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ETSY's Q3 Earnings Beat Estimates, Revenues Increase Y/Y

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Etsy, Inc. (ETSY - Free Report) reported third-quarter 2023 earnings of 64 cents per share, beating the Zacks Consensus Estimate by 30.61%. The bottom-line figure reflects a year-over-year increase of 10.3%.

Revenues advanced 7% year over year to $636.3 million. The figure beat the Zacks Consensus Estimate by 1.04%.

Top-line growth was driven by accelerating services revenues.

Strong momentum across active sellers and reactivated buyers remained positive.

Etsy, Inc. Price, Consensus and EPS Surprise

Etsy, Inc. Price, Consensus and EPS Surprise

Etsy, Inc. price-consensus-eps-surprise-chart | Etsy, Inc. Quote

Top Line in Detail

Marketplace revenues were $460.92 million (72.4% of the total revenues), up 3.9% from the year-ago quarter’s level, driven by the solid momentum across buyers. ETSY acquired 6.1 million new buyers, which was a major positive. The total number of active buyers on Etsy’s marketplace stood at 91.6 million, which increased 4% year over year.

Services revenues were $175.38 million (27.6% of the total revenues), up 16.2% on a year-over-year basis. Etsy ads acted as a key driver of revenue growth.

Quarterly Specifics

Etsy’s active buyer base increased 3.4% from the prior-year quarter’s figure to 97.34 million, which came ahead of the consensus mark of 96.6 million.

The active seller base stood at 8.8 million, up 19% year over year. The figure topped the consensus mark of 8.37 million. Increased investments to provide tools and insights for sustainable pricing strategies for sellers had a positive effect on seller base growth.

ETSY witnessed solid momentum in buyer reactivation. Reactivated buyers were 6 million, up 19% year over year.

Gross merchandise sales (GMS) of $3.04 billion were up 1.2% on a reported basis and largely flat on a currency-neutral basis from the prior-year quarter. The reported figure surpassed the Zacks Consensus Estimate of $3.02 billion.

The Etsy marketplace’s GMS was $2.7 billion, up 1% and down 0.3% on a reported basis and a currency-neutral basis, respectively, from the year-ago quarter’s figure.

GMS Ex-U.S. domestic for the Etsy marketplace rose 7% from the prior-year quarter’s figure on a currency-neutral basis and accounted for 47% of the total GMS.

Operating Details

In third-quarter 2023, the gross margin was 70.3%, which contracted 40 basis points year over year.

Total operating expenses were $358.92 million, down 73.9% from the prior-year quarter. As a percentage of revenues, the figure contracted to 56.4% from 231.3% in the year-ago quarter.

Consequently, ETSY reported an operating loss of $0.89 million compared with an operating income of $954.78 million reported in the prior-year quarter.

Balance Sheet & Cash Flows

As of Sep 30, 2023, cash and cash equivalents totaled $741.96 million, which decreased from $841.51 million as of Jun 30, 2023.

Short-term investments were $234.93 million, down from $235.3 million in the previous quarter.

Long-term debt stood at $2.28 billion at the end of the third quarter, which remained flat compared with the figure at the end of the prior quarter.

In third-quarter 2023, the company generated $218.51 million in cash from operations, up from $136.27 million in the previous quarter.

Guidance

For fourth-quarter 2023, Etsy anticipates the take rate to be approximately 20.8%, down slightly on a sequential basis due to normal seasonality. This can be used to estimate revenue range for the quarter. The Zacks Consensus Estimate for fourth-quarter 2023 revenues is pegged at $846.86 million.

GMS is expected to decline in the low-single-digit range on a year-over-year basis. However, if trends worsen, that could become a mid-single-digit decline, and if trends improve, GMS could be flat or even up slightly year over year.

The adjusted EBITDA margin is expected to be between 26% and 27%.

Zacks Rank & Stocks to Consider

Etsy currently carries a Zacks Rank #3 (Hold).

Ballard Power System (BLDP - Free Report) , NetEase (NTES - Free Report) and Upstart (UPST - Free Report) are some better-ranked stocks that investors can consider in the broader sector. While BLDP and NTES carry a Zacks Rank #1 (Strong Buy), UPST carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ballard Power System shares have declined 31.1% year to date. BLDP is set to report its third-quarter 2023 results on Nov 7.

NetEase shares have gained 49.2% year to date. NTES is set to report its third-quarter 2023 results on Nov 16.

Upstart shares have returned 86% year to date. UPST is set to report its third-quarter 2023 results on Nov 7.

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