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PRNewswire 1-Aug-2019 4:05 PM
BROOKLYN, N.Y., Aug. 1, 2019 /PRNewswire/ -- Etsy, Inc. (NASDAQ:ETSY), the global two-sided marketplace for unique and creative goods, today announced financial results for its second quarter ended June 30, 2019.
"Our excellent second quarter growth in revenue and GMS reflects solid execution across our portfolio of product and marketing investments and the strength of our core marketplace," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "We are making great progress improving our product experience and marketing capabilities, and it is paying off. In addition, we have a number of bold new initiatives which we believe will fuel our growth even further, including enhancing the shipping experience, helping our sellers better market and grow their businesses, and our planned acquisition of Reverb."
Second Quarter 2019 Financial Summary (in thousands except percentages; unaudited) |
|||||||||||||||||||||
Three Months Ended |
% Growth |
Six Months Ended |
% Growth |
||||||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||||||||
GMS |
$ |
1,094,829 |
$ |
901,685 |
21.4% |
$ |
2,118,857 |
$ |
1,762,760 |
20.2% |
|||||||||||
Revenue |
$ |
181,095 |
$ |
132,387 |
36.8% |
$ |
350,434 |
$ |
253,299 |
38.3% |
|||||||||||
Marketplace revenue |
$ |
134,403 |
$ |
91,306 |
47.2% |
$ |
260,533 |
$ |
179,273 |
45.3% |
|||||||||||
Services revenue |
$ |
45,896 |
$ |
39,507 |
16.2% |
$ |
88,067 |
$ |
72,112 |
22.1% |
|||||||||||
Net income |
$ |
18,223 |
$ |
3,379 |
439.3% |
$ |
49,802 |
$ |
16,346 |
204.7% |
|||||||||||
Adjusted EBITDA |
$ |
39,701 |
$ |
27,695 |
43.4% |
$ |
89,568 |
$ |
54,116 |
65.5% |
|||||||||||
Active sellers |
2,333 |
1,983 |
17.7% |
2,333 |
1,983 |
17.7% |
|||||||||||||||
Active buyers |
42,742 |
35,830 |
19.3% |
42,742 |
35,830 |
19.3% |
|||||||||||||||
Percent mobile GMS |
58% |
55% |
300bps |
58% |
55% |
300bps |
|||||||||||||||
Percent international GMS |
38% |
34% |
400bps |
38% |
34% |
400bps |
|||||||||||||||
For information about how we define our metrics, see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. |
"In the second quarter of 2019 we continued our momentum, posting 37% revenue growth and 43% growth in EBITDA versus prior year," said Rachel Glaser, Etsy, Inc. Chief Financial Officer. "Our investments in product initiatives and full funnel marketing are having a positive impact on growth in both active buyers and sellers and continued sequential growth in our frequency metrics. We are successfully improving the experience for buyers on Etsy and helping our sellers build successful businesses."
Second Quarter 2019 Highlights
Recent Announcements:
Second Quarter 2019 Financial Results
2019 Financial Guidance
2019 Guidance |
2019 Revised Guidance |
||||
May 8, 2019 |
August 1, 2019 |
||||
GMS Year-Over-Year Growth |
18-21% |
20-22% |
|||
~$4.6B - $4.8B |
~$4.7B - $4.8B |
||||
Revenue Year-Over-Year Growth |
30-32% |
32-34% |
|||
~$785M - $797M |
~$797M - $809M |
||||
Adjusted EBITDA Margin* |
23-25% |
22-24% |
|||
~$182M - $198M |
~$177M - $193M |
||||
* Assumes the midpoint of our revenue guidance. |
For a summary of the key items that we expect to impact our guidance, please read our Q2 investor presentation that is available on Etsy's investor relations website, investors.etsy.com. Etsy's revised 2019 guidance does not give effect to our planned acquisition of Reverb.
Etsy is not able, at this time, to provide GAAP targets for net income margin for 2019 because of the unreasonable effort of estimating certain items that are excluded from non-GAAP Adjusted EBITDA margin, including, for example, provision or benefit for income taxes and foreign exchange gain or loss, the effect of which may be significant.
Webcast and Conference Call Information
Etsy will host a webcast to discuss these results at 5:00 p.m. ET today. To access the live webcast and accompanying slide deck, please visit the Etsy Investor Relations website, investors.etsy.com, and go to the Investor Events section. To join the call by phone, please dial 1-855-852-1946 (toll free) or 1-720-634-2903 (toll) and use the passcode 6777029. A replay will be available through the same link following the conference call, or by dialing (toll free) 1-855-859-2056 or 1-404-537-3406 (toll) with the passcode 6777029 starting at 8:00 p.m. ET tonight through August 15, 2019.
About Etsy
Etsy, Inc. is the global two-sided marketplace for unique and creative goods. Our mission is to "Keep Commerce Human," and we're committed to using the power of business and technology to strengthen communities and empower people around the world. We connect millions of buyers and sellers from nearly every country in the world. 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 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
ir@etsy.com
Gabriel Ratcliff, Sr. Manager, Investor Relations
ir@etsy.com
Media Relations Contact:
Kelly Clausen, 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 and key drivers thereof, the timing and impact of our new and planned initiatives, including our free shipping program, the anticipated launch of a unified ad platform, our planned acquisition of Reverb, and the timing of our full migration to Google cloud. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "will," or similar expressions and 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 fluctuation of our quarterly operating results; (2) our ability to implement our business strategy; (3) our ability to attract and retain an active and engaged community of Etsy sellers and Etsy buyers; (4) our history of operating losses; (5) macroeconomic events that are outside of our control; (6) our ability to recruit and retain employees; (7) the importance to our success of the trustworthiness of our marketplace and the connections within our community; (8) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of Etsy sellers and Etsy buyers; (9) the effectiveness of our marketing efforts; (10) the effectiveness of our mobile solutions for Etsy sellers and Etsy buyers; (11) our ability to expand our business in our core geographic markets; (12) regulation in the area of privacy and protection of user data; (13) our dependence on third-party payment providers; (14) acquisitions that may prove unsuccessful or divert management attention, including our planned acquisition of Reverb; and (15) the potential misuse or disclosure of sensitive information about members of our community and the potential for cyber-attacks. These 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, 2019, 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 |
$ |
359,159 |
$ |
366,985 |
|||
Short-term investments |
274,673 |
257,302 |
|||||
Accounts receivable, net |
10,585 |
12,244 |
|||||
Prepaid and other current assets |
34,647 |
22,686 |
|||||
Funds receivable and seller accounts |
64,589 |
21,072 |
|||||
Total current assets |
743,653 |
680,289 |
|||||
Restricted cash |
5,341 |
5,341 |
|||||
Property and equipment, net |
128,409 |
120,179 |
|||||
Goodwill |
37,342 |
37,482 |
|||||
Intangible assets, net |
33,142 |
34,589 |
|||||
Deferred tax assets |
23,319 |
23,464 |
|||||
Long-term investments |
25,438 |
— |
|||||
Other assets |
25,131 |
507 |
|||||
Total assets |
$ |
1,021,775 |
$ |
901,851 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
20,504 |
$ |
26,545 |
|||
Accrued expenses |
55,687 |
49,158 |
|||||
Finance lease obligations—current |
9,306 |
3,884 |
|||||
Funds payable and amounts due to sellers |
64,589 |
21,072 |
|||||
Deferred revenue |
8,011 |
7,478 |
|||||
Other current liabilities |
8,413 |
3,925 |
|||||
Total current liabilities |
166,510 |
112,062 |
|||||
Finance lease obligations—net of current portion |
57,409 |
2,095 |
|||||
Deferred tax liabilities |
32,642 |
30,455 |
|||||
Facility financing obligation |
— |
59,991 |
|||||
Long-term debt, net |
284,011 |
276,486 |
|||||
Other liabilities |
38,902 |
19,864 |
|||||
Total liabilities |
579,474 |
500,953 |
|||||
Total stockholders' equity |
442,301 |
400,898 |
|||||
Total liabilities and stockholders' equity |
$ |
1,021,775 |
$ |
901,851 |
Etsy, Inc. Condensed Consolidated Statements of Operations (in thousands except share and per share amounts; unaudited) |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
Revenue |
$ |
181,095 |
$ |
132,387 |
$ |
350,434 |
$ |
253,299 |
|||||||
Cost of revenue |
58,605 |
45,409 |
111,263 |
86,704 |
|||||||||||
Gross profit |
122,490 |
86,978 |
239,171 |
166,595 |
|||||||||||
Operating expenses: |
|||||||||||||||
Marketing |
45,994 |
28,941 |
81,438 |
55,135 |
|||||||||||
Product development |
28,765 |
23,568 |
53,712 |
44,289 |
|||||||||||
General and administrative |
29,883 |
21,707 |
54,530 |
40,611 |
|||||||||||
Total operating expenses |
104,642 |
74,216 |
189,680 |
140,035 |
|||||||||||
Income from operations |
17,848 |
12,762 |
49,491 |
26,560 |
|||||||||||
Other expense, net |
(1,479) |
(8,137) |
(1,685) |
(8,954) |
|||||||||||
Income before income taxes |
16,369 |
4,625 |
47,806 |
17,606 |
|||||||||||
Benefit (provision) for income taxes |
1,854 |
(1,246) |
1,996 |
(1,260) |
|||||||||||
Net income |
$ |
18,223 |
$ |
3,379 |
$ |
49,802 |
$ |
16,346 |
|||||||
Net income per share attributable to common stockholders: |
|||||||||||||||
Basic |
$ |
0.15 |
$ |
0.03 |
$ |
0.42 |
$ |
0.14 |
|||||||
Diluted |
$ |
0.14 |
$ |
0.03 |
$ |
0.38 |
$ |
0.13 |
|||||||
Weighted-average common shares outstanding: |
|||||||||||||||
Basic |
120,198,526 |
119,450,194 |
119,848,289 |
120,819,201 |
|||||||||||
Diluted |
130,807,743 |
125,551,759 |
130,463,025 |
126,186,664 |
Etsy, Inc. Condensed Consolidated Statements of Cash Flows (in thousands; unaudited) |
|||||||
Six Months Ended |
|||||||
2019 |
2018 |
||||||
Cash flows from operating activities |
|||||||
Net income |
$ |
49,802 |
$ |
16,346 |
|||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||
Stock-based compensation expense |
18,919 |
15,071 |
|||||
Depreciation and amortization expense |
19,952 |
12,677 |
|||||
Bad debt expense |
4,146 |
1,961 |
|||||
Foreign exchange (gain) loss |
(1,240) |
2,849 |
|||||
Other non-cash losses, net |
6,314 |
3,914 |
|||||
Deferred income taxes |
(1,996) |
(377) |
|||||
Changes in operating assets and liabilities |
(14,603) |
14,320 |
|||||
Net cash provided by operating activities |
81,294 |
66,761 |
|||||
Cash flows from investing activities |
|||||||
Cash paid for asset acquisition |
— |
(35,323) |
|||||
Purchases of property and equipment |
(3,747) |
(304) |
|||||
Development of internal-use software |
(4,669) |
(8,146) |
|||||
Purchases of marketable securities |
(305,391) |
(234,149) |
|||||
Sales of marketable securities |
265,852 |
50,472 |
|||||
Net cash used in investing activities |
(47,955) |
(227,450) |
|||||
Cash flows from financing activities |
|||||||
Payment of tax obligations on vested equity awards |
(16,157) |
(7,898) |
|||||
Repurchase of stock |
(27,492) |
(89,661) |
|||||
Proceeds from exercise of stock options |
7,840 |
10,725 |
|||||
Proceeds from issuance of convertible senior notes |
— |
345,000 |
|||||
Payment of debt issuance costs |
(1,392) |
(9,561) |
|||||
Purchase of capped call |
— |
(34,224) |
|||||
Payments on finance lease obligations |
(5,475) |
(3,421) |
|||||
Payments on facility financing obligation |
— |
(5,469) |
|||||
Other financing, net |
2,072 |
1,023 |
|||||
Net cash (used in) provided by financing activities |
(40,604) |
206,514 |
|||||
Effect of exchange rate changes on cash |
(561) |
(3,447) |
|||||
Net (decrease) increase in cash, cash equivalents, and restricted cash |
(7,826) |
42,378 |
|||||
Cash, cash equivalents, and restricted cash at beginning of period |
372,326 |
320,783 |
|||||
Cash, cash equivalents, and restricted cash at end of period |
$ |
364,500 |
$ |
363,161 |
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 is as follows:
Quarter-to-Date Period Ended |
Year-to-Date Period Ended |
||||||||||||||||
As Reported |
Currency- |
FX Impact |
As Reported |
Currency- |
FX Impact |
||||||||||||
June 30, 2019 |
21.4% |
22.8% |
(1.4)% |
20.2% |
21.7% |
(1.5)% |
|||||||||||
March 31, 2019 |
18.9% |
20.6% |
(1.7)% |
18.9% |
20.6% |
(1.7)% |
|||||||||||
December 31, 2018 |
22.3% |
23.1% |
(0.8)% |
20.8% |
20.4% |
0.4% |
|||||||||||
September 30, 2018 |
20.4% |
20.8% |
(0.4)% |
20.2% |
19.2% |
1.0% |
|||||||||||
June 30, 2018 |
20.4% |
19.3% |
1.1% |
20.1% |
18.5% |
1.6% |
|||||||||||
Non-GAAP Financial Measures
Adjusted EBITDA
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; (benefit) provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange loss (gain); acquisition-related expenses; and restructuring and other exit expense (income). Below is a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
We have included Adjusted EBITDA in this press release because it is a key measure 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 platform.
We believe that Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business as it removes the impact of certain non-cash items and certain variable charges.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it 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 alongside other financial performance measures, including net income and our other GAAP results.
Reconciliation of Net Income to Adjusted EBITDA
(Unaudited) |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
(in thousands) |
|||||||||||||||
Net income |
$ |
18,223 |
$ |
3,379 |
$ |
49,802 |
$ |
16,346 |
|||||||
Excluding: |
|||||||||||||||
Interest and other non-operating expense, net (1) |
1,287 |
3,687 |
2,555 |
6,354 |
|||||||||||
(Benefit) provision for income taxes |
(1,854) |
1,246 |
(1,996) |
1,260 |
|||||||||||
Depreciation and amortization (1) |
9,810 |
6,357 |
19,952 |
12,677 |
|||||||||||
Stock-based compensation expense (2) |
10,837 |
8,617 |
18,919 |
15,071 |
|||||||||||
Foreign exchange loss (gain) (3) |
192 |
4,450 |
(870) |
2,600 |
|||||||||||
Acquisition-related expenses (4) |
1,206 |
— |
1,206 |
— |
|||||||||||
Restructuring and other exit income |
— |
(41) |
— |
(192) |
|||||||||||
Adjusted EBITDA |
$ |
39,701 |
$ |
27,695 |
$ |
89,568 |
$ |
54,116 |
|||||||
(1) Included in interest and depreciation expense amounts above, are interest and depreciation expense related to our headquarters lease. As part of |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
(in thousands) |
|||||||||||||||
Interest expense |
$ |
678 |
$ |
2,249 |
$ |
1,373 |
$ |
4,499 |
|||||||
Depreciation |
2,197 |
819 |
4,395 |
1,638 |
|||||||||||
(2) Total stock-based compensation expense included in the Consolidated Statements of Operations is as follows: |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
(in thousands) |
|||||||||||||||
Cost of revenue |
$ |
1,456 |
$ |
927 |
$ |
2,555 |
$ |
1,473 |
|||||||
Marketing |
723 |
699 |
1,354 |
1,177 |
|||||||||||
Product development |
5,294 |
4,025 |
8,813 |
6,664 |
|||||||||||
General and administrative |
3,364 |
2,966 |
6,197 |
5,757 |
|||||||||||
Total stock-based compensation expense |
$ |
10,837 |
$ |
8,617 |
$ |
18,919 |
$ |
15,071 |
|||||||
(3) Foreign exchange loss (gain) is primarily driven by the U.S. Dollar to Euro exchange rate fluctuations on the Company's intercompany and |
|||||||||||||||
(4) Acquisition-related expenses related to our planned acquisition of Reverb. |
View original content:http://www.prnewswire.com/news-releases/etsy-inc-reports-second-quarter-2019-financial-results-300895225.html
SOURCE Etsy, Inc.