Motley Fool
0
All posts from Motley Fool
Motley Fool in Motley Fool,

Etsy, Inc. Swings to a Profit

In June, online marketplace Etsy (NASDAQ: ETSY) announced a revitalized plan to double down on key initiatives for driving gross merchandise-sales (GMS) volume and improve profitability. The plan, which included a reduction of 15% of the company's global headcount, is already beginning to drive results for the company.

Etsy's second-quarter results highlighted an acceleration of revenue growth and robust guidance, giving credibility to Etsy's new CEO's aggressive plans to improve operations.

Image source: Etsy.

Etsy earnings: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$101.7 million

$85.3 million

19.1%

Earnings per share

$0.10

($0.06)

$0.16

Gross merchandise sales (GMS)

$748.0 million

$669.7 million

11.7%

Active sellers

1.83 million

1.65 million

10.9%

Data source: Etsy's second-quarter earnings release. Table source: author.

Etsy's second-quarter revenue was $101.7 million, up 19.1% year over year. This growth marked an acceleration compared to Etsy's 18.4% year-over-year revenue growth in Q1. Etsy's revenue growth during its second quarter was driven by a 12.5% increase in markets revenue and an impressive 25% increase in seller-services revenue.

Earnings per share in Etsy's second quarter was $0.10, up from a net loss per share of $0.06 in the year-ago quarter. But Etsy's earnings per share (EPS) benefited from a significant foreign-exchange gain and income tax benefit.

Etsy's gross merchandise-sales volume increased 11.7% year over year, driven by a 10.9% increase in active sellers and a 17.2% increase in active buyers during the same period.

Key takeaways

  • Etsy's business is becoming increasingly mobile. Just over half of Etsy's GMS was on mobile, up from 47% in the year-ago quarter.
  • International GMS represented 32% of total GMS, up from 31% in the year-ago quarter.
  • Highlighting Etsy's ability to improve its local communities in key international markets, GMS growth between buyers and sellers in the same country was the company's fastest-growing category of GMS, up 39% year over year.
  • Combining its June headcount reduction with workforce reductions earlier this year, Etsy's workforce is down 23% compared to the end of 2016.

What now?

Given the leadership transition it was undergoing at the time, Etsy opted not to provide any financial guidance when it reported its first-quarter results. So investors were watching the company's guidance closely when Etsy reported its second-quarter results. And Etsy's guidance didn't disappoint: The company guided for full-year 2017 year-over-year growth in GMS to be in a range between 12% and 14% -- above Etsy's 11.7% GMS growth in Q2. Management said it expected GMS growth to accelerate thanks to its more rapid testing and deployment of new products and features.

Etsy also said it expects 2017 year-over-year revenue growth to be between 18% and 20% -- approximately in line with the 19.1% year-over-year revenue growth Etsy achieved in its second quarter.

Finally, Etsy also said its streamlined organizational structure should positively impact profitability, driving its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin higher.

10 stocks we like better than Etsy
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Etsy wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 1, 2017

Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Etsy. The Motley Fool has a disclosure policy.