Etsy, Inc. (NASDAQ:ETSY) has announced its third-quarter 2023 earnings, reporting earnings of 64 cents per share, surpassing the estimate by 30.61%. This notable earnings performance represents a 10.3% increase compared to the previous year.
The company’s revenues exhibited a 7% year-over-year growth, reaching $636.3 million, surpassing the Zacks Consensus Estimate by 1.04%. This revenue increase was primarily fueled by the acceleration of services revenues.
Etsy experienced robust momentum among active sellers and reactivated buyers, contributing positively to its performance.
Detailed Revenue Breakdown
Marketplace revenues accounted for $460.92 million, representing 72.4% of the total revenues. This segment reported a 3.9% increase from the previous year, with strong buyer momentum. Etsy successfully acquired 6.1 million new buyers, making a significant impact. The total number of active buyers on Etsy’s marketplace reached 91.6 million, marking a 4% year-over-year increase.
Services revenues, comprising 27.6% of total revenues, amounted to $175.38 million, showing a substantial year-over-year increase of 16.2%. Etsy ads played a crucial role in driving revenue growth.
Specifics for the Quarter
Etsy’s active buyer base grew by 3.4% compared to the previous year, reaching 97.34 million, surpassing the consensus estimate of 96.6 million.
The active seller base reached 8.8 million, reflecting a remarkable 19% year-over-year increase and exceeding the consensus estimate of 8.37 million. The company’s investments in tools and insights for sustainable pricing strategies for sellers played a positive role in this growth.
Reactived buyers numbered 6 million, experiencing a 19% year-over-year increase.
Gross merchandise sales (GMS) totaled $3.04 billion, demonstrating a 1.2% increase on a reported basis and remaining nearly flat on a currency-neutral basis compared to the previous year. These results exceeded the Zacks Consensus Estimate of $3.02 billion.
Etsy’s marketplace GMS reached $2.7 billion, marking a 1% increase on a reported basis and a slight 0.3% decrease on a currency-neutral basis compared to the previous year.
GMS Ex-U.S. domestic for Etsy’s marketplace surged by 7% on a currency-neutral basis, constituting 47% of the total GMS.
Operating Details
In the third quarter of 2023, Etsy’s gross margin was reported at 70.3%, representing a 40 basis points contraction compared to the previous year.
Total operating expenses amounted to $358.92 million, reflecting a 73.9% decrease from the previous year. As a percentage of revenues, this figure contracted from 231.3% in the previous year to 56.4%.
Consequently, Etsy reported an operating loss of $0.89 million, a contrast to the operating income of $954.78 million reported in the previous year’s quarter.
Balance Sheet & Cash Flows
As of September 30, 2023, Etsy held cash and cash equivalents totaling $741.96 million, marking a decrease from the $841.51 million reported as of June 30, 2023.
Short-term investments amounted to $234.93 million, down from $235.3 million in the previous quarter.
Long-term debt remained steady at $2.28 billion at the end of the third quarter, compared to the previous quarter.
In the third quarter of 2023, the company generated $218.51 million in cash from operations, a significant increase from the $136.27 million in the previous quarter.
Guidance
For the fourth quarter of 2023, Etsy expects the take rate to be approximately 20.8%, slightly down on a sequential basis due to normal seasonality. This figure can be used to estimate the revenue range for the quarter. The Zacks Consensus Estimate for fourth-quarter 2023 revenues is projected at $846.86 million.
Gross merchandise sales (GMS) are anticipated to decline in the low-single-digit range on a year-over-year basis. However, if trends worsen, the decline could become a mid-single-digit one, while improved trends could result in flat or slightly higher GMS year over year.
The adjusted EBITDA margin is projected to be in the range of 26% to 27%.
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