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Etsy, Inc. Reports First Quarter 2022 ResultsBROOKLYN, N.Y., May 4, 2022 /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, 2022. First quarter 2022 performance highlights include:
"Despite continued uncertainty and macroeconomic headwinds, Etsy continues to rise to the occasion to deliver solid results that show us maintaining most of the gains reported during the extremely strong year-ago period," said Josh Silverman, Etsy, Inc. CEO. "We kicked off 2022 with product and marketing investments aligned with our 'Right to Win,' with a keen focus on delivering value to our sellers by attracting new buyers to Etsy and increasing buyer purchase frequency. In addition, we are particularly proud of our efforts to support our community in Ukraine through a combination of efforts in keeping with our core mission and fundamental values." First Quarter 2022 Financial Summary (in thousands, except percentages; unaudited) The financial results of Elo7 and Depop have been included in our consolidated financial results from July 2, 2021 and July 12, 2021 (the dates of acquisition), respectively. The unaudited GAAP and non-GAAP financial measures and key operating metrics we use are:
For information about how we define our metrics, see our Annual Report on Form 10-K for the year ended December 31, 2021. "Etsy delivered better than anticipated first quarter 2022 consolidated adjusted EBITDA margin of 27.5% on solid revenue results in line with our expectations," said Rachel Glaser, Etsy, Inc. Chief Financial Officer. "In the current macroeconomic environment, consumers have less disposable income and many more places to spend it, and while this creates a short-term headwind for sales on our marketplaces, we have very strong conviction in the long-term growth potential of our business. We continue to invest with discipline in our House of Brands and remain focused on delivering profitable growth." First Quarter 2022 Operating Highlights Select highlights of first quarter business initiatives for the Etsy marketplace are outlined below: Product: Our primary focus in 2022 is to enhance the customer experiences across Etsy.com to engage and retain the millions of buyers who found Etsy for the first time or found us again over the last two years. These are just a few of our initiatives during the first quarter, aligned with our "Right to Win" strategy.
Marketing: We continued to optimize spending across our marketing channels, focusing on driving top-of-mind awareness and new buyer acquisition and increasing purchase frequency of existing buyers. Here are some highlights:
Impact Pillars: We continued to make progress on our Impact strategy to reflect the positive impact we want to have on the world while advancing and complementing our business strategy. Here are some highlights for the first quarter:
Here are a few operational highlights from our subsidiary marketplaces: Reverb launched a new Google integration to continue to optimize our performance marketing efficiency and better target prospective buyers with higher potential lifetime value. Reverb also continues to scale tests of new advertising channels, including display advertising, and affiliate and influencer marketing. Efforts to increase seller visibility, reduce friction when creating a listing, and leverage machine learning to better communicate pricing contributed to an over 10% year-over-year increase in users listing gear for sale on Reverb for the first time. In addition, investments to improve search engine ranking drove organic search to be Reverb.com's leading source of web traffic during the quarter. Depop improved buyer conversion and frequency with its new "Make an Offer" feature, allowing buyers to seamlessly submit offers to sellers for products of interest. Depop also increased brand awareness among Gen Z audiences in select local markets in the United States, launching its first-ever digital video campaign as it continues to build an impactful marketing strategy. Elo7 expanded shipping options for sellers resulting in cheaper shipping costs and faster delivery times, improving the overall buyer experience and driving conversion improvements. Elo7 also enhanced search functionality which it will expand to all searches in the second quarter. Financial Guidance and Outlook Etsy's guidance for consolidated GMS, revenue, and Adjusted EBITDA margin for the second quarter of 2022 is: GMS: $2.9B to $3.2B Revenue: $540M to $590M Adjusted EBITDA Regarding Etsy's outlook, Mr. Silverman commented, "We are emerging from an unprecedented time - and within that Etsy had unprecedented growth. In a world of so many more choices, our guidance implies somewhere between a decline of low to high single digits for Etsy marketplace GMS year-over-year— retaining over 90% of the gains we have made over the past 2 years. Despite the near-term uncertainty, we have ample reason to remain very optimistic for the long-term. We've got a world class team with the creativity and conviction to invest with purpose on behalf of our seller community. We truly believe we offer something different - across every brand in our House - and that the size of the prize for Etsy is enormous." 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. These marketplaces share a mission to "Keep Commerce Human," and we're committed to using the power of business and technology to strengthen communities and empower people. 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. Etsy, Inc.'s "House of Brands" portfolio also includes fashion resale marketplace Depop, musical instrument marketplace Reverb, and Brazil-based handmade goods marketplace Elo7. Each Etsy, Inc. marketplace operates independently, while benefiting from shared expertise in product, marketing, technology, and customer support. Etsy 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 Jessica Schmidt, Sr. Director, Investor Relations Media Relations Contact: Sarah Marx, Director, Corporate Communications 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 2022 and key drivers thereof; our opportunity; the impact of our "Right to Win" and other growth strategies, including our strategies for integrating our "House of Brands" marketplaces, marketing and product initiatives, and investments and other levers of growth on our business and operating results, including future GMS and revenue growth; our ability to attract, engage, and retain buyers and sellers; our plans for investment in our marketplaces and in our member support programs; strategic investments or acquisitions and the potential benefits thereof; our intended environmental and social impacts; the global macroeconomic uncertainty, including additional or unforeseen impacts the COVID-19 pandemic and general market, political, economic, and business conditions may have on our business, strategy, operating results, key metrics, financial condition, profitability, and cash flows; changes in overall levels of consumer spending and e-commerce generally; and volatility in the global economy. 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," "outlook," "plan," "potential," "target," "will," or similar expressions and derivative forms and/or 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 sustain our rapid growth; (2) risks related to the ongoing COVID-19 pandemic, which continues to impact our business and results of operations in numerous volatile and unpredictable ways, as well as risks of reversal of the shift to e-commerce when the pandemic abates; (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 active and engaged communities 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 communities; (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) our ability to successfully integrate the Depop and Elo7 acquisitions and execute on our "House of Brands" strategy; (17) acquisitions that may prove unsuccessful or divert management attention; and (18) the potential misuse or disclosure of sensitive information about members of our communities and the potential for cyber-attacks. These and other 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, 2021, 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.
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 are as follows:
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; (benefit) provision for income taxes; depreciation and amortization; stock-based compensation expense; foreign exchange gain; 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. With respect to our expectations under "Financial Guidance and Outlook" above, reconciliation of Adjusted EBITDA and Adjusted EBITDA margin guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity, and low visibility with respect to the charges excluded from these non-GAAP measures; in particular, stock-based compensation expense, foreign exchange gain and acquisition-related and other non-recurring expenses can have unpredictable fluctuations based on unforeseen activity that is out of our control and/or cannot reasonably be predicted. 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 platforms. We believe that Adjusted EBITDA and Adjusted EBITDA margin can provide useful measures for period-to-period comparisons of our business as they remove the impact of certain non-cash items and certain variable charges. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, 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.
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