payments pages of Etsy.com.
– Enhancing search and discovery: Helping buyers better navigate the 45 million items on Etsy.com is a key area of focus. Over the past several months, we have conducted numerous product experiments and launched several new enhancements. Early results from A/B tests are encouraging.
– Building world-class marketing capabilities: We are focused on SEO, digital acquisition marketing and email to increase traffic to Etsy.com. Additionally, we have paused brand marketing initiatives for the remainder of 2017 and have redirected a portion of that spend to digital acquisition marketing.
– Providing best-in-class seller tools and services: We plan to continue to invest in tools and services that enable Etsy sellers to start, manage and scale their businesses. New enhancements in the second quarter included increasing Promoted Listings inventory on mobile web, mandating use of Etsy Payments in all eligible countries and launching updates to Pattern by Etsy that allow Etsy sellers to include non-Etsy merchandise on their Etsy-powered custom websites.
Optimizing our structure: In May and June we took actions to streamline our cost structure, improve focus on strategic growth opportunities, and drive faster execution. These actions included reducing our headcount by approximately 245 positions, or approximately 23% of our headcount at the end of 2016 (the “Actions”).
As a result of the Actions, we have identified approximately $20 million in 2017 expense reductions, which we expect to result in approximately $35 million in annualized cost savings. These savings will be realized through a combination of headcount reductions, reduced third-party expenses, and programming costs.
Strengthening our leadership team: Earlier this week, we appointed Mike Fisher as our new Chief Technology Officer. Mike brings over two decades of experience to the role, and will help us further scale our global platform, deepen our machine learning expertise, and drive execution as we work to create the world’s best buying and selling experience.
Second Quarter 2017 Financial Highlights
“We are confident that our newly streamlined organizational structure will allow us to accelerate our product launch cadence while generating cost efficiencies, resulting in a positive impact on our Adjusted EBITDA margins going forward,” said Rachel Glaser, Chief Financial Officer.
Total revenue was $101.7 million, up 19.1% year-over-year, driven by growth in both Markets and Seller Services revenue. Markets revenue grew 12.5%, driven by growth in transaction fee revenue and, to a lesser extent, growth in listing fee revenue. Seller Services revenue grew 25.0% year-over-year, driven primarily by revenue growth in Etsy Payments. Seller Services revenue also benefited from revenue growth in Promoted Listings and, to a lesser extent, Pattern and Shipping Labels. Gross profit for the second quarter was $66.0 million, up 17.3% year-over-year and gross margin was 64.9%, down 100 bps compared with 65.9% in the second quarter of 2016.
Total operating expenses were $77.7 million in the second quarter, up 50.6% year-over-year. The primary driver of the year-over-year increase was $10.6 million in restructuring charges and other exit costs resulting from the Actions as well as digital acquisition marketing expenses.
Net income for the second quarter of 2017 was $11.7 million with earnings per share of $0.10, compared with a net loss of $7.3 million and a net loss per share of $0.06 in the second quarter of 2016. Etsy’s net income in the second quarter of 2017 included a $16.1 million foreign exchange gain, an income tax benefit of $9.4 million, and interest expense associated with the build-to-suit lease accounting related to our new headquarters, all primarily non-cash.
Non-GAAP Adjusted EBITDA for the second quarter was $12.7 million and declined 9.6% year-over-year. Non-GAAP Adjusted EBITDA margin (i.e., non-GAAP Adjusted EBITDA divided by revenue) was 12.5%, down 400 bps year-over-year and up 250 bps sequentially compared to the first quarter of 2017. Expense related to digital acquisition marketing was the primary factor contributing to the Adjusted EBITDA margin decline in the second quarter.
Net cash provided by operating activities was $12.1 million in the second quarter of 2017 compared with $16.8 million in the second quarter of 2016. The year-over-year reduction in net cash provided by operating activities was primarily related to restructuring and exit costs resulting from the Actions.
Cash, marketable securities and short-term investments were $287.2 million as of June 30, 2017.
See the press release for tables and guidance.
SOURCE: Etsy Press Release
