BROOKLYN, N.Y., May 5, 2021 /PRNewswire/ -- Etsy, Inc. (NASDAQ: ETSY), which operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world, today announced results for its first quarter ended March 31, 2021, including the following highlights:
"Last year the world took notice of Etsy's highly differentiated value proposition, and that incredible momentum has continued into the first quarter of 2021," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "We moved the needle by growing our team to deliver an exciting product roadmap aligned with our Right to Win strategy, and are executing a dynamic marketing strategy focused on driving frequency and keeping our buyers engaged. In a time when human connection is so vital, Etsy provides a one-of-a-kind community where sellers are empowered to grow their businesses, reaching buyers who value finding items that express their unique identity, while putting their money where their heart is."
First Quarter 2021 Financial Summary | ||||||||||
(in thousands, except percentages; unaudited) | ||||||||||
The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are: | ||||||||||
Three Months Ended March 31, | % Growth | |||||||||
2021 | 2020 | Y/Y | ||||||||
GMS | $ | 3,143,172 | $ | 1,353,291 | 132.3 | % | ||||
Revenue | $ | 550,646 | $ | 228,055 | 141.5 | % | ||||
Marketplace revenue | $ | 413,642 | $ | 155,921 | 165.3 | % | ||||
Services revenue | $ | 137,004 | $ | 72,134 | 89.9 | % | ||||
Gross profit | $ | 407,729 | $ | 145,639 | 180.0 | % | ||||
Operating expenses | $ | 257,092 | $ | 120,274 | 113.8 | % | ||||
Net income | $ | 143,766 | $ | 12,522 | 1,048.1 | % | ||||
Adjusted EBITDA (Non-GAAP) | $ | 184,068 | $ | 55,056 | 234.3 | % | ||||
Adjusted EBITDA margin (Non-GAAP) | 33 | % | 24 | % | 900 | bps | ||||
Active sellers | 4,702 | 2,814 | 67.1 | % | ||||||
Active buyers | 90,654 | 47,748 | 89.9 | % | ||||||
Percent mobile GMS | 63 | % | 58 | % | 500 | bps | ||||
Percent international GMS | 42 | % | 36 | % | 600 | bps |
An active seller is a seller who has incurred at least one charge from us in the last 12 months. As part of our commitment to integrity and transparency, we continuously monitor the criteria for disqualifying a seller as an active seller. Commencing in the first quarter of 2021, we expanded our disqualifying criteria, but did not apply such criteria to prior periods as the impact of such criteria was immaterial to such periods. For information about how we define our other metrics, see our Annual Report on Form 10-K for the year ended December 31, 2020.
"Our disciplined investments in both product and marketing have enabled us to make significant strides in frequency," said Rachel Glaser, Etsy, Inc. Chief Financial Officer. "GMS per active buyer on a trailing twelve month basis was up 20% year-over-year, driven by engagement among our most valuable cohorts, specifically habitual buyers, which represent on average about 40% of Etsy marketplace GMS and our fastest growing buyer segment. With heightened consumer awareness of Etsy's brand and the breadth of unique products that increase keyword inventory, our marketing dollars continue to yield positive returns, as evidenced by very healthy adjusted EBITDA and margins in the first quarter."
First Quarter 2021 Operating Highlights
Select highlights of our first quarter operating performance and business initiatives are outlined below:
Product: Aligned with our Right to Win strategy, we improved customer experiences across the Etsy marketplace, including the following activities:
Marketing: We continued to drive frequency among existing buyers and acquired new buyers as a result of expanded investments across all marketing channels:
Impact Pillars: We continued to make progress on our Impact strategy which reflects the positive economic, social, and ecological impact we want to have on the world while advancing and complementing our business strategy. Here are some highlights:
Reverb:
Financial Guidance and Outlook
Given the continued uncertainty of future macroeconomic conditions as a result of the ongoing COVID-19 pandemic, Etsy is not issuing guidance for the full year 2021 and will continue providing guidance on a quarterly basis until otherwise stated. Below is Etsy's guidance for consolidated GMS, revenue, and Adjusted EBITDA for the second quarter of 2021.
Q2 2021 Guidance | ||
May 5, 2021 | ||
GMS Year-Over-Year Growth | 5% - 15% | |
GMS | ~$2.8B - $3.1B | |
Revenue Year-Over-Year Growth | 15% - 25% | |
Revenue | ~$493M - $536M | |
Adjusted EBITDA Margin* | 25% - 28% | |
Adjusted EBITDA | ~$129M - $144M | |
*Assumes the midpoint of our revenue guidance. |
Mr. Silverman commented, "We currently expect Q2 2021 GMS to decelerate along with the rest of e-commerce as we lap the tremendous 2020 growth rates. That said, we'll keep the pedal to the metal in 2021 to continue to improve our customer experiences, make Etsy top-of-mind for the millions of buyers who have found Etsy for the first time or are relying on us now more than ever, and further invest in our very large market opportunity."
Webcast and Conference Call Information
Etsy will host a video webcast conference call to discuss these results at 5:00 p.m. Eastern Time today, which will be live-streamed via our Investor Relations website (investors.etsy.com) under the Events section. Those interested in submitting questions during the earnings call can do so by using the Q&A chat window, which will be available during the webcast. A copy of the earnings call presentation will also be posted to our website.
A replay of the video webcast will be available through the same link following the conference call starting at 8:00 p.m. Eastern Time this evening, for at least three months thereafter.
About Etsy
Etsy, Inc. operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. Our primary marketplace, Etsy.com, is the global destination for unique and creative goods. 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. In addition, Etsy, Inc. owns Reverb, a leading global online marketplace dedicated to buying and selling new, used, and vintage musical instruments.
Etsy's mission is to "Keep Commerce Human," and we're committed to using the power of business to strengthen communities and empower people. Our company 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 and ESG Engagement ir@etsy.com
Gabriel Ratcliff, Director, Investor Relations ir@etsy.com
Media Relations Contact:
Sarah Marx, Senior Manager, Corporate Communicationspress@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 for the second quarter of 2021 and key drivers thereof; the uncertain impact that the COVID-19 pandemic or its abatement may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows, on changes in overall levels of consumer spending, on e-commerce generally and on volatility in the global economy; the impact of our strategy, marketing and product initiatives on our business and operating results; our future investments; our intended environmental, social, and ecological impacts; and the size of and our ability to capitalize on our large market opportunity. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by terms such as "aim," "anticipate," "believe," "could," "enable," "estimate," "expect," "goal," "intend," "may," "plan," "potential," "target," "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) our ability to continue our rapid growth; (2) risks related to the ongoing COVID-19 pandemic, which continues to impact our business and results of operations in numerous ways that remain volatile and unpredictable and risks related to the return to pre-COVID consumer shopping behavior; (3) the fluctuation of our quarterly operating results; (4) our failure to meet our publicly announced guidance or other expectations; (5) our ability to successfully execute on our business strategy or if our strategy proves to be ineffective; (6) our ability to attract and retain an active and engaged community of sellers and buyers; (7) macroeconomic events that are outside of our control; (8) our ability to recruit and retain employees; (9) the importance to our success of the trustworthiness of our marketplaces and the connections within our community; (10) our ability to enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers; (11) the effectiveness of our marketing efforts; (12) the effectiveness of our mobile solutions for sellers and buyers; (13) our ability to expand our business in our core geographic markets; (14) regulation in the area of privacy and protection of user data; (15) our dependence on third-party payment providers; (16) acquisitions that may prove unsuccessful or divert management attention; and (17) 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 Annual Report on Form 10-K for the year ended December 31, 2020, and subsequent reports that we file with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. 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 ofMarch 31,2021 | As ofDecember 31,2020 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,163,678 | $ | 1,244,099 | |||
Short-term investments | 502,569 | 425,119 | |||||
Accounts receivable, net | 22,991 | 22,605 | |||||
Prepaid and other current assets | 46,277 | 56,152 | |||||
Funds receivable and seller accounts | 158,104 | 146,806 | |||||
Total current assets | 1,893,619 | 1,894,781 | |||||
Restricted cash | 5,341 | 5,341 | |||||
Property and equipment, net | 107,960 | 112,495 | |||||
Goodwill | 139,745 | 140,810 | |||||
Intangible assets, net | 182,312 | 187,449 | |||||
Deferred tax assets | 7,723 | 115 | |||||
Long-term investments | 137,655 | 39,094 | |||||
Other assets | 23,056 | 24,404 | |||||
Total assets | $ | 2,497,411 | $ | 2,404,489 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 16,386 | $ | 40,883 | |||
Accrued expenses | 218,157 | 232,352 | |||||
Finance lease obligations—current | 8,639 | 8,537 | |||||
Funds payable and amounts due to sellers | 158,104 | 146,806 | |||||
Deferred revenue | 12,260 | 11,264 | |||||
Other current liabilities | 13,499 | 14,822 | |||||
Total current liabilities | 427,045 | 454,664 | |||||
Finance lease obligations—net of current portion | 43,042 | 44,979 | |||||
Deferred tax liabilities | 33 | 58,481 | |||||
Long-term debt, net | 1,302,345 | 1,062,299 | |||||
Other liabilities | 41,172 | 41,642 | |||||
Total liabilities | 1,813,637 | 1,662,065 | |||||
Total stockholders' equity | 683,774 | 742,424 | |||||
Total liabilities and stockholders' equity | $ | 2,497,411 | $ | 2,404,489 |
Etsy, Inc. | |||||||
Condensed Consolidated Statements of Operations | |||||||
(in thousands, except share and per share amounts; unaudited) | |||||||
Three Months Ended March 31, | |||||||
2021 | 2020 | ||||||
Revenue | $ | 550,646 | $ | 228,055 | |||
Cost of revenue | 142,917 | 82,416 | |||||
Gross profit | 407,729 | 145,639 | |||||
Operating expenses: | |||||||
Marketing | 151,204 | 48,505 | |||||
Product development | 53,706 | 37,782 | |||||
General and administrative | 52,182 | 33,987 | |||||
Total operating expenses | 257,092 | 120,274 | |||||
Income from operations | 150,637 | 25,365 | |||||
Other income (expense), net | 7,091 | (15,672) | |||||
Income before income taxes | 157,728 | 9,693 | |||||
(Provision) benefit for income taxes | (13,962) | 2,829 | |||||
Net income | $ | 143,766 | $ | 12,522 | |||
Net income per share attributable to common stockholders: | |||||||
Basic | $ | 1.14 | $ | 0.11 | |||
Diluted | $ | 1.00 | $ | 0.10 | |||
Weighted-average common shares outstanding: | |||||||
Basic | 126,214,735 | 118,138,186 | |||||
Diluted | 144,714,686 | 123,119,053 |
Etsy, Inc. | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(in thousands; unaudited) | |||||||
Three Months Ended March 31, | |||||||
2021 | 2020 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 143,766 | $ | 12,522 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Stock-based compensation expense | 20,351 | 13,811 | |||||
Depreciation and amortization expense | 13,080 | 15,163 | |||||
Provision for expected credit losses | 4,601 | 3,684 | |||||
Foreign exchange (gain) loss | (4,395) | 8,157 | |||||
Non-cash interest expense | 271 | 8,570 | |||||
Deferred benefit for income taxes | (3,068) | (2,829) | |||||
Other non-cash expense, net | 1,184 | 530 | |||||
Changes in operating assets and liabilities | (27,325) | (29,944) | |||||
Net cash provided by operating activities | 148,465 | 29,664 | |||||
Cash flows from investing activities | |||||||
Purchases of property and equipment | (526) | (567) | |||||
Development of internal-use software | (3,226) | (1,261) | |||||
Purchases of marketable securities | (268,972) | (101,501) | |||||
Sales and maturities of marketable securities | 91,714 | 109,422 | |||||
Net cash (used in) provided by investing activities | (181,010) | 6,093 | |||||
Cash flows from financing activities | |||||||
Payment of tax obligations on vested equity awards | (14,802) | (4,198) | |||||
Repurchase of stock | — | (24,992) | |||||
Proceeds from exercise of stock options | 3,930 | 4,896 | |||||
Payment of debt issuance costs | (25) | (14) | |||||
Settlement of convertible senior notes | (27,319) | — | |||||
Payments on finance lease obligations | (2,421) | (2,566) | |||||
Other financing, net | 1,259 | (5,804) | |||||
Net cash used in financing activities | (39,378) | (32,678) | |||||
Effect of exchange rate changes on cash | (8,498) | (4,018) | |||||
Net decrease in cash, cash equivalents, and restricted cash | (80,421) | (939) | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 1,249,440 | 448,634 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 1,169,019 | $ | 447,695 |
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-Neutral | FX Impact | As Reported | Currency-Neutral | FX Impact | ||||||||||||
March 31, 2021 | 132.3 | % | 127.5 | % | 4.8 | % | 132.3 | % | 127.5 | % | 4.8 | % | |||||
December 31, 2020 | 117.7 | % | 115.2 | % | 2.5 | % | 106.7 | % | 105.7 | % | 1.0 | % | |||||
September 30, 2020 | 119.4 | % | 117.4 | % | 2.0 | % | 101.1 | % | 100.9 | % | 0.2 | % | |||||
June 30, 2020 | 145.6 | % | 146.7 | % | (1.1) | % | 90.8 | % | 91.6 | % | (0.8) | % | |||||
March 31, 2020 | 32.2 | % | 32.6 | % | (0.4) | % | 32.2 | % | 32.6 | % | (0.4) | % |
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin
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; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange (gain) loss; and acquisition-related expenses. We also provide Adjusted EBITDA margin, a non-GAAP financial measure that presents Adjusted EBITDA divided by revenue. Below is a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
We have included Adjusted EBITDA and Adjusted EBITDA margin because they are key measures 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 and Adjusted EBITDA margin 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 and Adjusted EBITDA margin have limitations as an analytical tool, and you should not consider them 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 and Adjusted EBITDA margin alongside other financial performance measures, including net income, revenue, and our other GAAP results.
Reconciliation of Net Income to Adjusted EBITDA | |||||||
(Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2021 | 2020 | ||||||
(in thousands) | |||||||
Net income | $ | 143,766 | $ | 12,522 | |||
Excluding: | |||||||
Interest and other non-operating expense, net (1) | 706 | 6,354 | |||||
Provision (benefit) for income taxes | 13,962 | (2,829) | |||||
Depreciation and amortization | 13,080 | 15,163 | |||||
Stock-based compensation expense | 20,351 | 13,811 | |||||
Foreign exchange (gain) loss (2) | (7,797) | 9,318 | |||||
Acquisition-related expenses | — | 717 | |||||
Adjusted EBITDA | $ | 184,068 | $ | 55,056 | |||
Divided by: | |||||||
Revenue | $ | 550,646 | $ | 228,055 | |||
Adjusted EBITDA margin | 33 | % | 24 | % |
(1) | Included in interest and other non-operating expense, net is primarily non-cash interest expense, including amortization of debt issuance costs, related to our convertible debt offerings, which were entered into in March 2018, September 2019, and August 2020. The adoption of Accounting Standards Update 2020-06 in the first quarter of 2021 resulted in a decrease in non-cash interest expense related to our convertible debt offerings as there was no amortization of the debt discount due to its derecognition. |
(2) | Foreign exchange (gain) loss is primarily driven by the change in U.S. dollar, Euro, Pound Sterling, and Canadian dollar exchange rates on our intercompany and other non-functional currency cash balances. |
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SOURCE Etsy, Inc.