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Etsy Earnings: Revenue Surges

By Daniel Sparks - Updated Nov 7, 2018 at 6:46PM

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Fueled by business momentum and a higher fee structure, this online marketplace company is booming.

Etsy's (ETSY 9.02%) strong performance under CEO Josh Silverman continued for yet another quarter. The online marketplace platform for creative goods reported another quarter of accelerating growth. The period validates Silverman's leadership and the company's recent efforts to reinvigorate its operations while investing aggressively in growth opportunities.

Here's a close look at the highlights from Etsy's third-quarter update.

Etsy website displayed on a laptop.

Image source: Etsy.

Etsy's third-quarter results: The raw numbers

Metric

Q3 2018

Q3 2017

Year-Over-Year Growth

Revenue

$150.4 million

$106.4 million

41.3%

Net income

$19.9 million

$25.8 million

(22.9%)

Earnings per share

$0.15

$0.21

(29%)

Data source: Etsy third-quarter earnings release. Table by author.

What happened with Etsy this quarter?

  • Etsy's revenue soared 41.3% year over year, an acceleration from 30.2% growth in Q2.
  • Net income of $19.9 million was down 22.9% year over year but up significantly sequentially from net income of $3.4 million in Q2.
  • Gross merchandise sales (GMS) volume increased 20.4% year over year, in line with growth for the key metric in Q2.
  • Etsy's marketplace revenue rose 42.6%, helped by the company's higher pricing structure announced in July. (Editor's note: This percentage has been corrected.)
  • Services revenue -- or revenue from optional services for sellers such as promoted listings, shipping labels, and Etsy Plus -- jumped 36.5% year over year. (Editor's note: This percentage has been corrected.)
  • The company's net income declined from $25.8 million in the year-ago quarter to $19.9 million as Etsy increased its marketing spend.

What management had to say

"We put our new pricing structure to work by increasing investments in marketing and product initiatives to fuel growth," said Silverman about the period in Etsy's third-quarter press release. "We also completed a major step in our migration to the Cloud, a key foundational investment as we scale for future growth."

Etsy's CFO, Rachel Glaser, said the company's strong GMS and revenue growth during the quarter "demonstrate continued operational execution and business momentum." Further, Glaser commented on Etsy's increased marketing spend, noting the company "focused on leverage and return on investment" with this spending.

Looking forward

With this strong quarter in the rearview mirror, Etsy revised its full-year outlook. Management said it now expects full-year 2018 revenue to rise 35% to 36% year over year. This is up from a previous forecast for revenue to rise 33% to 35%. Further, management is now aiming for GMS to rise 19% to 20%, up from a previous forecast for 18% to 20% growth.

Management also notably announced a $200 million repurchase program.

"The stock repurchase program has no time limit and may be modified, suspended or terminated at any time by the Board of Directors," the company said in its third-quarter earnings release. "Repurchases under the stock repurchase program will be funded from Etsy's existing cash and cash equivalents or future cash flow."

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Etsy, Inc. Stock Quote
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