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Etsy, Inc. Reports First Quarter 2016 Financial Results

BROOKLYN, N.Y., May 3, 2016 /PRNewswire/ -- Etsy, Inc. (ETSY), a marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods, today announced financial results for its first quarter 2016, ended March 31, 2016.

"Our financial results in the first quarter were driven by our strong execution," said Chad Dickerson, Etsy, Inc. CEO and Chair. "We supported 1.6 million active sellers and 25.0 million active buyers, who together generated nearly $630 million in GMS. The second quarter is also off to an exciting start with the launch of our newest high-impact seller service, Pattern by Etsy, and a host of other products and seller tools that we believe will build long-term value for our community. We are as committed as ever to our vision of reimagining commerce and are looking forward to a productive year."

First Quarter 2016 Financial Summary




(in thousands, unaudited)





Three Months Ended
March 31,


% Growth Y/Y


2015


2016









GMS

$

531,915



$

629,853



18.4

%

Revenue

$

58,543



$

81,847



39.8

%

Marketplace revenue

$

30,151



$

35,730



18.5

%

Seller Services revenue

$

27,279



$

43,533



59.6

%

Adjusted EBITDA

$

6,673



$

14,751



121.1

%







Active sellers

1,428



1,603



12.3

%

Active buyers

20,837



25,027



20.1

%

Percent mobile visits

59

%


63

%


400

bps

Percent mobile GMS

43

%


47

%


400

bps

Percent international GMS

30.5

%


30.3

%


(20)

bps










For information about how we define these metrics, see our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 1, 2016.

First Quarter 2016 Operational Highlights

GMS was $629.9 million, up 18.4% compared with the first quarter of 2015. On a currency-neutral basis (excluding the direct impact of currency translation on GMS from goods that are not listed in U.S. dollars) GMS growth in the first quarter of 2016 would have been 19.1% or approximately 0.7 percentage points higher than the as-reported 18.4% growth. We believe that weaker local currencies in key international markets continued to have an indirect impact on international buyer behavior and GMS growth by dampening the demand for U.S. dollar-denominated goods. As we begin to anniversary the major gains of the U.S. dollar against global currencies it is increasingly difficult to estimate the indirect impact of currency exchange rates on international buyer behavior and GMS growth. We believe, however, that the continued year-over-year decline of GMS between international buyers and U.S. sellers, which was down approximately 11% year-over-year in the first quarter, is indicative of the ongoing impact of currency valuation. In contrast, excluding our French marketplace ALM, GMS from international buyers making purchases from sellers in their own country grew approximately 56% year-over-year during the first quarter of 2016.

Growth in GMS was supported by 12.3% year-over-year growth in active sellers and 20.1% year-over-year growth in active buyers. Percent mobile visits was approximately 63% compared with approximately 59% in the first quarter of 2015 and approximately 61% in the fourth quarter of 2015. Percent mobile GMS was slightly more than 47% compared with approximately 43% in the first quarter of 2015 and approximately 44% in the fourth quarter of 2015. Continuing the trend we've seen for multiple quarters, mobile visits once again grew faster than desktop visits and, once again we narrowed the gap between mobile visits and mobile GMS. Further supporting this trend was our strong year-over-year growth in mobile app and mobile web GMS, which each grew faster than desktop GMS during the first quarter.

We saw percent international GMS begin to stabilize in the first quarter of 2016 and we continue to believe that we can grow international GMS, over time, to represent 50% of our total GMS. We believe currency exchange rates contributed to the slight year-over-year decline in percent international GMS, which was 30.3% in the first quarter of 2016. Percent international GMS was 30.5% in the first quarter of last year and 29.2% in the fourth quarter of 2015.

Recent Launch Highlights

During the first quarter and the month of April we launched a new seller service as well as several new products and seller tools. Highlights include:

  • Pattern by Etsy, our newest paid seller service that we launched in April. Pattern enables Etsy sellers to create their own custom websites in minutes and leverage all the hard work they've already put into their Etsy shops. Pattern will help Etsy sellers address a fundamental pain point, the need to market and promote their businesses, and allow them to spend more time on the creative aspects of their shops.
  • Shop Home, a product we launched in April that brings a new modern look and feel to Etsy on each shop's landing page. We've redesigned shops on Etsy, making them more customizable and mobile friendly, providing a consistent shop experience to Etsy buyers regardless of what device they use. This new product gives Etsy sellers more creative control over the look and feel of their shops and allows them to highlight their brands within the Etsy marketplace.
  • Shop Videos, a new seller tool launched in January that enables Etsy sellers to record, edit and upload videos about themselves and their shops directly from the Etsy app. We believe this tool will encourage Etsy sellers to share their inspirational stories with Etsy buyers and allow our community to connect and engage in new ways.

First Quarter 2016 Financial Highlights

Total revenue was $81.8 million, up 39.8% year-over-year, driven by growth in both Marketplace and Seller Services revenue. Marketplace revenue grew 18.5%, primarily due to growth in transaction fee revenue and, to a lesser extent, growth in listing fee revenue. Seller Services revenue grew 59.6% year-over-year and was driven primarily by revenue growth in Direct Checkout, which continued to benefit from the integration of PayPal. Seller Services revenue also benefited from robust growth in revenue from Promoted Listings and Shipping Labels. All three of our Seller Services continued to grow faster than Marketplace revenue in the first quarter. We also recognized $1.7 million of gift card funds from our third-party service provider in Other revenue during the first quarter, reflecting a portion of accumulated unused gift cards.

Gross profit for the first quarter was $53.9 million, up 42.6% year-over-year, and gross margin was 65.9%, up 130 bps compared with 64.6% in the first quarter of 2015. Gross profit grew faster than revenue in the first quarter because of the leverage we achieved in technology infrastructure and employee-related costs and because of the gift card revenue, which carries a high incremental margin.

Total operating expenses were $47.2 million in the first quarter, up 10.5% year-over-year, and represented 57.6% of revenue, down from 72.9% of revenue in the first quarter of 2015. The favorable year-over-year comparison was partially driven by the $3.2 million one-time charitable contribution that we made to Etsy.org in the first quarter of 2015. Excluding this expense, total operating expenses would have grown 19.4%, a significantly slower pace of growth than our revenue growth.

During the first quarter, we began to gain leverage in our marketing expenses, which grew more slowly than revenue. Marketing expenses grew 29.8% year-over-year and were primarily driven by growth in digital marketing expenses focused on product listing ads and affiliate marketing campaigns and employee-related...


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