BROOKLYN, N.Y., Feb. 26, 2020 /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 financial results for its fourth quarter and full year ended December 31, 2019.
"Last March we laid out a multi-year growth strategy for Etsy, including an ambitious product, marketing, and technology roadmap, which deepen our Right to Win and serve as the foundation for our five-year growth targets through 2023," said Josh Silverman, Etsy, Inc. Chief Executive Officer. "We're off to a great start with our 2019 performance, by staying focused on the fewest things that can make the greatest impact for buyers and sellers, including new initiatives that will further our competitive advantages and meaningfully contribute to future results. All of the work we've done in 2019 to improve the customer experience made Etsy.com a great destination for holiday shopping, with consolidated fourth quarter GMS and revenue growing 33% and 35% respectively, and 20% and 28% for the core marketplace."
Fourth Quarter and Full Year 2019 Financial Summary(in thousands except percentages; unaudited) | |||||||||||||||||||||
The financial results of Reverb have been included in our consolidated financial results from August 15, 2019, the date ofacquisition. The key operating and financial metrics we use are: | |||||||||||||||||||||
Three Months EndedDecember 31, | % Growth(Decline) Y/Y | Year EndedDecember 31, | % Growth Y/Y | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||
GMS (1) | $ | 1,655,716 | $ | 1,246,472 | 32.8 | % | $ | 4,974,944 | $ | 3,931,745 | 26.5 | % | |||||||||
Revenue (2) | $ | 269,998 | $ | 200,028 | 35.0 | % | $ | 818,379 | $ | 603,693 | 35.6 | % | |||||||||
Marketplace revenue (3) | $ | 189,651 | $ | 151,406 | 25.3 | % | $ | 593,646 | $ | 444,765 | 33.5 | % | |||||||||
Services revenue | $ | 80,347 | $ | 48,622 | 65.2 | % | $ | 224,733 | $ | 158,928 | 41.4 | % | |||||||||
Net income | $ | 31,291 | $ | 41,251 | (24.1) | % | $ | 95,894 | $ | 77,491 | 23.7 | % | |||||||||
Adjusted EBITDA (Non-GAAP) | $ | 54,624 | $ | 51,359 | 6.4 | % | $ | 186,268 | $ | 139,510 | 33.5 | % | |||||||||
Active sellers (4) | 2,699 | 2,115 | 27.6 | % | 2,699 | 2,115 | 27.6 | % | |||||||||||||
Active buyers (4) | 46,351 | 39,447 | 17.5 | % | 46,351 | 39,447 | 17.5 | % | |||||||||||||
Percent mobile GMS | 58 | % | 56 | % | 200 | bps | 58 | % | 55 | % | 300 | bps | |||||||||
Percent international GMS (1) | 35 | % | 36 | % | (100) | bps | 36 | % | 35 | % | 100 | bps |
(1) | GMS for the three months and the year ended December 31, 2019 includes Reverb's GMS of $165.5 million and $242.4 million, respectively. Consolidated percent international GMS includes Reverb's percent international GMS of 18% for both the three months and the year ended December 31, 2019. GMS for the Etsy marketplace on a standalone basis for the three months and the year ended December 31, 2019 was $1.5 billion and $4.7 billion, respectively. |
(2) | Revenue for the three months and the year ended December 31, 2019 includes Reverb's revenue of $13.1 million and $19.1 million, respectively. Revenue for the Etsy marketplace on a standalone basis for the three months and the year ended December 31, 2019 was $256.9 million and $799.3 million, respectively. |
(3) | In the fourth quarter of 2019, we reclassified Other revenue to Marketplace revenue. See "Revenue Categories" for our Marketplace and Other revenue under our previous and current presentation. |
(4) | Active sellers and active buyers includes Reverb's active sellers and active buyers of 162 thousand and 624 thousand, respectively, as of December 31, 2019. Reverb active sellers and active buyers are sellers and buyers who have incurred at least one charge or made at least one purchase, respectively, from Reverb in the last 12 months. Active sellers and active buyers for the Etsy marketplace on a standalone basis were approximately 2.5 million and 45.7 million, respectively. |
For information about how we define our metrics, see our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.
"Our strong 2019 performance was driven by investments in marketing, product development, people and the cloud, all while maintaining very healthy adjusted EBITDA margins of approximately 23%," said Rachel Glaser, Etsy, Inc. Chief Financial Officer. "These valuable strategic investments will enable Etsy to drive further growth and scale our business in 2020 and beyond."
Fourth Quarter 2019 Etsy Marketplace Operational Results
The following operational highlights include results related to the Etsy.com marketplace and do not include Reverb results:
Fourth Quarter 2019 Financial Results
The following financial highlights reflect our consolidated financial results and include the financial results of Reverb for the fourth quarter of 2019:
2020 Outlook and Financial Guidance
Regarding Etsy's outlook, Mr. Silverman commented, "Etsy entered 2020 with strong momentum, and we see a clear multi-year runway to continue improving search and discovery, building trust and human connections in the marketplace, expanding our integrated marketing approach, and investing to fuel our sellers' success. This sets us up for continued growth to achieve the multi-year targets we set last March, with the Etsy marketplace expected to grow 16-20% in 2020, outpacing e-commerce growth, and revenue expected to grow at a faster rate. Reverb is a great addition to Etsy, and we will focus on product improvements and more sophisticated marketing programs to further its growth as a leading online marketplace for buying and selling new, used, and vintage musical instruments."
We are issuing 2020 guidance for consolidated GMS, revenue, and Adjusted EBITDA.
2020 Guidance | ||
GMS | ~$6.2B - $6.4B | |
GMS growth | 25% - 28% | |
Revenue | ~$1.04B - $1.06B | |
Revenue growth | 27% - 30% | |
Adjusted EBITDA | $220M - $235M | |
Adjusted EBITDA margin | ~21% - 22% |
For a summary of the key items that we expect to impact our guidance, please read our Q4 investor presentation that is available on Etsy's investor relations website, investors.etsy.com.
Etsy is not able, at this time, to provide GAAP targets for net income margin for 2020 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 Investor Events section of the Etsy Investor Relations website, investors.etsy.com. To join the call by phone, please dial 1-877-823-7014 (toll free) or 1-825-312-2242 (toll) and use the passcode 8532119. A replay will be available through the same link following the conference call, or by dialing 1-800-585-8367 (toll free) or 1-416-621-4642 (toll) with the passcode 8532119 starting at 8:00 p.m. ET tonight through March 11, 2020.
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 Relationsir@etsy.com
Gabriel Ratcliff, Sr. Manager, Investor Relationsir@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 and key drivers thereof, planned updates to our Etsy Ads platform, our ability to continue to benefit from our transition to the cloud, and the impact of our strategy, marketing and product initiatives on our business and operating results going forward. 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 successfully execute on our business strategy or if our strategy proves to be ineffective; (3) our ability to attract and retain an active and engaged community of sellers and 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 sellers and buyers, including the success of our Etsy Ads platform; (9) the effectiveness of our marketing efforts; (10) the effectiveness of our mobile solutions for sellers and 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 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 September 30, 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 December 31, | |||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 443,293 | $ | 366,985 | |||
Short-term investments | 373,959 | 257,302 | |||||
Accounts receivable, net | 15,386 | 12,244 | |||||
Prepaid and other current assets | 38,614 | 22,686 | |||||
Funds receivable and seller accounts | 49,786 | 21,072 | |||||
Total current assets | 921,038 | 680,289 | |||||
Restricted cash | 5,341 | 5,341 | |||||
Property and equipment, net | 144,864 | 120,179 | |||||
Goodwill | 138,731 | 37,482 | |||||
Intangible assets, net | 199,236 | 34,589 | |||||
Deferred tax assets | 14,257 | 23,464 | |||||
Long-term investments | 89,343 | — | |||||
Other assets | 29,542 | 507 | |||||
Total assets | $ | 1,542,352 | $ | 901,851 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 26,324 | $ | 26,545 | |||
Accrued expenses | 88,345 | 49,158 | |||||
Finance lease obligations—current | 8,275 | 3,884 | |||||
Funds payable and amounts due to sellers | 49,786 | 21,072 | |||||
Deferred revenue | 7,617 | 7,478 | |||||
Other current liabilities | 8,181 | 3,925 | |||||
Total current liabilities | 188,528 | 112,062 | |||||
Finance lease obligations—net of current portion | 53,611 | 2,095 | |||||
Deferred tax liabilities | 64,497 | 30,455 | |||||
Facility financing obligation | — | 59,991 | |||||
Long-term debt, net | 785,126 | 276,486 | |||||
Other liabilities | 43,956 | 19,864 | |||||
Total liabilities | 1,135,718 | 500,953 | |||||
Total stockholders' equity | 406,634 | 400,898 | |||||
Total liabilities and stockholders' equity | $ | 1,542,352 | $ | 901,851 |
Etsy, Inc.Condensed Consolidated Statements of Operations(in thousands except share and per share amounts; unaudited) | |||||||||||||||
Three Months EndedDecember 31, | Year EndedDecember 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | $ | 269,998 | $ | 200,028 | $ | 818,379 | $ | 603,693 | |||||||
Cost of revenue | 90,824 | 57,111 | 271,036 | 190,762 | |||||||||||
Gross profit | 179,174 | 142,917 | 547,343 | 412,931 | |||||||||||
Operating expenses: | |||||||||||||||
Marketing | 84,034 | 63,362 | 215,570 | 158,013 | |||||||||||
Product development | 35,701 | 28,542 | 121,878 | 97,249 | |||||||||||
General and administrative | 34,401 | 21,524 | 121,134 | 82,883 | |||||||||||
Total operating expenses | 154,136 | 113,428 | 458,582 | 338,145 | |||||||||||
Income from operations | 25,038 | 29,489 | 88,761 | 74,786 | |||||||||||
Other expense, net | (2,287) | (6,613) | (8,115) | (19,708) | |||||||||||
Income before income taxes | 22,751 | 22,876 | 80,646 | 55,078 | |||||||||||
Benefit for income taxes | 8,540 | 18,375 | 15,248 | 22,413 | |||||||||||
Net income | $ | 31,291 | $ | 41,251 | $ | 95,894 | $ | 77,491 | |||||||
Net income per share attributable to common stockholders: | |||||||||||||||
Basic | $ | 0.26 | $ | 0.34 | $ | 0.80 | $ | 0.64 | |||||||
Diluted | $ | 0.25 | $ | 0.32 | $ | 0.76 | $ | 0.61 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 118,403,747 | 120,192,912 | 119,665,248 | 120,146,076 | |||||||||||
Diluted | 123,397,255 | 129,012,508 | 125,720,073 | 127,084,785 |
Etsy, Inc.Condensed Consolidated Statements of Cash Flows(in thousands; unaudited) | |||||||
Year EndedDecember 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 95,894 | $ | 77,491 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Stock-based compensation expense | 44,395 | 38,231 | |||||
Depreciation and amortization expense | 48,031 | 26,742 | |||||
Bad debt expense | 10,963 | 4,124 | |||||
Foreign exchange (gain) loss | (5,708) | 5,997 | |||||
Amortization of debt issuance costs | 2,006 | 1,191 | |||||
Non-cash interest expense | 19,108 | 10,968 | |||||
Interest (income) expense on marketable securities | (4,182) | (2,887) | |||||
Loss on disposal of assets | 1,667 | 136 | |||||
Deferred income taxes | (15,248) | (22,414) | |||||
Changes in operating assets and liabilities | 9,994 | 59,346 | |||||
Net cash provided by operating activities | 206,920 | 198,925 | |||||
Cash flows from investing activities | |||||||
Acquisition of businesses, net of cash acquired | (270,409) | — | |||||
Cash paid for asset acquisition and intangible assets | (1,963) | (35,494) | |||||
Purchases of property and equipment | (7,528) | (1,019) | |||||
Development of internal-use software | (7,750) | (19,537) | |||||
Purchases of marketable securities | (661,821) | (514,286) | |||||
Sales of marketable securities | 461,098 | 284,943 | |||||
Net cash used in investing activities | (488,373) | (285,393) | |||||
Cash flows from financing activities | |||||||
Payment of tax obligations on vested equity awards | (32,547) | (24,065) | |||||
Repurchase of stock | (176,985) | (134,647) | |||||
Proceeds from exercise of stock options | 9,791 | 18,253 | |||||
Proceeds from issuance of convertible senior notes | 650,000 | 345,000 | |||||
Payment of debt issuance costs | (11,904) | (9,962) | |||||
Purchase of capped call | (76,180) | (34,224) | |||||
Payments on finance lease obligations | (10,833) | (6,057) | |||||
Payments on facility financing obligation | — | (10,164) | |||||
Other financing, net | 8,265 | (128) | |||||
Net cash provided by financing activities | 359,607 | 144,006 | |||||
Effect of exchange rate changes on cash | (1,846) | (5,995) | |||||
Net increase in cash, cash equivalents, and restricted cash | 76,308 | 51,543 | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 372,326 | 320,783 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 448,634 | $ | 372,326 |
Revenue Categories
In the fourth quarter of 2019, we reclassified Other revenue to Marketplace revenue. The following table provides our Marketplace and Other revenue under our previous and current presentation:
Quarter-to-Date Period Ended | |||||||||||||||
Previous Presentation | Current Presentation | ||||||||||||||
MarketplaceRevenue | Other Revenue | MarketplaceRevenue | Other Revenue | ||||||||||||
(in thousands) | |||||||||||||||
September 30, 2019 | $ | 140,966 | $ | 662 | $ | 141,628 | $ | — | |||||||
June 30, 2019 | 134,403 | 796 | 135,199 | — | |||||||||||
March 31, 2019 | 126,130 | 1,038 | 127,168 | — | |||||||||||
December 31, 2018 | 150,540 | 866 | 151,406 | — | |||||||||||
September 30, 2018 | 110,927 | 1,245 | 112,172 | — | |||||||||||
June 30, 2018 | 91,306 | 1,574 | 92,880 | — | |||||||||||
March 31, 2018 | 87,967 | 340 | 88,307 | — |
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 | ||||||||||||
December 31, 2019 | 32.8 | % | 33.0 | % | (0.2) | % | 26.5 | % | 27.5 | % | (1.0) | % | |||||
September 30, 2019 | 30.1 | % | 31.1 | % | (1.0) | % | 23.6 | % | 26.1 | % | (2.5) | % | |||||
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 | % |
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 for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange (gain) loss; acquisition-related expenses; non-ordinary course disputes; and restructuring and other exit costs (income). A reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure follows.
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 EndedDecember 31, | Year EndedDecember 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Net income | $ | 31,291 | $ | 41,251 | $ | 95,894 | $ | 77,491 | |||||||
Excluding: | |||||||||||||||
Interest and other non-operating expense, net (1) | 6,372 | 3,099 | 11,121 | 13,221 | |||||||||||
Benefit for income taxes | (8,540) | (18,375) | (15,248) | (22,413) | |||||||||||
Depreciation and amortization (1) | 15,271 | 7,626 | 48,031 | 26,742 | |||||||||||
Stock-based compensation expense (2) | 13,339 | 14,244 | 44,395 | 38,231 | |||||||||||
Foreign exchange (gain) loss (3) | (4,085) | 3,514 | (3,006) | 6,487 | |||||||||||
Acquisition-related expenses (4) | 976 | — | 3,917 | — | |||||||||||
Non-ordinary course disputes | — | — | 1,164 | — | |||||||||||
Restructuring and other exit costs (income) | — | — | — | (249) | |||||||||||
Adjusted EBITDA | $ | 54,624 | $ | 51,359 | $ | 186,268 | $ | 139,510 |
(1) | Included in interest and depreciation expense amounts above, are interest and depreciation expense related to our headquarters lease. As part of the adoption of ASU 2016-02—Leases in the first quarter of 2019, we now account for our headquarters as a financing lease. Previously, we accounted for our headquarters under build-to-suit accounting requirements. In the three months and year ended December 31, 2019 and 2018 those amounts are as follows: |
Three Months EndedDecember 31, | Year EndedDecember 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Interest expense | $ | 642 | $ | 2,248 | $ | 2,675 | $ | 8,996 | |||||||
Depreciation | 2,197 | 819 | 8,789 | 3,276 |
(2) | Total stock-based compensation expense included in the Consolidated Statements of Operations is as follows: |
Three Months EndedDecember 31, | Year EndedDecember 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Cost of revenue | $ | 1,658 | $ | 990 | $ | 5,787 | $ | 3,357 | |||||||
Marketing | 1,224 | 688 | 3,774 | 2,507 | |||||||||||
Product development | 6,519 | 9,873 | 21,085 | 21,234 | |||||||||||
General and administrative | 3,938 | 2,693 | 13,749 | 11,133 | |||||||||||
Total stock-based compensation expense | $ | 13,339 | $ | 14,244 | $ | 44,395 | $ | 38,231 |
(3) | The changes in foreign exchange (gain) loss are primarily driven by U.S. Dollar to Euro exchange rate fluctuations on our intercompany and other non-functional currency balances. |
(4) | Acquisition-related expenses are expenses related to our acquisition of Reverb. |
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SOURCE Etsy, Inc.